Mr. HALE. I do not think it would include that. Mr. Johnson put that in there; that is his portion of the bill, and he can probably explain that better than I could. If I objected to that provision, it might seem as I had some personal interest involved in the bill. Mr. TILSON. It would rule you out, would it not?

Mr. HALE. Unquestionably.

Mr. TILSON. It would rule you out, because the field clerks got more than $60 a month?

Mr. HALE. I want to say that I hold no brief for the field clerks; but you must take into consideration that, while they got $1,200 a year, they paid 57 cents a day for their rations, and they bought their own equipment, and had many other expenses, so that they were worse off than the top sergeant.

I was won- .

Mr. TILSON. I am not disparaging them in any way. dering whether they were discriminated against in any way.

Mr. HALE. Mr. Johnson can explain that much better than I can. Mr. TILSON. With your explanation as you have made it, I am not at all reconciled to the provision by which $240 would be given to the man who had been in the service 65 days, and only the same amount to a man who had been in the service eight months.

Mr. DICKINSON. You were suggesting a while ago, Mr. Hale, that a specific tax imposed for the purpose of paying any bonus that may be given in the bill might be held unconstitutional. Might not the same question be raised as against levying an additional tax upon large incomes, for that specific purpose, that that also might be held to be unconstitutional? Would not the same question arise to which you referred, that it was class legislation?

Mr. HALE. I hardly think so. I think, as long as there is an amendment to the Constitution at the present time providing for an income tax, and no specific amount named as to what those income taxes will be

Mr. DICKINSON (interposing). That is for all purposes?

Mr. HALE. That is it exactly.

Mr. DICKINSON. Then your idea is to increase the percentage on large incomes, but not for the specific purpose of paying these bonuses? If you increase it for the specific purpose of paying this bonus provided in this legislation, would not that be class legislation?

Mr. HALE. It probably would be considered class legislation if it was clearly defined as applying to this bonus. But you asked us to state how this revenue was to be raised to meet this additional bond issue, and we have replied by saying a graduated specific income tax. Mr. DICKINSON. Without specifically mentioning that it is for this purpose?

The CHAIRMAN. I do not see how that could apply to a specific tax there and have it so covered up as not to show the purpose for which it was to be used.

Mr. HALE. Just increase it 2 per cent, and graduate it.

The CHAIRMAN. Then the men who passed that law, if they were called upon to answer the question, "What did you do it for?".

Mr. HALE. Just a minute; let me make this statement: If the war had continued for six months more, an additional tax would have had to be raised.

The CHAIRMAN. And where could we have put it? Do you know? I do not.

Mr. HALE. It would have been necessary to find a way.

The CHAIRMAN. Yes; it would have been necessary to find a way; and we would have found a way. There are many ways to raise this money by taxing the people. But I am just suggesting the question that if you add 2 per cent to incomes to meet this obligation or bonus, how could it be done without divulging the purpos.?

Mr. HALE. No

The CHAIRMAN. I will not ask you to go into that; that is just a supposition. There are other men who want to be heard to-day. Mr. DICKINSON. I want to get this clear: It was said that objection would be made to a specific tax on the ground that it might be held to be unconstitutional. It was suggested to me then, that if you were to provide for the payment of this proposed bonus by levying an additional income tax, and it was so written in the bill, that might be held for the same reason unconstitutional. But if the income tax were increased without specifically mentioning for what purpose it was to be used, it might not be held unconstitutional; possibly, not being within the letter of the law, the courts might not hold that it could be implied into the law.

But I want to get at your view as to writing into this law providing for the payment of the bonus a provision that you will get the money by levying an additional income tax on large incomes.

Mr. HALE. No; I would not do that.

Mr. DICKINSON. Well, that was the way I understood your suggestion.

Mr. HALE. My suggestion was merely to suggest a way in which the additional revenue is to be raised to take care of this bond issue, if it is made.

Mr. DICKINSON. And not recite it in the bill?

Mr. HALE. Absolutely not, because it would defeat the bill.

Mr. LONGWORTH. What court has ever held that the Congress has not the power to levy any tax it sees fit?

Mr. HALE. I am not sufficient of a lawyer to answer that.

