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May I. suggest the following plan:
1. For w^tge earners and salaried peo. pie, collect taxes on 1942 income as here­
tofore! except if desired, these taxes can
be withheld from the wage and salary
envelope, Of course, there isn’t any rea; son why tlteftax can’t he taken out of the
; envelope ».-* these individuals for the
. 1942 tax as well as for any other year.
2. Serve notice that one-fifth of the
1943 4*ix on wage earners -and salaried ind'
Is is to be paid in 1944, plus 1944
arned. This makes your 1944 tax
The balance of the 1943 tax is
to be paid in the next four years, the last
year being 1948. The big advantage of
the plan is that the wage earner and sal­
aried man has practically a year’s notice
that he has to set aside one-fifth of his
1943 income for payment in 1944.
3. Collect taxes from farmers, bankers,
brokers, doctors, lawyers, and so forth,
just as we have heretofore. I don’t see
any practical way to put this class of tax­
payer on the pay as you go basis without
making it more complicated and more
confusing than the present system. Such
people do not know what their income is
until the end of the year, and to try to
anticipate it will, in my opinion, only
. make headaches for the taxpayers as well
as the treasury department.
In addition I would like to say this. I
would feel very much ashamed, staying
at home where I am safe and sound, and
trying to have my taxes canceled for the
year 1942, while thousands of good Amer­
icans are risking having their heads shot
off in North Africa or the southwest Pa­
cific. I just can’t see the patriotism of
advocating cancellation of taxes under
these circumstances. The cancellation of
taxes is one thing and the pay as you go
method of tax collection is another thing.
It positively is not necessary to cancel
taxes infor
to put the pay as you go
collection into effect.

R a y m o n d E. H e r m a n .
Federal Reserve Bank of St. Louis



Real Estate




March 12, 1943
Mr. Marriner S. Eccles, Chairman
Federal Reserve Board
Washington, D. C.
Dear Sir:
I read an article this morning quoting you in a talk
which you gave before the Central States group of the Investment
Bankers Association of America. The press quotes you as stating
that the country was asleep to inflationary danger of present
war financing and that not only were present taxes inadequate,
but the government’s deficits were being made up by inflationary
bank borrowings.
I agree 100 percent with these sentiments. This gives
me an occasion to bring up something that is very much in the
public press and minds at the present time and that is the socalled "Ruml Pay-As-You-Go Tax Plan”.
I am very much opposed to the Ruml plan, which I think
should be called "A Plan To Cancel All Income Taxes For Americans
Due On Their 1948 Income, A War Year When These Americans Had The
Greatest Earnings In The History Of The World." I think it is
fundamental and sound economics, and especially in war time when
you have high earnings, to tax heavily. If you are going to can­
cel taxes the time to do it is at the bottom of a depression, not
in a period of large earnings.
The estimated earnings of the American people last year
were very close to 120 billions of dollars, the greatest in the
history of the world. It seems economic insanity to me to talk
about cancelling all taxes on individual incomes due for 1942 when
this was a year that the American people had their greatest earn­
It may surprise you to know that I have talked to over
a hundred people on the Ruml pay-as-you-go plan, and with one ex­
ception, every single one of this number misunderstood the plan.
I have talked to all kinds of people, mailmen, elevator operators,
lawyers, and so forth, and some of the lawyers are members of the
largest and most responsible firms in Chicago. Every man,with the
one exception^ noted thought the Ruml plan was purely a pay-as-you-


earn tax collection plan. They did not know that the Ruml plan
provided for cancelling of all taxes on their 1942 income. When
I explained to them that under the Ruml plan all of their taxes
due on their 1942 income would be cancelled, they were vigorously
opposed to this feature even though some of them said it would be
a real hardship to pay their taxes on 1942 income. Nevertheless
they were against cancellation in these times; said they wanted
to do their part.
I don»t believe a large number of Congressmen understand
this. I doubt they have talked to anywhere near the number of
people I have talked to. The average person that has written in
to Congress, and I suppose Congress has had a good many letters,
is writing in under the same misunderstanding.
Mr. Ruml has stated that the tax year would simply be
moved ahead. This does not mean to the average person that his
taxes are going to be cancelled on 1942 income. It seems to me
that one of the biggest pushes on the road to inflation would be
given by such a plan.
I would like to quote herewith from the United States
News in a recent number:
"At home the situation is becoming chaotic,.dangerous.
"On the one hand, there*s the start of a mad scramble
to get rich out of war, to dodge war service, to limit the war
effort, to avoid any sacrifice.
"Two motives are inspiring Congress to revolt:
"1. Desire to make everybody happy. To forgive taxes.
to ease up on the drafting of men, to assure everybody everything
they may want, to fight a painless war. However, the first desire
can*t be satisfied without an inflation that could be more painful
than the war controls themselves.
"Dominating motive in Congress right now is that of help­
ing groups that want to get rich out of the war, that want to make
a good thing out of the war."
When I read this I can*t help but think about the boys
who are fighting overseas and wondering what they would think of
America if they knew this, and it were true.
The President came out and endorsed the pay-as-you-go
idea in principle. He did not advocate cancellation of taxes. It
seems to me somebody has got to come out publicly and denounce this
cancellation feature. I think the President could kill it in a very
few words, because the fraud of the plan is obvious.


