Plenary Session Transcripts

Governors Attending:

Guests:

Discussion Subjects:

Taxation of intangible property; state taxation of banking institutions; severance taxes; government and business; social welfare: the state’s duty to its dependents and the convict problem; state administration: concentration of executive authority and responsibility; and the Boulder Dam

Points of Interest:

Governors discussed what they considered to be federal encroachment on states' rights with respect to the taxation of National Banks. For example, Governor Ben Paulen of Kansas stated that federal law unjustifiably classified National Banks as national agencies, which could not be taxed at a rate higher than other moneyed capital in the state. This meant that states which exempted individual mortgages or taxed them at a nominal rate either had to apply the same rule to National Banks or raise the individual mortgage rate to match what it thought was a fair tax rate for the Banks.

Governors also talked about the efficacy of severance tax, meaning tax against "takers" of a state's natural resources, as a hedge against future revenue losses. Governor Huey Long of Louisiana said that some corporations had already challenged the severance tax in his state by seeking to devalue the resources they were taking, which prompted a revision of the valuation method to focus on the quantity of what was being taken rather than its quality. Some Governors expressed concern that a severance tax would discourage manufacturers from doing business in a state, but Governor Long responded that if a state began with a relatively low tax, neighboring states would likely follow suit, thus eliminating competition for new business investments. The Governor also cautioned that it was crucial to educate the public about the value of natural resources to ensure that those resources would not be exhausted by business interests.

It was clear by the tone and content of the Governors' meeting that the nation was heading toward a depression, and there was talk for the first time of government stepping in to help stabilize the economy. Governor Ralph Brewster of Maine in fact relayed President Hoover's direct request for state cooperation in a general program of government-business collaboration toward stabilization, and Governors were addressed by the author of The Road to Plenty regarding the importance of using economic indices to determine when and under what conditions the government should step in.

With respect to the Boulder Dam, it was revealed that upper states from which water was coming favored the interstate compact that had been adopted for water development, while some of the lower states that received the water did not, leading the federal government to intervene.

Memorable Quotes:

Referring to the results of over-production, Governor Ralph Brewster of Maine said: "...almost everyone in America may have material comforts and luxuries that were denied to our ancestors, but the fact remains that repeatedly, we see the spectre of unemployment stalking abroad in our streets and that means disaster not only to the unfortunate individuals but to every one dependent upon the purchasing power they now lack."

Governor Brewster also said: "Economists have all felt that in past centuries there was an inexorable law of supply and demand, under whose unhappy influence we must carry on, and that these periods of purging in our economic life were essential to the healthy progress of the nation. That view is being challenged, not only by economists, but by thoughtful students of government as well, and it is along those lines that Mr. Hoover very earnestly hopes the nation may find the opportunity to move...he now feels that co-operation between the Federal government, the States, and other public authority, may, in a very substantial extent, prevent...recurring periods of depression."

William T. Foster, author of The Road to Plenty, said: "...go forward in developing those measures or indexes of business conditions which enable us to tell, and promptly, when it is desirable to curb to some extent the flow of money to consumers to prevent inflation, and on the other hand, when it is desirable to expand expenditures to prevent a start downward from developing into depression...if you start as soon as the indexes show an unmistakable trend downward [in purchasing power]...then slight expenditures may accomplish a great deal toward checking the movement."