The Birmingham age-herald., 1922-12-17
 MELLON ON TAXATION


 reduced from the present 50 per cent. to not more than 25 per cent; and this from no favor to capitalists either but for the reason that he believes the government will take in more money by that method than by the existing one. Of course, there is already the criticism that he purposes to let the rich escape from bearing their proper burden; but he says that the rich men are escaping in altogether too grea. numbers now, and that he is devsing his plan in order to make the escapes fewer, and to get the money the government must have to carry on it's business properly.
 There is no use, says the secretary, in trying to provide new tricks to prevent escapes from federal taxation as long as the law offers big premium to the rich men to reduce their taxable incomes, which they do by investing in tax-free securities; for the rich men will invent or discover new ways of avoiding them. The high rates of taxation appear productive, says the sec retary, but the fact is that they are be- coming increasingly ineffective, and are yielding less and less revenue each year. As the income from this source is vanishing in increasing ratio, it will be wise to face the situation squareiy and correct the ar tificial condition, which is not wholesome from the point of business and industry, 2nd embarrassing to the government. MT. Mellon states the case forcibly when he says: Investors who would normally put their surplus into productive enterprise are automatically driven under the pressure of nl at into i,, toy exempt securities, with the result that the federal government loses the revenue, busi- ness and industry lose the capital, and funds badly needed for productive purposes are diverted into unproductive and frequently wasteful expenditure"
 It is system that cannot be permitted to continue, he says, without grave danger to our economic structure as well as to our system of taxation. This is not anything new to persons who have taken the trouble to observe the working of the tax system. MT. Mellon however, is high authority on the subject of finance, and his opinion carries great weight. He supports what Otto Kahn stated at the time the tax was first imposed, and who expressed alarm lest industry should be vitally affected by the withdrawal of capital from it's use
 As for the effect upon the revenues, MT. Mellon cites some interesting figures. To support his argument that the high surtaxes gradually are defeating their own pur- pose," he says that, while net incomes of all classes during the period from 1916 to 1920 increased from $6,29s, ,577 ,62o in 1916 to $23, ,735, ,629,18 in 1920, and the number
 xo 944 in 1920, the number of returns of in- comes over $3oo,000 decreased during the same period from ,296 in 1916 to 396 in 1920, and the amount of incomes over $30O,OOo from $992, 1927, ,9S6 in 1916 to $246, 1885 in 1920.
 There are other ways of escaping than by investment in tax-exampt securities, as for example, deduction of losses on sales of capital assets, with failure to realize upon capital gains, and the secretary would put a 121a per cent limit on the reduction the same as there is on the gain < exchanges of property and securities so as to avoid tax able gains; and division of property, the creation of trusts and the like. The great est leak, however, is through the medium sf securities, and Mir. Mellon advises that an amendment be proposed forbidding the fur ther issue of tax-exempt securities. That the situation is serious is shown by the state ment that the free securities now put upon the market at the rate of about one billion annually. The readiness with which they are taken is regarded as proof that they are the Outstanding avenue" of es- cape from surtaxes.
 The secretary is confident that if the changes are made, removing the pressure and at the same time taking away the "ave- nue." there will be no decrease in revenue, and, in the long run, larger returns should be brought into the treasury.
 We are not convinced that there is any thing economically advantageous in taxing securities; for it is law of credit that money exacts the interest to which it IS enttled and an added tax upon the security is simply an increased amount the borrower will have to pay; and this in turn will prove restrictive of enterprise; but there is no serious reason to question what MT. Mellon says about the vanishing returns, and the advisability of doing something to bring in the needed revenue. Whether it be in Mel Ions way or some other, the need of action on the situation is imperative.
 
 REDUCING THE WAR DEBT
 The federal treasury, by paying s1,ooo,-