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Show WHY NEW LIBERTY BONUS 1 ARE SUBJECTED TO TAXES Secretary of the Treasury McAdoo Makes Address to War Convention of American Bankers' Association at Atlantic City. By W. S. COUSINS, Editor of The American Banker. NKW YORK, Sept. 23. The iinp?tvl-lnc; iinp?tvl-lnc; L's;ie of the second Liberty loan bonds being the leading subject sub-ject of interest to bankers and business men today, in proof of which statement, one need only cite that thpy were chief topb-S of discussion at tlu: Amerlfan Bankers' association convention con-vention this week, and the war convention conven-tion of American business, last week at Atlantic City, makes of great, importance impor-tance a careful and srudlous attention to the text of an address delivered last Saturday Sat-urday evening at White Sulphur Springs, when .Secretary of the Treasury McAdoo for the fh-Ht time "explained why the fortlK'oming issue of Liberty bonds would he subject to the income supertax and liie w;n- profits and estate taxes instead of, like the first bonds, hinj exempt from all taxation, and also why the interest inter-est rule has bff-n fixed at 4 per cent. "The tv- has been seme criticism about i h b-i.-uy of the new bonds," said Mr. McAdoo. ",ome people complain that they should be exempt from tho super income in-come tav; s as well as the normal income laves. Tho difficulty about that 1b this: Wo cii.nnot finance rhis war through any ono class. 1 1 you exempt these bonds from the .supertaxes the government is compelled to pay the equivalent of an increased in-creased rate of interest on the bonds hoi:',t by men of- large means, which niv.s them a return on this bond far In excess of what the men of moderate means or the. men of small means, who pay no supertax and no Income tax, would get from the same bonds bought hy them. In effect, it means that the government, of the United States would pay to the man of large means a much higher rate of interest than It would pay to the man of small or moderate means. Not a Wise Thing. "If you make the. interest rate 32 per cent, the appeal is not so strong to the man of moderate means and of small mean.1 in t he country. If you compel them to take the low rate of Interest in order that you may induce the man with the large income to buy the bond at a very high rate of interest, you will in a measure compel the man of small means to con tribute to hia government in the way of a concession in the interest rate to enable the government to pay the man of large meann a higher rate of interest inter-est on his bond. "Tttat is not a wise thing to do. We must make a wide appeal with those bonds. We must therefore mwke the interest in-terest rate such as will justify the man of small means In putting his money Into this investment, the man who does not get any benefit from the exemption at all. "The 4 per cent rate on the new bonds Lo bo Issued will extend the field of investment in-vestment very much more widely than the 3 per cent rate on the bonds of the last issue. If we should build up ultimately through practically complete tax exemption a preferred class of people who are exempt from all taxation, the time will come when it would occasion very grave discontent. The irregularity and inequality of that system would, react re-act upon the public welfare. "Suppose the government of the United States had outstanding eventually $15,-000,000.000 $15,-000,000.000 of wholly tax exempt bonds that are exempt from supertaxes and all other taxation. The interest upon ttiat would be $600,000,000 per annum. Treats All Alike. "Before this war broke out the entire expenditures of the federal government were about $1,000,000,000 per annum, ao that move than half the expenditures of the government in ordinary times would be required in the future for the payment of interest upon these bonds. "Suppose that $200,000,000 of this sum I am taking an arbitrary sum merely for the purpose of Illustration represented represent-ed the amount which the government otherwise would collect from the imposition imposi-tion of supertaxes, what would be the result? The government of the United States would have to tax the people of the United States $300,000,000 additional to make up the deficiency which was occasioned oc-casioned by the exemption of the wealthier wealth-ier classes from supertaxes. "The basis upon which these bonds are issued gives everybody, rich and poor alike, an investment upon like terms. The supertaxes which the government imposes upon Incomes is a policy or a system which has been adopted deliberately by the American people upon the principle that those who have the most property and are most able to pay shall bear a larger portion of the burdens of supporting support-ing the government." So much for the methods to be used to raise some of t he enormous funds needed to carrv on the war. Let us now consider what U has cost us to date, and something more of the future that