Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-05-24
Hits Present Income Levies
and Advises Against Policy
of Continued Loans.
SAYS TREASURY WARNED
CONGRESS AGAINST CUTS
Insists Sinking Fund Must Be
Maintained, in Radio Forum
Address.

Revision of the tax system to pro-
vide regular flow of revenue was sug-
gested last night by Secretary Mellon.
In an address in the National Radio
Forum, arranged by The Star and
broadcast over a Nationwide network
Of the Columbia Broadcasting System,
the Secretary Of the Treasury said I'M
Ger the present system the income
fuctuates with the upward or down.
ward swing of business.
This is due" he added. ito the fact
that we rely for two-thirds of our tax
revenue on the income tax, which Is
subject TO sweeping variations"
The situation in which we find our
selves at present, with a serious deficit
facing us at the end of the year.
Mellon said, raises the question as to
whether we have yet developed a sufi-
GENTLY well balanced system to provide
the revenues on which the Government
must be able TO count from year to
year"
Opposes Continued Loans.
The Government of the United
States can meet the present Treasury
deficit through borrowing Secretary
Mellon declared.
But such a course is only a tempo-
rary expedient, he said
The strong credit position of our
Government" continued Secretary Mel
Ion, makes it possible to take care of
a temporary decrease in the revenues.
But the continuing policy. addressed to
conditions as they may be expected to
prevail over considerable period of
time, can only be maintenance of the
sound principle of closing each fiscNl
year with balanced budget"
Secretary Mellon pointed out that
during the last two years the Treasury
Department has faced variety of prob
lens with the Governments financial
position changing from one of great ease
to one of increasing difficulties. Reve-
nues, particularly those derived from in
come taxes, have abruptly declined, and
at the same time expenditures have in
creased, he said, owing largely ito
measures undertaken to alleviate the
depression in agriculture and industry.
Face Prospect of 1882 Deficit.
"As a result" said Mr.. Mellon, I'VE
shall close the current fiscal year with
a large deficit. We face the prospect
Of deficit again next year, although
we do not yet know just how great that
deficit may be-"
The Secretary of the Treasury de-
clared that the position in which the
Government now finds itself lis not
unfavorable for dealing with the pres
ent emergencies, and that it IS due
largely to the fact that since the war,
and particularly in the two years since
the present administration began the
Government has overlooked no oppor-
tunity to set its financial house in
order, and. in a manner of speaking. TO
prepare for the rainy day that was
sure to come.
Secretary Mellon listed as accom-
plishments of the Treasury sound
policy of debt retirement and steady
program of tax reduction.
The Government he said, depends
on two sources of revenue: First inter-
nal revenue taxes, including the income
taxes, taxes on tobacco and State
taxes, and second, customs duties. Inc
customs duties, he said, are fairly staple
and may be relied on to produce an
even flow of revenue.
THE individual income tax, how
ever" said Secretary Mellon. has be-
come so restricted in its application
that it has become a class rather than
a general tax. with its incidence limited
to a comparatively small number Of
taxpayers Out of a total population OF
I20. GOO. coo there are only 100000 in
dividuals and about 100000 corpora
lions who pay an income tax. Further
more. some $4,000 individuals pay
about 81 per cent of the total amount
received from individual income taxes.
Severe Shrinkage Results.
I'm times like the present, when in
comes have fallen of, such a system
inevitably results in severe shrinkage
in the Governments revenues. This
fiuctuation in the revenues is further
increased by our treatment OF capital
gains and losses.
Secretary Mellon said that the Treas
ury has been aware for some time of
the defects in the tax structure, and
that it had warned Congress three years
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