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Now, these gentlemen come here as landlords and as the representatives of landlords, asking that they be regulated in their rentals. They themselves ask for it; they have introduced no bill that does not ask for it.

Then the question how you shall give regulation to them comes up. I insist that the plan of taxation is better than that of fine-I believe that is conclusive-and that the plan of letting the assessor do it, whoever he may be, regardless of his personality, instead of a rent administrator, is better.

Mr. Howry says on page 37 of the record:

The defect as I see it in this substitute bill is the arbitrary and unlimited power given to a rent administrator or to a rent administrative board; but it occurs to me that where property is valued at so much, as shown by the assessment books and by the judgment of people competent to express an opinion on the subject, the rental ought to be something commensurate with the value of that property when you are dealing with the question of what an owner shall get out of it.

I agree with that statement exactly. I think Mr. Howry-I do not know him-has put the whole thing in a nutshell.

I will hasten along all I can. It is just such things as that that I want to impress upon the committee. It will not take me many minutes longer to do it, I hope.

In Capt. Peyser's testimony, on page 52 of the record, there is something I wish to refer to, because I do not think that Capt. Peyser, as a very rich man, has viewed the situation from the standpoint. of the humble tenant.

Mr. Parker said to Capt. Peyser:

Then you make yourselves rent administrators?

To that Capt. Peyser answered:

Yes; we fix the rate of rent according to the bathing accommodations, according to the location, and the furnishing of the house.

I do not believe that is a correct basis. He speaks of himself as representing the Government.

Senator DILLINGHAM. Yes.

Representative JOHNSON. I do not think Capt. Peyser's basis is a correct one at all. I think that what he gets to eat is one of the most important things.

Senator HOLLIS. I assume that Capt. Peyser was not speaking about places where a man got room and board.

Representative JOHNSON. Yes; he was. At the bottom of page 52, I read as follows:

Capt. PEYSER. Yes; we fix the rate for room and board, and fix the rate of return to the Government, payments, and everything else. Everything is carried out by the department.

Senator HOLLIS. Is that working pretty successfully?

Capt. PEYSER. Very.

Mr. PARKER. Then you make yourselves rent administrators?

Capt. PEYSER. Yes; we fix the rate of rent according to the bathing accommodations, according to the location, and the furnishing of the house.

I think, however, that he has left out a most important item, and that is board.

In passing, I might say that if rents come down, labor will come down; and in the same connection I will say that last winter's coal bill certainly can not be used as a basis for the coal bill of any other winter. It was the severest winter we have ever had. More coal

was used than ever before because of the extreme cold weather. And, then, when a great quantity of coal, or at least some coal, was here in great carloads, they could not get it out because it was frozen in the cars; and, in some instances, they had to blast it out, and all that made it more expensive. That had not occurred before; and basing the cost of coal for the future on that as a basis is not correct. We will not have that condition again.

Another thing, that I was about to forget, the newspapers and those who have commented upon the bill-here before this committee and elsewhere-state that the rental contracts, in the bill which has passed the House-are made void. They are not. They are voidable. The matter has been discussed at considerable length by one of the local newspapers, which seems never to have heard of the difference between a contract that is void and one that is voidable.

I had never seen or heard of the English law upon the subject of rents until after this hearing had commenced. I did not know that the English had had such a law; but they have done something along the same line in their legislation by providing that excess rentals shall be "irrecoverable "I use their word, irrecoverable." An English statute has closed the doors of the courts, and made “irrecoverable" exorbitant rents.

By the bill, which has just passed the House of Representatives, the doors of the courts are closed against enforcing these contracts. Instead of leaving it to a judge to decide whether they are against public policy, the bill declares them to be against public policy and closes the doors, just as the doors of every court of equity in every country in the world from the days of Justinian down have been closed, against people trying to enforce inequitable contracts. The old idea still exists that a man must first do equity before asking it. Senator SAULSBURY. I do not follow you in that. You allow the landlord to collect, but under your income-tax provision you make him pay it over again.

Representative JOHNSON. Yes; but the bill which I introduced has this to say on that subject:

SEC. 5. That all leases, contracts, and agreements, expressed or implied, providing for the payment of any larger amount of money or at a higher rate than that fixed by the deductions herein allowed for the use or occupancy of any "real estate" are hereby declared to be contrary to public policy and unenforceable.

