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HERE seems to be the feeling on the part of some investors that the changes proposed in the Federal tax laws will result in lower prices for municipal bonds and therefore that it would be well to switch from such securities at this time. The newspapers recently reported "a moderate wave of selling" of tax-exempt bonds. And, among others, a doctor in the West owning $95,000 of bonds, of which $40,000 were city and county issues of his own and neighboring states, wrote to this magazine to ask if he should not sell that part of his holdings and reinvest the money in other classes of securities.

But before one exchanges municipal bonds for other securities it would be well to take into account the difference in degree of safety that exists between them and most other bonds; and then it would be well to give more careful consideration to the probable effect of the proposed tax changes on the prices for these bonds. It is possible that it may be entirely different from what is expected by some investors.

It was stated in the papers that the "wave of selling" referred to was due to the belief on the part of owners of municipal bonds that the proposal to make the interest from such bonds subject to the Federal income tax would be retroactive and apply to outstanding bonds as well as to future issues. That would be a violation of the contract rights of the holders of these outstanding bonds; and, as a matter of fact, there is no intention of making the constitutional amendment, which is necessary to provide for this taxation, apply to any but future issues of such bonds.

If an amendment of this sort is approved by the legislatures of the requisite thirty-six states, its influence on the

price of outstanding municipal issues will more likely be exactly opposite to that feared by such owners of these bonds. For it would limit the tax-exempt issues to the amount now outstanding, and this amount would be steadily reduced by maturities among the present issues. If the demand for them for the purpose of reducing income tax liability continued, their price could therefore be expected to advance.

The other proposal of Secretary Mellon for reductions of the surtax rates on large incomes may, however, have the effect on outstanding municipal issues that these holders fear. It is to these changes that attention should be directed at this time. They may be made effective by the next Congress, while the constitutional amendment is a more remote matter-there are many who believe the states will never approve it. Its opponents quote from Mr. Charles E. Hughes's annual message as Governor of New York State in 1910, when he said: "To place the borrowing capacity of the state or of its governmental agencies at the mercy of the Federal taxing power would be an impairment of the essential rights of the state." It is this opposition to further infringement of states' rights that is expected by many to result in the defeat of this amendment if it is presented to the states for ratification.

Returning to the more immediate prospect of the effect of reductions in the surtax rates, one can see that if these are lowered to the point where the net income left to the investor from taxable securities seems to him sufficient to compensate for the risks therein, he will be less inclined to buy or hold tax-exempt securities. In other words, he will be encouraged to take the risks involved in taxable enterprises. But to attempt to

reach any conclusion as to how much shifting in present investments this might cause one must first know how many tax-exempt securities are held for the purpose of reducing tax payments.

Unfortunately there are no figures available on this score for later than 1920. The income tax returns for that year required individuals with incomes of $5,000 or more to furnish detailed information as to their tax-exempt income. In that year such income amounted to a little more than $105,400,000. Assuming that this came from securities bearing an average interest rate of 4 per cent., it represented holdings of of approximately $2,120,000,000 of tax-exempt bonds by these individuals. About one third of these were held by people having incomes of $5,000 to $20,000, for whom the reductions in the surtax rates will make the least difference; and less than one. fifth, or approximately $400,000,000, by those having incomes above $300,000the ones who now enjoy the most advantage from ownership of tax-exempt issues, and who would probably be the most likely to switch into taxable securities if the reductions in the tax rates are sufficient to make the latter attractive to them.

But there are offsets to the selling that may come from these people of large incomes that make it difficult to reach a definite conclusion as to what the effect on municipal bond prices is likely to be. In the first place, there is a steadily growing demand for investment securities in this country. The number of investors is many times what it was before the war, and it would not be surprising to find that the demand on the part of new investors for municipal bonds after they are known to have a natural market will send them to higher prices than those at which they are selling to-day. The general trend of long term interest rates is still downward, which will help along an upward movement in the price of municipal as well as other bonds. Furthermore, the output of new municipal issues is not likely to keep up at the high rate of recent years. The pinch of mounting

local taxes is being felt and voters are not likely to be as free with their authorizations of new bond issues as they have been since the war.

