Causes of the Panic 
39 
borrowed money for the carrying of securities, it 
would be found that there are an overwhelming 
aumber of holders, who, because of this tax, do not 
sell. In our daily experience we find it common 
that men who are holding securities and desire to 
purchase additional securities in the market which 
they consider as having an intrinsic value in excess 
of the market price, do not feel that they can sell 
that which they have, but in the satisfaction of this 
desire they borrow either through their brokers or 
directly through their bankers funds necessary for 
such purposes, thereby placing added burden on the 
credit structure.” 
This tax on profits on the sale of stocks, bonds, 
real estate, and so on, was put into the original 
income tax law in 1913. It had no proper part in 
such a law, for the simple reason that profits on 
such sales represent a growth in capital, not a growth 
in income. In successive annual reports, Secretary 
Mellon had repeatedly called attention to the fact 
that such taxes hinder and prevent business trans- 
actions which would otherwise take place. If the 
law were repealed the loss in revenue would be, in 
a degree, counterbalanced by the encouragement 
which repeal would give to turning into real profits 
the paper profits on securities as fast as they accrue. 
These real profits might then be added to the capital 
fund of taxpayers, and put to work earning more 
money that would be taxable. 
Even during the calendar year 1927, when the 
long bull market was rising fast, the revenue from