The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1922-11-11
TAX FREE SECURITIES
States Should Maintain Their Right to Issue
Such Securities and Save About the
Last Vestige OF State Rights

ey. TO handle for borrowers who are
in urgent circumstances and who
can be. made to pay through the
nose
There is an enormous amount of
financing to be done in Europe by
American bankers, so. the anguries
read and the prophet says. Before
that great adventure gets into full
swing it will be a good thing, think
the international bankers if COM
petition from American states and
municipalities is. got out OF the way.
It is argued that sums loaned to
states and municipalities is taken
from the productive enterprises.
The: truth is that public money is
the quickest spent. The turn over
is very rapid. OF the billions
that have gone into tax-free loans,
it is safe to say that two-thirds
,--nlor than that-have already
found their way back into the
general capital asset Of the nation,
to be used all over again. More
over; virtually all of these. tax-free
bonds have one transeendent mer-s
.iit-they provide for their own
amortization within a compara-5
lively short tinae. This is quite in
contrast to much Of the general
financing Of the day where earning.
power is capitalized rather than i.1-.
Festment, and the public's money
taken without any idea of its ever
being actually returned. What
would transportation rates be now,
for instance, if all railroad bonds
had been compelled by: law to car.
nv an amortization feature? But
financing has been through re-
financing rather than by payment
We know of no money being In
vested today. anywhere, that is
more certain to yield biz dividends
than the proceeds from tax-free
bond issues for the construction of
permanent highways, drainage,
Baterworks, sewerage systems, etc.
It is charged that the privilege
Of issuing tax-free securities con-
.stitutes temptation to small po-
litical units all ever the country to
run. into excesses and squander
funds on unwise und We
wonder if anywhere in the world
there can be found more sconser-
Vative voters on a proposition IN
volying taxes than in the ordinary
American community. The farmers
are so. hard pressed that they ex-
anime with the: nainutest care any
proposal for spending money. So
do the smaller cities. In addition,
there is a limit under the law, in
most cases, as to loans which a
municipality can make, Just as
there 5s.a limit to the character Of
undertakings in which a state may
indulge. We take it as truism
that the spending OF. money raised
by local bond issues IS more care
fully guarded beyond comparison
.so-thansis is the expenditure of fed
eral funds.
IF any farmer imagines that his
.own taxes would be decreased by
denying hereafter to his: own. local
securities the tax-free privilege, he
is sadly befuddled. He will be
taxed to pay the inevitably higher
interest on local loans and this ex-
ira taxation viii more than ball
.aaces any gain he might. :supposit-
iously. make in federal taxes.
Indeed, we find nowhere any
discussion as to benefits to accrue
to the states from the passage Of a
constitutional amendment giving
Washington the right to tax state
issues. It viii help the federal
government, is the cry. Aye. rob-
bing, Peter to pay Paul. The ag-
grandizsment Of the nationaE treas
ury at the cost of the state .ex-
-eheaaers. 5..,-,
Many states voted for the income
tax amendment to the constitution
because they thought it would
compel rich communities to bear
parts of their burden; The propos-
ed amendment we are writing
about now coaida not conceivably
have that effect. It would make
the poor states poorer, even if it did
not. make the rich states richer.
. There Is nothing more dangerous
ii modern government than the
tendency toward Capitalization and
the destruction Of local self-govern-
naent. The. temptation is insidious.
Men ride into Office on. a platform
Of protest against this tendency,
and before they have been in Wash
ington "a year bureaucracy has.
made cen.ralists Of them. Any
thing that is likely to further cen
ira lzatioa is deplerable. The. Ro-
mans were the greatest governors
of wide territory evertknown, and
their cardinal principle was max
timum OF local self-government.
Some Of the most astute political
students alive believe in their
hearts. with all the sincerity of
their souls. that complete central
izaiion would mean ultimately and
inevitably another civil war. in the
United States. That may be an ex-
trene view, but history would sup
port it.
Quite aside. therefore. from any
question Of financing or any issue