Western Reserve chronicle. [volume] (Warren, Ohio) 1855-1921, 1870-06-08
DEBATE ON THE INCOME TAX,
JTTVE q 1874

Mr.. Garfield. of Ohio. / move to
amend section thirty-five of this bill, so
that it will read as follows:
AHd be 10 further enacted, That there
shall be levied and collected annually a
tax of five per cent. upon the gains, prof
its, and income of every person residing
in the United States, n of every citi-
zen of the United States residing abroad,
derived from any source hereinafter de-
scribed, whether within or without the
United States, except as hereinafter pro-
vided, and a like tax annually upon the
gains, profits and income derived from
rents of real estate within the United
States owned by any person residing
without the United States and not a citi-
zen thereof.
The effect of this amendment, with
slight amendments in the next section,
will be to abolish all that portion of the
income tax which relates TO business
the making of money by engaging in
work; so that, if my proposition be
adopted, the whole weight of the income
tax will fall upon realized wealth. i
desire, by the amendment, to remove the
burden of this income tax from labor,
that il may rest exclusively upon capt.
tai. The amendment will continue the
income tax upon interest, rents, divi-
dends, all profits arising from corpora
tons. In short, whenever any man ter
inmates his active career of life, and
becomes a mere capitalist, living upon
the profits of his wealth invested in
some permanent form, that mans in
come will pay a tax. But whenever a
man enters into a business, wherever he
is a producer OF wealth, wherever by his
labor he makes use of his capital to
increase the wealth of the nation, then
he is to be exempted from the income
tax.
1 mean to say in general that all the
strong and pungent objections to this
tax, as urged in the debate here, have
referred mainly to its inequality and in
justice in its application to the different
trades, occupations, and vacations in
which our people are engaged. l my
self know an instance of an officer of the
Army, having no income whatever eX-
cept his salary as a military officer, who
paid as income tax in one year SlO9,
while a neighbOr worth 500, 600 in lands
and houses, flocks and herds, paid in
come tax amounting to only forty-eight
dollars. Numerous examples could be
given showing how all over the country
this tax falls on labor and activity, while
invested capital escapes. L believe that
all OF nearly all of this inequality can be
removed by the amendment L have
offered. With the modification which l
propose this income tax cannot be called
unjust. 1t will then fall in part upon
the bonded debt of the United States
upon all bonds which are regular invest
ments of capital. The exemptions can
be arranged in whatever n may
be deemed most equitable. 1t would
doubtless be proper to arrange the X
emptiOns in such a way as to relieve, for
instance, a widow or other person de-
pendent solely for support upon a small
investment barely sufficient to afford by
its proceeds a subsistence. By the last
annual report of the COMMISSIONS of
Internal Revenue it appears that over
nine million dollars of this income tax
is derived from corporations.
In this form the tax would be contin-
ued under the amendment which ] pro-
pose. From the returns it is impossible
TO tell with precision how much of the
tax paid by individuals is derived from
the earnings OF business and how much
from accumulated capital ; but 1 have no
doubt that this amendment Will leave
about one half of the total receipts
from income tax untouched, while the
other half will be RENTED. With such
a modification of the tax, which it seems
TO me is a fair compromise between the
extremes of opinion on this question,
we might let the tax continue. Such at
least is my view.