covery of his reasonable and entire compensation for such use and contracts have been audited most exhaustively. In practically manufacture. Mr. NELSON of Wisconsin. Will the gentleman cite the place of that law? Mr. WAINWRIGHT. That is the act of Congress of June 25, 1910, as amended by an act of July 1, 1918. all of these it has been found that overpayments, more or less large, had been made in the postarmistice settlements. These hasty settlements, it will be borne in mind, were made by the previous administration. Upon the present administration of the War Department fell the stupendous task of making these audits, so necessary before these contracts could be closed. This work has been continuously in progress for the last two years and is not yet complete. In a number of cases the payment of certain so-called bonuses were involved. These arose as follows: Tentative or bogey prices had been established in certain of these contracts, which also provided that the contractors were to share with the United States in any saving less than the estimated cost. There appears to have been no question as to the legality of this arrangement. But since the audits were undertaken the legal department of the Government has raised the question of the legality of these bonus payments, which are included in the claims for overpayments. It is repeated that the United States must have the power to incorporate in its aircraft desirable features. It is impossible to ascertain in all cases whether any one or more such features have been patented, and if so, whether the patents are valid. Unless there is some assurance given, manufacturers may hesitate to incorporate in their product certain improvements for fear that they will be estopped by the patentees or those claiming to own or control the patent covering such feature or de-effected if the cost, as ascertained on final audit, proved to be vice. This "save harmless" clause merely assures the manufacturer that the Government will protect him in strict conformity with the provision of the act just quoted. The gentleman from Wisconsin states that one patriotic inventor offered to the United States a license under certain patents which he claimed to own and which he asserted were valid. He further states that the Government refused to accept such license and that the effect of such action was to leave the so-called air trust in a position to infringe these patents and collect a royalty from the Government, whereas, if the Government had taken such license there would be no excuse for paying a royalty to the air trust. There is one case, as I am informed, which is probably the one to which the gentleman refers. In this particular case the patentee did offer a license covering aircraft built for the War Department and for the Navy Department. It was pointed out to him that other departments of the Government might desire to use aircraft, and he was asked to make this license broad enough to cover all of the activities of the United States. This he did not do, and the United States declined to accept the partial license which he offered. The reasons for this were controlling. The acceptance of such a partial license would have estopped the United States from thereafter questioning the validity of the patents and in case other departments of the Government made use of them the United States would have no defense against a claim for Infringement. The gentleman from Wisconsin makes the statement thatthe concerns which at the outbreak of the war were prepared by experience and the possession of adequate factories and engineering staffs to launch into the promptest possible quantity production of efficient battle planes were denied contracts, while automobile concerns and individuals who were without either experience, factories, or engineering staffs for designing and building aircraft were permitted after we entered the war to form companies for the manufacture of aircraft. It would be decidedly interesting if the gentleman from Wisconsin had named any firms in the United States equipped by experience and with proper factories who were capable of building aircraft and who were not given contracts by the departments. As a matter of fact, Mr. Crowell's authoritative book, "America's Munitions," states that when the United States entered the war there were in all of the United States only six aircraft companies which had ever built more than 10 machines. These were the Curtiss, the Standard Aircraft Co., the Burgess Co., the L. W. F. Co., the Thomas Morse Co., and the WrightMartin Co. Certain contractors as a result of this audit have already returned to the United States the sum of $1,800,000 which they were overpaid. To the Department of Justice there have been forwarded the cases of 25 others. The amount involved in these cases totals $32,000,000, of which $9,000,000 is represented by the bonus payments. There are three other cases still before the Air Service, involving a total of $8,000,000, of which $2,500.000 represents bonus payments. There is one case which has not yet been completely audited. From this I believe it will appear that the aircraft manufacturers, termed by the gentleman the "air trust." has received no undue favors from the present administration. Except for the one audit, which is not quite complete, all these claims are now out of the War Department and with the Department of Justice. I find I was in error in my statement the other day that an action had been brought against the Wright-Martin Corporation. I now find that no such action has been brought. As I am informed, the general situation