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vestigations and accurate information, and that the success of any scheme is inseparably associated with the scientific system of accident statistics and investigation of accident causes.


We find in all European states compensatory legislation is intended to exclude, or purposely endeavors to discourage or retard, the use of preëxisting remedies for recovery in action based upon personal injury. We find that a single liability is essential to satisfactory operation of the compensatory principle, and its adoption should be accompanied by the repeal, so far as possible, of all other remedies within the limit of its application.


We find as an essential feature of all European systems, provision for rapid, cheap, and impartial adjustment of compensation claims by tribunals of arbitration whose judgment is final on questions of fact and subject to one or more appeals on questions of law.


Compensation must be assured or it becomes an empty right and useless remedy. If it is dependent upon the solvency of the employer, the position of the employee of the small employer is not improved. Insurance alone assures solvency and guarantees recovery to the workman and lessens the burden of the employer. Provision should, therefore, be made whereby every employer of labor shall satisfy the proper state authorities that the payment of the prescribed compensation is assured to his employees through either one of the following methods:

1. By the employer's own financial liability, or

2. By an accident insurance department organized and maintained by the state, or

3. By insurance in private liability insurance companies, duly approved by the state, or

4. By insurance in mutual insurance associations duly approved by the state.

Assurance under any one of the last three plans must operate to relieve the employer from personal liability. The closer the connection and coöperation between shop management, insurance management, and accident prevention activities, and the closer the insurance rates are based upon the individual accident prevention effort of a shop, the better and more efficient the system will be.


We find in the complete statistical record of the German Empire covering a period of twenty-five years and sustained by the less complete returns of other European countries and the relative rates of private insurance, that we must readjust our conventional notions of the comparative hazard of various employments. European and Canadian evidence indicates a high percentage of accidents in agricultural as well as in industrial pursuits. If, therefore, any one employer becomes an insurer against accidents in employment, all employers should bear the same burden in proportion to the actual hazard of their particular pursuits. We find that the application of the principle of compensation should be universal or it places unequal and arbitrary burdens upon classes of employers and denies participation in the benefits of its remedial provisions to vast classes of wage workers.


We believe those systems most equitable and effective which require contribution from employer, wage worker, and possibly the state. A system cannot be effective in preventing accidents or in discouragement of fraudulent claims which does not secure the fullest coöperation of employer, employee, and state; and no system can be just or in keeping with the American spirit of securing benefits in proportion to individual effort which does not place the burden of making compensation for accidents jointly upon those responsible for their occurrence.


We feel called upon to emphasize that any application of the compensatory principle in our country requires assurance of substantially uniform legislation by the states of the Union. The establishment of a variety of systems differing in form and substance and creating new liabilities, varying in nature and degree, would produce conditions too obviously harmful to require amplification.


We are conscious that the introduction of principles implying systematic compensation of accident into our form of government bristles with legal difficulties. We here are not concerned with their consideration or discussion; we are primarily interested in the selection of a sound policy. The nature and extent of desirable change is to be ascertained before the method of its

execution becomes the primary concern. We believe, however, that the encouragement of voluntary action by employers has not received sufficient public consideration. While our legislatures deliberate over their powers of compulsion, they might also with profit give full consideration to their opportunities for persuasion. The voluntary adoption of equitable schemes can be expedited by lessening the liability of employers who guarantee just compensation, as well as by threatening the legal defenses of employers who do not.

The basis for our conclusions we shall be able to place before members of the American Association for Labor Legislation at an early date in the form of charts, diagrams, and figures. They are compiled from an investigation of the subject among 20,000 American manufacturers and after a four months' study of European conditions.

The short time at my disposal does not permit such a lengthy and thorough discussion of the whole subject as I should like to indulge in, but in conclusion I want to impress upon you the advisability of your coöperation with progressive employers' associations. It requires the best efforts of all patriotic men and women interested in this question to settle it equitably and promptly. The scientific man alone can accomplish little; the same holds good of the legislator, the lawyer, the wage-worker, and the employer; but coöperation between all of these forces will result in the early adoption in all the states of the Union of a system which is reasonably free from all the defects of European systems, and which at the same time embodies the best points of all of them. You will find the National Association of Manufacturers in the front rank of the forces working constructively for an equitable compensation system for injured workers. We shall work with you if we can, without you if we must.




The present paper is addressed to the economists of this Association in their professional capacity; it should be interpreted not as a defense of the state income tax, but as a plea for the reconsideration of a question upon which, apparently, the guild of economists is about to pronounce a final decision. Three quarters of a century ago the economists of the English-speaking world drifted into a position of antagonism to the trade union. The consequences were unfortunate to everybody concerned. Today the economists of this country have lined up in opposition to the state income tax in an array so nearly unanimous that the outside world would be justified in asserting that current American political economy is against the state income tax.2 Before such a decision is irrevocably registered and accepted by the economists themselves, I ask a rehearing. The reasons for this request are as follows:


The strongest arguments against the state income tax are not altogether convincing.

1. The first of these is the assumption that the only kind of an income tax which can succeed in the United States is one constructed on the English model and dependent for its success upon the device of collection at the source. This assumption loses sight of the fact that a large majority of the successful income taxes now in force in Europe make practically no use of

This has been denied, but the more authoritative opinion seems to support the statement in the text.

'Mr. Lawson Purdy, an authority for whom the writer has the greatest respect, goes out of his way in a paper on the federal corporation income tax, to express this opinion: "It has been suggested that the power to tax incomes should be reserved to the states. This suggestion must be made in derision, or in profound ignorance. Several states have tried to impose income taxes and failed utterly, as they must fail. The only income tax which has a chance of success must be patterned after the British income tax, which taxes all incomes and uses corporations as tax collectors. This requires nation-wide jurisdiction." State and Local Taxation, Third International Conference under the auspices of the International Tax Association, p. 229.

the device of collection at the source- or no more use of the device than any American commonwealth could easily make. In fact, of the large number of state income taxes collected on the continent of Europe, only those of Spain, Italy, and Norway, so far as I can learn, make extensive use of collection at the source. It is very difficult to get information concerning the efficiency of these lump-sum income taxes. Some of them are doubtless failures from the administrative standpoint, as in the Swiss canton of Zurich. But a few of them are conspiciously successful, and many of them, from all that can be learned, are quite as successful as our American tax on real estate.

2. Continental experience with the income tax furnishes sufficient reason to doubt another of the arguments confidently adduced against the state income tax, the argument that the income measure or basis is particularly unsuitable for local taxation, and that the chances of success of the income tax increase pari passu with the extent of territory over which it is levied. Saxony (with only 4,202,216 inhabitants in 1900) collects a progressive income tax and, from all that can be learned, administers the tax successfully, as does Baden (with less than 2,000,000 inhabitants in 1900), Bavaria (with a population of 6,176,057 in 1900), and many of the other German states which are even smaller. In several of these commonwealths, moreover, income is employed as the basis of both state and municipal taxation. In Prussia, for instance, according to the latest statistics which I have seen, the municipalities collect 54 per cent more on the basis of income than the central government itself. And yet American writers constantly assume that if the federal government is to employ the income tax, the several state governments must forego that privilege. In point of theory there is no tax so suitable for use by both federal and state governments as the income tax, and if the rates are kept moderate it is hard to see any practicable objection against this dual system. Of course, if we must collect at the source, a federal income tax is the only form which has any chance of success. But, as European experience suggests, collection at the source is not indispensable.

3. Closely connected with the preceding argument is the contention that state income taxes in this country, if widely introduced, would give rise to an intolerable amount of double taxation. They might, but they need not necessarily do so. Income taxes are of two varieties, business and personal income

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