nt which cannot be without effect upon our own prosperity,
resources and economic power.

The financial dislocation, the discouragement and the apprehension
caused by unduly heavy taxation of incomes will not only act as a drag
on enterprise and constructive activity, but will make it exceedingly
difficult, if not impossible, for corporations to sell securities in
sufficient volume and thus to obtain adequate funds to conduct their
business--especially also as investors will be fearful that high rates
of taxation once established will not easily be reduced to normal
levels, even when the present emergency is passed.

Extravagance, log-rolling, the unwise and inefficient expenditure of
money by governmental bodies are amongst the besetting sins of
democracy. The formula once found, the machinery once employed for the
raising of huge revenues, are apt to make the way of wasteful
governmental spending all too temptingly easy.

It must not be forgotten that taxation must necessarily by that much
diminish the surplus income fund of the individual and that both
theoretically and actually the spending of money by the government
cannot and does not have the same effect upon the country's prosperity
and enterprise as productive use of his surplus funds by the
individual.

The sentimental, and thereby the actual, effect of extreme taxation
will not be confined to the relatively small number of people in
possession of very large incomes. The disturbance and fear caused by
the contemplation of an excessively high ratio of taxation, even when
applied to a relatively few, is bound to spread to those also of more
moderate incomes.

Capital is proverbially timid. It will not take risks, except in the
expectation of commensurate reward, and if it sees the danger of its
reward being unduly infringed upon by excessively rigorous income
taxation, it will anticipate that menace by withdrawing from the field
of constructive investment to the greatest extent possible.

So much is this the case that I incline to the belief that _taxation so
graded as to result in a maximum average of say 33-1/3 per cent. would
produce at least as great a revenue as a maximum average of 50 per
cent_.

It is one of the oldest principles of taxation that an excessive impost
destroys its own productivity.

The flood of securities which would be coming for sale in order to
escape extreme income taxation would create a grave condition of
demoralization in