The sun., 1918-09-13
Huge Investment Capital when
Avoids Surfaced Liberty Bonds.

AVOIDS SuftaAeO LtUerty bVhue'
Secretary, McADoo's plan Of limited
exemption of Government bonds from
income surtaxes will help to rescue
future Liberty loans from failure.
But, started in the right direction,
It can and should go further. 1t is
only question of time until the
Treasury and Congress will be COM
PEELED to send 1t longer way. They
can do this now to the full success OF
such loans as the Government must
nut out. They can do it and save
money for the Government. They
can save more in the way of permn-
nent interest than they will lose in
temporary taxes.
In his letter to Chairman KITCHlN
Mr.. MCADoo stated the question fatty
enough. He said that as the high
Kitchn surtaxes would drive large
investments out of the Liberty loan
bond market, the Governments
choice now lies between raising the
interest paid by the bond or lower
ing the surtax imposed on the bond.
But he might well have set forth the
obvious conclusion growing out OF
his premise that raising the Interest
for the full term of the bond. while
in the long run 1t would cost the
Government perhaps billions more to
fight the war, nevertheless might still
bar prodigious investment capital out
OF the Govcrnment bond market.
The Government might raise the
interest rate to ! per cent, to per
cent, but If wild man from BOrneo
in the Ways and Means Committee of
the House should thresh out sur
taxes to take away from the bond
holder that additional interest and
something more besides, such a D
per cent or 6 per cent. bond wouldn't
look any better to him than bond
paying AZ per cent. or 4A per cent.
with reasonable amount of the In
terest left to him by the national
tax gatherers.
The 81 per cent bond was good
enough to satisfy investors. The
proof of it Is that. exempt from all
taxes, 1t commands II higher price
to-day than the other war bonds.
Just as long as the surtaXes rise and
rise it will appeal to investors when
they will not touch bonds of higher
interest, paying excessive surtaxes.
Secretary McADoo need not yet
have issued bond higher than 4 per
cent. IL there had been any guaran-
tee that per cent. or something near
4 per cent. would be left to the bond
holder. AS matter of fact, with Il
Eftchin at the head of the Ways and
Means Committee making surtaxey to
fit his economic Authorizations, there
could be no guarantee, there could be
no reason to suppose, that two-thirds,
or one-half, or even one-quarter of the
<lnterest Of the present AZ per cent.
bofsls will be left to large investors
after\,pot the owner of the bonds but
the tax gatherer, in effect, has clipped
their coupons.
If. as Secretary MCADoO warns Mr..
KITcHIN, the Government raises the
interest rate, that increased interest
will go for years and years into the
pockets of the small investors who do
not have to pay the surtaxes. But as
hundreds of millions of capital which
would he subject to the high surtaXes
will still stay away from the bonds
just the same. the Government simply
will be out of pocket the difference in
interest paid to those who would have
bought the bonds anyhow at lower
rate of interest.
In this country there are hundreds
of millions, there are billions Of CAPT
tai which will not, which, because of
the statutes, because of the vigilant
scrutiny of the courts, because of the
moral and legal obligations of the
trustees and managers, cannot be In
vested on patriotic impulse. JOHN
Brown. the man OF salary, acting
for himself, can buy Government
bonds to the limit of his capacity
whether he gets . per cent. or l per
cent out of them. So can Pluto
CRGsUs, acting for himself. But the
trustee has no option in the matter,
The trustee must handle the funds
entrusted to him under the strlctest
regulations and the deepest respon
sibility so rs to produce n reasonable
income for the interests or the In.
dividuas of which he Is trustee.
In this country trusteeship en-
braces the widest fields. Banks are
trustees. Insurance companies are
trustees. All manner of religious,
charitable and educational funds are
n
~ p = ;. sals.,,,.a = $40