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Mr. RADCLYFFE. Certainly.
Mr. Rice. Are not the cotton manufacturers exporters ?
Mr. RICE. Are they not increasing their exports ?

Mr. RADCLYFFE. While we are exporting cotton goods at the rate of $10,000,000 a year we are importing cotton goods at the rate of $11,000,000 a year. We are buying $26,000,000 of woolen goods from abroad, and are not exporting a dollar's worth of woolen goods, while England sells $115,000,000 worth. Now, I am after a portion of that $115,000,000 and to stop buying $26,000,000 worth of woolen goods which we ought to make at home. The restricted market for our manufactured products is causing a good deal of the depression in business. If we had a larger market abroad for our goods we should have a larger trade. Not only do we need a change in the tariff, but we also need commercial treaties which I know you, Mr. Chairman, have advocated with great ability. While you were representing this country in Paris at the Esposition, I believe you saw the advanced condition of the industries of European countries, and how important and desirable it was that our country should have a market in Europe. We need a commercial treaty with France, and we need commercial treaties with every country with which England has a commercial treaty to-day. England secures special advantages by its treaties, and we need to be on an equal footing with her by similar treaties.

The CHAIRMAN. Specify any country except France with which England has a special commercial treaty.

Mr. RADCLYFFE. I will not mention it as a fact, but I believe it to be a fact that England has a commercial treaty with Brazil.

The CHAIRMAN. There you are mistaken. The people of Great Britain have been, for many years, averse to making commercial treaties, with the exception of the Cobden treaty made with France in 1860; and that has been a subject of a good deal of discussion as being a violation of sound principle. And now that the Cobden treaty is about expiring it is extremely questionable whether it can be renewed. I am not arguing against commercial treaties, but only mention this as you refer to them. I am not aware of any country that has them except France, which has always had two tariffs : one the conventional tariff, and the other the commercial taritt. England made a commercial treaty, known as the Cobden treaty, with France, and it has been that kind of treaty which I myself have been desirous of making with France, in order that we might get special benefits.

Mr. RADCLYFFE. While England may not have commercial treaties, I think she has secured advantages from the tariffs of other countries. I was examining some time ago the Chilian tariff (or at least the tariff of one of those South American countries), and I noticed that the goods imported from Great Britain were to pay such and such duty, while the same goods imported from other countries were to pay a higher rate of duty.

The CHAIRMAN. I think we have a treaty with Chili containing the “most favored nation clanse,” and a like treaty with every South American state, so that that distinction would not apply to us.

(Mr. Radclyfte having read a portion of his paper on the subject of taxation, the following discussion took place:)

Mr. RICE. Do you mean to say that real estate is subject to greater taxation than money invested in government bonds ?

Mr. RADCLYFFE. I certainly said so.
Mr. RICE, How so?

Mr. RADCLYFFE. Because real estate has to pay State and municipal taxation and insurance, and so much has to be allowed for repairs.

Mr. Rice. Is not insurance a contingent on real estate that is entirely separate from taxation ?

Mr. RADCLYFFE. Certainly. I was merely showing the advantages of government bonds as an investment in comparison with investment in other kinds of property.

Mr. Rice. A great deal of the real estate in our State is mortgaged, is it not!
Mr. RADCLYFFE. So it is everywhere, I expect.

Mr. RICE. Do you know any money that is loaned on property in Massachusetts at less than 6 per cent.? Is not that the regular ruling rate of interest on all money invested in mortgages in Massachusetts ?

Mr. RADCLYFFE. I should take it to be so. Mr. Rice. Now, the rate of municipal taxation in Massachusetts does not exceed 14 per cent., does it? Mr. RADCLYFFE. I do not think it does.

Mr. Rice. Take the money invested in government bonds at 4 per cent., and is not the difference fully equal to the amount of taxation on real estate? I mean, take a government bond at 4 per cent, and a mortgage bond at 6 per cent., and allow li per cent. taxation on the mortgage bond, does not the holder of the government bond pas as much in the diminished rate of interest which he receives from the money invested in government bonds ?

