Evening journal., 1918-09-14
Huge investment Capital Which
Avoids Surfaxed Liberty Bonds
lFrom the New York sun.)


Secretary McAdoo's plan Of limited
exemption Of government bonds from
income surtaxes will help 90 rescue
future Liberty Loans from failure. But
started in the right direction, it can
and should go further. It is only a
question OF time until the Treasury and
Congress will be compelled TO send Il
a longer way. They can do this now
to the full success Of such loans as the
government must put out. They can
do 10 and save money for the govern
ment. They can save more in the way
Of permanent interest than they viii
lose in temporary taxes.
In his letter to Chairman Kitchin Mr..
McAdO0 stated the question fatty
enough. He said that as the high Kit
chin surtaxes would drive large in
vestments out OF the Liberty Loan bond
market, the governments choice now
lies between raising the interest paid
by the bond or lowering the surtax i'm
posed on the bond But he might well
have set forth the obvious conclusion
growing out Of his promise that raising
the interest for the full term Of the
bond, while in the long run IL would
cost the government perhaps billions
more to fight the war, nevertheless
might still bar prodgious investment
capital out Of the government bond
market.
The government might raise the in
terest rate to per cent, to 6 per cent,
but If wild man from BOrneO in the
Ways and Means Committee Of thI
House should thresh out surtaXes to
take away from the bond-holder that
additional interest and something more
besides, such 5 per cent or per cent
bond wouldn't look any better to him
than a bond paying AZ per cent or AZ
per cent with a reasonable amount Of
the interest 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,
It commands a higher price today than
the other war bonds. Just as long as
the surtaxes rise and rise it Will ap-
peal TO investors when they will not
touch bonds Of higher interest, paying
excessive surtaxes.
Secretary McAdoO need not yet have
issued a bond higher than q per cent
il there had been any guarantee that
per cent, or something near 4 per
cent, would be left to the bond-holdei
As a matter Of fact with a Kitchin at
the head of the Ways and Means Com
mittee making surtaXes TO flt his eco
nomlc hallucinations, there could be no
guarantee, there could he no reason to
suppose, that two-thrds. or one-half,
or even one-quarter Of the interest Of
the present AZ per cent bonds will be
left to large investors after, not the
owner Of the bonds, but the tax gain
erer. in effect, has clipped their cou-
pOns.
IT, as Secretary McAdoo warns Mr..
Kitchin, the government raises the IN
terest rate, that increased interest viii
go for years and years into the pockets
OF the small investors who do not
have to pay the surtaXes. But as nun
dreds Of millions OF capital which would
be subject to the high surtaXes Will
still stay away from the bonds just the
same. the government simply viii be
out of pocket the difference in interest
Maid TO those who would baye bought
the bonds anyhow at a limited rate OF
interest.
In this country there are hundreds
OF millions, there are billions OF capl-
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 trus-
tees and managers, cannot be invested I
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 D per cent
or 1 per cent out Of them. SO can Pluto Il
croesus. acting for himself. But the
trustee has no option in the matter.
The trustee must handle the funds en-
trusted to him under the strlctest reg