The Birmingham age-herald., 1924-01-06
cent. and the Mellon proposal of 3

the Ilremen.
 cent. and the Mellon proposal of 8 and per cent. .
 The democrats drafting a minority program said they were prepared to press for its enactment fully aware that President Coolidge was opposed to any changes in the essential pro- visions of the Mellon draft, as was announced yesterday at the White House. They said also that they ex- pected to have the support of a suf- surgents and House members from the central and far west to put over their amendments.
 In his letter to Secretary Mellon, Senator Couzens asked for "statis- tical evidence in support of your statements that the surtax revenue of the government is shinkling. that 1t is doing so on account of the present surtaX rates and that 1t may in the near future, unless the rates are reduced" He said he also desired some definite proof of the relation of the tax exempt securities ques- tion to surtax reduction"
 Apparently your proposal for a reduction in the surtax," said Sena- tor CouZens, lis based on your ob- servations of the investor-I mean the investor who may buy railroad bonds, industrial bonds or govern ment. state municipal bonds. Every one knows the return usually re- ce!ved> on these kinds of invest ments. There are many people, how ever, who receive incomes from bank stocks, and as the result of con- ducting businesses as traders, job bers, merchants, or manufacturers. but are not. strictly speaking, in- veStors in the same sense as above referred to. Those latterly referred to are in more speculative business and many of them are receiving in. comes from 10 to 100 per cent on their investment. It seems 10 me that your proposal for a reduction in surtax will give the biggest relief to this class, and that is the class which can best afford to pay'
 In reply, Alr. Mellon said that the preparation of income statistics waS a matter of considerable time and labor and that those based on the 1922 returns would not be available. He declared. however, that in out lining it's tax revision program the treasury had used available statis- tics which were most compelling" Mellon Gives Figures.
 MT. Mellon gave figures to show that the percentage of surtax on in- comes in excess of $500,000 in rela- ton to the total surtax had decreased progressively each year from 66.s per cent in 1916, to 206 per cent Tn 1921. - ..-
 Tt is not necessary" said MT. Mellon, "that we consider solely tax exempt securities as the means of tax avoidance, but the existing tax exempt securities which would be unaffected by any constitutional amendment are the most open ana well known invitation to the avoid ance of high surtaxes. There are approXima tely $11,0O0, 000, 900, ot wholly tax exempt securities out standing and the loss of revenue to the government over what it would receive if the income were taxable is estimated al over S200, 100000 a year. and the loss of revenue over a similar investment in productive business at over 00,000, 900 year.
 Treasury statistics. said MT. Mellon. show that the percentage of wholly tax exempt securities to total gross estate based on returns for inheri- tance tax purposes, was 2S.97 Ill 1923 and the percentage of wholly tax exempt securities to total bonds and stocks was 4l.9S. In 1917 the percentages were 2,21 and 3.2G, re- spectively, increasing to 9.79 and 14.5O in 1920. In 1922 the percen- tages were 6.S2 and 1O.53,
 Division Of Wealth.
 Again we have proof" said the letter to Senator Couzens," of this progressive diversion of wealth from productive to unproductive business
 "Yolr statement to the effect that tax exempt securities are not attrac- tive as compared with bank stocks and industria1s which wield from IL to 100 eer cent per annum Is mis' leading as you make your basis the amount originally invested. The proper basis is the market value ot the securities. The question is, can a tax payer get more return after in come taxes out of S1 900 worth of tax exempt securities or out of Sl.0Ou worth of some taxable investment?
 "I know Of no sound bank stock which yields as high ass10 per cent on what 1t can be sold for and the money put in tax eXempts, nor of any sound investment which run up to 100 per cent on the market value of the stock. 1t is true that specula- tion gives these high returns but II is the very demand for such returns on account of the high surtaxes which has kept capital out of ordi- tracted it only to such projects as give ODDOI lOE uhNdO PAOAAN' Senator Couzens said in his letter than in his annual report the treas ury secretary had pointed out that taxpayers paying surtaXes in the Highest brackets would have to have investments yielding about I0.4 per cent in order to be as attractive as 5 per cent tax exempt securities but that he had not dealt with the in- come from bank stocks and the common stocks from many indus trial concerns which as stated above pay 10 to 100 per cent such cases, for instance as the Standard Oil dividends of $13S,423,295 in 1923.'
 o O O
 Hold No Attraction.
 "Certainly." added Senator Cou- zens, "taX exempt securities hold no attraction for them."
 Touching on this point MT. Mellon replied:
 Your citation of the Standard oil dividends in 1923 as an example of investments which would be made in