Los Angeles herald. [microfilm reel] (Los Angeles [Calif.]) 1900-1911, 1909-06-21

~ an income tax law, largely
M An on the ground that it would
N M be a direct tax, serves to
ia " show how legal opinion, as
llE well as public sentiment
may change. For a hundred years the
courts and congress proceeded on the
theory that an income tax was not a
direct tax-or more strictly speaking,
that taxes on lands and capitation
taxes were the only forms of direct
taxation, which must, according to the
federal constitution, be apportioned
among the various states in proper
ton to population. Twenty zone JUS
tees of the supreme court had taken
this view directly or indirectly, while
only FIVE had held a contrary opinion.
Then came the fight on the income
tax of the Cleveland administration.
First, the supreme court held that a
tax on rent was a tax on real estate,
and therefore unconstitutional. An
other case was soon brought before
the court in which it was contended
that any sort of an income tax was
unconstitutional This was the famous
Pollock case. in which the court stood
four to four, Judge Jackson of Tonnes
see being ill and unable to sit. On a
rehearing Judge Jackson took part and
supported the constitutionality of the
law. But one of the justices, who had
voted to uphold the law at the first
hearing, voted against it on the rehear-
ing, and in spite of Justice Jackson s
arising from a sick bed to sustain the
law, it was declared unconstitutional
by majority of one vote.
The world at large. and even the
most careful writer's, have always at
tributed the change to Justice Shiras
of Pennsylvania, but Senator Bailey Is
authority for the statement that it was
not Shiras. but Horace Gray of Massa-
chusetts who voted to uphold the law
i'm the first case and to declare it I'M
constitutional at the second hearing.
Justice Shiras never affirmed or denied
that he had changed his mind, it being
an unwritten law that no justice shall
discuss outside the consultation cham
Der that which takes place behind its
portals. II Senator Bailey is correct
concerning this matter and he seems
to know whereof he speaks, this fur
nishes a remarkable and unusual in
stance of widely disseminated informal
ton of an erroneous character How
ever it may be the fact remains that
the changing of a single mind served
to reverse presidents of a hundred
years.
The first income tax law ever en-
acted by the American congress was
that of 1861. known as the Stevens
Morrill, act. Practically everybody ac-
guessed in it, and as part of a gen.
eral emergency revenue measure it was
but little discussed. The law was re-
pealed in 1862 and another substi-
tuted therefor. The second law was
amended several times. The first year
of the income tax law the revenue de-
rived from it was about $15,000,000. The
next year it was $21, 100000. During the
fiscal year 1866 the income tax reve-
nue. was $60,000,000, and the following
year S57. 100000. Thereafter the line of
exemption was continually placed high
err and the revenues from the tax de-
clined to S27.000.000 in 1870.
The agitation that led to the repeal
of the income tax law in 1870 was di-
rected more against the excessiveness
of the tax than against it's principle.
Special Commissioner Wells stated in
his report that an income tax of per
cent was higher than any nation had
ever before levied. except in time of
great emergency. He advocated that
the rate be cut to per cent and
levied on all incomes above $1,000. In
1870 the law was amended so as to
make the exemption $4,000 and the rate
21a per cent. 1t was by it's own terms
to remain in force only one year. That
winter a bill was introduced by Sem
ator Scott of Pennsylvania, the effect
of which was to repeal the income tax
law entirely. Senator John Sherman,
afterward secretary of the treasury
and secretary of state, reported the
bill adversely. A few days later it
was considered and passed by a ma
ioritY of one vote.
The matter was brought up in the
house by a resolution denying the right
of the senate to originate income tax
legislation. Randall of Pennsylvania
made point of order against the reso-
luton, but Speaker Blaine held that ii
was in order. The house adopted the
resolution, but the senate tenaciously
adhered to its course in spite of the ac-
ton of the house. Both houses ap-
pointed conferees, but they were unable
to agree. Later a bill was offered in
the house to repeal the law. Consider
alton of this measure was refused by
majority of one vote, just as one
vote had passed the income tax meas
ure in the senate.
From the beginning of the govern
ment there had been many cases de-
cided which indirectly affirmed the
consttutionality of an income tax But
the first case in which that precise
question arose was that of the Pacific
| Insurance company against Soule
Originally it was not at all a case to
test the validity of the income tax law
The suit grew out of the difference in
the value of gold and paper money
| The insurance company rendered
$5376 as the amount of it's income tax
the tender being in paper money. The
collector refused this. declaring that
| it should be in gold. or the equivalent
of gold-$7365 in paper. 1t was on this
| issue that the case went to the SUI