J. HERBERT HODGINS December 15 1926


J. HERBERT HODGINS December 15 1926




AMAN who had used a razor for a purpose for which it was not originally made, but for which it is sometimes used in the interests of the undertaker, was given a life sentence. He was placed in a car with other prisoners and started prisonward. The convicts began asking each other the length of their individual sentences. One said he was in for a year. Another announced a commitment for three years. Finally they reached the man who had wielded the razor. “How long you in for, boy?” they asked. “Oh! from now on,” was the reply.

The story is not mine; it comes to me from General H. N. Lord, Director of the Bureau of the Budget for the United States. It was told by General Lord to emphasize the fact that after five years of a budget plan, the Administration at Washington is still carrying on.

“Constructive economy,” General Lord stresses, “is not a week end visitor in the federal establishment. It has, I trust, taken up its permanent abode with us. The federal service to-day is really practising real economy. We are not practising parsimony. We are practising simple honesty with the people of this country whose money we spend.”

With all that has been accomplished since the system of the Bureau of the Budget was established at Washington-—a system which I presume to venture holds much of inspiration to Ottawa-—I find that President Coolidge continues unrelenting where constructive economy is concerned.

I had the privilege on a recent morning of sitting in on a newspaper conference at The White House. Quite in the ordinary routine the question came before the President of the advisability of the federal administration undertaking the building of a highway to some point of great historical interest. The highway would have served but the one purpose, apparently, the fact that motorists might have had a more pleasurable drive to and from one of America’s historic homes. Mr. Coolidge made it clear that while from the aesthetic viewpoint he might like to have seen such a highway established, he still clung to his creed of utility before ornamentation. Thus, whatever task the President is compelled to encounter, he continues to have the courage of his convictions where the homely virtues are concerned.

“Primarily, we consider the corporate welfare of the federal government,” said President Coolidge during the course of his address to the Budget meeting of the United States government, held at Washington last June, “but that is not the ultimate object. The real purpose for which we are assembled is to discuss plans and adopt policies which will affect in their actual daily life the welfare, progress and prosperity of 117,000,000 people. What we do here reaches into every home in the land. It determines whether the tax-gatherer is going to require more money from the head of the household to meet the cost of maintaining the Government or whether the taxgatherer is going to leave more money with the head of the household to meet the cost of maintaining the family. Our efforts here are translated into benefits for the head of the household

and his family. This does not mean the Government should refuse to make outlays which are for the development of the country and the benefit of the people, but taking all these elements into consideration, it does mean a strict adherence to the principle of constructive economy.”

Hopeful Anticipation

ALL of which comes at a time when - Canadians are beginning to anticipate some tax reductions at Ottawa. Press despatches to the effect that the Minister of Finance is looking into the returns from the income tax and sales tax, with a view to making reductions, are pleasant reading and seem to have some basis of fact. “We have promised to ease the burden of irksome taxes and we are prepared to do that very thing,” the Hon. James A. Robb, Minister of Finance, told the Toronto Globe the other day. He added, “At the same time it should be remembered that in making that particular promise we did not mention any specific tax. You may be assured that we are not going to fall down on that promise, but it will take time, and the public must be patient until the Budget is presented to find out just where the reduction will come.”

It is not surprising that the Hon. Mr. Robb looks favorably upon the idea of tax reduction. So soon after an election which many people are disposed to say was won on the Budget which he created and sponsored, it is not surprising that the Finance Minister appreciates both the economic value and the political importance of tax reductions.

After a practical try-out of one income tax reduction, Mr. Robb has seen the outward and visible signs of business recovery which we, among others, predicted would follow in the wake of any income tax pruning.

Mr. Robb says: “Signs of good times are not lacking. One at Ottawa, trying to place his finger on the pulse of the country, cannot help but get that impression, but aside from all that we have the same expression of opinion from our great bankers, heads of our transcontinental railway systems, and it seems certain that still better times are in store for us during the coming year.”

Then we turn to similar remarks of President Coolidge, who also holds the view that tax reductions in a country serve to stimulate business in that country. President Coolidge says: “The correctness of the theory that reduction of tax rates economically applied will stimulate business and thereby increase taxable revenue is being demonstrated ” And, again: “Past experience has shown that a reduction of taxes has been followed by increased prosperity.”

Looking, then, to the experience of the republic to the south of us, it would seem that we could not go amiss were we to establish further and fuller policies looking to tax reform in this country.

