The Washington herald., 1921-09-06
Senate Committee Aims
To End Investments
That Avoid Levy.
FOREIGN INCOMES
TO BE EXEMPTED
Mellon May Ask Repeal
Of Excess Profits Tax
For 1921.

L ne attitude OF the senate on the
objections raised to many features
of the House bill revising Federal
taxation will be determined largely
by the decisions of the Senate FL
nance Committee in the course of a
fortnight's consideration of the
measure. beginning today.
The question of the need of rails
ing more revenue Is provided by the
House bill will be discussed by the
committee with Secretary Of the
Treasury Mellon on Thursday. Mr..
Mellon is expected to urge the ap-
plication Of the repeal of the excess
profits tax TO income on the calen-
dar year 1921. in lieu of the House
provision under which the repeal
would be effective. beginning with
1922 incomes.
Tax Free Securities n Problem.
The reduction of the higher sur
taxes with a view to removing the
incentive of the rich to reduce their
tax bills by investing in tax-free
securities also will come in for a
good deal of discussion.
This is difficult problem. The
only way adequately to deal with
it Is to make State and municipal
bonds taxable by the Federal gov
ernment. To do this. it is held.
would require an amendment of the
Constitution, which 1t would be i'm
possible to achieve IL thirteen or
more States were unwilling to sur
render their present advantage in
marketing of securities immune
from Federal taxation.
Under such circumstances the ad-
ministration has deemed 1t wise to
reduce the temptation of the rich
to invest in tax free securities in
order to avoid Federal income tax
alton. hoping thereby to increase
the yield of the higher surtaxes to
some extent. at least.
Big Incomes Avoided Levy.
Some indication of the extent 20
which the rich have avoided taxa<
ton in this manner is afforded by
the income tax statistics. In 1918.
when taxes had been nearly doubled.
the number of taxpayers with in
~N''ANS VI liOIH So.OOU S0,UUU In
creased sixty-six per cent over 1917.
while the taxes they paid in 1918
Increased more than 400 Der cent
over 1917. On the other hand there
were twenty per cent fewer tax
PAYERS with incomes from $4,000 to
100000 in 1918 than in 1917 and the
tax yield from this source increased
only seventy-five per cent.
vfauy ~ -
tion which greeted proposals to
levy various new miscellaneous
taxes. when the matter was under
discussion in the House. it is not
likely that such new taxes as a
Federal automobile tax. a tax on
bank checks. or an increase in first
class postage rates will again be
given further consideration. The
committee. however, might decide
to increase the fat corporation tax
or restore some of the miscel-
laneous taxes. such as the pro-
posed tax on proprietary medicines
and toilet articles which was elimi-
mated in the House.
Exempts Foreign Incomes.
As a means of placing American
businessmen abroad on more of an
equality with their competitors of
other nations, the new tax bill will
for the first time relieve them en-
tirely of taxation at home on their
foreign income.
Provisions prpviding for tax ex-
emption of what are described as
foreign traders and foreign trade
corporations are contained in the
tax bill as passed by the House.
Some of the details have not been
finally perfected to the satisfaction
OF those interested in the matter
and the provisions will be amended
somewhat by the Senate committee.
There Is little question. however.
but that the bill as finally enacted
VIII place American citizens in the
same position which foreign trad
ers Of other leading nations are
under the terms of their tax laws
The national foreign trade council
mas taken an active interest in the
matter and its investigation Of the
subject indicates citizens of nearly
all the leading nations of the world
are exempt from taxation on income
derived in other countries.