The Washington times., 1923-12-29
TAX EXEMPTION
Of SECURITIES
ATTACKED
Otto F. MaIIery Cites Depress-
ing Effect of Public Build
ing Orgy.
By WILLIAM HARD.

A large confirmation was given
today to Secretary of the Treasury
Melons attack upon tax-exempt
securities, when Otto T. Mallery, OF
Philadelphia, at a meeting here OF
the American Association for Labor
Legislation, emphatically exposed
the extravaganza of American
States and municipalities in their
building operations during this year
and unsparingly showed the connec.
t1on between that extravaganza and
the high cost of living.
A high tribute was incidentally
paid by Mallery to the policy OF
the Federal government in restrict
ing its building operations at this
time under the influence Of advice
from Secretary Of Commerce Hoover.
Practical Achievement.
''Only the Federal government"
said Mallery, 'is able to show any
great practical achievement in
carrying out the recommendation
of the conference on unemployment
called by President Harding in the
matter Of expenditures for public
works. The States and municipali-
ties In this year 1928 will have
spent nearly one billion dollars on
Of bonds"
Maliery, who is one of the
eollntEy's leading experts on public
works and unemployment and the
cost 0f living. pointed out drama
tacally the evil effect thus produced
On private business and on prices
Tor commodities. At the very time
when those prices were already
high, the States and municipalities
have gone into the market with en-
larged demands for building ma
srials and have raised all prices
till higher by competition against
prfvate- business men for commodi.
tiles and for labor.
This was the last straw that
broke the camel's back with an un-
ecoaomic burden" said Mallery.
President Harding's conference,
Maliery reminded his hearers,
warned the States and municipali-
ties against this policy. The con-
ference urged all public authorities,
Federal or State or municipal, to
curtail their public works in boom
times and to accumulate a reserve
OF public works to be executed in
times of depression when all con.
structjon could be done with a large
saving OF money and also with
large and good social influence in
Eescuing working people from unem-
ployment.
Orgy of Spending Results.
Contrary to this advice the States
and municipalities, according to fig.
ures presented by Mallery, have
been engaged in a totally unre-
pepditures- Confirmation is given |
to these figures of Mallery,s by an |
independent inquiry in the Depart |
ment of Commerce.
This inquiry shows q startling |
contract between what private busi- |
ness has been able to do and what |
public agencies have insisted upon
doing during this year. Private |
business is doing less construction |
now than in 1919. while public !
agencies, out OF the taxpayers |
money, are insisting upon doing al |
most twice as much.
In 1919 the average per month of
contracts let for private business
buildings" and for private ''indus. |
trial buildings" was approximately
this sum had sunk to some |
361. .o00.0O
Meanwhile, however, for "educa. |
tIonal buildings" and for "other
public and semi-public buildings"
the tendency has been precisely |
the other way. The average per |
month Of contracts for such build. |
ings in 1919 was twenty-four mil. |
Hon dollars. In October Of this |
year it had risen to forty-six mil. |
lion dollars.
Tax Exemptions Is Advantage.
One Of the main incentives to |
such excesses is admitted to be |
the advantage which States and |
municipalities enjoy over private |
business in the matter of exemp-
ton from taxation for their secur-
tiles. The investor who buys the |
securities Of a private business, |
issued to develop the business, has |
to pay full taxes to the Federal |
Government on his income from |
those securities. The investor. on |
the other hand, who buys State
bonds or municipal bonds, issued
20 construct pavements and parks
and city halls and county court
buildings and plazas and monu-
ments. pays no Federal income
tax on this investment. He, accord
tngly, prefers this investment and
the States and municipalities hasten
w O4AOE IL IO
The result is not only that money
Is diverted away from productive
business enterprises, but also that |
the cost Of living is unduly raised |
by the excessive competition Of pub
lie business with private business in
boom times for labor and for CON-
moditfes.
Mallery expressed the hope that |
States and municipalities in the year
1924, under pressure from their tax
payers, may abate their enthusiasm |
Tor constructing vast public works |
ut boom-time prices and may def
nitely begin to keep a large per-
centage of these works lin reserve"
to be executed at lower prices land |
with great incidental benefit to all :
buslness) when the next period Of |
business slackness arrives.
Reserve in Slack Times.
According to MalIery's idea, which |
has stood the test of examination by |
the best economic students in the |
country, every State and every rnu. |
nicipality should put all it's proposed
public works into a sort of "puolic
works authorized list" and then, out
OF this list. in boom times it should
build public works slowly and IN
slack times 1t should build them
fast,
Meanwhile Mallery's proofs of
State and municipal extravaganza,
a. presented to members of the
American Association for Labor
Legislation, have given a strong