Andrew
Mellon,
the son of the banker, Thomas Mellon, was born in Pittsburgh
in 1855. When he took control of his father's banking house he invested
in growth industries such as coke, coal and iron. Mellon helped establish
the Aluminum Company off America, the Gulf Oil Corporation (1895),
the Union Trust Company (1898) and the Pittsburgh Coal Company (1899).
A member of the Republican Party,
Mellon served as secretary of the treasury under presidents, Warren
Harding,
Calvin
Coolidge and
Herbert
Hoover.
During his period in office (1921-32), Mellon followed policies that
involved cutting income tax rates and reducing public spending. He
also brought an end to the excess profits tax. Mellon's policies created
a great deal of controversy and he was accused of following policies
that favoured the wealthy.
The economic depression was partly blamed on Mellon's policies and
contributed to the defeat of Herbert
Hoover
in 1932.
Mellon lost in post as secretary of the treasury with the election
of Franklin D. Roosevelt in 1932.
Andrew Mellon, who established the Mellon Institute for Industrial
Research and endowed the National Gallery of Art, died in 1937.
(1)
Andrew Mellon, Taxation: the People's Business (1924)
The problem of the government is to fix rates which will bring in
a maximum amount of revenue to the Treasury and at the same time bear
not too heavily on the taxpayer or on business enterprises. A sound
tax policy must take into consideration three factors. It must produce
sufficient revenue for the government; it must lessen, so far as possible,
the burden of taxation on those least able to bear it; and it must
also remove those influences which might retard the continued steady
development of business and industry on which, in the last analysis,
so much of our prosperity depends.
Furthermore,
a permanent tax system should be designed, not merely for one or two
years nor for the effect it may have on
any given class of taxpayers but should be worked
out with regard to conditions over a
long period and with a view to its ultimate
effect on the prosperity of the country as
a whole. These are the principles on which
the Treasury's tax policy is based, and
any revision of taxes which ignores these
fundamental principles will prove merely
a makeshift and must eventually be replaced
by a system based on economic rather
than political considerations.
There is no reason why
the question of taxation should not be approached from a nonpartisan
and business viewpoint. In recent years, in any discussion of tax
revision, the question which has caused most controversy is the proposed
reduction of the surtaxes. Yet recommendations for such reductions
have not been confined to either Republican or Democratic administrations.
My own recommendations on this subject were in line with similar ones
made by Secretaries Houston and Glass, both of whom served under a
Democratic President. Tax revision should never be made the football
either of partisan or class politics but should be worked out by those
who have made a careful study of the subject in its larger aspects
and are prepared to recommend the course which, in the end, will prove
for the country's best interest.
I have never viewed taxation
as a means of rewarding one class of taxpayers or punishing another.
If such a point of view ever controls our public policy, the traditions
of freedom, justice, and equality of opportunity, which are the distinguishing
characteristics of our American civilization, will have disappeared
and in their place we shall have class legislation with all its attendant
evils. The man who seeks to perpetuate prejudice and class hatred
is doing America an ill service. In attempting to promote or to defeat
legislation by arraying one class of taxpayers against another, he
shows a complete misconception of those principles of equality on
which the country was founded. Any man of energy and initiative in
this country can get what he wants out of life. But when that initiative
is crippled by legislation or by a tax system which denies him the
right to receive a reasonable share of his earnings, then he will
no longer exert himself and the country will be deprived of the energy
on which its continued greatness depends.
This condition has already
begun to make itself felt as a result of the present unsound basis
of taxation. The existing tax system is an inheritance from the war.
During that time the highest taxes ever levied by any country were
borne uncomplainingly by the American people for the purpose of defraying
the unusual and ever increasing expenses incident to the successful
conduct of a great war. Normal tax rates were increased, and a system
of surtaxes was evolved in order to make the man of large income pay
more proportionately than the smaller taxpayer. If he had twice as
much income, he paid not twice but three or four times as much tax.
For a short time the surtaxes yielded a large revenue.
But since the close of
the war people have come to look upon them as a business expense and
have treated them accordingly by avoiding payment as much as possible.
The history of taxation shows that taxes which are inherently excessive
are not paid. The high rates inevitably put pressure upon the taxpayer
to withdraw his capital from productive business and invest it in
tax-exempt securities or to find other lawful methods of avoiding
the realization of taxable income. The result is that the sources
of taxation are drying up; wealth is failing to carry its share of
the tax burden; and
capital is being diverted into channels which yield neither revenue
to the government nor profit to the people.
(2)
George
Norris, statement on
the financial policies of Andrew
Mellon (December,
1925)
The revenue bill as passed in the House is indefensible. In a nutshell
it is a millionaires' bill. Practically all the reductions made are
on the taxes of the incomes of those who are immensely wealthy Mr.
Mellon himself gets a larger personal reduction than the aggregate
of practically all the taxpayers in the state of Nebraska. The reduction
of inheritance taxes on big fortunes contained in this bill is a greater
step backward than has been taken by Congress since the war. It was
passed by the House without fair consideration, without reasonable
opportunity for debate, and is a demonstration of the working of the
new rules just adopted by that body, enabling a few men who are alleged
leaders to dominate the House and handle it as completely as the master
controls his servant.
(3)
Gerald Nye, speech in Congress (May, 1926)
The Mellon tax revision legislation provides great reductions in taxes
to those who can best afford to pay taxes and causes the masses of
the people to pay a greater proportion of the whole tax to be collected
than was the case under the old bill... Favors have been granted by
Congress to the railroads, the bankers, and great industries time
and again. Congress considers what it has done for them 'good business';
but when the same measure of aid is asked for the farmer, it immediately
becomes paternalism and class legislation.
Available
from Amazon Books (order below)
