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OCIALISM, Communism, Anarchism, Syndicalism, I. W. W.-ism are seeking to make converts in their attacks upon the very foundations of our government, in their attacks upon the institutions which have made America a great democracy, affording more opportunities for success and happiness than anywhere else in the world. Although every human being hopes for ultimate success, warfare against the successful is volubly raging. The dreamer, usually honest, but usually 'impractical, the demagogue, never honest, but often too practical, the professional reformer for personal profit, are all preaching the gospel of unrest, of class hatred, of disrespect for law and order, of discontent with honest endeav

or.

Their stock in trade is appeal to the jealless ousy and cupidity of the fortunate. Capitalism is to be destroyed. Individual initiative is to be throttled. Its rewards confiscated. The lazy and indolent hope to secure to themselves the earnings of the thrifty and the diligent. As in Russia, some would use force, others would through taxation "bleed capital white." To justify confiscation, in one form or another, the faults of capitalism are magnified, its virtues decried.

Reward of Individual Initiative

Only as industry is rewarded by the possession and use of its accumulations can it be hoped that accumulations or capital will be striven for and preserved. Without the aid of capital or the accumulations of yesterday, each day is a new beginning. The mechanical aids to production encouraged under the capitalistic system have released human energy into a further multitude of inventions. Machinery has increasingly overcome the need and the hardship of manual labor, bringing increased opportunity, increased remuneration, increased possessions.

The wonderful progress and prosperity of America are due to the protection of the reward of individual initiative. The reward of individual initiative is the outstanding attribute of the capitalistic system. When Russia substituted Sovietism for individualism, only the generosity of the world saved her people from starvation.

So that the inspiration of individual reward may remain the heritage of our people, equality of opportunity must be maintained; equality of capacity is a biological impossibility. The capitalistic system has brought to all the people more comfort and greater leisure than has any other thus far tried system. Its higher evolution demands that, with the further development of the machine, there must be given greater consideration to the development of the men. If we wish which to preserve the good this system brings to humanity, we must abolish in it whatever is bad and detrimental in progress, to happiness, to liberty. Those men who have courageously and honestly demanded that the evils of the capitalistic system be corrected, should command our admiration and respect.

Safeguarding Labor and Business

There should be no child labbor. If it is impossible to restrict it legally, the moral force of the entire capitalistic system should protect child life and child opportunity. It begins with protecting womanhood and motherhood, compelled to labor, and is intelligent self-interest, intelligent self-preservation.

There should be no seven day labor week. There should be no unduly long hours of labor, undermining the health of workers, and even where this is not true, preventing them from having proper leisure for family life, for self-improvement for recreation.

There should be no treacherous business cycle with its inflation or deflation, exces

sive wages or unemployment, "feast or famine." Industry should seek levels which would result in constant production, avoiding excesses which lead to suspension of operation, resulting in home-destroying unemployment.

Our Americanization efforts, meagre and too long postponed, have left vast multitudes. of immigrants unfamiliar with American institutions, American ideals. The advantages of American political and economic life have been accepted by too many of our newly, adopted citizens without understanding. Should future immigration be viewed from the standpoint of greater material wealth for the already wealthy America, or should America insist on a quality of citizenship that will conserve the character and integrity of her institutions?

Any system of society can last only if its adherents promptly abolish evils as they develop. If this is not done from within, be assured it will be forced from without by those who will destroy with the evil all that is good."

Defense of Federal Reserve System

Congress has amended the Federal Reserve Act in ways which appear not to have improved it. The addition to the Federal Reserve Board of members representing distinctive interests sets a dangerous precedent. Representation on a body such as the Federal Reserve Board ought to be for the benefit of all the people. Representatives ought to be appointed on account of their qualifications and their technical training. There can be no objection to a farmer on the Federal Reserve Board. provided that the farmer understands the mechanism of finance and provided also that he will regard himself not as the advocate of measures which may prove of benefit to one industry of our people at the expense of others.

The incidental weaknesses which have been developed in the administration of the Federal Reserve system can readily be corrected. The unfavorable public opinion which has been drawn down upon the system can be corrected only by an intelligent understanding on the part of both the banker and the layman of its beneficent and stabilizing purposes. If America wishes a continuance of this financial structure, if its charter is to be renewed, its fundamental principles must not be perverted and American public opinion must be brought to an understanding that this system was the result of

the most painstaking study of the financial systems of the civilized world; to an understanding of the interdependence of the Federal reserve System and American Commercial life; and that unless intelligently supported, the present Federal Reserve Banks may follow the way of the First and Second banks of the United States:

Maintaining Sound Money Standard

We have a responsibility also concerning public opinion regarding the gold standard. The economic existence of a nation is dependent upon its medium of exchange. The degree of stability of that medium determines the degree of that nation's continued well-being and progress; and because so much of the superstructure of any economic condition is based upon the character of money used, there are those whose jeremiad bewails money as the root of all the maladjustments in any economic society. They, therefore, seek continuous experiments with it or its entire abolition.

