Evening star., 1924-03-25
Finance Committee Adopts
Mellon Rates. But Limits
Differentiation.
TREASURY FAVORED CUT
OF 25 PER CENT ON ALL
Maximum for Reduction Placed at
$4,000, With Greater Total on
Same Status as Unearned.
BY DAVID LAWRENCE.

The Mellon plan has not been in
serted in the revenue bill by the SEN
ate finance committee, as was stated
in some published reports last night
Instead, one of the principal recon-
mendations made by the Secretary of
the Treasury has been temporarily, at
least, turned down 1t relates to
earned incomes and affects more in
diViduals than the other parts of the
Mellon plan which were approved.
What the Senate finance committee
did by vote of 8 to was to adopt
the Mellon rates on the surtaxes, ap-
proving 4 25 per cent schedule as
maximum instead of the Longworth
bill passed by the House providing for
a 5Il2 per cent maximum
But the Mellon plan itself as origi-
nally recommended was a carefully
balanced scheme. Wealth was to be
given certain reductions but coupled
with those were reductions to the tax
payer of small income. Ths Senate
finance committee has given the
Wealthy investor the reductions want
cd, but has deprived the man of sln1il
income who earns his livelihood with
out capital and with only the energy
of his hands or his mind the conc2s-
Limit Cut to $4,000.
The House ignored the Mellon
recommendation for a fiat 25 per
cent reduction on all earned incomes
and said it should apply only to. in
comes below $4,000 year. The SEN
ate finance committee. despite Mr..
Melons advice, has cut y still fur
ther to $4,000.
There is, of course, absolutely no
reason Mr.. Mellon told the Senate
finance committee, for a $4,000 limi-
tation on earned income. If the dis
tinction between unearned income and
earned income is good, 1t Is good in
every bracket. II the tax on unearned
incomes in excess of $4,000 is at the
proper rate then the same rate Is too
high for earned incomes"
Stated in another way, what Mr.. Mel
lon meant was that a man who earned
business executive. composer. inventor
or any profession in which brains are
the sole capital used should not be in
the same position as a man of Inherited
or accumulated capital who clips in
'Testment coupons and gets an income
of $4,000. People in the latter class,
for instance, have approximately $780,
0C0 of capital. which. at per cent,
lOE ttlEIl dDOul SGl,uUU IL yedT
They pay the same rate of taxes as
the professional man, yet when he is
sick hiT income stops and when he
dies. he cannot bequeath his law
practice or his medical ability to
another, though the man with the
capital can go away from his place
of business and spend life of leisure
and still draw the same income. He
can bequeath it to another person
when he dies. Technically he doe mt
income n
rs the person who works with his
mind or his hands.
All Below $1,000 'Earned.,
Mr.. Mellon says that if tho Senate
thinks the rate of taxation for a
man of $4,000 income should be fixed
at certain rate, then the man with
the other kind Of income should not
have the same advantage.
Mr.. Mellon incidentally has agreed
that all income below $4,000 should
be considered as earned" SO that
widows and orphans and others who
may be unable to earn a livelihood
shall not be penalized. Five thou
sand dollars. is the average income
on an estate of approximately $S5, 900.
The House bill further complicated
matters by providing that the defi-
milton of earned income" should in
clude in cases where the income is the
result of the use of capital in con-
nection with personal services, an
amount representing as a reasonable
salary for personal services render
ed. Mr. Mellon criticizes that provision
thus:
1.-The Treasury Department for the
years of excess profits taxes expert
4nced the greatest administrative diff
ficulties in determining what was
reasonable salary in cases Of closely
owned corporations The present
definition means that in every case
where there is any personal service
whatsoever the department must de-
termine what is reasonable salary
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