So that, as you see, it does treat it in a different way from what you thought.

Senator SAULSBURY. I see, now.

Representative JOHNSON. The more the bill is studied the better you will see it is.

There was something said here about Mr. Browne, who testified, still being connected with the House District Committee. I take it that there arose in the minds of some-perhaps in the mind of Senator Dillingham-the Mr. Browne was associated with me on the District of Columbia Committee.

Senator DILLINGHAM. He made that perfectly clear.

Representative JOHNSON. When he was employed by the committee back in 1911 or 1912-I do not remember which-his services

were turned over almost exclusively to then Representative George, who was getting up a report on the tax assessments in the District. I believe there should be another amendment to the bill, and that is suggested by the loan-shark bill. I would not have thought of it, only I saw it in Mr. Browne's testimony. In the loan-shark bill there was a provision fixing the rate of interest on loans made by pawnbrokers where collateral security was taken-personal chattels. That bill took care of the situation where they undertook to charge usury by way of commissions for securing the loan, or for storage of a watch or a ring or something that might be pledged. All such subterfuges were resorted to, and that bill has a provision in it which takes care of that, and I think this bill should have a like clause. It is possible that where a rate of rental is agreed upon that is reasonable and comes within the provision of such law as may be made, it can be increased by charging a commission to get the man the property by somebody connected with the real-estate office. I believe that this bill should have a clause to cover that. Senator POMERENE. How much of a commission? Representative JOHNSON. Well, I

Senator POMERENE. What amount?

Representative JOHNSON. I do not believe he should be allowed any. You do not understand me, Senator. I say that a man may go to a real-estate agent's office and want to rent a house, and the rental may be properly fixed; but then they could say, "Now, I will charge you a commission for getting you this house," and the man would have to pay it, and it would be an increase of his rental.

Senator SAULSBURY. You mean that matters should continue just as they are, and that the real-estate agent should get his commissions out of the rents from the landlord?

Representative JOHNSON. Yes. I do not believe that he should be given the opportunity to increase the rate of rental by charging the tenant a commission. That brings my mind to another thought. This bill proposes to fix a per cent upon gross incomes from real estate and tax accordingly. I have no way of knowing whether it is true or not, but since this clamor for houses has been on and since rents have gone skyward, the real-estate agencies in town have increased their charges for collecting rents from 5 per cent to 10 per cent.

I said I did not know whether it was true or not; but if it is true. then they are taking 10 per cent of the gross income for collecting the rent. I do not believe that it will be disputed, they take 5 per cent of it already. But I have nothing but information on the subject. I have no knowledge. Certainly 5 per cent is high, and if they were to take another 5 per cent out of the gross income, then rents would have to be increased.

I find on page 84, where Mr. Browne is testifying, the following: Senator DILLINGHAM. He thinks it is based on the fact that the power to tax carries with it the power to destroy, and he thinks that the present situation of the Government justifies it in destroying.

Mr. BROWNE. I would not say destroying, but going to extreme measures to prevent the raising of rents.

I say that this contemplated exercise of power is not only not intended to and does not destroy property, but it is intended to, and will, destroy profiteering. A high rate of taxation is imposed in the bill of my authorship, which passed the House, to destroy

not any property-not any legitimately gained property-but to destroy unreasonable and excessive profit.

Senator DILLINGHAM. But you do not claim that that was the thought in the mind of the court when it declared, in discussing the general question, that the power to tax carried the power to destroy? Representative JOHNSON. The court did not have this question, Senator, nor one like it, in that decision.

Senator DILLINGHAM. I have been glad to see that you very frankly put your bill upon the basis that it is not a tax regulation but it is the imposition of a tox for another object entirely than that to provide revenue to the Government.

Representative JOHNSON. Yes; I took that ground quite frankly, because I have already said to you in the beginning that I thought we could not reach it by fine. Finding it impossible to reach it by fine, I have sought to reach it by tax, which would be effective, or which would destroy the profiteering going on.

Senator SAULSBURY. On the same basis as the old tax on bank issues?

Representative JOHNSON. On exactly the same principle. This bill was drafted with two statutes in mind—one the present national income tax and the other the banking law which gave the right to the one upon whom usury had been practiced to recover the amount of usury paid.

