Evening star., 1942-08-03
La Guardia Opposes
Tax on Income From
State and City Bonds
Proposal Would Severely
Disrupt Municipal
Financing, Mayor Says

B, ths Associated Press.
Mayor F. H. La Guardia of New
York testified today that taxation O
the income from future issues O
State and local bonds would have
disastrous" consequences on munic.
ipal financing.
Appearing before the Senate Fl.
nance Committee studying the S..
271 100000 tax bill, Mr.. La Guardis
said there would be no net gain fol-
the Federal Government in taxing
the income from such bonds because
local taxpayers in the end woulo
have to pay the bill.
IF these securities are taxed, the
taxpayers of the cities pay for it, not
the rich guys these youngsters from
the Treasury Department say,
Mayor La Guardia declared. turn
ing to glare at three youthful Treas
ury representatives. who sat nearby
We've heard from all these young
sters, and they just don't know,
he continued.
Gentlemen. there is not city ir
this country that is not skating or
very thin financial ice.
Increased Interest Cited.
Every cent of Federal taxes i'm
posed on these bonds will be re-
f1ected in increased interest we pay
on these bonds, and that in turr
will be reflected in increased taxes
on real estate, which is already over
burdened"
Turning to another aspect of the
bill. Mr.. La Guardia recommended
that the committee consider the
question of amending a House -ap-
proved payroll collection tax to make
it withholding levy of which one
fourth would be returned to indi-
viduals after the war.
The House voted to impose a levy
of 5 per cent, less personal exemp-
tions, on the income from wages
interest and dividends, beginning
January /, the collections to apply
on 1912 income tax liabilities. The
rate would advance to 10 per cent
in 1914
Mayor La Guardia said the pei
cent rate might be increased by
per cent or possibly little more
and arrangements made to give non
negotiable, interest bearing GER
tificates to the taxpayers for one
fourth of the amount collected. He
suggested that the certificates be
made payable a year or l8 months
after the war ended.
Small Business Aid Urged.
The taxes imposed by the pending
bill, he said, would make it prac-
tically impossible for ordinary citi-
zens to purchase any appreciable
amount of Government bonds.
I'VE must pay for the war, OF
course, but we must be thinking OF
what is going to happen after the
war" he said.
Expressing the belief that small
businesses would be seriously dam
aged by the wal economy. Mr., La
Guardia said some provision also
might be made for creation Of re-
serve for them out of taxes paid.
There will not be many small
manufacturers or shops If the wal
continues for three or four years,
the Mayor testified.
Senator Connally, Democrat, o1
Texas asked Mr. La Guardia how ef.
fective New York's sales tax hac
been in producing revenue.
ITS just as good as said it woulo
be bad when I opposed the sales ia,
in the House." replied Mr.. La
Guardia, who formerly served in the
House.
Austin J. Tobin of New York, rep
resenting the Conference on State
Defense, testified that Federal tax
alton of municipal and State bonds
would seriously impair financing by
cities that are cooperating to fur
nish vital utilities for war indus.
tries.
Mr.. Tobin urged the committee
not to burn down the barn to catch
q few mice"
He said such taxation would ado
practically no revenue in the next II
years. but he estimated it ultimately
would add SITS 900 900 to State ano
city financing costs by forcing ur
the rate of interest.
Mr.. Tobin said cities such as De
troit and Philadelphia with "urgen
refunding programs would feel th'
impact of the proposed new tax i'm
mediately, adding:
Cities which are Loyalty cooper
atlng in the war effort to provid,
the roads, the sewers, the wate
supply and the schools required i'm
mediately by expanding war indus
tries, such as, Norfolk. San Diego
Wichita and Cleveland. would fee
the burden of increased borrowin,
costs at once
Evil Held Exaggerated.
Mr.. Tobin said the "so-called evil
of the tax-exempt security had beer
grossly exaggerated. adding tina
only 6 per cent of the capital in al
estates more than $4,000 had beer
invested in State and local bonds
He complained that Federal taxa
ton Of the income from State ant
municipal bonds would constitute
an invasion of the field of local self
government.
1T would be one thing if the gun
which the Treasury seeks to put il
your hands was gauged to hit onl,
the bond holder but what the,
press upon you here shoots caniste
and grape into our whole politica
system" Mr.. Tobin declared, ad
ding:
If Congress has the power b.
simple statute to tax State ant
municipal bonds, it has inevitabl
the power to control State AM
municipal financing
Professor Opposes Plan.
Prof. Harry l.. LutZ of Princeto
University said taxation of the in
come from State and local bond
would be form Of "robbing Pete
to pay Paul because of the increas
In local taxes that would follow.
Don't you think it ought to wor
the other way, too?" asked Sena
tor Vandenberg, Republican, c
Michigan. Don't you think Pete
ought to Quit asking Paul to pay S
much OF his local bill?"