Evening star., 1923-01-06
MELLON |N.ATTACk
ON TAXEXEMP TON
ReneWs Plea for Passage of
Measure Amending United
States Constitution.
VIEWS GIVEN IN HOUSE
Denies States Rights Will Be
Curtailed by Ban on Tax
Free Securities.
VIEWS GIVEN IN HOUSE

Urging adoption of constitutional
amendment to prohibit further is
suance of tax4exempt securities, Sec
retary Mellon. in a letter presented
yesterday to the House, declared the
tax-exempt privilege. with the facility it
gives to borrowing, leads in many
cases to unnecessary or wasteful
public expenditures" which in turn
is bringing about "a menacing in
crease In the debts of the states and
nation"
Mr.. Melons views were given in
response to a letter from Representa-
tive Green, republican, Iowa, author
of the resolution, asking for an ex-
preston as to the wisdom of a pro-
posed amendment by Representative
Garner. democrat. Texas, which, the
Secretary said, would tend to make
the legislation ineffective. Secretary
Mellon said the constitutional amend
ment would not infringe upon the
rights of the states This was quickly
Tennessee, democratic leader, who de-
clared the Secretary was the only
responsible Official willing to ad-
vance that claim.
Sees Menace I'm Exemptions.
The argument was made by the
Treasury Secretary that the large
amount of tax exempt securities was
menace to taxation and to the coun-
try's resources and prevented the free
flow of money to industrial and COM
mercial enterprises.
i note that in support of his pro-
posed amendment, Mr.. Garner has
stated" Mr.. Mellon wrote, that
under the resolution as reported by
the ways and means committee. the
n icN NriY 1sasaf &c
against the bonds of state and in
favor of the bonds of a railroad or in
dustrial corporation, and that his
amendment is proposed in order to
prevent such a result.
Il am glad TO be able to write you,
first, that in the Judgment of the
Treasury the resolution in the form
reported by the committee would of
itself prevent discrimination of this
character, so that the amendment
proposed by Mr.. Garner is unneces-
sary, and second, that to adopt the
amendment proposed by Mr.. Garner
would probably nullify both sections
and make the whole constitutional
amendment ineffective.
States Rights Protected.
whatever opposition there is to the
proposed amendment to restrict fur
ther issues of tax exempt securities
rests. think, upon misundeTstand-
ing Of the subject and effect of the
amendment, and this, in turn, harks
back to the old controversies about
states rights and the powers of the
federal government. ! can say with
out hesitation that separated from
these old pTejudices and taken from
the point Of view of the facts as we
have to face them today, the proposed
constitutional amendment involves no
question whatever of states rights
and makes no attack whatever on the
credit or borrowing power of the
states or their political subdivisions
"The amendment would apply with
absolute equality to the federal gov
erpment on one hand and to the
states on the other, and in the inter
ests OF the general welfare would
put exactly the same restrictions
upon future borrowings by the fed
eral government as upon future bor-
rowings by the states and their po-
litical subdivisions"
From the point of view of the states
themselves, Mr.. Mellon said he be-
tinued issuance of tax-free securities
saved nothing to the taxpayers of
the states "and that in the long run
IL brings heavier taxes"
These debts, he wrote, constitute
a constantly growing charge upon
the taxpayers of the states "and will
ultimately have to be paid, principal
and interest. through tax levies upon
these taxpayers"
Green Resolution Again Up.
Consideration of the Green resolu-
ton which would authorize submis-
sion to the states of an amendment
prohibiting further issuance OF tax
exempt securities was begun In the
House prior to the Christmas i1oli-
days, but after a day of discussion
republican leaders decided to delay
action on the measure.
Receipt of Secretary Melons let
ter revived the discussion yesterday,
Mr.. Garrett. in brief speech, declar-
ing that while every one recognized in
Secretary Mellon a man of great pow
er and intellectually his ipse dixit
upon this legal question was not con-
elusive.
when one has studied the legal
propositions involved" he added, re-
ferrtng to the states rights issue, "he
cannot fail to say, though he will say
1t respectfully, that such an asser-
is preposterous. No attack upon the
credit OF the states when you give
to the federal government the power
to tax that credit? No attack on the
credit OF the national government
when you give to the states the pow
er to tax the national governments
credit?
Questions Melons View.
"of all who have argued this ques-
tion the Secretary OF the Treasury so
far as know is the only one who has
ever asserted that It did not affect
the rights of the states. and in turn
did not have the power to affect the
rights, the credit and strength of the
federal government itself.
"I do not want to charge the Sec
retary of the Treasury with dema-
goguing. He is not that type of a,
man. Yet IL is singular that he should
use the words old prejudices' in con-
nection with the discussion of this
matter"