Evening star., 1924-01-16
mellon HITS BACK
At COUzENS' STAND
Michigan Senator's Own In.
vestments Cited as Surtax
Cut Argument.

Replying to Senator Couzens, re-
publican, Of Michigan, on the question
OF reducing income surtaxes from so
per cent to 25 per cent and stopping
the issuance Of tax-exempt securities,
Secretary of the Treasury Mellon in
a letter to the Senator cited the
1atter's own investments In such
securities as an argument supporting
his proposals for such tax legislation.
Mr.. Couzens recently challenged the
Secretary to joint debate on the
surtax question, but Mr.. Mellon did
not mention this in his letter.
'If. as you say, high surtaxes are
tmmaterial," the Secretary wrote, "it
would be interesting to know what
Influenced you in your selection Of
tax-exempt securities to the exclu-
sion of all others.
Refers to Couzens' Funds.
1T is reported in the newspapers
that all of your capital is now in
taX-exempt securities, and have not
seen any denial from you. This
means, IL anything, that you pay no
income tax. Now, 1t Is a most un-
usual thing that a man Of wealth and
business experience should put his
ity which some change in the law
might render much less valuable.
1T has usually been considered
prudent that investments be diversi-
ned and you might have selected, as
we'll as tax-exempt securities. United
States government and sound public
utility and industrial bonds. the care
of which would bring no more busi-
ness worry than tax exempts.
1T is not to be doubted that if
OF
time you invested your wealth you
would have done the prudent thing
and diversified your investments. taxi
ing part, at least. in securities the
income from which is taxable. g
Must system of taxation which
permits man with an income Of
over S1,O0O.O00 a year to pay not
one cent to the support of his gov
ernment remain unaltered?"
Wants Capital in Trade.
Turning to broader argument in
support of his proposal to reduce
and stop issuance of tax-exempt Sc
curities. Mr.. Mellon declared this
would divert capital into channels
where IL is vitality needed, such as
railroads and building. At the same
time, he said. municipal and state
bonds would still have the wide
market" among conservative in
vestors they had before the imposi-
tion of high surtaxes.
True, state and municipal extraya-
Sance would be curtailed." the Secre-
tary said, but their bonds will sell
on their merits and to the same class
of investors who heretofore favored
them. The men capable of business
success will get out of their dead in
vestments and put their brains and
money to work."
Cites Railroads Plight.
Asserting present surtax rates were
Forcing railroads to increase their
bonds obligations far out of propor-
tion to their stock issues, Mr.. Mellon
declared the time is rapidly ap-
preaching when the railroads will be
unable to issue farther bonds without
substantial increase in the stock in
vestment." If the roads are to be
furnished with the capital they need
to meet the nations Transportation
requirements, he said, it must come
from the sale of stock, and to permit
any sale surtaxes must be so reduced
as to attract the large investor to
that type of security"
The acute shortage Of housing ia
cilities which still obtains in the
large cities, the Secretary said. is
largely due to present surtaxes dis
couraSing investment of capital in
that field. They result, he said, ei-
ther In the failure to make invest
ment because of the unlikelihood Of
adequate return, or a "gouging; Of the
tenants" in order to secure a return
that will offset the surtax.