Word: tax-exempt
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Dates: during 1923-1923
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...Ford, however, agreed to lend Detroit the money it needed at 4%, and $500,000 is reported to have been already advanced. By so doing, Mr. Ford, of course, acquires tax-exempt securities on a reasonable basis, and thus removes a considerable amount of his future income from the tax-gatherer's reach. This fact, however, is quite disregarded in the publicity given Mr. Ford as a new rival to the financial center...
...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...
...vice of the situation lies in the existence of high surtaxes in conjunction with the continued issuance of tax-exempt securities. Adoption of a constitutional amendment to restrict further issues of tax-exempt securities, coupled with legislation closing the gaps in the income law, is a final but far from immediate solution. And it will not eliminate tax-exempt state and municipal bonds now outstanding. Awaiting their retirement will postpone the date of complete solution. Only reduction by Act of Congress of the surtax rates to a level at which the inducement to invest in tax-exempt securities becomes negligible...