HB2S-I 
 
 .FV3 
 
HB 251 
 .F43 
 Copy 1 
 
 CAN THE ACCUMULATION OF 
 GREAT WEALTH BE REGU- 
 LATED BY TAXATION? 
 
 DISCUSSION OF THE AFFIRMATIVE BY BOW AARON A. 
 FERRIS, OF CINCINNATI, AT THE ANNUAL MEET- 
 ING OF THE OHIO STATE BAR ASSOCIA- 
 TION, AT PUT-IN-BAY, JULY 12, 1906. 
 
 6? 
 
 i 
 
K. 
 

 .F4- 
 
 Can the Accumulation of Great Wealth be 
 Regulated by Taxation. 
 
 Discussion of the Affirmative by to. Aaron A. Ferris, of Cincinnati, at the 
 
 Annual Meeting of the Ohio State Bar Association, 
 
 at Put-in-Bay, July 12, 1906. 
 
 Mr. President and Members of the State Bar Association: 
 
 In his address delivered at the laying of the corner stone 
 of the office building of the House of Representatives, April 
 14, 1906, President Roosevelt spoke these words : 
 
 •'It is important to this people to grapple with the problems 
 connected with the amassing of enormous fortunes, and the use 
 of those fortunes, both corporate and individual, in business. 
 We should discriminate in the sharpest way between fortunes 
 well won and fortunes ill won; between those gained as an in- 
 cident to performing great services to the community as a whole, 
 and those gained in evil fashion by keeping just within the lim- 
 its of mere law-honesty. Of course no amount of charity in 
 spending such fortunes in any way compensates for misconduct 
 in making them. As a matter of personal conviction, and with- 
 out pretending to discuss the details or formulate the system, 
 I feel that we shall ultimately have to consider the adoption of 
 some such scheme as that of a progressive tax on all fortunes, 
 beyond a certain amount, either given in life, or devised or be- 
 queathed upon death to any individual — a tax so framed as 
 to put it out of the power of the owner of one of these enor- 
 mous fortunes to hand on more than a certain amount to any 
 one individual; the tax, of course, to be imposed by the 
 National and not the State Government. Such taxation should, 
 of course, be merely aimed at the inheritance or transmission 
 in their entirety of those fortunes swollen beyond all healthy 
 limits. ' ' 
 
Whether these words of the president inspired the committee 
 in charge to formulate the question under discussion, it is not 
 material to inquire. In any event the subject is one which has 
 arrested the attention of every thoughtful person concerned in 
 the welfare of the human race, and who really is striving for 
 the permanency of Republican institutions. 
 
 What, then, prompted the committee to bring before this 
 association for consideration, a subject so big with importance; 
 in some respects so novel, and in every way so difficult of 
 answer? It may be assumed that the committee, alive as to the 
 questions of the day ; on the alert as to possible perils confront- 
 ing the American people, has felt, and rightly, that the State 
 Bar Association of Ohio was a safe body to consider and throw 
 light upon any question involving civil and political rights. 
 
 The first thought that arises, suggests the inquiry : Is there 
 any peril in sight, or to be foretold from any experience, that 
 would warrant any interference with, or regulation of, the 
 accumulation of wealth, great or small? 
 
 In a recent issue of the New York World (June 13), a paper 
 noted for statistics, there appeared a carefully prepared article, 
 with the heading: "Rockefeller fortune will be twenty-five 
 billions, seven hundred and thirty-two millions of dollars ($25,- 
 732,000,000) if John D. lives to be one hundred years old. 
 * * * almost three times as much gold and silver as there 
 is in circulation in banks and in all the treasure houses and mints 
 on earth to-day." 
 
 This article goes on to state : 
 
 "Nobody knows just how much Mr. Rockefeller is worth 
 at the present time. It is doubtful whether he himself could 
 give an estimate that was not a million or two off the mark. 
 Careful investigators have computed his wealth at $615,000,000, 
 within the past few weeks, and this figure is believed to be as 
 accurate as it possibly can be. 
 