Mr. LONGWORTH. Why do you say that would be unconstitutional, then?

Mr. HALE. Because it has been stated that class legislation is unconstitutional, and it has been declared unconstitutional by the

courts.

Mr. LONGWORTH. Well, what is class legislation?

Mr. HALE. That would be class legislation absolutely if you levied this tax for this specific purpose and not as general taxation.

The CHAIRMAN. And any class legislation ought to be declared unconstitutional.

Mr. DICKINSON. You have class legislation in all the States.

Mr. HAWLEY. Let me ask this question: Any difficulty that might arise in this situation could be avoided by the passage of a special revenue bill in an act by itself, could it not?

The CHAIRMAN. I do not think we need dwell on that question any further at this time. That is a question for the committee and Congress to determine, and not a question for the witness to decide; and I do not think we ought to take up any more time on that question. Mr. FREAR. May I ask the witness a question, Mr. Chairman? The CHAIRMAN. Yes, certainly.

Mr. FREAR. Were you present yesterday when Mr. McFadden made a proposition, which I think was made to the members of the committee, with regard to using the British bonds as a basis for this fund of which you speak?

Mr. HALE. Yes, sir.

Mr. FREAR. What is your idea about that? Have you given it any consideration?

Mr. HALE. Well, the question in my mind regarding that suggestion is simply this: Would it not result in the United States Government predicating an obligation of its own on an obligation of Great Britain that might in some potentiality never be realized?

Mr. FREAR. Of course, the suggestion made by Mr. McFadden, as we understood it, was that these were to be based strictly upon the British bonds, without any relation to our own bonded indebtedness. I did not know whether you had given that any consideration.

Mr. HALE. Not a great deal of consideration; I have not. The question has come to me suddenly. I would rather study it over. Mr. LONGWORTH. That would be based on certain bonds that were nonexistent.

Mr. FREAR. Well, that was entirely a matter of suggestion.

Mr. RAINEY. Mr. Hale, I am very much interested in the proposition with which you started, in which you stated that this so-called bonus is to be paid, under the theory of your organization, for the purpose of reimbursing the service men for the monetary losses accruing to them during the war?

Mr. HALE. Yes, sir; that is the foundation of the argument. Mr. RAINEY. Yes; that is the basis of the argument for that compensation?

Mr. HALE. Yes, sir.

Mr. RAINEY. Now, after determining that, in order to find out just what your organization stands for-and you speak for a very important organization indeed-I will ask you if you would think that a man or an officer who received $2,000 a year, and which sum was more than he ever received before in his life, is entitled to any compensation for monetary losses if he did not have any monetary losses?

Mr. HALE. While an officer may have received $2,000 a year, have you taken into consideration what his equipment cost him, going into the service and being replaced?

Mr. RAINEY. Well, taking all of that into consideration?

Mr. HALE. The second lieutenants got $1,700 a year, and from that on up

Mr. RAINEY (interposing). Well, figuring all of that in-and of course, that would have to be figured in to determine whether he sustained monetary losses or not?

Mr. HALE. After deducting his expenses from what he actually received, including paying for his rations in the field and his mess bills in rest areas at the prices which were charged in France, which were almost akin to the prices charged over here, he had really very little left at the end of the month.

Mr. RAINEY. Then, is it the position of your organization, first, that we are going to give this bonus to recompense service men for

their monetary losses; and second, that there were no officers or privates in the service but those who did have monetary losses? Mr. HALE. That is the position we take.

Mr. RAINEY. There was not a single man in this great Army of 4,000,000 men who did not sustain monetary losses?

Mr. HALE. There may be some; but it would be hard to draw the line of demarcation.

Mr. RAINEY. Then I think we can safely depart from your basic proposition with which you started in considering what we ought to do. At the present time, does your organization know that the Government is running behind, although we are still collecting war taxes, from $2,000,000 to $6,000,000 or $7,000,000 every day? Have you taken that into consideration at all?

Mr. HALE. We have taken into consideration-as I have said, we were just as solicitous for the welfare of the Government as we were for the welfare of the ex-service men.

Mr. RAINEY. You have considered that fact?

Mr. HALE. Yes, sir.

Mr. RAINEY. Now, the porposed 2 per cent tax on these large incomes of which you speak would yield about how much?

