The evening telegraph. [volume] (Philadelphia [Pa.]) 1864-1918, 1869-11-11
SPIRIT OF TEE PRESS.
EditorIaI Opinions OF the Leading Journals
Upon Current ToDlcs-COmDlIed Every
Day for the Evening Telegraph.
INCOME TAX FRAUDS-THE SPECIAL
INVESTIGATION

income returns shows that he is rapidly
mastering the details of the business of his
bureau. Quick to discover faults in the ad
ministration of the law, and possessing the
requisite decision and frmness to apply the
remedies, the Commissioner is proving him
self an excellent executive officer For years
it has been perfectly well understood by all
familiar with the subject that the Govern
ment loses enormous sums annually through
the failure of citizens to comply with the
law in making their income returns. 1t is
not doubted that five per cent. on all the in
comes of this country if correctly assessed
and faithfully collected, would realize sixty
millions of dollars annually, instead of he
4hirty-four or thirty-five millions now re-
ceived from this source. But while this loss
has been well known to the Department
hitherto no effort has been made to correct
it. Under such an administration of the law,
the taxpayer soon came to understand that
when he had made his income return, and
deposited the same with the assessor, the
matter was ended and nothing more would
doe heard about it until the next annual notice
should again call the subject to his attention.
If mistakes had been made, the taxpayer
would not be called on to correct them; if
frauds had been committed, no efforts would
be made to discover them. Under such cir
cumstances, it is not surprising that burden
so onerous as that of five per cent. income
tax was more frequently avoided than volun-
farily assumed by the taxpayer.
1t does not seem difficult to many to con-
vince themselves of the correctness of their
own actions and the purity of their own
motives, as the various pretexts resorted to
by parties for the purpose of avoiding the
income tax abundantly prove. One merchant,
for instance, finds at the end of the year that
his entire profits are represented in a book
account, or in bills receivable, to the amount
say of $5e,000. Nothing can, he reasons
with himself be considered as income that
has not been actually received. AS, he
argues, these accounts and bills, although
perfectly good, have not been collected,
therefore he has no income This satisfies
his conscience and evades the tax, and he
forthwith makes his return. Thus the
well-to-do merchant, who seems to be do
ing prosperous business, and who lives
as If he, at least, believed himself in the en-
Joyment of liberal income, appears in the
next weeks Gazette as living without any
income whatever. The Government loses
the $2500 taxes, but the merchant does not
lose the accounts due him, which he proceeds
TO collect and place to the credit of his bank
account, apparently never supposing that any
portion of it has been unjustly withheld from
the Government. Others seek to deceive
themselves by sort of legerdemain in book
keeping. Knowing that, in making their in
COuS IeJuIl, ueDlouue tueIn DluSC Do returned
at their true value, they keep what they call
guarantee fund; that is,s they carry to the
account of particular fund q sufficient per-
centage of their entire sales to guarantee
every transaction This percentage varies
with different merchants from two and a
half to ten per cent. of their entire business.
OF course this fund is more than sufficient
to cover losses actually sustained. The re-
suit is that large share of the merchants
re of 70 ha
represented in the accumulations of this fund,
which, however, is never counted in making
the income return. In other instances in
bestments are made and sum is set apart as
guarantee against loss arising from them.
We have heard of several instances of this
process, and which exhibited remarkable
ability in avoiding taxation, but q simple case
will suffice for illustration. A firm, some
time during the fallof 1868, invested $500, 900
in Government bonds at 100. These bonds
had risen by January l, 1869, to 115. When
the firm came to make their income return,
they thought it prudent to set apart from
their profits the sum of 100000 to guarantee
them against any loss which might result from
a possible depreciation in the price of the
bonds 1t is needless to add that the $3.50, 900
was deducted from the amount returned as
income, and $500 was thus saved to the firm.
We are glad to see that Commissioner
Delano is determined to correct abuses of this
description. He has resolved that the income
returns of last year shall have thorough
overhauling. To this end officers have been
detailed to this special duty, and are now at
work in all the leading cities of the country.
Their advent in this city is, we understand,
creating quite a sensation among those who
have learned how TO live in brown-stone
houses, and keep handsome equipages, with
out possessing any income. We trust the
investigation will be thorough and exhaustive.
The merchant or banker who deliberately de-
fruds the Government on his income return
is not a whit better than than he who de-
frauds it in whisky or tobacco. When it
comes to be understood that every doubtful
return is to be investigated, and that the in
quiry will not necessarily end with the filing
of the returns in the Assessors Office, the re-
ceipts of the Government from this source
will be largely increased If Commissioner
Delano will carefully but persistently follow
up the investigation he has begun, we have
no doubt next year will witness an increase
of the revenue from incomes of no less
than ten millions of dollars.
But while it is source of great gratifica-
tion that this work is begun, we cannot so
cordially commend the action of the Commits
sioner in the choice Of officers to whom the
work has been assigned Instead of imposing
this work upon the assistant assessors in
charge of divisions, he has deemed it wise to
appoint officers specially for it, thus enlarging
the number of revenue officers and materially
increasing the expenses of his department
This we regard as a serious mistake. We
know of no class of officers who devote less
time to the discharge of their duties than as
sistant assessors in charge of divisions. We
do not believe they work, on an average,
three hours per day. They could easily un-
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