Evening star., 1923-11-12
Tax Reduction or Bonus?

Tax Reduction or Bonus?
Secretary Melons letter to Acting
Chairman Green of the House commit
tee on ways and means proposes a
program of tax reduction which, in the
circumstances, is in effect a definition
of the issue between that measure and
the adjusted compensation or soldiers
sonus. For months past the prediction
Sas been confidently made that a
Epnus bill would be passed by the new
Congress, possibly at the first session
soon to open, and that there was. suf-
ficient strength assured for it in both
houses to carry it over a presidential
veto. Tax-reduction plans have neces-
sarily been predicated upon such a
possibility. Mr.. Melons letter indi-
Gates that the administration is not
disposed to wait for the proponents of
the bonus to make the issue. This let
ter must be regarded as a strategic
move, in effect an appeal to the coun-
try to consider first the advantages of
the outlined plan of tax reduction, net
ting, according to the Secretary's esti-
mate. saving of s323,OO0,OOO to the
taxpayers.
If this program, as outlined by the
Secretary Of the Treasury, is adopted
in legislation, the smaller taxpayers
would receive substantial relief, as it
would reduce the normal tax rates of
ana s per cent on personal incomes
to 8 and 6 per cent, respectively; would
provide for 25 per cent reduction in
tax on earned incomes as opposed to
income from investments and busi-
ness, which is a change in admins
trative policy, and would abolish all
surtax charges against incomes of less
than $4,000. This plan also would re-
adjust surtaxes on incomes over s10,-
O0G and reduce the maximum surtax,
now AZ per cent, on incomes of $780,
: 900 and over, to 25 per cent on in
comes of 100000 and over. This, it is
urged, would soon yield an increase
rather than a decrease of revenue.
The so-called nuisance taxes and the
taxes on admissions and telephone and
telegraph services would be abolished.
In one respect Secretary Melons
recommendations go to the point Of
encouragement Of industry pr omoting
investments by discouraging invest
ments in taX-free securities. At pres
ent there is a pronounced and, in ef-
feet, pernicious tendency toward in
veStment in taX-free bonds issued by
states and municipalities, encouraging
the issue Of such loans, which even
tually must be paid out Of taxation,
and depriving railroads and other in
dustrial enterprises in large measure
of the revenues necessary for their
rehabilitation from wartime exhaus-
ton and their proper development to
meet the new demands Of business of
the funds necessary for maintenance
and expansion.
AS the issue is thus presented by
this letter, which must be viewed as
expressing the policy Of the admins
tration, Congress will be called upon
to determine whether to grant relief
through lowered taxes to perhaps 49,
100000 taxpayers who would be ia.
vision, or to grant adjusted compensa.
tion or bonus to about one-third of
that number. The situation simply is
this: A bonus must be paid out of
taxes. There is no other source from
which it can be granted. If the bonus
is taken out of tax money the govern
ment cannot possibly reduce it's rev.
enue. If the bonus is not granted the
government can, as Mr.. Mellon shows.
safely reduce its revenues from taxa
ton and carry on it's program of ade-
quate maintenance and systematic
debt reduction. To grant the bonus
and reduce the revenues together
would mean a complete change of
policy respecting the liquidation Of the
war debt, involving postponement for
long period of the final payment Of
the bills incurred in Americas par
ticipation in the great war.
That is the issue, therefore, which
Secretary Melons letter, presumably
with the Endorsement of President Cool
idge, lays before Congress on the eve
of the session-tax reduction for fif-
teen millions or a bonus for five mil
lions.
q. But the issue between tax reduction
sas thus proposed and adjusted com.
pensation or bonus should not preclude
the enactment in any case of legisla-
tion designed to make adequate pro-
vision for those veterans Of the war
who were disabled, by wounds or dis
ease. and who now need aid from the
government. They should be helped.
with sympathetic consideration of
theirsneeds, up to the point Of 100 per
sent thoroughness, whether taxes are
reduced, increased or remain as they
are.
:-k.