Evening star. [volume] (Washington, D.C.) 1854-1972, 1895-01-23
E TAX ACT
Judge Hagner Holds That the Law
is Valid.
DECISION IN THE MOORE TEST Case
A Review of the Points in the
Injunction Petition.
AN A P e A L n 0 T E D
DECISION IN THE MOORE TEST Case
AN A P P E A L n 0 T E D

Court No. 2, held that the recent income
tax act is valid, and that the court cannot
interfere in the matter of It's collection.
The case in which the validity of the tax
was attacked was that of John G. Moore
against the commissioner of internal rev.
enue, in which Mr.. Moore sought, by in
junction, to restr ain the commissioner from
proceeding to make arrangements for the
collection of the lax. The suit was hled
last month, and the defendant demurring
to complainant's bill of complaint, the de-
n2urrer was argued before Judge Hagner
last week by Assistant Attorney General
Whitney in support of the demurrer and
by Mr.. Jere NJ. Wilson in opposition.
In he bill of complaint MIR. Moore stated
that lie is stockholder in divers corpo-
rations organized and doing business IN
the United States, paying dividends from
their net earnings to him and to their other
stockholders, from which net earnings
divers sums Of money would be paid 10
him as such dividends during the year
ending December 81 1891. That In ad1i-
ton to such dividends, he has an income
derived from the gains and profits OF his
business, embraced within sections 81 and
~ of the income tax, largely in excess
of $4,000. That under section ~ OF said
act, the corporations before referred TO
are also required to pay tax or pc:
cent on their net earnings, respectively.
out OF said net earnings; and that by sec
tions ~ and ~, thu complainant is re-
CURED to pay a like tax upon the moneys
pad to him as dividends by such cor
poraticus. thereby wrongfully duplicating
the tax on the complainant.
Discrimination Alleged.
Mr. Moore alleged further that said
taxation is unjust and unequal; that 1t
6iscriminates against him for the purposes
of taxation, as compared with persons
whose income is not in excess of that
sum.
The further complaint was made by Mr..
Moore that aliens are subjected to similar
taxation, are certain state corporations.
He claimed that if the said taxes are col
lected, although unlawful and unjust, he
would be without remedy 10 recover the
same from the United States: or If col
lcctible at all it could only be done by
such vexatious, expensive and long-con-
t.nued litigation as would render the
remedy useless. Mir. Moore prayed the
court to restrain the commissioner and aii
other persons from proceeding to do any
thing looking to or contemplating the COL
lection of the said income tax.
The Judges Decision.
Referring to the objection of the COM
rlainant respecting the alleged duplica-
ton of the tax, Judge Hagner said that
it was but fair to presume that the Off
GERS of the treasury would enforce the
law SO as to prevent harsh construction,
ard that an arrangement by corporations
to pay the tax before July. 1875. would be
accepted as relieving stockholders. VeNa-
tions as it RAY me- he said. it is rot possi-
bic practically to avoid duL Hcation CT
taxation in every case, the power to tax
twice being as ample as the power to tax
orce. ard tax twi,e reaching the same
property being 10 objection to Its validity.
Speaking of the objection that the pro-
posed taxation is unjust and unequal in
eXcmptirg persons enjoying an annual in
come less than $1,000, Judge Hagner re-
marked that the wisdom or eSpediency
of the action of the government in the
exercise of such power is beyond the
control of the judicial authority.
Referring to the objection that aliens
are included in the provisions of the tax
act Judge Hagrer explained that there
was no indication that mere sojourners or
visitors are included, the term being
"every person residing therein" Hence,
he said, what constitutes a residence within
the meaning of the act would be for the
determination Of the court in any particu-
lar case. The taxation Of aliens, says the
court. could not in any way mjure Mr..
Moore.
Abiding to the objection that state and
municipal corporations are not exempted.
Judge 'Hagner referred to the fact that
Mr.. Moore did not allege that he is a
shareholder or otherwise interested in any
such corporation, and therefore had no
personal grievance involved therein. Judge
Hagner said that 'the statute does not in
words or by necessary implication include
such corporations, and Congress having
no power to tax them, it is to be presumed
Ger gress did not intend to include them.
Ii is not alleged, the judge added, that
the defendant as commissioner of internal
revenue, intends to include such corpora
tions by his construction of the act; or
that he has prepared or ordered to be pre-
pared, any forms, rules, regulations
Instructors" to that effect, the averment
that such corporations are not excepted
ont of the act being mere conclusion of
law advanced by the complainant.
EarniEgs Prior to the Act.
Quoting the act to the effect that moth
ing herein contained shall apply to states,
counties or municipalities" Judge Hagner
said that the act. by its fair meaning,
would operate an exception from taxation
of such corporations as are inStrumen tall
ties and agents Of states, counties or mum
icipalties; and must have been inserted in
the paragraph as declartion Of that privi
lege.
In regard to the point that the tax would
be upon a portion of the income earned
prior to the passage Of the act, Judge
Hagner said that there was similar pro-
vision in the former income act and It was
sustained by the Supreme Court.
Explaining that he had so far examined
Mr.. Moore's objections as If the application
for the injunction was one OF an ordinary
character, Judge Hagner stated that the
bill Of complaint presents the exceptional
prayer InaL lNo court Shall uSclaTe as CE-
constitutional, and, therefore, void, all the
provisions of the act of Congress relating
to the income tax, and shall enjcin all
proceedings looking to the collection Of
this portion Of the public revenue under
that act.
The judge stated that the courts Of equi-
ty are always averse to interfering with
the collection of taxes, and only interfere
when the enforcement would cause ire
parable injury, etc. The law, he stated,
leaves unimpaired the right to test the va
ldity Of the tax by action at law.
In conclusion Judge Hagner said that he
was of the opinion that the complainant,
for the reason stated in the opinion, Is not
entitled to the relief claimed, and the bill
Of complaint would, therefore, be dismissed.
Mr.. Wilson, however, was given leave to
further amend the bill, proceeding which,
he explained, would not necessitate further
argument. It Is the intention, Of course,
of Mr.. Moores attorneys Mr.. Wilson end
ex-senator Geo. F. Edmunds to carry the
case to the Court of Appeals, and from
there, If possible. to the United States Su-
preme Court.