The Washington times., 1924-02-20
TAX EXEMPTION
BATTLE SPLITS
CONGRESS
Democrats GIoat Over Defeat
of Mellon PIan-oId Guard
and Liberals at Odds.
Continued from First Page)

Continued from First Page.)
ing the federal government to tax
the income from state and munich
pal securities and to put an end
to further issues Of ''tax-exempts.' -
This situation is now seized upon
by the Republicans for use against
the Democrats.
The Democrats have to admit
that they chiefly were responsible
for the defeat Of the anti.tax-ex-
empt constitutional amendment. The
Republicans come mostly from re-
gions where the states ana munich
palities are wealthy enough to Dc
able to pay a higher rate Of
interest on their borrowings without
really much feeling it.
The issue, therefore, tends to de.
velop into partisan issue Of Re-
publicans versus Democrats.
Amendment by Reed.
Senator Reed Rep) of Pennsyl-
vania, as soon as the tax bill
reaches the Senate. will offer an
amendment to it laying federal
taxes on the income from state and
municipal securities without waiting
for any anti-tax-exempt constitu-
tional amendment.
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is listed as strong conservative,
is expected to raise a first-class
storm of dismay and horror among
all immediate prospective buyers Of
"tax-exempts."
Senator Reed maintains that It
is not certain that an anti-tax-ex-
empt constitutional amendment is
needed. He maintains that the Su.
preme Court has not in fact made
any definite decision to the effect
that the Federal Government is to-
day without constitutional power to
lay taxes on the income from the
securities Of states and municipal.
ties.
He contends that a strong doubt
exists in the matter and that the
thing for Congress to do is to lay
taxes on all such income by statute
and then let the Supreme Court at
last say definitely whether any
such statute is constitutional or
not.
Sustained by Frear.
This same argument is earnestly
and emphatically advanced in the
House of Representatives by James
A. Frear. of Wisconsin. Republican
and Progressive"
Mr.. Frear has already attempted
to amend the present tax bill in
more or less the manner proposed
by Senator Reed of Pennsylvania.
The Frear amendment was de-
reated in the House of Representa-
tiveS in committee of the whole. II
1t Is not revived in the House, q
similar proposal will be brought
forward by Mr.. Reed in the Senate.
Meanwhile Senator Shipstead Of
Minnesota, ex.Republican and Farm
er-Laborite, again asserted that the
Federal Treasury is even now under
Federal statute selling large guam
titles Of short-time Federal secur.
tiles, which, when held by corpora
tons, are exempt from Federal
taxation.
Other Senator's who do not be-
long to the Farmer-Laborite faction
or to the Farm Bloc faction point
out that the Federal Government
through its Federal farm loan banks
and through its Federal intermed1-
ate rural credit banks continues to
sell large quantities Of tax-exempt
securities for the benefit not Of
corporations, but of farmers.
Federal Government Sinner.
The Federal Government, 1t was
declared under Republican rule is as
big a sinner in this matter as the
States and municipalities. Every
month by millions and more mil
lions Of dollars the volume Of tax.
exempt securities, local and Federal,
spreads and grows and offers q
larger and larger retreat to persons
who wish to withdraw their wealth
from bearing its share Of the burden
Of Government through taxes.
At least one leading Democrat of
SAAO AAASAO0b lain Al Ills IlOuk5
Representatives expressed today a
willingness to support an amend.
ment to the tax bill laying upon
the income from State and munich
pal securities the full Federal sur
taxes whenever such income in the
hands of any one person took him
into the surtax class.
This gentleman contended that
the Republicans are grossly ex-
aggerating the importance of tax.
exempt securities as the means by
which the very rich can withdraw
their income from sur-taxation. He
said, however, that he was ready
to tax the income from 'tax-ex.
empts'' whenever that income in
any individual case was SO large
as to put its possessor into the sur.
tax brackets.
Republicans meanwhile showed
that they intended to avenge their
taxation defeat in the House of
Representatives by going to the
country and denouncing the Demo.
Gratis as the party of phantom sur.
taxes which the rich will never nav
and of actual tax-exempts into
which the rich will burrow.
Copyright, 1924, Washington P.aas
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