Evening star., 1923-01-04
Controversy Over Tax-Exempt
Bond LEGISLATION Increasing.

The discussion of President Hard
ing's plan to bring the tax-exempt
securities of the states and munich
palities into the open where they
would be subject to taxation levies
| has split editorial opinion wide open.
Party lines are badly shattered and
| writer's of all political faiths are
lined up on both sides of the ques-
tion. 1t is accepted. even by those
who enthusiastic favor the plan.
that the possibility of securing the
votes necessary to enact a constitu-
| tional amendment is most remote, but
| some of them at least believe that
| none is needed and that a liberal
construction of existing law would
! throw much capital. now hidden. back
| into the channels of commerce.
Recalling that as Governor of New
| York. Secretary of State Hughes op-
posed abolishing tax-exempt securi-
ties, the New York World demo
| cratic) argues that "it is no partisan
contest that is going on in Congress.
! for the actual leadership of the op-
posing forces is all republican and
all part of the administration. The
republicans in the House who sup
port the amendment are following
the President. The republicans. and
i the southern democrats. who oppose
the amendment are following the
Secretary of State. 1t is from him
that they draw their inspiration, and
| if Mr.. Harding is beaten on his per-
sonally conducted amendment to the
Constitution he will have been beaten
by Charles E. Hughes, his Secretary
of State" 1t is the opinion of the
New York Times independent demo-
! cratic) that 1.-The true way in which
| to check the swelling volume OF state
and city loans free from taxation is
not by means of an impracticable
| constitutional amendment, but by. re-
ducing federal taxes to the point where
| investors will prefer to pay them
rather than go to the trouble of legal
~ evading them" Putting the Hard
| ing plan into effect would not accom-
p1ish a noticeable revolution" the
Baltimore News independently holds,
| but would make matters much more
| logical. But whether it would actual
ly be an improvement over present
! conditions or not is another question
| and one that is at least arguable." The
| reciprocity feature of the proposal is
of doubtful value, the Providence
| Journal (republican) holds, inasmuch
as ga proposed amendment to the
Constitution which would not alone
l subiect state issues to federal taxa
! tion but, should they seek compensa-
| tion, require that states first put a
new burden on their own people. does
| not at a glance seem particularly at
| tractive."
There is always one great funda-
mental principle to be remembered In
! laying taxes" the New Haven Jour-
| nal-Courier independently points out,
| the power to Destroy The question
| today is whether the exercise of IN
| taxing power is not rapidly approach
/ ing the condition where destructtUn n
| is Threatened to human enterprise and
| human initiative" 1t Is the men with
large incomes who have invested in
| tax-exempt bonds. the Albany Knick-
| erbocker Press independent republi-
can1 points out, and 80 far as pos
sfbie surplus money has been put into
| tax-free securities. with the addition
! aiiy evil result that legitimate and
nroductive business enterprises have
| in many cases been unable, to obtain
| the capital essential for their devel-
opment and many plans Tor invest
| ment or expansion have been dropped.
| Moreover, while the wealthy are thus
! having less, the number of small in
comes which are taxed has steadily
| Increased. Opposition to the amend
rnent has been based upon the charge
| that it would impair the credit of the
| states and make 1t difficult for them
70 sell their securities. If. however,
no tax-free securities remained, 1t
| would seem that there would. be no
| determination. And in view of the
difficulty of obtaining the two-thirds
| vote requiFed for q constitutional
amendment, there is to be considered
| the possibility that an amendment is
not required" Because of the opposi-
| tion in banking circles. the New York
Globe (independent) believes the Leg
iislation may be defeated, but IL insists