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i^icli Uncle
By GEORGE S. BENSON President, Harding College, Searcy, Arkansas
A YOUNG 4-F of my acquaintance works at a government-operated chemical laboratory in a distant state. He came home on leave a few months ago and scratched around considerably on his father's big farm collecting rocks. He said he had always believed those shale glades might have value. Now he would find out.
More recently he was at home again, discreetly silent on the subject of his mineral samples. After his first breakfast he saddled a nag. Not pleasure; it was a business trip. He cantered directly to the home of his mother's uncle, the richest retired capitalist thereabout. When he took to horse again, he was a sadder but wiser young man of affairs.
Apparently the young man's home acres are full of a good grade of valuable ore, near the surface and not costly to recover. He had visions of incorporating a new, local industry soon after the war, offering jobs to the whole county's discharged service men and unemployed war workers. All he needed was capital — that's what he thought. He had even checked markets, demands, and prices and had drawn probable production and profit charts for his prospect.
"Uncle Jeff knows his business," the lad said woefully. "He says he has $100,000 to put in such a venture if he can figure a way to come out whole. I showed him how we could earn $100,000 easily the first year, but he got out tax sheets and showed me that a 100 per cent return on an investment of $100,000 is no good to him. The most he would be allowed to keep, along with his other income, is less than $3,000."
This young man went to a lot of trouble to learn what economists have been saying for two years. From his great-uncle's point
of view, a profit of $100,000 a year was only 2.8 per cent on a return on a $100,000 investment, thus:
Net profit $100,000
Normal profit $8,000
Normal tax 40 per cent....$ 3,200
Excess profit $92,000
E. P. tax 85 per cent 78,200
Total taxes 81,400
Net profit after taxes $ 18,600
Personal income tax 85 per cent.. 15,810
Income remaining $ 2,790
Of course, a $3,000 yearly income is $60 a week, good pay if it is a salary with no investment and no risk of financial loss. When a man puts up the tenth part of a million dollars (or when ten men go together and invest a million) it is seldom in "a sure thing." There are always risk* to run in industry.
All investors expect their money to work for them. For a man of much wealth, $100,000 earns only a small "salary." Such men are very careful therefore to put capital in a safe place with little or no danger of loss. That's the gravest prospect facing the United States at the close of the war: Danger of having service men come marching back victorious over various armies or various dictators, to find no work at home.
The American people need a great many items, and are ready to buy them. Manufacturers know how to make them, good enough for anybody at popular prices. Making these things can provide good jobs for millions of men; but will it happen? Well — there is one sure way to spoil the prospect. Keep the taxing system exactly like it is now, so people who invest in industry can't benefit from it. Investments are absolutely essential to making jobs.