Tax Expert Says Sales Tax System
Is Direct Tax Upon Poor of State
A. J. Maxwell, considered one of
the state's greatest authorities on
taxation, delivered an address Satur
day night over the radio in which he
bitterly assailed the sales tax plans,
as now being considered in the North
Carolina legislature. Mr. Maxwell |
spoke very plainly of th? causes lead- 1
ing up to the necessity for even con- ,
3itWring a sales tax lor North Caro
lina.
The address of Mr. Maxwell fol
lows:
It should be the aim of every North
Carolinian to find the best way out
of the difficulties that have deadlock
ed our General Assembly for two and
a half months, and that have such an
important bearing on the future of
, the state and the welfare of its peo
ple.
No General Assembly that has met
in North Carolina in many years has
be?n moved with more serious and
definite purpose to serve the welfare
of the people of the State. After a
session that has already run two
weeks beyond the constitutional term,
and that has given to profound consid
eration of our serious problems, it has
completely enacted but one measure
of major importance. There can be
but one answer to this exceptional ?
situation, and that is, if their zeal '
to serve the interest of the over-bur
dened taxpayers of the State, they ?'
have set an objective that they find >
under present conditions is practical- j
ly impossible of attainment. j
To be sure, the Finance Committee
revenue bill estimated to reach within i
of the House has finally reported a j
six hundred thousand dollars of the
sum demanded by the MacLean Bill. *
Its actual revenue yield, under present 1
conditions, will likely be two million j
dollars per year less than its objec- 1
tive. But in order to reach this near '
its goal they have reported a bill, set '
up in the name of tax relief, that if
enacted into law would levy the s
taxes on business and proverty ever. *
enacted in any Ameri?| n State, and t
it must be apparent to any one fa
miliar with the situation at the State \
Capital that it cannot be enacted in- {
to law. ? i
Beginning with an amendment to '
the Constitution that permitted a c
board income tax, the State has grad- t
ually built up in the last, ten years a 1
system of general fund revenue of v
fifteen million dollars. The MacLean s
bill assumed that at one stroke, in y1
these times of distress, the State t
could practically double this volume t
of revenue. '
The MacLean bill ploughed its way j'
through the General Assembly in its t
early days under the presuasive power
of tapping new sources of wealth and ii
taxation to sustain it. Its sponsors s
has'e spent anxious days looking for t
new sources of wealth to tap, and at a
the end of their search have reported d
a bill that distinctly carries less tax e
on wealth than the original Budget j
revenue bill, as will be hereafter
shown; and the only new sources that j
have been found to tax are the sources j,
that reach the food and clothing and s
all the necessary spending of all the r
people of the state. On these this bill c
would- impose a tax more than five u
times as heavy as imposed in any gen- v
eral sales tax in any American state. 0
To this there is added an additional v
tax of five per cent on every user of t
alectric lights, gas, telephones and
telegraph, to be definitely added and
collected as an additional tax upon 0
every user of these facilities. i
This program does in fact mean re- s
duction in taxes in large sums upon h
large property owners, and the larger v
the ownership of property the larger r
the reduction. This is the necessary j,
effect in shifting the base of taxation f
from property to consumption or re- t
tail sales. But it certainly offers no y
relief to the man in distress? to the t
small home owner, rural or urban? ?
who is having his fight to feed and r
clothe his family and meet other ob- t
ligations, including taxes. Responsible a
representatives of organized farmers s
of the state say that this bill will cost ,
the average fanner two dollars for j
every dollar of tax relief, and I be- c
lieve that is true. And to the unfor- {
tunates on farms, in factories, and in (
cities who da not own even a modest ,
home, the taxes imposed in this act (
are clear net additions to his burdens. ^
There i3 no virute in merely shifting ,
this burden, and certainly none in j
shifting it from ownership of prop- ,
ertv to ownership of an appetite. ,
The effect of this legislation upon
twenty-four thousand merchants in ,
North' Carolina, and its effect upon (
the whole business of merchandising
in the state, is worthy of serious con
sideration. Of course the tax will have
to be passed on in increased price of
merchandise, and in this view is not
a direct tax upon the merchant.
