tax.

Such a minimum standard deduction would benefit millions

of families, mostly wage earners, who are now being squeezed between the pressures of inflation and an unjust tax burden. The minimum standard deduction of $1,100 would modestly assist most of these overburdened taxpayers with incomes up to $11,000. The Tax Reform Act of 1969 (H. R. 13270) adopted this

part of the reform package which the National Committee on Tax Justice had proposed. That provision goes far in meeting the objective of the reform of the NCTJ to remove from the tax rolls persons who fell below the poverty line income figures. It has been estimated that close to six million poor persons who now, despite their impoverished state, pay federal income taxes will be relieved of that inequitable burden.

A second step taken by the Tax Reform Act of 1969 which we support is the raising of the standard deduction to 15% with a $2,000 maximum. That long-needed liberalization of the standard deduction provisions, along with the new minimum standard deduction, will provide much needed tax relief for low and middle income families. That too was an important component of the reform advocated by the National Committee on Tax Justice, and we urge its retention by the Senate.

Among the special provisions that favor the wealthy and which must be corrected if we are to have a fair tax system, are the treatment of capital gains and percentage depletion allowances, the handling of charitable contributions, provisions relating to interest-free bonds of state and local governments,

fictitious farm losses, and a range of tax favors which cor

porations enjoy.

Capital Gains

There can be no basis in equity for giving specially favorable treatment to money which has been gained on the stock market or through other forms of speculation, or even by sound long-term investment, as compared with income which a man has earned by the sweat of his brow.

-If long-term capital gains were taxed as ordinary income is, we recognize that there might be some inequity when a very large appreciation is realized in any one year. This could be dealt with through an extension of the averaging provision, which would allow the taxpayer to average such amounts over a longer period of years.

A particularly inequitable loophole in the law is the provision that if assets are held to death, any appreciation that has taken place is wiped out at that point for capital gains tax purposes. This seems to us completely unjustifiable. We support the proposal that such appreciation should be taxed

in the same manner as any other long-term capital gain.

In light of the estimated $10 billion in tax revenues which escape through the preferential treatment of capital gains--by far the largest single loophole--the changes recommended in the Tax Reform Act of 1969 are incredibly limited. They recoup only a tiny fraction of the revenue lost and leave

completely intact the capital gains transferred by gift or

death.

Making a Profit on Property Contributed to Charity

Several highly technical loopholes permit wealthy persons in some cases to make a profit out of a charitable donation-that is, the taxpayer is actually better off after making the gift and taking a corresponding tax deduction than he would have been if he had sold the gift, retained the money himself and paid the appropriate taxes on it.

We support the Treasury proposals designed to prevent such a taxpayer from not only forcing his fellow taxpayers to completely subsidize his charitable giving, but to pay him a

profit on it as well.

Interest-Free Bonds

Failure of the federal government to tax the interest on bonds issued by state and local governments provides wealthy persons with still another tax haven. Such bonds carry a very low interest rate--typically about three percent--which makes them uneconomic for the ordinary taxpayer to purchase. But

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since the interest is nontaxabl, it is wort: much more to the top-bracket taxpayer than a much higher rate of interest that would be taxable. Another aspect of tax exempt interest on state and local bonds relate to industrial development bonds. The situation is inequitable enough when it is merely a matter of a ompany which is deciding where to expand its faciliti . But one injustice is piled upon another when the device is used to lure a plant away from a town in which it is alry located. The local government which does this is

stealing a ay anothe

town's economic lifeblood, depriving wor

kers of their jobs and the whole ton of its economic security-and taxpayers, through the exemption, are paying to have

it done.

We pro

se that the privilege given state and local gove ments to issue tax-exempt bo..s should be ended im dia.ely. The federal government should be giving more financial aid to state and local governments, but it should be done directly, not by tax devic

Proper safeguards should be devised so that the equity of taxpayers currently holding bonds with tax exempt status be protected.

Fictitious Far Losses

Farming is probably the only industry in this country where the biggr year income is, the bigger your losses are. This is because of loopholes in the law regarding taxation of income

Om farming operations, which enable so-called "gentleman armers" with large nonfarm incomes to show factitious paper os es on their farm operations and charge them up against heir non farm income.

By taking adv ntage of those provisions, taxpayers with large nonfarm incomes are able to show their actual pital expenditures on the farm as apparent losses, which are then offset aga'st nonfa a income at a large tax saving. At a later period, the asset so created can be sold, and taxed only capital gain at a much lower rate.

as

We consider Senator Metcalf's proposed remedy (S.500) which limits the amount that may be deducted from nonfarm income while at the same time protecting the gemine farmer who may also have an off-farm job, to be sound,

Percentage repletion Allowances

The treatment of depletable resources urgently needs r vision. The preferential tax treatment applies primarily to the oil and gas industry, though some other industries base on depletable resources do get favored tax treatment also.

No other industry, however, has succeeded in getting so many tax favor or making so much out of them as th oil compani s. They are permitted to charge off intangible drilling costs

as a current rather than a capital expense.

Ty are permitted a so-called depletion allowance which

is not really a depletion allowanc at all, but a direct tax