Evening star., 1933-05-25
Indictment Of the Income Tax.

Indictment Of the Income Tax.
There has been high indignation as
well as establishment on the part OF
the average citizen on salary to learn
that while he was sweating to pay his
heavy Federal tax on his diminishing
income in the years OF 1881 and 1882
the partners in the House OF Morgan
we're aLae to write off their taxes with
their capital losses and paid nothing.
Some of the indignation has apparently
been transmitted to Chairman Dough-
ton of the House Ways and Means
Committee. who will call meeting OF
his committee to see whether some
thing should or can be done.
Thee was, of course, nothing particu-
iarly startling In the testimony that
showed how the Morgan partners ana
Mr.. Morgan himself, one of the richest
men In the world, escaped payment OF
income taxes for the two years close
ly following the crash Of 1929,
All that this testimony did was to re-
veal. in a highly dramatic manner, one
of the inherent weaknesses in the in
come tax law itself. Congress could
have easily obtained from the Bureau
of Internal Revenue the facts to show
how many other wealthy and noted
Americans were able to take advantage
of their losses in escaping income taxes
at a time when the contributions from
their wealth were needed more than
ever by the Government. Such facts
have been known for long time. and
they have been pointed out before.
Former Secretary OF the Treasury
Mellon used 1t as an argument against
placing SO much dependence on a tax
that could not be expected to yield in
hard times anything like the revenue
yielded in good times.
In considering the fact that the
Morgan partners were able to escape
any payment of income tax in 1891 and
1892, 1t must be remembered that they
paid the huge total of something like
$11, 1,000,0O in 1929. For. when the in
come tax law Jumps capital gains along
with ordinary income from salaries,
rents, etc, the receipts pile up in good
years. In bad years, when capital gains
become losses, the receipts fall of. If
capital gains are taxed as income, there
is a certain amount Of elemental JUS
i,, he Iaf hof Tadnnt ions in tQv
should be allowed for losses. But 1t
will be hard indeed to demonstrate the
presence Of elementary or any other
kind of justice In law which forces
the man on small fixed salary to pay
q tax while his fellow-citizen of great
wealth is legally permitted to go wholly
free.
The dramatic revelations concerning
some of the inherent injustices Of the
income tax law are made at time
when the Congress is toying with the
idea, not Of batting millionaires, but Of
soaking the one and one-half per cent
of the population which for the calendar
year 1881 paid income taxes with more
and heavier forms Of the same tax.
Ninety-flve per cent of the income tax
payers pay taxes ON incomes OF $4,000
or less, and these incomes will be fur
ther reduced by the salary cuts which
have gone into effect since the calen-
dar year 1881.
Coupled with the injustices threatened
under the proposed plan Of boosting
income taxes and imposing double
taxation on stock dividends, there is
the element Of uncertainty as to yield.
The yield from income taxes has been
overestimated every year since the
advent of the depression. In his message
to Congress last week the President
warned that the revenues so provided
Ito amortize the cost of the public
works program) must be adequate and
certain rather than inadequate and
speculative"
Instead of imposing new and more
injurious hardships under an income
tax boosting program, and making
frantic last-minute efforts to lock the
door after the Morgan partners income
taxes have gone, Congress should
examine anew the advantages which
lie in a general sales tax that exempts
the essential and necessary needs OF
life.