, 1924-07-16

ties issued by the States and political
subdivisions which are tax exempt.
The effect of the high surtaxes is
the withdrawal of large sums of capt.
tai from commercial activities and its
investment in tax exempt securities,
thus impeding the development of the
country, which is so essential to all of
its people.
/ know of one instance about 18
months ago in which many millions of
dollars were SO withdrawn and REIN
vested in the amer indicated. If the
surtaxes at the time had been 25 per
cent the change would not have been
made. As a matter of fact the true
rate of surtaxes to obviate the large
transfers to taxfree securities and to
keep money in commercial activities
is somewhere about 5 per cent.
A first class conservative invest
ment carries interest of say 8 to 5.25
per cent. You can buy first class tax
free securities now in the neighbor-
hood of a. per cent. You will readily
see that a surtax of % per cent
charged against a first class non-tax-
free bond paying $50 per cent leaves
$50 per cent as against a taxfree rate
of at least 4.50 per cent, and this does
not take into consideration the normal
tax and in some instances State in
come taxes.
The east with which, thanks to the
present tax laws, municipalities, etc,
can now dispose of their securities,
has led to much extravaganza in pub
lie expenditures and has in~cidently in
creased the local taxes which all pay.
, The politicians fail to point out that
in the last analysis a large part of the
heavy taxes is finally passed on to the
consumer in the price of the article.
President Coolidge, in a speech in
New York last winter, clearly demon
strated this. He made two illustra-
lions that are we'll worth keeping in
mind. In n case he questioned whe-
Their a working man obliged to pay
5 per cent on his first days work, 10
per cent on his second days work, rs
per cen on his third days work, 40
per cent on his fourth days work, so
per ent on his fifth days and 60 per
cent on the sixth days work would
work on the last two or three days,
and he stated that capital is in the
same position. 1t quits when the tax
gets high. He cited in the other in
stance the farmer who sold a hide and
when he bought a pair of shoes paid
five or six taxes that had accumulated
between his selling the hide and buy
ing the shoes.
When Congress takes away so per-
cent of a persons income and taxes
his estate upwards of GO per cent, it
seem to me it violates the property
rights guaranteed by the Constitu-
ton.
Chief Justice Marshall stated that
THE power to tax is the power to de-
stroy." And in view of the publicity
feature in the recent Act passed by
Congress which is bound to have a
serious effect on the credit of the
small merchant, etc, one could well
add "and annoy"
These heavy taxes in peace times
are indefensible and their advocates
apparently do not stop to consider the
possible effect on the National De-
Tense in the case of another war. 1t
is just as important to conserve the
financial resources as it is to maintain
an effective military establishment.
Have you pondered what the effect
would have been in floating the Liber-
ty and Victory Loans if we had start
ed from the present basis of income
and estate taxes instead of the low
basis that wns in existence prior to
the war? In the opinion of many able
authorities 1t would have been an ex-
tremely difficult task to finance the
war.
There is no doubt that these surtax-
es are drying up the retruns from the
large fortunes. Statistics show that
when the surtax was 10 per cent prior
to the war the collections from in
comes Of 100000 or over were only
about si,0oo,Oo0 less than they were
under the 80 per cent surtax Of 1922.
Just think Of i'll II want to buy
either of my sons on interest IN a
business or build them a house, under
the Gift Tax clause in the now Rove-
nue. Act have to pay heavy taxes
for The gift, which IS certainly a nov
city b tax legislation.
l lave strayed away from the sub