The Washington herald., 1909-06-17
TEXT OF MESSAGE

To the Senate and House Of Repre-
sentatves:
It is the constitutional duty OF the
President from time 10 time to recon-
mend TO the consideration OF Congress
such measures as he shall judge neces-
sary and expedient. In my inaugural
address. Immediately preceding this
present extraordinary session OF Con-
gress. / invited attention 10 the neces-
sity for a revision OF the tarin at this
session, and stated the principles upon
which 1 thought the revision should be
effected. 1 referred 10 the then rapidly
increasing deficit and pointed out the
obligation on the part OF the trainers OF
the tariff bill 70 arrange the duty so as
to secure an adequate income and sug-
gested that II il was not possible TO do
so by import duties, new kinds OF taxa
ton must be adopted and among them
1 recommended a graduated inheritance
tax as correct in principle and as Ger
tain and easy Of collection
Income Tax Proposed.
The House OF Representatives has
adopted the suggestion and has provided
in the bill it passed for the collection OF
such tax. In the Senate the action OF
its Finance Committee and the course Of
the debate indicate that it may not agree
10 this provision. and 1t Is now proposed
to make Up the deficit by the imposition
OF a general income tax IN form and
substance OF almost exactly the same
character as that which in the case Of
Pollock rs. Farmers Loan and Trust
Company Q57 L. s. 420 was held by the
Supreme Court TO be a direct tax. and
therefore, not within the power of the
Federal government to impose. unless
appOTtioned among the several States ae-
cOrding TO population.
Amendment Is Suggested.
The decision Of the Supreme Court in
the income tax cases deprived the na-
tionaI government OF power which. by
reason Of previous decisions OF the court.
Il was generally supposed the govern
ment had. II is undoubtedly a power
the national government ought 10 have.
Il might be indispensable 10 the natural
life In great crises. Although I have not
considered a constitutional amendment as
necessary TO the exercise Of certain
phases OF this power. a mature Considera-
ton has satisfied me that an amend
ment IS the only proper course for its
establishment 70 its full extent ], there
fore. recommend TO the Congress that
both Houses, by a twO-third vote, shall
propose an amendment 20 the Constitu-
ton conferring the power 10 levy an in
come tax upon the national government
without apporti0nment among the States
In proportion 10 population
Second-The decision IN the Pollock
case left power IN the national govern
ment 10 levy an income tax. which ac-
compIishes the same purpose as a cor
poratlon income tax. and is free from
certain objections urged 10 the proposed
income tax measure
Proposes Excise Tax.
I therefore. recommend an amendment
20 the tariff bill imposing upon all corpO-
rarions and joint stock companies for
profit. except national banks otherwise
taxed). savings banks and building and
loan associations, an excise tax meas
ITed by . per cent on the net income OF
such corporations This IS an excise tax
upon the privilege OF doing business az
an artificial entity and OF freedom from
q general partnership liability enjoyed by
those who own the stock.
/ am informed that a 2 per cent tax
Of this character would bring into the
treasury Of the United States not less
than ,000
The decision OF the Supreme Court in
the case of the Spreckels Sugar Refining
Company against Mccain C1S2 L. s, 80
seems clearly 70 establish the principle
that such q tax as this Is an excise tax
upon privilege and not a direct tax on
property and is within the Federal power
without appOrti0nment according 20 pop
ulations. The tax on pet income is pref
erable 10 one proportionate 20 a per
( centage Of the gross receipts. because II
is a tax upon success. and not failure
/ It imposes q burden az the source Of the
/ income al a time when the corporation
Is well able 70 pay and when collection
is easy.
Brings Federal Supervision.
another merit OF this tax is the Fed.
ersI supervision which must be exercised
/ in order 10 make the law effective ovey
t the annual accounts and business trans
actions OF all corporations. While the
/ faculty Of assuming a corporate form
/ has been OF The utmost utility IN the
! business world. IT is also true that sub
stantially all the abuses and all thC
evils which have aroused the public q
/ the necessity Of reform were made pos
sible by the use OF this very faculty II
now. by a perfectly legitimate and ef
I fective system OF taxation. we are incl
dentally able 10 possess the government
( and the stockholders and the public o.
4 the knowledge Of the real business trans
+ actions and the gains and profits O
| every corporation in the country, ".
4 have made a long step toward that su
{ pervisOTy control OF corporations which
+ may prevent a further abuse OF power.
/ I recommend. then, first, the adoption
/ OF a joint resolution by twO-thirds Of
/ both Houses, proposing 10 the States ar
/ amendment 10 the Constitution granting
\ 10 the Federal government the right Il
\ levy and collect an income tax without
/ appOrtionment among the States accord
/ ing 70 population; and. second. the en-
aCtment as part OF the pending Tevenu'
measure. either as a substitute for o.
in addition 70, the inheritance tax Of al
4 excise tax upon all corporations. meas
ured by per cent OF their net income.
! WILLIAM Il TAFT
The White House, June l6. 1909