Cleveland daily leader. [volume] ([Cleveland, Ohio]) 1865-1873, 1865-11-30
Shall Foreign Capital he Exempt from
tn ~nffOn

A decision has been rendered in the
United States Circuit Court, in session at
Baltimore, Chief Justice Chase and Judge
Giles on the bench, which is of the great
est possible interest to taxpayers in the
United States. We publish elsewhere a
Il statement of the case, and The main
points in the decision of the court, as re-
ported in the Baltimore ConamerciaL. The
Internal Revenue act, section 122d, sub
jects call railroad, canal, turnpike, canal
navigation or slackwater companies to a
duty of five per cent on all interests and
diUidends derived from their bonds or
shares, and authorizes them to withhold
that amount from bondholders and share
holders, and make payment to govern
ment q discharge to that extent from pay
ment to Them Hitherto, this provision
of the law has been held to apply to citi-
zeas and aliens, residents and non-resi-
dents, alike. a British subject, residing
in ireland, brought the suit in question,
Central Railroad
Company to pay over to him an amount
withheld under the foregoing clause
in the revenue law. The court
held that, taken independently, this sec
! ton Of the lav-wUuru rHPusv ar"N upon
xary with American stockhold-
ers but That the VarIO,- sections were TO
be construed collectively, anl A. other
sections were made to apply speclalv 70
citizens of and residents in the United
States, the inference was that only these
classes were. contemplated by the trainers
of the statute. We do not claim the pos
session of sufficient legal lore to review
the ruling of the court; but we are quite
sure the American people will protest
against exempting from taxation the i'm
mense foreign capital sent hither for in
vestment. A common-sense view of the
subject had led the masses to believe that
the clause requiring corporations to with
hold the tax from bondholders and pay it
directly to the government, was inserted
solely with a view to reach foreign bond
and shareholders. There would be no
necessity for such provision were all the
parties amenable to taxation residents of
the United States, for they could then be
reached by the ordinary mode of collect
ing the revenue; but by no other means
could foreigners with American invest
ments be reached. The court, however,
ruled otherwise, and held that this section
-seeminglyof a special and exceptional
character-should be interpreted in the
light of the provisions of other sections.
There is no valid reason why foreign
capital invested in American corporations
should be exempted from taxation, any
more than similar investments of Ameri-
can capital Some of our railroads are
largely owned by foreign capitalists, as is
the case with the Atlantic and Great West
ern, the New York and Erie and the Hi
nOis Central. There is no reason why the
members of such corporations, receiving,
as they do, the protection of the govern
ment, and reaping all the advantages of
cur laws, should enjoy an exemption from
Federal taxation, whilst other corporations
Of a similar character, composed of Amer
lean citizens, are taxed to the full extent
of the law. Some one has Numbered. If
the court is right, then is Congress wrong.
If the trainers of the statute perpetrated
such a stupid blunder, it is to be hoped the
will be speedily amended. Should
the verdict Of the Circuit Court be affirm
ed by the Supreme Court, then must the
law be construed IN the light of this decis-
sion, in which case the only remedy would
be found IN an amePdment of the act. In
event can u government afford to
IN hT"U7Vf n7rvfSH ooPTudItsUs
TO the detrlment of our w taxpayers,
and we hope the matter will receive the
early attention of Congress.