as to all these claims is about as follows: Actions have been brought upon two of the larger claims, against the Dayton-Wright Co. and the Duesenburg Motor Co., which are now pending, the testimony before the master having been completed, and they are about ready to be brought before the court for trial. But it has been deemed wise, owing to certain serious and close legal questions which apply to all these claims, not to put the other claims in suit until there has been a judicial determination of such questions raised in those two suits. As far as the Wright-Martin claim is concerned, I understand there are very serious doubts as to the existence of a cause of action. The claim was assigned to an eminent lawyer in New York, who, after a most laborious examination of the whole complicated matter, advised in effect that a cause of action did not lie against this company. That case, with all the others, has been transferred by the Department of Justice to the new commission on all the war transactions, known as the War Transactions Board. Mr. NELSON of Wisconsin. Will the gentleman give the name of the attorney? Mr. WAINWRIGHT. I think it was a lawyer by the name of Myer Steinbrink. Mr. NELSON of Wisconsin. And was he not let out of the department because his services were entirely unsatisfactory? Mr. WAINWRIGHT. I am not entirely familiar with all the circumstances. Mr. NELSON of Wisconsin. Well, I will give the gentleman that information. He was let out of the Department of Justice. Mr. WAINWRIGHT. My information was simply to the The gentleman from Wisconsin speaks of the large sums paid to the contractors for aircraft during the war, and claims that there is evidence that many of these concerns were greatly overpaid. There is no question there were great overpayments to these contractors, but how much of this was due to honest mistake in the hasty settlements, which I will allude to, or whether there were elements of fraud involved I am not prepared to dis-effect that Mr. Steinbrink reported to the Department of Justice cuss further than to say that according to my understanding the War Department has not called the attention of the Department of Justice to any elements of fraud in forwarding these claims for collection. But these facts the House should know. After the armistice it was deemed desirable that these contractors resume their peace-time production as promptly as possible. To this end a settlement with the United States for the work done in the production of aircraft seems to have been considered essential. Such settlements, arrived at hastily, were made without an audit in order that the concerns in question might recommence their normal peace-time tasks. The contracts, however, distinctly provided that their books should be open to the United States for six years after the war closed in order that they might be audited and the precise sums due ascertained. Such an audit has been made by the Air Service. All contracts made by the War Department for aircraft during the war have been scrutinized with extreme care. In most of them there appeared to have been no overpayment. Some 36 of the major that in his opinion there was no cause of action, that his brief or opinion on the case was reviewed and the department disagreed with him. Naturally that may have relieved him from further consideration of the case. As I understand. it has now been sent to some other eminent counsel, a Judge Purdy, in Minnesota, who has been retained to consider all of these cases. It may be, of course, a court will sustain Mr. Steinbrink's view. The gentleman referred in connection with this case to a letter written by the Secretary of War. May I say that according to my information that was a letter which in some way mysteriously disappeared from the personal files of the Secretary of War. Mr. NELSON of Wisconsin. I will tell you where it is. It is in Mr. KELLER'S impeachment of Mr. Daugherty. The papers are there. Mr. WAINWRIGHT. However that may be, that matter speaks entirely for itself. It was a letter written by the Secretary of War to a business man of standing in Boston who had appealed to him for a further reconsideration of this case, simply asking that before the claim reported by the War Department to the Department of Justice should be put in suit there might be some reconsideration in the Department of Justice. Possibly at the instance of the Secretary of War, this not unnatural and entirely proper privilege was accorded these parties. A hearing was held before the Attorney General, with the result that the Department of Justice concluded there was no reason to disagree with the conclusions of the War Department, and the parties were notified that the matter must be put in suit. This all involved a delay of little more than a month, and I submit that the ultimate interests of the Government were in no way adversely affected. Although Mr. Hughes in his report emphasizes the necessity for making sure in the audits and final settlements that the Government is fully protected against unnecessary loss through waste and the absence of suitable factory supervision, it is my understanding that he found little evidence of positive fraud or dishonest dealings. But the gentleman from Wisconsin condemns the giving of contracts to any of these contractors that built aircraft during the war and inserted in the RECORD a list of contracts let by the Air Service. The fact is that they are practically the only concerns in the country equipped with the necessary plants, skilled personnel, and offering any assurance of responsibility and the fulfillment