Evening star., 1933-01-12
The Political Mill
BY C. Could Lincoln.

How long can this country exist with
half its wealth tax free and the other
half paying all the taxes? 1t might
occur to the incoming Democratic ad-
ministration that here is chance. a
plan to balance the budget without TIE
imposition Of any new taxes. Just make
the old taxes apply to the present tax
exempt securities. 1t would require an
amendment to the Constitution to ac-
complish this end, it is true. But the
Democrats are committed to one amend
ment of the Constituticn-to give us
beer. wine and liquor again-and why
should they balk at a second which
would have far more real and bene-
fetal effect upon the economic situa-
ton?
The Secretary of the Treasury esti-
mated that in 1881 there were out
standing in the United States So, $780,
100000 securities which were tax ex-
emDt, so far as the normal income taxes
and surtaxes imposed by the Federal
Government were concerned. The fig
ure is probably by no means an over
statement of the situation. Here is this
vast amount of wealth-and much of it
belongs to men and women of great
property-that is not bearing its share
of the tax burden, while the men and
women who toll in this country must
pay the income taxes. Recently 1t has
been proposed to broaden the base" so
as to make the income tax apply to
more and more men and women OF small
means as a way out of the Treasury
deficit. 1t might occur to those in
power that 1t would be just as well to
levy the income tax on those who have
sought to avoid all Federal income tax,
or very large part of the tax they
would ordinarily pay, bv purchasing
tax-free Government bonds. Federal
EXEMPT securities has been a refuge to
which great wealth has hurried to
avoid taxes.
The theory of the tax-free Govern
ment bonds, Federal and State, has
been that they were necessary to pro-
vide the Government with money at
low rates OF interest. This was we'll
enough in flush times, when money of
the wealthy was willing to go into in
dustries that offered greater return.
But that Is not the case today. More
hundreds of millions of dollars would
move quickly into new low-interest-
bearing Government bonds today If
they were placed on the market-the
rich who wish to avoid taxes and to
obtain what they consider safe invest
mentS The depression has made a
very different situation. But no mat
ter what the reason for the issuance
Of tax free bonds In the past, the prac-
tice which has built up such huge
reservoir Of untaxed wealth in this
country Is not sound in theory. The
sooner this source of wealth can be
taxed the better for the whole country.
n y y X
Some members Of Congress seem to
be fearful of tackling this problem OF
taxing the untaxed wealth Of the coun-
try. They object that it would take
a long time to get through a consti-
tutional amendment; that the States
would raise an awful howl; that the
Government would have to pay higher
rates of interest and so would gain
little or nothing in the long run. Well
the way matters stand today, 1t Is not
likely that the Government would have
to pay higher rates of interest; the
NUVtIIullCIlt HOu1N 6CS OLlC AAOAASy AAOaA'
those who wish a safe" investment
A few years ago constitutional amend
ment to prevent tax-exempt securities
was agitated in Congress. 1t got no
where. That, however. was before the
depression had settled down on this
country. It may be recalled that years
ago in France those in power sought
to take all the taxes from the men and
women Of small means and to give ex-
emption to the wealthy mobiles. The
practice may have been comfortable
for the wealthy, but it was not so good
for the poor. Eventually the French
did away with this practice, and in a
harsh way.
There is other wealth in this country
which does not bear taxes-very large
wealth-that of the institutions OF
learning and the churches. 1t is en-
tirely unlikely that this wealth will be
made subject to taxes The people have
not reached the conclusion that the
property Of the churches or Of the
schools and colleges should bear the
one way in which the wealth of these
institutions might be tapped, and that
Is through the so-called manufacturers
sales tax. They all buy supplies. Sena-
tor David I. Walsh of Massachusetts,
who supported the manufacturers sales
tax in the Senate Finance Committee
last year, pointed out that this tax
would reach the wealthy who today
have their money invested In tax-free
securities, but who buy many things,
and also that it would tap the wealth
invested in churches and institutions OF
learning.
A breeze blew in from the west yes
terday. Senator-elect William Gibbs
McAdoo paid his first visit to the
Senate since his election and was
warmly greeted by many of his Demo-
cratic colleagues on the floor. He was
on his way from California to New
York to confer with the President
elect, Franklin D. Roosevelt, whose
nomination he cinched in the Demo-
cratic National Convention in Chicago
last June, much to the rage of Al
Smith and other opponents Of Roose-
velt. If Mr.. McAdoo has any candi-
dates for the Roosevelt cabinet, he
did not divulge their names to the
press. He. himself, his friends insist,
has absolutely no desire to enter the
cabinet, but wishes to take his place
in the Senate.
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Mr.. McAdoo thinks that 1t is more
important, perhaps, to deal with the
economic recovery of the farmers Of the
country than to balance the budget
He declared himself In some Of his
conversations here prepared to be radi-
cal or even revolutionary in his attack
on the farm problem, indicating that he
would go to the extent Of price-fixing
so as to give the American farmer a
return for his produce greater than the
cost Of production. Well, straight
out price-fixing program for farm
products would be easier to work ano
probably more satisfactory in the long
run than the cumbersome domestic
allotment plan as written into the farm