Evening star., 1909-06-20
NO DECISION is REACHED
What Constitutes Net Earnings p
Question to Be Solved.
STATES RIGHTS OPPOSITION
Discrimination Possibilities as Re-
CARDS Exemption of Small Cor
porations-Other Difficulties.

bers of the Senate committee on finance
for nearly two hours last evening with
out definite conclusion upon any propo-
siton connected with It.
Senator Root. on account Of his reputa-
tion as corporation lawyer. sat in the
conference to give his views upon diff
ferent branches of the question as they
came up.
While no decision was attained. some
positive opinions were elected by the
discussion. One of these. generally
shared. was antagonistic to the sugges-
tion that small corporations should be
exempt from tax.
The question was raised whether the
tax might not be assailed upon consti-
'utlonal grounds as class legislation If
there were such discrimination in favor
of small corporations.
Problem Is Foser.
What constitutes net earnings?" was
the burning question of the committee
session. According to authentic infor-
nation the problem had not been salts
factorily solved uo to the close of the
meeting.
AS presented to the committee by At
torney General Wickersham, the amend
meht proposes tax of per cent on
the net earnings of all corporations II
had been estimated unofficialIy that this
would produce in revenues about s25.-
100000 annually.
Members of the finance committee
We're unanimous in the opinion that this
estimate is too low, and that the rev.
enues from per cent tax on earn
inGs of corporations would raise a sum
nearer $50, 0o0, 900 than S25, 600 600
On the assumption that $4,000, 900 is
taxes on the earnings of corpora tions
the committee considered reducing the
rate OF tax to / per cent. Such change
VIII not be made, however, until more
dennite information can be obtained as
to the possibilities of a per cent tax
Exemption Not Favored.
Several senators have suggested that if
a law is passed imposing a tax on cor
porations 1t should not be applicable to
such OF them as earn less than s.. 900 a
year. The committee did not look upon
this suggestion with favor, and it is
asserted that the members are a unit
against any exemption.
1t is likely that all of the republican
members of the finance committee may
confer with President Taft and admins
trat1on leaders regarding the program
outlined within a few days.
Discussion OF the corporation tax
amendment still continues rife among
senator's on both sides of the chamber in
their conversation, and the forthcoming
debate in the Senate is in a measure
forecasted thereby. Unquestionably the
tax is To meet with opposition, although
few doubt that in the end it will pass.
Bondholders May Escape.
Discriminatory possibilities of the tax
furnish the main topic of discussion. The
fear that the most valuable assets of
corporations-the funds to pay interest on
bonds-will escape taxation still possesses
the minds of many senator's. They can
not clearly see how this can be avoided,
owing to the preferential position of the
bondholder in Il corporation.
There Is much concern for small bust
ness organizations. incorporated for con-
Nenlence. Many senators think these
ought TO be excluded from the operation
OF the law if possible.
Such organizations a s real estate firms
grocers and minor business enterprises Of
all kinds will object to the publicity of
their affairs which conformance 10 the
law Will require. They will be compelled
10 make public the scope of their bust
ness, which is said to be not always de-
sirabie in small communities where there
is close competition.
Corporation VS.. Individual.
Another class of discrimination was
pointed out by a congressman yesterday
in conversation.
Il am interested in coal corpora ton in
my state" he said, which is a million
dollar concern. We will pay the tax,
submit TO the publicity and all that
Right alongside of our property is an
other mine which is not Incorporated and
which does as big business as we do
but the owners will not be taxed"
Arguments of that kind are met by
senator's with the suggestion that the in
corporated concern has an advantage over
the private partnership in the matter of
liability. suits al law and in other ways
and that the tax,levied is by way of com
pensation for the advantages which in
corporation grants.
One objection which will be vigorously
urged against the tax in the Senate de-
bates, according TO threats which are ut
tered in private. is that the proposed tax
viii be the longest step yet made by the
government in encroachment upon states
rights. Protests on this score are ex-
pected from old line democrats They
will contend that the government will
trespass upon state corporations doing an
intrastate business and which in their
opinion should not be subject 10 govern
ment supervision.
Ground for Lively Battle.
This line of argument will he combated
by men OF Senator Roots persuasion. who
agreed with the doctrines Roosevelt
HHHNCld ed OF WlGer government super
vision of all corpora tions. a lively battle
along these lines may be expected
Some gloomier ones about the Senate
express the opinion that the discussion of
the corporation and income taxes will
take such a wide range and occupy so
much. time TO the hindrance OF the pass
age of the tariff bill that senators may
grow uedried and shunt both subjects
| oyer - the regular December session
! Against this view. however. IS the firm
determination of A large faction in the
| SeEate To force action on the income tax
and not 10 let the session adjourn with
out progress.
Many senator's can he found who firmly
| believe that the income tax, IL submitted
by Congress 10 the states. will never
! he ratified. The pessimistic remarks of
Senator Hughes u the Senate Friday
voiced their opinion when he said that
| twelve states by Withholding their sane
| tion can prevent ratification and that it
| will be quite possible to sew up twelve
commonweaths against ii.