The Birmingham age-herald., 1924-01-29
House Committee Places Decrease At Fourth Of Present Rate
 Charged
DEMOCRATS HOLD
 FOR LARGER CUT
Party Stands Solidly For Slash Of A Per Cent Instead Of
 Mellon's Schedule Rate
HUSBAND AND WIVES r
 DIVISION IS REJECTED
Definition Of Treasurer Holds Incomes Of Over s5,O0O As
 All In Earned Class

WASHINGTON. Jan. 2s.--(By As sociated Press. )-Income tax payers got their first slice, of the proposed tax relief today when the House ways and means committee adopted the recommendation of Secretary Mellon to allow special % per cent reduction on the tax on incomes, which are learned" !"
 All taxable incomes under $5,O00 were defined as earned for purposes of this reduction, while $20,000 was set as the maximum amount of incomes on which the reduction could be taken
 Treasury estimates show that about 13,00O,000 taxpayers have incomes of less than $5,000 and automatically could deduct from their tax, when com puted, 25 per cent of it's total. Thus, married man with two children, who now pays tax of $2S on an income of S4,000, would pay only $22.50, this figure not taking into account any nor nal income tax reduction-a proposi- don still before the committee.
 Action Clears Way
 Disposition of this section of the bill cleared the way with the exception of some odds and ends to be taken up to- morrow for consideration by the com mittee of income rates themselves, in- cluding the surtaxes, the main point at issue in the tax revision program.
 Majority members of the committee met late today to discuss program of procedure, but agreed only to meet in full committee tomorrow. Some mem- bers have declared for writing re- publican income rate schedule while others wish to work out the rates in full committee Democrats, however, have declared they will stand solidIy for their, party proposal of reduction ill surtaxes to A per cent maximum instead of 25 per cent as suggested by Secretary Mellon. The house 'republi- can steering committee also discussed the tax situation today, but reached no conclusions.
 Opposed To Decision
 Before taking up the earned income nrovision; the rcinmittee definitelx res jected Secretary Melion's proposal to prohibit husbands and wives in the eight community property law states from dividing their incomes for purpose of taxation. Chairman Green had sub mitted a substitute proposal, the origi- nal having already been defeated, to prohibit this division when the incomes were derived from wages or salaries alone. Representatives Garner, demo- crat, Texas, and Hadley, republican, Washington, led the fight against this section.
 Secretary Mellon's recommendation for special reduction in the taxes on earned income provided for the 25 per cent rate to apply on such incomes of any amount, and defined earned income as that received from wage salaries and professional services.
 Earned Income Proposal
 Representative Garner, author of the democratic tax plan, adopted by the earned income proposal in his plan, but suggested a. reduction of 33 1-3 per cent. The 25 per cent rate, however, will stand in committee, Chairman Green said because no amendment was offered to change it.
 In earned incomes above $5,000 the definition of Mir. Mellon also will hold. Mir. Garner moved today to define earned income" as reasonable com pensation of allowance. for personal service and capital by incorporated per sons of agriculture or other business. This was defeated by a strict party vote and the move by Representative Mills, New York, to declare all $5,000 as earned" income was adopted.
 In setting q maximum amount for the earned income, the resolution of Representative 'Treadway, proposing $20000, was adopted.