great fund of capital as a whole which is derived from incomes of all kinds. It is this fund which in its turn is one of the vital forces necessary for the normal activities and progress of industry. If that fund is suddenly and too greatly reduced, the effect upon commerce and industry is liable to be abrupt and withering.

I yield to no one in my desire to see the burden upon the poor and those of moderate means lightened to the utmost extent possible.

I realize but too well that the load weighing at this time upon wage earners and still more perhaps upon men and women with moderate salaries is almost too great to be borne and certainly much greater than it should be. I wish a commission might be appointed, consisting of those best qualified in the entire country, to apply themselves to this most serious, difficult and complex problem, indeed to the entire problem of excessively high prices. I hope they would discover means, if not to remedy the situation entirely, at least to alleviate it.

But I am convinced that relief cannot be found in taxation of incomes at rates without a parallel anywhere, and in unduly burdensome imposts upon business activities. I am convinced that certain theories being urged upon Congress and the people and to which the House War Revenue measure is in part responsive, while doubtless meant to tend and seemingly tending to a desirable consummation, are in fact bound, in their longer effect, to bring about results harmful to the community at large, rich and poor alike.

It is only that conviction which has emboldened me to state my views publicly. In doing so I fully realized that I was running the risk of having my action misunderstood or misconstrued, and to be charged with selfishness and lack of patriotism.

Yet, I feel certain that in the end just recognition of their motives will not be withheld from those who, in defiance of the fleeting popularity of the plausible, venture to point out the dangers of impetuous action, however well intentioned, in the present emergency, and to urge that moderation and that regard for the lessons of history and of economics which can be left aside only at the peril of the general welfare.

Very faithfully yours,

(Signed) Otto H. Kahn

P.S.—That you or any one else should even for a moment attach credence to the monstrous suggestion that capitalists fomented America's entrance into the war because they feared that otherwise the amounts loaned by them to the Allies might be jeopardized or lost, is a truly distressing manifestation of the willingness of some of our people—I trust not many—to believe evil of men simply because they have been materially successful.

Leaving aside the cruel injustice of such an imputation, it attributes to moneyed men a degree of stupidity and of ignorance as to their own interests, of which they are not usually held guilty.

America loaned to the Allied nations, prior to our entrance into the war, roughly speaking, $2,000,000,000, of which sum all but a small fraction was loaned to England and France.

These loans were made almost entirely in the shape of bond issues which were widely distributed amongst individuals and institutions throughout this country. Therefore, no very large portion of the aggregate is in the hands of any one person or institution.

To any one acquainted with financial affairs it is absolutely inconceivable that England or France would have defaulted on the relatively moderate amount of their foreign debt, whatever might have been the outcome of the war, if America had not joined.

Let us grant, for argument's sake, the wildly far-fetched supposition that in one way or another their internal debt might have become affected; it would still be utterly inconceivable that they would have permitted a default in their foreign debt, because it is, of course, suicidal for any nation to jeopardize its world credit.

But let us go still a step further and assume, in defiance of all reason, that even this totally inconceivable thing were to have happened. It would have meant, of course, not a total and irrecoverable loss to the holders of obligations of the Allied countries, but merely a more or less temporary shrinkage of the value of such holdings.

A single year's war taxation will take out of the pockets of capitalists a great deal more than they could possibly have lost through depreciation in value of such amount of Allied bonds or loans as they may hold.

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