The Washington herald., 1920-10-15
CONTINUED FROM PAGE ONE.

but we are confronted with .
condition, not a theory
The discrimination which permits
the owner of liquid capital to es-
cape all direct taxation by the sim
pie process of buying municipal or
other tax-exempt bonds becomes
naturally all the more effective and
aecentuated as the income surtax
rate increases
The existence of that mass Of
non-taxable securities Is therefore
an additional consideration among
those which should have bid our
Isgislators pause before raising the
scale of direct taxation to unexam-
MED heights; it is an urchallenge-
able argument against the fairness,
Iappropriateness and productiveness
of enormous supertaxes.
Advantages Are Outlined.
doubt whether il is fully real
lied by many people how immense
is the advantage which is enjoyed
by capital invested in tax-exempt
securities as compared to capital
invested in business or in corporate
securities or earned in salaries.
Since there are outstanding at
nresent billions of dollars worth OF
municipal bonds which may De pur-
chased to yield from 51a to per
cent. let US for a moment consider
the Weld which a taxable security
or a business would have to bring In
in order to be the equivalent OF
ltax-exempt investment yielding 5A
per cent.-The table runs ike TINS:
In the case of incomes exceeding
500 900. the taxable security on
business would have to yield $50
per cent.
In the case Of incomes exceed
il ing $4,000, 7.2s per cent.
In ;he case of incomes exceeding
$4,000. III per cent.
In the case of incomes exceeding
/ $4,000, s.23 per cent
In the case of incomes exceeding
! $50, 900, s.sS per cent
| In the case of incomes exceeding
| $4,000, 9.75 per cent.
In the case of incomes exceeding
{ $4,000. 1866 per cent.
1 In the case of incomes exceeding
! 5000, 11.73 per cent.
! In the case of incomes exceeding
| 100000, 1907 per cent.
I In the case of incomes exceeding
| 5000, 900, 1897 per cent.
| In the case of incomes exceeding
/ 100000. 1897 per cent.
In the case of incomes exceeding
| $500, 900, 1888 per cent.
| In the case of incomes exceeding
sl.OOo,OOO. 21.30 per cent.
You see, therefore, that a man in
the higher supertax classes. begin
ming with those earning incomes OF
$50, 900, actually makes an invest
ment yielding him from 8 Ia pei
cent to q Ia per cent (and still
more if other taxes are included be-
sides the Federal income taxi it he
puts that part of his income which
is subject to the maximum tax-anC
: that is much the largest part-intc
a 52l per cent tax exempt bond, a!
compared to putting it to work il
his business or investing in ordinary
bonds or in mortgages.
Zeal Incentive Gone.
In the face of these comparisons
what induCement is. there for a maj
to take upon himself the risk anC
drudgery. the worries and cares o
active business, in the expectation
of reasonable profits? What incen
tive is left to him for normally re
munerated effort and enterprises un
der a dispensation which permit
him to retain but an inconsiderabl
fraction of the fruits of his work
while the government takes tn
, lions share up to three-quarters an,
more. in direct taxes-not durinl
wartime. when no decent minded
man hesitates or questions abou
bearing whatever burden may b.
placed upon him-but in times o
peace? Does it not follow tha
there will ensue either a slackeninJ
M business effort or a tendency t
exact unduly and undesirably larg
profits so as to offset the burden o
taxes?
1t may be said. We'll. supposfn,
man with a very large incom
. is made to pay up to three-quarter
Z of it in taxes. He still has plent,
left" Granted, but that is not tn
point. The point is not what hap
pens to the rich mamie can pro
teCt himself-but what is the effec
on the country? Capital for bust
ness or for corporate investment
is a vital necessity for the upkeeI
and expansion of trade and indus
try. And it is out of annual saving
of the individual, after meeting liv