New Britain herald., 1922-12-06
MELLON SUGGESTS CUTTING INCOME
 SUR7AX RATE FROM SOP C. TO25P C.

chases a bond for $i,00o which ap- preeiates in value may exchange thai bond for another of the value of s1.000, together with $l00 In cash without the realization of taxable in- come.
 This provision of the act Is being widely abused" he adds.
 Aside from his recommendations for. tax revision, MT. Mellon deals in his report with conditions generally over the country and with the opera tions Of the various divisions of the treasury He sounds an optimistic note as to the business outlook and reports substantial progress both in the reduction of the public debt and in economy in public expenditures.
 The past twelve months, he says, have been marked by further liqui- dation and recovery from depression, and, more recently, by q substantial revival of business. Prices of com- modities have risen materially, the volume of business has been mount ing to higher levels and labor throughout the country is again fully employed.
 "The year is closing with bountl- full crops" the report continues, "and the severe depression in agriculture has been relieved. Banking condi- tions generally are sound, money rates are reasonable, and there is sufficient credit available to meet all legitimate demands.
 Tn the treasury the year has seen reduction in the gross debt amount ing to about s1.oO0. 100000, a bal anced budget for the fiscal year, 1922, showing n surplus of over $300.000,- 900 above expenditures. and substan- tial progress in the refunding of the short-dated debt, which has now been reduced to manageable propor- tions. These developments are all helpful, and afford the basis for 8 revival of business and industry on sound lines"
 Note of Warning.
 Into this situation, however, MT. Mellon injects note of warning. He says the restriction of immigration and the general resumption of indus trial activity have resulted in a scar city of labor embarrassing to some lines of business. He adds that the railroads are suffering from under maintenance and inadequate equip ment, and are finding it difficult to move commodities to meet the de- farm products are selling too low at the farm and too high at the distrib- uting centers.
 The Secretary also declares that the increase of $1,ooo, 100000 in the gold holdings in this country since 1919- 1920 has tendency to expand credit and create an unnatural ease Of money for the purposes of expansion and credit. Then too, he calls atten- tion that the uncertain state in Europe has impaired the corrective forces which used to operate in nor nal times and has so reduced the buying power of foreign countries as to destroy or endanger the foreign markets for many American products. Enough forces are operating" he continues, Ito make us cautious in estimating the prospects for the fu- ture and to take care lest we build on false basis. Business in this coun- try can not progress indefinitely with out its foreign markets, and under expansion now, with rising costs and artificial values, would inevitably SOW the seeds of reaction and make more difficult the reestablishment of nor- nal relationships abroad.
 "The Treasury aims above all to keep it's house in order in the belief that a sound financial structure here will in the long run afford the best basis for extending needed assistance to Europe and for a healthful revival of domestic business on constructive lines"