The Topeka state journal., 1922-12-18
TOPEKA STATE JOURNAL
Information Bureau
FREDERIC J. HAsKIN. Dtrecsss.
Washington, D. O.
TAXATION PROBLEMS Up TO
CONGRESS


the war period, when the public un-
derstood that the country faced an
emergency. less attention was paid to
what might be called the scientific
equilibrium of taxation. The public
knew the government needed money
to keep up its vast war expenditures
and the taxes were paid, generally
without very much question. With
the war over and the people showing
q. growing tendency to analyze such
matters, the various taxes are coming
in for close scrutiny to determine their
fairness and their relative wisdom
Three vital points will be up for dis
cussion during this winters session
and, in all probability, there will be
legislation on some if not all of~them-
They are: First, the question of sur
taxes; second, the tax exemption OF
municipal and state securities, ana,
third, the taxabiiity of undivided sur
pIuses- On every one OF these ques-
tions. members of both houses are di-
vided. so the session promises to pro-
duce some lively tax contests
The question of surtaxes is one in
volving the economic law of diminish
ing returns Another way OF stating
the matter is to say it involves killing
the goose that lays the golden eggs
Surtaxes are paid by comparatively
wealthy people and by great corpora
tIOnS- To become ll8D1e 1OT
means that a large income is being en-
joyed There are two schools OF
thought on the question One is that
the people and corporations VINO are
getting big incomes should be taxed
to the limit The opposing theory Is
tha. such taxation is discrimination
and will inevitably defeat itself by
provoking all manner of legal evaslons
of taxes This theory is that rich
man or corporation will pay a good
= ~. fv,Ir fair and the
government will get much revenue out
of such payments, but that II he
thinks the tax is unfair he will do
everything he can to defeat Its pur-
pose. Secretary of the Treasury Mel,
lon declares that the government Will
get bigger revenue out of a moderate
surtax than out of what may be re-
garded as an extortionate surtaX-
Many Ways to Evade Surtax.
One of the highest officials of the
recently boasted that he
knew a hundred ways to evade the
surtaxes. This in all probability was
no exaggeration- 1t is possible, tor
instance, for a rich man to hand his
property over to his heirs, thus d.
viding it up into so many parts that
no one of them will have to pay much
surtax By such a method, the aS-
gregate of the taxes on the several
parts will not be equal to what the
tax would be on the whole income II
kept in the name of one man. Trusts
may be created and scores of other
legal evasions can be resorted TO Which
bereave the treasury of the tax in
come.
The secretary cites statistics to illus
trate his point. He shows that IN 1919
the sum Of ssoo.0Qo.ooo was collected
in surtaxes. In 1920 this had declined
to $3.50, 900; in 1921 to $45O,OOO,-
600 and the estimated surtax return
for 1922 is placed by the secretary at
only $3.50, 100000. These diminishing
returns from the surtax, in spite OF
the fact that the rate has remained
the same prove, in the, SecretaIys
opinion, that in spite of everything the
internal revenue bureau can. do, tax
payers are finding out each year more
ways to avoid the payment OF taxes.
The secretary insists that this consti-
tutes the killing of the goose that lays
the golden eggs.
on large incomes the rates, includ-
ing surtax, amount to So per cent as a
than half a man
income No man, the secretary as
serts, no matter how wealthy, likes to
see more than half of his years in
come taken away. He is urging con-
gress to fix a maximum rate OF about
1t may be recalled that during the
war Baron Astor paid an income tax
of about 125 per cent. according to re-
ports then printed. That is, he had to
turn over 10 LIlG ldA COAAGClOAS CfIAS
single cent he made during the year
and, in addition, dig down into his
pocket and find % per cent more
This arose from the fact that he was
to both American and Brit
ish income taxes deriving income
from both countries
While such an arrangement is en-
durable in time of war, 1t is lllog-cal
in peace times, in the opinion of Sec
retary Mellon and other advocates OF
f-eduRfinn ThPV assert that
men who assist in devel-
oping the business of the country viii
be discouraged and stop doing bust
ness. If a newsboy makes so cents a
day and has it all taken away from
him or even half, he will shortly say
it's no use doing all that hard work
for nothing and will cease his efforts.
of revision say the prin-
ciple holds true of the rich man or the
active corporation as well as of the
Tax Exempt Securities.
The principal avenue of evasion of
taxes is presented by tax-eXempt Sc
curities of states and municipalities
The annual report of the secretary OF
the treasury shows that $11,00O,0O0,-
600 of such securities now are out
standing in the United States. This
means that the income on this vast
sum is free of any federal taxation
Conservatively estimating that rate
Oh ~ per cent NOuAO dPRAg OAi oNCA
age to the income from these securi-
ties were they not exempt from taxa
ton. it is seen that a revenue of ST.
100, ,0O0, 900 would accrue to the treas
ury-
This exemption IS permitted by the
which provides that the
federal government may not interfere
with the rights OF Estates and cities to
decIare their securities exempt from
taxation Secretary Mellon has recon-
ad 70 that the COnStItU-
ton be amended so that the federal
government may interfere TO the ex-
tent of levying the income tax on the
incomes from such bonds.
About $1,000, 100000 of fresh Sc
rurities OF this class are issued by
states and cities every year. SO the
of tax free income is increas-
ing rapidly. Such a tendency makes