Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1884-03-31
THE GOVERNORS INCOME TAX SCHEME

II would no doubt be advisable for you to impose
income tax on the gross receipts OF These (ral-
road companies and c)rPoratons) corporations in
addition to the tax on their property until the
amount realized therefrom at least equals the
amount OF tine tax, penalty, interest," and costs,
which the State and counties have los are liable
to lose by reason of the non-paymentsof the tax
levied against them under existing laws
And it is mmaterial whether the receipts Of such
corporations entirely earned from business done
in other States and Territories.
The lines quoted are from the special
message of the Governor of the State of
California to the Legislature in extra ses-
sion. They deserve a place in history as
brilliant example of recorded ignorance of
the fundamental principles of political
economy, and as vicious assault upon the
essential elements of a republican form of
government. Perhaps no higher cOmph-
ment can be paid to the Executive than to
assume that he had neither mind nor hand
in the compilation of the remarkable para
graph.
While the extract upon its face exposes
the irrefutsble answer to the pernicious
and communistic dogmas embodied, it may
be profitable to call attention somewhat in
detail to the fallacy thus Illuminated,
though any full exposition OF the politico-
economic consideration involved is impos-
sible in these narrow limits. And, first,
let us examine the recommendation itself of
which the Governor is made the mere
medium of expression.
An income tax is to be levied on gross
receipts-in the face of the settled and
nowhere disputed truth that the only de-
fensible income tax is that which exempts
savings, and bears upon all contributors to
the Government equally and uniformly.
But it is not even proposed by the new
scheme to make the new income taxation
bear equally upon all of the same class
those competing in the same business
since it is proposed to tax corporated
carriers in one way, and partner
ship carriers and private carriers in an
other. The incidence of taxation, it is
fatty proposed, shall be determined, not
by the class, but by the particular crrcum-
stances ot competing interests, and this, as
NJ. Theirs puts it, is robbery"
While poltical-economic theorists have
favored a just and equally bearing, and
therefore Improbable, income tax, the
accepted great authorities hold that
savings in all incomes should not be taxed.
If the tax is levied at all, it can be Justly
placed only on that which has been repre-
scented by expenses, or which has been In
vested in property, and as such is liable to
taxation.
"No income tax, says John Stuart
Mill, sis really just from which savings
are not exempted, and no income tax ought
to be voted without that provision. The
reason advanced is corclusive-savings pay
st any rate the full tax as soon as invested,
and their exemption is necessary IN the
earlier stage to prevent paying twice. And
this is no favoring Of the rich, because, as
has been clearly demonstrated, as the
rich divert their income from the supply of
their own wants to productive. industry
through which, instead of being consumed,
It is distributed in wages, it lie favoring the
poor to exempt the savings"
1t must be taken, then, that a State can.
not afford to tax savings in an income
scheme, since it should be its aim TO en-
courage them. To tax the gross income,
and at the same time tax the property in
which savings are invested, is double
taxation, and must tend to drive invest.
ment to jurisdictions where such tyranny
is not practiced. An income tax must be
based on the income of the past year, but
property in which incoms saving is in.
vested is of the present. II, then, that in
possession is to be taxed, only that income
not IN possession should be taxed. Yet the
advice Is deliberately given to the Legisla.
tune to tax both.
1t is to be a tax upon gross income in
addition to the tax upon the property from
and through which only the income is de.
sirable-in the face of the undeniable
truth that no double taxation is Just or en-
durable. The proposition TO tax incomes
in Massachusetts was not permitted to take
on the form Of law until it WAS provided
that no income shall be taxed which is
derived from property subject to taxation
"A proyiso that cannot be successfully
assailed. While al corporations are to be
drag.netted by the new scheme, carrier
corporations are mainly aimed at, and the
case Of such, especially the income, is to s
greater or less extent being constantly con
rerted into the property necessary TO the
uses and enlargement of the service, and