New-York tribune., 1922-12-07
Cut From so TO % Per
Cen. in Income Levy Rec
ommended as Means to
Bring In More Revenue
High Rates Are Ineffective
Billion Annually Escapes
Taxation Through Invest
menis in Exempt Bonds

4 of the Treasury, to-day told congress
\ In his annual report. As medium Of
\ Increasing revenues from this source
\ he suggested tic reduction Of the max
\ imum income surtax rate from th'
! present 30 per cent TO not more than
% per cent Secretary Mellon sug'
rested no general revision Of the reve'
nue. laws nor additional taxes, express
ing the hope Of meeting any indicated
government deficit through collection
Of back taxes and income from other
sources.
The Secretary informs Congress tha.
20 attempt alone 90 stop the gaps
through which there Is an avoidance Of
tax payments % he government Will
not be enough, because the existing
rates Of surtaN "put such heavy press
ure on the lager taxpayers 20 reduce
their taxable incomes" that new ones
would surely be found. lie added that
the high rates Sound productive" but
that the fact remains that they are be-
coming increasingly Ineffective and are
yielding less and less revenue each
year.
Congress Must Face Facts
Then bluntly he tells Congress Il
must face the facts Equaroly" and
correct the artificial conditions which
now prevail, and which, he asserts, are
not wholesome from the point Of view
Of business OF industrial development,
and at the same time are impairing the
revenues Of the government.
The more important Of the methods
used by the taxpayers 70 reduce the
amount Of income subject 70 taxation
are listed By Mr.. Mellon as follows;
| Deduction Of losses on sales Of eapi-
tai assets. with the failure 70 realize
on capital gains.
II Exchanges Of property and securities
80 as 20 avoid taxable gains.
Investment in tax exempt securities,
and
Division Of property, creation Of
trusts and the like.
mot all Of these things can be con-
/ troled By law or by regulation" he
continued, "4nd most Of them lead 20
unnatural and frequently harmful eco
nomie results. To reach the evil OF tho
thing most necessary is the reduction
/ OF the surtRx rates themselves In order
70 reduce the pressure for avoidance
and maintain the revenues derived
from the surtax.'
In "es.nettly urging" prompt edop,
tion OF the proposed constitutional
amendment against the further issu-
Ianee Of tax exempt securities the Treat
| ury Secretary says these securities
I now reaching the market a. the rate OF
about $1,000 100000 annually, form the
Outstanding avenue" OF escape from
/ the surtaxes.
No Limit on Loss Deduction
Pointing out that the present law
/ limits the tax on gain In capital trans
actions 20 I2h per cent OF such gain,
but puts no limit on the deduction OF
losses in such transactions, Mr.. Mellon
urges that the amount by which the
tax may be reduced on account OF losses
from the sale OF capital assets shall not
exceed i2h per cent Of the amount OF
such loss.
NJ "This would, 70 a large extent" he
asserts. "eheek one Of the methods
widely used b. taxpayers at the pres
ent time for decreasing their yearly
income. The alternative Is 10 refuse
70 recognize either capital gain or cap.
ital loss for income tax purposes, and
II the present situation IS allowed 20
continue there is no doubt that IL would
save revenue % ADOPT this course. This
is. IN fact. the practice which has been
;. followed in England for many years.
II As 70 the avenue Of escape afforded
In the section Of the law dealing with
exchanges OF securities, the Treasury
Secretary urges that the statute be
amended 50 as 10 limit the cases In
which securities may be exchanged for
other securities, without the realization
OF taxable income, TO those cases where
the exchange Is in connection with the
reorganization, consolidation or merger
Of one or more corporations.
II Aside from hiG recommendations fol
tax revision, Mr.. Mellon deals with
conditions generally over the country
and with the operations Of the vari'
Gus divisions Of the Treasury, He
sounds an optimistic note as 10 tho
business outlook and reports substsn.
tiai p ogress. both In the red -ction Of
the public debt and in economy in pub
lie expenditures.
! Recovery From Depression
The last twelve months, he says
have been marked by further liquida-
tion and recovery from depression, and
more recently, by q substantial revival
Of business. Prices Of commodities
have risen m terially, the volume Of
business has been mounting 10 higher
levels and labor throughout the coun.
Try Is again fully employed.
"The year is closing with bountiful
crops" the report continues, "and the
severe depression in agriculture has
been relieved. Banking conditions
generally are sound, money rates arc
reasonable and there Is sufficient credi,
available 20 meet al legitimate de.
mands.
"In the Treasury the year has seer
reduction In the gross debt amount.
ing 70 about 81 900, 900 900. q ba.6ncec
budget for the fiscal year 1922 show.
ing a surplus Of over 1900 100000 above
expenditures, ard substantial progres.
in the refunding Of the short dated
debt which has now been reduced Il
manageable prOpOrt ons. These devel.
opments are all helpful, and afford the
basis for q revival Of business and In.
dustry on sound lines"
Into this situation. however. Mr.
Mellon injeets a note Of warning. He
says the restriction Of immigration and
the general resumption Of industrial
activity have resulted in a scarcity o.
labor embarrassing 10 some lines o.
business. He adds that the railroad.
are suffering from undermaintenaDcs
and inadequate equipment, and arc
inding II difficult 9 move eommodi.
ties TO meet the demands Of business
AZ a consequence farm products arc
selling too low nt the farm and toe
high at the distributing eenters.
III The Secretary also declares that the
increase Of 81 900, 100000 In the gold
A.Ili.n. In ahin rnnnlrr rirnn Infn