The Washington herald., 1922-03-13
New Taxes Preferable to
Certificate Plan, Says
Secretary.
DANGEROUS ABUSE
is DECLARATION
No Provision Made to Re-
tire Obligations Due
In 1926.

Adding to the confusion and doubt
surrounding the soldier bonus bill.
Secretary of the Treasury Mellon has
made public a letter strongly con-
demning the compromise measure.
Melons principal objection Is to
the provision for bank loans on ad-
justed service certificates, which he
declared is bad policy and would
freeze credit
Fears Frozen Loans.
The effect of this provision" Mel
lon wrote, lis to transfer the cost of
policy loars frcn the government to
the banks. and to place in the banks,
to the exten' that the ex-service men
are able to obtain loans from them.
a mass of unliquid. non-negotiable
paper upon which the banks will be
unable to realize until 1925.
The result would be frozen bank
oans and imitation of currency and
credit. Needless to say. paper which
Is secured on non-negotiable coilat-
eral. and which may not be repaid for
three years, is not desirable paper
for commercial banks to hold.
Sees Abuse Of Credit.
The most serious aspects Of the
loans from the point of view of the
Treasury, is that they would be float
cd at the banks on government cred
IL.
The plan in substance involves a
dangerous abuse OF the government
credit" said Mellon. for il con-
templates the issue Of a vast amount
"f government obligations which are
non-negotiable. and have no present
rcaliZable value unless pledged with
banks, in which event the obligations
become. in effect. two or three notes
which the government would be oblig-
cd TO pay on in 1925 upon default by
the veterans. This practically means
that cash payments on adjusted serv-
ice certificates would be financed for
the next three years through a-forced
loan from the banks"
Thinks Tax Preferahl<xs = =
borrowing would be preferable to
his, Mellon stated He estiUated the
lost of the bonus from $500. .o0e. 900
10 S400. .00O.9 900 for the next three or
four years. with possible continuing
liabilities of 5000. 900 a year un-
til 1913.
There is TO way by which the
American taxpayer can avoid the
burden" Mellon pointed out, land II
bonus is to be imposed. II would
he far better for all concerned that
1t be placed upon a direct and definite
basis and paid each year out OF cur
rent revenue.
TO do this at the present time will
necessarily mean the imposition of
additional taxes for the purpose"
Recalls President's stand.
Mellon recalls the attitude of Pres
ident Harding. and points out that
the measure as drawn makes no pro-
visions for meeting the cost of the
bonus. or for retiring the obligations
which will come due in 1925. The
direct cost as he figures 1t would be
$3.50. 1854 900 for the fiscal year 1923:
$21s.44O. 900 for 1924; $12S.O13.00O for
1925. and for 1926. when adjusted
service certificates would be redeem
ed from banks. $615, $4,000. It is
desirable from a business standpoint,
to make provisions for amortization,
because OF the maturities of the pub
lie debt, Mellon stated.
To Report Out Bills.
The full effect of the secretary's op-
position will be apparent when the
Ways and Means Committee meets to
day with the avowed intention OF
reporting out the bill.
The reported intention of Presi-
dent Harding to veto the bill has pro-
duced confusion and hesitancy. al
though leaders insist they do not be-
lieve the Presidents attitude has been
correctly interpreted. The intention
TO report out the bill persists.