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Dominion Bureau of Statistics, Internal Trade Branch-monthly average of Dominion of Canada long-term bond yields, 1919-37

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NOTE. In 1919, 3 issues were used, viz, 5 percent, 1931; 51⁄2 percent, 1933; and 51⁄2 percent, 1937. In January 1920, 52 percent, 1934, was added. In October 1923, 5 percent, 1943, was substituted for 5 percent, 1931, while in January 1926, 52 percent, 1933; 52 percent 1934; and 52 percent, 1937, were dropped and 42 percent, 1940; 42 percent, 1944; and 42 percent, 1936, were added. In January 1932, 42 percent, 1948, and 41⁄2 percent, 1949, were added, and at the end of 1932, 4 percent, 1947, was substituted for 42-percent, 1940. In January 1936, 42 percent, 1947, and 3 percent, 1950, were substituted for 5 percent, 1943, and 42 percent, 1944. This left as at present, 42 percent, 1946; 4 percent, 1947; 41⁄2 percent, 1948; 41⁄2 percent, 1949; 3 percent, 1950; 41⁄2 percent, 1947.

Dominion Bureau of Statistics, internal trade branch-Yield of representative Ontario long-term bonds, 1900-37

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Dominion Bureau of Statistics, internal trade branch-Yield of representative Ontario long-term bonds, 1900-37-Continued

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NOTE.-Yields for months of February, March, May, July, August, September, and November not obtained prior to 1920. Issues used 1934-37 were 5 percent, 1948, and 41⁄2 percent, 1950.

Prices and yields on July 8, 1937, of certain dominion, provincial and industria bonds payable in Canadian currency only

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650

DOMINION OF CANADA AND PROVINCE OF ONTARIO LONG-TERM BOND YIELDS

1919-1937.

1919 1920

1921 1922

1923

1924 1925 1926 1927 1928 1929 1950 1931 1932 1933

1954

1935

1936 37

(Averages of Representative Issues Used in Computing

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Dominion Bureau of Statistics Index Numbers of Bond Yields)

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STATEMENT OF ROSWELL MAGILL, UNDER SECRETARY OF THE TREASURY

Senator VAN NUYS. You may proceed, Mr. Magill.

Mr. MAGILL. Mr. Chairman and gentlemen of the committee, Senate Joint Resolution 5 proposes a constitutional amendment whereunder the United States shall have the power to lay and collect taxes on income derived from securities issued after the ratification of the article by or under the authority of any State, but without discrimination against such income; and whereunder each State shall have the power to lay and collect taxes on income derived by its residents from securities issued after the ratification of the article by or under the authority of the United States, but without discrimination against such income.

The Treasury Department is thoroughly in favor of the principle and objectives of this resolution. The issue of tax-exempt securities results in a serious impairment of the effectiveness of the progressive income-tax system adopted by the Federal Government and by a number of the States. A constitutional amendment of this character has been advocated on a number of occasions by the present and previous administrations. It was advocated by Secretary Morgenthau in his statement of February 19, 1935, before the Judiciary Committee of the House of Representatives. Subject to such textual changes as the drafting experts may believe necessary, I should greatly welcome favorable action on this resolution at this time.

Senate Joint Resolution 154 differs from S. J. Res. 5 in three respects: First, while it would empower the United States to lay and collect taxes on the income derived from securities issued by or under the authority of any State, it would not empower the States to tax income derived from securities issued by or under the authority of the United States. Second, it would empower the United States to tax the securities themselves, as well as the income derived therefrom.

Third, it would empower the United States to tax the incomes received by individuals as officers and employees of the States and of their political subdivisions.

I believe that two objections can be raised to this resolution: The first is that it would grant no reciprocal power to the States to tax the incomes of Federal employees, or the securities and the income derived therefrom issued by or under the authority of the United States. This would appear to be inequitable.

The second is that it would empower the Federal Government to levy taxes on the securities themselves, as contrasted with the income therefrom, issued after the ratification of the article, by or under the authority of the Federal and State Governments. In other words, the Federal Government would be empowered to levy a property tax on these securities. It is not clear to me whether the intent of this section of the proposed amendment is that the revenues from this tax are to be collected in the several States in proportion to populationin accordance with article II, section 9, paragraph 4, of the Constitution. If this is the intent, enormous difficulties would obviously be involved in the collection of the tax. If, on the other hand, this is not the intent, and if the Federal Government is to enter the field of property taxation, I am aware of no good reason why the securities of the Federal, State, and local governments should be singled out for

such taxation. Further, the adoption of the property-tax feature of this amendment might seriously impair the attractiveness to investors of obligations issued by the Federal, State, and local governments, and thereby increase the interest costs of future issues of securities by public agencies.

If the property tax feature of this resolution were eliminated, and if the resolution were altered to grant to the States the power to tax the compensation received by individuals as employees of the Federal Government and the income derived from securities issued by or under the authority of the Federal Government, I should favor the adoption of this resolution.

If your committee desires me to submit additional information I shall be very glad to hear from you.

Senator VAN NUYS. Mr. Edmonds, do you wish to make a statement?

Mr. EDMONDS. Yes, Mr. Chairman.

Senator VAN NUYS. You may proceed.

STATEMENT OF FRANKLIN S. EDMONDS OF PHILADELPHIA, PA.

Mr. EDMONDS. My name is Franklin S. Edmonds, and I am an attorney at law, partner in the firm of Edmonds, Obermayer & Robmann, 1418 Packard Building, Philadelphia. In addition, I have had the following experience in taxation.

From 1924 to 1927 I was chairman of the Pennsylvania Tax Commission which was a legislative commission to investigate and to recommend amendments to the revenue laws of the State.

From 1926 to 1934 I was chairman of the committee on uniformity and reciprocity in State taxing legislation of the National Tax Association, which was the committee which promoted the subject of reciprocity with reference to the State taxation of intangible personal property of nonresident decedents. In 1932-33 I was president of the National Tax Association.

I have considered with great interest the proposed amendment to the Constitution of the United States, and I commend its sponsor for his initiative in this matter, and I ask the members of the subcommittee to report it favorably to the whole committee and for these recommendations, I advance the following arguments:

First. This amendment was first proposed by Senator Glass when he was Secretary of the Treasury and the proposal was renewed by Mr. Andrew W. Mellon when he held the same high office. In 1922 and 1923 the resolution passed the House of Representatives, but the Senate did not act favorably upon the same. It has been endorsed by the business interests of the country as is evidenced by the position of the Chamber of Commerce of the United States taken in a referendum submitted to the membership in 1920 and by resolutions adopted at annual meetings of which the most applicable is the resolution adopted in 1924 which reads:

Constitutional amendments should permit nondiscriminatory taxation reciprocally between the Federal Government and the States on income derived on future issues of securities made by public authority.

The great weight of authority among the students of taxation is in favor of an amendment which will provide that interest from Federal, State, and municipal securities shall not be exempt from taxation

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