of their contracts. It should be pointed out that not all of the aircraft manufacturers were members of the Manufacturers' Aircraft Association, and I am informed that in placing contracts the Air Service has never given consideration to whether any bidder was or was not a member of such association. I call attention also to the fact that the contracts which have been let are not confined to the Manufacturers' Aircraft Association, but there are several contractors in the list furnished by the gentleman from Wisconsin who are not members of that association. Mr. NELSON of Wisconsin. Will the gentleman yield? Mr. NELSON of Wisconsin. The gentleman will find that they are dummies outside, but the same fellows are behind them. Mr. WAINWRIGTH. The gentleman makes an assertion which I am not prepared to accept. I question very much the accuracy of the information which the gentleman has and the source from which he has obtained it. Mr. CONNALLY of Texas. Will the gentleman yield? Mr. WAINWRIGHT. I will, but I want to get through. Mr. CONNALLY of Texas. I simply wanted to inquire if there had been any criminal prosecutions resulting from this. Mr. WAINWRIGHT. No; I understand not. Mr. BLANTON. Will the gentleman yield? Mr. WAINWRIGHT. I will yield to the gentleman for one question, but I want to complete this speech. Mr. BLANTON. The gentleman says he is not prepared to accept the statement made by the gentleman from Wisconsin [Mr. NELSON]. Is the gentleman prepared to deny the state ment? Mr. WAINWRIGHT. What statement? Mr. WAINWRIGHT. I have no information on that score, and I am not prepared to accept it or deny it. Mr. NELSON of Wisconsin. I have been informed that that is the case. I have not investigated it myself. Mr. WAINWRIGHT. The sole consideration of the War De partment in placing the aircraft contracts has been whether the bidder had a suitable plant and the necessary experience to enable him to complete the work. The aircraft industry is absolutely dependent for its support upon the Government business. It is well known that were it not for the contracts of the Army and the Navy, and to a much lesser degree the Post Office Department, this industry would starve, for there is no such thing as a commercial demand for their product. Unfortunately, in this country to-day there is practically no commercial aviation. Indeed, gentlemen, let us face the facts. If we are to maintain the Air Service of our fighting forces or of other Government departments at all it can be only by a judicious distribution of contracts and by supporting those concerns which already have the necessary facilities and skilled personnel, or else the Government must enter upon this manufacturing itself. I believe that the gentleman from Wisconsin and this House should know, however, that the greatest care has been exercised in the letting of all recent contracts. The actual cost of work has in practically all cases been ascertained with exactness, the books of the contractors being open to the War Department and examined by competent Air Service employees. The contractors' working methods have been checked by competent inspectors and every precaution has been taken to make certain that prices were fair and just. The gentleman from Wisconsin makes the grave charge that manufacturers who have built aircraft for the United States have made unconscionable profits and that various duplications of charges and exorbitant fees have run this profit up to an alarming amount. I am thoroughly satisfied that the gentleman is misinformed. Since the present administration came in on the 4th of March, 1921, as I am informed, the total of all contracts of over $10.000 each made by the Army Air Service for airplanes, engines, and spare parts is $15,233,865.94. About half of this total, I am informed, has been let to contract since the present Chief of Air Service took office. I am assured that the average profit made by these contractors has been much less than 10 per cent. In some cases when the contractors have been called upon for estimates of cost of special or extra work, work involving changes and possibly the undoing of work already done, these estimates have shown a profit of 20 per cent; but the sums involved have not been large, and this does not affect the statement just made that their average total profit has been much less than 10 per cent. In some cases I know that the contractors have actually lost money. Indeed, certain of them have met with such heavy losses that they have been forced to the wall. None of these concerns has fattened on these contracts, so far as has been observed, for on the whole it is a precarious business in which they are engaged. Further available for the fullest scrutiny by Congress, and not only this more, gentlemen, of course every contract of the Air Service is but the books of all of these contractors must be open to you for examination, as they have been to the Air Service; and I am convinced that such examination will more than confirm the statement I have made as to the profits realized. The gentleman from Wisconsin cites several contracts recently made by the Air Service, which I will discuss briefly. In one of these he states that change in shipping instructions increased the cost by $30,000. That is true. But I find that the contract as originally drawn provided for the delivery of these planes in the United States. Thereafter it became necessary to send 10 of these planes to our insular possessions, requiring packing for overseas shipment. These were large planes. They had to be shipped knocked down and in several sections. As