North Carolina has been one of the
slowest states in the union to develop
large cities, because of its commercial
disadvantages, mainly in transporta
tion costs. Our fight has always been
to maintain commerce on an unequal
competitive situation with our Vir
ginia neighbors. The flow of merchan
dise across ita border ha3 always been
and is now. relatively heavy. We can
levy no tribute there; and when we
levy one per cent gross on all retail
*ale?. we emohasize this disparity,
we further sfiackle the opportunity of
the home merchant and inevitably
strengthen the trend of purchase be
yond the border. This would be
keenly felt in commodities that are
dealt in in large volume and on close
margin, and to some extent in nearly
all classes of merchandise. Even
groceries are bought in sufficient
quantities by large users, like hotels
and restaurants, for a gross sales tax
to influence the point of purchase in
many cases.
A sales tax levied by a state necee
isarily leaves its borders wide open to
[free commerce, and its necessary ef
j feet is to shrink opportunity for bus
iness growth within its borders and
to enlarge opportunity for the growth
of business across its borders. This
is in exact contrast to the effect of
import taxes levied by an independent
sovereignty, which shrinks the oppor
tunity for business across the bound
ary and enlarges opportunity for bus
iness and profit within the boundary.
States do not have complete sov
ereignty, and a state cannot impose
any tax on commerce that crosses its
borders by freight, express, parcel"
pest or any other means of transpor
tation. This leaves a wide open road
of escape from any form of a state
sales tax, that not only avoids the
tax but deprives a home merchanfof
the business.
Buyers in this state could not only
avoid the tax by ordering merchan
dise, but we are peculiarly susceptible
to border competition where purchases
can be made with almost equal con
venience on either side of the line, in
that we are a long, narrow state, with
forty counties bordering on a state
line. 1
No state has yet experimented with
ft one per cent general gross sales tax.
The nearest approach to it is West
Virginia, with a tax on gross retail
sales of one-fifth of one per cent and
in exemption of $10,000. The law of
;hat state has been disappointing in
ts revenue yield and harmful in its
snsiness effects, and its repeal is 1
itrongly advocated by its tax author- :
ties. How much more harmful would :
>c a tax five times as large as that :
?annot be known until some state
nakes the disastrous experiment. Let 1
is hope that North Carolina will not i
'urnish this horrible example of im- i
wvcrvthing business and taxing pov- <
\rty in a pitifuly superficial gesture <
Administrative difficulties of a I
lales tax are too obvious to require 1
irgument, and furnish a sound -objec- 1
ion to this form of tax.
There is a very important sense in (
vhich it is necessary that responsible (
tovemment should consider the polit- j
cal consequences of its acts. We can- j
lot make a customs house of every j
ine of the twenty-four thousand re- i
ail stores in North Carolina, collect
ng their toll on every transaction (
rith every purchasing citizen of the
tate in the aggregate sum of nine
?lillion dollars, without creating fric- ,
ion and irritation that will weaken
he hold of party ties, even where J
hey have been held in "deep affection, *
ikI without fostering ill feeling be- .
%vteen the state and its citizenship.
The Tax Commission did not reach j
ts conclusions with respect to the (
ales tax field upon superficial s
hought. The whole subject was an- J
lyzed in its consequences and inci- t
ience3, and its conclusions represent- a
d mature consideration of the sub- j
ect in all its phases. j
If there had been attached to the i
lacLean bill, when it was introduced l
n the early days of the session, a a
ales tax raising every dollar of its i
evenue by a tax on consumption, ex- t
ept the tax savings of railroads and
itilities passed back to them, it c
/ould never have passed either house j
f the General Assembly. Then it c
ras new sources of wealth that were j
o be tapped. Then it was popular to }
ttack the Tax Commission because j
t had failed to find such new sources j
f wealth ? they were to be found. t
?he author of that bill served on the
ub-committee that spent long weeks c
anting for these new sources that '
irere to furnish the main motive .
lower to cc.rry out the provisions of
lis bill. They not only have not c
ound any new sources of wealth to ,
ax, but have cut out one minion one '
mndred thousand dollars or addl- ,
ional revenue which the Tax Com
nission caused to be written into the ,
evenue bill, including an additional ,
ax of $600,00?) on power companies
ind telephone companies carried in
lection 208 1-2. This was stricken out i
vith the active support of Mr. Mac- '
jean. Every penny of additional tax ^
:arried in the House revenue bill '
igainst railroad, power and telephone <
:ompanies is represented by estimated ?
