Evening star., 1923-11-12
323-MILLION TAX CUT
Is URGED BY MELLON

CONTINUED from First Page.)
and limitation of the deduction from
gross income for interest paid during
the year and for losses not Of q busi-
ness character to the amount the sum
Of these items exceeds tax exempt IN
come Of the taxpayers. 1t also was
proposed to tax community property
income of the spouse having control Of
the income. in order to equalize the tax
basis, as between residents of those
states which do and those which do
not recognize such income OF husbands
as joint income OF husband and wife.
Other suggested revisionS were re-
peal Of the tax on admissions and the
tax on kilograms. telephones and leased
wires.
The full text Of Mr. Melons specific
recommendations follows:
Il. Make a Is per cent reduction
in the tax on earned income.
THE fairness Of taxing more lightly
income from wages, salaries and pro-
fessional services than the income from
business or from investment Is be-
yond question. In the frs. case the
ration: sickness or death destroys 1t
and old age diminishes It In the other,
the source Of the income continues: 1t
may be disposed of during a mans life
ana 1t deSCendS 10 MS helES
"It Is estimated that this amend
ment will mean a loss in revenue of
about $97,500,000 a year. the great
er part of which falls in the lower
income brackets.
-. Where the present normal tax
and where the present normal tax Is
per cent. reduce 1t to per cent.
VIII Mean Big Loss.
This affects all personal income
and the loss Of revenue comes large
ly from the lower brackets 1t Is es-
timated that this will mean a loss Of
revenue Of $s1.6o0.0o0 a year.
"3. Reduce the surtax rates by
commencing their application at $40.
600 instead Of $4,000. and scaling them
progressively upward to 25 per cent
at 100000.
"This will readjust the surtax rates
all along the line. and the Treasury
recommends the readjustment. not In
order to reduce the revenues. but as
a means Of saving the productivity
Of the surtaxes. In the long run 1t
will mean higher rather than lower
revenues from the surtaxes. At the
outset 1t may involve temporary loss
tuary 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 100000, zoe, and
that in all probability the revenue
from the reduced rates soon will
equal or exceed what would accrue at
the present rates, because of the en-
couragement which the changes will
give to productive business.
Present System Failure.
srrh. r.a aJu.<~ao< ~ <ha ,,,r<o-a.
moreover. is not in any sense a par
tisan measure. 1t has been recon-
mended. on substantially this basis.
by every Secretary of the Treasury
since the end Of the war, irrespective
Of party. The present system is a
failure. 1t was an emergency meas
ure, adopted under the pressure Of
war necessity and not to be counted
upon as a permanent part of our
revenue structure. For short period
the surtaXes yielded much revenue,
but their productivity has been con-
experience shows that the high rates
now in effect are progressively be-
coming less productive of revenue.
1.-THE high rates put pressure on
taxpayers to reduce their taXabAe IN
come, tend to destroy individual ini-
tiative and enterprise. and seriously
impede the development Of hro-
ductive business. Taxpayers subject
to the higher rates cannot anord. far
example, to invest in American rail-
roads or industries, or embark upon
new enterprises In the face of taxes
that will take 80 per cent or more OF
any return that may be realizeo.
These taxpayers are wfthdraMins
ness and investing 1t instead In tax
exempt securities and adopting other
lawful methods of avoiding the reali-
cation of taxable income.
transactions that would normally go
through and to discourage men OF
wealth from taking the risks Whfch
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 situation II to put the taxes
on q reasonable basis that Will per-
nit business to 60 on and industry
to develop. This, believe. tns rean,
Accomplish, and it will not only pro-
duce larger revenues, but at the same
time establish industry and trade on
a healthier basis throughout the
ual breakdown in the system and a
perversion of industry that STILES
our progress - Q nation.
"The growth Of tax-exempt secur-
tiles. which has resulted directly
from the high rates Of surtax. 10 at
the same time encouraging extrav-
agance and reckless expenditure on
the part of local authorities. These
state and local securities will ulti-
mately have to be paid. principal and
interest. out Of taxes. thus contrib.
uting directly to the heavy local
farmers and small property owners.
There IL no immediate remedy for
this within the power Of Congress
except the readjustment Of the sur
taxes on q basis that will permit
capital TO seek productive employ
ment and keep 1t from exhausting
itself In tAx-exempt securitieA The
productive use Of capital In our rail.
roads and industries will also tend