I am informed, the cost of this work, including the disassembly, the packing, and the amount of labor and material involved, was carefully ascertained and was found to be for each plane $3,000; hence the additional cost of $30,000. The gentleman from Wisconsin states that a contract was given to the Packard Co. for motors, the cost being about $19,000 each, and claims that this cost is excessive. As a matter of fact, these are motors of a new type, larger than had ever been built for the Air Service, delivering about 700 brake horsepower. It was an experimental order for 10 motors. There was public competition in the bidding, and the prices bid varied from about $19,000 to $34,000. The Packard Co was the next to the lowest bidder, its bid only a few dollars greater than the lowest bidder, who was deemed to lack the necessary experience and equipment for the work. As justifi cation of this price, which may seem high, it may be said that for much smaller motors of between 400 and 500 brake horsepower, made in considerable quantities, the Army and the Navy are paying $9.500 each, a price believed on careful investiga tion to be entirely reasonable. Attention is called to the payment of $88,000 to the Gallaudet Co., under contract for three airplanes for $110,000, which was canceled. This was an experimental contract for an entirely new type of airplane. It is a well-known fact that the building of a first experimental plane is much more costly than subsequent planes of the same type. This contractor completed and de livered one plane and he had performed considerable work on the other two. This particular type of plane was found to be unsatisfactory and too costly to build in quantities, so it was decided not to complete the other two. It may be unnecessary to state that it is often impossible to ascertain in advance whether a new type of plane will do until it has been actually built. In this case the books of the contractor were subjected to a careful audit, the contract canceled in accordance with its terms, and the contractor paid only what he had expended, without one cent for profit. Such incidents, of course, are undesirable-indeed, unfortunate-but I believe, happily, are rare, but can not be avoided if we are to test out new ideas, new devices, new designs, which is the only way we can make prog ress in this new art about which we have so much to learn. The gentleman from Wisconsin mentioned the Barling bombing plane, built by the Air Service, as having no military value. As a matter of fact, this is the largest airplane ever built. It has a multiple power plant and the experience gained with it will be of decided value. Incidentally it may be pointed out that the contract for this plane was made before the present administration. It has not yet been tested to capacity. Tests already made, I am informed, do indicate that it will probably be capable of lifting not less than 15,000 pounds in addition to its own weight. It is believed it can be used as a bombing or as a long-distance scouting plane, and that when carrying its crew and its maximum amount of fuel can fly not less than 1,200 miles. The gentleman from Wisconsin stated that in 1920 the Air Service deliberately destroyed a plane designed by an independent manufacturer which for speed and carrying capacity was twice as efficient as this Barling bomber. The calculated carrying capacity of that particular plane, I am informed, was far below that of the Barling bomber. It was built about a novel power plant which the Air Service hoped would be suecessful, but careful and exhaustive tests showed conclusively its power plant was not effective; that it would have to be entirely redesigned. As built around this power plant it was found that the plane could not be flown without great peril to the lives of the pilots. It was never flown, so it was decided that as it was worthless for any Air Service purposes it should be destroyed. Another example of an experimental plane. The gentleman from Wisconsin assails the Air Service for carrying on what he represents to be an unwarranted propaganda, questioning the right and the duty of those best informed of the facts and most responsible for our air defense to undertake to enlighten the public through the press and by spoken word, and at every reasonable opportunity upon the serious ness of our situation and in advocacy of some reasonable policy and proper measures to make it more efficient. If those who have the information and are familiar with the subject are not to be permitted to express their views and to enlighten the country on the subject, how can we ever expect that necessary sentiment to insure us protection in this regard will be created? These men are no ordinary public servants, but gain their knowledge by assuming daily risks to life no other class of public servants incur. I know personally many of them, including General Patrick, the Chief of the Air Service, who since he assumed office has flown thousands of miles in the air in pursuance of his duties and as an example to those under his command. I repel indignantly the charge that these gallant officers of the Air Service are animated by any other than the highest, purest, most patriotic motives, not only in their conduct of the business affairs of the service but in the voice they are raising for an adequate air defense of this country of ours. They know the facts and simply wish the country to profit by the hard lessons learned from our total lack of preparation when we were plunged into the last war. We all know, or should know, how much of the enormous waste and huge