Evening star. [volume] (Washington, D.C.) 1854-1972, 1904-02-25
Objections to Amendments of
the House District Committee,
HEARING AT CAPITOL
EXEMPTION OF STOCK OF INCOR-
PoRATED COMPANIES.
Argument by George E. Hamilton,
Representing Business Interests
Assessor Darneille's Views.

The House committee on the District of
Columbia granted a public hearing this
morning on House bill 1886. proposing vari-
Gus amendments to the personal tax laws
of the District The discussion was con-
fined almost wholly to the proposition of
the committee to strike out of the existing
law the proviso which exempts mercantile
and newspaper companies from taxation on
their capital stoch when Incorporated. The
Commissioners have sought TO enlarge this
proviso by adding the words land business
companies which. by reason of incorpora-
ton, receive no special benefit" The COM
mittee recently reported the bill, with the
recommendation that all exemptions be
omitted, placing upon all corporations,
whether public or private, the tax of 11a
per cent on the capital stock, the value of
the latter to be fixed by the personal tax
appraisers. Upon the request of Repre-
sentative Cowherd the bill was recommit-
ted to the committee for purposes of re-
vision, and is again under discussion.
Present at the hearing this morning were
Commissioner Henry L. West and Assessor
Hopewell II. Darne,lle, representing the
District of Columbia; Mr.. George E. Ham
Hton, representing various business incor-
porations; Mr. A. Hoehling, representing
certain contractors, and Mr. E. j. Stell-
wagon of the Union Trust and Storage
Company and other interests.
Mr.. Hamilton's Argument.
Mr.. Hamilton made the most extensive
argument. going into all the features of
the local system of taxation as applied
to corporations and other business concerns
He declared that it was but just and proper
that corporations. which by reason of in
cooperating of by their character receive
special benefits, franchises or privileges
should pay taxes upon their capital stock
this TAX being paid in the nature of
privilege or franchise tax.
But said Mr.. Hamilton 1.-THE ayera se
business firm which incorporates receives
absolutely nothing from the government
but name. Its earning capacity is not
increased in any way, and John Smith e,
Co., Incorporated have absolutely no more
rights privileges or benefits than pIain
John Smith & Co"
Then why do these companies incorpo-
rate?" asked Representative Davis of Min
nesota, member Of the committee
They do it simply as a matter of bust
ness direction" replied Mr.. Hamilton
NIhey incorporate a matter of conven-
fence in the direction of the firms affairs
and for the better protection of the mem
berS of the firm, their heirs in case
of death. There have been cases where a
business partnership has been dissolved by
death and the surviving partner has taken
advantage of the situation. BY incorporat-
Ing and issuing stock absolute protection is
afforded to those whose money has been in
vested In the business.
II do not deny that there are private in
dividual advantages in Incorporating. but
1t is nothing in which the general public
Is Interested. and the government, /
understand it, does not propose tax on
matter of simple business convenience
By Incorporating, the continuance OF the
good Will is assured. but the government
is not taxing good will understand it
The Newspaper Companies.
Referring to newspaper companies, AR
Hamilton stated to the committee that
two of the local daily publications are in
corporated and one not Incorporated. I'm
der the law as reported by the committee
the two incorporated companies would
have to pay tax on their real estate,
on their machinery and other personal
property, and also on their capital STOCK.
The third paper. enjoying the same privi-
1eges the other two would have to pay
only on real estate and machinery. He
declared such system to be manifestly
unjust. MIR. Hapliiton said there was no
special reason for the newspapers incor-
p6rating, for al individual properties their
earning powers would he just as grea6.
Mr.. Hamilton also cited the case of two
jewelry companies doing tus ness side by
side almost on Pennsylvania avenue One
Is an incorporated company, while the
other is private firm. Both pay the Same
license tax. both the same rate on their
stock in trade, while the Incorporated firm
capital stock.
Representative Cowherd said it was not
the intention of the committee in amend
ing the bill to propose double tax The
committee thought that in imposing tax
on the capital sock it relieved such in Tor
porated concerns from the tax on their
tangible personal property.
The Assessors Opinion.
Mr. Darnelle, the assessor, VS. asked his
opinion as to the effect of the amendment
In this respect. He replied that IL the bill
passed as first reported by the committee,
the matter would be left in such tangled
condition he would have is go entirely over
the law to ascertain just what the condi-
tons would be.
pictured by his citation of the two jewelry
firms would continue unless the committee
adopted the suggestion of the Commits
sioners and Included other business com
panies'' in the exemptina paragraph.
Representative Powers OF Massachuset 8
explained TO the committee the operation
of the corpora ton Jaw in his state. There
are two classes of corpoeations-private
business or commercial corpora tons, which
are taxed the sane as partnerships or pr
waite firms, and quasi-public corporations,
which are required to pay special or
franchise tax. The private corporations
are taxed on their capital stock but the
value of this stock IS fixed absolutely by
the value of the company's assets. which
are Otherwise exempt from other taxes
This tax, therefore, amounts to nothing
more than tax ON the stock in trade,
such as is now imposed ON all business
concerns in the District of Columbia
Mr. Hamilton said such a system might
be made applicable here, but that the num-
Der of actual commercial corpora tons is
small compared 10 the number of compa-
MES such as real estate companies that are
Incorporated without any stock in trade
The only effect of the law as proposed by
the committee. he contended. would be to
greatly Inconvenience the incorporated
companies by driving them back into the
old way of doing business as private part
rerships. He declared there was no way
10 find out the actual value of the stock of
an Incorporated real estate company.
Yes there is, asserted Representative
Davis. Summon the officers and make
them swear to the value
Then" replied Mr.. Hamilton, you re-
turn to the old inquisitorial system with
all its dangers. The honest man will pay
his taxes and the dishonest man will swear
them or. When you get away from the
system of fixing values by board of COM
petent assessors. you put IA premium upon
perjury
hats the law in my state, anyway"
reJo'ned MIR. Davis He added he thought
II shame that the holders OF stocks
bonds and notes not taxed under the
District system and declared newspapers
should be taxed on their subscription lists