Evening star., 1926-11-09
TAX PLAN OPPOSED AS MELLON
PROPOSES 250 MILLION CREDIT
Smoot Against Presidents Project, But Is
Cautious in Comment-Norris Would
Apply Money to Public Debt. -

contract which II has mace Win tne
purchasers in good faith of its secur-
tiles. An early repayment OF our DEBT
has been the policy Of this country
after other great wars in our history.
1t Is sound policy that in the days
Of our prosperity we should prepare
for the next emergency.
Turns to Receipts.
IF II does not seem probable that
we can contemplate a reduction In
Government expenditures in the next
few years. then we must turn to a
consideration Of Government receipts
in order to determine to what extent,
II at all, taxes can be reduced. These
receipts have been of two general
classes.
During the war and in the period
of postwar adjustment the Govern
ment made what might be called cap
ital investments in such things as war
supplies. new surplus. loans to rail-
roads. investments in the War FL
of the Federal Land Banks. In the
last five fiscal years receipts from
these and other similar sources have
returned to the Treasury some $780,
100000. During the same period col
lection Of back taxes over refunds OF
taxes, a contribution also from past
years, has brought in 100000, 900.
I'm the current fiscal year net re-
ceipts from similar revenues. includ-
ing net back taxes, should be 1880
100000. In the next fiscal year SIM
liar receipts should be about $50,000,-
600, a decrease Of 5000 .000, 900. OF the
Investment assets there remain about
$400. .000. 900, but the greater part 10
Of doubtful or slow character, and by
the close of the present fiscal year. in
June, the Internal Revenue Bureau
should be substantially current on
back taxes, and this item as q ma
tertal net receipt will disappear. In
determining Government receipts for
future years. therefore. this class Of
receipts can no longer be relied upon.
Current Taxation Receipts.
The second general class is the re-
ceipts from current taxation, which
consist Of customs. income taxes and
miscellaneous internal revenue. and IT
is upon these current taxes that the
Government must now rely for It's
revenue. In the divisions Of the
spheres Of taxation between the State
and municipal governments on the
one hand and the Federal Govern
ment on the other, one fundamental
difference is particularly true. In
general, taxes Of. the States and
municipalities are based upon real
and personal property, the valuation
Of which is fairly constant. and upon
other sources such as franchise taxes,
which do not vary substantially over
a period Of years. Federal Govern
ment revenue, on the contrary, comes
almost entirely from sources which
may and do fluctuate violently from
year to year. Income taxes are based
on a percentage Of the income earned
by the taxpayers.
"A good year is Immediately re-
fiected in increased income and more
Government revenue. and a bad year
Will equally make itself felt In de-
creased income and less Government
revenue. The greater part OF the
miscellaneous internal revenue taxes
are dependent upon the purchasing
power Of the American people. which
in turn reacts promptly to good or
had times This is also true OF Gus
toms. II consumption falls on, Inn
ports Immediately decrease and with
them customs duties. Under our pres
emit system we have abundant reve'
nues when business 1s good. and we
may expect diminished returns when
conditions change materially.
High Tide OF Prosperity,
I'VE are now at a very high tide of
prosperity in the United States There
is no reason to expect at this time a
marked reaction. but before determin-
ing that permanent tax reduction can
be had we must have reasonable as
surance Of a continued flow from the
sources from which our revenue Is
obtained With only a few months
test Of the revenue act Of 1926. COM
mon sense requires that we do not act
precipitately. We face the near ex-
haustion Of wartime assets and the
necessity Of putting our sole reliance
for Government revenue upon a class
Of current taxes which are peculiarly
susceptible to large variations.
Tax reduction applies mot to one
year, but to every year after it's adop-
ton. Surplus is a casual happening.
occurring in ono year and not in an
other. A loss of revenue whcdh could
be easily sustained in the fiscal year
1927 might result in putting the bud
get in the red in 1929 and require the
imposition of additional taxation.
Business can easily adjust itself to
a lowering Of expenses through q re-
duotion in taxes, but If q decline in
prosperity should come business could
not stand q raise in expenses through
more taxes.
"The necessity that we do not COM
nit our Government to an unsound
fiscal policy for the future should not
prevent the Government treating its
taxpayers fairly in any particular
year in which Government revenues
are overabundant. believe in debt
reduction along the program settled