Evening star., 1921-10-14
Administration Embarrassed
When Surtaxes Are Boost
ed and R. R. Bonds Sag.
SEE WHEELS OF BUSINESS
IN NEED of BROAD POLICY
Leaders Now Fear All Capital
Would Be Diverted to Tax
Exempt Bonds.
BY DAVID LAWRENCE.

The first effects of the unscientihc
or rather disjointed way in which the
tax problem has been tackled In Con-
Eress is being felt by the executive
branch Of the government. 1t leaked
out today that after selling during
three weeks in September more than
1000. .O00. 900 worth Of industrial and
railroad bonds held by the Treasury
the sale stopped abruptly as soon as
the agricultural bloc in the Senate
forced the republican leaders to agree
to higher surtaxes amounting TO
about so per cent.
Money that had been expected would
flow into business and cause re-
opening Of factories and revival OF
export trade has sought other chan
nels of investment. The trouble Is
that in Congress the feeling prevailed
that the higher surtaxes should De
imposed in order to make up for reye-
nue. that would be lost through the
similar incomes. The argument was
made that wealth should be taxed
heavily.
Policy of Economics-
But as government officials point
out it is not a question Of discrim-
ination between large and small An
comes. but a broad policy OF eco
been held stagnant. initiative has
been repelled and the country's re-
construction retarded by the vicious
character OF the excess profits taxes
both republicans and democrats ad-
init this. Now. however. in the short
space Of two weeks a demonstration
is being given of a parallel emer-
gency-the imposition Of taxes so
high that it will keep capital from
being used in industry. Omcials OF
s-A Il, At0N
ployment win continue unless means
are found to tempt persons with
money to lend it to business enter
prises that need expansion and devel-
opment. Indeed, it is urged that the
pIrehssns power Of iasor % es al
is not relieved by the easier flow Of
capital from 5Hvisible to visible use.
Thus agriculture would surer along
with other retail end gh2lesale busi.
tas-exemp. bonds are Eobbisd MP
City and municipal bonds are tag
tree Under the federal Constitution
Congress cannot touch local securi-
ties. Accordingly billions OF dollars
are tied UP In municipal bonds that
ness -, y'2s 81 - 81
satsratisa psist Reached.
The full Significance of the agree
Lfent Hldue uy liz o0HdkS icduSIS A@SI
eek to make the surtaxes about so
per cent is beginning to dawn on the
administration. which Is likely to ex-
press itself very atrongly on. this
point before long. The House bill
I..ade the sdrtaxes about 80 per cent.
N,aich. with the addition of s per cent
,.or.nal tax, made the total federal
Tax about 40 per cent. This, too. is
considered high. but the fact is the
government found a ready market
1ur it's securities when that figure
was under discussion. The moment
the proposal was made, however, to
go higher--to a so per cent surtax,
plus an 8 per cent normal tax-the
saturation point was evidently
reached--men with money no longer
considered the railroad bonds offered
for sale by the government worth
buying when other tax-empt securi-
tues were available.
The Treasury Department had fully
expected to dispose of $25O,000.0O0
worth of railroad securities. Every
thing went fine during the recess of
Congress-, but the new tax program
has knocked the bottom out of the
governments aspirations. And the
awkward part of the situation is that
the executive branch of the govern
ment, which is trying hard to bring
about a business revival. is handi-
capped by the attitude of some men,
bers of Congress who are mostly con-
cerned with bill that looks we'll in
print. a measure that seems to relieve
the moderate incomes, but "soaks'' the
people with capital. President Har-
ding alone can reconcile the two. and
before the tax program is finally COM
pleted his Intervention Is expected.
Copyright. 1921