The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1921-05-27
rAx-ExEMPT RoNps.

Lney are the SOURCE Oh uI1dlr CoHl-
petition with other classes of paper.
Exemption from taxation, however.
enables the flotation of these securi-
ties at rates OF interest below those
applying to railroad and industrial
stocks and bonds and mortgages.
But there is pending in the United
States senate a bill raising the rate
Of interest on farm loan bonds to s n
per cent. Less than ten years ago a
yield of 5 per cent was all that was
expected in a high grade investment
security. Even a yield of 4 u per cent
was considered good in some of the
old issues of long standing. and many
bonds, legal for savings banks and
other institutions, gave return of
only 4 per cent. A preferred stock
selling to yield per cent was consid-
cred somewhat speculative, per cent
decidedly so, and to buy anything
yielding more than that was an out
and out gamble.
Since the war, however, interest
rates have been steadily working to-
ward higher levels. AS a result, many
of the issues that have been brought
out within the past few months have
carried an 8 per cent coupon. Stan
dard Oil, Pennsylvania, Armour and
other companies that have always en-
joyed highest credit, have been COM
PEELED to pay as high as Z per cent
or more on funded obligations.
The secretary of the treasury is es-
pecially insistent that there be a cur
tailment in the issuance of nen-tax-
able paper. The conditions of which
he complains can hardly be improved
by raising the interest rates on farm
loan bonds. On the other hand the
secretary's objections might be par
TALLY overcome by a reduction of the
interest rates on tax-free bonds.
1t is charged that money is being
held out of industrial enterprises to
the detriment of the business inter-
ests of the country. Such a condition
can hardly be improved by making
already popular investments still
more attractive.
Perhaps the surest way to encour-
age capitalists to invest in productive
enterprises would be to lower the rate
of federal taxation on incomes This
could be done by substituting a tax on
sales for other Objectionable forms of
raising revenue. The principle of the
income tax is all right and that form
of taxation has come to stay, but it
should not be permitted to paralyze
the country's enterprise and progress.
lawmaker, who is looking forward to
reelection by the votes of the COM
mon people, in any scheme that will
hit the rich man. The ordinary eiti-
zen doesn't care If the millionaire is
taxed 100 per cent of his income; it
doesn't make any difference to him
self, he thinks. And, regardless Of
the merit of that point of view, there
is good ground for imposing taxes, in
| time of national necessity, at a heav-
Ter rate upon those who have the
larger incomes than upon those whose
incomes leave them little or no sur
plus above the bare cost of living.
But the present surtax plan is
working to the detriment of the COM
have found how to escape the high
surtaxes. by investing their money in
tax-free bonds; so the governments
income has been greatly reduced from
this source. These tax-dodging in
vestments have taken enormous sums
Of capital out of productive enter
prises, and are making it more and
/
ness to get the money needed with
which to expand and carry on their
business; one result is increasing I'M
employment and another is the high
price of commodities.
The proof of the first statement is
found in the figures of the internal
revenue bureau itself. In 1918 there
with taxable incomes above 100000
a year to make a total of nearly one
billion dollars of such incomes-er
which they paid income taxes and sur.
taxes. BY 1920 the number of In
comes reported for taxation at above
$4,000 had fallen off SO per cent
And the total of taxable incomes ir
$9s2, 100000 to $392,o0o, 900!
What had happened in those two
years? What had wiped out mort
than half of the country's multi-nil.
lionaires and reduced their income BY
two-thirds? 4-
The answer is the multimillionaire:
had transferred their investments t.
tax-free bonds.
Under the existing circumstances
there seems to be little reason 70
making tax-free farm loan bonds NOR,
attractive to investors than they nov
are and placing the burden OF tn
adeed interest charge on the people
Whenever It becomes desirable t,
raise additional revenue thru taxation
sorn ahrdp q Naxfo;Va 80 her ~.