The Washington herald., 1920-10-15

pG,ed BY Otto H. KohH for the BHsi-
ness Section Of The Washington
Herald.
ARTICLE II.
Tbs Income Tax.
II our extreme surtaxes on in
comes and our excess profit tax had
the effect of breaking the vicious
circle Of price-boosting and wage
boosting, II these taxes had power
to eliminate or curb 'profteering,"
much might be forgiven them
But experience has proved that
not only have they no such effect
and no such power, but indeed they
have tended to greatly intensity
those evils. There can be little
doubt that the excess profit tax in
its existing form and the high sur
taxes are, in effect, nothing less, to
a large extent, than disguised ana
inflated consumption taxes.
Comparing our income taxation
with that Of England, we find that
in that country taxation starts
with incomes (for married mem of
1925; here with incomes of $4,000.
The English tax on the smaller in
comes, say up TO $4,000, is, on the
average, from six to ten times as
heavy as ours. On the other hand,
our tax in its upper scale is far
heavier than that of England. The
English maximum taxation is so
per cent, but profits made by a per-
son otherwise than in his regular
business are not subject to income
tax at all in England. Our maxi
mum taxation is 73 per cent, and
applies to all sources of income or
profit Except taX-exempt securi-
ties). That is the highest scale of
Income taxation existing anywhere
in, the civilized world. In addition,
we have State income taxation In
many of the States.
English surtaX Lower.
The English normal tax is 80 per
cent, with certain attachments in
accordance with smallness of the
income taxed Our normal rate is
6 per cent, with an abatement to 4
per cent on the first $4,000 Of taxa
BILE income.
On the other hand, the highest
English surtaX rate is so per cent
while ours is IS per cent. That is
to say, in Enpland, the highest in
come taxpayer is taxed at a rate
twice that applicable to the lowest
taxpayer exclusive of those tax
payers whose income is so small as
to be materially affected by abate-
ments). With US the highest in
come taxpayer is taxed at a rate
haf
applicable to one whose income is
between $4,000 and $1,000 a year.
Our scale Of income taxation in
respect to small incomes is juster
and wiser than the English scale,
and is greatly preferable to it, but
our moderation in respect to tax
ing small incomes makes all the
more conspicuous the unnecessary
and harmful extreme to which we
go at the other end of the scale.
Britain, as 1 have said, does not
subject to income tax incidental
profits which a person makes out
side his regular line of business
l discrimination which seems to mo
acking in justification. Further
more, the British subject residing
and earning his income outside of
the British Isles pays no tax to his
uajesty's treasury; but the Ameri-
ean citizen similarly situated is
subject to our income and excess
profit tax Moreover, the English
Excess proft tax, while nominally
higher than ours, is assessed on a
basis and by methods which make
L both fairer and less burdensome
han ours.
On the other hand. we exempt in
some from municipal bonds, county
bonds, State bonds, farm loan bonds
and (unless specifically otherwis,
provided for) federal bonds. That
5 to say. from the capitalist en-
Eaged in business. or investing his
money in supplying funds to our
Industries, we take away up to
hree-quarters of his income land
wen more If we include other than
upertaxes); but to nonworking or
aonventuring capital we offer a
afe and tempting refuge in the
ax-exempt securities above re-
,erred to.
There are at present outstanding
about sl4,0o0,o0O 900 worth of such
ax-free bonds, and more are bein.
reated all the time.
TaI-Exempt Bonds Popular.
Under the existing schedule Of in
ome taxation, the inducement 10
ruy tax-exempt bonds is so great.
md the consequent demand for
hem SO strong, that a ready and
ager market is offered to pretty
Ieariy every township and county
hus greatly facilitating wastefui
pending by municipal and other
ocal governments.
Capital invested in such bonds
rot only has been and is free from,
, axation, but owing to the effect o.
he high supertaxes in stimulating
he demand for tsx-free- bonds. such
apital has been but little impaired
while capital invested in taxable
Ionds has undergone a very heavy
hrtnkage.
/ am advised that it is not feasi-
Ne under the constitutional iimita--
ions Of our governmental SYSTEM
Tor would 1t be fair, to remove the.
ak exemption from such bonds Of
he tax-free class as are now ont
tanding. Nor, as I am Informed
Fould 1t be possible, according 70
he predominant opinion of legal
authorities, for Congress 10. subjeict
wen future issues of State, munfnf-
val and county bonds to taxation.
Inless constitutional amendment
e adopted to that effect.
Personally, I do not favor the in
titVtion of tax-exempt securities.
lecause 1 believe IL economicaIi,,
.nsound and socially Objectionable
CONTINUED ON PAGE FOUR.