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Editorial
December 30, 1922
The Labor World
Duluth, Saint Louis County, Minnesota
What is this article about?
Editorial criticizes Secretary Andrew Mellon's proposal to reduce income surtax rates from 50% to 25%, arguing it enables tax evasion by multi-millionaires via methods like stock dividends. Highlights Standard Oil's billion-dollar stock dividends and calls for Congress to address tax leaks and oppose Mellon's policies favoring the wealthy.
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TAXES AND MELONS.
The first concern of the multi-millionaire secretary of the treasury in making his annual report is the reduction of the maximum income surtax rate from the present 50 per cent to not more than 25 per cent. Secretary Mellon's argument for reducing the tax on multi-millionaires is that men of wealth evade taxation because of the high rates and they would not take advantage of the government if the rates were reduced.
Consider the implication of this recommendation: that multi-millionaire and their wealth are above the law and that they will only contribute to the expense of government on their own terms! Such argument is in line with a contention that tariff duties should be decreased to eliminate smuggling. Yet we know that as long as there is a tariff there will be smuggling and as long as there are taxes there will be people who evade them. Secretary Mellon's vision is apparently clouded by his own money bags.
Secretary Mellon tells of four means used to reduce the amounts of income subject to taxation:
1. Deductions of losses on sales of capital assets, with the failure to realize on capital gains.
2. Exchanges of property and securities so as to avoid taxable gains.
3. Tax-exempt securities.
4. Other avenues of escape, such as the division of property, the creations of trusts, and the like.
While the secretary of the treasury recommends certain steps to stop these leaks, he fails to mention the greatest leak of all, the stock dividend craze which has swept the country during the last month and which he, himself, inaugurated, according to the statements of financial journals. Billions of dollars of profits "are going into the pockets" of security holders of the United States without being subject to taxation by means of the stock dividend trick.
In the last few weeks the Standard Oil companies alone have declared a billion dollars worth of stock dividends. Every day increases the total. Industrial companies and financial institutions are rushing to join the procession. Instead of declaring cash dividends, the money remains in the coffers of the big corporations and nothing is available for investment in new enterprises.
Under the law fifty per cent of these profits going to multi-millionaires would be payable to the United States in income taxes. This in itself is sufficient to account for the decrease of $1,141,000,000 in income and profit taxes received by the United States during the past year. And still Secretary Mellon talks of reducing the surtax. Must the people of the United States admit that they are helpless in the hands of our multi-millionaires?
If anything is obvious, it is the fact that congress must consider earnestly every possible means of recovering some of the taxes that have been evaded during the past year. It can not longer permit the wool to be pulled over its eyes. Mellon helped to repeal the excess profits tax with a loss to the treasury annually when added to surtax reductions of approximately a half billion dollars. He opposed any tax on undistributed profits intended to reach the enormous surpluses that have been accumulating in the treasuries of the companies that have been engaged in stock dividend orgies during the last few months. He opposed any inheritance tax or gift tax that would reach gigantic mushroom estates. He is the greatest exponent in the administration of the principle that to those who have shall be given--even unto ship subsidies--and nothing shall be taken away. From those who have nothing shall be taken away even the wages they receive. Congress will be justified in considering any of his financial recommendations with suspicion.
It has come to pass, as Justices Brandeis and Clark of the U. S. Supreme Court said, in a dissenting opinion in the stock dividend case, that "if stock dividends representing profits are held exempt from taxation under the 16th amendment, the owner of the most successful businesses in America will be able to escape taxation on a large part of what is actually their income.
That such a result was intended by the people of the United States when adopting the 16th amendment is inconceivable."
But what is the intent of the people among multi-millionaires as long as they retain control of the government and its administration.
The first concern of the multi-millionaire secretary of the treasury in making his annual report is the reduction of the maximum income surtax rate from the present 50 per cent to not more than 25 per cent. Secretary Mellon's argument for reducing the tax on multi-millionaires is that men of wealth evade taxation because of the high rates and they would not take advantage of the government if the rates were reduced.