total of our expenditure in the last war was directly due to our failure to heed warnings such as this. The enormous development in aeronautics, in aircraft since the war, the greatly increased importance of the Air Service as a combat arm, all point to the greater use of aircraft if unhappily another war should come, and I for one believe it to be the duty of these officers to put the facts plainly before our people. If this be propaganda, we can not have too much of it. And I must plead guilty to the same offense; for in the press, in my speeches, while Assistant Secretary of War, I lost no opportunity to make the same appeal. My last official act was to recommend as strongly as I could an increase in the strength of the Air Service, an appropriation large enough to maintain it properly and adequately, an orderly program of construction, The cause of peace certainly, Mr. Speaker, will not be promoted by permitting ourselves to become impotent on sea, on land, and in the air, or by slipping back into the same condition of total unpreparedness as cost us so dear in life and treasure in the World War. Mr. Speaker, it can be shown, if any doubt exists, that every possible effort has been made by the War Department to prevent waste and to make the appropriations for new material for the Air Service accomplish to the best degree the purpose for which they were intended, namely, to promote, in so far as their meagerness will allow, our efficiency in the air. The contracts let by the Air Service have been safeguarded in every possible way, so that no excessive profit has been made by a single contractor. The patent clauses placed in aircraft contracts are to protect the United States and to carry out the manifest will of Congress. They do not permit the payment of royalties to any but the owners of patents found to be valid. I am informed that the so-called "save harmless" clause has been objected to strenuously by one particular individual, the same who offered to the United States for a nominal price a partial license to use his patent. It is this same individual who has brought suit against the Manufacturers' Aircraft Association, the officers of both Air Services, and others. This suit is now pending in a Federal court. Now, practically all charges and the reflections upon the Air Service made by the gentleman from Wisconsin are contained in allegations in the complaint in this suit. Also, by a singular coincidence, the language used by the gentleman from Wisconsin in parts of his speech corresponds quite closely with the language used in that complaint. It is submitted that this court is the competent and proper tribunal to determine the truth or falsity of these charges, and I venture to question whether it is wise for Congress to prejudge this case or permit itself to be used by private individuals to further their own ends. Mr. NELSON of Wisconsin. Will the gentleman yield? Mr. NELSON of Wisconsin. Does not the gentleman think it would be wise for the Government to subsidize these concerns to some extent? Mr. WAINWRIGHT. I will say for the benefit of the gentleman from Wisconsin I think it is practically necessary to subsidize them. In my judgment we are very nearly doing that at the present time. I do not mean by "subsidizing" paying anything more than a reasonable profit, but that the only way we can keep them going is by giving them the work, as there is nobody else to whom we can give it. Now, may I call the attention of the House to an account appearing in the morning press-an article in the Washington Post, also by a singular coincidence-reporting the dismissal of a suit for $51,510,000 against many of these same parties. The ground of this suit appears to be that the defendant had slandered the plaintiff and his business and had entered into a conspiracy to ruin him. The court has dismissed it finally on the ground that the charges are too vague and indefinite to meet the requirements of the law as to pleading. Possibly this is the suit I have already alluded to. not before he introduced his resolution but before he made his I wish it had been possible for the gentleman from Wisconsin, speech, to make some greater inquiry of those who were informed of some of these facts. Had he done so, I believe his speech would have been of a different nature. Of course, Mr. Speaker, the War Department and the Air Service court and invite the fullest inquiry upon all these matters. By all means let us have this investigation, if it is this House, including the gentleman from Wisconsin, of the instill deemed necessary in order to convince every Member of tegrity and fidelity of the War Department and the Air Service, or to set at rest suspicions that they have been false to the sacred trust committed to their charge. In any event. Mr. Speaker, I feel the gentleman from Wisconsin will have performed a real patriotic service if his resolution and his remarks have attracted the attention of the House and of the country to the necessity for an adequate air defense, and if they will induce some action looking to a proper program in that regard. Indeed, to that end I urge that the Military and Naval Committees of this House be specially charged to inquire into this matter and to formulate and present to the House such a joint program as will provide for the proper development of the air force of the United States. In this matter, my colleagues, let us be constructive and not merely destructive. [Applause.] Mr. MCSWAIN. Mr. Speaker, will the gentleman yield? Mr. MCSWAIN. As I understood the gentleman, he said that the profits now being made by these