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J. C. N I C H O L S




J. C. N I C H O L S

310 WARD



April 25,1945

Mr» Marriner Booles
c / o Board of Governors of the
Federal Reserve System
Washington D.Cm
Dear Marriner:
I recently read copies of l e t t e r s of exchange between you
and the National Real Estate Board, and while I r e a l i z e your s i n c e r i t y in r e l a t i o n to checking i n f l a t i o n in real e s t a t e , I f e e l
sure you are overlooking one or two very important f a c t s •
There are l i t e r a l l y hundreds of thousands of commercial
and r e s i d e n t i a l properties a l l over the United States that need
r e h a b i l i t a t i o n . This i s particularly true of commercial properties,
a great mass of which have not rented f o r enough to pay taxes f o r
the past few years and are frequently held by owners who can not
a f f o r d to remodel them and bring them up to date. In order t o make
these properties presentable and useful i t frequently requires a
large investment of funds and considerable risk is involved. Certainly investors would be unwilling to buy such property and spend
considerable sums in remodeling i f they were t o be faced with a
very large excess p r o f i t t a x . In my rather close contact with
r e s i d e n t i a l properties throughout the country, I f e e l there i s
immense opportunity to provide better housing, particularly to the
lower income group, by incouraging investors to get run-down properties and put them in good condition. This involves a r i s k on
the part of the investor and certainly these a c t i v i t i e s would be
discouraged i f there would be a large excess p r o f i t tax put on
the possible earnings such an investor might make in his sincere
e f f o r t s to restore such run-down properties*
The Art Gallery Trust here in Kansas City, of which I am
a member, recently acquired some such buildings and we are spending
seme $40j000«00 in r e h a b i l i t a t i o n , and we think we are doing a good
constructive j o b f o r our town, and certainly we would not have been
w i l l i n g to undertake such a risk i f we thought we would be confronted
with a large excess p r o f i t t a x . I can not help but b e l i e v e that you
have overlooked t h i s very important phase in real estate in every
c i t y and even the small towns throughout America. To put such propert i e s in good condition would increase the tax revenues of the other
communities and create real progress and service to future tenants
and owners*



I simply mention the above to you because I am quite
sure you have overlooked this very important consideration and one
which I think is extremely important in post-war years« W ara a l l
worried about our blighted areas in the larger c i t i e s and want to
urge private capital to undertake the rehabilitation and restoration
of properties#
I appreciate your interest in the whol6 matter, but i t is
my honest opinion that such a program you have suggested would work
to a great disadvantage to property ownership throughout the United


May 9, 1945.

Mr*. J . C. Nichols,
Chairman of Board,
J» C. Hichols Company,
310 ferd Parkway,
Country Club Plaza,
Kansas City 2 , Missouri*
Dear Mr* Nichols:
AS I have been out of town, reply to your l e t t e r
of ^ p r i l 25 has been delayed» 1 think we both agree that the
construction industry should be given a l l possible encouragement a f t e r the war, but 1 cannot follow your suggestion that i t
i s desirable at t h i s time t o encourage large-scale expenditures
on the improvement of existing real estate property o r , f o r that
matter, on the construction of new property* I think that such
expenditures should wait until the requirements of war production have shrank and s u f f i c i e n t resources have again become
available t o meet c i v i l i a n requirements* Thus, I do not think
that your considerations regarding the d e s i r a b i l i t y of investing
funds in real estate are pertinent to the current situation,
which f o r some time w i l l s t i l l oe one of wartime scarcity*
AS t o the postwar period, I have repeatedly i n dicated that I favor outright tax encouragement of new and
productive investment, and some statement of my position, I
take i t , you have seen in the correspondence with the National
Real Estate Board, to which you r e f e r . The wartime rates both
of the excess p r o f i t s tax and of the corporation income tax
should, of course, be reduced when budget conditions permit and
general inflationary pressures have passed* However, I believe
that tax requirements a f t e r the war w i l l remain high and that
i t w i l l be necessary t o continue t o obtain a substantial amount
of yield from the corporate tax* I f proper steps are taken t o
encourage small and growing enterprise, retention of a substantial tax on corporate income w i l l be l e s s depressing t o
economic a c t i v i t y and t o investment than would excessive
reliance on excises and similar tax sources which bear most
heavily on consumption.


Mr- J. C. Nichols



May 9, 1945

As I have pointed out at various times, what would
really encourage risk capital in the postwar would be t o reduce
the excess p r o f i t s tax from the present 95 per cent maximum t o
possibly 65 per cent and iaaKe the corporation tax 25 per cent
instead of U per cent as i t i s now with the surtax» I would then
exempt from the 25 per cent corporate tax a l l p r o f i t s paid out
in dividends, which would be taxed in the hands of the recipients*
This would avoid the double taxation that i s so great a deterrent
t o the investor in productive enterprise* ht the same time! I
would give an exemption of $25>000 t o a l l corporations under the
excess p r o f i t s tax* This would not matter much in the case of
the Large corporation, but i t would be of tremendous benefit t o
the small and medium-sized concerns.
while you mention the excess p r o f i t s tax in particular,
I am wondering i f you are not thinking more of the recent suggestion
I made f o r a capital gains tax. *nyway, I am enclosing a copy of
an explanatory statement as to the reasons why i f e l t t h i s was a
necessary protective step against i n f l a t i o n which, of course, would
have disastrous e f f e c t s upon real estate values in the end.
frith best regards,
Sincerely yours,