Evening star., 1934-03-08
Favors Constitution Change
to Allow Levy on Future
Public Securities.
WOULD ALLOW STATES
TO COLLECT REVENUE
$l45,0C0,00o Treasury Gain Seen
In Assessing Non-Tax.
able Issues.
BY the Associated Press.

BY the Associated Press.
A constitutional amendment to per-
nit the Federal Government to tax
income from future issues OF Federal.
State and municipal securities was
advocated today by Secretary
Morgenthau.
Testifying before the House Judici-
airy Committee, Morgenthau also
favored giving the States the right
to tax income from Federal securities.
The cabinet member added that if
State and municipal securities only
were exempt from taxation it would
be likely to react unfavorably on the
market for Federal securities, to in
crease the cost of the Governments
borrowing and to complicate our
financing operations"
Agreement Is Sought.
Morgenthau also disclosed the Treas
ury was studying the question of some
agreement between Federal. State and
municipal issuers OF securities as to
the province of each in the field.
Roswell Magill. Treasury adviser. es-
timated that taxing non-exempt secu-
rites would increase net revenue by
Sl45 100000 year to the Federal
Government alone. He did not esti-
mate what the States might get.
Morgenthau's statement was brief.
He appeared at the committees in
vitation to express the Treasury's po-
sition. Morgenthau said
The Treasury Department favors
as permanent policy the elimination
Of the exemptions from Federal in
come tax now accorded to the inter
securities in so far as future issues OF
such securities are concerned.
I consider it very important that
when the exemption is eliminated it
should b. eliminated not only In re-
spect to future issues of Federal Sc
curi.ies but In respect to future issues
of State and municipal securities as
well. The enactment OF legislation
requiring Federal obligations to be Is
sued in the future on a fully taxable
basis, in competition with wholly tax
exempt securities originating else
where. would be likely to react un-
favorably on the market for Federal
securities, to increase the cost of the
Governments borrowing and to COM
plicate our financing operations.
Il am advised that constitutional
amendment would be required to en-
able the Federal Government to tax
the interest on State and municipal
securities. In my Judgment. such an
amendment should be orawn en- a
reciprocal basis: the States should be
Federal securities snd the Federal
Government to tax the income from
State and municipal securities.
Il favor such an amendment"
Several constitutional amendments
and bills are pending to do just what
Morgenthau recommended.
While the Treasury Secretary was
appearing before the House group. the
Senate Finance Committee revising
the House tax bill struck out provi-
sion placing surtaxes on shareholders
dividends paid out of corporation ac-
cumulated earnings made prior to
March /, 1918. This provision would
have raised an estimated s6,000,000.
Morgenthau Is Criticized.
Morgenthau came under fire from
both sides of the Senate yesterday
afternoon in the debate which preced-
ed confirmation of Robert H. jackson
of jamestown, N. Y, as counsel of the
Internal Revenue Bureau.
Morgenthau was charged by Sena-
tor Couzens, Republican. of Michigan
with being absolutely tricky and
wholly unreliable" in his testimony
on the nomination of Jackson. but
the Michigan Senator raised no OBJ
lection to confirmation and the ap-
pointment was approved without a
record vote.
Morgenthau also was criticized by
Chairman Harrison Of the Finance
crat, of Virginia for asking E. Barrett
Prettyman Of Maryland to resign in
order to appoint the New Yorker
Prettyman later was appointed cor
poration counsel for the District, sue
ceeding w. w. Bride.
Harrison, nevertheless, defended
Morgenthau's conduct before the
Finance Committee. asserting it could
not be termed tricky and unreliable"
under the widest fight of the
imagination"
Couzens repeated the charge in the
face of Harrison's denial and said he
was very doubtful of the ability of
the Secretary Of the Treasury to con-
duct that great Office in the light
OF methods that have developed In
the few weeks or months that he has
been IN office"
The plain-spoken Michigan Senator
condemned Morgenthau for not ex-
planning to the Finance Committee,
when questioned about it, that jack
son had served nine days as special
counsel without being sworn in and
thus had access to records that were
secret under the law.
Couzens Raps Tydings.
Couzens also criticized Senator Tyd-
dings, Democrat, of Maryland, for
withdrawing opposition to Jackson,
asserting the Marylander originally
had raised the issue, but had lost
interest because Prettyman had now
gotten another Job.
Earlier in the day Tydings told the
Senate he would not oppose the Jack
son nomination because Prettyman
did not want to remain IN the Inter-
nal Revenue Bureau II Morsenthau
did not want him. Tydiues said he
was authorized to say, however, that
Morgenthau had meant no reflection
on Prettyman in asking for his resig-
nation.
Couzens, who was, . constant critic
OF the administrations Of former Sec
retary Mellon. told the Senate he
had hoped with the adysut Of the
new deal' he would no longer have
a a. - -