Evening star. [volume] (Washington, D.C.) 1854-1972, 1953-12-30
Mellon and Small Tuxpoyer

In recent letter in The Star signed
Retired Treasury Employe," the writer
took issue with statement in a column
of mine on taxes that the Mellon Tax
Plan" sponsored by Andrew w. Mel
lon, Secretary of Treasury in the Hard
ing. Coolidge and part of the Hoover
administrations, started an era of
special tax privilege for the rich and
powerful which lasted until the depres-
sion struck at the end of 1929" On his
part he said that "Mr. Mellon was the
greatest champion of tax reduction for
the small taxpayer within my men,
ory."
I covered tax bills of the Mellon era
beginning with the Mellon Tax Plan"
of 1924. Refreshing myself again on the
record find:
The first tax bill for which Mr. Mel
lon had responsibility was that signed
by President Harding in November,
1921. The Secretary Of Treasury had
recommended repeal of the wartime
excess profits tax and reduction Of the
maximum rate from 70 per cent to 40
per cent. along with enactment OF
certain excise taxes to make up the loss
Of revenue in those fields. Congress re-
pealed the excess profits tax and reduced
the surtax maximum to so per cent.
Mr.. Mellon made no recommendation
about taxes of medium and small tax
payers: Congress did nothing about
them.
Between the 1921 act and the 'Mel-
lon Tax Plan" of 1924 certain things
happened which caused some concern
in the Harding administration and
some criticism of it, including the
short-lived postwar depression when
there was substantial unemployment
and the drop of farm prices due to pile
I'm of SURPRISES with loss OF foreign
markets after the war.
The mellon Tax Plan" which the
Secretary of Treasury recommended 10
congress on November 10, 1923. ana
which was the object OF a most LAVISH
nropaganda campaign by big business
and finance, proposed that the maxi
n,,,no surtax rate be cut in half, from SO
to Is per cent, and that there be re-
duction from to per cent IN norma,
rates on net incomes up TO $4,OOU' anu
from to per cent on those from
$4,000 to $4,000.
The Mellon program was ripped 10
nieces in Congress by coalition OF
democrats and insurgent Republicans.
Taxes on the small taxpayer were cut
in half. Otherwise the bill, when 1t
came from Congress, fixed the maxi
mum surtax rate at 40 per cent instead
of the Is per cent advocated by the
Trea sury Secretary, and boosted the IN
beritance tax rate from IS to 40 per
cent, among other changes. The Secre-
tarv was dissatisfied with what Con-
eress had done to his program and Tor
a time there were reports he might IN
duce President Coolidge to veto the Dill.
But the President signed 1t.
DESPITE Mr.. Melons displeasure with
the law. Republicans found that 1t was
their best issue in the 1924 presidential
camnaien and Mr.. Mellon found him.
self a hero with the business and n
nancial community.
The overwhelming reelection OF
Coolidge in 1924 paved the way Tor the
Secretary's major, and long-aWalted,
coup two years later in the 1926 Reeve
me Act in which a majority OF Con-
gress went along eagerly with his rec
concentrations. The maximum surtax
rate was cut to 20 per cent on incomes
of $3.50 900 and over from the 40 per
cent maximum which applied to in
comes of 100000 and above; the in
heritance tax was reduced from
maximum of 40 per cent to 20 per cent;
the gift tax and the capital stock tax
were repealed. The small taxpayer was
also cut in with a good share, so that
his taxes were then at the low point
which Retired Treasury Employe"
cited and from which he took his tax
computation example, but with no
mention of the handsome windfall-
then and previously-of the big tax
payer, individual and corporate.
There was never. during this era, any
question about Secretary Melons aim
in tax policy; the only argument was
Cd as to it's fairness and co as to its
economic efficacy. He was very frank
about his purpose to scale down taxes
on big corporate and individual wealth
on the theory that this would release
funds for expansion of productive en-
terprise that would provide Jobs and
sustain employment and prosperity.
theory which Democrats later called
"the trickle-down-fr from the-top" the
DRY. The theory came under criticism
when funds were funneled into stock
market speculation in the dizzy and
frenzied pace of the Coolidge BOOM"
as it was called. For most people the
argument was settled with the stock
market crash of 1929. the signal for
the depression. Thereafter Mr.. Melons
reputation for Government fiscal man
agement dimmed considerably.
Aside from the favoritism enjoyed by
individual and corporate wealth in the
Mellon era from tax laws, it also got
special and favored treatment in adj
ministration of the law. at least ac-
cording to findings of an inveStiga-
ton of the Internal Revenue Bureau
directed by the ruggedly independent
Republican Senator from Michigan,
James Couzens, himself very wealthy
man. This investigation, which ran