concerns making airplanes in peace times would not exceed 10 per cent. Mr. WAINWRIGHT. That is the best of my information. Mr. MCSWAIN, Is the gentleman advised what per cent of profits were realized by these concerns that made the airplanes in time of war? Mr. WAINWRIGHT. I have not that information. Mr. MCSWAIN. The gentleman says that the excessive payments made in time of war or closely following the war were hasty. Does it not seem singular that these hasty calculations all resulted in overpayments and that none of them resulted in underpayments? If mistakes are made, why should they not be made in favor of the Government sometimes? Mr. WAINWRIGHT. I am not personally informed, nor am I familiar with the circumstances under which those settlements were made during the time of the Democratie administration immediately succeeding the war, or upon what basis the payments were made. Mr. MCSWAIN. I wonder if the gentleman and I could not agree in this, that in time of war the airplane concerns, the artillery concerns, the explosive concerns, and all others should give their services to the Government without profit, just as did 4,000,000 of our boys, who gave one year of their lives to the Government without profit, 100,000 having given their life's blood, and 300,000 their broken bodies. Mr. WAINWRIGHT. No one would more cheerfully join with the gentleman in accomplishing that result, if our people were so patriotically inclined. Mr. LAZARO. Mr. Speaker, will the gentleman yield? Mr. LAZARO. The gentleman is well posted on the subject of aviation? Mr. WAINWRIGHT. Not as familiar with it as I might be. It is a very difficult subject. Mr. LAZARO. Would the gentleman mind inserting in his remarks how we compare with the other advanced countries of the world in respect to aviation? Mr. WAINWRIGHT. I would be very glad to confer with the gentleman to bring that out so that it may be inserted at some future time in the RECORD. We are away behind the other countries, of course. Mr. LAZARO. Every day we read in the press where other countries are going forward and we are not making any progress. I am anxious to know if we are getting value received for our money. Mr. WAINWRIGHT. It is my firm conviction not only that every effort has been made and is being made but that, so far as it is humanly possible, the grants of money made by Congress for the support and development of this service and to put it upon a plane of efficiency have been used to the best advantage. Mr. BLANTON. Mr. Speaker, will the gentleman yield? Mr. BLANTON. Both the gentleman from New York [Mr. WAINWRIGHT] and the gentleman from Wisconsin [Mr. NELSON] speak of a probable investigation. I suggest to the gentleman from New York and also to the gentleman from Wisconsin that we already have 11 committees on expenditures in the various departments of the Government, and that these committees have authority already to investigate all of the expenses heretofore made by these various departments. We do not need any new investigating committee if we could get these other committees to function. Mr. WAINWRIGHT. It would seem to me it might not be a bad plan as an alternative to the gentleman's suggestion that when the present subcommittee gets through with their work on the military appropriation bill that that subcommittee of the Committee on Appropriations then devote its efforts to this purpose. and that it see how those grants of money have been applied. The SPEAKER. The time of the gentleman from New York has expired. [By unanimous consent, Mr. WAINWRIGHT was granted leave to extend his remarks in the RECORD]. activity resulting from diverting capital from tax-exempt securlties into business, more jobs, and a lower level of prices. It sounds like the millennium, but it is reasonable to think that many of these results will follow the adoption of a tax system that contains the essentials of the Mellon plan. The main features of the Mellon recommendations include a 25 per cent reduction in the tax on earned income; the reduction of the present normal tax from 4 per cent to 3 per cent, and where it is 8 per cent reduces it to 6 per cent; reduces the surtax rates by commencing their application at $10,000 instead of $6,000, and scaling them progressively upward to 25 per cent at $100,000. The plan, as I understand it, has three outstanding features, all of which are necessary to its success. They are (1) a reduction of taxes on earned income; (2) a reduction of the normal rates of taxes which the man of small income must pay; (3) a reduction of the surtaxes. There is no dispute about the necessity for writing the first two recommendations into law. It is merely a question of how far we can go with reductions. On that point it seems to me the part of wisdom to take the advice of experts who have recommended rates fixed not arbitrarily but after careful calculation by Government actuaries as to the amount of revenue which may be expected if the rates proposed are put into operation. It is easy and popular to slash rates downward. But, after all, the first requirement to be met is providing an adequate income for the Government; and rates should not be cut beyond the point of greatest return for the Government with the least amount of burden on the taxpayer. These two provisions for a reduction of normal taxes and taxes on earned incomes will result in a saving to taxpayers amounting to over $189,000,000. Much of this will affect ex-service men, who compose so large a part of the taxpayers in that class. About 70 per cent of the loss of revenue to the Government from the recommendations