New-York tribune., 1901-07-12
WANTS LIQUOR TAX REPAID
SOUTH CAROLINA BRINGS SUIT AGAINST
THE FEDERAL GOVERNMENT
INTERNAL REVENUE SYS-
TEN ASSAILED
GBY TELEGRAPH TO THE IR1suSE.l

lbf TELECRAFH TO THE TRIBCNEJ
Washington, July 11.-South Carolina has
made an attack on the entire internal revenue
system OF the United States which has aroused
lively interest in legal and official circles. Gov
ernor McSweeney few days ago made de-
mand on the internal revenue collector for the
district of South Carolina for the return of all
the taxes collected by the government from the
dispensers OF liquors in that State since the
dispensary law became effective in 1893. The
collector referred the question to Mr. Yerkes,
the Commissioner of Internal Revenue. who
promptly refused to recognize the claim. Mr.
Yerkes who is regarded as an expert in internal
revenue law. is preparing a formal answer to
the South Carolina demand His written opinion
will be completed early next week. and is
pected 10 set forth elaborately the governments
attitude In this novel and possibly vitality i'm
portant case.
a. the time that this demand made
a suit was filed in the Court of Claims by
Franklin II. Mackey. In behalf of South Caro-
lima. for the return of the taxes The amount
involved is only $4,000. which represents an
annual tax of SO collected by the government
from each man actually engaged in dispensing
liquors in South Carolina under the State dis
pensary law, and also tax of S123 from the
State Dispensary Commissioner. Mr. Mackey's
brief declares that the liquor traffic in South
Carolina is private but State business:
that the men engaged in it are agents of the
State and are paid out of the general revenues
of the State that their compensation does not
In any way depend on the amount of sales they
make. but is regulated and guaranteed by law,
and that by levying tax these agents the
Federal government is interfering with the
police power of the State
AS the Court of Claims has adjourned until
the second Monday In October the trial of the
case probably cannot take place before Novem-
ber or December. If South Carolina loses I'm
the Court OF Claims an appeal will at once be
taken to the United States Supreme Court. AS
the Supreme Court has sustained the constitu-
tonality of the South Carolina Dispensary law
on the ground that II provides simply for
legitimate exercise of the police power of the
State. great concern has been aroused as TO how
the court will reconcile this view to the OBJ
vious necessity Of denying the contention which
the South Carolinians are now making. 1t is
believed that II the Supreme Court should sus-
tain the present contention. a serious and per-
haps fatal blow would be dealt to the internal
revenue system. and that before long Congress
would be compelled 10 devise entirely
excise scheme. IT is pointed out that IL South
Cardinals peculiar excise law should make that
State immune from the Federal tax on the liquor
business, other States would soon follow her
lead, and ultimately all the States would be in
position to defy the Federal authority in i'm
portant particular.
Commissioner Yerkes Is not apprehensve of
the outcome OF the suit. Neither are Attorney
General Knox and the members OF his staff who
will represent the government in the pending
litigation. Mr.. Yerkes, however, admits that
first glance the decisions of the Supreme
Court in all similar cases seem TO favor the
South Carolina contention. He says the courts
opinion upholding the South Carolina dispensary
law distinctly declares that law to he a correct
exercise OF a States police power. but does not
say that this power he exerted to
nullify the laws Of the United States and the
regulations of the internal revenue system.
With the issues thus Joined some of the ablest
lawyers In Washington think they tre-
mendous struggle ahead in the Supreme Court.