Omaha daily bee., 1921-05-02
Revised Tax
Program IRA ] Is
Proposed.
Secretary Mellon Says Sub
stantial Cuts in Current Ex-
penditures of Nation
Are Imperative.
Urges Corporation Levy
By ARTHUR SEARS HENNING

by Akl HUk SEANS HEN
Chicago Tribune Omaha Bee Leased Wire.
Washington. May ASSERTING
that the nation cannot continue to
spend at this shocking rate" Secrc-
tary OF the Treasury Mellon, in a
letter to Chairman Fordney OF the
house ways and means committee,
says the tax burden under which the
people are staggering can be reduced
only by Substantial cuts in current
expenditures
At the rate the government is ex-
pending money the secretary does
not deem possible any material re-
duction OF taxes and he proposes
revision program embodying not so
much decrease, as redistribution
Of taxation.
Mr.. Mellon favors repeal OF the
excess profits tax and the substitu-
ton of additional corporation taxes,
reduction Of surtaxes and other re-
adjustments OF income taxes, retcn-
ton Of the transportation and present
sales and excise taxes, but repeal OF
the soft drink and other taxes diff
cult to collect and an increase in
stamp taxes. A general sales tax he
is not prepared to recommend.
Would Restrict Securities.
The secretary also urges testric-
ton OF the issuance of tax free Sc
curities, particularly by states and
municipalities. He also wants
provision to enable a taxpayer to
deduct the net losses OF one year
from the income of succeeding years.
Mr.. Mellon says that. there will
be a deficit June 80 of nearly $l1S,,
100000. In the next fiscal year, the
government will expend about ST.,
00O,000,000 less than this year, but
will have prospective deficit OF
$l8,000,000. Disbursements this year
will total $5,602,00O000, including
$500, 100000 for debt retirement.
Next year the disbursements will
be $4,50O, 900, 900, including $s00,000,-
600 for debt retirement. Internal
taxes yielding $4,OO0000,000 next
year and the year thereafter, COM
pared with $4,550,000O00 this year,
the secretary regards as imperative.
The unexpected heavy current ex-
penditures, Mr.. Mellon says, have
upset calculations as to debt retire
nent and the government cannot ex-
pect to retire any OF, the orstand-
ing $2,500,000,0 600 flozting debt in
the next two years, out OF current
revenues. Nor can the country
look to any plan for funding the
floating debt to reduce the burden
of internal taxes during the next two
years"
To Reduce Short Time Debts.
Through the operation of the
sinking fund and miscellaneous debt
retirements, the treasury expects to
reduce the short dated debts $1,000
600, 600 in, the next two years and
the remaining $6000000,0O0 will
have to be refunded
Secretary Mellon hopes that the
house, having passed the emergency
tariff bill, will proceed to revise the
revenue laws and to that end he
makes the following proposals:
l. Repeal the excess profits tax
and make good the loss of revenue
by means of modified tax on cor
porate profits or flat additional in
come tax upon corporations, and the
repeal of the existing $1,000 exen1p-
ton applicable to corporations, to
yield an aggregate revenue of be-
tween $400000,000 and $500, ,000, 900.
The excess profits tax is complex
and difficult of administration and
is losing its productivity. It is esti-
mated that for the taxable year of
1921, it will yield about $450,000000
as against $2,50O,00O,0O0 in profits
taxes for the taxable year of 1918.
81 800 100000 for the taxable year
1919, and S750,000.0OO for the tax
able year 1920.
Replace Excess Tax.
In fairness to other taxpayers,
and in order to protect the revenues,
however, the excess profits tax must
be replaced, not merely repealed, and
should be replaced by some other
tax upon corporate profits. A flat
additional tax on corporate incomes
would avoid determination Of invest
ed capital, would be simple of ad-
rninistration and would be roughly
adjusted to ability to pay 1t is es
timated that the combined yield to
accrue during the taxable year 1921
from tax of this character at the
rate OF per cent and the repeal OF
the $1,000 exemption would be about
$500, 100000
2. Readjust the income tax rates
to maximum combined normal taH
and surtax of 40 per cent for the
taxable year 1921 and of about 5S
per cent thereafter, with view 20
producing aggregate revenues sub
stantially equivalent to the estimated
receipts from the income tax under
existing law. This readjustment is
recommended not because it will re-
lieve the rich, but because the high
er surtax rates have already passed
the collection point. The higherirates
constitute bar to transactions in
volving turnovers of securities and
property, which, with lower surtax
rates, would be accomplished and
thus yield substantial new revenue
TO the government.
The total net income subject to
the higher rates is rapidly dwindling
and funds which would otherwise be
invested in productive enterprises are
being driven into fields which do not
yield taxable income. The total es-
minated revenue from the surtaxes
under existing law is about $500, ,o00,-
600 for the taxable year 1927.
Revisions Urged.
5. Retain the miscellaneous specific
sales taxes and excise taxes inciud-
ing the transportation taN. the tobac-
so taxes, the tax ON admissions and