The New York herald., 1921-12-08
Secretary Melons Report.

dent already had advised Congress
and the country of the magnitude of
the fiscal transactions which loom
| big and oyershadowing in the report
of the Secretary of the Treasury sub
mitted yesterday. The Director of
the Budget had covered in detail the
Government receipts and expendi-
lures, actual and expected. Some OF
the edge has thus been taken off Sec
retary MELONS presentation Of the
Governments huge financial busi-
ness. but the fact remains that his
report is a fine exhibit of the
trained, scientific, business manage
ment of the Government finances
under one of the country's clearest
thinkers and soundest bankers.
One of the interesting and i'm
portant operations of the Treasury
under the direction Of thoroughly
competent financier is the way it
has prepared for the handling of
heavy Government obligations soon
to fall due. Within the next year
and a half six and three-quarters
billions of dollars of such debt will
mature. If 1t were possible to do so
it ought to be discharged. Refund
ing short term debt costs more in
the long run, of course, than paying
up. But in the present situation
clearing off a debt to stop interest
charges on it is a theory the utter
inability to clear off the debt is
condition.
The short term notes and bonds
must be refunded in the near future
because nothing else can be done.
With this in view Secretary MELLON
has been rearranging the maturities
of Treasury certificates and short
term notes-this in itself a process
of refunding-so that they will not
be coming in for payment at the
same time the 1918 series of war
savings securities fall due little
more than year from now and the
Victory loans early in 1923.
With the work Secretary MELLON
already has done in redistributing the
| Treasury notes not only will the field
be clearer for the necessary refunding
of the bulk of the savings securities
and the Victories, but there will be a
better chance to cut the interest
rates to the further tightening of the
current tax burden. And every dol
lar that can be taken off the interest
load helps just that much to reduce
ultimately the principal of the tower
ing debt.
Another important feature of the
Treasury report is the attention it
gives to a thorough, lucid and con-
vincing exposition of the bad effects
upon revenues of the unsound taxa
tion methods which Congress has con-
tinued to keep in force. II the rev.
cnues in the last two years had main
tanned anything like the levels that
were expected Of them, the Treasury
would not now be compelled to make
/ technical maneuvres for refunding
maturing debts; it would be counting
/ the cash already in hand to meet
them as they come due, or buying
them heavily in the open market to
cancel them before maturity.
! But, as Secretary MELLON shows,
the bottom has been gradually fall
ing out of the revenue producers that
are most favored by Congress. The
very highly taxed incomes above $780,
| 900 year, for example, dropped in
number from 1926 in 1916 to LOIS
in 1917 and 679 in 1919. The taxable
/ incomes in that class went down from
S993. .000,0 in 1915 to s731 900, 900 in
! 1917 and to S440, 900, 900 in 1919. The
incomes above 100000 from divi-
dends. interest and investments fell
from S707 .000, 900 in 1916 to S616,00o,-
coo in 1917; $344 100000 in 1918 and
| S315, ,000. 900 in 1919.
Still more striking are the figures
OF taxable income from interest. ex-
elusive of Government obligations,
for incomes of 100000 and over. In
1915 the taxable amount was 1885,
100000: in 1917, 100000: 1918,
s75,000,OO0, and 1919. s60,000,0 600.
Yet, as the report emphasizes, actual
incomes we're not thus diminishing
in those years which marked the
countrys highest prosperity. 1t was
the taxable principal which was shift
ing out Of active industrial and bust
ness investments. The Treasury has
been losing the revenue; worse yet
the country has been suffering the
costly withdrawal of those invest
ments from taxpaying productive
channels into tax exempt channels.
Secretary MELLON argues earnestly
for rational tax methods and bear
able tax rates which not only will en-
courage mobile capital TO 20 back