Budget Results in the United States

LET us consider at least briefly just what has been accomplished in the United States since the Bureau of the Sadget was instituted. I shall quote from he President’s address at the tenth Buditudget meeting a year ago. He said; “If ^|>u will look hack at the situation which existed in June, 1921, when your first meeting was held, you will be able better to understand the tremendous results of a policy of constructive economy. At that time 5,000,000 of our people were without employment, trade and commerce were iespondent, transportation was unable to inance itself, the loss of buying power on he part of the wage earner depressed the rice of all agricultural products, our ireign relations were in an uncertain täte, we were threatened with an munition of alien goods and alien people, mut $7,000,000,000 of unfunded public bt was shortly to mature. It was almost possible to secure private credjt. The irden of taxation was overwhelming. “The action of the Government was 'mpt and effective. It is for us to see it remains sustained. The flood of . .„igration and importation was checked legislation. Our own people began to nd work. Our own goods began to find a market. Taxes were enormously reduced. Federal expenditures, which then amounted to $5,538,000,000 for that fiscal ;ar, it is now estimated, will be cut down

• $3,619,000,000 for this fiscal year, at is a saving of $1,919,000,000. Our rt term obligations were so skilfully led that instead of embarrassing ness the operation actually stimui it. The public debt then was $23,000,000. At the end of this fiscal , it is estimated it will be less than

0,000,000,000. This is a payment of out $4,000,000,000 and represents a rly saving in interest of $179,000,000.” n short, as President Coolidge points ,, taxation in the United States, since yyC Bureau of the Budget started to i'■ate, has been reduced from $54.14 r capita to $27.28.

It is now eight years since the Great ar ceased. We have had eight years of 'ace and one tax reduction in Canada,

* income tax reduction which applied ;e" the Robb Budget of 1926. By cont in the United States, since the comcement of the fiscal year 1921, there a - 'en three substantial reductions in

a benefit of this joint executive pslative effort to reduce federal ..iture in the United States has I directly to the people. The last tax ction in the United States, under the act, relieved some 2,000,000 people i paying any direct tax and reduced l'a:: burden of all other tax payers. 921 in the United States the income of a married person with no dements and a total net income of $3,000 /■¡alary was $60; in 1923 it was $7.50; 16 it is nothing. For a single person j-m income of $3,000 from salary in 'he income tax was $120: in 1923 it j-2.50; while in 1926 it is only $16.88. r;he same time, miscellaneous war lave also been materially reduced in Slvited States. These taxes were under more than fifty categories, are now reduced to five. This re\ in large measure the so-called /■e taxes which were found so irrito everyone. The revenue from these tinees is reduced by about $275,000,000. (

Canada’s Debt Reduction

JUST what have we been doing in this country in the way of reducing our public debt? Canada’s net debt, which on March 31, 1921, stood at $2,340,000,000,

ios i_k on March 31, 1923, of

I * By March, 1925, it had

$2,417,000,000, and was \zine to $2,389,000,000 in March, r i^bst government figures show - at the end of September, ' ■ 5,000,000. In other words,

1 $117,949,000 from the 93.

the Bureau of iblic debt has teen per cent, ada, the public

debt has been decreased about five per cent. At the same time in the United States, taxes have been pruned to the vanishing point so that the moderateincome individual is no longer burdened with income taxes.

A remarkable anomaly in the Canadian situation developed the other day when the Canadian Council of Agriculture, purporting to speak with authority from the viewpoint of a farmer, passed a resolution dealing with the subject of the income tax. The farmers want the income tax retained. They oppose any further reduction. “Since the income tax is essentially a tax upon urban dwellers in Canada,” remarks The Financial Post, “chiefly upon the salaried class, and is virtually no tax at all, so far as the farmers are concerned, it is small cause to wonder that Canadian editors are inclined to resent the farmers’ resolution on the income tax. They consider it a somewhat self centred and even selfish plea by the farmers. There is a disposition generally to feel that making direct taxes upon the farmer as light as possible, lighter even than upon city folks, is in itself justifiable. It is in effect, a way of bonusing the farmer, encouraging him to continue his productive work and adding slightly to the advantages of farm existence. But when the farmers pass resolutions demanding that the tax which falls heaviest upon city people, be continued upon its present onerous, unjust and annoying basis, the city editors get a little hot under the collar.”

An Abolition Campaign

IN THE meantime, a campaign to 1 abolish the income tax entirely in this country is under way. The Retail Trade Bureau of Canada is conducting the campaign and has Colonel W. C. Innes, travelling throughout Canada speaking on the subject. The Montreal Gazette commending the work, adds its voice to the plea for complete elimination of the tax on incomes from our scheme of governmental finance. Says the Gazette: “No other single factor militates so strongly against the commercial and industrial recovery of the Dominion. No other country in the world has such opportunities as Canada, but complete realization of these opportunities is impossible while the yoke of the income tax remains.”

Here is the resolution as the Canadian Council of Agriculture passed it, “Whereas income tax is a direct personal tax and is based upon the ability of each citizen to contribute to the expenses of government and should, therefore, be retained as a permanent part of our system of taxation, and whereas the Canadian Council of Agriculture has already affirmed its conviction that reductions in taxations should apply to indirect taxes in preference to the income tax; be it, therefore, resolved that this council oppose by every means in its power any effort to abolish or further reduce the income tax. The council, nevertheless, recognizes the injustice of subjecting any form of income to double taxation, and favors the adoption of measures designed to remove such inequalities in the incidence of the income tax.”

