Congress Should Override Tax Bill Veto


By ALBEN W. BARKLEY, Senator from Kentucky

Delivered before United States Senate, Washington, D. C, February 23, 1944

Vital Speeches of the Day, Vol. X, pp. 292-295.

MR. PRESIDENT, on yesterday the President of the United States sent to the House of Representatives, and indirectly to the Senate, a message vetoing the tax bill recently passed by both houses of the Congress after six or eight months of deliberation upon it. I should have preferred to discuss this veto message on a proposal to pass the bill over the President's objections, but not knowing what action the House will take, and therefore not knowing whether the Senate will be given an opportunity to vote upon the veto, I have decided to discuss it now.

The President says in his message that he regrets it, but that he had to veto the bill in the public interest. He says that many months ago he asked Congress to increase the taxes by ten and one-half billion dollars, and that—to use his own language—"persons prominent in our national life have stated in no uncertain terms that" his figure was too low.

This reference in justification of his veto is obviously to Mr. Wendell L. Willkie, the up-to-date Halley's comet darting across the firmament hither and yon to illuminate the heavens with an array of fantastic figures which neither it nor anybody can comprehend. I cannot but wonder, Mr. President, whether this spectacular celestial nomad has frightened the President into the use of figures quite as fantastic, though not as large.

Puts Net Gain Over Two Billion

The President states that while the measure purports to increase the national revenue by a little more than two billion dollars, the actual net result is a little less than one billion dollars.

The Treasury Department has but yesterday reported that the net increase in taxes provided in this bill amounts to $2,194,000,000. The staff of the Joint Committee on Internal Revenue set up by Congress estimates the net income to be around $2,300,000,000.

But let us take the figures of the Treasury Department itself, which we might well admit are conservative. This $2,194,000,000 figure is arrived at after deducting from the gross increase in revenues provided in the bill any losses from other categories that may occur by reason of the bill itself.

Whether those losses amount to $150,000,000, as the President states, or to a smaller, or a larger sum, as estimated by the Treasury, they were all taken into consideration and deducted from the gross increases carried by the bill in order to arrive at the $2,194,000,000 reported by the Treasury. It may be that figure is subject to a further readjustment on account of what the Treasury calls nonrecurring items amounting to about $75,000,000.

In order still further to belittle the amount of revenue provided in this new tax bill, the President has resorted to one of the most unjustifiable methods of calculation it is possible to conjure up, which obviously was handed to him by a mind more clever than honest.

Social Security "Freezing" He refers to an amount which he figures as $1,100,000,000, which he claims would be collected by a doubling of die Social Security taxes on March 1 of this year. I am one of the members of the Committee on Finance who voted against the freezing of the Social Security tax when it

was passed on by the committee. I not only voted on the floor of the Senate against freezing that tax, but I made an argument against it when the amendment was before the Senate for its consideration. The amendment freezing the tax at 1 per cent. instead of automatically raising it to 2 per cent, was adopted overwhelmingly both in the committee and in the Senate.

In my discussion of that proposal on the floor of the Senate, I stated that I had never regarded the moneys procured by this tax as anything but a sacred fund to be used for the payment of the worthy purposes contemplated when the Social Security Law was enacted, and that I did not at that time, nor at any other time would I, vote to increase this tax merely for the purpose of letting the Treasury use it as revenue to carry on the ordinary expenses of the Government.

"It Is Not Treasury Capital"

It is true that in order to hold this fund inviolate and obtain an income upon it the law provides that it shall be loaned to the Treasury at 3 per cent interest. But it is a loan. It is not Treasury capital. It is no more to be regarded as income in the Treasury than the money obtained by the sale of war bonds, and it must be repaid, just as they are to be repaid, the only difference being that this loan bears a higher rate of interest than any of the war bonds now being sold to the public.

But even if this social security tax should raise the amount which the President estimates, he has no right to say that if it is left in the pockets of employers and employes, instead of being collected from them, it will reduce the annual income of the Treasury by that or any other amount. It simply is not an accurate statement of the facts, and everybody knows it. As a matter of fact, it will not raise that amount because two months of the year have already elapsed, during which time social security taxes have not been and will not be collected.

