 Longing watches have won 10 World Fair Grand Prizes, 28 gold medals and more honors for accuracy than any other timepiece. Longing, the world's most honored watch, is made and guaranteed by the Longing Wittenall Watch Company. It's time for the Longing Chronoscope, a television journal of the important issues of the hour, brought to you every Monday, Wednesday and Friday. A presentation of the Longing Wittenall Watch Company, maker of Longing, the world's most honored watch, and Wittenall, distinguished companion to the world-honored Longing. Good evening. This is Frank Knight. May I introduce our co-editors for this edition of the Longing Chronoscope? Mr. Edgar Baker, a managing director of Time Life International, and Mr. Henry Haslett, senator of the Freeman and contributing editor of Newsweek Magazine. Our distinguished guest for this evening is the honorable Hubert H. Humphrey, United States senator from Minnesota. The opinions discussed are necessarily those of the speakers. Well, Senator Humphrey, I see that the New York Times this morning credits you with a very important victory in helping to get past the President's reorganization plan of the Internal Revenue Bureau. The Times wrote the victory was less a personal one for the President than it was for three freshman senators who led the fight, Hubert Humphrey of Minnesota, Mike Manroni of Oklahoma, and Blair Moody of Michigan. So could you begin by telling us what the reorganization plan does, Senator? Well, the key to the reorganization plan, or the crux of it, is that it removes the political patronage system from the Office of the Collector of Internal Revenue. In other words, it places the appointment of all the collectors of Internal Revenue in the many revenue districts, strictly under the civil service system, the competitive merit examination. I think this is highly desirable. I think that we have had plenty of demonstration of the inadequacy of the politically appointed collectors of Internal Revenue. It places a premium upon competence and technical background. Well, Senator, if my memory is correct, of the 64 present collectors, seven have either been forced to resign or discharged. Now doesn't that mean that the President's plan is in effect a plan to prevent himself from making bad appointments? Well, as a matter of fact, the President Truman made none of these appointments. Well, either he or Senator, either he or President Roosevelt, I meant to say. Or any President, because may I say that back in the good old days, the days when Andrew Mellon was Secretary of the Treasury, we had an even worse situation than we had now. I don't mean to inject the partisanship into it, but it's literally true. But these are not holdovers from the Mellon. They're not holdovers, but the political patronage system just has not produced the kind of caliber and talent that we should have in an office as important as the Collective Internal Revenue's office. Plus the fact that the present collector's office is a busy office. You have over 70 million tax returns, for example, about 50 million tax payers. And when you consider the tremendous number of taxes that a collective internal revenue must be responsible for, I think he ought to be recruited and hired on the basis of technical skill, background experience, and all that comes with a competitive merit system examination. Well, Senator, the passage of the bill is very timely. The idea of March and final date for tax payment are close upon us. I understand that you are in favor of an even tighter tax bill. Is that correct? I'm in favor of what I call a tighter or a more honorable tax structure. That is absolutely true. I personally believe that the entire tax structure of our country needs a basic overhauling. It has grown pretty much like topsy. Every time we've needed a little more revenue, we've fished around to find some new way of adding a new tax to the tax structure. In the meantime, some people have been fishing around to see how they could get out of paying taxes. Senator, what specific recommendations would you make? Well, my recommendations have been termed, not by myself alone, but by many others over the years, loophole plugging provisions. By that, I mean tightening up the tax structure in reference to certain specific tax allowances or special treatment taxes that we have in the tax system, such as the capital gains tax structure, family partnerships, the failure to have withholding upon corporate bond interest and dividends, the split income provisions, the depletion allowances for gas and oil wells. There are other such little tax matters as corporate spin oil. Senator, suppose we take the first one you mentioned, the capital gains tax. What would you do about that? What's your recommendation on that? Well, first of all, I want to make my position quite clear. I think that the capital gains tax schedule, which is to be differentiated from the earned income schedule and the corporate income schedule, is a legitimate tax schedule. I mean, it has a legitimate purpose. The purpose for it when it was enacted was to promote investment, capital improvement and investment. The original capital gains was for 25% tax maximum of 25%. But you had to hold your property or your bond or your stock for a period of two years to give a sense of legitimacy to the investment. Now, that period, that holding period has been reduced from two years to one year to six months. And in the last two sessions of the Congress, they've tried to cut it down to three months when speculation has been rampant, particularly, by the way, every time you have a defense or a war situation, they always want to cut down the holding period on capital gains. Well, Senator, isn't it true that on the other side, you cannot deduct capital losses against income? You can deduct. Except, except against about $3,000. So capital losses are not deductible. Therefore, you shouldn't tax capital gains as full income, should you? Mr. Hazelt, I'm sure that you and I'll have quite a disagreement about that because when you talk about capital gains and capital losses, you can deduct capital losses from your capital gains. Capital gains. So you keep it all within the same house. Yes, but you have to add your capital gains tax to your income tax, but you cannot deduct your capital losses from your income. That's correct, isn't it? But now, wait a minute. And isn't that a heads-eye win, tells you lose, Mr. President? No, what you would have is a heads-eye. The government loses and tells you win. No, I'm sorry. If the heads-eye, the government wins and if the tails you lose, you the taxpayer loses because you can't deduct it against your income. Now, that's the simple fact, Senator. Mr. Hazelt, there are several, there are several, and you're a wise economist, and you know that there are three basic tax structures in this country, the kind I pay, which is earned income tax, the kind that a corporation pays, which is corporate tax, and the kind that a speculator pays, which is capital gains tax. And the guy that's speculating on the market pays a lower