Evening star., 1927-11-12
MILLS WOULD BAR
TAX ON j. s. BONDS
Treasury Official Holds Pres
ent Law Favors Corpora
tions, Not individuals.
BY the Associated Press.

BY the Associated Press.
WORCESTER, November 12.-Be
cause of the surtaX on Government,
securities. corporations fix the price
at which Treasury issues are mar
| keted, Undersecretary Mills asserted
| tonight in an address advocating foI
the Treasury exemption of Fedora
securities from that levy.
Speaking before Il joint meeting OF
| the stockholders of the Boston Fed
eral Reserve Bank and the Worcester
! Economic Club, Mr.. Mills declared
that corporations have the power to
drive the individual investor from the
| Federal securities field. as such hold
ings held by corporations are tax
exempt, while the individual is re-
| quired to pay the Federal surtaX.
United States securities" he con-
| tinued. "are sufficiently attractive to
| corporations to make them more than
willing to take the entire block of new
issues offered from time to time.
Small Investor Handicapped.
'This being the case, the price
which corporations are willing to pay
inevitably fixes the price at which
the United States is able to market
its securities. Since the corporations
are wholly tax exempt on their in
comes from such securities, whereas
the individual income derived from
these securities is subject to the sur.
tax. the former are in a position to
pay price which might well make
the securities unattractive from the
standpoint of the individual investor.
Such situation is undesirable.
During the war, Government securi-
ties were distributed very widely and
n hn inn
held. that it was desirable. But under
existing circumstances. as the war
loans are gradually being refunded
into securities bearing a lower rate of
interest. the number of holders of
United States securities tends con.
stantiy to become more limited
How could it be otherwise, when
States and municipalities are in a 30.
sltlon to issue their securities free
from all taxation?" the undersecretary
asked. The average rate of interest
paid by all States on their total in.
debtedness during 1925 was about Ala
per cent, while the man with an income
OF $4,000 will receive a net yield Of
only 500 per cent on a 16-20-year 33s
per cent United States Government
bond. Moreover. even after Federal
taxes, he can receive approximately
= per cent on the highest grade of
public utility bonds.
Exemption Is Urged.
These figures make it perfectly ap.
parent that in so far as the individual
investor Is concerned, the United
States Government is at serious
disadvantage today in marketing its
securities because of the provision in
the Liberty loan act which limits the
tax-exempt privilege to the norma
tax.
Under these circumstances. the
Treasury Department believes that
the Congress should give serious con
sideration to an amendment of the
second liberty loan act as amended
authorizing the Secretary of the
Treasury in issuing securities in the
future to make them exempt from
the surtax as well as the normal tax
THE enactment of such an amend
| ments would not in any way interfere
with the adoption of a constitutions
amendment permitting the taxation oi
so-called tax exempt securities, should
Congress and the States deem this t.
be desirable. Taking the long time
view of the situation, believe tha,
the enactment of such a constitutions
amendment is desirable, for con
slider it inconsistent with our prin
ciples OF democratic Government tha
our laws be SO framed as to permit
any class of our citizens to escape
their just tax obligations"