CHAPTER V 
TAX EXEMPTION IN RELATION TO PRIVATE 
FINANCING 
The next argument to which we must give atten- 
tion is the claim that the exemption of certain 
securities from taxation causes a scarcity of capital 
for those enterprises which do not have the benefit 
of the exemption. During the period of tight money 
from 1919 to 1921 this argument was especially 
popular. Its force has been greatly reduced by the 
persistent ease which has characterized the money 
market ever since the summer of 1921; yet as re- 
cently as September, 1923, Representative Ogden 
L. Mills stated the point as follows: * 
Is there any need to point out that we are driving 
liquid capital needed for production into unproductive 
channels? Let me give you one illustration that came 
to my attention. A man I know had half a million dol- 
lars of bonds of an industrial corporation paying 5 per 
cent and selling at 85. By selling the bends, taking a 
loss of 15 points, and investing in New York City 414 
bonds due in 1917 at 106 that man would make in the 
course of the life of the bonds $226,000. If instead of 
buying New York City bonds due in 1971 he bought farm 
loan bonds callable in 1932, that were at the time selling 
! Proceedings of the National Tax Association, 1923, pp. 337-8. 
102