 "In 1905 Mr. Rockefeller was worth $550,000,000, showing a 
 gain for the present year of $65,000,000. In 1900 he had only 
 $400,000,000, and the year before that he was poorer still, 
 $250,000,000 representing his total wealth. In 1885 he had 
 $100,000,000, in 1875 $5,000,000, in 1872 $1,000,000, in 
 1870 $50,000, in 1865 $5,000, and in 1855 not a solitary penny. 
 During the past 51 years his fortune has increased from noth- 
 ing at all to $615,000,000. 
 
3 
 
 "It has been repeatedly declared that Mr. Rockefeller is 
 already a billionaire, this estimate of his fortune being based 
 on the value of his holdings in Standard Oil and other interests. 
 As a rule these estimates may often be regarded with security 
 as fictitious, being founded more on inflated than actual values. 
 So for that reason it is more reasonable to take the most con- 
 servative estimate of Mr. Rockefeller's fortune, which places 
 his present wealth at $615,000,000. 
 
 "Mr. Rockefeller has over 33 years to live before he reaches 
 his one-hundredth birthday. During that time it is reasonable 
 to suppose that his millions will be entitled to a natural growth, 
 just the same as every other person's money grows when it is 
 judiciously invested and carefully guarded. 
 
 "From 1905 to 1906 the natural growth of his millions 
 added $65,000,000 to the principal. Year after year at this 
 rate the natural growth should become gradually larger and 
 larger, until, when Mr. Rockefeller is 99 years old, the mere 
 interest on his money should be $2,757,000,000 in one year — over 
 four times as much as he is worth at the present time." 
 
 Take the figures given as a conservative estimate of his for- 
 tune to-day, cut them in two, and divide by ten, and still his 
 fortune would be indecently large, irrational, and beyond all 
 wholesome needs or requirements. 
 
 A half century ago, a citizen of the United States, with prop- 
 erty worth a million dollars, was considered a phenomenon. 
 One could have counted the millionaires in this broad land on 
 the fingers of one hand. How is it now? It is probable that 
 there are at present more millionaires in the Senate of the 
 United States, and of greater wealth, than there were in all 
 of the states together fifty years ago. 
 
 Within the last twenty-five years, colossal fortunes have been 
 piled up by individuals, and at a rate that is appalling. Enor- 
 mous salaries, beyond the powers of any man to earn, and out 
 of all reason, have been paid to this and that official of private 
 corporations. And what conditions, moral, civil and political 
 confront the American nation at this, the threshold of the 
 twentieth century? How will the future historian write it 
 down, when he comes to tell of those conditions? Will he 
 narrate, that it was an age distinguished for its men of letters; 
 for its achievements in art, or architecture; for its men noted 
 for statesmanship ; for its religious fervor ? No ! he must re- 
 cord that we were a nation gone mad in the pursuit of money; 
 
4 
 
 that it was an age distinguished for the nurture and develop- 
 ment of trusts; celebrated for the great army of grafters in 
 political and civil life ; for its abuse of corporate franchises, 
 public and private ; for the corruption and degradation of 
 municipal government ; for the absence of political virtue ; for 
 its tendency to forget and ignore the lessons in civil liberty 
 handed down by our forefathers; and for sowing the seeds of 
 socialism and anarchy ! 
 
 No one would have the temerity for a moment to contend 
 that Mr. Rockefeller or any of the multi-millionaires of his 
 class acquired his fortune through superior skill, extraordinary 
 and unremitting labor, or through superlative wisdom, single- 
 handed and alone. It need not be averred that he has acquired 
 it through dishonest dealings, as that term is used in every-day 
 English. But he has amassed it through fortuitous manipu- 
 lation of public and private corporations, by a skillful process 
 of stock-watering; by methods of absorption and elimination — 
 absorbing of formidable rivals, and by the suppression and 
 wiping out of the more insignificant and smaller operators; 
 by stiffling competition; through the modern monstrosity of the 
 trust. And the state has made it possible and easy for the in- 
 dividual to pile up fortunes, swollen to unhealthy proportions, 
 and beyond the dreams of avarice. 
 
