Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-06-14
TAX-FREE RoNns.

Insthe early days Of the liberty loans. uonda a. tho
y 10y .iseue bearing 9 IL per cent sold on the market at
= oout par, although subsequent issues bearing higher rats
were offered at q considerable discount, The recon for
I'M vas that the 8 liz. per cent bonds carried tax az
enpeon features which did not apply to the other bonds.
consequently these bonds were III demand by persons Of
large incomes who would have been subjected "a the
progressive income tax had their money been invested
IN ordinary securittess They found II to their advantage
9 guy first liberty bonds and realize 3 10 par cent On
them. remaining exempt from taxation rather than to
invest IN other securities upon which in the case OF per-
sons OF very large incomes. the surtax would amount TO
Is per cent.
ABOUT sS, the lowest point on record. Among the reasons
Tor this decline was the prospect that the United states
sosern"ent was likely to issue farm, loans bonds having
the same tax exemption provisions as the liberty bonds
ana bearing 5 l-2 per cent interest instead of $l-2. That
made farm loan bonds If they should be issued, a 3 per
cent per annum better investment than the liberty bonds.
Ihe result was that several dollars were knocked off the
value of every bond of this issue held by every individual
IN the United States and the decline In first liberty bonds
was accompanied by a decline OF considerable proportions
IN the market value of all other bonds.
The Herald has often made the statement +h.+ te
person who. owns liberty bonds and intends to keep them
need not concern himself with their market price. This
is exactly true, but it is not everyone who can be sure that
he will keep his liberty bonds as the occasion may arise
when it VIII be necessary for him to realize on them for
some urgent and necessary purpose. In this case, the
market price becomes n very important element: and the
present situation is that the. prospect of the issuance Of
these tax exempt farm loan bonds has deprecated the
selling value of a 500 liberty bond OF the first issue ap-
proxinately SO. This seems like rather \ s,eep price TO
pay for the issuance Of these bonds.
The discrimination cannot even be justified on the
OASIS OF benefit to the farmer. The government must
nave money with which TO carry On its operations. That
money must be derived from somewhere II millionlfres
can invest their funds TO tAx-exeEnp1 bonds paying a high
rate of interest, they win do so. The money on which
they would otherwise be taxed viii be exempt. Some
other property must be taxed to make up the SHORTAGE
and IN making up that shortage the farmer. the merchant
the iahorinE man, and professional man, must all con-
tribute And il viii be OF little advantage even to the
borrowing farmer to- obtain money at perhaps a traction
less than the ordinary price if he must be taxed in order : :
to make up tina, difference, and in order also to make up
the loss in revenue due to the issuance of securities Of this
class The whole principle is unsound. There ought to bel
an end Immediately to the issuance of tax exempt secur-
OF all kinds The liberty bonds stand in a class by
and these with the exception of the first issue.
are not exempt from progressive TAXATION. The more tax
exempt securities are placed on the, market, the greater
the opportunity afforded the rich man to dodge taxation |,
and the rich man will take advantage Of it just as the
man would If the opportunity came his way. For ,
every tax exemption there must be an additional tax
upon someone and upon some class Of property. The
sane method is to tax securities OF ali kinds, tax
hem equitably, and Progressively where progression is I,
ogtcally called for and then every kind Of investment and I
every sort Of enterprise will stand upon its own basis. s