New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1869-01-28
TlydTJOy ON BANKING CAPITAL.

TAXATTON ON BANKING CAPITAL.
Mr.. Assessor Websters efforts to compel the
bankers of Wall-st. to pay their proper proper
ton of the taxes contemplated by the Internal
Revenue laws is creating quite stir among
the Bulls" and Bears" Whatever may be
the result of the contest, the Assessor of the
XXXIId District is entitled to credit for the
resolute manner in which he has taken this
particular Bull " by the horns. The facts in the
case, as we understand the matter, are sub
stantialy these: The Act of July 10, 1866 (sec.
110) provides for a monthly tax Of lone
"twenty fourth of one per cent upon the capt.
"tal of any bank association, company, or
Corporation" and a similar tax on 1.-THE
"capitdl employed by any person in the business
"of banking, beyond the average amount in
"vested in United States bonds" Section 70
of the same act defines bankers as every in
"coIporated or other bank, and every person,
"fyn,, or company, having place of business
"where credits are opened by the deposit or
"collectiOn of money, or where money
sis advanced or loaned on stocks, bonds, bull
"liOn, bills of exchange, or prOmlssory notes, or
"where stocks, bonds, bullion, bills or ex-
"change or prOmissOry notes are received for
Discount or for sale"
Assessor Webster contends, with much force,
that, under the section first quoted, it is the
the duty of bankers to return for taxation all
the capital with the exception mentioned in
the law used or employed by them in the
purchase and carrying of stocks and bonds,
gold or bullion, for their customers, as beng
capital employed in the business of banking,
although the capital thus used may have been
the proceeds of permanent or temporary loans.
The bankers, on the other hand, contend that
they should return-that is, those of them who
cOndeseend to make any returns at all-only
the actual amount of free capital, or money,
over and above all liabilities, with which they
begin business admitting however, that any
profit not drawn out and spent at the end OF
the year, but carried to capital account, would,
by its amount, increase their taxable capital
thereafter On this theory it would seem that
n person with sufficiently good credit to Dor
row the money necessary to go into busl-
ness 1--WE have heard of such cases outside
of Wall-st and is barely possible that they
sometimes happen there would employ no capt.
tai, and should therefore pay no tax But this
is too preposterous to be seriously considered.
y
il in the banking business, to all intents and
purposes employs million dollars capital, the
same ms if he had been the lucky owner of that
million. And if it is admitted that borrowed
money used in banking is capital employed,
then we submit that it would be difficult
task to make a reasonable distinction between
long loans and short ones Shall money Dor
rowed for year and used in banking, be
& ,oth xrra1 for min
six, three, or one month, or ten days
not be So treated Suppose that Messrs
Bull g. Co., bankers, at the request
of a customer, buy for that customers account
and risk 100 shares of stock of a market value
of 500 per share the customer depCsiting, when
giving the order, margin of 10 per cent. b.
a. Co., not having the necessary capital them
selves, borrow the remaining 80 per cent or
$4,000. Now, as we understand it, Mr.. Webster
claims that this $4,000, for which b. & Co.
charge interest, is capital employed by them in
the business of banking, and is taxable as such,
while the 81 900 margin" is taxable as a de-
posit The Assessor fails to see either law or
justice in exempting from taxation as capital
the money obtained on loan by private bank
ers, with which to do the business OF hundreds
of millions year, while reporting at his
Office less than 100000 as capital employed in
banking. and as the basis of these stupendOus
transactions. In some cases, as we learn, heavy
and leading banking houses have made no re-
turn of capital whatever. We trust Mr.. Web
ster will persevere in welldoing; that his in
depreciation of the law. which looks reason
able, will prove to be the correct one, and that
he will be sustained by the Internal Revenue
Office and by the Courts, if the case should be
carried there. There is no danger that Capital
will ever pay more than its proper share of the
burdens of taxation. The boarding of the cur
rency of the country, aud the combination of
hidden capital for the purpose of giving facti-
tious present values, or for the purpose of de-
pressing values; the rampant, gambling specu-
lation which is fraught with infinite mischief
to the legitimate trader and to the best inter
ests of the country, should not be treated with
any especial tenderness in the matter of taxa
ton.