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Mr. RADCLYFFE. From the way you put the question it appears so, but I was making the point that there were inducements offered by government bonds to make capital inactive, and I stated that if a man invested $10,000 in real estate he would have as an outgo to allow for insurance, taxes, and repairs. You admit that, do you not?

Mr. Rice. You are familiar with what percentage real-estate owners in Boston think they ought to get on their investments. That is large enough to cover these extraordinary expenses of insurance and repairs.

Mr. RADCLYFFE. It is just large enough for them to receive 3 per cent. on the property. They do not get that interest on their investment, because if they only get 3 per cent. on the property, they have to pay that out to meet the insurance, the repairs, and the taxation.

Mr. Rice. Do you mean to say that property is rented at 3 per cent, ?
Mr. RADCLYFFE. Some of it does not rent for even that much.
Mr. Rice. I was not aware of any such rents.

The CHAIRMAN. You say that the issue of the 4 per cent. government bonds tends to make capital inactive. If a 6 per cent. bond is exchanged for a 4 per cent. bond, how is any capital made inactive by that process ?

Mr. RADCLYFFE. The money paid out by the Secretary of the Treasury in redemption of a 6 per cent. bond might be invested in active business, but the holder of the 6 per cent. bond will go and buy a 4 per cent. bond.

The CHAIRMAN. Where does the goverment get the money to take up the 6 per cent. bonds unless it sells 4 per cent. bonds ?

Mr. RADCLYFFE. But, unfortunately, all the money that is put into 4 per cent. bonds is not received from 6 per cent, bonds.

The CHAIRMAN. How is any capital made inactive by the exchange of 6 per cent. bonds for 4 per cent. bonds ?

Mr. RADCLYFFE. It is not done by the exchange of bonds. Do you mean to say that all

the money that goes into the 4 per cent. bonds is represented by 6 per cent. bonds ?

The CHAIRMAN. Every dollar. No 4 per cent. bond can be issued unless a corresponding 6 per cent, bond is retired.

Mr. RADCLYFFE. I heard of two bank presidents in Boston who, a short time ago, held a conversation on the cars, in which they were referring to the fact that there was no money to be made in the banking business, and they said that money was to be made in buying government bonds. I was going on to state that there are 660,000,000 of 6 per cents. which are now redeemable at the pleasure of the Secretary of the Treasury, and that, by their being changed into 4 per cents., an annual saving of $13,200,000 in interest could be effected. I was going to state how desirable such a decrease of interest payment would be, in order that taxation may be reduced, and I thought that the sooner that could be brought about the better.

The CHAIRMAX. But if the government bonds were taxed that could not be brought about.

Mr. RADCLYFFE. I do not advocate taxing government bonds. I have already stated that the tarift should contain a duty on tea and coffee. I would recommend also relieving active capital from taxation, and putting the tax on accumulated wealth-an income tax.

The CHAIRMAX. Is there a distinction between active capital and accumulated capital.

Mr. RadCLYFFE. I said between active capital and accumulated wealth. I want an income tax, which would fall not on what a man earns, but on what his estate shall be worth at the time of his death.

The CHAIRMAX. Is it a succession tax that you mean?

Mr. RADCLYFFF.. I mean anything that would be regarded as property at a man's death and from which he obtains an income.

The CHAIRMAN. Suppose I have $100,000 actually engaged in the business of making iron and that I am making an income out of it, would you have that taxed or not?

Mr. RADCLYFFE. Would you consider that accumulated wealth? The CHAIRMAN. Certainly. If I had $100,000, and put it into the manufacture of pig-iron, I would consider it accumulated wealth.

Mr. RADCLYFFE. I think that if an income tax can be adjusted to fall upon accumulated wealth instead of on active capital, it would be a very desirable tax.

Mr. Rice. Is it such an income tax as that that you recommend ? Mr. RADCLYFFE. I say that an income tax that would give a revenue would be desirable if it could be put on accumulated wealth.

