The New York herald., 1921-11-18
50 P. c. SURTAX SET
BY HOUSE, IGNORING
APPEALBY HARDING
COncurs in Senate Maxi
mum Income Levy, ScOrn-
ing a Compromise.
81 G.. @. P. MEN DESERT
First Important Defeat ol
Administration, Which
Urged 40 Per Cent.
LETTER SENT TO FORDNEY
President Insists Business Is
Injured by High Rate and
Gives Illustration.
Special Despatch TO The New YORK HEnAtn.
New York Herald Bureau,
Washington. ID. C.. Nov. II.

SP'Stot DcsputCN 10 HE NEW 'Ohk fiEhALhs
New York Herald Bureau
Washington, ID. c., Nov. II.
/ The Harding Administration suf-
fered its first important defeat in Con-
gress to-day when the House, by
vote of 201 to 173, decided to concur
in the Senate income surtax rates
with so per cent maximum.
! A special plea by President Har-
ding. in the form Of a letter to Rep
resentative Fordney, chairman of the
Ways and Means Committee, failed
| to hold the Republican lines intact.
Ninety-four Republicans deserted their
party and joined with the Democrats
to reject the 32 per cent. maximum
surtax rates, originally favored by the
Administration and the House. Only
three Democrats kicked over the party
traces to vote in favor of the 80 per
| cent. maximum.
President Harding in his letter to Mr..
Fordney reiterated his belief that the
% per cent. rate was more Just and
equitable, but he suggested the advisa-
bility of a compromise with 40 per
cent. maximum.
In response to your inquiry as to the
wisest course in dealing with the diff
| ference between the two houses of
Congress in the matter OF higher surtax
on incomes said the President, IT can
say only that in view Of our earlier
| conference on tax matters and the ul-
innate adoption OF the higher surtax
rate Of 81 per cent ! still believe the
rate approved BY the House to be the
rearer to a just levy and the more
promising one in returns to TIE public
treasury.
"The responsible Administration is
anxious. first of all. 10 lay the neces-
sary taxes to meet the demands of the
Treasury. There is moral obligation,
howe, er, on the party in power to do
everything possible to keep faith with
promises made to the public.
1--WE have been collecting the highest
surtax on incomes levied at this time
in all the world. The effect has been
the restriction of the easy now of capi-
tai in the channels most essential to our
normal and very necessary activities.
No one challenges the levy of the higher
tax in the stress of war, but now we
are struggling for the readjustment of
peace.
Where there is so wide difference
in the judgment Of the two houses. /
have thought it might be possible. and
wholly desirable. to reach an equitable
compromise say maximum surtax
levy OF 40 per cent. This would put
the higher Federal tax on incomes at
total of 4s per cent. which would meas
urably meet the expectations of those
who are, above all else. concerned with
the return of hopeful investment of cap
ital and the application of our capital
resources to profitable productivity.
II am wholly confident that the help
full results spreading thersfrom to every
active participant In our Industrial and
economic life, from management to
every wage Garner, would be vastly
more advantageous to our people than
the maintenance OF wartime levies ps
peacetime penalties on capital. which
are certain TO hamper the restorati ton OF
our activities for which we all so much
hope.
Gives Convincing Illustration.
"one experience will afford a convinc-
ing illustration. In seeking to hasten
the railway settlements growing out of
Federal control l authorized the Direc-
tor General to invite the cooperation of
the War Finance Corporation to con-
vert salabre securities into the cash
needed for the settlements in process Of
making. During the period of public
belief In 30 per cent. surtax. as pro-
vided by the House, the sabs of these
bills receivable was progressing in a
most promising way. Indeed, we had
converted more than 500 900 coo of rail-
way notes into ready cash.
THE very moment the higher surtax
became a likely levy, these conversions
ceased entirely. Manifestly the pro-
hibitive surtax tends TO divert our avail
able and much needed capital from en-
ployinent In our every day activities IN
investment In tax-free securities, The
records show that It is making a con-
tinued diminution In our receipts from
income taxes and Il Is making more
difficult the normal financing OF every
sort OF essential activities and Ia en-
phasizing the tendency to turn 10 the
Government for that paternalistic relief
OF both industry and agriculture which
has no rightful place in o. peace time
policy.
II am we'll convinced that fair COM
promise between the rates adopted by
either House will be the best possible
solution of the situation, and an early
decision will put an end TO existing
anxiety, even though the larger expec-
tations of the country are not fully
met"
The fight for the so per cent. maxi
mum surtax was led by Representatives
Frear of Wisconsin (Rep.) and Garner
Of Texas (Dem.).
Congress has repealed the excess
profits tax" said Mr.. Frear. I'VE have
reduced the surtaxes. We have repealed
the luxury taxes. Don't you think when
you 60 back to your constituents you
viii need moro than a letter from the
Continued on Page Nine.
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