Evening star., 1942-01-22
The Political Mill
Proposal to Tax Income From Stote and Municipal
Bonds Expected to Meet Strong Resistance

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tremendous costs are given as the
reason for levying on incomes Of
the people from whatever source
they may come. The State and
municipal securities, interest
bearing. total today somewhere
between $4,000, ,000, 900 and $2o,-
W0,000,000. This is really q great
block Of wealth, however. which
is free OF taxation by the Federal
Government. Unless the tax Is
made to cover securities already
issued-the chance of obtaining
any appreciable revenue from the
plan is slight indeed. States and
municipalities are not putting out
many new issues Of securities
these days. On the contrary, 1t
Is said that the total amount Of
such securities Is shrinking. A
preliminary statement covering
long time interest bearing State
and municipal securities, now be-
ing prepared puts the total at
$19,s17 ,269, 900.
Federal bonds-Treasury bonds
outstanding as Of December 81,
1941 totaled $33 ,367 1893 200. The
interest on the old issues, prior
to March, 1941, are subject to
surtaxes but not to the normal
income tax. The newer issues,
in some cases, are subject to the
normal tax.
If the Treasury proposes to
levy taxes on the outstanding
State and municipal bond inter-
est, there seems no good reason
why it should not go the whole
way and obtain as much revenue
as possible from the interest on
all Federal securities, via the
normal income tax rate as well
as the surtaxes. Should any such
program as that outlined 90
through, the States may under
take to levy taxes on the interest
on Federal securities through
their own income tax laws.
Merely a Suggestion.
1t was emphasized by those
who have heard the Treasury Of
ficials that the suggestion of a
tax on these State and municipal
bonds is still merely a suggestion
or 1t was when 1t was put forth
in recent conferences. What the
details Of the plan would be has
not been disclosed. However,
$500. .000, 900 is q large item of new
revenue. 1t may well be that the
administration will seek to tap
this source. If 1t does not, 1t will
have to find some substitute.
The argument has been ad.
vanced often that income from
any source should be taxable
that neither in Federal securities
nor In State or municipal securi-
ties should wealth find q hiding
place. an escape from the burden
placed upon other wealth. It
sounds reasonable, although the
theory in the past regarding Gov
eminent securities has been that
to make them tax exempt makes
them more salable and helps to
bolster the credit Of the Govern
ment. State or Federal. Today,
the need for revenue Is 10 great,
however. that all such reasons
may well lose weight.
The Government has engaged
IN the sale Of United States saw
ings bonds, Defense savings
bonds and Defense stamps, which
may be converted into bonds. The
interest on such bonds will fall
under the Federal income tax
as presumably will all other is
sues Of the Federal Government.
1t had sold $3,6l6, ,08s 300 United
States savings bonds as Of De-
cember 81. ls4l. and $685., So, 900
Defense savings bonds from May
/. 1910. to January 13, 1912. De-
tense stamps, according to re-
ports from the Post Once De-
partment-they are sold ut post
ofdces-have reached approxi-
mately $S7 ,288, 900. There are