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Show Ham and Eggs Sleight o'Hand By HARLEY L. LUTZ Professor of Public Finance, Princeton University A difficulty that always arises when the people have been educated to believe be-lieve that white rabbits can be pulled out of silk hats is that there must be more and bigger r ! 1 rabbits or Jie f3f?v show vill no longer draw a K" ' ', . ... h crowd. In the f .'ft. y.y,- last five or six Jtf- I earS SOme re" markable finau- $) ... .: $ cial rabbitshave r I' b e e n brouht (' - out of the siff: A , ' J1 i hat, but the act A 15 not holdi"K ? - h 1 h e customers t- k 1 -; so well now, ? and it is only (4 natural that j- i fc I I others should try for variations varia-tions in the trick In order to set the attention and the support of the gullible. gul-lible. Two new financial white rabbit schemes are before the Ways and Means Commitee for a try-out, in the hope of getting "big time" booking. book-ing. Both profess a desire to promote the general welfare, but they are simply the old "ham and eggs" act under a different name. They are almost al-most as much alike as two peas from the same pod. One bill (1I.R.2) offers a monthly annuity not to exceed $200 to all qualified persons over 00 years of age. The condition that this money must be spent during the month identifies it as a descendant of Town-sendism. Town-sendism. The other bill (H.R.I ) proposes to guarantee to all qualified quali-fied persons over GO years of age a monthly minimum of S30 with a maximum maxi-mum of StiO. This bill does not require re-quire that the money be spent during the month, but it aims at the WCTU vote by providing that none of it shall be used to support any poison in drunkenness or gambling. Each bill provides, as one condition of eligibility, eligi-bility, that the annuitant shall not engage en-gage in any gainful pursuit. The method proposer! lor financing these pensions is incredibly naive. One bii) provides for a iax on transactions, the other for a tax on gross income. In each case the tax is to be 2, The sponsors have offered some utterly fantastic figures as to the total volume of transactions, or E.ross income, on which the tax is to I be laid. As of 1936, they estimate I the "theoretical taxable balance" of ! transactions, or gross income, at $362.4 billions. They assume that the government can actually collect, from such a tax on this base, a revenue of $7.3 billions. This is so theoretical that it is not even funny, or so funny that it is not even theoretical. One illustration will reveal the absurdity of the so-called "estimates." In building up the huge toUil of transactions, trans-actions, which amounts to some seven times the estimated national income, they put down, for 193(i, a gross income in-come of $125 billion from security transactions. Presumably they mean by this the total amount realized from the sale of securities, or the total value of security transactions. It was explained that this figure was obtained ob-tained from the Research Division of the Bureau of Foreign and Domestic Commerce. But the Statistical Abstract Ab-stract of the United States, compiled by that same authority, gives the total market value of all sales of stocks and bonds on all registered exchanges as $27.3 billion in ISCili. This is slightly more than one-fifth of the estimate used in planning the free ride to Utopia. The first thing a careful person would do would be to find out the reason for this kind of difference in two sets of figures from the same source. These apostles of the general welfare wel-fare rely on getting a revenue of $2.5 billion from the 2 tax on security secu-rity transactions. The federal government gov-ernment levies stamp taxes on the issue and the transfer of stocks and bonds, at the rates, which are ordinarily or-dinarily far below 2 of the values involved, in-volved, are nevertheless high enough to restrict some market transactions. For 19;it the federal revenue from this source was SGl.218,000. A 2 tax would freeze the security market solid, except for deals wild enough to afford a trading profit at least equal 1o the tax. A share of stock quoted today at 100 would not move ; unless the bid were better than 102. A $1,000 bond would not move unless the bids were belter than $1,020. It is a tragedy to be old and in need. It is an even worse tragedy, when one is oid and in ntod, to ba hoodwinked hood-winked by promises which rest on such a complete misunderstanding of , what it is all about as in the case with ; these latest white rabbit financiers. |