Senator SAULSBURY. In our State we have a forfeiture clause; not only forfeiture of interest or excessive interest, but forfeiture of the principal, for usury.

Representative JOHNSON. That is in the national-bank act also. Senator SAULSBURY. It is very effective. There is practically no usury practiced in our State, I believe.

Representative JOHNSON. Mr. Hight testified that hotels should not be included. I can not see any reason why they should not be. The bill as originally drafted did not name hotels by using the word, but it certainly did cover them, because it included mentioned houses and buildings. If a hotel is either a house or a building or a room, then it is included. But as some people have asked the question whether it covered hotels. I offered the amendment to use the word "hotels," just to avoid answering questions. I never suspected for a moment that any court would ever hold that a hotel was neither a house nor a building nor a room.

On page 89, in his testimony, Mr. Hight says:

In other words, the hotels in the District of Columbia are practically compelled to insure to their guests, at face value, all the jewelry or other valuables which they may bring into the hotel, regardless of any lack of care on the parts of the guests in safeguarding such valuables.

He is mistaken about that, not only about the law but mistaken as to the fact. Commissioner McChord, of the Interstate Commerce Commission, was a neighbor of mine down in Kentucky; we live just 18 miles apart, and our families were intimate there and we are intimate here. Mr. McChord has his daughter here with him, and for some years they have been living at the Willard Hotel, and they are living there now, and she lost some very valuable jewelry from her room there. She did not tell me. She told Mrs. Johnson so; and she said that the jewelry was an absolute loss to her; that the hotel did not compensate her for its loss at all.

Further along Mr. Hight says:

In conclusion, will say that if any mention were to be made of a percentage of increase over the rates of 1916, instead of 10 per cent an increase of not less than 333 per cent would be no more than reasonable.

He admits by that statement that a horizontal percentage increase is good enough if it is big enough. His objection is quite clearly shown there to be to the 10 per cent horizontal increase, where he would not object to a horizontal increase of 333 per cent.

Senator POMERENE. That is hardly a fair way to reason the thing, Mr. Johnson.

Representative JOHNSON. I think so, Senator.

Senator POMERENE. No. Suppose, on the other hand, that here is a man who has gone along, and he has been getting 4 per cent net for his property?

Representative JOHNSON. You mean the landlord?

Senator POMERENE. And another man is content with only 5 per cent. Now, even a 10 per cent increase on that would not be fair. Representative JOHNSON. I was not discussing, in what I last said, whether it was fair or unfair. What I was emphasizing was that this gentleman by his statement admitted, substantially, that a percentage increase was practical if it was big enough. He objects to a 10 per cent increase, but does not object to a 33 per cent increase. Therefore the percentage increase is not his objection to the bill, but it is the 10 per cent rate of increase to which he objects. Senator POMERENE. That does not necessarily follow. Representative JOHNSON. I think it is inevitable.

Senator POMERENE. Oh, no.

Representative JOHNSON. In my judgment, from that language it is inevitable.

Senator POMERENE. Oh, no; a man might object to the reason of the increase proposition in toto, but he might say that if it was big enough there might be margin enough in it for him and be content with it. That is the fair conclusion to draw from that. I am not approving his statement, or approving yours, but I am simply finding fault with your legislation.

Representative JOHNSON. I must insist that I can not see it in any other way except that he agrees to a percentage plan provided the percentage is big enough, and his language, to me, is unmistakable. On page 90 I find the following:

Senator HOLLIS. Yes; but pardon me, you take the responsibility, and the owners of the property have the property there, and they get a certain return on it, and it is not likely to be any less, and I do not see any reason why you should not tell us what their net return on that investment is. You say that it is not any more than it ought to be. Well, that is a matter of opinion. If you could give us the facts, we could form our own judgment as to whether it is a fair return or not, and from that we could form a judgment as to what would be a fair return on other properties in Washington, but I do not

And there Senator Hollis was broken in upon by Mr. Hight. I agree with Senator Hollis, exactly, in what the thought contained in that question. Here is a man running a hotel who objects to a horizontal increase of rentals, although he admits that if 333 per cent was the horizontal increase, it would not be objectionable. Then he fails to tell you what he is making out of his business. If he was not willing to enlighten the committee as to what he was making out

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