iquivalent reduction in property tax- 1
?s. Not a nickel c* new money! And 1
;he striking out of section 208 1-2
represents a net reduction to them in i
taxes contained in the Tax Comrnis- i
sion Budget revenue bill of six hun- 1
ired thousand dollars! i
The net result is that a tax reduc
tion ia provided proportioned to the ,
ownership of property or wealth, and
a net increase in taxes is levied pro
portioned not to wealth or property
but to the necessities of consumption
? the necessity to buy food and shoes
and clothes, and other such things j
necessary to both rich and poor alike, j
There's no tax relief in it for those
who need it. There's no tax relief in
it for the farmer, who would be
caught for more new tax on his pur
chases than he would be relieved of,
on his property. There's no encour
agement for business in it. There's
no sound political economy in it.
There'* no satisfying precedent of ex
perience by any state in it. There's
no germ of state building in it.
There's another very essential thing
that cannot be found in it. There's
nothing in it that offers the slightest
hope of saving a tax dollar. That'.s an
other tremendously important phase
of this question that none of its ad
vocates have dared to think through.
It is practically universal experi
ence that when any government en
ters an important new field of taxa
tion it thereupon rapidly expands
governmental costs. That has been
our own experience. When the state
set up new sources of revenue just ten
years ago, it began to rapidly in
crease expenses. As soon as the state
withdrew from the property tax field
' the counties and cities more than ab
'sorbed the difference the second year
and then increase expenses in rapid
fashion. This was especially true of
public school expenses. This rapid
expansion, following the use of a new
source of revenue ten years ago, is
the principal cause of our present
difficulties, accentuated by present
hard times, to be sure.
Now it is proposed not only to en
ter an important new field of taxa
tion in this time of distress, but to
shift to the state the responsibility
for the last dollar of expense of op
eration of public schools in every com
munity in North Carolina. Can any
man begin to foresee what this will
mepn in increased costs and in in
creased taxation in North Carolina
two years or ten years from today? It
automatically creates the incentive in
every community in North Carolina .
to demand expense, rather than econ
omy, in public school costs. Why not?
Does not the state pay for it? What
county superintendent of schools
could hold his job under this law who
did not exert himself to get all he
could, instead of the least that would
do the job? What the result would be j
of a composite of this local influence ,
in the General Assembly in the next
five years is of course in- the realm of j
speculation, but the inevitable and ,
necessary trend of it would be up- ^
ward, and only upward. ^
Relief of burdened taxpayers in ]
North Carolina does not, in my opin- j
ion, lie in that direction. There ought ]
to be a substantial reduction in the i
present inflated, excessive, and burd- ]
ensome costs; and the 'program out to .
be so set up that any economies used j
would be immediately reflected in the j
taxes paid by the people in district or s
county where the economies are ef- ,
fectuated. We cannot expect economy
if no taxpayer can feel it except as it s
is spread out over the whole state. (
But, it is said, the MacLean bill is 1
the law of the land, and must be ob- (
served. This attitude is unworthy of 1
its advocates and as illogical as the '
:ontention that the Constitution re- 1
luires the state to furnish the i..oney t
for running the public schools, when i
it makes the county boards of com- i
missioners liable to indictment if they ?\
fail to levy the necessary taxes for c
this purpose. When did an act of the i
Seneral Assembly become superior to t
:he wisdom of the body that enacted c
it? Any statute on our books is with- <
in the province of the General Assem- t
)ly now in session; and if this one s
was enacted on a misconception, as it c
low plainly appears it was, it ought f
x> be corrected. Its sponsors say now t
:hat no new sources of wealth can be &
found to support it. The author of "]
;he MacLean bill himself is now com- t
jletely disillusioned about finding new t
sources of wealth. He has not only t
:ompletely abandoned that course, but c
le helped to eliminate some new j (
lources that had been written into the ' "
?evenue bill. They say now that ev- g
sry new dollar must come from con- j
sumption taxes. If it could not have I
>een passed ORIGINALLY on this E
inderstanding, it ought not to be J
mstained NOW on this understand- 1 5
ng. To maintain any other position G
s to maintain the advantage of a
nisunderstanding. And if it can now
>e demonstrated that a more direct
ind certain and actual measure of tax
?elief can be secured in another way,
hat ougKt to be adopted.
