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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Aug. 1, 1917)
ftpr.-!, kit- sa)(n'nr)wswas!l,wMW',,'w "P'SSffll'V1 It r'f . ti The Commoner VOIi. 17, NO. 8 30 lqv?tfWfi1prvrf I: If- T k - Income Tax Exempt tion on Bond Issues In the July number of Equity, the editor, Charles F. Taylor, presents an argument for the removal of 'the Income tax exemption from all future t ond issues by the United States. Under the caption, "Liberty Bonds for the Rich," ho eays: "In connection with income taxation, it is un fortunate that the -'Liberty bonds' are exempt from income taxes. For this reason these bonds will have dfforont values for different holders. "While to 'the masses' these bonds will bear only oM per cent., to the wealthy man whoso income la such that the higher portfons of which is sub ject to a surtax of 50 per cent, these bonds will bo equivalent to a btnd bearing 7 per cent in terest. To him, tho income of a 7 per cent bond would have to bo cut 50 per cent, if the new law provides for audi a surtax, and the surtax may be higher; while the 'Liberty bond,' bearing 3 per cent not, which will bo made higher if fu ture bonds are offered at a higher rate, does not have to bt. oven mentioned in an income tax re turn. This double valiu gives an undue advant age to the large holder. For this reason, bonds thus exempted will finally find their way into the vaults of the very wealthy. This is not good public policy, and it is unfair. It is both unfair and bad policy to oxempt any kind of productive property from taxation. If it is too late to re move this exemption from the first bond issue, it should bo removed from future issues. "Mr. Otto H. Kahn, a prominent financier of New Ycrk city, figures that, according to the in come rates as flxedSJu the war revenue bill as It passed the house of representatives, invest ment in 3" per cent Liberty bonds is equivalent to investing In taxuble security according to the following table: Per ceut 52 in respect of Incomes over....$ 100.000 B.38 In respect of incomes over... 150,000 5.93 in respect of incomes ovei . . . 200.000 6.45 In respect of inco nes over. . . 250.000 7.07 in respect of incomes over... 300,000 7.82 in espect of incomes over... 500,000 8.75 in respect of incomes over... 1,000,000 8.97 in respect of incomes over... 1,500,000 9.21 in respoct of income over... 2,000,000 "Usually, 'war taxes' disappear very soon after the cessation of war; but the war debt remains, tc be paid largely by the returning soldiers and their descendants. When this war ceasea we. may expect sucn unusual taxes as excess profits tax, munitions taxes, etc., to be removed, for tho very gcod reasons that there may be no more excess promts, and that munition manufacture will gre?.tly decline. But huge private incomes will not cease. The 'war' income tax should re main until the 'entire war debt has been paid." grade school boys." See Congressional Record for May 22nd, 1917, pages 2960 and 2961. He has also used that expression in his correspond ence with mo. It is a great satisfaction to me to observe that the senate finr.nce committee re moves that defect in its recent report. Now it is important that tho income tax ex emption should be removed from all future bonds issued by the United States; else theso bonds in future years (they can not be paid nor readjusted under fifteen years the time should have been five years at the longeet instead of fifteen) will drift into th hands of persons with largo private! incomes' in order to escape sur taxes on their income's.' The value of ithe recent Liberty (3 per cent) bonds to such persons has bee figured out by Mr. Otto H. Kahn and is given on the page above referred to in Equity and marked therein. This is somewhat startling. When we think of our tremendous indebted ness at the end of this war and the means, for paying the interest and repaying the debt, we meet at once with the problem of taxation. The excess profits tax will no longer then be pos sible because the excess profits will have disap peared with the war and possibly before. The usual internal revenue Sources will have greatly diminished owing to the greatly diminished con sumption of alcoholic beverages. The two chief sources remaining will be sur-taxes on large in comes and the undemocratic taxation of con sumption. The surtaxes on large incomes are already seriously crippled by the issuance of the Liberty bonds and the Farm Loan bonds with income tax exemption. If the future bonds are issued with income tax exemption the sur-tax on large incomes in order to pay the interest and principal of the war debt will entirely dis appear as a means of revenue for that purpose or for tny other purpose. A great mistake has been made. It seems that the . vernment, parti 3ularly your branch of the government, is about to continue this great mistake on an even larger scale., I hasten t" you with this warning and with on urgent suggestion that all future bonds of Ahe United States be issued without income tax exemption. The existence of productive property in, pri vate hands, tax free, is a great evil to any gov ernment. Particularly is this true qoncerning income tax exemption on the obligations of the United States government at the present time. Very sincerely yours, C. F. TAYLOR. LETTER TO THE SECRETARY OF THE TREASURY Following is a copy of a letter bearing on his subject which was sent to Secretary of the Treasury McAdoo by Mr. Taylor: Philadelphia, July 25, 1917. (Hon. William G. McAdoo, Secretary of the Treasury, Washington, D; C. , My dear Sir: I fear that the democratic prin lple embodied in the recent income tax amend ment, is in jeopardy concerning the sur-tax on large' incomes, the very feature of the income tax that we most value. Two billion United States "Liberty" bonds, ijhave been issued with income tax exemption. The Farjbi Loan bonds (4 per cent) have also ibeen issued with income tax exemption. We are now facing another largo bond issue and if the income tax exemption continues on these bonds this administration will receive severe criticism and. condemnation in yejars to come. I am enclosing July Equity opened and marked at the place (pg. 129) where my recent refer endum to the economists of the country on fi nancing the war begins. I wish to call your at tention particularly to tho" marked portion of