 Stopping for a moment to inquire how this modern develop- 
 ment has come to pass, it will be interesting to note a few of the 
 facts. That the trust is of modern growth, and that the abuse 
 of public and private franchises is of very recent date, needs 
 no extended research. 
 
 Those delegates from the states, who compiled the Articles 
 of Confederation, apparently had no dictionary containing the 
 word corporation. So, too, the Federal Constitution, that 
 splendid example of organic law, nowhere mentions the term 
 "corporation." Coming to Ohio, the Constitution of 1802 con- 
 tains not one word about the organization of corporations. 
 The nearest approach to any reference to corporations, occurs 
 in Article VIII, Section 27, under the Title Bill of Rights, 
 where it is provided — 
 
 "That every association of persons, when regularly formed 
 within this state,, and having given themselves a name, may, 
 
on application to the Legislature, be entitled to receive letters 
 of incorporation, to enable them to hold estates, real and per- 
 sonal, for the support of their schools, academies, colleges, uni- 
 versities, and for other purposes." 
 
 Great abuses grew up under this Constitution in the way 
 of special privileges, and the Constitution of 1851 followed, 
 with the broad provision, that "Corporations may be formed 
 under general laws," and with the added proviso for double 
 liability. But the double liability provision has now been ab- 
 rogated; and with no proper safe-guards in the general statutes, 
 the bars have all been let down; and, from no corporations we 
 have gone with a bound to incorporations for everything, great 
 and small, except "for carrying on professional business." 
 The doctor, the lawyer, the school-teacher, and the preacher of 
 the gospel, are barred, in Ohio, from becoming incorporated 
 for business purposes ! 
 
 The quotation assigned here for discussion puts the verb in 
 the potential form. "Can the Accumulation of Great Wealth 
 be Regulated by Taxation?" 
 
 Before advancing argument on the proposition whether it 
 is possible so to regulate the accumulation, it would perhaps be 
 well briefly to consider it in the subjunctive form — as to 
 whether it would be advisable so to regulate great wealth. 
 
 It needs no citation of authority in support of the proposition 
 that the state or nation should do anything to protect and pre- 
 serve itself. Society without government is anarchy. Granted 
 that perils confront the state, whether they be political, civil, 
 moral or international, it must be conceded that the duty of the 
 state is to put promptly in motion every force and means at 
 command to avert the danger. There are evidences enough 
 that grave perils now confront the American nation; that the 
 signs of unrest and discontent are manifest; that corruption, 
 permeating almost every branch of business and municipal gov- 
 ernment, is dulling the public conscience and sapping the moral 
 fibre of the present and the rising generations. Surely it is not 
 an overwrought imagination which foresees danger impending 
 over American institutions — to be traced for the most part to 
 the insane rush for and the accumulation of great wealth. 
 
If it is the duty of the nation to defend itself from perils, 
 there must be a lawful way of accomplishing that defense. 
 Motive is the basis for every offense against moral or civil law. 
 When a man violates the moral law, he does so through some an- 
 ticipated pleasure resulting. If he robs his neighbor, he expects 
 thereby to reap some supposed benefit. Make impossible the 
 realization of his hopes and the motive will disappear. The 
 accumulation of great hordes of money, follows the desire for it, 
 and being a menace to Republican institutions, can taxation 
 regulate it and thereby avert the danger? 
 
 Taxation the Remedy. 
 
 How can the state /ekpress the madness of mankind for the 
 accumulation of colossal wealth? The answer is, make it less 
 easy to accumulate; revise completely the whole corporation 
 law, which now permits incorporation for practically every 
 purpose in business, with nine parts of water to one of sub- 
 stance, and then allows the corporation to run and manipulate 
 with comparatively no supervision. And then, what is per- 
 haps most important of all, compel the corporation and the 
 individual to pay his just proportion of taxes. It is notorious 
 that our laws are lamentably weak both as respects special and 
 unrestricted privileges granted by the state through corporate 
 franchises, and through an imbecile system of taxation. Does 
 any one suppose that Mr. Rockefeller pays his just proportion 
 of taxes as an individual; or that any of the corporations in 
 which he is interested pays its just part of taxes for the support 
 of government? Is there a corporation in existence anywhere, 
 or a multi-millionaire, who pays the taxes he should pay accord- 
 ing to law? If there be such a corporation or individual the 
 American people would like to know its or his name, and erect 
 a monument in memory. It stands to reason that if the laws 
 for taxation were wisely made, and rigidly enforced, one great 
 impediment to the piling up of immeasurable wealth would be 
 established. 
 