I venture to say that President Coolidge would disagree with this resolution of the Canadian Council of Agriculture. Dealing not in theory, but dealing rather in sound economics and speaking from a five years’ experience with the Bureau of the Budget and the remarkable results which it has accomplished in the United States in reducing public debts, in reducing direct taxation, and in bringing about general prosperity throughout the country, President Coolidge has given it as his belief that taxation reduction and government economy work to the wide-spread progress of the people and of the nation.

President Coolidge firmly believes that the in£h ence of these reductions on the welfar nd prosperity of his people extend be.'on^ ■'*'-■ •'ossible material reductions. “It reaches into every¿phase of the daily lives of the people,” says the President. “There are more of the necessaries, conveniences and luxuries in the homes of the people, in the city and in the open country, because the Government has let the people have more of the money they earn instead of taking so much from them in taxes.”

This refutes arguments set up on behalf of the agrarian community, that tax reductions work to the good of the city people and to the hurt of the farm people.

Let us examine how tax reduction in the United States has been made possible, and determine at the same time if it is not within the realm of possibility to introduce similar tax saving measures in Canada: In the final analysis it may be set down, that without the Bureau of the Budget, the present financial situation in United States government would not have been realized. The whole scheme of “constructive economy,” as President Coolidge so aptly and so insistently expresses it, has been built up upon the system of a budget which is just as successful in individual private life as when applied to government spendings.

Initiation of a campaign for retrenchment in the United States goes back to the term of President Harding who stressed the importance of a definite objective. He did not live to carry through his ideals but his objective was re-established by President Coolidge. Calvin Coolidge was brought up to “watch the pennies and the dollars will look after themselves.” This personal policy of watching the pennies has been rigidly carried into federal life. No economy was considered too small to be of value in the general scheme of retrenchment. I could cite some remarkable, some interesting, even some amusing instances where economy was carried out.

A few examples of governmental saving may be inspirational to Ottawa. They are taken from a wealth of exhibits which show the hearty commitment of federal agencies to the policy of saving wherever saving can be made legitimately.

Constructive Economy

THE Bureau of Standards of the United States Department of Commerce had to move a large testing machine. A benevolent contractor, as General Lord described him, offered to move it for $25,000. There was no $25,000 available due to the budget! The Bureau of Standards used its own personnel and moved the machine for less than $5,000. Likewise, by making use of its own personnel, funds being scarce because of the reductions in the budget, a concrete areaway and steps were constructed at a saving of $10,000 below what a contractor had asked for the job.

In the engineering branch of the United States Navy of every dollar expended to-day, seventy-eight cents goes into the ship, whereas in 1921 the ship got only fifty-seven cents, an increase of thirty-seven per cent, in the ship’s share of the dollar. As a result of intensive study by naval personnel, the cost of lubricating oil was reduced from $1,300,000 to half that in 1925. This one concrete saving in one year is sufficient to pay the salaries of the President’s cabinet for one full four-year presidential term.

And the efficiency of the Navy has by no means been impaired by this policy of economy. To prove it let me quote from the annual report of the Secretary of Navy who says: “It is the opinion of the department that economy has benefited the navy by eliminating extravagance and waste, by developing thrift and in particular by developing the skill, zeal and character of the navy personnel.”

I could go on quoting instances of important savings in all departments of the United States Government, for the director of the Bureau of the Budget, General H. N. Lord, has kindly furnished me with several pamphlets that clearly set forth the actual performances, but the important point is that tuffcCCrW ef'cot

of all these efforts toward retrenchmen! has resulted in a reduction of depart mental estimates by $1,456,000,000. Nt more and no less than a stupendoi s achievement; and, yet after all, it is no more and no less than the introduction of big business methods of efficiency and sound administration into government affairs. And this saving in governmental expenditures has made possible the triple reduction in taxes which has curred in the United States.

Surely in his study of the ways means by which the burden of taxa in Canada may be lessened for the pe the Finance Minister need go no fu afield than Washington. Perhaps not too much to hope that upor arrival in Washington the new Can: minister, Hon. Vincent Massey, will time to observe, to study and to to Ottawa regarding the operations i. United States of the Bureau of the Buuv which has accomplished so much tov the financial rehabilitation of governm in that country and toward the relief of tax-burdened people. The Bureau oí th Budget may still have its critics but its achievements have been of too vast a significance and of too far reaching an influence to be disregarded.

“Critics of what we are doing,” say General H. N. Lord in his facetious uf which nevertheless carries an underly. note of significance, “when savings of * sort are cited, try to explain them at by saying that probably this would have happened anyway or that w they appear like savings there are cer... factors of some intangible character t, volved that make them misleading, that only a portion of what is claimed i real saving and so on, ad infinitum. Th remind one of the pessimistic won travelling with a party in Wales. Tbj} unfortunate woman could see nothin-, . admire or to approve. At one point in tl journey the party paused in wondei amazement and awe, as there unfoldr before them a picture of majestic mour tains, rising mass upon mass, crag upt crag, peak upon peak, climbing er higher and higher, until their tower summits disappeared in enveloping cloi ‘Aren’t those mountains high!’ exclain one of the party to the pessimis,

‘Only the tops of them are,’ was the

“I hope our critics will give us a the grudging credit that the woman g the mountain.”