New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1869-02-01
cApIrAL Used IN BANKING.

THE TRIBUNE has already called attention
IN the fact that Mr. Assessor Webster has raised
the question whether the Bankers of this city
ara fully complying with the law IN tile
montbIv returns made and tax paid by them
on the amount of capital which they seyeraly
employ One thing is certain that the treas
ury has received q very moderate income rom
this source, and as the Government must have
money, it is but just that the taxes should 1all
where, as in this case, they can be most easily
borne. The class principally affected by the
ouestion in dispute is composed of merchants
and bankers who operate extensively in tins
market upon foreign capital, and by means OF
bills of exchange make available huge vol
ume of money on either side Of the Atlantic,
os NAV for the time being be considered most
profitable. OF these dealers there are two classes
first, branches or agencies OF great European
houses; and second, local houses with COM
paratvely moderate capital, but who, on the
strength Of private character and resources, are
able TO establish an extensive credit abroad
Now when demand is made for return ana
payment of tax upon capital employed, the
first class answers, 1--WE have no capital-we
" are merely agents. The second class deduct
from their nominal capital the amount OF Gov
eminent securities held at the moment; and, as
many of these dealers have, not uDfrequently,
n very large amount of these securities on
hand in the regular course of business, the bal
ance of taxable capital exhibited is more mod
est than profitable.
The question is, Do these houses make
correct returns, OF are they evading the lawi
What is the meaning of the phrase capital
io into nf COnOTpgg
seems sufficiently plain to be easily under
stood The first act leyying tax upon the
capital of banker was passed June 80, 1854.
The language there employed was: "A duty
" of one-twenty fourth of one per centum each
month, as aforesaid, upon the average
"amount Of the capital of any bank, associa-
Z" ton, company, or corporation, or person en-
gagged in the business Of banking, beyond
"the amount invested in United States bonds.'
This law was found 20 be imperfect in two
respects: 1st. For purposes of taxation, IN
corporated companies and private individuals
| were placed on the same footing, IN some re-
speets to the great advantage of the latter,
especially when dealers in foreign exchange.
| Cd. BY allowing a deduction of the amount IN
vested in United States bonds, it was perfectly
easy for a banker in good standing to borrow
or carry for single day, while he made his
monthly return n sufficient amount OF these
! bonds to avoid serious taxation 1t is perhaps
needless to say that while this act was in force
no question like that now under discussion
could have been raised, because the context
clearly shows that the same rule was to apply
in determining the taxable capital of the
| incorporated bank and the private banker
But it appears that Congress, noting the
| failure of this portion of the act to provide
revenue, made important amendments in the
Act of July 10, 1866. Observe the distinctive
difference in the language employed: a tax
"of one-twenty-fo of one per centum
each month as aforesaid upon the capital of
" any bank association, company, or corpora
ton, and on the capital employed by any person
" in the business of banking beyond the arer-
age amount invested in United States bonds"
! Here we sec that clear distinction is made
between the taxable capital of the Incorporated
company and the private banker; and that the
latter could no longer, in making his monthly
return, deduct the gross amount of bonds held
at that time, but only the average amount held
| for the month
An Incorporated institution has a capital de-
termined by law, is auth orized to issue circu-
| lation, and to receive deposits, each of the
three contributing to the support of the Gov
eminent; and although in process of time
| surplus of profits may accumulate, there can be
no sudden and heavy increase OF decrease, by
| its own will, of its available assets, nor any
great variation in the amount of its monthly
| tax But private banker, and more especial
| " dealer in foreign exchange, or branch Of
European house, may at pleasure bring into
the market an immense amount of money,
lending it and using it in every way recOg-
nzed rs banking and in the case of branch
house without showing upon their books any
capital whatsoever TO the credit of the resident
partner or agent. These parties have hith-
erto claimed TO DO taxed only in the
manner of incorporated banks, and have conse-
quently thus far avoided the payment of any
considerable amount. But it is urged that this
claim is not we'll founded An incorporated bank
Ia taxed upon the capital it owns The general
meaning attached to the term capital of
"bank" is without question. BY law tax Is
| expressly imposed on the capital employed by
private banker. There is no reference or
understanding that he is the owner BY express
enactment after two years Of trial, Congress made
this marked distinction between the taxation of
individuals and corporations. Thepe centage of
tax (one-half of one per cent year) is by no
means excessive, but a just and proper cOntribu-
ton to the support of the Government, and we feel
confident that the law is in no sense dubious OF
uncertain, and that It's careful examination will
convince the authorities at Washington that
all capital brought into this market for pur-
poses Of banking whether owned by the man
Il 4 ~