The Omaha morning bee. [volume] (Omaha [Neb.]) 1922-1927, 1923-12-17
Proposed
Tax Cut Is
Outlined
Secretary Mellon Forwards
Definite Amendment to Rev.
enue Act to House WAYS
and Means Committee.
Benefits Small Salaries

Washington, Dec. l6.-Secfetary
Mellon has reduced to definite form
his tax reduction proposals and for
warded a complete redraft Of the rev
enue act to the house ways and
means committee for use in consid-
GRAFTON of tax revision legislation to
be begun Tuesday.
The treasury secretary in a letter
accompanying the redrafted measure
Ionie public today at the treasury
noted that the reduction program
"appears to have met with a most ia
vorable public reception" and advised
Acting Chairman Green of the COM
mittee that treasury officials are pre-
pared to present at any time argu-
ments in support OF the proposed re-
vision.
In an analysis of the changes pro-
posed, Mr.. Mellon placed first the
25 per cent reduction on incomes
below $4,000 and the additional credit
Of 25 per cent to be granted on earned
incomes, showing that in the case
Of earned incomes OF $4,000 or less
the reduction contemplated really
amounts to about A per cent.
Analysis of Proposed Changes.
Mr.. Melons analysis of the
changes proposed follows:
Il. Earned income, defined as
wages, salaries and professional fees,
is given a credit of rs per cent Of
the amount of the tax attributable
to the earned income.
a. f-L - t~ct
$4,000 of net income is fixed at 8
per cent, and upon the remainder Of
the net income at 8 per cent.
"3. The surfax rates begin at I per
cent on net incomes from 10000 to
$12, 900; an additional 1 per cent for
each $4,000 Of net income up to $685.
900 then per cent additional for
the next $4,000 of net income up to
$40, 900: and then / per cent addi-
tional for each $4,000 of net income
up to total of 25 per cent at $780,.
900 and over.
"a. Capital assets are defined as
property held by the taxpayers for
pnaupfit or investment for more than
two years. Upon the sale Of capital
assets, the tax on the gain from the
sale is limited to 12h per cent Of
the gain, and the amount by which
the tax is reduced on account OF such
loss is limited to 12h per cent OF
the loss.
Deductions from Income.
rs. The taxpayer is permitted to
take as a deduction from his gross
income in determining his taxable in
come interest on indebtedness and
losses Of a nonbusiness character
only to the extent that the sum Of
tax-exempt interest.
"6. In community property states.
where husband and wife have a joint
interest in certain property OF either
acquired after marriage. the income
from this property Is taxed to the
spouse having control OF the prop
erty.
~. The principle contained In the
1918 revenue act that liquidating divi-
dends constitute sale of the stock
instead Of a distribution Of earnings
has been restored. This puts liquid
ating dividends within the capital
gain section of the act and recognizes
the real effect OF such dividends.
"s. The section with reference to
the reorganization OF corporations
has been rewritten to eliminate exist
ing uncertainties in the present act
and to include other usual forms Of
corporate reorganization in aid OF
business, such as the splitting Of one
corporation into two or more corpor-
!. ations.
Check on Reorg
"9. Provisions have been inserted
to prevent the use of this reorganiza-
ton section to escape proper taxa
ton by Increasing the basis for de-
probation or depletion. or by In
creaslng the basis OF gain or loss
from the sale OF assets transferred
in connection with a reorganization.
or by distributing as capital gain
what are In effect dividends out Of
earnings.
40. The deduction for discovery
depletion Is limited to 30 per cent OF
the net income from the property de-
pleted.
ii. III TIE CdSr VI d u UNI 8hNt~
the trustee has the discretion to dis.
tribute or not, the income is taxed
TO the beneficiary II distributed and to
the trustee IL not distributed.
''12. Where the grantor OF n trust
reserves the right to change the trust
in favor OF himself. the income Of the
trust Is taxed to the grantor.
Penalty Provisions.
'f3. The penalty under section 220
which seeks to penalize corporate
forms used to avoid imposition OF
surtaxes on the stockholders, Is now
based on all the income Of the corpor-
alton which would be taxed In the
hands of an individual.
IA. The application of the pres
en- law requiring an income for
fractional part OF year to be
placed on an annual basis Is restrict
ed TO cases where return is made
for n part OF a year az the result
OF the voluntary act Of the taxpayer
IN making a change In his taxable
year.
"15. board ~ tax appeals is
created TO hear all appeals from the
assessment Of additional income and
estate taxes. which win sit locally In