comes in the brackets of incomes under $10,000 a year, and only 2 per cent of the loss of revenue from incomes in excess of $100,000 a year; and it is estimated that even this 2 per cent will be more than made up in the second year of the operation of the law. It is not a rich man's bill; it is a poor man's bill; it is fair to all. The following table is interesting as showing the income tax payable on incomes of $1,000 to $10,000 under the present law and under the Mellon plan: Income tax payable upon certain earned net incomes. Mr. DARROW. Mr. Speaker, I ask unanimous consent to extend my remarks in the RECORD upon the question of tax reduction. The SPEAKER. Is there objection? Mr. BLANTON. Mr. Speaker, reserving the right to object, is this in response to the petition from so many thousand farmers that the gentleman presented here some time ago? Mr. DARROW. I think that this will be pleasing to the farmers. The SPEAKER. Is there objection? Mr. DARROW. Mr. Speaker, I favor the Mellon plan for tax reduction, because it is the only constructive plan that I have seen which promises any real and permanent relief from the high cost of living. It gets to the heart of several problems, and after reading the arguments Secretary Mellon advances and the other proposals I am firmly convinced that in the adoption of this sound and comprehensive system of taxation lies the solution of many other problems, such as housing, price of rents, getting the railroads back on an efficiency basis that will make possible lower freight and passenger rates, increased savings by reduction of taxes on earnings, greater industrial $10,000. As regards the revision of surtaxes I can see no ground for a difference of opinion when the facts of the situation are taken into consideration. Certainly there is no reason for any partisan or political division on this question. The recommendations which Secretary Mellon has made are similar to those made by his two predecessors, both of whom served under the Democratic administration. The question should be approached solely from the economic side, with a regard to the effect the revision will have, first, on the country's revenue, and, second, on the general prosperity of the country as a whole. Surtaxes were evolved during the war to make the rich pay. They did pay for a while, but now that the war is over the rich are paying no longer. Capital has been steadily disappearing into the bottomless pit of tax-exempt securities, where, so far as the Federal Government or even the business of the country are concerned, it is as unproductive as if the whole amount were invested in diamonds. Nobody wants to see America, with the opportunities, the energy, and the industrial genius which have made her the greatest nation of the world, emulate India. That country has been noted for centuries as the sink into which countless mil lions of gold, silver, and jewels find their way, to be used not in the service of the human race but for storage in treasure vaults or as ornaments. Under the present surtax rates capital does not find it profitable to take a chance. If you can get as much net income out of a safe 4 per cent tax-exempt bond as out of a speculative investment paying 11 per cent, you are not going to hesitate very long. There is no question that great fortunes are going into such bonds at an alarming rate. This fact is sufficiently demonstrated in the following table, contained in Secretary Mellon's letter to Congressman GREEN of Iowa, showing the decline of taxable incomes of $300,000 and over: Table showing decline of taxable incomes over $300,000. These figures do not indicate that the total net income of the country has declined since 1916. On the contrary, the total income has increased from over $6,000,000,000 to over $19,000,000,000, but the total amount of incomes of $300,000 and over has decreased from $992,000,000 in 1916 to $153,000,000 in 1921. It must be remembered that in 1916 there was a low surtax on this class of 10 per cent, as compared with 65 per cent in 1921. It would seem, therefore, that the only reasonable course to pursue is a reduction of the surtax to a point that makes it profitable for capital to take risks of business and also to carry its share of the tax burden. Under the present tax law a man with an income of $50,000 pays 31 per cent; of $75,000, 43 per cent; and of $100,000, 56 per cent. It will be noted, therefore, that high surtaxes are not borne only by the extreme incomes. Making a man work three days out of six for the Government imposes odds too heavy to be borne; business adventure becomes too hazardous and the high spirit of initiative disappears in discouragement. It is all right in theory to levy excessive tax rates on the rich; but we are confronted not by a theory but by a set of hard facts. So far as I have been able to observe, under the present system of taxation a large proportion of everybody's tax is passed on to the man who last buys and consumes any given article. Most manufacturers add their taxes onto the cost of the article and then fix a price that will not only give a profit but will cover the tax. It is easy to see how articles, such as, for instance, flour or cotton, or woolen clothes, which pass through many hands before reaching the ultimate consumer, are loaded down with a heavy amount of taxes, all of which come out of the final purchase price paid for the article. Home building is seriously checked through the difficulty in financing the erection and sale of houses. This matter was recently forcibly brought to my attention by a large operative builder, a man who for 20 years or more has been building dwelling houses in Philadelphia to sell to people of small or moderate means. He is seriously hampered by inability to place his mortgages. For years he had no difficulties in this direction, always having had a list of satisfied investors who were willing to buy mortgages as fast as he made them. Now these same investors decline to accept mortgages, saying, “We can not afford to buy mortgages any longer; we are putting our money into municipals and other tax-exempt securities." 