Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1918-09-19
THE OSTRICH POLICY
AND LIBERTY BONDS
Congress Seems Determined to Adopt 1t in
Order to Keep War Securities
ot par

at Par
THE drive for the fourth Liberty Loan
is to begin week from Saturday.
1t is understood that the country will
be asked to subscribe for $4,000, 100000
worth of bonds, the interest on which
will be Az per cent.
Congress is struggling with the task
of raising revenue by taxation with which
to supplement the proceeds of the bond
sale, in order to provide funds to prose-
cute the war. An additional sale of
$4,000 100000 in bonds will have to be
made before the close of the fiscal year
if we are to raise the $4,000, 100000
mated will be necessary to pay the bills.
1t will strain the resources of
the country to raise the SS,000,0 100000
by taxation which, added to the
S16,000,O0O, 900 of bonds to be issued, will
make up the total needed. The money
will be raised. That is admitted. Men
with property to be taxed will pay their
tax bills, perhaps with a wry face, but
they will pay them. Men with money to
invest will buy the bonds.
1t does not seem, however, as If Con-
gress were going about its task with that
degree of financial intelligence which
should be exercised in these critical days.
What the Government needs is net rev.
enue. Yet the Treasury Department is
planning to pay Az per cent interest
on the fourth Liberty Loan and to col
lect back as taxes the greater part of the
difference between the 312 per cent on
the tax-free bonds of the first loan and
the Az per cent on the new loan. The
net revenue which it will collect will be
negligible so far as providing funds for
prosecuting the war; but the excess in
terest which it will have to pay in time
of peace when the tax on the income
of the bonds may be reduced, will be a
burden upon the country for years to
come.
The proposed tax on the income from
the new bonds, after the exemption of a
limited amount in the hands of a single
purchaser, is 12 per cent. The difference
between the income from Az per cent
bond and a 31a per cent bond is 17.8
per cent This, on the surface, makes
a greater net return to an investor in
the bond drawing the greater interest.
But the 4A per cent bonds of the Liberty
Loans already foated are selling below
par. They have been quoted as low as
S95 for $10O bond. The tax-free 3k
per cent bonds have been selling for S102
or thereabouts for a 500 unit.
This disclosure of the attitude of in
vestors toward these securities ought to
be illuminating to Congress. It's only
effect has been to lead the Ways and
Means Committee to draft a measure
giving the President power to prevent the
buying and selling of the bonds, in the
belief that if no one is allowed to sell a
bond it will continue to be worth its
face value, and that investors will buy
new bonds in the confident belief that
they will remain at par. Such reasoning
is worthy of the ostrich which buries it's
head in the sand and thinks it is in
visible. The Senate has rejected it, but
the House has yet to admit it's folly.
lHe suSCepllpiiltieS anu IlllllullleS OF
capital ought to be considered in the
drafting of the revenue bill, rather than
the tmidties of the politicians who balk
at the issue of tax-free securities. Capt.
tai is timid when confronted by bond
subject to taxation because it has no
guarantee that the tax rate at the time
the bond is issued may not be increased
in the next revenue bill. 1t knows that
the heavier the tax on accumulated wealth
the better do certain demagogic poit-
clans think they are pleasing the people
The market quotations on the Liberty
Bonds already issued ought to convince
the men in Congress that there is a
financially wiser course than that to
which they seem to be committed.