Evening star., 1909-06-21
KN0TTY PROBLEM OFFERED
Discussion May Keep Congress Here
ALI Summer.
May BE PUT OFF TO DECEMBER
President Taft and the Attorney
General Confer Over Program
Relating to Corporations.

cASidldiou OSHatof Dllilngndm or YER
mont. as he emerged from the President s
Office this morning This new tax propo-
sition will extend the session indefinitely
DO you expect to be here until Septem-
ber p the senator was asked.
We'll. perhaps not quite as long as
that he said. with laugh, ''but there s
no telling how long. All can say is that
do not know and no one else knows
when we will adjourn. 1t looks like a
very long session.
1t was the practically unanimous opin-
ion of all congressional callers at the
White House today that in advancing his
corporation tax program President Taft
has given Congress problem with which
1t will be wrestling many weeks from
now. Futher than that. it begins to look
to some a S If. out of sheer desperation
over the questions that have been raised
and threaten to torment the best minds
in Congress. the income tax of Bailey
Cummins may be accepted as the simplest
proposition after all. There were hints
today that senators who have opposed an
income tax all along had rather take that
than bother with trying to solve the intri-
cacies that are presented in the corpora
t1on tax idea. Besides, an income tax
would not become effective for three years
and II would not expose the business of
the corporations to the publicity that is
sure to follow a corporation tax, and the
manding to know whether it is getting a
proper share of the net earnings.
President Taft now sees that he has
stirred up discussion that will be al
most endless and that will give the SEN
ate finance committee the work of its life
in getting up a measure that will stand
the tests of common sense, financial law
and the requirements of the Constitution.
Conferring With Attorney General.
For an hour and a half this morning the
President went over some of the problems
of the situation with Attorney General
Wickersham. who has been given the
difficult task of drawing up measure
that will not conflict with business prog
ress. Or the Constitution. Mr.. Wicker
sham is declared to be the best qualified
man in the country for the work. He is
familiar with the laws of New Jersey and
all states which tax corporations in diff
ferent forms. He has been corporation
lawyer for years, identified with some OF
the great corporations. and he knows
where and how they could circumvent a
corporation tax law. The evasion of the
law is just what is troubling the Presi-
dent and those trying to get together
upon bill. Mr. Wickersham has not yet
completed the draft of the amendment
to the tariff bill.
1t is plain that If the tax is imposed upon
the net earnings of corporations with
out limitations or restrictions the gov
ernment will be deprived OF much of
the tax by the diversion of the gross
earnings to interest upon bonds, leaving
little in the way of net earnings. 1t Is
predicted that bonds would be issued to
a greater extent than ever before known,
and that stockholders would get COM
paratively little unless they were given
a share in the distribution of bonds. On
the other hand if the bonded debt OF a
corporation is limited by the law that
would work a hardship upon some cor
porations whose wealth and business per-
NIT them to issue bonds far beyond their
capital stock. in many instances hun
dreds of times greater.
Effect Of Tax.
In New Jersey, as Senator Kean has
pointed out to President Taft, corpora
tions within the state are taxed upon
their gross earnings. while out-of-state
corporations are taxed upon their capital
stock. From the two sources the state
receives about S3.0OOOOO year. The tax
alton upon gross receipts does not en-
courage bond issues, while that upon net
earnings would do 20, in the view OF
many.
who criticise the tax program that In
addition to resorting to bond issues upon
which to pay out their net earnings many
small corporations, especially those large
| ly controlled by families, will begin pay
ing heavy salaries to members Of the
families in control, which would add to
| the woes of the small stockholder, who
would possibly find nts stock decreasing
in value.
Exempting Small Corporations.
Another point the President has under
consideration is that of exemDting small
corporations. making the bill apply to
corporations with ret earnings in excess
| Of 5000 a year.
| It is the understanding among senator's
| that the new amendment will exempt all
corporations to the amount OF 5000 net
! earnings. BY this means the law Will be
saved from the charge of inequality or
discrimination, and at the same time the
| smaller corporations will be relieved of its
application 1t is not so much the tax
| itself to which the small corporations OBJ
| ject, but the necessity of making returns
under the law and the publicity given
| their business.
Conference With Finance Committee.
! President Taft last night invited the re-
/ publican members of the Senate finance
/ committee to dinner at the White House
/ Senator Root also being a guest. The
/ whole question was gone into, although
/ nothing concrete was handled. The alb
| sence Of the Attorney General prevented
! this Senator Aldrich has expressed the
| opinion that the tax would produce S40,-
| tsp 900 year for the government The
!, Baltimore and Ohio railroad. for example
| would pay into the government $500, COO a
wear if the tax should be put at pei
| cent This rate has not been settled upon
| and is one of the questions before the
committee.
| Senator Aldrich wants to report the
amendment TO the Senate as early a.
practica BILE. He knows that the discus
sion upon 1t will be severe and protract
ed. and the sooner the amendment car
| begin to percolate through senatorial
gray matter the better.
May Go Over to December.
The belief is growing among som.
congressman that the result of the agi
tation of the corporation tax question
may be It's postponement to the Decem
ber session. The latest suggestion at
tracing attention is that the inability O,
the conferees to decide between the
Houses inheritance tax and the expect
ion fax nS r. i-a,1