It absolutely is not necessary, in order to put the
pay-as-you-go method of tax collection into effect, to cancel
The proponents of the Ruml plan have used the fear
of delinquencies. A 25 percent delinquency would be high, but
in order to equal 100 percent cancellation of 1942 taxes, you
would have to have 100 percent delinquencies.
I think there are certain groups who have not profited
by the war, probably people earning $3000 and under a year. In
my opinion, also, the men fighting in the active service should
not be taxed. I don*t think this should apply to men in uniform
who are in Washington or Chicago offices, and so forth.
I might say here that I have paid income taxes every
year for thirty years, with two exceptions, and I am not trying
to get out of anything.
I have two boys in the service, and without the slight­
est bit of exaggeration I can tell you sincerely that I would be
ashamed to look these boys in the face if I were trying to have my
taxes cancelled on my 1942 income, or any other war year, while
these boys risked having their heads shot off. It is Just incom­
prehensible to me that any American, if he thinks at all, can be
in favor of having his taxes cancelled when most of his earnings
are due directly or indirectly to the war, and when the men in the
service are sacrificing so much more than the taxpayer who stays
safely at home.
I hope you will do what you can to see that this Ruml
plan is not adopted.



fery truly,


March 15, 1943.

Mr. Raymond E. Herman,
10 South LaSalle Street,
Chicago, Illinois.
Dear Mr. Herman:
On behalf of Mr. Eccles, who is temporarily
out of the pity, I wish to thank you for your interest­
ing letter of March 12.
It is of particular interest because of your
experience in discussing the Ruml plan with numerous
individuals, and what you find bears out similar sampling
of public opinion elsewhere. As you have doubtless noted
since writing, the President has expressed himself ex­
plicitly in opposition to the Ruml plan.
It occurred to me that you might be interested
in seeing the full text of Mr. Iccles* talk in Chicago
since the newspaper accounts were necessarily very brief.
I am, accordingly, enclosing a copy. It seems to me
that it rather closely parallels your own ideas at various
Sincerely yours,

Elliott Thurston,
Special Assistant to the Chairman.




R A Y M O N D E. H E R M A N

Real Estate




March 18, 1943

Mr. Elliott Thurston
Special Assistant to the Chairman
Board of Governors of the
Federal Reserve System
Washington, D. C.
My dear Mr. Thurston:
Thank you very much for your courteous letter of
March 15th in reply to mine of March ISth.
Thank you also for sending to me the complete
address of Marriner S. Eccles before the Central States §roup
of the Investment Bankers Association of America, in Chicago
on March 11th. I read.the address through and was impressed .
by the soundness of Mr. Eccles* ideas.
r ~~
Since writing you I have received the published vol­
ume of the hearings before the Committee on Ways and Means in
the House of Representatives on a proposal to place" income tax
of individuals on a pay-as-you-go basis. I have read the book
through and it seems to me that the statement of Elisha M.
Friedman of Hew Xork was especially intelligent and construc­
tive. Mr. Friedman*s statement begins on page 490.
I notice more and more that the proponents of the
Ruml plan who talk have one thing in common, and that is that
they are very much more interested in the cancellation of all
taxes on 1942 income than they are in the pay-as-you-go method
of tax collection. It is my opinion that if the cancellation
feature were eliminated from the Ruml plan, the active propon­
ents of this plan would have very little interest in the pay-asyou-go part.
I would appreciate your extending to Mr. Eccles my
high opinion of his address here in Chicago.
'--- I am a Republican in politics, but first of all I am
an American. I think the tax question is most certainly an
economic one and not a political issue and I can* t see why any­
body, in these times, wants toplay politics on this question.
Federal Reserve Bank of St.REH:LA

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