In his desire to criticize the bill and complain of Congress, the President, in talking about the desire for tax simplification, said—and I quote him:

"The nation will readily understand that it is not the fault of the Treasury Department that the income taxpayers are flooded with forms to fill out which are so complex that even certified public accountants cannot interpret them. "No," says the President, with a comma, "it is squarely the fault of the Congress of the United States in using language in drafting the law which not even a dictionary or a thesaurus can make clear."

Treasury Experts Blamed

Mr. President, no man could have made that extraordinary statement who has sat in tax committees in the Capitol of the United States. If it was made by anybody who ever sat in a tax committee, it was a deliberate and unjustified misstatement in order to place upon Congress the blame for universal dissatisfaction with tax complexities, and in order to produce the illusion that the executive departments have in vain protested against this complexity.

Congress is to blame for these complexities to the extent, and only to the extent to which it has accepted the advice, the recommendations, and the language of the Treasury Department, through its so-called experts who have sat in on the passage of every tax measure since I can remember.

Every member of the House Ways and Means Committee and every member of the Senate Finance Committee knows that every time we have started to write a new tax bill in the last ten years we have started out with the universal desire to simplify the tax laws and the forms through which taxes are collected. We have attempted to adopt policies which would simplify them. When we have agreed upon a policy, we have submitted that policy to the Treasury Department to write the appropriate language to carry out that policy; and frequently the Treasury Department, through its experts, has brought back language so complicated and circumambient that neither Solomon nor all the wise men of the East could understand it or interpret it.

"Inconsequential Faults"

In his effort to justify this veto message, the President is forced, with a searchlight and a magnifying glass, to find inconsequential faults. The President states—and I quote him:

"The bill is replete with provisions which not only afford indefensible special privileges to favored groups but set dangerous precedents for the future."

As evidence in support of this statement, the President refers to the provisions of the bill permitting corporations reorganized in bankruptcy to retain certain excess-profits credits and other items attributable to the contributions of stockholders who are, to quote the President, "usually eliminated in the reorganization." This is cited as a loophole in behalf of special privileges.

As a matter of fact, nobody knows at this time whether there would be any loss whatever to the Treasury on account of this provision. It all depends upon the outcome of litigation now pending in the courts, the outcome of which no person can foresee with any degree of certainty. But even if the litigation should result in making this provision effective, it would not substantially, but would merely to a small extent, allow corporations which have come out of bankruptcy to claim and obtain the same credits which corporations which are still in bankruptcy obtain. Therefore no person can categorically claim that this provision would result in a loss to the Treasury.

Held No Ground for a Veto

The President cites the percentage depletion allowance on a few new and insignificant items in this bill, not heretofore carried in the tax bills or in the present law, and says that such allowances are questionable in any case. It is well known, Mr. President, that the Treasury has always been opposed to any sort of depletion allowances in the development or marketing of minerals; and the use by the President of the phrase "questionable in any case" indicates that his objections in this regard coincide with the traditional views of the Treasury. But according to the Treasury's own figures, the amount involved in revenue by this provision is so insignificant as to make a veto on that ground almost grotesque.

The President refers to the lumber industry as being permitted to treat income, from the cutting of timber as a capital gain rather than as annual income, and cites that provision of the bill as a loophole in favor of special privilege. In all fairness to the Congress and to the people who read the President's message, it ought to be stated that under the present law if a man owns a tract of timber and sells that timber, or sells the land on which it grows, to another person, company or industry, he is allowed under the law to pay taxes upon it as capital gain, not as annual income, for the year in which it is sold.

Gives Background of Issue

The difference between the tax provisions relating to capital gains and those relating to annual income are technical and are not understood by the average citizen or by many experts.