awaits. Big War Appropriations. In conclusion, Mr. McAdoo also revealed re-vealed for the first time that the war savings certificates to be issued In connection con-nection with the new loan will bear 4 per cent interest and will be virtually "babv" discount bonds. When Lord Nortneliffe expressed amazement at the great seal on winch everything was done in this country, an i declared that he was staggered by the ease with which the American con- ; greys voted billions of dollars for wnr purposes, he pointed out tho sharp dis-tirunon dis-tirunon between the United States and every other country in the world in the matter of wealth. The deficiency appropriation appro-priation bill just passed by the house provides cash appropriations for war purposes pur-poses amounting to $4.sr,0,000.00f, and togt-5 her with contractual authorization the appropriations total $T.144.0OO,0i)0. The vast wealth which makes these expenditures easily possible is the creation crea-tion cf the past fiftv vears. so that from the viewpoint of wealth the United States i a new country. The Amcrica m' lSt0, with a toial population of only 31,0m),u0n and a total valuation of ?H.-OfM. ?H.-OfM. noo.000, was a trifling proposition compared with the towering giant who now occupies 3,000.000 square miles of the American mainland, besides the half-million half-million square miles of Alaska and the far eastern possessions. A million men will be in the field in the near future, ! and next year it is calculated that 2.3U0.- j 000 Americans will be following the colore j across the sea. Change Is Radical. This is such a radical and unexpected change in the situation that the majority of military experts confidently look for the restoration of peace in 191S. Germany and Austria want peace. The governments of : those countries are anxious for the con- : elusion- of hostilities. They recognize the significance of American participation In ! the conflict and the certainty of over- i whelming disaster to the central em- '. pires following this accession to the war : j resources of .the allies. Undoubtedly one powerful motive which impels the Teutonic Teu-tonic empires to sue for peace is the growing fear that the United States will Insist as a preliminary condition of peace thai Germany and Austria become republics. re-publics. It has been pointed out that no treaty executed by the German or Austrian emperor could be accepted with confidence, as any such agreement would be regarded as a scrap of paper by the two kaisers. The cost of the present conflict in human hu-man life, money and material resources has been so enormous that the civilized world demands the establishment of conditions con-ditions which shall be an unimpeachable warrant that the peace concluded after this war shall mean the opening of an era of industry and commerce, continuing continu-ing without interruption for an indefinite indefi-nite period to come. It is recognized that Germany and Austria cannot resist successfully suc-cessfully the present forces of the allies, and when the new American armies have arrived on the scene further resistance on the part of the central powers will be hopeless- So strong are the allies in their determination to gain a complete victory that they will atop at nothing needful to obtain It. It is to be noted that Japan has signified her willingness to send an army of a million men to Russia, while China has 300.000 men which can be dispatched to the same field. Hope Is Forlorn. These considerations challenge attention atten-tion because they make it plain that German and Austrian resistance to the allies is a forlorn hope, and that the most the two kaisers can hope for is postponement postpone-ment of the evil day. Obviously, the longer that this, evil day is put off the worse the day will be when It arrives. Already the world is contemplating with expectant curiosity the international conditions con-ditions which will prevail when his majesty, maj-esty, George V, king of Great Britain and Ireland, emperor of India, etc., and the mikado of Japan will be the last sovereigns sov-ereigns remaining on earth and when emperors, kings and hereditary rulers of all grades have disappeared from among men, and the places thereof shall know them no more. This readjustment of th two hemispheres hemi-spheres to reforms of administrations, except ex-cept for the British empire, will constitute consti-tute only one of the changes which will distinguish the world of tomorrow from that which existed prior to August, 1314. The Industrial changes which will take place will be even more important and revolutionary than the substitution of democracy for monarchy in every country. coun-try. In the days to come America will lead the nations In supplying capital for the rehabilitation of devastated ' lands in Europe and the rapid process of modernizing modern-izing not only Mexico and South America, but also China, India and. to a certain extent. -apan, the island empire of the far east. |