Evening star., 1924-06-03

! Tho Presidents statement. issued
.Rhenhe signed the revenue bin. follows
Tho passage of a new revenue bill
was. required for two reasons, the re-
5 (fucfton of taxation and the reform of
! tzx4don. Tho bill as passed provides a
! certain amount Of tax reduction. It inn
proves some Of the features OF admins
trakion- But it is not only lacking in
tax reform. it actually adds some unde-
sirable features to the present law. AS a
permanent expression Of government f1s-
cal policy this bill contains provisions
which. IN my opinion. are not only un-
satisfactory, but are harmful to the fu-
ture of this country.
The reduction of high surtaxes from
SO to 40 per cent is quite immaterial to
accomplish a real Improvement in the
law. The resolution for a constitutional
amendment giving to the state and the
federal government reciprocal nights or
taxation securities issued by the
other. which was urged in my annual
message to the Congress, failed OF pas
sage. The suggestion of reaching, in
part, the abuse of tax-exemption by
limiting the deduction for interest OF
non-businesS character to the amount
that such interest exceeds the tax
exempt revenue of the taxpayer has not
been adopted. With some $12,000, ,000.-
GOO Of tax-exempt securities now out
standing, and 81 600. 100000 of new is
sues each year, it is idle to propose high
surtaxes. A man with large inherited or
accumulated capital is told he must pay
one-half Of his income to the govern
ment if he invests it in productive bust
ness. but he is invited to be relieved of
all tax by the simple expedient OF with
drawing from business and investing in
taX-exempt securities. This does not
mean that wealth in existence is taxed ;
it is not. 1t escapes. 1t does mean. how
ever, that initiative and new enterprises
are throttled.
Fail 10 Give Revenue.
While the Inconsistency of high
surtaxes existing side by side with
a lawfully authorized means Of avoid
ance is obvious. it is not simply
through tax exemption that high
surtaxeS are uneconomical. The ex-
perience for the few years under
high surtaxes shows the increasing
failure Of these taxes as source of
revenue There are many means of
escaping the tax, and with the set
tIement Of conditions abroad we may
anticipate the movement of capital
from this country to other parts of
the world where income is not so
penaliZed. Ways will always be
found to avoid taxation inherently
excessive. We are presented. then,
with a plan Of taxation which pun
ishes energy and initiative and must
decrease revenue. Such a plan will
ultimate ely work harm to the country
and should not be permitted to con-
tinue much longer. The cure does
not lie in attacking the symptoms by
other unsound penalties worse than
the disease itself, such as an undis-
trbuted surplus tax. but in correct
ing the cause. The remedy is such
a reduction in the peak of the sur
taxes as will attract capital to new
enterprises and prevent the contin-
ual diminution of taxable income in
the higher brackets. In this way
alone can high living costs, the in
direct tax paid by all of the people.
be reduced and the productivity of
a graduated income tax main tanned.
High Estate Taxes.
The principles applicable to high
surtaxes apply similarly to high es-
tate taxes. The bill raises the estate
tax to 40 per cent. As a concomitant
is added a gift tax, which is a further
invasion of the rights of the citizen
both unusual in nature and of doubt
full legality. When there is added to
this the inheritance taxes levied by
the state, there amounts to practi-
cal confiscation of capital. To meet
these taxes executors must realize
cash on forced sales of property,
with a general lowering of all values
upon which the credit structure of
our country is based, and diminish
ing the very source from which this
revenue comes. 1t is proposed to
take capital and to use it in the ordi
nary operating expenses of govern
ment. We are thus to live, not on
income, but on principal, and to that
extent we exhaust our resources and
prevent the Industrial expansion es-
sential to our increasing population
and our high standard of living.
eral government have been war
measures. 1t is now proposed to use
these reserves in times of peace.
They should be kept for emergencies.
Interest of States.
The states have a very real in
terest in this tax. Inheritance taxes
constitute material part of state
small factor in federal revenue. AS
the federal government fnvades this
sphere, belonging primarily to the
states, it will cut down the flow of
and thus force the states to higher
taxes from other sources. which will
mean increased land taxes. For the
sake of s12.000,000 of additional
revenue the federal government in
its strength should not further
handicap the states. already heavily
burdened with expenditures which
can be met only by taxation. 1
believe also it would be advisable to
call a conference of the taxing
authorities of the states and the
Treasury. before the next session of
the Congress to give consideration
to some comprehensive plan of divi-
sion of this field of taxation between
government and the elimination of
overlapping and unfair taxes.
Our institutions guarantee to our
citizens Sanctity in their private
;vI,@ rxixr NyrI, TO
the needs of government, Under the
law as it now exists the Treasury
has access to all information useful
in determining the liability of the
taxpayer.
For the needs of revenue publicity
is unnece ssary. While the bill pur-
ports not to give full publicity, this
is scarcely true, and it still sacrifices
without reason the rights OF the tax.
payer. In each post Office the amount
which the citizen contributes to the
Treasury must be exhibited to the
curious and to the taxpayers busi-
ness rivals. Committees in Congress
have access to returns and other
private papers, without any restric-
ton as to their publication in open
committee or on the floor of Congress,
the most certain means of publicity.
If a taxpayer desires hearing be-
fore the board of tax appeals he
must expose to the public the COM
plete details of his income To put
this price upon the fair determination
of tax liability in its regular ad-
ministrative course is entirely un-
justifiable. Yet, such is done in the
publicity provisions of the board of
tax appeals. .
Violation Of Rights.
1t in -,oS alone in the unwarranted
fpterference with the right of the
citizen to privacy that these provi-
sions are hurtful. 1t is believed that
far from increasing revenue, the de-
sire to avoid the qualification OF the