this report on, page 136. The defect, there .men tioned, in the present income tax makes sur taxes on large incomes payable practically only every second year; and this defect has enabled Congressman. Edmund Piatt to class those who a.vor. sur-taxes on large incomes with "fourth DEMOCRATS IN THE LEAD To The Commoner, Lincoln, Nebr. On June 20 the dry republicans of the state held a convention at Columbus to consider er and determine whether or not they shall or ganize as dry rupublicans. On the same day the executive committee of the Democratic Dry Federation held a meeting to put the finish ing touches to their organization. We are not informed as to whether the demo cratic committee planned to have their meeting on the same day that the dry republicans meet, or whether, the two meetings occurring on the same day is a circumstance which is usually catalogued as a "strange coincidence." But, be that as it may, the fact that the executive com mittee of the Democratic Dry Federation meets to" complete their organization on the same day that the dry republicans meet to start their or ganization is a contrast a contrast that marks well the characteristic progressiveness of the democrats. Probably the democratic committee will fe licitate the dry republicans upon their decision to organize. It is well that they should; and who can gainsay their right to do so? In 'fact, they may do so with all tho satisfaction of pre ceptors for have they not shown the dry re publicans the way? It wus on April 12 that the dry democrats held their convention and decided to organize. Two months and eight days after the dry demo crats organize the dry republicans follow suit. Not only have the democrats taken the lead in the fight for prohibition in Ohio, but they have acquitted themselves as well, if not better, in other states and In the nation. Of the twenty-five dry states, eighteen of them are in the democratic column. After repeated efforts, extending over a period of fifty years or more under republican administrations, to vote the District of Columbia dry, the temperance forces had to wait for a democratic congress to pass the law and a democratic President to sign it The two attempts to pass tho Webb-Kenyon bill under republican administrations failed the one attempt under a democratic administration succeeded the Webb-Kenyon bill, prohibiting the Shipping of intoxicating liquor into dry ter ritory, is now the law. The postal regulations under republican administrations never prohib ited the sending of papers and periodicals car rying liquor advertisements into dry territory but these advertisements are now barred from the mails thinks to the democratic adminis tration at Washington. It does look as though the democratic party has pre-empted the tem perance field of all honors. It is time that our jcepublican brethren'got started. But to return to the two state organizations It will be recalled that it was William J. Bryan who first suggested that the drys o'both parties organize. It was expected that tho democrats would act upon it, but now the members of the party that has bought for years to destroy him do likewise. What a tribute to his influence! What 'a demonstration of his leadership! Cer tainly it is great to be a democrat and a dry one WM. P. HALENKAMP, Sec'y. -V Democratic Dry Federation of Ohio, Columbus, Ohio. Politics in Germany From The American Review of Reviews for August. , If Americans do not understand clearly why the German chancellor, Dr. Theobald Theodor Frederic Alfred .von Bethmann-Hoilweg, was obliged on the 14th of July to retire from the post which he had held for exactly eight years, they may at least console themselves by the re flection that the German public was also much bewildered about it, and the German press in terpreted it in a variety vof ways. The Reichs-'-ag, which is the popularly elected parliament ary body that represents all Germany, has no direct control over imperial policies', but has im portant indirect influence over policies' through its tfdwer to giv6 or Withhold the money that pays the public bills. Furthermore, it is a na tional debating sqciety and its discussions bear importantly upon the shaping) of. German opin- ion. For although Germany is not as completely governed by public, opinion as England or the United States, it is useless to deny that so in telligent a country as Germany is in the last resort controlled by the dohiiiiating sentiment of its people. THE REICHSTAG PEACE PROPOSAL For some time past, there has been a steadily Increasing clamor in Germany for peace at al most any price except that of dismemberment and humiliation. Large and important groups in the Reichstag, ordinarily out of sympathy with one another, have been coming together on the platform of peace along lines that Russia and the United States might regard as reason able. Thus the Catholic element, known as the Centrist party, and the social democrats , these two groups being much the largest of the ' eight or more distinct parties in the Reichstag were able to agree upon a peace resolution and to secure the support of a third group called the Radicals the three groups thus brought to gether constituting a large majority of the total chamber. The strength of the three parties sup porting the peace resolution was reported as follows: Socialists 107, Center 91, Radicals 45, making a total of 243. The rest of the Reichs tag consisted of National Liberals 45, Conserv atives 44, and the so-called German party 27, these three groups being devoted to the idea of a "Gorman peace' based upon victory, annex ations, indemnities, and German dominance everywhere. Besides these there ar 20 Inde pendents and a group of 18 Poles. The peace resolution of the majority parties was so im portant that we must quote it here in full. It is as follows: "As on Augu. 4, 1914, so on the threshold of the fourth year of the war the German people Btand upon the assurance of the speech from tne throne 'We are driven y no lust of conquest. "Germany took up arms in defense of Its lib erty and Independence and fo? the integrity or its territories. The Reichstag labors for peace and a mutual understanding and lasting recon ciliation among the nations. Forced acquisi tions of territory and political, economic, an financial violations are incompatible with sucu a peace. "The Reichstag rejects all plans aiming at an