Reply to Letter from Roy W. Howard.
The President under date of September 2, 1935, wrote the following reply to Mr. Howard:
My dear Mr. Howard:
I appreciate the tone and purpose of your letter, and fairness impels me to note with no little sympathy and understanding the facts which you record, based on your observations as a reporter of opinion throughout the United States. I can well realize, moreover, that the many legislative details and processes incident to the long and arduous session of the Congress should have had the unavoidable effect of promoting some confusion in many people's minds.
I think we can safely disregard the skeptics of whom you speak. Skeptics were present when Noah said it was going to rain and they refused to go into the ark. We can also disregard those who are actuated by a spirit of political partisanship or by a willingness to gain or retain personal profit at the expense of, and detriment to, their neighbors. Then there were those who told us to "do nothing." We had heard of the do-nothing policy before and from the same sources and in many cases from the same individuals. We heard it when Theodore Roosevelt and Woodrow Wilson proposed reforms. The country has learned how to measure that kind of opposition. But there are critics who are honest and non-partisan and who are willing to discuss and to learn. I believe we owe, therefore, a positive duty to clarify our purposes, to describe our methods and to reiterate our ideals. Such clarification is greatly aided by the efforts of those public-spirited newspapers which serve the public well by a true portrayal of the facts and an unbiased printing of the news.
However, experience is the best teacher and results are the best evidence. As the essential outline of what has been done rises into view, I am confident that doubts and misapprehension will vanish. I am confident further that business as a whole will agree with you and with me that the interests of what we broadly term business are not in conflict with, but wholly in harmony with, mass interests.
I note what you say of the hostility emanating from "financial racketeers, public exploiters and sinister forces." Such criticism it is an honor to bear. A car with many cylinders can keep running in spite of plenty of carbon— but it knocks. When it is overhauled an important part of the job is the removal of that carbon.
In the large, the depression was the culmination of unhealthy, however innocent, arrangements in agriculture, in business and in finance. Our legislation was remedial, and as such, it would serve no purpose to make a doctrinaire effort to distinguish between that which was addressed to recovery and that which was addressed to reform. The two, in an effort toward sound and fundamental recovery, are inseparable. Our actions were in conformity with the basic economic purposes which were set forth three years ago.
As spokesman for those purposes I pointed out that it was necessary to seek a wise balance in American economic life, to restore our banking system to public confidence, to protect investors in the security market, to give labor freedom to organize and protection from exploitation, to safeguard and develop our national resources, to set up protection against the vicissitudes incident to old age and unemployment, to relieve destitution and suffering and to relieve investors and consumers from the burden of unnecessary corporate machinery. I do not believe that any responsible political party in the country will dare to go before the public in opposition to any of these major objectives.
The tax program of which you speak is based upon a broad and just social and economic purpose. Such a purpose, it goes without saying, is not to destroy wealth, but to create broader range of opportunity, to restrain the growth of unwholesome and sterile accumulations and to lay the burdens of Government where they can best be carried. This law affects only those individual people who have incomes over $50,000 a year, and individual estates of decedents who leave over $40,000.
Moreover, it gives recognition to the generally accepted fact that larger corporations enjoying the advantages of size over smaller corporations possess relatively greater capacity to pay. Consequently the act changes the rate of tax on net earnings from a flat 13 3/4 percent to a differential ranging from 12 12 percent to 15 percent. No reasonable person thinks that this is going to destroy competent corporations or impair business as a whole. Taxes on 95 percent of our corporations are actually reduced by the new tax law. A small excess profits tax is also provided as well as an intercorporate dividend tax which will have the wholesome effect of encouraging the simplification of overly complicated and wasteful intercorporate relationships.
Congress declined to broaden the tax base because it was recognized that the tax base had already been broadened to a very considerable extent during the past five years. I am aware of the sound arguments advanced in favor of making every citizen pay an income tax, however small his income. England is cited as an example. But it should be recalled that despite complaints about higher taxes our interest payments on all public debts, including local governments, require only 3 percent of our national income as compared with 7 percent in England.
The broadening of our tax base in the past few years has been very real. What is known as consumers' taxes, namely, the invisible taxes paid by people in every walk of life, fall relatively much more heavily upon the poor man than on the rich man. In 1929, consumers' taxes represented only 30 percent of the national revenue. Today they are 60 percent, and even with the!passage of the recent tax bill the proportion of these consumers taxes will drop only 5 percent.
This Administration came into power pledged to a very considerable legislative program. It found the condition of the country such as to require drastic and far-reaching action. Duty and necessity required us to move on a broad front for more than two years. It seemed to the Congress and to me better to achieve these objectives as expeditiously as possible in order that not only business but the public generally might know those modifications in the conditions and rules of economic enterprise which were involved in our program. This basic program, however, has now reached substantial completion and the "breathing spell" of which you speak is here—very decidedly so.
It is a source of great satisfaction that at this moment conditions are such as to offer further substantial and widespread recovery. Unemployment is still with us but it is steadily diminishing and our efforts to meet its problems are unflagging. I do not claim the magician's wand. I do not claim that Government alone is responsible for these definitely better circumstances. But we all know the very great effect of the saving of banks, of farms, of homes, the building of public works, the providing of relief for the destitute, and many other direct governmental acts for the betterment of conditions. And we do claim that we have helped to restore that public confidence which now offers so substantial a foundation for our recovery. I take it that we are all not merely seeking but getting the recovery of confidence, not merely the confidence of a small group, but that basic confidence on the part of the mass of our population, in the soundness of our economic life and in the honesty and justice of the purposes of its economic rules and methods.
I like the last sentences of your letter and I repeat them: "With all its faults and with the abuses it has developed, our system has in the past enabled us to achieve greater mass progress than has been attained by any other system on earth. Smoke out the sinister forces seeking to delude the public into believing that an orderly modernization of a system we want to preserve is revolution in disguise."
Very sincerely yours,
Mr. Roy W. Howard,
New York City
Franklin D. Roosevelt, Reply to Letter from Roy W. Howard. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/209120