I have neither the time nor the disposition to go into an explanation of this difference at this time. Suffice it to say that while under the present law the owners of timber land may sell it to a lumber or milling company, or to anyone else who moves in upon it and cuts the timber and sells it, and are allowed to pay taxes on the basis of a capital gain, the person who buys, cuts and markets the timber pays taxes on an annual income basis because he is in that basis. And in order to arrive at his income for that year upon his operation in that or any other field, he is allowed to deduct the costs originally, together with the expenses of operation, to arrive at the net income upon which he will pay the tax.

But if the owner of that same land and that same timber, instead of selling it to another, moves a sawmill upon it and cuts it himself and sells it himself in the market, he is taxed upon it as income for that year. In other words, if he sellsI it outright to another, he is taxed in one way. If he cuts it himself he is taxed in another way. This discrimination was recognized by the committee as an injustice to owners of land containing timber.

"No Apology" for His Stand

I voted for this timber amendment as a member of the Finance Committee. I voted for it on the floor of the United States Senate. I signed the conference report containing it, as one of the conferees on the part of the Senate. For that vote I make no apology to any human being. I did not vote for it in order to create a fantastic or imaginary loophole to allow someone to escape taxes. I voted for it as an act of justice to those who grow timber over a period of a generation, or half a century, and who are entitled to just treatment, no matter in what manner they dispose of the timber.

The President, in order to justify his treatment of this amendment, cites his own experience as a timber man, and from his experience he regards such income as constituting annual income. I do not know to what extent the President is engaged in the timber business. I do know that he sells Christmas trees at Christmas time. They are, no doubt, of easy growth and short life, and I have no doubt that the income from the sale of them constitutes annual income, not only to him, but that such income would constitute annual income to any other persons engaged in a like enterprise.

But, Mr. President, to compare these little pine bushes with a sturdy oak, gum, poplar, or spruce which requires a generation of care and nurturing to produce in the forest and from which no annual income is derived until finally it is sold, would be like comparing a cricket to a stallion.

The President refers to a certain exemption in the bill from the excess-profits tax for natural gas pipelines, and uses that as a horrible example of loopholes which Congress had deliberately provided for special interests. The amount of taxes provided in this provision, Mr. President, according to the Treasury's own figures, would not exceed five million dollars.

He refers to commercial airlines, not more than three of which could possibly be affected by the provisions of this bill. According to the Treasury's own figures, the amount of taxes involved in this extension of the tax subsidy on mail contracts is not a penny more than $1,500,000. These are the items which the President, with a search tight and magnifying glass, has gone about to find in order to sustain the veto, in order to prove to the American people that the Congress of the United States has deliberately used the taxing power to impoverish the poor and make the rich richer.

"Implored" Against Veto

The President said that he had been advised by some not to veto this bill "on the ground," to quote his own language, "that having asked the Congress for a loaf of bread to take care of this war for the sake of this and succeeding generations, I should be content with a small piece of crust." I am one of tho?e, Mr. President, who advised the President not to veto this bill. I not only advised him, but I implored him not to veto it, because I did not then believe, and I do not now believe that the veto which he has sent to Congress was justified. I make no apology for that.

The President said that he had been advised that "having asked the Congress for a loaf of bread to take care of this war for the sake of this and succeeding generations, I should be content with a small piece of crust." He should be content. Then he states: that he might have given heed to such advice—

"If I had not noted that the small piece of crust contained so many extraneous and inedible materials."

What the "Crust" Would Buy

Mr. President, how small a piece of crust is this and how inedible is it, containing as it does two and one-quarter billion dollars? How small a piece of crust is this, and how inedible is it? This "small piece of inedible crust" is more than the national debt of the United States Government prior to the First World War. This "small piece of inedible crust" is more than twice the annual cost of the Federal Government prior to the first war. This "small piece of inedible crust" constitutes a sum of money large enough to pay the entire $1,350,000,000 which Congress last week authorized to be expended for the relief of human suffering in occupied territories and still leave a billion dollars. This "small piece of inedible crust" constitutes a sum of money large enough to buy many airplanes, tanks, and many millions of rounds of ammunition. It is large enough to set up many hospitals for the relief of those injured in this war. That piece of inedible crust constitutes a sum large enough to pay two-thirds of the expenses of the mustering-out pay for the armed services of the United States which Congress passed only a few weeks ago, and which the President himself recommended and signed.