A good part of the selling of municipal bonds by large investors will probably take place gradually and the greater part of the selling immediately incident to the passage of lower surtax rates will very likely be done before the passage of the law. And smaller holders of these bonds who sell because they think their bonds are going to decline in market value may find that they have only those of their own kind for company. They will have parted with one of the safest portions of their investment lists, and they may find that they cannot replace these bonds for any less than they sold them for.

The Western doctor did not specify in his letter what had led him to think of selling his $40,000 of municipal bonds. He simply said, "I am wondering if it would not be wise to sell my municipals and reinvest in long term low rate bonds of high grade-industrial, railroad, and public utility." In reply to him it was written that he could probably get a return of at least 1 per cent. more by making this change and that the prospects for still farther advances in prices seemed better in low interest rate corporation issues than in municipals; but it was pointed out that he would be sacrificing a certain degree of safety in his investments in making this change. He would be substituting for issues that have the unlimited taxing power of cities and counties back of them issues that depend on the stability of individual businesses for their continued interest and principal payments. He would also be restricting the diversification of his investments, for he already had a considerable amount of corporation bonds.

The problem that he presented is one that each investor must solve for himself. It is the question of giving up a degree of safety for a higher return. for a higher return. But to owners of municipal bonds who are concerned regarding the future value of their holdings it can be said that there is not likely to be much if any depreciation in their value.

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FEW months ago, in an article dealing with investments for women, the remark was made that if they were along in years their investment problems might be solved by the purchase of annuities from good life insurance companies. Since then several letters have been received from men as well as women asking for additional information regarding this form of investment. The following came from a man in Oregon:

I always read with interest the articles upon the subject of investments that appear in your publication, and should much appreciate it could you in the near future spare the time and space to discuss that of annuities.

I would like to ascertain to what class of

people life annuities are especially desirable, the advantages and disadvantages (if any) of this form of investment, where annuities

can be purchased and any other particulars that you might think best to give advice upon to those ignorant of this subject.

In the WORLD'S WORK for March, 1924, there was an article dealing with annuities in which it was said: "For elderly people without dependents to whom they wish to leave their money, annuities offer a safe method of increasing income without running the risk of losing both principal and income." That article quoted extensively from Mr. David Parks Fackler, the dean of consulting actuaries in this country, who is not only an authority on annuities, but a purchaser of them himself and a living example of the relative truth of the saying of insurance men that "annuitants never die."

Mr. Fackler recommended the purchase of annuities for elderly people suffering from the high cost of living. Such people are most susceptible to the appeals of fraudulent promoters, and Mr. Fackler said: "If they knew that by purchasing annuities their life incomes could be doubled

Canadian companies, which have had longer experience with annuities and whose investments are of a character that gives a higher yield, offer somewhat larger returns than these. Women get less than men because they live longer. These payments continue for life and are not subject to income tax until the full amount paid for the annuity has been paid back. If there is anything left at the death of the annuitant, it goes to the company. There are other forms than this life annuity, such as refund annuities, where some of the principal may come back to one's heirs; joint annuities; annuities to provide for the old age of both husband and wife; and deferred annuities. These latter can be purchased by younger people to provide an income starting at a later date and continuing for life. This form is particularly suitable for working women.

Many life insurance companies sell annuities, and it is possible for the person interested in this form of investment to get information from such sources. All the information the individual needs to give the company, or its agent, is the date of his or her birth.

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HE impression gleaned by many of our readers from "Prohibition As It Is" seems to be one of sorrowful disillusion. To them Rollin Lynde Hartt is completing a bitter pilgrimage that is doing little save discourage the honest faith previously entertained by a large public in the efficacy of this most discussed of amendments. Touching this opinion we have received much correspondence. It is always welcome be it on whatever side of whatever discussion involved, but we think it perhaps a little hard when a clerical gentleman brands us powerfully as the outriders of a pernicious host devoted to the chaotic dissolution of the country. A recent communication, from California, we include in our columns in no spirit save that of respect:

of his narrative of the search for the White Indians of the Darien Jungle, and Sir Philip Gibbs the third article of his story of "Tragic Europe."

