INDIRECT ENCROACHMENT ON FEDERAL AUTHORITY 921 bonds also yield only four per cent net, than on the same three or four per cents when they and the six per cents produce a net yield of those amounts. It is more congenial [to give the state a third of one's income from any given source than to divide fifty-fifty. Though a corporation may make a sacrifice of income to gain the benefit of sure and quick assets, its sacrificial spirit is likely to vary inversely with the amount involved in its indulgence. Whether a corporation would be wise to reduce its proportion of high-grade assets because of a diminution in their net yield is not in point. If it would in fact do so, a nondiscriminatory tax on the capital value of all its assets in whatever form imposed, would reduce the market for United States bonds. Here is an incalculable factor. It may be of considerable or of Httle importance. An argument against allowing it consideration may be found in the fact that there is no reason why an investor should ever take less interest than he can get, except as he receives other advantages which he regards as compensatory. A corpora- tion which foregoes income to gain security ought to stick to its choice even when pinched by increased taxation or by any other expense. It would have the same inducement to increase its in- terest receipts, whatever the cause of its decreased net income — whether it has to spend an additional $5,000 for taxes or for in- creased wages. It could hardly be said that a labor xmion was interfering with a federal instrumentality because it succeeded in establishing such higher wage schedules that the employing cor- poration decided to invest henceforth only in seven-per-cent stocks in order to maintain its rate of dividends. The analogy affords a basis for the argument that such effect as taxation of corporate stock or franchise may have to deter the corporation from purchasing high-grade low-interest-bearing securities must be regarded as in- direct, since the same effect may be contributed by other factors. Nevertheless it remains true that taxation measured by the value of securities owned, and which therefore in effect falls on those se- curities, falls more heavily on securities with the lower interest yield. The ratio between the net yield of public and of private obligations is more favorable to the latter when both are taxed on their capital value than when both are exempt. It may well be, therefore, that state taxation directly on United States bonds should be forbidden on economic grounds. How, then, are we to
