Evening star., 1925-10-19


opposed to eXempting from income
tax persons earning $4,000 or less.
This position he made clear To the
public prior 10 his appearance today
before the House ways and means
, committee. drafting the new revenue
bill
In letter to Senator Edge. Repuh-
! lican. New Jersey. published today,
Mr.. Mellon explained he did not favor
such exemption of small incomes. "as
il would ''he an enormous loss of reve-
nUe Ia the Government" lie likened
the virtue of the small taxpayer in
the scheme of he Government in
come 10 the value of The 5-and-lo cent
stores profits on small sales.
AR MELONS position on this matter
is taken as an answer also I" the re-
Gently announced program of Repre-
sentative Garner. Democrat. Texas.
for an exemption Of such small in
comes. Whether a partisan fight over
this issue will result was matter Of
much speculation here today rs the
tax revision hearings ploued into the
subject of such vital interest IN every
Americana cut in taxes.
Text Of Letter.
The text uf Mr.. Melons letter fol
lows:
"Mv Dear Senator:
Il have been So busy with the va
rious foreign debt negotiations that
| have DELAYED answering your letter
of the 24th until today.
You suggest that il might he ad-
visahle in amending the income lax
Law To exempt all net incomes "f
81 900 or less. Your reason for this
suggestion is your information that
IL probably costs the Governme mt
more To collect the tax on net in.
comes up to $4,000 than the Govern
ment receives from the tax. and,
therefore. It would he in the interest
! of economy from the Government 5
| standpoint to exempt net incomes OF
$4,000 or less.
! "Your estimate of the loss of rev,
| en,re of sS3 0nO 900 by the adoption
Of such suggestion Is apparently
based on the elimination Of the tax
on net incomes of $1,000 and under
without extending a like exemption
Ia taxpa yers with higher incomes. II
would hardly seem equitable 10 raise
the exemption on taxpayers having
incomes of 81 600 and less and not
permit similar exemption to tsXpar-
erS having incomes in excess OF
s. 900. For example. il is not fair To
levy no tax on Il man with net in
come of 81 $40 and to tax man with
an INCOME Of S5,lo0 on all income in
excess Of $1,000. If the principle Of
straight $4,000 exemption on all
taxpayers were applied il il estima /
ed that the loss of revenue. baSe on
1928 returns. instead Of 'SS3 ,o0o 900
would he Sl61 5000
Very Productive.
IF. Eow. we compa rte this prospec.
tive loss of revenue with the expense
of collection. ii * obvious that the
tax is very productive of net revenue
to the Government. The total eXpend
itures of the Internal Revenue
Bureau for the year 1924 We're some
s42 .000, 900. From this $S.00o.hoo
should be deducted for expenditures
directly made for the enforcement of
the prohibition and narcotic laws
lea wing some $4,000, 900 To represent
the expense of collecting the personal
income taxes. both large and small,
the corporate income taxes and all the
misce LA neouS taxes. AS a. matter oil
fact. the small returns are audited in
the field in the various collectors Of
fees. and except in unusual cases do
not come into Washington at all. This
audit is part of the regular work in
the collectors offices. and the total eX-
pense Of all collectors offices is only
about $4,000 900 a year. In other
words at an expense of S14.000. 900 a
year these small returns are audited
and the collectors do al the other
work required of them. 1t seems to
me If we had a complete cost system
there would he allocated to the eX-
pense of collecting the tax on net in
comes of $1,000 and less not more
than $1,000 900. Compare this eX
penSe with a revenue of S161 900 900
There is another point to he con
sidered. 1t would not he practica BILE
even If the exemption were ra aised. 10
eliminate the making of returns by
those having a certain gross income
though their net income is below the
exemption. At present. all having A
gross income of s. 900 a year must
! make returns. Were this not required
many taxable incomes would evade
payment Of tax. So. if the exemption
were raised. almost as many returns
would have To he audited. You can
readily understand this. since as the
law now stands less than 50 per cent
of those who make returns and whose
returns are audited pay any tax at all
Small Returns Quickly Audited.
Coming now to the question at
delay and congestion in the bureau
il has heen our experience that re
turns of small net incomes are yer,
quickly audited. and thai the returns
of large incomes are the principa
, cause of delay and require the grea,
number of employees. An experienced
! auditor can handle UP to 500 small
returns a day, whereas. ii may take
him three or four months to handle
one large return. Add to this the fact
that these returns are audited in the
| field and you can ca silly see that theil
elimination would in no wise relieve
! the Bureau Of Internal Revenue from
| its present congested condition, MOI
| permit a lowering of the period of the
| statute of limitations. If YOU vii
| examine the forms used for returns
| of less than $1,000 and for those ir
| excess of 5000. copies of which
| inclose, you will note the simplicity
Of the former and the complica &c
| character of the letter. These forms
have been the result of practica
| experience and give a clear. indica
| tion of the difference in time required
! for audit.
1T Is true that under the present
law married man with an incoms
of 50 600 paws but $40 tax or ope