Mr. HALE. About $200,000,000.

Mr. RAINEY. About $200,000,000 a year?

Mr. HALE. Yes; based on the 1917 figures.

Mr. RAINEY. Notwithstanding the fact that we are collecting this very large income tax, and these very large taxes of other character, we are running behind about $1,000,000,000 per year. You understand that, do you?

Mr. HALE. Running behind $1,000,000,000?

Mr. RAINEY. Yes; our deficit is $1,000,000,000 per year, in running this Government now, with these very high income taxes we are imposing, which. are among the highest imposed by any of the commercial nations of the world. In spite of that, we are running behind $1,000,000,000 a year. Has your organization taken that into consideration also?

Mr. HALE. We have.

Mr. RAINEY. And you think, without injuring the country economically, that we could collect $200,000,000 a year more from the large incomes?

Mr. HALE. From the incomes above $50,000 per annum.

Mr. RAINEY. Well, if we did that we would have to levy some more taxes. If we levied 2 per cent more on the incomes above $50,000, we would only collect one-fifth of the present annual deficit. In other words, leaving the service men out of consideration, if we collected this $200,000,000 additional in the manner you stated, we would still have to find some method of collecting $800,000,000 more before we would collect enough money to pay the ordinary expenses of running the Government at this time.

Mr. HALE. Well, you are not going to collect it all from the income

taxes.

Mr. RAINEY. That is true; there are other sources of revenue; and we would have to establish the heaviest taxation that any nation in the world ever attempted to collect in order to meet all of those obligations. Have you taken that into consideration?

Mr. HALE. I have already stated that we are as solicitous for the welfare of the Government as we are for that of the ex-service men.

Mr. RAINEY. You have an organization which represents, as you state, 750,000 World War men. Can we expect any assistance from your organization in our efforts to economize?

Mr. HALE. In what way, if you will give me an illustration?

Mr. RAINEY. By resisting the demands of Government employees for larger compensation-and they are all demanding that; I do not know of any who are not. And by resisting the demands of the American Federation of Labor, who stand for the Plumb plan, with its possibilities in the way of taxes in the near future; and by resisting the demands for the expenditure of probably $1,000,000,000 dollars for universal military service. Can we count on your great organization for assistance in economizing in those directions?

Mr. HALE. Your last question I will answer in the affirmative; because we have affirmatively gone on record as against compulsory military training. As to the question of being involved in any questions of a civic or political character, we are estopped by our constitution from that; we are solely for the benefit of the ex-soldiers. Mr. RAINEY. I know

Mr. HALE (interposing). But if any question of Americanism is involved, or if any question involving jeopardy to our Government or its institutions, either internally or externally, you can count upon us for support. But as to any controversies between the Government clerks and Congress, we are in no position

Mr. RAINEY (interposing). Well, the Government clerks are in the position of making demands upon the Treasury of the United States, and so are you. And we want to gratify your demands; and we all feel like doing so. Now, will you help us in our efforts to keep down the compensation of the great army of Government employees?

Mr. HALE. I could not answer that question for our organization, because I do not believe that it comes within the jurisdiction of our organization. I could not answer it, because I believe it is an extraneous matter, so far as our organization is concerned.

Mr. RAINEY. Well, your demands concern intimately
Mr. HALE (interposing). The ex-soldier.

Mr. RAINEY (continuing). The finances of this Government and our national expenditures.

Mr. HALE. Yes; and we are entirely divorced from the Government clerks. If you ask me ask me whether our organization will go on record as opposing any increase to Government clerks, I will say, "No,' because our consitution would estop us from doing that.

Mr. RAINEY. We can not count on any help from your men in that respect as an organization. How do you feel about it personally? Mr. HALE. As to the Government clerks?

Mr. RAINEY. Yes.

Mr. HALE. I think the "laborer is worthy of his hire."

Mr. RAINEY. Have you taken into consideration the fact that we must economize in some way?

Mr. HALE. If you must economize in some way, the ex-soldier is entitled to it far more than the Government clerk is entitled to a $240 bonus.

Mr. RAINEY. Can those of us who may oppose the Government clerks' demands rely upon you for assistance?