Mr. Rice. That is, on Mr. Hewitt's pig-iron or on his income from pig-iron business?

Mr. RADCLYFFE. I should consider that, if Mr. Hewitt had accumulated a large fortune and placed it in the iron business, and if that was to be considered an estate at the time of his death, it should be taxed.

Mr. Rice. Would you only tax it at the time of death?

Mr. RADCLYFFE. No. What I mean to say is : Suppose a man earned $1,500 or $2,000 or $3,000 a year by his labor, I would not tax what was dependent entirely on the efforts of the man, but I would tax that which was really property and which he could leave.

Mr. Rice. You mean an annual income tax, not a legacy tax.
Mr. RADCLYFFE. I do not mean a legacy tax.

The CHAIRMAN. I observe that you want to relieve active capital from taxation as far as possible, which is a very proper thing to do; hence you draw the distinction. There are a great many rich men in active business and making a profit from their business, and I want to know whether you propose to tax their profits as part of their income?

Mr. RADCLYFFE. Yes, sir. Whatever is accumulated wealth should be taxed. I would avoid taxing as much as possible any dollar that is invested in the iron business or any other manufacturing business, but I would tax accumulated wealth, whether it be represented by railroad bonds, insurance stock, national-bank stock, or the income from government bonds.

The CHAIRMAN. Suppose that Mr. Rice is a very rich man in the iron business, that he owns all his own capital, that he does not owe a cent, and that he has got his mills and machinery all paid for; and suppose that I am in the same kind of business, and am a poor mani, having to borrow capital and to pay interest on it, and suppose Mr. Rice and I compete with each other; would you tax Mr. Rice and not tax me, or would you tax me and not Mr. Rice, or would you tax neither?

Mr. RADCLYFFE. I would tax neither. The CHAIRMAN. Then Mr. Rice's accumulated wealth is to go free of taxation, whereas the accumulated wealth of another man, which was loaned to me to carry on business in competition with Mr. Rice, is to be taxed ?

Mr. RADCLYFFE. Mr. Rice's accumulated capital will be employed in his business.

The CHAIRMAX. Yes; but he gets an income out of that business. Mr. Rice may farm out his whole iron manufacturing business and capital, and may have an income of $100,000 a year from it. There is the money going into active business, and Mr. Rice gets $100,000 a year income out of it; but, as his capital is employed in that way, he is to be relieved from taxation, whereas another man, with the same amount of capital invested in houses or other property, is to be taxed. Is that the theory which you wish to lay down?

Mr. RADCLYFFE. I did not say anything about houses.

The CHAIRMAN. But you said that you would tax accumulated capital which would be called an estate at a man's death.

Mr. RADCLYFFE. Certainly.
The CHAIRMAX. Would not houses be called an estate!
Mr. RADCLYFFE. Do I understand you to speak of the business of building houses?

The CHAIRMAN. No; I mean the case of a man who has his money invested in houses, and who rents them and derives an income from them. Is that man to pay an income tax, while Mr. Rice, who has his money invested in the iron business, shall not pay an income tax ?

Mr. RADCLYFFE. That would be for the persons who make the laws to say.

The CHAIRMAN. But you advise us to put on an income tax, and you ask us to draw a distinction between accumulated capital and active capital, and I want to know what the distinction is.

Mr. RADCLYFFE. I have made it as clear as I possibly can.
The CHAIRMAN. Then you may go on with your statement.

Mr. RADCLYFFE. The difficulty is, Mr. Chairman, that you always bring forward as an illustration your investments in the iron business.

The CHAIRMAN. But I put Mr. Rice in that business in order to avoid this criticism.

Mr. RADCLYFFE. I know you have got himn in now ; I consider that the iron business represents active capital, and I would not tax that. And while I consider that house property may be accumulated wealth, I can also see that it may not be accumulated wealth.