 Montesquieu, in his Spirit of Laws, says (Book 13, Vol. 1) : 
 
 "The public revenues are a portion that each subject gives 
 of his property, in order to secure, or enjoy the remainder. 
 . . . Nothing requires more wisdom and prudence than 
 
the regulation of that portion of which the subject is deprived, 
 and that which he is suffered to retain. The public revenues 
 should not be measured by the people's abilities to give, but by 
 what they ought to give." 
 
 Further on this writer continues: 
 
 "It is a general rule that taxes may be heavier in proportion 
 to the liberty of the subject, and that there is a necessity for 
 reducing them in proportion to the increase of slavery. This 
 has always been and always will be the case. It is a rule derived 
 from Nature that never varies. We find it in all parts, in 
 England, Holland, and in every state where liberty gradually 
 declines^we come to Turkey." (Book 13, p. 247.) 
 
 Article I, Section 8, of the Federal Constitution provides that 
 "the Congress shall have power to lay and collect taxes, du- 
 ties, imposts, and excises, to pay the debts and provide for 
 the common defense and general welfare of the United States." 
 
 This is a very broad provision of constitutional law. And 
 there is to be found in the Constitution no limitation upon this 
 power of taxation. 
 
 The Constitution of Ohio, Article XII, Section 2, provides 
 that — 
 
 "Laws shall be passed taxing, by a uniform rule, all moneys, 
 credits, investments in bonds, stocks, joint stock companies, 
 or otherwise; and also all real and personal property, according 
 to its true value in money." 
 
 And there is no limitation in the present Constitution upon 
 the power of taxation, except that it be uniform. 
 
 Mr. Justice Story, in his Treatise on the Constitution (Sec. 
 965), asserts broadly the power to tax for other purposes than 
 for revenue, and says: 
 
 "The absolute power to levy taxes includes the power in 
 every form in which it may be used, and for every purpose to 
 which the Legislature may choose to apply it. This results 
 from the very nature of such an unrestricted power. A forti- 
 ori it might be applied by Congress to purposes for which the 
 nations have been accustomed to apply it. Now, nothing is 
 more clear from the history of commercial nations, than the 
 fact that the taxing power is often, very often, applied for 
 other purposes than revenue. It is often applied as a regu- 
 lation of commerce. It is often applied as a virtual prohibition 
 
upon the importation of particular articles, for the encourage- 
 ment and protection of domestic products and industries; for 
 the support of agriculture, commerce and manufactures; for a 
 retaliation upon foreign monopolies and injurious restrictions; 
 for mere purposes of state policy and domestic economy; some- 
 times to banish a noxious article of consumption; sometimes as 
 a bounty upon an infant manufacture or agricultural product; 
 sometimes as a suppression of particular employments; some- 
 times as a prerogative power to destroy competition and secure 
 a monopoly to the government." 
 
 Judge Cooley, in his work on Taxation, recognizes all these 
 purposes for taxation, and, in addition, asserts the power to 
 tax for moral obligations. 
 
