The New York herald., 1920-12-28
BONUS WMLSHAKE
NATIONS FINANCES,
CONGRESS WARNED
Houston Says All Estimates
Must :se .e:'i;ced Down to.
Bare Necessities.
OFFERS HIS TAX PLANS
Careful Summary Proposed
Raising Four Billions a
Year for Three Years.
RICH AVOIDING TAXATION
Would Replace Excess Profit
Plan With Levy on Income
of Corporations.
RICH AVOIDING TAXATION
Special Despatch TO TIE New YORK HERALD.
New York Herald Bureau,l
Washlngton, ID. C.. Dec. %.

Special Despatch TO THE New YORK HERALD.
New York Herald Bureau,
Washington, ID. G.. Dec. 20.
UNLESS every unnecessary eXpendi-
ture. such as the proposed appropria-
ton for payment of soldiers bonus, be
avoided, unless every official or other
estimate or request for appropriations
be reduced to a minimum, no sound
plan of tax revision can be carried out
and the successful financial conduct of
the Government during the next three
years will be seriously imperilled."
These are the closing words of a
statement made to the Senate Finance
Committee to-day by Secretary Hous-
ton of the Treasury defining reasons
why he opposes approval by the Sen
ate of the House bill granting four
optional bonus schemes to ex-service
men in the world war.
He fatty told the committee he had
given no study to any of the proposals
suggested for additional taxes to raise
bonus funds; that all his attention had
been confined to devices for raising
funds for current needs and future un-
avoidable obligations; that the most
generous of the four bonus proposals
would require s4,534, 900, 900, and the
lowest at least $1,000 900, 600, and that
he is opposed to any and all Of them.
supplementing Secretary Houston's re-
view of our finances. DR.. T. S. Adams,
Treasury expert, explained in detail
many Of the sources of government in
come that are shrinking. Both OFF,
cials in the most solemn terms warned
Congress against mourning any further
obligations.
Would Lower Income Surtaxcs.
Secretary Houston presented a care
fully prepared summary of recommends
tions for tax revision, based on
proposal to produce $4,000. 100000 year
until the end OF the fiscal year 1928. In
brief he said this summary meant that
"a system of taxation based upon the
income tax--adjusted to ability to pay
bears less heavily on the taxpayers and
yields less revenue, as 1T must. when
the income of the country declines"
"I recommend the reduction OF the
extreme income surtaxes, not to exempt
the rich but to tax the rich,' said Mr..
Houston. at present by investing In
tax free securities and by the use or
other devices the very wealthy can
and do avoid taxation. The taxable
income of taxpayers having net incomes
offer $780, 900 year fell from $s92.-
e72,9s5 in 1916 to s392,247,329 in 1918.
This condition, have suggested, may be
met either by reducing the upper sur
taxes to a lower general level, or by
reducing tho upper surtaxes with re-
epect to that part of the income which
is saved and reinvested In taxable
property or business. leaving the pres
ent rates, II necessary. upon income
which is wasted or used in ostentatious
and unnecessary consumption.
"Thc excess profits tax should be re-
placed, primarily because 1t is losing It's
productivity and promises In the near
future to become statute of exemptions
rather than an effective tax. Moreover.
the tax is so complicated that it imposes
upon both taxpayers and administrative
authorities burdens too difficult to be per-
manently carried. I recommend that II
be replaced--not merely repealed--with
simpler and more certain tax upon cor
poration income or profits. 1 suggest in
this connection for the consideration OF
the Congress either flat additional tax
on corporation profits. such as recently
has been adopted in the United Kingdom.
or a tax upon the undistributed profits
OF corporations under which. III adopted,
corporations should be expressly au-
thorized to pay taxes through their
stockholders. as partnerships are now
taxed through their members. BY either
of these proposals the Income tax on
corporations could be made n fair
equivalent for the income tax as now ap-
piled in effect to individuals. partner
ships and personal service corporations.
Expects Increase on Luxurfes.
saT recommend the retention of sim
pie system of specific sales or consuinp-
tion taxes designed to collect moderate
proportion OF the aggregate tax levy
from a few highly productive taxes on
non-essentials. Miscellaneous sales or
excise taxes. shifted In main to the con-
(, sumer. supplied in the last fiscal year
about 20 per cent. OF the total taxes, or
about % per cent. if customs duties are
counted as consumption taxes
TN view OF the financial needs OF
the Government these proportions may
properly be maintained or even In
creased to perhaps 80 or 35 per cent.
but no radical increase as doubling the
consumption taxes would in my opinion
be justified. There must be a fair ball
ancc In the tax system as a whole be-
tween taxes on the consumption OF the
masses and taxes on wealth, income ana
business. It would be especially un-
Fortunate to substitute sales taxes OF
sny variety for taxes upon corporation
trofits required both to balance the tax
system and to equalize taxes on cor
3orations with the progressive income
tax as applied to unincorporated busi-
aess concerns. To place such an un-
fair load on the masses would violate
all tho recognized principles OF justice
as TO the division or distribution OF the
total tax burden. I do not oppose ali.
gales taxes, but I have recommended
the repeal of those sales taxes which
are difficult to enforce. unduly vexatious
ind Of inconsiderablc yield. The entire
iax system. including the existing
gpeciao sales taxcr. should be simpl!-
nca. not further complicated by tho
s-GptIon of turnover or general salos
~ which would require huge additional
administrative force IL administered
.n'opcrly and would result in wide
yrread evasion if not thoroughly ad-
| r1lnistered.
"The excess profits and other taxes
N which in my opinion should be replaced
would yield in the future less than $780,
100. 900 year. In order to meet this
Y A.x ~~1