Word: tax-exempt
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...tendency to become unproductive of revenue, is not confined to the very highest surtax rates. The tendency is characteristic of all the surtax classes where the rate is high enough to induce evasion of the burden by investment in tax-exempt securities and availing of other methods of avoiding payment of the higher rates. The following table, which, while not official, is compiled from the official Statistics of Income published by the Bureau of Internal Revenue, shows clearly the dwindling of taxable incomes of $100,000 a year or more, and the tax derived from them. *Percent *Percent *Percent...
...such fashion and at such times as to accomplish a maximum reduction of taxable income; the exploitation of certain features of the law such as the provision contained in Section 202 of the Revenue Act of 1921 relating to exchanges of securities; but finally and most important, investment in tax-exempt securities...
...income by deduction of losses is equally possible and even more desirable as it is estimated that there is a heavy loss of tax revenue from this cause. But in this matter, as in other matters, legislation is no panacea. Ways of escape will persist, in spite of legislation, and will be availed of, as long as there is sufficient inducement. No matter what gaps are stopped by acts of Congress, the output of tax-exempt securities by states and municipalities will continue to afford an easy escape from all federal income surtaxes. This broad highway to exemption from taxes...
...Many Tax-Exempt Securities...
...dividends of 10 per cent. The average commercial bond, which is subject to normal tax as well as surtax, must pay slightly more, about 10.40 per cent to yield the same, after payment of taxes, as a 5 per cent state or municipal bond to the taxpayer in the highest surtax class. There is every inducement and ample opportunity to the taxpayer in the higher surtax class to transfer his investment funds from railroad and industrial securities to state and municipal bonds. The tax-exempt security is the occasion for the evil, but the high surtax is the moving cause...