After having followed every phase
>f this question, I have no hesitation
n saying that can be done. And it
:an be done without handicapping
lusiness with a sales tax. I concur
'ully in the conclusion of Mr. Mac
lean's sub-committee that the Mac
lean bill cannot be sustained without
i sales tax.
The part of the present revenue bill J
tet up to sustain the MacLean bill
?epresents a shift in taxation, and it
s inevitable that the great prepond
trance of that shift ? based on con
lumption ? is to those who are least
ible to bear it. Whatever means of
?elief this General Assembly can find
'or burdened taxpayers should be di
?ect and genuine, and not put back on
:he weakest of them in some other
:onn.
The first approach should be to re
store at least a large part of the
ileven hundred thousand dollars
which the committee cut out of the
Budget revenue bill, and to restore
:he general appropriation bill to
something near the budget figure,
leaving a general balance as between
estimated state revenue and expense.
The next aproach to this problem
should a substantial reduction in
the total cost of the public schools
that has been inflated at an unreason
able rate of increase and out of pro
portion to our tax-paying ability, un
der present conditions at least. Then
let this redaction be set up so that
savings effected would be directly re
flected in the tax rates in communi
ties where the savings are made.
The Finance Committees have for |
sixty days wrestled with The problem i
of raising a minimum of twelve mil- '
lion dollars of new money to sustain
the MacLean bill, and find it cannot
be done without resort to the sales tax
for nine million dollars. If these com
mittees will get away from the nine
million that is now contemplated to
pass back in taxes on sales, and will
concentrate on the problem of three
and a half million dollars that will
not be passed back in any form of tax
to the .people they are seeking to re
lieve, they can solve that problem in
a short time.
This would represent actual net re
lief to these taxpayers, and would
make a total direct appropriation by
the state of ten million dollars to the
public schools. The increase in this
sum, together with average relief in
county road taxes already enacted,
would make an actual average net tax
reduction for property ownfers of 30
cents per hjundred. Other measures
have been enacted that provide tax
reduction ? particularly in debt ser
vice levies by providing for leveling
out debt maturities of local govern
ments, and reducing expenses of local
governments. If to these reductions
there is added a measure of real econ
omy, locally reflected in school costs,
we will have a greater reduction in
property taxes than originally con
templated in the' MacLean bill, which
it is now apparent would not be an
actual reduction but a shifting in
form of levy, to be paid in largo part
by the same people we are trying to.
relieve, and in even larger part by the
poorest classes of people.
There is no doubt in my mind as to
which of these plans represents REAL :
TAX RELIEF to the class of prop
erty owners who most need the help!
of the state, and this program can be j
carried through without disrupting,
business which is already struggling i
for existence. And it can be carried
out without entering strange fields of
taxation that are irritating as well
as burdensome. j
I have endeavored to present the
broader aspects of this question as I,
see it. I not only concede as high-!
purpose to those who advocate the ,
sales tax as I claim for myself, but 1 1
renew the tribute yrith which I began i
this address to the serious purpose of !
its advocates in the General Assembly
to achieve the largest possible meas- 1
ure of tax relief. It is .their ambition
to render a great service that has;
brought us squarely to this vital is-;
iue. It has clearly resolved itself in- '
to the one issue of sales taxation ?
taxing poverty to relieve distress : re- !
lieving wealth, in many cases, by tax
ing poverty; shriveling business op
portunity, and setting a premium on
purchases beyond the state. Why not i
ook this thing squarely in the face, '
?nd see it for what it is. before it.
jets a nine million dollar hold on our
?evenue system, and before its dam
ige to our business structure has been
vrought?
