Evening star., 1938-04-18
BYRD WILL PRESS
F0RTAXCHANGES
Seeks Senate Approval of
Amendment Allowing
Levy en- u. S. Bonds.
By G. GOULD LINCOLN.

from a Senate Judiciary Subcommittee
on his resolution for a constitutional
amendment allowing reciprocal tax
alton on future security issues by Fed
eral. State and local governments, and
allowing also reciprocal taxation of
Government pay roll salaries, Senator
Byrd, Democrat, of Virginia said today
he would press for action by the full
committee and the Senate.
The Virginia Senator, who intro
duced his proposed constitutional
amendment in June of last year,
pointed out that Federal. State and
municipal pay rolls. which are not
subject to reciprocal taxation, total
approximately $500, 900 900 annually.
He figured, too that there are $54,-
489 100000 in Federal, State and local
securities, yielding approximately 81
000000,000 in interest annually wholly
or partially exempt from taxation.
President Roosevelt announced Fri
day he would send special message
to Congress urging that laws be passed
prohibiting the issue of further tax
exempt securities, and also providing
for the taxation of all Government
pay rolls, State and Federal and
municipal.
Many members of the Senate MAIN
tain that the Federal Government
cannot, without constitutional
amendment, tax the securities issued
by States or the salaries paid to State
employees.
The President, on the other hand,
quotes the language of the Sixteenth
Amendment to the Constitution, pro-
viding for Federal income taxes to sup
port his theory that this can all be
done by law. The amendment says:
"The Congress shall have power to lay
and collect taxes on incomes, from
whatever source derived, without ap-
portionment among the several States,
and without regard to any census or
enumeration" This language, the
President insisted, was so clear he
believes the Supreme Court would up
hold such law as he proposes.
However, the decisions of the court
in the past have been to the contrary.
and the court undoubtedly would be
called upon to pass on the validity Of
such law, if enacted.
Best Able to Pay.
Pointing out that the purposes of
his constitutional amendment have
been recommended by nearly every
President and Secretary of the Treas
ury for 20 years, including President
Roosevelt and Secretary Morgenthau." ."
Senator Byrd said that it had been
estimated "at least one-tenth of the
annual American income escapes the
possibility Of taxation at one of these
sources or the other, or both" He
added: "A greater evil lies in the fact
that income escaping is income of
persons, in most instances, best able
to pay.
There are on the civil executive
pay roll of the Federal Government
more than 100000 persons who are
paid at the rate of nearly ST.. 500. 900 900
year, which is exempt from State
income taxation. This number does
not include legislative, judicial, mill
tary, relief or pension rolls. Seven
eighths of that personnel work and
reside in the States, and not in the
District Of Columbia.
"On the other hand, best available
figures indicate 100000 persons are
on State and local government pay
rolls with salaries totaling approx
mately $4,000, 100000 annually, wholly
exempt from Federal income taxation.
LAS of July /, 1886, the date of the
latest compilation upon which con-
gressional tax experts have made esti-
mates on this subject, there were out
standing Federal, State and local Sc
curities totaling s54,489, 100000 in
principal, yielding approximately two
billion dollars in interest wholly or
partially exempt from taxation. It Is
safe to assume that these figures are
greater now.
Subject to Surtaxes.
"An expert estimate that $1,100,-
100000 of that two billion dollars of
interest would be subject to surtaxes
In addition to the normal tax is proof
that tax exempt securities are
profitable refuge for thu rich and very
rich.
When large private security in
Vestors find it more profitable to
transfer their money to Government
tax-exempt securities the Government
loses not only the tax revenue from
their heavy investments, but it loses
also in proportion to the resulting re-
duction in productivity.
For Federal income tax purposes
total or partial exemption is due to
two causes. The Supreme Court has
held that the Federal Government is
powerless to tax the interest on Sc
curities Of other governmental units
rendering about $S40 100000 Of annual
interest according to 1886 estimates)
paid on s17.500, 100000 of State and
local debt beyond Federal taxation.
Also, the Federal Government has, by
contract with holders of Federal Sc
curities, exempted from both normal
and surtaxes about $27O 900, 900 of in
terest on approximately $14, 500, 900 900
of Federal debt. In addition to this,
by contract, tS,9 Federal Government
eXempts more than 100000, 900 of
annual interest on more than $22,-
000,000000 of Federal securities and
securities of Federal corporate instru-
mentalities"
Senator Byrd pointed out that, in
the face of the staggering debts cur
rent with all governments, State and
Federal, their bond issues must be re-
financed with new issues for a great
many years to come. Therefore, when
new issues are put forward, they would
be subject to taxation, and gradually
all would be subject to such payments
F(()D r. Il IT.