The Birmingham age-herald., 1923-11-12
MELLON WANTS TO
 REDUCE TAXATION
fContinued from Page one.)

(COntfnued from Page One'D
 the current fiscal year to a total of not more than s3,50O, 900, ,ooo, of which
 about s5OO,O 900 will be fixed
 charges on account of the sinking
 fund and other retirements of the
 debt.
 Declaring 1t appeared that for this
 year and for the next four or five
 years there would be surplus Of
 something more than $500, 100000
 year over and above expenditures
 chargeable to the ordinary budget,
 including the fixed debt charges pay
 able out of current revenues, the
 treasury head asserted that this
 gives reasonable margin not merely
 for tax revision, but also for tax re-
 duction."
 The full text of MT. Melons spe-
 cific recommendations follow: a
 q. Make a 25 per cent reduction
 in the tax on earned income. The fairness of taxing more lightly in- come from wages, salaries and pro- fessional services than the income from a business or from investment is beyond question. In the first case
 the income is uncertain and limited in duration. Sickness or death de- stroys 1t and old age diminishes. In
 the other, the sources of the income continues; it may be disposed of dur ing a mans life and it descends to his heirs. It is estimated that this amendment will mean a loss in reve-
 nue of about s97,500,00o year, the greater part of which falls in the lower income brackets.
 "2. Where the present normal tax is four per cent, reduce it to three per cent, and where the present normal tax Is per cent, reduce it to per cent. This affects all per-
 sonal incomes and the loss of reve-
 nue comes largely from the To.
 brackets. It is estimated that this will mean a loss in revenue of $91.- 6000 1000 a year.
 8. Reduce the surtax rates by commencing their application at S10,000 instead of $6,o0O, and scaling them progressively upward to 25 per cent at s100,000. This will re- adjust the surtax rates all along the | line and the treasury recommends the readjustment not in order to re-
 duce the revenues, but as means of saving the productivity of the sur | taxes. In the long ran, it will mean higher rather than lower revenues | from the surtaxes. At the outset 1t may involve a temporary loss in rev. enue. but the government actually estimates that even during the first year, if the revision Is made early enough, the net loss in revenue from all the changes in the surtaxes would be only about S100.000,000. and that l in all probability the revenue from | the reduced rates will soon equal or
 exceed what would accrue at the | present rates, because of the encour- | agement which the changes will | give to productive business. The re- | adjustment of the surtaX, moreover, ! 1t is not, in any sense, partisan | measure. It should be recommended,
 on substantially this basis, by every l secretary of the treasury since the
 end of the war, irrespective of party.
 The present system is a failure. It was an emergency measure adopted l under the pressure of war necessity, and not to be counted upon as a permanent part of our revenue struc- | ture. For a short period the sur | taxes yielded much revenue, but their productivity has been constant | ly shrinking and the treasury ex- perience shows that the rates now in l effect are progressively becoming
 less productive of revenue. The high rates put pressure on taxpayers to reduce their taxable income, tend to destroy individual initiative and enterprise and seriously impede the
 development of productive business. The taxpayers subject to the higher
 rates cannot afford, for example, to invest in American railroads or in-
 dustries or embark upon new enter
 prises In the face of taxes that will take 50 per cent or more of any re-
 turn that may be realized. These taxpayers are withdrawing their
 capital from productive business and
 investing it instead in tax exempt securities and adopting other lawful
 methods of avoiding the realization of taxable income. The result is to stop business transactions that
 would normally go through, and to ! discourage men of wealth from talk ing the risks which are incidental to
 the development of new business. Ways will always be found to avoid
 taxes so destructive in their nature,
 and the only way to save the situa- ton is to put the taxes on a reason
 able basis that will permit business
 to go on and inquiry to develop. This. believe. the readjustment
 herein recommended will accomplish, | and it will not only produce larger
 revenues, but at the same time es- tablish enquiry and trade on a
 healthier basis throughout the coun- try. The alternative Is gradual
 breakdown in the system, and a per
 version of industry that stiles our the tax exempt securities, which has
 of surtax. Is at the same time en- couraging extravaganza and reckless expenditures on the part of the local securities will ultimately have to be paid. principal and interest out of taxes, thus contributing directly to <tr 11