If you add to these considerations the circumstance that, owing to the
intervention of our Government in financing and otherwise providing for
the Allies, the commissions and profits of those who have heretofore
dealt with the Allies will be largely cut off; that business will,
quite rightly, be subjected to a large excess profits tax; that capital
for years to come will have to pay increased taxes to provide for the
debt incurred through the war, for pensions, etc.; if you will reflect
on these and various other patent considerations, you will realize that
any rich man, fomenting for selfish reasons our entrance into the war,
would be a fit subject for the immediate appointment of a guardian to
take care of him and of his affairs.

II

_The Actual Return Upon Taxable and Tax-Exempt Securities_

Dear Sir:

Your letter indicates that you do not sufficiently realize the
enormous advantage in interest yield which under the income tax
schedule as fixed in the House Bill is possessed by tax-exempt
securities as compared to taxable securities, especially, of
course, in respect of large incomes.

Permit me to call your attention to the following eloquent facts:

The yield of tax-exempt securities at prevailing prices ranges from
3-1/2% to nearly 4-1/2%. _Under the rates fixed in the War Revenue
Bill as it passed the House of Representatives, a taxable 6%
investment_ would yield:

PER ANNUM
2.28% on incomes over $2,000,000
2.34% " " " 1,500,000
2.40% " " " 1,000,000
2.69% " " " 500,000
2.97% " " " 300,000
3.26% " " " 250,000
3.54% " " " 200,000
3.90% " " " 150,000
4.20% " " " 100,000

Or, to put it in another way, the investment in 3-1/2% "Liberty
Bonds" is thus equivalent to investing in a taxable security
yielding:

PER ANNUM
9.21% in respect of incomes over $2,000,000
8.97% " " " " " 1,500,000
8.75% " " " " " 1,000,000
7.82% " " " " " 500,000
7.07% " " " " " 300,000
6.45% " " " " " 250,000
5.93% " " " " " 200,000
5.38% "