66 It is not hard to find an explanation for this condition. The laws of Pennsylvania do not permit him to create a mortgage bearing more than 6 per cent interest, or to agree to pay the State tax on money at interest," which was assessed against the mortgage owner. The deduction of this tax (four-tenths of 1 per cent on the principal) reduced the net return to the purchaser to 5.6 per cent, and if the purchaser had to pay, say, 20 per cent income tax, that still further reduced his net return to 4.48 per cent. Under these circumstances the investor's choice was between buying a mortgage that actually netted him only 4.48 per cent, which had to go through the form of returning for both State and Federal taxation, on which he had to mail every six months a bill for interest and a receipt for payment, and where he was liable at times to have to wait for payment where the mortgagor was temporarily out of work, or had sickness or death in his family; and buying a municipal bond that would pay him from 4 to 5 per cent, where he was sure of always receiving his interest on the day it was due, having only to cut a coupon, and being under no necessity of returning the bond for any kind of taxation. To my mind this clearly illustrates how excessive surtaxes prevent home building. They also lead to increased rents. There is no doubt that these high taxes are to a considerable degree responsible for increased house rentals in Philadelphia, which, according to a recent survey by the Philadelphia Housing Association, are shown to be 20 per cent higher than they were a year ago. A reduction of taxes will help to lower the cost of living. If uncollected taxes in the amount of $300,000,000 a year for 20 years, or a total of $6,000,000,000, are left with the people, instead of being extracted in taxes, they will have an incalculable effect on the Nation's healthy expansion. It must, in the end, be far more beneficial to every ex-service man than a small cash bonus could possibly be. Furthermore, a sound revision of the surtaxes must result in stopping the greatest outstanding menace that confronts the country to-day-the disappearance of wealth into hiding places, where the tax collector can not get at it. In the interests of the small taxpayer the surtaxes should be revised downward. Realizing the urgency of immediate relief from the burdens of taxation the Republican members of the Ways and Means Committee of the House of Representatives, which is now considering this subject, have recommended that there be a 25 per cent retroactive reduction on income-tax returns for 1923, which will effect an immediate saving of $225,000,000 to the taxpayers of the country. This step has the full approval of Secretary Mellon, who has reported that such action can be taken without inconvenience to the Treasury. This feature will be heartily welcomed by all and is further evidence of the sincere desire to bring immediate relief. I am firmly convinced that in actual dollars and cents the majority of ex-service men will fare better as a result of a sound revision of the taxes than they would with a bonus. Nobody feels more deeply than I do the debt of gratitude which the country owes to those who risked all they had in her defense. So far as the country can actually relieve the suffering of those who are disabled there must be no counting of the cost in meeting this obligation. If Congress follows Secretary Mellon's recommendations on the question of taxation, the country may be assured that the ship of state will be charted on a true course that will lead to the port of prosperity. The country is on the upward trend; and I, for one, should see with much hesitation any departure from the present sound economic policy of retrenchment and debt payment which has brought this country to its present fortunate situation as compared with the other nations of the world. ADJOURNMENT OVER TO-MORROW. Mr. LONGWORTH. Mr. Speaker, I ask unanimous consent that when the House adjourns to-day it adjourn to meet on Thursday next. The SPEAKER. Is there objection? ORDER OF BUSINESS. Mr. WARD of North Carolina. Mr. Speaker, I ask unanimous consent to address the House for five minutes upon the question of the item in the Commerce appropriation bill touching the Lighthouse Service. The SPEAKER. The Chair would suggest to the gentleman that to-day is to be devoted to the Consent Calendar under an order previously made. The Chair does not wish to object, of course, but the calendar is quite long and a good many members are interested in it. Mr. WARD of North Carolina. Mr. Speaker, I withdraw my request for the present. My reason was that it seems to me that it is an urgent matter and that this was an appropriate moment. CONSENT CALENDAR. The SPEAKER. To-day is consent day, and the Clerk will call the Consent Calendar. TWO SIAMESE SUBJECTS FOR INSTRUCTION AT THE UNITED STATES MILITARY ACADEMY. The first business on the Consent Calendar was the joint resolution (II. J. Res. 144) authorizing the Secretary of War to receive, for instruction at the United States Military Academy at |