The Topeka state journal., 1922-12-06
Draw Capital From Hiding
Place, Is Melons Plan.
Country Must Not Be Subjected
to Additional Tax.
MAKES REPORT TO CONGRESS
Real Danger in Decline of
Taxable Incomes, He Says.
Opposes Tax Exempt Securities
Business Outlook Rosy.

Washington, Dec. 6.-Undaunted by
the expected deficit this year in gov
ernment revenues, Secretary of the
Treasury Andrew w. Mellon in his
annual report to congress today de-
ciared the country should not be sub
jected to additional taxation.
Instead of recommending new taxa
ton to make up the deficit, Secretary
Mellon advocated the lowering of sur
tax on large incomes from the pres
sent SO per cent to 25 per cent. con-
tending this action would result in
capital being drawn from its hiding
places and put to productive work
thus creating new tax sources ma
turally.
Great wealth, Mellon pointed out.
now sinks itself in tax exempt Sc
curities and other tax free invest
ment fields and yields the government
nothing. If this money is released, he
pointed out. it will multiply tax
There is real danger, his report said,
in the decline of taxable incomes
above 100000.
Defeat Own Purpose.
The surtaxes are gradually defeat
ing their own purpose" his report
said. High rates are becoming in
effective because of the steady disap-
pearance of taxable incomes to which
they are intended to apply"
Great wealth, Mellon said, is now
escaping high income taxes by Cd de-
busting losses on sales of capital as
sets, with failure to gain on capital
assets; CD exchanging property and
securities to avoid taxable gains; CD
putting wealth on frozen tax exempt
securities, and (4) by dividing prop
critics and creating trusts
THE thing most necessary is reduc-
ton of the surtax themselves his re,
port continued. II believe it would
be sound policy, and at the same time
be helpful to the money situation, to
reduce the surtaXes to a maximum of
25 per cent, which would mean COM
bined maximum, including normal and
surtax of not over 33 per cent. Read
justed to this basis, surtax rates
would, in my judgment, accomplish
their purpose and yield as large or
larger revenues to the government,
without the unwholesome conse-
quences of existing rates.
Broaden the Market.
Lower surtax rates would broaden
the market for government securities
and otherwise encourage the develop
ment of productive enterprise. Until
some readjustment is made. the yield
of higher surtax will tend to drop
toward the vanishing point
Secretary Mellon condemned as an
'fniquity'' the tax exempt security, and
he recommended constitutional
to forbid it He said
S11, ,000, 900 of tax exempt bonds are
now being held by investors, and is
increasing at the rate of $1,000,000
year. Regarding them, Mellon said:
with these securities available for
investment 1ully exempt from federal
income sUrtaXes. investors who would
put their money into productive enter
prise are automatically driven under
pressure of high surtaXes into invest
ment of tax exempt securities. The
result is the government loses the
revenue business and industry loses
the capital, and funds badly needed
for productive purposes are diverted
into unproductive and frequently
wasteful public expenditure
Business on Increase.
Secretary Mellon. in a rosy review of
the business outlook. said:
''Prices Of commodities have risen
materially; inventories generally are
low; the volume of business has been
mounting to higher levels; labor is
again fully employed.
The year is closing with bountiful
crops Severe depression in agricul-
ture has been relieved. Banking con-
ditionS are sound, money rates are
ideal and there is sufficient credit
available to meet all reasonab BILE de-
Even abroad there are indica-
tiOnS of progress in reconstruction"