I have achieved an age and per
ipective in the service of the people
>f the state which encourages me to
lazard one criticism of our North
Carolina, for whose welfare I claim as
nuch solicitude as any other citizen,
rhis criticism has some universal ap
plication, but seems to me especially
;rue of our North Carolina. Since
ibout the period of the World War
ve have lost something of the conser
vatism that has been traditionally
?haracteristic of our people. We are
lot content with making orderly prog
?ess in any direction ? we have be- j
:ome plungers. Our nerves have taken
>n edge. When we started to go into
lebt we lunged into debt. When we
itarted to increase the scope and cost
>f public service, we lunged into a
'our hundred per cent increase in
.en years. But we cannot lunge our
lelves free of debt and its obligations,
rhat requires time and patience and
ipplication. We need to recall some
hing of the conservatism of counsel
hat marked our pre-war course, and
ontemplate a course of action that
TRUETT HENDERSON
WINS FIRST PLACE
Truett Henderson has won the
'place of valedictorian for the senior
'class of Rosman High school, accord
ling to a recent announcemnt from the
i office of Supt. G. C. Bush, with a
| scholastic average of 92.5 for the first
; three years and six month of his
high school career.
Truett nas eclipsed the records of
all his nineteen classmates. Accord
ing to his instructors, Truett has done
excellent work, has been a dependable
and likeable student and has won for
himself the admiration of his class
and friends who have learned with
Cisure of the recent honor which
come to him. Truett is the son
of Mr. and Mrs. C. W. Henderson of
Quebec.
Mildred Watkins is salutatorian,
having made the second highest aver
age in scholarship during the past
three years and six months of her
high school career. The exact aver
age was 91.2 for all her subjects. The
newly named salutatorian is the
daughter of Mr. and Mrs. L. M. Wat
kins of Rosman. Since entering high
school Mildred has not only excelled
in her academic work, but has been
prominent in many of the school's ac
tivities. She will appear as one of the [
student speakers at the high school I
commencement program, April 29th, !
at 8 o'clock p.m.
represents progress in the. direction I
of our goal that can be sustained, and ;
that gives to every citizen in every j
line of endeavor in the state the right j
to feel that the state is interested in
his welfare.
Australia is more than 25 times as
large ?33 Great Britain.
FAKE TELEGRAMS
BEING SENT OUT
j Winston-Salem, March 24 ? The ap
pearance of a number of fake tele
grama falsely notifying individuals in
various sections of the country that
I they have been awarded one of the
prizes offered by the R. J. lUyiiOlds
Tobacco company in the Camel cigar
ette contest, led officers of the com
pany to issue this statement today.
"We have learned through numer
ous letters, telegrams and newspaper
articles that practical jokers in some
sections of the country are sending
telegrams purporting to come from
us notifying individuals that they
have won a prize in our $60,000
Camel cigarette contest," the state
ment said
"We regret the appearance of these
hoaxes and wish to assure contestants
and the public generally that no
prize selections have yet been made.
In fact it will be several weeks be
fore the judges and their staffs can
possibly make selections.
"Approximately a million answers
were received in the contest Obvi
ously a fair reading of so many let
ters requires a considerable period of
time. Every letter is' being given a
careful reading. Those with special
merit must be studied.
"We want to thank all who entered
the contest and to ask them to be pa
tient. Several more weeks must
elapse before the judges can render a
decision. The names of all winners
will be included in our formal an
nouncements just as quickly as the
letters can be examined and selection?
determined."
LOTS OF FOLKS ore sending hi
One Dollar and Two Dollars to pay
on their eubieription.
THE
BREVARD UNDERTAKING CO.
D. F. MOORE and PURDE OSBORNE
SOLE OWNERS
DAY PHONE, 88
NIGHT PHONE: D. F. Moore, Phone 250
Purde Osborne, Phone 159
%
AMBULANCE Service At ALL HOURS
FR
A BROODER
AND
25 BABY CHICKS
TO BE GIVEN AWAY AT
4:00 O'CLOCK
Saturday Afternoon, March 28
Do you want these Chicks and this Brooder? If so call
at our store at any time on Saturday, ask about this gift,
f
and you may be the one who will get these Chicks and
the Brooder.
'
B. & B. Feed & Seed Co.
BREVARD, N. C.
* 't.
SPECIAL FOR THIS SATURDAY:
100-lbs, Cotton Seed Meal, $1.50; 100-lbs Hulls, 70c;
75-lbs Shorts, $1.40; 24-lbs Mother's Best Flour, 80c;
24-1 bs So-Good Flour, 65c; 5-lbs B&B Special Coffee $1
.