History repeats itself and is doing so at the present time in the advocacy of fiat money, based on commodities, labor hours or land. It would seem that the disasters which printing huge quantities of paper money has brought to Russia and Germany would have served as a warning to, those in this country desiring to overthrow the gold standard. It would seem that the confusion of minds in Russia would not have spread to this country. With our broader education, it should be realized that money is a mere symbol of value, and generally speaking, not value itself. Hence, the creation of money by government fiat does not, in any sense, increase wealth and it is wealth which people need and desire and money only as it represents wealth. Wealth can be created only by production. Confusion in monetary standards can do more to hinder production and thereby check the increase of wealth than can almost any other method known to man. People will cease to produce unless they receive a safe return. Bankers advocate thrift. Thrift is a worthy endeavor in a country of stable currency, but a changing currency, as we have abundant evidence in past and present day history, "makes a mockery of thrift."

Frank W. Simmonds has succeeded George E. Allen as deputy manager in charge of the State Bank Division of the American Bankers Association. Mr. Simmonds was formerly with the Chamber of Commerce of the United States.

I

T has become highly important for trust company and bank executives, particularly in the exercise of fiduciary and other functions, to possess more than a superficial knowledge of the problems of taxation. The broadening scope of banking and trust company service renders such knowledge of greater value in meeting the requirements of patrons and of developing new business contacts. Of all forms of taxation, Federal or State, none probably has grown more rapidly in general use than those which are known universally as death duties, more commonly referred to in the United States as inheritance taxes,

Various Forms of Taxation

The inheritance tax has been more widely adopted than any other tax now in existence with the exception of the general property tax or some modification of it, despite the fact that many economists state that the general property tax has gone into the discard. Not more than fifteen States have a personal income tax, while probably not even that number have corporation income taxes. Many States have no specific system, of taxing corporations; only three States have a stock transfer tax and probably less than ten have a mortgage tax. We might continue down the list of special franchise taxes, coal taxes, timber taxes and various other forms of impost, but we would find that they were in most instances confined to only about five or six jurisdictions. The inheritance tax, however, has been adopted by forty-six out of the forty-eight States,

and in the remaining two States efforts have, at various times, been made to place such an exaction upon the statute books. Furthermore, the Federal Government imposes a death duty, known as an estate tax, and the territories of the United States, as well as the ten Canadian Provinces, also have imposts of a like character.

The inheritance tax does not operate until after a man's death. That is the reason that it has received a smaller degree of attention than have other taxes. But this ostrich-like attitude has ceased. Men of affairs and even the small property holder have today begun to realize that the estates which they have accumulated with such care will be materially decreased by inheritance taxes when death comes unless they make proper provisions for meeting these taxes.

Protection for Estates

The method of making such provision is still open to discussion. In fact, no scientific method has been developed. In a general way, however, it may be stated that protection for a man's estate may be secured if the matter is considered in time and if proper advice is sought. Today almost every trust company is spending large sums of money in instructing the public in regard to the care of their estates. In order, however, that the instruction may be useful, every phase of the situation should be examined. It cannot be denied that one of the most important features to be considered in connection with such protection is the inheritance tax which may be imposed' and

the methods to be taken to minimize any disastrous results arising from the operation of the tax laws. No further argument ought to be necessary to impress upon trust company executives the importance of having a full and accurate knowledge of inheritance taxation, or at least of having sources from which this knowledge can be obtained.

Divergent Laws and Interpretations

While it is true that the inheritance tax laws of some States have in many instances been; in part or in whole, derived from others, it is equally true that as these laws are developed, there has been a wide divergence from the original form, and that there are nearly as many interpretations put upon similar phrases of inheritance tax laws as there are jurisdictions which have adopted inheritance tax statutes. For instance, under precisely the same wording, one State might hold that certain property was subject to tax and another State that it was not taxable. Undoubtedly this expression, "property subject to tax," is a misnomer, since, generally speaking, it is not the property itself, but the right to transfer the property which is made taxable. This principle has been enunciated by the courts in almost every jurisdiction which imposes an inheritance tax and is one of the basic ideas underlying this form of taxation. Nevertheless this phrase is popularly used, and is far more convenient than is the phrase "property, the transfer of which is subject to tax."

It is not even necessary to seek different jurisdictions in order to find these variations of opinion in the interpretation of the law. Up to July 1, 1923, the Tax Commission of Kansas held that in determining the amount of the net estate subject to tax, the Federal estate tax was deductible. On July 1st, a new set of Commissioners came in and they immediately ruled that the Federal estate tax was not a proper deduction. This is simply typical of the ten thousand and one instances of the difficulties involved in the interpretation of the inheritance tax laws.

The man in the street, having heard much talk about inheritance taxes, is bound to seek advice on the subject. The most ob-, vious place to look for this advice is at the bank or trust company with which he does business. The question then arises, how many banks and trust companies are prepared to furnish accurate and proper advice? A man's fortune may be, in great part, dissipated because he did not receive adequate information before his death. The

question of residence, the question of where he does business, the question of what securities he holds, the question of his beneficiaries, the question of the form of his will, the question of the amount of insurance which he carries-these all enter into and play a material part in the problems involved in inheritance taxes. It may even matter greatly where the intangible evidences of his wealth, such as stocks, bonds and mortgages are located for safe keeping.

