Evening star., 1933-03-25
More Tax-Free Securities2

Inc IOVeIHIIleIlJ 10 dUUuI W idui1SA
new bond issues running into the bill
lions of dollars to help lift the crush
ing burden of farm mortgages and to
give work and food to the unemployed
Are these new Government bonds to be
tax free? That is q question which
the Roosevelt administration and the
Congress must soon determine. 1t has
been indicated by some Of the sponsors
of these measures Of relief that the
bonds would be tax exempt.
In other days big issues Of Govern
ment bonds were put forth with the pro-
viso that they should be free Of taxa
ton. It was contended that because Of
the purposes for which they were is
sued, or because of the low interest
rates which they bore, their purchasers
should not be compelled to pay taxes.
Those were days when industry was
thriving. when money sought investment
in industrial stocks and bonds, sure Of
far larger returns than came from Gov
eminent securities. Today the boot is
on the other leg. Money in large guam
titles is seeking investment in Govern
ment securities, first because the securi-
ties are considered safer, second be-
cause the earnings from industrials have
fallen off enormously, and third because
the owners of this wealth are able to
avoid the payment of taxes if it be in
vested in Government bonds.
Not only must the administration
and the Congress consider their course
in regard to the proposed new bond is
sues, but they must also give considera-
tion to the refinancing of Government
securities which will take place before
long. There are sufficient reasons why
q halt should be called on the further
or future issue of tax-free Government
securities. When the people realize that
billions Of wealth In this country goes
scot free, so far as Federal and State
taxes are concerned, because they are
invested in Federal State and municipal
bonds. they are not likely to have SYM
pathy with the further enlargement Of
this refuge from taxation now sought by
many Of the wealthiest persons in the
country. It is difficult to justify, from
the point of view of the taxpayer, the
taxation Of one billion dollars Of the
peoples wealth and the exemption from
taxation of another billion.
BY just so much as the tax-free Sc
curities relieve part of the people from
the burden Of taxation the rest of the
people must pay increased taxes. The
amount Of tax-free securities in this
country today has reached staggering
proportions. It Is variously estimated
that the total is between $23, 900, 900 900
and $38,oo0,00 100000. with the higher
figure probably more nearly correct.
In the last Congress the present Sec
retary of State, Cordell Hull, then Sen
ator from Tennessee, took a strong
stand against the issue of future tax
free securities by the Federal, State
and municipal governments. He intro
duced broad resolution proposing an
amendment to the Constitution, the ef-
feet Of which would be to prohibit the
issue of such tax-free securities Sen
ator Ashurst of Arizona, chairman Of
the Senate Judiciary Committee, not
only in earlier Congresses, but also in
the present session, has offered similar
resolutions. It is his purpose soon to
appoint a subcommittee to consider the
pending resolution to this effect and
any others of the same character that
may be introduced
Here is opportunity for the Roosevelt
administration to take firm stand Tn
the matter of tax-free Government
bonds. The more tax-free bonds the
heavier the taxes will fall upon the
wealth which does not find investment
In Government securities and the
heavier the taxes upon the incomes OF
persons who have not invested in Gov
eminent bonds. If this tax-free wealth
today could be compelled to pay its
share of the tax burden, the budget
could be the more easily balanced with
out heavier taxation, or perhaps with
even lessened taxation, on the rest Of
the people.