The CHAIRMAN. Take Mr. Astor's estate, for example, an enormous estate in houses, which he rents. There is no doubt about his accumulated wealth. He is about the richest man in New York in accumulated wealth. If any man is to be taxed, his is a case for taxation; yet you say you will tax him, and that you will not tas me if I put my money into the pig-iron business; now, Mr. Astor performs as useful functions in the world as I do. He supplies houses for people to live in, while I only supply pig iron to make stoves, &c. I want to get at your distinction between these two kinds of capital.

Mr. RADCLYFFE. I have given it as best I can. I do not say that such an income tax can be established ; I merely say that if it can be, and if we could have the same reve. nue from it as we had in 1870 (some 25,000,000), that would come in very handy now and help to reduce taxation in other directions.

The CHAIRMAN. It would not reduce taxation; it wonld only change the incidence of it.

Mr. RADCLYFFE. When I spoke of bonds, you thought to pin me down as if I had stated that bonds ought to be taxed; and so you strive to pin me down on this income tax proposition when I merely make it as a suggestion.

The CHAIRMAN. I do not try to pin anybody down. I am trying to get at the exact facts.

Mr. RADCLYFFE. Excuse me. I think that you cross-examine very much as a lawyer would.

The CHAIRMAX. But I am not a lawyer. I am an ordinary man of business.

Mr. RADCLYFFE. I know that you are a very able debater in Congress while I am an ordinary individual using my pen. I am more accustomed to giving suggestions in that way than to debate. I merely suggest that if the government can get 25,000,000 from a tax on accumulated property it would be an excellent thing to do.

The CHAIRMAN. I not only think it would be an excellent thing to do, but I am in favor of an income tax. I am the only Representative from the city of New York who voted to instruct the Committee of Ways and Means to report an income tax; but I want to know how to apply it. It was the business of the Committee of Ways and Means to report a bill for an income tax; but when the committee undertook to apply it, it could not do so. The thing that we want is not a suggestion to put on an income tax (for everybody can make that suggestion), but we want to know how to put on an income tax so as to make it just.

Mr. RADCLYFFE. I was about to submit a plan of a tariff and a tariff system, but you would not let me.

The CHAIRMAN. I stated that that subject belonged to the Committee of Ways and Means.

Mr. RADCLYFFE. So does the subject of an income tax, and yet you ask me for a system.

The CHAIRMAN. And that is the objection I am making to it now. Mr. RADCLYFFE. Then let us pass it by, as it belongs to the Committee of Ways and Means.

(Mr. Radclyffe then concluded the reading of his paper.)


NEW YORK, August 21, 1878. Mr. William. G. H. SMART appeared before the committee.

By the CHAIRMAN: Question. State your occupation and residence. ---Answer. I am a stonecutter, residing in Boston.

Q: Are you now engaged in that business ?-A. Yes, sir; when I have an opportunity.

Q. You mean when you can get work ?--A. Yes; when I can get work independently. Q. How do you mean?-A. I mean without working for an employer.

Q. You mean when you can contract to work yourself without the intervention of an employer?-A. Yes.

Q: In other words, you employ yourself ?-A. Yes, but under the disadvantage of having no capital.

Q. You are a mechanic not willing to take wages, and you have no capital ?-A. Yes.

Q. Be good enough to say how long it is since you had work ?-A. I have had work frequently for considerable time on that basis, until the bad times came and the general depreciation in business, since which I have not of course had such good opportunities. I have been idle in the same way as capitalists themselves have been idle, and have had to keep men idle. I have been more or less idle. But I have been gradually changing my occupation somewhat, so as to make it suit my peculiar economical creed a little better.

Q. Have you been giving attention to the labor question and to the causes of the general depression in business ?-A. I have been.

Q. Have you made up your mind what those causes are ?-A. Yes.

Q. Be good enough to state them to the committee.-A. If the committee will permit me, I think I cannot make my statement in briefer terms or in a better way than I did in criticising the lecture delivered two years ago in Boston by Hon. David A. Wells: a lecture on the very subject that the committee is now investigating.

The CHAIRMAN. But you do not expect to take up the time of this committee in reading to us a lecture of Mr. Wells, because Mr. Wells is an authority whom we all read. The thing that we want to know from witnesses is the result of their own experience in regard to the depression in labor and the remedies which they would suggest.

