The gazette-times. [volume] (Heppner, Or.) 1912-1925, 1922-02-16
TAX EXEMPT SECURITIES
MENACE TO INDUSTRIES
AND BURDEN TO FARMER

Washington, Feb. l3.-Hearings
before the house ways and means
committee on the constitutional
amendment proposed by Representa-
tive McFadden to make state and
municipal bonds subject to taxation
have closed. The hearings were at
tended by farmers, bankers, labor
representatives, representatives Of
public utilities, treasury officials and
others. 1t appeared to be almost
the unanimous opinion that future
issues of such securities must be
subject to taxation. Otherwise all
federal sources Of revenue will dry
up, business and industry will suffer
acutely and practically the entire
burden of public taxation will be
shifted to incomes from labor and
TO real estate.
Conservative estimates place the
amount Of outstanding tax exempt
securities at $l0,000,000,000. Many
reliable authorities say the amount
is double this. New tax exempt Sc
curities in the sum Of 100000
were issued in 1921.
EVILS OF TAX EXEMPT SECURITIES.
The evils of tax exempt securities
issued by states, counties and NUM- |
cipalities are many. They may be
briefly set forth as follows:
lst: The exemption Of such prop
erty from taxation shifts the burden
Of all taxation to real estate and to
incomes from other sources, mostly |
income from labor.
I'd: The ease with which these
securities can be issued and market
ed is constant and irresistible
temptation for extravaganza upon the
part Of municipal, county and state
authorities.
Sd: The fact that capital can in
vest in such securities and obtain
a tax-free income Of from three to
five per cent prevents its being in
vested in industries, commerce, pub
lie utilities and other enterprises, the
income from which is taxed.
4th: 1t is drying up the natural
and legitimate sources Of federal re-
venue and compelling the congress
to devise other forms of taxation,
which are irritating to say the least,
and odious and burdensome in many
instances.
1t is inevitable that if the issu-
ance of tax-free securities by states,
counties and municipalities continues
the congress must begin to levy taxes
upon occupations and upon the con-
sumption of necessities, such as a
tax on coffee, sugar and salt, in or
der to obtain enough revenue to meet
the legitimate requirements of the
United States government.
Data presented to the house COM
mittee by treasury officials and tax
experts shows that even under pre-
sent conditions the federal treasury
is losing S30O,000,000 taxes a year
by the diversion of capital into tax
exempt securities.
PENALlzING FARMER BOTH WAYS.
Another evil resulting from eX-
empting the income from such Sc
curities, thereby inviting capital to
invest in them, is to push the interest
rate up on all other sorts of securit-
les, such as mortgages on land and
bonds issued by public corporations.
Statisticians showed the house COM
mittee on ways and means that farm
mortgages Of the country aggregate
about S4l5,000,000, or approximate
ly s per cent. The income from
farm mortgages is taxable. The in
come from tax-eXempt securities is
sued by states and cities is non-tax-
able. As a result farm mortgages
must pay the holder from 8 per cent
up in order to enable him, after he
has paid his taxes, to have a net in
come equal to what he would have
we're he to invest in tax-exempt Sc
curities. In this way the farmer is
being doubly penalized by the exis-
tence of tax-exempt bonds. He is
being penalized by having heavier
tax levied on his land, in order to
meet the expenses of government,
and again by having to pay higher
interest rate than he otherwise would
were not farm mortgages compelled
to compete with taX-eXempt state and
city bonds,
Practically every farm organiza-
tion was represented at the hearing
and, without exception, they went on
record in favor Of stopping the is
suance Of tax-exempt securities. The
recent farm conference also went on
record against further exemption OF
income from securities issued by
states and municipalities,
Honey Philosophy or 1922.
If we lived in a garden of flowers