 Chief Justice Marshall, in the great case of McCullough v. 
 Maryland (4 Wheat., 316), involving the constitutionality of 
 the law incorporating the Bank of the United States, in render- 
 ing the opinion, quotes from the preamble of the Constitution 
 those inspired words, where it is declared that: 
 
 ' ' We, the people of the United States, in order to form a more 
 perfect union, establish justice, insure domestic tranquility, 
 promote the general welfare, and secure the blessings of liberty 
 to ourselves and our posterity," 
 
 and further citing the clause relating to the enumeration of 
 powers conferred upon the Congress where it is provided 
 that the Congress shall have the power of making "all laws 
 which shall be necessary and proper for carrying into execution 
 the foregoing powers, and all other powers vested by the Con- 
 stitution in the Government of the United States, or in any de- 
 partment thereof," uses these words: 
 
 "The Government which has a right to do an act, and has 
 imposed on it the duty of performing that act, must, according 
 to the dictates of reason, be allowed to select the means. . . . 
 Let the end be legitimate, let it be within the scope of the 
 Constitution, and all means which are appropriate, which are 
 plainly adapted to that end, which are not prohibited, but con- 
 sist with the letter and spirit of the Constitution, are consti- 
 tutional." 
 
 The fundamental rule for taxation, as laid down by Adam 
 Smith (Wealth of Nations, Bk. 5, Ch. 2, Art. 4) is, that— 
 
 "The subjects of every state ought to contribute towards 
 the support of the government, as nearly as possible, in propor- 
 
9 
 
 tion to their respective abilities; that is, in proportion to the 
 revenues which they respectively enjoy under the protection 
 of the state. The expense of government to the individuals of 
 a great nation, is like the expense of management to the joint 
 tenants of a great estate, who are all obliged to contribute in 
 proportion to their respective interests in the estate." 
 
 John Stuart Mill (Pol. Econ., Bk. 2, Ch. 2) says: 
 
 "I see nothing objectionable in fixing a limit to what any 
 one may acquire by the mere favor of others, without any ex- 
 ercise of his faculties, and in requiring that if he desires any 
 further accession of fortune, he shall work for it." 
 
 The English government has, for many years, imposed an in- 
 come and a succession tax. By the Succession Act, of August, 
 1894 (57 and 58 Vict., Ch. 30), a graded rate of taxation of 
 estates was fixed, varying from one pound on estates of one 
 hundred pounds and not exceeding five hundred pounds, to 
 eight pounds per hundred on estates of 1,000,000 pounds and 
 over. 
 
 We have in Ohio the tax on collateral inheritance; and it is 
 to be deplored that the law taxing direct inheritance has been 
 repealed. But the beneficial workings of this law have been 
 fully demonstrated. 
 
 It will doubtless be contended that the state has no right to 
 regulate the accumulation of wealth by taxation, on the ground 
 that to do so would interfere with individual liberty, and would 
 tend to repress individual effort. It would be an insuperable 
 objection to such regulation, if lawful and healthy ambition were 
 thereby to be stifled. But there is a well recognized line of dis- 
 tinction between liberty and license. The state does not hesitate 
 to enact laws restraining and punishing the violation of moral 
 and civil law. Freedom of speech is a fundamental right. But it 
 must not be interpreted to mean that a man has the right to libel 
 and slander his neighbor. It permits a man to gratify his appe- 
 tites. But it forbids that he shall make a beast of himself. If, 
 then, the individual, availing himself of the powers and privileges 
 which the state has given him for the acquirement of wealth, 
 proceeds to make a glutton of himself by piling up wealth out 
 of all proportion to his possible needs, the needs of his family, 
 and the demands of society, thereby promoting the cause of 
 
10 
 
 anarchy, and imperiling the existence of the state, shall not the 
 state interfere and say to the individual : Thus far shalt thou 
 go and no farther? 
 
 Suppose for a moment, that the individual, with his accu- 
 mulated billions, should take upon himself to buy up all the 
 lands in a state or territory. There is no law against his doing 
 so. Would not the state have the power, and would it not be 
 an imperative duty, to place a limit upon his acquisitions. 
 
 The conclusion is, therefore, that the state can regulate the 
 accumulation of great wealth by taxation ; and it is the duty of 
 the state promptly to take steps in that direction, to the end 
 that justice may be established; that the general welfare may 
 be promoted: and that the blessings of liberty may be secured 
 to ourselves and our posterity. 
 

 \ 
 
 LIBRARY OF CONGRESS 
 
 013 742 027 2 •