Some States deal lightly with the beneficiaries of a decedent; others impose a heavy tax, apparently upon the theory that no man has a right to leave a large amount of property to his heirs and that the State should share in every distribution occurring by reason of death.

Some jurisdictions impose a tax upon the transfer of stocks of domestic corporations or bonds issued by such corporations when owned by a non-resident decedent, others grant them an exemption. These factors must be taken into consideration in determining the investments which a man is to make. It is not too much to say that investment houses will in the not distant future advertise in connection with issues of securities put out by them, "inheritance tax features passed upon by X," referring to a well-known inheritance expert, just as today they advertise that the legality of the issue has been approved by a more or less wellknown law firm.

A decade ago wealthy men did not worry about inheritance taxes. The result was that their estates were, in many instances, cut in half. Even men who were regarded as astute financiers evaded and avoided thesubject. Their laxity may have been due to the same cause which keeps many men from making their will; it may have been due to indifference as to the financial fate of their beneficiaries or it may have been due to laziness. The most probable explanation is, however, that it was due to ignorance.

Why Accurate Information Is Necessary

The inheritance tax situation has materially changed in the last four or five years. What was true a decade ago is not true today. On every hand information in regard to inheritance taxes is sought. One university, which specializes in business courses, offers instruction in inheritance taxes. This is undoubtedly the first course in this subject which has ever been given in any institution of learning, but it appears probable that before many years are over a large number of colleges will be called upon to offer similar instruction.

There appeared recently in a prominent financial paper, an account of a man who died and left an estate of about $3,000,000, of which 23 per cent. was required for inheritance taxes. The estate, as is usually. the case where no protection is afforded, consisted of a very small amount of cash, and it became necessary to sell a considerable portion of the assets, at sacrifice prices, in order to realize funds sufficient for the payment of death duties. The tax collector is insistent. He refuses to wait. If the tax is not paid within a certain limited time, penal interest is imposed upon the amount due. Furthermore, the tax is made a lien upon the entire assets of the estate and the State may sell these assets in any manner it sees fit, in order to realize the funds necessary for the satisfaction of the tax, cost of sale, and all penalties which may be imposed.

In a different case cited recently in another financial paper, it was shown how the accident of a residence being located 25 feet on one side of a State boundary line, instead of 25 feet on the other side, resulted in the amount of tax being reduced over 300 per cent. The fact that the decedent selected the place of residence that he did was doubtless the purest accident. He certainly did not have in mind the question of inheritance taxes when he so located. In fact, it is improbable that he himself could have told on which side of the line he lived. By merest chance he selected that side of the line which was to the advantage of his beneficiaries and to the disadvantage of the taxing authorities.

Important Considerations as to Jurisdictions

It may be objected that laws should not differ so; that there should be a uniform rate of taxation throughout the country. Unfortunately, legislation in forty-eight States cannot be controlled, certainly not by the average citizen. Conditions must be accepted as they are found. If one State imposes an inheritance tax of 40 per cent. and another State imposes no inheritance tax at all, it is quite obvious that the latter State will, for inheritance tax purposes, be the most desirable State for a man to select as his residence. If one State imposes a tax upon stock of domestic corporations and upon mortgages secured by real estate located within the State when owned by a . non-resident decedent, and another State does not impose a tax under similar circumstances, it is equally obvious that a man who has a tender regard for his wife and children should avoid purchasing securities or investing his money, other factors being equal, in the State which imposes the tax.

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Theoretically, it is possible that a man's entire estate may be eaten up by inheritance taxes. While it is doubtful whether this result has ever actually occurred, yet in view of the fact that many States are increasing their inheritance tax rates, the possibility of such a result is daily augmented. As a matter of fact, several large estates have unquestionably been ruined, and one practically wiped out through the imposition of inheritance taxes.

In considering the subject of inheritance taxes, the fact should not be overlooked that almost every foreign country of importance imposes a tax of this character. In Germany, death duties may run as high as 90 per cent., and if a decedent's estate were subject to tax both in this country and in Germany, it would appear that there would be no funds left out of which to pay the full amount of tax imposed. If the tax were imposed only by one or two jurisdictions, it would not be so bad, but in the case of wealthy men, taxes are known to have been imposed by fifteen, twenty, and twenty-five jurisdictions. A famous example of this character is found in the case of the estate of the late E. C. Converse, of Connecticut, whose executors probably paid inheritance taxes to more than half the States of the Union.

In subsequent articles, the more detailed problems connected with the inheritance tax from the trust company standpoint will be given consideration. The foregoing will, however, indicate in a general way, the great importance of a knowledge of this subject to every trust company official.

The Guaranty Trust Company of New York announces the appointment of J. Luther Cleveland, Jr., as an assistant secretary of the company. Mr. Cleveland will assist in handling the company's business in the southwestern part of the United States.