The Washington herald., 1921-11-10


In other words . per cent tax
free bond becomes q 13.7s per cent
bond to the man with an income
Of 100000 or more, or in other
words the rate Of income II multi
piled by more than three.
The constant change In tax laws
bearing upon these exemptions In
wolves many technicalities and re-
quires careful study to discover the
right relation to the income OF the
buyer. The effect of tax exemption
privilege was shown In the record
of the Liberty 81 issue which was
bought up by large investors As
consequence the large resales OF
Liberties which depressed the mar
ket did not include the 3h issue
until In May, 1891, when the rumor
spread that income taxes were TO
be lowered, when Liberty 3hs set
tied to new low records.
The following States exempt prac-
tically all of the issues of the STATE
and its divisions: Alabama, Arizona
California, Connecticut, Delaware,
Georgia, Indiana, Iowa, Kansas,
Kentucky, Louisisna, Maine, Mary
land. Massachusetts,. Michigan, Min
nesota, New Jersey, New Mexico,
New York, Utah. Washington, Wis
consin and Wyoming. In three
States the right Of exemption Is
doubtful, while in twenty-five
States the State constitutions do
not permit either exempting or
taxing securities at q lower rate
tfSn ocfer property.
In the States which allow tax ex-
emptions Of their own issues and
those of their subdivision. the out
standing factor is the recent date
Of the extension Of this privilege.
The exemption of municipal bonds
of other classes or securities since
the adoption of income taxes. The
result should be a relative lowering
of rates on these issues. as conn
pared with the best private corpo-
rations.
The purpose of such exemptions
has generally been stated to be the
encouragement of industry to locate
within the States, or to avoid the
duplication in taxation. Most states,
however, tax the holder of corpor-
ate securities without regard to
their location. A few States exempt
investors shareholdings In foreign
corporations when they are taxed
in the State in which the company
Is organized. Real estate mortgages
and capital stock of manufacturing
corporations are the securities
which are most commonly exempt
ed. Much of the agitation for the
repeal Of the tax exemption privi-
lege has hinged around the farm
loan bonds, both those of the jotnt
stock land banks and the Federal
land banks.
One proposal 10 to eliminate the
tax free feature OF future bond is
sues of the joint stock land banks.
Some would have this extended TO
the Federal land bank bonds also.
Another proposal Is for a constltu-
tional amendment to permit the
Federal government to tax all "a.
curtttes alike. Some form of lini-
tation is likely to be adopted sine.
a continuation Of present conditions
may not unlikely result in a total
OF $4,000, ZOO, 900 of tax exempt ,e.
curities by 1880. So long az the
privilege is enjoyed by certain
bonds there will be constan, sytt..
tion to add new issues to the ltst
such as the home loan bank bonds
and the like.
Ire possible limit Of fncom. tax
exemption on Liberty loans other
than sh and 3% Is stated by M.
Lagerquist in his book, mentioned
above. to total $4,000. or Fed.
eral farm loan bonds and nunerou.
other securities there are no lIrnIt,
upon the exemption as to IN.
amount held.