The present estimated margin between public receipts and expenditures for this fiscal year is very small.  Perhaps the most important work that this session of the Congress can do is to continue a policy of economy and further reduce the cost of government, in order that we may have a reduction of taxes for the next fiscal year.  Nothing is more likely to produce that public confidence which is the forerunner and the mainstay of prosperity, encourage and enlarge business opportunity with ample opportunity for employment at good wages, provide a larger market for agricultural products, and put our country in a stronger position to be able to meet the world competition in trade, than a continuing policy of economy.  Of course necessary costs must be met, proper functions of the Government performed, and constant investments for capital account and reproductive effort must be carried on by our various departments.  But the people must know that their Government is placing upon them no unnecessary burden.

TAXES

Everyone desires a reduction of taxes, and there is a great preponderance of sentiment in favor of taxation reform.  When I approved the present tax law, I stated publicly that I did so in spite of certain provisions which I believed unwise and harmful.  One of the most glaring of these was the making public of the amounts assessed against different income-tax payers.  Although that damage has now been done, I believe its continuation to be detrimental To the public welfare and bound to decrease public revenues, so that it ought to be repealed.

Anybody can reduce taxes, but it is not so easy to stand in the gap and resist the passage of increasing appropriation bills which would make tax reduction impossible.  It will be very easy to measure the strength of the attachment to reduced taxation by the power with which increased appropriations are resisted.  If at the close of the present session the Congress has kept within the budget which I propose to present, it will then be possible to have a moderate amount of tax reduction and all the tax reform that the Congress may wish for during the next fiscal year.  The country is now feeling the direct stimulus which came from the passage of the last revenue bill, and under the assurance of a reasonable system of taxation there is every prospect of an era of prosperity of unprecedented proportions.  But it would be idle to expect any such results unless business can continue free from excess profits taxation and be accorded a system of surtaxes at rates which have for their object not the punishment of success or the discouragement of business, but the production of the greatest amount of revenue from large incomes.  I am convinced that the larger incomes of the country would actually yield more revenue to the Government if the basis of taxation were scientifically revised downward.  Moreover the effect of the present method of this taxation is to increase the cost of interest on productive enterprise and to increase the burden of rent.  It is altogether likely that such reduction would so encourage and stimulate investment that it would firmly establish our country in the economic leadership of the world.