Evening star., 1938-01-16
j. s. SALES TAX
HELD INEVITABLE.
Babson Statement Gives
Recommendations for
Federal Reform.
Special Dispatch to The Star.

Special Dispatch to The Star.
BABSON PARK, Fla, Jan. 15.-"The
biggest problem facing the Nation to-
day is not the recession; not the Job
less: not the railroads. 1t is our taxa
tion system" says the Babson weekly
statement. IF We continue at the
rate We are going, We will ultimately
commit suicide by taxation. Govern
ment spending is eating up our pres
ent assets. Taxes are hindering us
from building up new capital. More
than any other reform" our taxing
methods. from Federal down. need a
complete and thorough overhauling
during 1898.
Our present system Is just a big
piece OF patchwork Its only basic
policy Is to conceal taxes from the
ultimate payer-the consumer 1t is
short-sighted, unequitable. unreason-
able! 1t penalties initiative and
thrift. 1t handicaps industrial growth.
1t hinders the normal operation of
business. 1t retards new building. 1t
encourages loose fiscal policies. It
fosters sit-down strikes of capital. It
is heading the United States straight
toward bankruptcy and imitation.
Broader Base Urged.
"Five years ago the income tax was
the major source of Federal Govern
ment internal receipts. Despite the
passing of many new revenue laws, it
still contributes 40 per cent. Yet in
1928 only 4,070,0o0 fled income re-
turns, and Of these only 2,52s, 900
paid tax. Hence the burden of
income taxes is still hearsey among
95 per cent of the Nations voters.
Broadening the tax base and cutting
down on exemptions would have two
important results:
"(a) It would make millions of
citizens more directly concerned with
public spending.
"(o) 1t would produce an additional
revenue of perhaps s5oo,ooo,0 900 per
year
Relief Held Urgent.
THE last bracket on the income
tax schedule takes IS per cent of
an individuals earnings in that
bracket. No one claims that a rich
man needs ST 100000 annual income
to live. but he does need much more
than this to keep his business up to
date. He will not borrow money.
He cannot sell stock.
Hence, in most cases his only
source Of new capital is from his own
income. After paying taxes, large
employers do not have enough money
left to keep their businesses running
as they used to run, or to employ
as many people as they formerly
employed. The taxes on high in
comes should be cut down. These
same comments apply to estate and
gift taxes. Certainly. provisions for
payment Of inheritance tariffs must
be altered.
Capital Gains Tolls Hit.
If the Federal Governments big
source of revenue is to be the income
tax, then incomes must be aided in
every conceivable way. Hence, my
opposition to big capital gains tolls.
England has a problem similar to
ours. But she bears down on the
incomes and leaves capital gains alone.
Her theory seems logical: Encourage
the individual to make investments
to start novel enterprises, to open
new mines. so he will make more
money; then he can pay an income
tax year after year. Assessing capi-
tai gains heavily is like killing the
goose that lays the golden eggs. =
Exemptions Opposed.
Under present tax schedules
wealthy mans capital is shunted from
business into taX-free securities such
as Government, State and municipal
bonds. This is bad policy. 1t makes
It difficult to secure new capital for
business enterprises.
There are about $50, 900 900 900 in
non-taxable securities outstanding to-
day. Naturally, these cannot be taxed,
but income from new public road issues
should be assessable Besides forcing
money into business channels, elm
mating tax-exempts should also tap
q steadily increasing source of new
revenue for the Government. On the
other hand, it would make public
financing more difficult and more
costly, and prices of public bonds more
unstable.
Government Workers Escape.
Among the unfair angles of the
tax muddle is the exemption Of Gov-
eminent employees from the income
tax. During the depression the aver
age public official had his pay cut
only 10 per cent, while the average
private citizens salary dropped as
much as so per cent! Stability of
income is exemption enough for our
vast army Of public officeholders. By
taxing them not only would the Treas
ury pick up good slice Of new in
come, but it would make another
group-and one very much In need
OF 1t-more conscious of public ex-
pense.
Profits Levy Scored,
"Of all the legislation recent,v
written, the undistributed profits tax
Is probably the worst. It is ill-advised
ehort-sighted and contrary to our
ideals OF thrift. It threatens the
stability OF all industry. Although
1t would be a temporarily deflationarv
step. this tax should be wiped of
the statutes"