Evening star., 1938-03-22
Taxes
Continued From First Page.)

would bring s562o0,00o revenue in
the fiscal year 1899. while the modifi-
cations of the House bill would bring
s57, 100000. A fiat rate of Is per cent,
he estimated. would be worth only
$39 800, 900 II applied to gains on assets
held at least two years.
Alternate Modificatio
Alternative notifications, he said,
would yield sums ranging from $685.
900,000 to $40 900. 900.
For the calendar year 1898, however
Mr. Magill estimated that the fiat IS
per cent rate on capital gains beyond
a two-year period would have brought
in s46.400, 900. as compared to an esti-
mated s42,20o.O0o under the treat
ment proposed in the House bill.
Upon completion of the Treasury
oficial's testimony. Chairman Harri-
son announced that executive sessions
to revise the pending bill would start
on Thursday.
DR.. Magill dealt first with the in
equity OF consumption taxes, as COM
pared to income and estate levies, al
though such taxes account for about
one-third Of our total revenue at
present.
Adding that the elimination of the
consumption taxes should be under
taken gradually, the Undersecretary
reminded the committee that:
THE bill. as introduced in the
House, made a start on this type Of
revision by eliminating number of
consumption taxes aggregatins about
$4,000 10000. On the floor of the House,
however, the tax on distilled spirits
was increased to yield an estimated
10 millions additional: and the impor.
tax on pork products was almost
trebled in amount. a change which.
however. appears unlikely to yield any
additional revenue Both of these
changes the Treasury regards as un-
desirable"
Income Taxation,
Turning next to principles of in
come taxation, DR.. Magill put the de-
partment on record in support of con-
tinued taxation of capital gains as
income and eventual elimination of
the income tax exemptions now
granted to interest on State and local
bonds and on public salaries of sub
divisions.
The income tax should rest equally
on incomes of similar size" DR.. Ma
gill said. 1T is on this basis that
the Treasury has urged for many
years that existing exemptions from
Federal income taxes, now extended to
the interest on State and local bonds
and to State and local official salaries,
should be eliminated for the future
and that capital gains should continue
to be subject to the income tax
Neither of these recommendations is
peculiar to this administration.
so long as vast reservoir of tax
exempt securities exists it is difficult
or impossible to make any system Of
progressive surtax rates operate eff.
fectively. Possibly the problem car
be partially solved by statutory pro-
vision. Possibly q constitutional
amendment should be proposed as the
most effective means Of ending these
tax exemptions for the future. The
Treasury strongly recommends that
effective action be taken as promptly a
possible in one or both forms. ~
Exemptions Endorsed.
DR.. Magill's defense of the principle
OF undistributed profits tax was hung
largely on the fact that individual
proprietors and members of partner.
ships are subject both to normal taxes
and surtaxes on the entire net income,
whether distributed or not.
The undersecretary indorsed the re-
lief granted to corporations with net
incomes under $4,000, the House bill
exempting them from the undis