The New York herald., 1921-05-02
MELLON HAS PLAN
FOR TAX REVISION
Urges Excess Profits Re-
peal and Readjustment
of Income Leyies.
TAX ON AUTOMOBILES
Fayors Doing Away With
Many Of the So-Called
Nuisance Duties.
END SHOCKING SPENDING
Secretary Warns L. $. VIII
Have No Fund to Retire
Floating Debts.
TAX ON AUTOMOBILES
END SHOCKING SPENDING
Special Despotch to TIE New YoRa HERALD
New York Herald Bureau.
Washington, ID. c., May l.


New York Herald Bureau.
Washington, ID. G.. May |.
With the warning that the nation
cannot continue 10 spend "at this
Shocking rate" and that now is not
the time for extravaganza of enter
ing on new fields of Government ex-
penditure. Secretary of the Treasury
Mellon to-day sent TO Chairman Ford
ney (Mich.) of the House Ways and
Means Committee and TO Chairman
Penrose lPa.) of the Senate Finance
Committee his eagerly awaited detailed
recommendations for a revision Of the
internal tax system.
."rhe nations finances are sound,
and its credit is the best in the world"
says Mr.. Mellon, "but il cannot afford
reckless or wasteful expenditure"
Ordinary expenditures for the first
three quarters of the present fiscal year,
the Secretary says, have been s3.ISS.-
I'll. 1896. or at the rate Of $4,000 100000
for the year. OF these about $3.50 1000, 900
have been for the War Department.
about $500, 900, 900 for the Navy, about
100000, 900 payments to the railroads
and about S650.000 900 interest on the
public debt an aggregate OF s2.600.0oc.-
900 under these four headings In nine
months. or at the rate of 0,000 900
a year. Estimated expenses for the
next fiscal year for all purposes are
about s4.500.00o, 900.
Four SPECIFIC Recomm ndnt tions.
Mr. Mellon recommends repeal OF the
excess profits tax. readjustments Of in
come tax rates. repeal of certain ''nuis-
ance" taxes, but not OF all the miscel-
laneous excise and sales taxes. such as
the transportation. admission and to-
bacco taxes, and imposition of new
stamp taxes and license tax on use OF
automobiles.
He says the Treasury Is not prepared
at this time to recommend a new gem
eral sales tax. He asks Congress either
by statute or the submission of q con-
stitutional amendment to restrict fur
ther issues of tax exempt securities by
states and municipalities. which. he de-
clares. encourage the growth of public
Indebtedness. divert capital from pro-
ductive enterprises and Constitute an
economic evil Of the first magnitude"
nal taxes on the present basis for the
next fiscal year are SO, 700, 900. 900 and
are sS50.000,000 less than last year.
owing 10 shrinkage in business. and
likely to be further reduced
Mr.. Mellon says that when the Gov
eminent has definitely balanced its
budget the excess Of current receipts
over current expenditures Will not pro-
vide for the fixed public debt redemp-
tion and unless expenditures are greatly
reduced there will be practically no
funds for the retirements this year and
next OF the floating debt
The following are the specific recon-
mendations Of Secretary Mellon for tax
| revision.
First-Repeal the excess profits tax
and make up the loss by means OF modi-
fled taxes on corporate taxes or a fat
additional income tax upon corporations.
and the repeal OF the existing $4,000 ex-
empuon applicable to corporations to
yield an aggregate revenue OF between
| S400.000,000 and $500. 1000. 900. The ex-
cess profits tax Is complex and difficult
Of administration and Is losing its pro-
ductivity. 1t IL estimated that for the
| taxable year 1921 It viii yield about
$450.0o0,000 as against 81 500. 00o. 900 in
profits taxes for the taxable year 1918.
y.
and S750,000. 900 for the taxable year
1920. 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 nat addi-
tional tax on corporate income would
avoid determination OF invested capital.
would be simple or administration and
would be roughly adjusted to ability to
pay. IL is estimated 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
$4,000 exemption would be about $780,
100000
Income Tax Rates.
Second-Readjust the income tax rates
10 maximum combined normal tax and
surtax OF 40 per cent for the taxable wear
1921 and Of about 33 per cent. thereafter,
with view to producing aggregate rev.
enues substantially equivalent to the es-
timated receipts from the income tar un-
der existing law. This readjustment is
recommended not because IL will relieve
the rich. but because tho higher surtax
rates have already passed the collection
point. The higher rates constitute n bar
to transactions Involving ttirnovera or
securities and property. which, with low
er surtaN rates, would be accepted and
thus yield substantial new revenue to
the Government, The total net income
subject 10 the higher rates. IL rapidly
dwin6ling and funds which would other
wise be invested IN productive enter
prise are being driven into fields which
do not yield taxable income. The total
estimated revenue from the surtaxes un-
der existing law Is about $500, 600 600 for
b hg q ~. a
yield for the year from the surtax rates
above % per cent. would be about $780,
100000. The immediate loss IN revenue
that would result from the repeal OF the