Consider the implication of this recommendation: that multi-millionaire and their wealth are above the law and that they will only contribute to the expense of government on their own terms! Such argument is in line with a contention that tariff duties should be decreased to eliminate smuggling. Yet we know that as long as there is a tariff there will be smuggling and as long as there are taxes there will be people who evade them. Secretary Mellon's vision is apparently clouded by his own money bags.
Secretary Mellon tells of four means used to reduce the amounts of income subject to taxation:
1. Deductions of losses on sales of capital assets, with the failure to realize on capital gains.
2. Exchanges of property and securities so as to avoid taxable gains.
3. Tax-exempt securities.
4. Other avenues of escape, such as the division of property, the creations of trusts, and the like.
While the secretary of the treasury recommends certain steps to stop these leaks, he fails to mention the greatest leak of all, the stock dividend craze which has swept the country during the last month and which he, himself, inaugurated, according to the statements of financial journals. Billions of dollars of profits "are going into the pockets" of security holders of the United States without being subject to taxation by means of the stock dividend trick.
In the last few weeks the Standard Oil companies alone have declared a billion dollars worth of stock dividends. Every day increases the total. Industrial companies and financial institutions are rushing to join the procession. Instead of declaring cash dividends, the money remains in the coffers of the big corporations and nothing is available for investment in new enterprises.
Under the law fifty per cent of these profits going to multi-millionaires would be payable to the United States in income taxes. This in itself is sufficient to account for the decrease of $1,141,000,000 in income and profit taxes received by the United States during the past year. And still Secretary Mellon talks of reducing the surtax. Must the people of the United States admit that they are helpless in the hands of our multi-millionaires?
If anything is obvious, it is the fact that congress must consider earnestly every possible means of recovering some of the taxes that have been evaded during the past year. It can not longer permit the wool to be pulled over its eyes. Mellon helped to repeal the excess profits tax with a loss to the treasury annually when added to surtax reductions of approximately a half billion dollars. He opposed any tax on undistributed profits intended to reach the enormous surpluses that have been accumulating in the treasuries of the companies that have been engaged in stock dividend orgies during the last few months. He opposed any inheritance tax or gift tax that would reach gigantic mushroom estates. He is the greatest exponent in the administration of the principle that to those who have shall be given--even unto ship subsidies--and nothing shall be taken away. From those who have nothing shall be taken away even the wages they receive. Congress will be justified in considering any of his financial recommendations with suspicion.
It has come to pass, as Justices Brandeis and Clark of the U. S. Supreme Court said, in a dissenting opinion in the stock dividend case, that "if stock dividends representing profits are held exempt from taxation under the 16th amendment, the owner of the most successful businesses in America will be able to escape taxation on a large part of what is actually their income.
That such a result was intended by the people of the United States when adopting the 16th amendment is inconceivable."
But what is the intent of the people among multi-millionaires as long as they retain control of the government and its administration.
What sub-type of article is it?
Taxation
Economic Policy
Partisan Politics
What keywords are associated?
Income Surtax
Tax Evasion
Stock Dividends
Multi Millionaires
Secretary Mellon
Tax Reduction
Undistributed Profits
What entities or persons were involved?
Secretary Mellon
Multi Millionaires
Standard Oil Companies
Justices Brandeis And Clark
U.S. Supreme Court
Editorial Details
Primary Topic
Criticism Of Secretary Mellon's Income Surtax Reduction Proposal And Stock Dividend Tax Evasion
Stance / Tone
Strongly Critical Of Tax Policies Favoring Multi Millionaires
Key Figures
Secretary Mellon
Multi Millionaires
Standard Oil Companies
Justices Brandeis And Clark
U.S. Supreme Court
Key Arguments
High Surtax Rates Lead To Evasion By Wealthy, But Reduction Would Encourage Compliance
Stock Dividends Allow Billions In Untaxed Profits To Security Holders
Standard Oil Declared $1 Billion In Stock Dividends Recently
Congress Must Recover Evaded Taxes And Scrutinize Mellon's Recommendations
Mellon Opposed Taxes On Undistributed Profits And Inheritance
Supreme Court Dissent Warns Stock Dividends Exempt Profits From 16th Amendment Taxation