It is interesting to reflect that Sir Philip, whose pen not so many years ago was among the more formidable weapons that eventually brought about the defeat of the German Empire, was only lately a fêted guest in Berlin. The dispatches of Philip, Gibbs, war correspondent, possessed in their vigorous descriptions estimates and opinions of embattled Germany that must have caused to grow in the hearts of her warriors and citizens, a strong if not violent resentment. The peaceful but lean years are now upon Germany. Sir Philip Gibbs has lost not a jot of his ability for incisive phrase and accurate observation. But the difference lies in the response. In Berlin Gibbs is fêted.

Like Doughty of "Arabia Deserta" fame and Wilfred Scawen Blunt who preferred the sands and diamond brilliance of Sheik El Obeyd in Egypt to the gentler countryside of his native Sussex, Martin Johnson, whom all readers of the WORLD'S WORK will remember as an explorer of untrodden places and notably as the man who made the wild animals of Africa act leading parts in moving pictures of his own. making, resides more or less permanently at Paradise Lake, a mysterious and fascinating bit of that dark continent. In the

April issue he tells us more of his experiences. His narrative will be accompanied by suitable African photographs. os So

A last word about our Little Read School Marm before she disappears in the cloud of correspondence that her little readiness has provoked. It may well be our last chance anyway, for it seems possible that her next appearance will be in the rôle of erudition, the part that originally she was cast to play. Dean W. F. Barr of the College of Education at Drake University in Des Moines, Iowa, is certainly the best qualified of all those who have communicated with us in her behalf, to speak of her needs and problems.

To the Editor, WORLD'S WORK.

Sir: I was very much interested in reading the little article in the December number of the WORLD'S WORK called "The Little Read School Marm," and I am writing to say that educational leaders and organizers are themselves very largely responsible for conditions that exist as they are set forth in this article.

It was my privilege a little while ago to write a letter to the Research Bureau of the Bureau of Education, calling attention to the thing that I am mentioning here, but the response, while it indicated proper interest in better preparation, did not concede that preparation is the basic thing.

There has been a plea for better salaries, for teachers' pensions, for permanence in positions, and it has been shouted from the house tops that the teaching profession can never be what it should be until in these things it can be placed on a level with other professions such as law and medicine.

Now the fact is that lawyers and doctors have proceeded in a much more business-like way than have the teachers in bringing about their recognition. Their organizations have put the pressure not on higher fees but on higher standards of preparation. They have in this way been able to put certain limitations on the number of people who get into the profession simply by making it harder to get in. With teachers this has not been the case. Whenever an effort is made to raise the standard of preparation for entering the teaching profession the chief objection that is met to such efforts is among the teachers themselves, and those who are the leaders in educational

The young man planning to enter the medical profession, must be a high school graduate with at least two years of college work, which is followed by four years of professional training and this usually by one or two years of internship.

The teacher's qualifications in most states are determined by a minimum age standard and ability to pass certain examinations making at least a minimum average grade.

We have at the present time in Iowa some thousands of teachers without positions. The same condition exists in other Mid-Western states. Naturally a very large percentage of these teachers are in the lowest scale of qualifications, but unfortunately some of those having the low standard of qualifications are able to get the positions that should go to those who are better prepared.

If one says anything about the increase of salaries, he is met with the statement that there are plenty of teachers and that many are now getting more than they are worth, which is true.

Parents do love their children. They rightly consider them the dearest earthly possessions. Parents are easily reached through a concerted plea for better trained teachers, because they will readily see that this better training means much for the children. That is a plea for the children and not for the teacher's private interest.

We talk psychology, we say that we teach psychology, but do we really practice it?

I have been teaching a good many years and have taught for as little as twenty-four dollars a month, but I do not have much sympathy for the plea that the state ought to establish minimum salaries as long as those asking for minimum salary standards object to having the state establish some reasonable minimum standard of qualification.

I appreciate the excellent articles in the WORLD'S WORK, and wish you success in the great work that you are doing.