Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-02-04
VICTORY FOR MELLON.
Long Advocated Principles to Be En-.
bodied i'm Law.
BY DAVID LAWRENCE.

Adoption by the Senate of the max
;mum of 20 per cent SurtaX on in
comes OF more than 100000 means
that for all practical purposes this
item my be considered as law. The
House and Senate being in agreement
on this point, there will be nothing
10 iron out in conference on this
provision of the bill, and with the
certain passage of the bill before
the end of this month taxpayers can
figure on the Senate schedule as the
one they will find on their income
tax blanks
The Importance of the Senate ac
ton cannot be overes mated. 1t
means that three-year battle for a
lower surtaX has finally been won by
those who have insisted that a pro-
ductive rate was more important than
d large rate. 1t has taken members
of Congress of both parties a little
while to get the full significance of
this argument, but it was due to their
diSinchnatiOn to accept the argument
until facts could be adduced to prove
il. Treasury figures show conclusively
that as the Government has reduced
surtaXes more revenue has been taken
in than under the high rates.
Further Changes Foreseen.
Indeed. the fact that the Senate ac-
cepted the principle of a productive
tax may be the forerunner of fur.
Their changes in the Surtax rate three
or four years hence. 1t is not be-
lieved, incidentally, that Congress
would be disposed to go much lower
than 20 per cent in the next revision,
which is scheduled to occur just be-
fore the 1928 presidential election,
but the significant thing is that a cut
has been made from 81 to 20 per cent.
Treasury experts have figured out
that the Government could really col
lect its necessary revenues on a Is
per cent surtaX, and Secretary Mellon
while making no public statement to
that effect. has felt for three years
that Is per cent rate would be
equitable. Some experts insist that
II should be 10 per cent. They point
TO the extraordinarily large receipts
from surtaXeS in the years imme
diately following the enactment Of the
law In 1913, when the surtax rates
were low and were not regarded as a
burden by business as a whole.
Affects Exempt Securities.
The chief value of the surtax re-
duction, apart from the effect on in.
dividual incomes, is the relatio 1ship
which 1t has to taX-eXempt securities
Every investment hItherto on a tax
able security has been compared with
n taX-eXempt to see whether the high
rate of interest or divide nds paid or
The taxable investmep. would. when
he income tax was deducted lie
greater or less than the yield on a
tax-exempt municipal or State bond
States and municipalities have beer
able to borrow money at per cent
for instance. and have attracted rnany
investors who felt that I per cent or
a. tax-eXempt was better than a OF
: per cent bond on which there Nigh,
be or per cent to pay in Fedora
taxes. 1t was all because Of the sur
tax, which in some cases took sc
cents out Of every dollar Of additional
income.
Now the comparison will be more
favorable to the taxable investment
and the Government expects thai
large holdings of tax-eXempts proba
bly, will be distributed and reach the
hands of investors who always have
bought that type of security in the
past. 1t may also have a deterren
,,-i-ct on the borrowing propensity O.
States and cities, circumstance
which may keep down the burden o
local taxation, which has risen in re
cent years to unprecedented heights
All in all the adoption of a 90 pei
cent surtax Is a victory for Secretary
of the Treasury Mellon, who from tn.
start has expounded the very tax doc
trine which will shortly be enacted
into law.
DOWNRIGHT 1921