tax rate than a worker that's earning $7,500 a year. It's not a short-term gain. On a short-term gain. On a short-term gain, he pays the same as a income tax. On a six-month gain, if he holds this... Well, that is not considered a short-term gain for a speculator. It used to be, it used to require... I can't sit around six feet. It used to require two years for capital gains. What I am saying, Mr. Hazelt, is that if you lose in the capital gains market, you can deduct your losses from your capital gains, and you only pay 20, 26% under the present law upon your earnings. But you either pay tax or new tax. If I lose as a wage earner, if I lose as a wage earner one year, I cannot go back and deduct it from my taxes that I paid the other year. But you don't... Senator Humphrey, that's an area in which I believe both, or all three sides of the argument, are agreed that whatever change might be made would be comparatively moderate. There's another area. You mentioned earlier the phrase, depletion allowance. One that we hear a great deal about. Would you care to explain in general terms what the principle of the depletion allowance is? Yes, I'd give a little historical background on the depletion allowance. It was enacted in the Congress, I believe, in the year 1925 or 26, right around that period. And the purpose of the depletion allowance for gas and oil and some mining interests, like sulfur, for example. It's now been extended further to other... It's been extended to about 45 commodities. And by the way, that's another one of the tricks. We even got it on oyster shells now, a depletion allowance. It's been extended by home, Senator, by the Congress. By the Congress, over the objections of the executive, every time a special interest group, sand and gravel boys, wanted to get in on it last time. Now, what is the depletion... Do you think it's wicked to have a depletion allowance when there's real depletion? No, I think a depletion allowance that's fair and equitable in terms of the scientific... Or the technology of the day is legitimate. Now, the purpose of the depletion allowance at first was to promote exploration of oil and gas fields. So we had a depletion allowance of 27.5%. But since that time, may I say, the scientific knowledge of where a gas field is and where an oil field is, is much better than it was in 1925. But isn't it also true, Senator? Oh, just a minute. They actually know how much oil is under the ground. No, not in every instance of the day. Well, then they don't know how much they're depleting it, do they? Mr. Haslick, a man in business gets what he calls a depreciation allowance. If you have a $100,000 factor, you can depreciate it. Now, a depletion allowance is a 27.5% upon your gross revenue. Well, if you're depleting it in three years, then that would be right. You argue that they're depleting it in a longer period. Plus the fact that a man that drills an oil well and finds a dead hole, when he finally hits one, he can take all of the deductions for all of the losses that he had before. But, Senator, isn't it? There are 45 separate gratuities or benefits given by the government for mining and gas and oil development. 45, which you didn't have in 1925. And I say that it's absolutely wrong in the year 1952 to have a depreciation allowance of 27.5% on gross income when you have 45 special benefits today which you didn't have at the time that the law was enacted. That's a tremendous change in the great many respects between 1925 and 1952, however, and so far as the supply of oil and other critical raw materials are concerned. That's correct. The supply is even to no one's supply today is much greater than it was in 1925, and I say that the bond market for gas and oil wells are guilt edged securities and the profit percentage in gas and oil development is above any other commodity in the American market. Well, Senator, as a last question as a final question, do you think that there is a prospect in the near future of a reduction of taxes generally or do you think the prospect is for higher taxes? Well, I think it greatly depends upon the international situation and I think the American people must know that the high schedule of tax today is primarily the result of the great international crisis. It is my feeling that as we level off and taper off on our rearmament program that we can get these taxes down and I think they should come down. The earned income tax and the corporate tax are terribly high. They're very high. And it's for that reason that I say that we should plug up these special treatment areas and thereby be able to at least level off the earned income tax rate and the corporate tax rate so that you don't knock out incentive in business and that you do not place an undue burden upon the individual that is having a pretty tough time making it go in this inflated period. Well, Senator, thank you very much for your answers. They've been very illuminating and we appreciate very much for being with us tonight. Thank you. The editorial board for this edition of the Laun Jean Chronoscope was Mr. Edgar Baker and Mr. Henry Haslett. Our distinguished guest was the Honorable Hubert H. Humphrey, United States Senator from Minnesota. The Winter Olympic Games recently completed at Oslo in Norway were exclusively timed by Laun Jean to a tenth and a hundredth of a second. This telegram that I have here is our reward. Laun Jean equipment used for all timekeeping during the Winter Olympic Games 1952 all worked perfectly. Thanks for your valuable cooperation and it signed the organizing committee. Now that's a wonderful telegram and we're ever so pleased. Laun Jean was actually official watch for the three great Olympic sports events during the past year. The Winter Olympics at Oslo. The third Bolivarian Games at Caracas and Venezuela and the first Pan American Games held in Buenos Aires in Argentina. And now we are proud to announce that the United States Olympic Committee has selected Laun Jean watches for timing all events for the selection of the United States Olympic team of 1952. So you see wherever precise timing is important. In sports, aviation and science, as in everyday life, the preeminent choice of watches is Laun Jean, the only watch in history to win 10 World's Fair Grand Prizes, 28 gold medals and highest honors for accuracy from the leading government observatories. Laun Jean, the world's most honored watch, premier product of the Laun Jean Wittner Watch Company, since 1866, maker of watches of the highest character. We invite you to join us every Monday, Wednesday and Friday evening at this same time for the Laun Jean Chronoscope, a television journal of the important issues of the hour, broadcast on behalf of Laun Jean, the world's most honored watch, and Wittner Distinguished Companion to the world honored Laun Jean. This is Frank Knight reminding you again that Laun Jean and Wittner watches are sold and serviced by more than 4,000 leading jewelers from coast to coast who proudly display this emblem, agency for Laun Jean Wittner watches. This is the CBS television network.