TAX-EXEMPT STATE LOANS.

Hawke's Bay Tribune, Volume XIII, Issue 284, 16 November 1923, Page 4

TAX-EXEMPT STATE LOANS.

When, during the war, it was ventured in these columns to criticse the plan introduced and maintained by Sir Joseph Ward of issuing practically all our war loans upon a taxfree basis, we were faced by his admirers pointing to the fact that America, on coming into the conflict, adopted the same method. To this we replied that it would probably not be very many years before the United States Government would realise with regret the mistake it was then making—a mistake in which it has persisted ever since with regard to later issues not only of Federal loans, but of State and municipal borrowings also. The time predicted, it would appear, has now come, for according to exchanges recently to hand the American Secretary to the Treasury, Mr. Mellon, has stated that the declared taxable income of persons each reporting over 300,000 dollars had decreased from 710 million dollars in 1916 to 229 million dollars in 1920, and, it is added, that figures for more recent years, when available, will continue this tale of decreasing return from heavy taxation upon people who have means to escape. The total of American tax-exempt securities to-day is not far from 12,000 million dollars, and is increasing at the rate of 1000 million dollars a year. How the number of rich individual taxpayers has shrunk under the system which exempts so much from taxation is seen from the fact that in 1916 6633 persons had taxable incomes of 100,000 dollars or over, while in 1921 the number was only 2352. In 1919 individuals with net incojnes of 100,000 dollars andover derived 756 million dollars of their total taxable income from property. In 1921 the same class of individuals received about 420 million dollars of their total taxable income from that so.urce. What is the explanation! the “Los Angeles Examiner” asks. It does not mean that the rich had smaller incomes in 1921 than in 1919; it means that many great fortunes have been “slackers," taken out of productive industries or commercial interests of some kind, and put into State, or municipal, or farm land bonds that cannot be taxed. One of the large American fortunes, that of the late William Rockefeller, when inventoried to assess death tax in August last, was found to contain 44 million dollars in nontaxable securites. Mr. Rockefeller, a director of 50 corporations, had withdrawn this great fortune frombusiness. A heavy income tax was the sole cause. He merely exercised his legal rights, as so many rich men have done and are doing. The United States Treasurer at length realises, a little too late it may be thought, that the system requires reconsideration in the interests of the general body of taxpayers. There can be no doubt whatever that in our own little country we are suffering, though, of course, in a much minor degree, from the adoption of this so easy, and therefore tempting, method of raising money for public purposes, and Mr Massey has shown sound judgment in setting about the buying up or redemption as speedily as possible of the tax-exempt securities issued by his predecessors in office at the Treasury.