To refuse, Mr. President, this small piece of inedible crust is the same as if a starving man were to say to his would-be benefactor, "Unless you serve me with a full eight-course dinner I will not eat a bite."

In his effort to belittle and discredit Congress throughout his veto of this bill, the President says:

"It is not a tax bill but a tax-relief bill, providing relief not for the needy but for the greedy."

That statement, Mr. President, is a calculated and deliberate assault upon the legislative integrity of every member of the Congress of the United States. The members of Congress may do as they please. But as for me, 1 do not propose to take this unjustifiable assault lying down.

For thirty-one years I have continuously represented the great Commonwealth of Kentucky in the Congress of the United States, fourteen years in the House of Representatives almost without opposition in my own party or in the Republican Party throughout that entire period. When my present term as a Senator shall have expired I will have served that great Commonwealth continuously for a period of thirty-two years.

Unless I am misinformed, that constitutes a longer period of service than can be claimed by any other previous Kentuckian who has served in either branch of the Congress.

When my present term in the Senate shall have expired I will have served in this body lor eighteen years continuously, which is a longer period than any previous Kentuckian can claim for continuous service in the Senate.

Mr. President, out of the fullness of my heart I entertain a profound gratitude to the people of my State for giving me the opportunity to serve them and the nation during this tragic period of our history. On the 27th day of next July I will have served as majority leader of this body for seven years. You may be surprised to know that, so far as I have been able to trace the record back in Senatorial history, this is nearly twice as long as any other man has served as majority leader of this body in any political party.

Mr. President, this is the first time during that long service, which I had thought was honorable, when I have been accused deliberately of voting for a bill that constituted a relief measure impoverishing the needy and enriching the greedy.

"Carried Roosevelt Flag"

Mr. President, for twelve years I have carried to the best of my ability the flag of Franklin D. Roosevelt. For the past seven years I have carried the flag of this Administration as majority leader of the Senate, and during these years I have borne that flag with pride because 1 felt that President Roosevelt in himself constituted a dynamic leader in the great crisis in the history of our country and the world for whom the people yearned.

I dare say that during the past seven years of tenure as majority leader I have carried that flag over rougher territory than was ever traversed by any previous majority leader. Sometimes 1 have carried it with little help here on the Senate floor and more frequently with little help from the other end of Pennsylvania Avenue.

Whether I have made a good majority leader, an indifferent majority leader or a bad majority leader, the record itself will speak. There is nothing in that record that I would now change; there is nothing in that record that I would not repeat under the same circumstances that existed during this course of my legislative history.

But, Mr. President, there is something more precious to me than any honor that can be conferred upon me by the Senate of the United States or by the people of Kentucky or by the President of this Republic, and that is the approval of my own conscience and my own self-respect. That self-respect and the rectitude of that conscience 1 propose on this occasion to maintain.

Plans to Resign Today

I thank heaven that my future happiness does not depend upon whether I shall retain the post of majority leader of the Senate for another hour. As proof of that, Mr. President, and in confirmation of this statement, I have called a conference of the Democratic majority for 10:30 o'clock tomorrow morning in the conference room of the Senate Office Building, at which time my resignation will be tendered and my services terminated in the post which I now hold at this desk.

Before leaving it, Mr. President, I wish to say that I have disagreed many times with my colleagues here on both sides of the political aisle, but I have sought to earn their respect and their esteem. I wish to express my deep appreciation for the courtesies which I have uniformly received before I depart from this station. I shall carry with me to my dying day the most sacred memories of long and honorable service in the two branches of the Congress of the United States.

Mr. President, let me say, in conclusion, that if the Congress of the United States has any self-respect yet left, it will override the veto of the President and enact this tax bill into law, his objections to the contrary notwithstanding.