There has been associated with the graduated inheritance tax the plan of a graduated income tax; but the graduated income tax would serve the proposed object both less efficiently and less equitably. It taxes the man who earns the money as well as him who inherits it. It taxes earned income as well as income derived from investments; and in taxing the income derived from investments, it cannot make any edifying discrimination as to its source. Finally, it would interfere with a much more serviceable plan of taxing the net profits of corporations subject to the jurisdiction of the Federal government—a plan which is an indispensable part of any constructive treatment of the corporation problem in the near future.
The suggestion that the inheritance tax should constitute a pillar of central rather than local taxation implicitly raises a whole series of difficult Constitutional and fiscal questions concerning the relation between central and local taxation. The discussion of these questions would carry me very much further than my present limits permit; and there is room in this connection for only one additional remark. The real estate tax and saloon licenses should, I believe, constitute the foundation of the state revenues; but inasmuch as certain states have derived a considerable part of their income from corporation and inheritance taxes, allowance would have to be made for this fact in revising the methods of Federal taxation. It is essential to any effective control over corporations and over the “money power” that corporation and inheritance taxes should be uniform throughout the country, and should be laid by the central government; but no equally good reason can be urged on behalf of the exclusive appropriation by the Federal Treasury of the proceeds of these taxes. If the states need revenues derived from these sources, a certain proportion of the net receipts could be distributed among the states. The proportion should be the same in the case of all the states; but it should be estimated in the case of any particular state upon the net yield which the Federal Treasury had derived from its residents.
THE ORGANIZATION OF LABOR
Only one essential phase of a constructive national policy remains to be considered—and that is the organization of labor. The necessity for the formulation of some constructive policy in respect to labor is as patent as is that for the formulation of a similar policy in respect to corporate wealth. Any progress in the solution of the problem of the better distribution of wealth will, of course, have a profound indirect effect on the amelioration of the condition of labor; but such progress will be at best extremely slow, and in the meantime the labor problem presses for some immediate and direct action. As we have seen, American labor has not been content with the traditional politico-economic optimism.