“Actually,
any one who gives the matter unbiased consideration will realize that
it is for the benefit of the rich to plug loopholes in tax laws, since
this raises more revenues without raising rates.” With this neat bit of logic, Secretary of the Treasury Henry Morgenthau
Jr. last week opened the great 1937 hunt for rich tax dodgers launched
so suddenly by him and Franklin Roosevelt early this month . The hunt meet was not in the customary inquisition chamber, the
Senate's barnlike caucus room, but in the House Ways & Means
Committeeroom, which has much better acoustics, handsome indirect
lighting, and comfortable chairs of green-blue leather. On the long
bench were little placards identifying the committeemen for the audience.
In the centre sat old Representative Bob Doughton of Laurel
Springs, N. C., chairman of the joint committee, his bald dome almost
as bright as his Palm Beach suit; at his left, Senator Pat Harrison,
vice chairman. There was no mistaking the curiosity of the inquisitors, just as eager
to hear the names of the wealthy tax dodgers whom President Roosevelt
castigated in his message to Congress as were the newshawks
scribbling at tables below and the audience perched on chair edges. But the proceedings did not fail to recognize the formal purpose of
the investigation: to find means of plugging holes in the income tax
law, not just to ferret out individual tax dodgers. Chairman Doughton
read a short statement saying that none but “those who used flagrant
means of tax avoidance'' need be uneasy about the coming inquisition.
Secretary Morgenthau in a monotone told the committee that nowadays
there are 45,000 tax lawyers and accountants, specialists in saving
their clients taxes, that often it is difficult to tell the difference
“between tax avoidance which is proper and tax-evasion which is
supposed to be immoral” until after a long legal battle. Rich men have
split their personalities by setting up alter egos in the form of
corporations and creating losses in some to balance profits in
others. “These transactions,” said he, “partake of the same unreal
character as if a small taxpayer incorporated his household kitchen as
a restaurant and deducted his expenses and losses from his taxable
income because he has so few customers.” When Under Secretary Roswell Magill, who followed his boss, did little
more than rehearse the different kinds of tax dodges already outlined
by the President, even Senator Harrison became impatient. What were
some of the names of those people who bought single payment life
insurance policies in the Bahamas, then borrowed back their payment and
claimed deductions for the interest they paid on it? Mr. Magill said
that the Treasury thought it best to have its experts testify on the
different types of tax avoidance, one by one, giving names and examples
as they went.
