The record-union., 1895-04-08
Special to the REooRD-UNroN.

correspondent: The United States Su-
preme Court has shot the income tax full
of holes.
The decision has been completed and
put in type, and only awaits formal rati-
fication at the consultation to be held at
noon tomorrow. The decision of the
lower court is reversed. The income tax
as whole is upheld. but only by di-
vided court
Two important portions of the law,
however, have been decided to be uncon-
stitutional, and they are so serious as to
affect materially not only the revenues of
the Government. but the estimation in
which the income tax will be held by the
people.
Under the decision to be handed down
by the court, probably next Monday. but
possibly later, all incomes derived from
rents are exempted from taxation by the
Federal Government, and all incomes de-
rived from State and municipal bonds are
similarly exempted.
In other respects the income tax law
stands as it was passed last August, but
the result of the consultations in the Su-
preme Court shows very conclusively
that the law can easily be picked to pieces
piecemeal, provided there is brought to
contest each particular point as 1t comes
up.
1t is curious fact, but none the less
true that the law which was passed al
the dictation of the Populist wing of a
Democratic Congress has been distorted
by the decision OF the linked States Su-
preme Court, clearly on constitutional
grounds, in such way that 1t will abso-
lutely protect the class of capitalists most
offensive to the Populistic element.
The landlords OF the country will pay
no income tax. The owners of bonds of
almost any kind, either Federal. State,
county or municipal, will also be free,
while the business man, the manufac-
turer and the salaried employe will, for
the present at least, be compelled to con-
tribute to the Treasury of the United
States Government two per cent of all in
comes in excess of $4,000 per annum.
The holes made in the income Ia law
are so fatal as 10 nccessitate either its re-
peal or its anne ndment, as the people of
the country will hardly care to see the
large capitalists and trust companies alb
solutely protected, while the poor men,
comparatively speaking, are forced TO
contribute to run the National Govern
ment.
The entire income tax, as passed by
both houses of Congress and approved
by the President of the United States. has
been trem bling in the balance for two
weeks, and now will be construed as
constitutional statute only because the
Supreme Court of the United States,
while upsetting two portions of the law,
is evenly divided on the general princi-
pie of the constitutionality of the whole
enactment.
The court has been in hot water all
during the time of making the decision,
and it was not until yesterday that the
last point was decided. The decision has
been completed and is already in type
The first meeting OF the court was held
Saturday. March 10Th, two days after the
conclusion of the arguments. The fol-
lowing Monday another conference was
held. Thursday found the Judges again
discussing the absorbing topic. Monday,
March 25th, they were still more or less
at sea, and Saturday, March 30th, they
succeeded in agreeing upon the outlines
of decision covering the opinion of the
lower court, but doing so only by means
of series of complicated compromises,
in which the individual opinions of diff
ferent Judges were set off against the
other.
When the first vote was taken as to the
general principle of the constitutionality
of a law of Congress taxing incomes it
was found that the court was evenly di-
vided. Only eight Justices heard the ar
guments, Justice Jackson being TOO ill to
appear in court.
The vote disclosed the fact that Chief
Justice Fuller and Justices Field, Gray
and Brewer were opposed to the law in
toto. They believed 1t was unconstitu-
tional as passed by Congress and that it
was direct tax, which, according to the
Constitution, must be levied among the
States according 10 the population as re-
turned by the census.
Justices Harlan, Brown, Shiras and
White voted to sustain the law as a
Il
their opinions by convincing argument,
that while portions of the law were
clearly unconstitutional. the general ef-
feet of an income tax could not be consid-
cred as opposed to the principles laid
down in the Constitution.
This first meeting of the highest court
in the land developed surprising and
yet rather natural diversity OF opinion.
While four OF the Justices were in favor
of upsetting the income law altogether,
the other four were just as strongly con-
WINGED that it should stand as a whole,
but wanted certain portions stricken out
The difficulty about the latter quartet
was that they could not agree on the par
ticular portions which they considered
unconstitutional. Justice Harlan was
bitterly opposed to the exemption of
savings banks and mutual insurance
companies.
He believed this feature was an indi-
rect contravention of the provisions of
the Constitution that all taxes should be
equal. AT the same time he believed
that the exemptions of the mutual in
surance societies, savings banks and
similar institutions could be cured by
striking them out together without
affecting the validity of the law as a
whole.
The other members of the court, how
ever, pointed out that the result of this
would be To force savings banks and
mutual associations to pay an income tax
on their receipts, bat inasmuch as Con-
gress specifically exempted them, the re-
suit of this would be TO levy tax upon
these corporations which had not been
sanctioned by Congress, which is the
only taxing power.
1t was manifest to the majority of the
Judges that the Supreme Court could not
by any decision impose tax which had
not been specifically passed by the legis-
lative branch OF the Government; hence
Justice Harlan's opposition TO portion
of the law failed to receive the support OF
majority of the Judges, the court still
remaining on this particular portion
evenly divided.
Justices Shiras and White, who were in
favor of upholding the law as a whole,
had serious doubts of the power of Con-
gress to tax incomes derived from State
and municipal bonds.
They took the ground that the Federal
Government, by taxing the incomes from
a State or municipal certificate of in
debtedness would, in effect, be taxing the
certificate of Indebtedness ITSELF because
tax on the income from a State bond
necessarily reduced the value OF the bond
itself to that extent.
1t was not until the final session yes
day that it was decided to relieve the
owners of all State, county and municipal
bonds from paying income tax on the in
terest they received therefrofn.
Justice Brown, anotberiof the four who
were willing TO upholdi the law as a
whole, was very strongly opposed to the
taxation of income derived from rents on