Douglas daily dispatch., 1927-11-12
TAX EXEMPTION
URGED FOR j. S.
BONDS BY MILLS

WORCESTER, Nov. II (P0-Because
of the surtax on government securities,
corporations fix the price at which
treasury issues are marketed, Under
Secretary Mills asserted tonight in an
address advocating, for the treasury
exemption of federal securities from
that levy.
Speaking before a joint meeting of
the stockholders of the Boston federal
reserve bank and the Worcester Eco
nomic club, Mr.. Mills declared that
corporations have the power to drive
the individual investor from the fed
eral securities field as such holdings
held by corporations are tax exempt,
while the individuaf is required to pay
the federal surtax.
United States securities" he con-
tinued, "are sufficiently attractive to
corporations to make them more than
willin gto take the entire block of new
issues offered from time to time.
This being the case, the price which
corporations are willing to pay newt
ably fixes the price at which the United
OUdOCD 40 ctOlC W I'D OCCuA4OAOO'
Since the corporations are wholly tax
exempt on their incomes from such
securities, whereas the individual in
come derived from these securities is
subject to the surtaX, the former are
in q position to pay a price which
might well make the securities un at
tractive from the standpoint of the
individual investor
"Such situation is undesirable.
During the war, government securities
were distributed very widely and at
the time it was held, and rightly held,
that it was desirable. But under ex-
isting circumstances, as the war loans
are gradually being refunded into Sc
curities bearing lower rate OF inter-
est the number of holders of United
States securities tends constantly to
become more limited.
How could it be otherwise, when
states and municipalities are in
position to issue their securities free
from all taxation?" the under secre-
tary asked. "The average rate of in
terest paid by all states on their total
indebtedness during 1926 was about
Ala per cent, while the man with an
income of $4,000 will receive a net
yield of only 3,O2 per cent on a 1920
year 39s per cent United States gov
ernment bond. Moreover, even after
federal taxes, ne can received approx
imately per cent on the highest grade
of public utility bonds
'These figures make it perfectly ap-
parent that insofar as the individual
investor is concerned, the United
States government is at a serious dis
advantage today in marketing its Sc
curities because of the provision IN
the liberty loan act which limits the
tax exempt privilege to the normal
tax. Under these circumstances, the
treasury department believes that the
congress should give serious considera-
ton to an amendment Of the second
liberty loan act as amended, author
ling 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
ment would not in any way interfere
with the adoption of constitutional
amendment permitting the taxation OF
so-called tax exempt securities, should
congress and the states deem this to
be desirable. Taking the long time
view of the situation, believe that
the enactment of such a constitution
al amendment is desirable Tor l con-
slider it inconsistent with our prln-
ciples of democratic government that
our laws be so framed as to permit
anv class of our c.*,zens to escape
their Just tax obligations"