The New York herald., 1921-01-10
SM0OT ADVOCATES
| 32PER CENT.PEAK
FOR PROFITS TAX
Has Three Hour Talk With
Harding, Their Views Re-
ported Harmonious.
AGAINST HIGH TARIFF
Scientific Law to Raise Not
More Than $500, 100000
i'll Revenue.
INHERITANCE TAX ONUS
Senator Would Eliminate It
Confident of Getting Four
Billions Annually.
INHERITANCE TAX ONUS

MARION, Ohio, Jan. 9.-Tax revision
and tariff recommendations made tc
President-elect Harding to-day by
Senator Reed Smoot (Utah) are likely
to be felt In the early legislation of the
new Administration. There is nc
Senator for whose hard sense and
ability the President-elect has a higher
respect. 1t was indicated to-day that
Mr.. Shoots Ideas coincide with those
of Mr.. Harding.
The recommendations made by
Senator Smoot are:
The peak of the excess profits
tax rate should be 80 per cent. GER
tainly not more than 40 per cent.
Such imposition and adjustment
Of taxation on business gains as
would vastly reduce unnecessary
annoyance TO business and would
greatly simplify revenue raising.
A protective tariff law adjusted
scientifically to the welfare Of bust
ness and labor and calculated to
raise not more than $500. .000,0 600 in
revenue.
Thoroughgoing departmental re-
organization to eliminate duplica-
ton and waste and TO save at least
$500, 10000 n year.
tn,taufioafinn IN JsstarYnine III
it be not wise to do away with in
heritance taxes, serious irnposl-
ton on going business and tax on
capital rather than on earnings.
Discunsion of Cabinet.
In addition Senator Smoot discussed
Cabinet matters with Mr. Harding. ad'
vocating the appointment OF Western
men for Interior and Agricultural port
folios. He spent three hours IN confer
ence with the Presldont-elect.
1--WE would have made most unsatis-
tory progress" Senator Smoot said when
interviewed, IF the experience OF the las:
few years of war taxation had not suB-
gested many measures of Improvement
The time has come thoroughly to survey
our experiences and take advantage OF
the lessons. For myself. I think the
higher rates of the excess profits tax
should be reduced
"A careful computation shows TIM;
when these rates get above q certain
percentage they cease to be productive,
because there are ways for keeping
profits from being so large. The ten
dency then Is to put capital into the vast
amount OF tax exempt securities thai
are in existence.
'I have a computation which shows
that when the peak of excess profits
goes above 81 per cent. IL becomes profi--
able to avoid the taxation by transfer
ring investments TO tax exempt securt-
ties. This,is mathematically demonstra-
BILE. and / would like to see 80 per cent.
made the limit. though l am doubtful
whether Congress will be willing to place
it below 40 per cent
"As Illustrating how earnings OF capi-
tai will Inevitably be lessened when the
tax burden Is too high 1t Ia found that
the number of people reporting annual
incomes Of S1.o00.0 900 or moro is now
only about one-fourth what II was at
the highest point"
Inheritance Tax Problem.
Senator Smoot discussed the inheri-
tance tax. saying that ne doubted II II
could be done away with. but expressed
his own convictions that as il is reaiIy'
tax on capital and not on earnings
Il Inevitably must be a serious burden
whose effect can only be unfortunate.
THE imposition OF fixed percentage
Of taxation on inhcritances." he said
means that when the head OF an estate
dies those who succeed to it's manage
ment must Immediately arrange such
measures of liquidation ms may be neees-
sary TO take out that proportion OF
capital which IL required TO meet the
Nx This Is not only n serious imposi-
ton on q going business, but II Is the
more serious because IL comes at time
when the management In passing TO new
and less accustomed hands. Thus the
difficulty is accentuated."
The Senator expressed confidence that
by g proper employment and adjustments
OF taxes on business gains the entire
system OF revenue raising can be snpli-
fed, and that the $4,000. 900, 600 that the
hnnuallJ H'tus CAu W op-
talned with much less expense and re-
duced annoyance TO people In business
to the tariff, he said he did not
favor attempting 10 raise more than
500 900, 600 through it.
II do not favor very high tariff rates
merely for the purpose of producing
revenue" he said. II would try 10 make
them as low as possible consistent with
n proper protection TO American business
md labor but no higher"
Department Reorxn nj xation.
Senator Smoot also discussed plans
for departmental reorganization, aiming
TO do away with duplication and waste IN
the administrative departments. He ex
planned that Congress had provided for
n Joint Congressional commission to be-
gin work at once surveying the depart
ments.
I'm my Judgment" he said, 'thc
proper readJustment In these regards
will save the Government about s200.-
600 900 year. I recall that Senator
Aldrlch once said that n Government
business was transacted az private basi-
-. Ta..tyl n...s