Mr. SMART. I did not propose anything of the kind, but simply to read a letter of


mine which I published in the Advertiser, criticising Mr. Wells's lecture and giving my own views.

The CHAIRMAN. Certainly, that is right.

Mr. SMART. It is necessary for me to say first that the first remark which Mr. Wells made in connection with the depression in business was its universality. He thought that universality was a marked feature of it, as it extended not only through the United States, but almost everywhere. Then he called attention also to geographical considerations, and subsequently, after asserting the marked absence of general causes in producing the general depression, he attempted to explain the depression by local causes chietly. It was there where I took issue with him. He mentioned a great many causes, but it is not necessary for me now to particularize. He attributed to local causes the general business depression which, he said, existed all over the world, particularly in the most advanced nations, and more especially in nations in which manufacturing industry had attained the greatest development.

The CHAIRMAN. England, for example.
Mr. SMART. England and Germany and America.

The CHAIRMAN. Do I understand you to say that the depression and bad times are worse in England than in Germany, which is much less developed ?

Mr. SMART. No, sir; I have no ineans of saying whether it is or not. I should say it is not so bad anywhere as it is in the United States, but I am not sure how the facts are in that respect.

The CHAIRMAN. While England is recognized as the most active nation in manufacturing industry and in mechanical power, and in the agencies of production, it is in that country, as I understand you, that the distress is greatest.

Mr. SMART. It is where it should be greatest, if there were not some qualifying circumstances. In England there is a large accumulation of wealth in proportion to busi

The wealth is distributed among a great number of large capitalists. We have not so much capital invested in business enterprises here as England has there.

The CHAIRMAN. Is there not a contradiction in the very statement which you have made, that the distress ought to be greatest in countries where industry is most developed ?

Mr. SMART. I am perfectly willing to be examined by you, because I see that you wish simply to eliminate error. I do not think that that does conflict, because, everything else being equal, I think my statement is true, that we may expect to find, where there is the largest development of manufacturing power, the greatest disturbances arising from the development of the manufacturing power, throngh machinery taking the place of human labor.

The CHAIRMAN. If you go to a country like England, where such development is greater than in any other part of the world, and find that the people there have suffered less than has been suffered anywhere else, is not that a direct contradiction to the principle which you have been laying down?

Mr. SMART. I think not, for this reason, that it takes a greater amount of time to bring about the same degree of disturbance in one country under different circumstances. I say that England will suffer more than any of the nations, but it will take a longer time to bring it about.

The CHAIRMAN. In the London Times, which I received yesterday, is a statement that the general business of England is recovering perceptibly, and the London Economist, of last week, has a table in which the same thing is proven, showing that in England they are again on the upward course, that they are improving, and that the general demand for goods is increasing. If that is a fact, then, with all their development of machinery and their accumulation of capital (which is the result of the development of machinery), they have passed through this crisis with much less suffering than we have. It is a fact that they have done so, because you will find by the poor-law reports that there is a steady decline of pauperism in England. That being the fact, how do you reconcile it with your statement that business depression should be greater in England than anywhere else, and that it is due to the development of machinery?

Mr. SMART. If you say positively that that is a fact, I must admit that it entirely upsets my theory.

The CHAIRMAN. In 1871 the number of paupers relieved throughout England was 1,081,000. In 1877 that figure had fallen to 728,000, and there was a steady decrease during the whole year. These facts seem to contradict the fundamental principle with which you set out.

Mr. SMART. Yes, they seem to, but there is another explanation that may be a good one. It is, that England, having such an influence on the foreign markets of the world through her free-trade system, has driven her rivals out of the foreign markets, and has recovered her business at the expense of all the rest of the manufacturing nations. Tht United States finds itself now with the whole burden of the disturbance thrown upon it, because England, being the great monopolist in manufacturing, has been able to overthrow the power of all rivals.

The CHAIRMAN. That only proves, then, that the nation which can develop itself most

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