majorities. All property owners are then completely

at their mercy, and the property of the whole country -

may be threatened with confiscation . . . It should
also be borne in mind that New York may any day
want to levy an income tax as a substitute for the
present personal property tax and in order to relieve
real estate. There is no doubt as to the power of the
State to levy income taxes. It may soon become neces.
sary; and, if honestly and capably administered, such
a tax would operate equitably and fairly. If Congress
should also have and exercise the same power, the
resources of the State in this respect, to provide for
her own urgent public improvements, would be neces-
sarily curtailed. And the Federal tax would have pre-
cedence . . . Such power, however, should be so limited
as not in any degree to impair or to diminish the
ability of any State fully and freely to maintain itself,
and to discharge those vastly preponderant duties
attaching to local jurisdiction, which, in express
terms, are reserved from the constitutional delegation
to the United States.”

The far-sightedness of these statements is now
plain to all.

When the 16th Amendment was before Con-
gress in 1909, a Federal income tax return of 2%
was in mind. It was suggested that a limit of 10%
be placed in the proposed 16th Amendment. This
was laughed off on the ground that it was ridicu-
lous to think that the Federal income tax rate
ever would be as high as 10%.

How ridiculous was it when we now see the
rate as high as 95%?

The latter is a wartime rate, it is true, and no
objection is made to high taxes to help pay to
win a war. The proposed XXII Amendment per-
mits high rates to win a war. We are talking,
however, of rates for post-war and peacetime.

It is plain that if the Federal Government can
tax incomes 95% in wartime, it can tax them 95%
i peacetime, or at some lower but still excessive
rate, with the result that so much of the wealth of
the States will be drained into Washington, that
Governors and county and city officials will have
to go to Washington, like blind beggars with tin
cups in their hands, to beg back part of the wealth

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created in their own communities, to sustain local
government activities.

The empty shell of State and local governments
urider such circumstances would be preserved, but
the life would be gone. This would be the end of
“an indestructible union of indestructible states.”
The republic would have been destroyed by the tax
route, with the most far-reaching implications to
the survival of free institutions.

To place a peacetime limit upon the power of
the Federal Government to tax incomes would not
reduce, by a dime, the revenue of the Federal
Government over the years. It would increase it
by stimulating production and expanding the tax
base.

It is an illusion to think that the Federal Gov-
ernment has resources of wealth to spend which
are not possessed by the 48 States, the 3,000 counties
and the thousands of local governments. Every
dollar of wealth not drained into Washington
would continue in existence and would be avail-
able for taxation by the States to the extent that
they found it necessary.

However, when State and local governments
levy taxes upon their own citizens, close to the
tax-levying authorities, less money is wasted and
less money needs to be raised for the support of
government. The less money taken in taxes, the
more is left in the hands of the people. The
temptation to waste is far less. The safeguards
against waste and extravagance are far greater.

Furthermore, the proposed limitation of the
taxing power of the Federal Government would
result in the vast encouragement and expansion
of enterprises, new and old, necessary to provide
jobs in post-war America.

It is for these and other reasons that this com-
mittee, composed exclusively of members of State
Legislatures, has been organized, to prevent State
and local governments from being destroyed by
the vampire of Federal taxing and spending.

Merle 8B. Smith

Chairman
STATE LEGISLATORS FOR THE XXI1 AMENDMENT