Evening star., 1933-05-29

Long before the Morgan revelations
Mr. Woodin's early retirement from the
secretaryship of the Treasury was a
current and persistent washington re-
port. Rumor had already selected his
successor - the fair-haired boy Of the
administration, Budget Director Lew
Douglas, who has in fact been one Of
the Presidents closest financial ad-
viers from the outset and grown steadily
in Mr. Roosevelt's regard. Douglas
would be the youngest, If not the great
est, Secretary of the Treasury since
Alexander HaNilton.
X X
One of the great Wall Street private
bankers soon to face Mr.. Pecoras guns
decided to shun the discomforts of
hotel life in Washington and has leased
for the duration of the war one of the
Capitals show places commanding an
incompatible view from the Potomac's
heights There he will hold court ca
Hill. The chatelaine of the establish
ment was not keen to rent her menage,
but succumbed to the lavish blandish-
mentS of the grandee Of William street.
X X X
An extraordinary phenomenon Incl
dent to the formulating of the admin
istration measures for the control of
the industry and the railroads and the
banks and for legalizing our abandon
ment of the gold standard and for
invalidating the gold clause in our
Government and private bonds-all
matters bristling with intricate and
debatable constitutional questions-has
been the absence from the picture of
Attorney General Homer S. Cummings
and the Department of Justice. The
I@ar
ton for the past two weeks, playing
golf at Asheville. The Department Of
Justice, with its new Democratic staff
still incomplete, has, to all outward ap-
pearances, been in a state of suspended
animation. The circumstances newt
ably give rise to hints that Mr.. Cum
nings is not only out of touch, but out
CT sympathy.
The Morgan disclosures have ex-
ploded a lot Of popular conceptions
about Federal income taxes. The
country has discovered, to its astonish-
ment and dismay, that American citi-
Zens may have the cash to pay for three
million dollar private yachts, yet may
escape the payment of Federal in
come tax, and escape such payment
under circumstances and by devices
sanctioned by law. The country is
brought to a realization that an income
tax is something more than a question
of the percentage tax rate. 1t is
question also of exemptions, deductions
and legal loopholes. The tax is as
sessed against net income, but net in
ccme means statutory net taxable in
come" and that, as shown in the case
of the Morgan partners, is frequently
a horse of q different color,
x *
A partnership, as is ]. P. Morgan Co.,
pays no Federal income tax as such, but
each partner accounts to the Govern
ment in his individual income tax re-
turn for his share in the profits or the
losses of the partnership. The Morgan
partners receive no salaries. II the part
nership books show that the losses ex-
ceed the profits, then the taxable in
come of the partners, except for income
from other sources, is something less
than nothing. and that is SO, in con-
temptation of the Federal income tax
law, even though they actually drew
out of the partnership thousand dol
lars in cash or a million dollars. If
there were no profits this cash could
not have been income. 1t must have
been capital, and capital is not taxable
under an income tax law. The Govern
ment goes after the capital via the in
heritance tax route.
X
The President gives himself no worry
or concern over public statements and
comment, via newspapers or the radio,
of his associates and advisers - not
even when the voluntary interpreter Of
his administration is his own son James.
| The latter Is weekly feature OF radio
program of a Boston broadcasting sta
| tion. In his most recent broadcast
James Roosevelt commented on the
| Morgan income tax disclosures-sug-
gesting that the law, rather than Nor
gan, was to blame-a subject on which
spicuously silent. The President was