Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-23
Public Debt and Taxes.

PUBIC Debt and Taxes.
Back in 1919 Congress committed the
Nation to a definite policy of paying
for the war on the installment plan
Confronted with a huge public debt.
the annual interest on which exceeded
by more than half billion dollars the
entire cost of running the Government
in 1916, the last pre-war year, Con-
gress enacted legislation for annual
payments to a sinking fund that would
pay of the debt within a period Of
twenty-five years. The foreign debt
payments. applied to the public debt,
would of course speed up the process.
AS Secretary of the Treasury, Carter
Glass summed up long statement on
the sinking fund legislation with the
conclusion that Whatever may be
necessary in the future financing Of
the Government, nothing must be per-
mitted to interfere with the effective
operation of the cumulative sinking
fund and the consequent gradual re-
tirement of the war debt"
out the wisdom of the cumulative sink
ing fund and the resulting policy Of
consistent public debt retirement, COM
pared the nation that does not system
atically pay its debts to an individual
guilty of the same sort of neglect. 1T
IS a sign of debility" he said, land
denotes the absence of essential vigor
and foresight. The public debt is
mortgage or lien upon national wealth
and unless the country pursues policy
of paying on this mortgage it is bound
to become more and more burdensome
as time goes on. Debt reduction, In
fact, is the best method Of bringing
about tax reduction. Aside from gradual
refunding at lower rates Of interest, it
Is the only method Of reducing the
heavy annual interest charges" Next
year the interest alone on the public
debt Is computed at $e19. oo0. 900.
The administration has consistently
upheld the debt retirement policy. It
comes as no surprise that President
Hoover refuses to entertain the pro-
posal that IN order to continue last
years per cent income tax reduction
or 10 avoid q deficit, sinking fund pay
ments should be suspended or reduced.
It ID natural, also, that Senator Glass
and administration leaders In Congress
wiz support the President, and that
the sound practice Of public debt retire.
ment win mot be easily overturned.
Naturally there viii be pressure for
continuing tax reduction in the short
session Of Congress. While the / per
cent reduction Of last year was in line
with Mr. Melons proposal that income
tax rates should be easily adjusted up
or down, depending upon the condition Of
the Treasury and Of the Nation, and while
1t was specifically applicable for that
one year alone, failure to maintain the
reduction another year will be interpre-
ted as a tax increase. Nothing could
be much more unpopular. Hard times
become a politically eloquent argument
for tax reduction, despite the fact that
It is prosperity that makes tax reduc-
ton possible. With the Government
several billion dollars ahead Of its
normal program for public debt retire
ment there is an enticing ring to the
plea that instead of failing to continue
tax reduction, the payment due next
year Of some 1896, 900, 900 to the sinking
fund be skipped
But to continue tax reduction on that
basis would be to delude the taxpayer
into false impression Of having saved
something. 1t would emphasize the
benefits of tax reduction by failing to
emphasize the duty and Importance Of
debt reduction. In 1922, after year Of
postwar depression, the Government
took O 5000 tax from 81 single man with
an income of $4,000. The comparable
tax next March, without the per cent
reduction, would be $1e1s8, which In
dicates the extent of sound tax reduc-
tion already accomplished. The tax
will fall due in year that Is generally
regarded now as signaling the end Of
the depression. 1t will not be taken
IEOtu LIlO6c VIII L4dFc UCCI % ADVERSELY
affected by depression that an increase
of 1 per cent over current taxes
viii be excessive. It will come
from the relatively small proportion Of
individuals who pay income taxes and
to whom the depression has meant
Least. and, generally speaking, from cor
porations as able to pay IL per cent on
taxable income next March as they were
able TO pay IL per cent last March.
If an emergency-not now existent
faces the country when Congress meets
and demands suspension or reduction
Of sinking fund payments, the money
thereby becoming available should be
used In public works or other methods
of relief for those who have suffered
most. It should not bs used to continue
@ tax reduction that in the first place
resulted from a fat Treasury balance
and not from cries for relief from lean
taxpayers. No temporary depression
should endanger so sound q financial
policy as regular and progressive debt
reduction.
Red documents, when unearthed, are