Evening star., 1933-02-08
HULL SEEKS LEVY
ON u. S. SECURITIES
IN NEW PROPOSAL
Continued From First Page.)

relatively rare under our modern stat
utes.
I'm the first class. the contract IS
clear. In the second class, there Is
probably a contractual exemption, de-
pending upon the precise wording and
intent Of the law. In the third class,
there Is no contract, as 1t is neither ex-
pressed nor intended.
"A State can grant no contractual
exemption from Federal taxation upon
State bonds/ nor, so far as recall, has
the Federal Government ever attempted
to grant a contractual exemption from
State taxation of Federal bonds. The
courts hold that there is lack of power
on the part of each to tax the obliga-
tions of the other. Our only contractual
exemptions, therefore are Q) exemption
from Federal taxation on Federal bonds
and (2) exemption from State taxation
on State and municipal bonds.
THE exercise of any additional tax
ing power will, of course, be a matter
Of judgment of the Congress. The
application Of surtax to public securi-
ties will not materially change their
relative price level. Those subject to
income surtax find tax-exempt securi-
ties correspondingly valuable to them
selves. but these surtaX payers are
relatively so few in number that the
demand for tax-free exemption by them
Is not sufficient to maintain a price
level much above that of public securi-
ties subject to surtaxes.
Graduated Taxation.
with graduated income taxation as
permanent policy Of the Federal
Government, as it should be that OF
the States, surtaxes on bond interest is
logical If the terms of bond sales are
to be equal in their application to all
classes Of purchasers. The value OF
the extent OF the wealth Of the holder
THE United States ought not to
contract away its power to tax wealth
by tax emptions. We have some $685.
600 ,000, 900 of Federal, State and local
securities largely exempt from all taxa
ton. The total value of properties
exempt prior to the panic aggregated
$50 .000, ,000, 900.
1T is unwise to create q class in the
country which cannot be reached for
tax purposes. Such policy is utterly
inconsistent and at war with any Sys-
tenn Of graduated income surtaxes, and
it would ultimately destroy the latter.
I'm the event Of war, it would be an
unspeakable tragedy to have locked up
In tax-exempt securities 40 to rs billions
of dollars owned by privileged class
which could not be reached even for
the most urgent and emergency war
tax
ut is impracticable to undertake to
compute the net difference between the
amount of revenue derived from the sur
tax on bonds and the saving in reduced
| interest from tax-exempt bonds for the
reason, as stated, that there is only 9
| limited class Of people to whom the
exemption from surtax is worth as much
as the difference between the price al
! which bonds could be floated with and
without the surtax. The amount Of tas
actually collected. therefore. gives but
one side of the picture, while omittine
even the more important side, " the
| loss Of revenue which arises from the
| inability to tax the income from fully
tax-exempt securities.
"Our tax-exempt policy. Federal
! State and local. has not only encour.
| aged extravagant expenditures and un-
necessary increases Of debt, but it il
driving the Nation into a condition
wherein there is gradually arising {
great idle class living on tax-exempt
| incomes"
Senator Hull said he was intensely
interested in the proposed constitu-
| tional amendment and that he woulo
| 90 all in his power to bring about it,
consideration. While that may not bt
/ possible during the present session o.
| Congress, should the Roosevelt admin.
istration get back of the proposal wher
the new Congress meets 1t is believes
it would have real chance OF adoption