Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-12-13
FEDERAL INCOME
SURTAXES

- Mellon in his annual report
the other day advises congress that
they should reduce the surtax in
big incomes from the present fig
ure of so per cent to not more than
half that per cent. He is quite
right, but he has not a ghost OF a
change to get congress to do any
such thing. A year ago he made
the same recommendation and the
house finance committee raised it
to IS per cent. The senate pro-
gressives, aided by the democrats
raised the house rate to so per
cent. The war rate was 65 per
cent. In the late election the DEM
/, ocrats used the fact that big in
comes had had their taxes cut
down from 65 per cent to so per
cent by a republican congress to
prejudice the voters. It was a
7 purely demogogic argument. The
fact is that the government cannot
and does not collect this so per
cent, except in a few where
for some reason the owner OF
these incomes cannot convert their
holdings in to tax exempt securi-
ties. Twenty-Five per cent is the
utmost limit that can be collected
in most cases. If the securities
that produce this income pay 6 per
cent the surtax of rs per cent plus
normal taxes would reduce the re-
turn to about 4 per cent. Non-tax
paying securities that are gilt edge
and pay more than that can be
bought on the market any day.
Further, as Mr.. Mellon points out,
the federal government loses the
revenue, business and industry lose
the capital, and funds badly needed
for productive purposes are di-
verted into unproductive and fire.
uuently wasteful expenditures"
Mr.. Mellon approves of the pro-
posal that legislation be passed
preventing the further issue Of
these tax free bonds. Last year
about a billion dollars worth OF
these tax free bonds were issued
and no legislation of this kind
could be made retroactive. More
over the result of such legislation
would be to increase the interest
rate which farmers would have to
pay on mortgage loans made
through the land banks. The money
for these loans comes from the
sale of tax free bonds which carry
about 4 IL per cent interest. The
money has to be loaned by the land
banks to the farmer at not more
than | per cent above the bond in
terest. Usually he gets his money
at about S IL per cent. 1t the
bonds which get this money were
made subject t. tax they would
probably not sell unless they car
ried 6 per cent or more. The same
thing applies to state, county and
city bonds which are tax free
These would also have to carry
higher interest rates in order to
sell. In fact, the borrower would
have to pay the tax in addition to
the going wage of capital, as he
always has done.
Still we agree with Secretary
Mellon that it would be wise to
cease issuing tax free securities,
because it is rapidly driving CAPT
tai into non-productive invest
ments from the standpoint of ma
tional development. 1t is better
to have the surplus capital of the
country invested in manufacturing,
mining or transportation than in
bonds that represent money al
ready spent. . However, there is
just one way to get capital invest
ed in productive enterprises, and
that is to convince the owner OF
the capital that he will make good
interest on his investment. The
world is crying out for capital
these days. There is not enough
of it to meet the demand. It will
60 where it can get the best wages,
security being assured against loss
Of principal,