The Daily Ardmoreite. [volume] (Ardmore, Okla.) 1893-current, 1920-12-13
MONDAY. DECEMBER IS, 1920
MIR. H0UST0N'S TAX
PROPOSALS

The levy Of heavy income taxes,
as is well known, gives a highly
preferred standing in the markets 10
taX-exempt bonds. which are chiefly
those issued for public purposes.
Several undesirable consequences re-
suit One is that more public
improvement work is undertaken than
4 just consideration of the countrys
economic, financial and industrial con-
dition would justify, in that, however
desirable in themselves, good many
of these improvements are not eco
nomically productive. Another is that
the abnormal issuance Of public bonds,
which results from the favorable
terms on which they may be sold,
affords a refuge TO capital seeking
escape from the income taxes, and
so deprives the government of a
consequence is that corporations en-
gagged in productive enterprises have
10 pay a higher price for the capital
they need, which higher price, OF
course, is an added charge of the
things they produce or the services
they render. To sell their securities
in competition with taX-exempt bonds,
corporations have TO give them
rate Of interest as much higher than
that borne by taX-exempt bonds as
will be needed to pay the tax on the
income derived from them. Since,
as has been said, this higher cost OF
capital must be passed TO the patrons
Of these corporations in the form OF
higher charges, it ends in the public
having to pay a large part Of the
income tax from which capital saves
itself by investing in tax-eXempt Sc
the supply of capital is less than
the demand, as has been the case. a
further consequence is to discourage
productive enterprises which it is 10
the interest Of the country to have
developed.
To obviate, or at least minimize,
these Ill consequences Of the heavy
income tax levies, Secretary Houston
has recommended that, for the pur-
poses Of taxation. incomes be separ-
ated into two classes-income that
is spent, and income that is saved
or reinvested. his assumption being
apparently, that that part of an in
come that is not spent will be in
vested, as doubtless 1t will in most
cases. though 1t is manifest that in
some it will not, unless The mere
keeping Of it on deposit in banks
may be counted as u form of invest
ment He would discriminate in as
sessing the income tax on the two
classes of income, making the rate
heavier on the spent than on the
saved or reinvested part. The differ
ence would increase with the size OF
the income. on incomes up to $4,000
the rate would be the same on the
spent and the saved parts. But begin
ming with incomes above $4,000 there
would be a progressive difference
between the rate Of taxation on the
spent and the rate on the saved par
OF the income. For instance, on ar
income OF $4,000 he would make the
rate 20 per cent on the saved par
and 2j per cent on the spent part
and increase the difference with th'
size OF the income until one having
an Income Of more than $4,000,
would have to pay only 20 per cen
on the saved and 80 per cent on th'
spent part.
The proposal is an attractive one
one obvious effect OF It would b
TO discourage extravaganza in per
sonal expenditure. 1t would oper
ate as penalty on spending and
therefore. rs a bonus on saving
though It would probably not exer