The Dawson news. (Dawson, Ga.) 1889-current, 1922-02-21
Tax Free Securities.

L
state and municipal bonds have been intro
duced and referred to congressional commit
tees. They are all in harmony with the rec
ommendation of President Harding's mes
sage to congress, in which he says:
Il think our tax problems, the tendency
of wealth to seek non-taxable investment
and the menacing increase of public debt
federal state and municipal-an justify
proposal to change the constitution SO as
to end the issue OF non-taxable bonds.
In this connection the Sandersvile (Ga)
Progress notes a strong and growing demand
for the abolition of the policy of issuing bonds
that are tax free, and says:
Rich tax dodgers in order to escape the
excessive income tax are investing their
wealth in these taX-free bonds instead OF
keeping it in the avenues of productive.
commerce. This throws the burden OF
taxation upon poorer people. who are lore
ed to pay heavier taxes III proportion to
their means than are the men OF great
wealth. If a curb is not placed upon the
issuance of tax-free bonds the practice may
ultimately grow into a national menace"
Facts relating to the present conditions
around which the movement for the amend
ment is revolving are represented to be as
follows: Secretary OF the Treasury Mellon,
appearing before the house ways and means
committee considering the amendment pro-
posed by Representative McFadden, OF Penn
sylvania, said that Sl0,660,000,000 in tax ex-
empt securities is now outstanding. Prof. Ed
win R. A. Seligman, of Columbia University,
estimates that between $9000000000 and
$10,000,0000 900 i'll municipal and state tax eX-
empt securities is outstanding and that the
total of tax exempt securities including near
ly $2O,0O0,0O0000 of government bonds, Who'll
ly or partially tax free, is $30000,0 100000 Mr.
McFadden supplied the information that, be-
cause of a rush by wealthy investors to OBJ
tain tax free securities, the amounts paid in
income taxes in 1916 totaled $o92, 972, 985, that
the total for 1917 was only 1871, 372,53, and
in 1918 only $392,247 1929. Within two years,
according to those figures, investors by pur-
chasing tax free securities were able to de-
chasing tax free securities, were able to de-
crease the total of the government income
tax revenue by nearly two-thirds. Mr.. Nc
Fadden says it is a reasonable conclusion
that they (the wealthy investors) have con-
verified their wealth into tax free securities
so rapidly that at a similar rate of CONVEX
sion they would be practically free Of all in
come tax by 1922"
The point to be kept in mind is that the
billions of dollars invested in the tax free Sc
curities are at work, earning something for
their owners. Just why capital that is pro-
ducing revenue for its owners should escape
taxation is incomprehensible. If the expense
of government, which is functioning for the
1 s o11+ q NV al
the people in proportion to their financial re-
sponsibility it would seem that social in
justice has been permitted to operate. Mr.
McFadden insists that "a social upheaval" is
threatened because of this discrimination and
that the violation of social justice is "crys-
TALKING into broad public discomfort" Prof
Seigman, recognized as an expert on taxa
ton, says:
IF we were to abolish all tax exempt Sc
ctmities we would increase our revenues
from the income tax about 50 per cent,
| which would permit either the reduction
! of income taxes all the way around or per-
NIT the elimination Of some other taxes.
If Prof. Seligman's theory is true as il
appears to be, that would make it possible
to distribute the burden OF taxation moro
fairly and thus to tighten the burden borne
by millions of less fortunate persons while
forcing the discharge of both a legal and ;
moral obligation on the part of the rich wht
now enjoy earnings from securities that arr
tax free.
For many years the plea has been mad
in favor of states and municipalities issuing
tax exempt securities that will enable then
to follow programs Of progress The pay
ment of low interest rate, OF course, make
lit possible for them to spend larger amount
on improvements OF public character. Thi
plea is met by the assertion that such an ad
Vantage results in state and city eXtrava
Igance, the unwise expenditure of funds easil!
raised, the old saying OF easy money, cas-!
go" applying itself admirably.
John c. Machem, Chicago banker, in al
address at the University of Iowa recently
said exemption nullihed the federal incom
tax law, because it enabled the large income
which is supposed to pay a proportionatel
heavier tax, to escape taxation entirely. n
also believes the exemption to be dangerou
in creating the tendency OF utilities to b
drven into public ownership for the advant
age of obtaining tax free privileges.
The News believes all inequalities in tax
alton, whatever they may be, should be re
moved. and that the existence OF tax fire
securities creates inequalities. 1t views con
sideration OF the McFadden amendment a