The Washington times., 1922-10-11
MELLON WILL
ASK CHANGE IN
REVENUE LAW
Secretary to Offer Suggestions
For Wiping Out Indicated De-
ficit Of $6oo,Ooo,ooo.
BY WINDER X. HARRIS,
nIyrPsnI Service,

Recommends tiOns for modifica
lions in the internal revenue law
will he made TO Congress by Sec
retary OF the Treasury Mellon. It
was learned at the Treasury today.
The changes to be proposed now
are under consideration by officials
OF the department in cooperation
with the Secretary and details are
being worked out by tax experts.
Mr.. Melons suggestions will be
embodied in his annual report which
goes to press on November 20 and
IL submitted TO Congress on the
opening day Of the regular session
in December.
No additional taxes will be urged
10 meet the indicated deficit Of
$500. .0OO. 900 at the end OF the current
fiscal year. It was definitely asCer-
Iained. Also, repeal OF tax laws
will not be asked.
Treasury authorities hope the Ak
pected 5000 900 900 deficit will he re-
duced by June 80. They believe that
whatever deficit actually obtains at
that time can be met by increased
returns from railroad and other
securities held by the Government. I.
from sales OF surplus property. and
from reductions in the cost OF OPP
Grating the Government.
Budgets Cuts TO Help.
Budget Director Lord. in his forth
coming annual report to Congress
will point the way to great savings
in the expenses OF the various de.
partments. II was stated.
The heart of the taxation prob.
lem to which Secretary Mellon and
his assistants are giving their at.
tcntion is in non-taxable securities
The Secretary repeatedly has point.
ed out to Congress the growing
danger from this direction. He IL
understood now TO he seeking some
method OF solving the problem that
he can recommend to the law.mak.
ing body.
Any attempt 10 restrict tho Is.
suanCe Of tax-exempt Federal So.
curities. tax authorities explain. IL
doomed to failure unless similar HC.
tiOn is taken with regard to State
and municipal bonds. II the Gov.
eminent is prohibited from making
its obligations nontaXable, there
will be no market for them as long
as State and city securities are
free from taxation.
There is resolution pending in
Congress now which would submit
to the States Constitutional
amendment prohibiting the issuance
OF tax.cxempt securities by either
the Federal. State. or municipal
governments. Secretary Mellon may
give consideration to this solution
OF the problem.
Why Liberties Drop.
Increasing numbers Of municipal
securities coming on the market in
the last several months. It was
said at the Treasury. were respOn.
sible for driving four OF the Lib.
erty loan issues below par last
week. Holdings OF nOn.taXable Fed.
eral securities are limited to $125.-
600 to a single individual. including
all Liberty issues. In the case of
municipal issues, there is no limit
to the amount OF nontaXable bonds
that one person may hold Hence
the preference for municipal seCuri.
ties over Government issues and
the consequent lack Of market for
Liberties which sent them below
par.
But there Is another side TO the
Sl25 900 exemption. II all persons
in the United States able to hold
that amount OF bonds should have
them. there would be no revenue 10
the Federal government from Lib.
erty bonds. This contingency was
seen when a provision was written
in the 1927 revenue act which re.
duces the exemption to $50. 900 Julv
l. 1923; to 100000 two years later:
then to $4,000. and finally to 81, ,OnO.
Reduction in the exemption TO
$50 900 at the beginning Of the next
fiscal year is counted on by Treasury
officials to increase the Federal
revenue