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G 0 P j (See speech of 11/29/37 - file) December 11, 1937* Mrv William A.fierin*Secretary c/o Honorable J. Mark Wilcox's Office The House of Representatives Washington* D. C. Dear S i n Thank you very much for your exceedingly nice letter. I want you to know that I appreciate it -had am hap^y to have you say that you liked the talk. The bill introduced by Mr. Wilcox to exempt from Federal taxation a maximum of 50 per cent of all individual and corporate incomes spent on new construction is aost interesting* Jou will under~ stand* of course, that I can comment only confidentially* From the standpoint of residential construction, 1 suppose a most important object of Government assistance would be to help small people in attaining home ownersnip or lower rentals* It is true* of course, that a substantial volume of new construction would probably assist in lowering rent a. But it seems to me that a tax exertion of the sort proposed would chiefly benefit better-placed individuals simply for the purpose of permitting them to use Inco&e* tax free, for the purpose of constructing rental property* which they w-,ulc. thereafter hold as owners* It might be more desirable to leave in effect trie present taxes and, if the Government wants to subsidise housing construction, to apply some form of direct subsidy designed to assist less well-placed individuals in the attainment of home ownership. This would h&ve social advantages* I think* and* at the same time, it would not relin uish the desirable progressive features of our present tax systeal* As for industrial construction* X am inclined to question whether a tax exemption should be applied to those elements of the business tax structure that are in a sense normal* that are a usual deduction from business profits* ana that* in any plan of taxation not resting with extreme severity on consumers1 purchases* mu-t be utilised in securing a revenue sufficient to meet modern Government costs* In trie long nan* such a tax relief would simply serve to concentrate the already h:,ghiy concentrated ownership of industrial facilities. Perhaps it would be preferable to use for the stimulus same temporary relaxation of such a tax as the undistributed profits levy* which is in * sense not a normal tax intended to be paid by business but is in part simply a penalty against those owners of corporate securities who are permitted to avoid individual income taxes by retaining earnings in the business. We w^uld then be in a position of saying? If you will* for tuis period in which construction stimilus is needed in the economy* actually spend funds for that purpose* we will in tuna permit you to &,void a penalty assessment on retained earnings* Mr* Villxast JU Merin - 2 I am & little pus sled to know just how a tax relief program would work out on the permanent basis apparently provided for in the bill* It seems to mo quite possible that a permanent stimulus of this size might in the course of time result in excessive c& ital expenditures for construction sad a consequent dislocation of the economy* In adoitioiif it seems to be the intention of the bill to limit the applicability of the proposed exemption to funds spent for constructions and I am wondering* if a tax progmm of this kind is to be developed* whether it sight not be veil to consider the inclusion of plant equipment and. perhaps other items that would actually increase the productive capacity of our industrial establishment* From the fiscal standpoint, I should also want to examine carefully from what sources governmental revenues of the raagnitude that would probably be lost by* this proposal could be made up withotit at the same time levying taxes that would have an equal or greater adverse effect on our economic operations* These are simply questions that h^ve occurred to win as I have read your letter and the inclosed bill. Let me tnsnk you again for writing me &s you did and for giving me the opportunity of seeing the bill that Mr* Vilcox has introduced* Cordially yours* M* S*. £eel@@t Chairman.
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