The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1922-12-22
MOVE TO TAX
STATE BONDS
MEETS SNAG
sponsors Surprised by
SolonS' Opposition
BY MARK SULLIVAN

the same as bonds issued by ordinary
business corporations, appears to have
surprised the sponsors of the measure,
but most of us from the beginning re-
allied it was inherent in the situation,
because there is nothing on the hori-
zon much clearer than a revival of
the old state rights issue.
The heart of the antagonism to Mr..
Harding's proposal lies in the fact that
it probably goes further in the direc-
tion of the invasion of state rights
than any of the many steps that have
been taken in a century of aggressive
crowding on the part of the federal
government The right of state to
= borrow money on such terms as it
pleases, and to tax it's citizens to pay
the principal and interest of these bor-
rowings on its own terms is about as
fundamental as anything can be. The
friends of state rights think that if
this goes there isn't much left, and
we might as well wipe out the whole
idea of state boundaries and individual
state identity.
Understand Reasons.
At the same time, even the oppon-
ents of the bill recognized fully the
reasons which gave rise to the propos-.
al, and admit that it is a situation de-
CuICs MIL ul6u dAd ldl sc III
vestors buy the bonds of states be-
cause the income from them is exempt
from taxation. The unhappy results
are two: One is that the federal gov
ernment loses the revenue; another is,
that funds which under ordinary cir
cumstances might be invested in pro-
ductive business enterprises are now
invested in the bonds of states.
Stated roughly, an investor who is
rich enough to be in the class which
pays the higher surtaxes is better off
f he buys a state bond yielding four
and one-half percent than if he buys
he bond of railroad or a steel cor
poration or any other business yield
ng over six percent. The result is
hat business must pay an inordinate
rate of interest in order to attract the
investors money.
Surtaxes Here to Stay.
From this considerable number of
other dubious results follow There
S a great incentive for the states to
sue more bonds and still more bonds.
Fney are tempted to go into all sorts
of enterprises, such as road building,
he erection OF expensive public build
ngs, and the like. From this it results
hat in addition to the diverting of
money there is also a diverting of la
business.
OF course, there is another way OF
meeting the situation That would be
20 reduce the high surtaxes and so
take away the condition which leads
the large investor to prefer state
bonds. But any motion looking to.
wards reduction o. higher surtaxes
is SO aggressively opposed that it is
almost hopeless.
Among public men there is a stead
lily growing disposition to feel tha:
too much is being done at Washington
and too little at the various state cap
tails; that the fedora. government has
already taken over more functions
than it is able to handle efficiently
and that it is desirable to get bacH
to what was once a fundamental doc
trine of the Democratic party; namely
jealous preservation of the rights o.
the states against federal encroach
ment.
t. Follows Contrary Policy
II is pointed out, ard it is quite true
that in other fields than this mattei
OF tax-exempt bonds, the federal gov
ernment is following contrary policy
of stimulating the states to create
expenditures. AS some men put it
congress is steadily bringing pressurv
on the states to give up more anG
more of their functions Congress, fo
example, has a system of appropria
tions for road building whereby thu
federal government will give a certai,
amount provided the states will rails
an equal amount The public buildin:
pork" bills are another example. Ye
another is the recently passed mater
; nifty bill.
D In connection with this last TIL
governor OF one state, Maine rejecte,
the federal governments gratuity. an.
in doing so wrote a letter which i
perhaps the best statement of tn
state rights issue in its newly revivet
form. He said, in part:
81 believe the time has come for tn
states OF the union to hold to a prir
ciple and to carefully scrutinize al
offers of federal aid before acceptin
them. Having no doubt as to wha
my duty is IN this matter. | decline {
accept the Sheppard-Towner bill an
this state for the time being wi
stand with New York, Massachusetts,
and Rhode Island, the three state
that have rejected it.
Refuse to Sell.
The state of Maine will not sell il
hirthright Principle, not expedienc!
has been the determining factor wit
me in the solution of this problem
The financial aspects OF federal al
are interesting
"The proffered $4,000 has been r,
ferred to as a free gift TO the stat
Of Maine, while in reality the feder;
government is taxing the state t
raise this money; and now. in orde
TO help our mothers and children, o
fers to pay back TO the state the tri'
ial sum OF less than two thirds of
one per cent for each inhabitant
At the present time over $4,000. .0C
is annually taken in taxes by the fe,
eral government from the people
= Maine. and less than $1,250000 is T
turned to the state in the form of fe
eral aid This $1S,000,000 of MaiT
money is paid into the federal trea
ury at Washington, a large portion b
ing absorbed in heavy administratio