The Barre daily times. (Barre, Vt.) 1897-1959, 1922-12-06
TO STOP GAPS
ON INCOME TAX
Sec. Mellon Urges the
Need of That Upon
Congress
WOULD REDUCE
MAXIMUM SURTAX
Secretary Outlines Some of
Methods To Escape
Taxes

: l.
ton Of the maximum income surta'
rate from the present SO per cent t
not more than 25 per cent and tn
closing up so far as possible of exist
ing avenues Of escape from fedora
taxes are urged BY Secretary Mellon Il
/ his annual report, transmitted to-day
| to Congress. No general revision Of the
revenue laws is proposed nor are add
tional taxes suggested, Mr.. Mellon ex'
pressing the hope of meeting any indi-
Gated government deficit through col.
lection of back taxes and income from
other sources.
/ The treasury secretary informs Con-
! gress that to attempt alone to stop the
gaps through which there ii an avoid
ance Of tax payments to the govern
ment will not be enough because the
existing rates of surtax put such
heavy pressure on the larger taxpay-
ers to reduce their taxable incomes
that new ones would surely be found.
He adds that the high rates "sound
| productive" but that the fact remains
that they are becoming increasingly in
effective and are yielding less and less
revenue each year.
Then bluntly he tells Congress the
time has come to face the facts
squarely" and to correct the artificial
conditions which now prevail and
which, he asserts, are not wholesome
from the point Of view of business or
industrial development, and, at the
same time, are impairing the revenues
of the government.
The more important of the methods
used by the taxpayers to reduce the
amount OF income subject to taxation
are listed by Mr.. Mellon as follows:
Deduction of losses ON sales of capt.
tai assets, with the failure to realize
on capital gains.
Exchanges Of property and secur-
tiles so as to avoid taxable gains
Investment in tax-exempt securities
and
Division of property, creation of
trusts and the like.
Not all of these things can be con.
trolled by law or by regulation he
continued, 'and most Of them lead TO
unnatural and frequently harmful eco
nomic results. To reach the evil the
thing most necessary is the reduction
of the surtax rates themselves, in or
der to reduce the pressure for avoid
ance and maintain the revenues derived |
from the surtaxa
Until some such rcadiustment is
made the yield Of the higher surtaxes
will tend, in the ordinary course Of
events, to drop toward the vanishing
point. The wise course is to reform the
surfaces now while the system still
functions and at the same time to
close, as far as possible: the gaps which
now exist. On this basis the revision
can be made without loss of revenue,
and, In the long run, with material
benefit to the revenues
To support his argument that the
nigh surtaxes gradually are defeating
heir own purpose" he calls attention
that while net incomes of all classes
Turing the period from 1916 TO 1920
increased from So POS, SIT ,620 in 1916
% S23,735.6lg, 1888 in 1920, and the num-
,er OF returns from 437 ,036 in 1916 to
,25o,o44 in 1920, the number of re-
.urns of income over 100000 de-
reased during the same period from
,296 in 1915 TO 1906 in 1920. and the
mount of incomes over 100000 from
1902 ,9I2,9S6 in 1916 to $246,354, 5s5 in
02O.
In earnestly urging" prompt adop- I
ion OF the proposed constitutional {
mendment against the further issu-
nee Of tax exempt securities, the {
reasury secretary says these securi- /
les, now reaching the market at the [
ate of about $1,000, 100000 annually, :
orm the outstanding avenue" of es- I
ape from the surtaxes.
with these securities available for i
ivestment, fully exempt as they are s
rom federal income snrtaxes," Mr.. h
Iellon continues, Investors who would g
ormally put their surplus funds into r
Productive enterprises, are automati- =
lily driven under the pressure of high
irtax rates into investment in tax
lempt securities, with the result thatI
he federal government loses the reve-
ne. business and industry loses the
lpital, and funds badly needed for
roductive purposes are diverted into
nproductive and frequently wasteful
Spenditure.
"This is a situation which cannot be
'rmitted TO continue without grave
niger 10 our economic structure, as
ell as our system Of taxation"
Pointing out that the present law
nits the tax on gain in capital tran
etions to 1874 per cent of such gain,
II puts no limit on the deduction Of
sses in such transactions, Mr.. Mellon
ges that the amount by which the
X may be reduced on account of losses
ON the sale of capital assets shall :
{ exceed 1874 per cent of the amount
such loss.