Tax-Exempt Bonds

With further surtax and income-tax reductions apparently slated for adoption during the next Congress, the old subject of tax-free securities may lose its former significance. The National Industrial Conference Board has estimated that on July 1 last about $14,000,000,000 of such tax-free bonds were outstanding in the hands of investors-- 13.6% more than on Dec. 31, 1923, and 242% more than on Dec. 31, 1912. The July 1, 1925, figure included about $2,750,000,000 of Liberty Bonds.

Even under the reduced income and surtax rates of 1924, a taxable bond would have to yield 8.33% to net an investor with $500,000 or more income as much as a 4 1/2% tax-exempt bond. Nevertheless, the prospect of tax reductions in the near future has apparently dulled the edge of the investor's appetite for tax-exempt bonds, for sales during the first half of 1925 were less than for the same period of 1924.

Of the tax-exempt issues of the past year, 17.8% were for state governments, 14.8% for counties, 12.5% for school districts, and 54.9% for towns, cities, etc. Of all state and municipal issues put out in 1924, 27.2% were for the building of streets, roads and bridges, 30.6% for schools, 10.3% for municipal water works, 7.7% for general improvements, 6.8% for sewers, 6.3% for buildings, 5.2% for soldiers' bonus, 2.2% for parks.