Refund Publicity

Big money cannot be handled in the dark without stirring some people's suspicions. To dissipate suspicion, President Hoover, by executive order, last week, lifted the curtain of secrecy from the Treasury's income tax operations, sufficiently to reveal the important details of all tax refunds above $20,000. It was a move long demanded by progressives and Democrats in Congress and as long opposed by Secretary of the Treasury Andrew William Mellon. The White House ordered the new policy; the Treasury obediently executed it.

Secretary Mellon, after the 1924 experiment, has disliked tax publicity. Last February the Senate was agitating publicity for tax refunds in the first deficiency bill.* Charges had been made that Mr. Mellon's department had secretly doled out large sums in the dark to a favored few. Mr. Mellon wrote to Senator Warren, Chairman of the Senate Appropriations Committee, reviewing the "gauntlet" which tax refund claims had to run in the treasury. Said the Secretary:

"This system completely and adequately protects the Government's interest. With this picture of the procedure in mind it is difficult to see the exact point at which a public hearing could be properly injected. ... I respectfully urge that the provision for a public hearing on these matters be eliminated [from the bill]. . . . Whether the final decision of the Department should be a public document presents a somewhat different problem, though it would seem such action is open to most of the objections above enumerated."

Congress nevertheless passed the bill containing, in modified form, a refund publicity clause drafted by Tennessee's loquacious Senator McKellar. So soon as Herbert Hoover became President, Senator McKellar attacked the reappointment of Secretary Mellon with a resolution directing the Senate's Judiciary Committee to enquire into Mr. Mellon's fitness-for-office.

This inquiry is not yet afoot, but President Hoover last week called his Treasury chief to the White House and told him what he wanted in the way of tax refund publicity. Mr. Mellon returned to his office, wrote a letter to the President recommending what the President had explained. Mr. Hoover then signed the necessary order.

The new policy will give the public "the amount of the over-assessment, a brief summary of the facts and a citation of the applicable statutory or judicial authorities." More important, it will create a new set of public precedents governing tax refunds, which will help to guide taxpayers through the maze that is the Internal Revenue Bureau.

Secretary Mellon said he took the action because of "unexpressed Congressional policy" and added: "The publication of the decisions will . . . show conclusively that the Treasury has nothing to hide, that there .is nothing mysterious about tax refunds."

The political wisdom of the new policy is obvious. It robs the anti-Mellon group in the Senate of their most tangible excuse for attacks on Mr. Mellon, of which the real motives have been partisanship and personal bitterness. Michigan's Senator Couzens, a stout Republican, yet long Mr.Mellon's bitterest antagonist, admitted the order was "an advance" and twitted the Secretary on his changed position.

Mr. Mellon's next notable act was to issue a statement which, had the Congress been in session, must have raised the roof of the Capitol. Said Mr. Mellon: "This is a good time for the prudent investor to buy bonds. ... It is easier to pick out sound bonds than sound stocks" (see BUSINESS, p. 49).

What Mr. Mellon's purpose was in this (for him) extraordinary remark, remained a mystery. Perhaps he wanted to let Senators McKellar, Couzens et al. know, in a delicate way, that the Secretary of the Treasury was still quite sure of himself. Or, perhaps again, he wanted to bolster the Federal Reserve Board's campaign against stock speculation loans. Or, perhaps a third time, there was a connection between the statement and the condition of U. S. Government bonds. The Treasury's quarterly financing of March 15 had been barely oversubscribed despite an interest rate of 4 3/4%. A $475,000,000-issue had brought subscriptions of only $523,000,000. And just before Mr. Mellon's bond-boosting statement, three issues of U. S. bonds had touched their all-time low.

*More than $2,000,000,000 in taxes have been refunded or credited since 1921. More than $1,000,000,000 in tax refund claims are now pending.