The Waterbury Democrat., 1937-06-01
HITS
 TAX EVACIONS
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NAAAFFFSA
 May FOrestalI Move
 The president sought to forestall an indicated attempt in certain con- eressional circles to expand consid- eration of anti-tax evasion legisla- ton to include revision of the en- tire tax structure.
 ''It seems to me-" MT. Roosevelt said, "that the first duty of the con- gress is to empower the government to stop these evil practices, and that legislation to this end should not be confused with legislation to re- wise tax schedules"
 He pointed out that he already had suggested to congress that there should be no new taxes or rate changes at the present session but left a hint that revision of the revenue laws might be undertaken at the next session.
 T have indicated to the congress, 1" he said, that the treasury will be prepared by next November to pre- sent to the appropriate committees information on the basis of which the congress may, if 1t chooses, un- dertake revisions of the tax struc- ture,"
 The president included in his message, letter from Secretary of the Treasury Henry Morgenthau, Jr., which cited the principal types of tax avoidance and evasion dis closed in a preliminary study of in- come tax returns for the calendar year 1886.
 Evasion Devices The evasion devices enumerated by Morgenthau included: l. Formation of personal holding corporations in nearby foreign coun- tries and islands;
 3. Creation of closely-held for- eign insurance companies; 3. Formation of domestic per- sonal holding companies, incorpora- tion of yachts and country estates; 4. Artificial deductions for inter- est and losses on loans to taxpayers by their personal holding companies or family trusts;
 5. Creation of multiple trusts for relatives and dependents; 6. Formation of husband and wife or father and. children part nerships;
 T. Setting up of tax-free pension ; trusts of which the only beneficiaries are small groups of officers and di- rectors in the high income brackets. Three Major Instances
 In addition, Morgenthau set forth three major instances in which the law itself permits individ- uals and corporations to avoid their full share of the tax burden. These included:
 l. Percentage depletion of such properties as oil wells and mines; 2. Division of income between husband and wife in states having community property laws; 3. Elimination of the requirement. that a nonresident alien must file an income tax return.
 Morgenthau's letter, the president said, left him with a feeling of in- dignation.
 Another Major Difficulty
 "What the facts set forth mean to me is that we have reached an- other major difficulty in the main tenance of the normal processes of our government" MT. Roosevelt said. We are trying harder than ever before to relieve suffering and want, to protect the weak, to curb avarice, to prevent booms and de- pressions-and to balance the bud- get. Taxation necessary to these ends is the foundation of sound gov- ernmental finance. When our legiti- mate revenues are attacked, the whole structure of our government is attacked. Clever little schemes are not admirable when they un- dermine the foundations of society"
 The president said that mot one but many red herrings are in prep aration" to obscure the real issue.
 Already certain newspaper pulp fishers are seeking to make it ap- pear-First, That if an individual can devise unanticipated methods nothing unpatriotic or unetthical; and, second, that because certain in- dividuals do not approve of high in- come tax brackets, or the undistrib- uted earnings tax, or the capital gains tax, the first duty of congress should be the repeal or reduction of these taxes"
 The president said the problem involves the decency of American morals.
 "The example of successful tax dodging by a minority of very rich individuals" the president contin- ued, breeds efforts by other people to dodge other laws as well as tax laws.
 Lawyers of High Standing
 "It is also matter of deep regret to know that lawyers of high stand ing at the bar not only have ad- vised and are advising their clients to utilize tax avoidance devices, but are actively using these devices in their own personal affairs. We hear too often from lawyers, as well as from their clients, the sentiment: It is all right to do it if you can get away with it.
 T am confident that the congress will wish to enact legislation at this session specifically and exclusively aimed at making the present tax structure evasion-proof."
 Morgenthau's letter described the treasury's surprise and disturbance" at the failure of March income tax receipts to measure up to budget estimates. The resultant preliminary study disclosed conditions so seri- ous. the cabinet member wrote, That immediate action is called for"
 The most popular of the tax eva sion devices, he said, involved the creation of foreign personal holding corporations in the Bahamas, Panama, Newfoundland, and other places where taxes are low and cor- poration laws lax.
 Americans have formed GA such companies in the Bahamas alone in