Los Angeles herald., 1909-09-22

tion proposing an amendment OF the
federal constitution authorizing the
general government to impose an in
come tax without apportioning it as a
direct tax according to the population
of the states
The provisions for the corporation
tax in the bill exempt all corporations
whose net income does not exceed
$4,000, 1t is therefore in effect, an in
come tax; that is, 1t taxes earnings
actually made. 1t is a tax upon sue
cess and not failure.
1.-THE most Objectionable feature of
a direct income tax is the premium
upon perjury which it offers to those
who are willing to conceal their in
come and who thus subject to a much
heavier proportionate burden those
who are conscientious in making their
returns. So great was this evil in the
levy of an income tax in England that
when that tax was imposed directly
upon individuals, 1t was found that the
proceeds of the tax at 10 per cent were
less than the proceeds Of an income
tax of per cent imposed as our cor
poration tax is, not upon the individ-
uals directly but upon the income be-
fore 1t comes into their hands"
Finds One Flaw
At this juncture President Taft re-
ferred to the English law and to the
criticism that the corporation tax in
the present bill is that those who own
bonds secured by mortgage on the en-
tire corporation pay no tax at all. In
explanation he said:
Congress could not authorize a cor
poration 60 recoup itself in the pay
ment of such a tax from the interest
to be paid because thus to impose a |
tax on the bond holders proportiOned |
to the interest he received would be
in violation of the constitution as inter-
preted by the supreme court as an in |
come tax not apportioned among the
states.
Now, If the proposed amendment to |
the constitution authorizing the i'm
position of an income tax without ap-
portioning it among the states, accord |
ing to population passes, it will be |
possible to add to our corporation tax
the feature of imposing a tax on the /
bonded interests in that corporation |
by a percentage tax upon interest to
be paid This would make the corpor-
alton tax a more beneficial measure
and one reaching interests that ought /
to be reached because, under modern !
systems of financing, the bondholders |
and stockholders are all of them in a
sense joint investors, and a corpora /
ton income tax ought to include them !
all.
An Equitable Burden
Under the conditions it seems to me |
clear that the corporation tax is an
equitable burden, one reaching active
business not too heavy to retard it, |
but enough to collect a substantial
revenue from those who are successful
in business. It is a tax easily col |
lected-one that no corporation can
escape-one in which perjury cannot
play any important part in an effort
to escape ii.
another feature of it is that Incl
dentally it will give the federal gov
ernment opportunity to secure most
valuable information in respect to the
conduct of corporations, their actual
financial condition, which they are re-
quired to show in general terms in
public return. In addition, the law
provides means of investigating fully |
their course of business"
Il want to say a few words in IA
vor of the passage of the income tax
amendment as proposed by congress to |
the states. Assuming the constitu-
tional authority to have been given, [
am opposed to a general Individual
income tax law except in times of great |
national stress. I am opposed to 1t be- |
cause ii puts such a premium on per-
jury.
Amendment is Favored
But I am most strongly in favor
of the adoption by the states Of the
amendment authorizing congress to |
impose an income tax without appor-
tioning it among the states according
to population, and I am strongly in |
favor of this because in times Of great |
stress, If war or some other calamity
were to visit this country the income |
tax would be one of the essential in
struments by which we could collect |
money to meet the exigencies 1t has
been so in the past, for during the
civil war it was understood that the
levy of an income tax without appor-
tionment was constitutional, and such |
a tax was levied and collected. And l
consider taxation as at present con-
strued an elemental weakness that the |
central government is not able in times |
of emergency to levy such a tax.
"Of course it will he said that no dis
tinction can be made in the conStltu-
ton by which the power to levy such |
tax can be limited to times of emer-
gency because it IS impossible to de-
scribe what the emergency should be.
I agree with that, and 1 agree that
there is q probability that at times the
desire to tax accumulated wealth will |
lead to the movement in favor or |
direct income tax.
"If the income tax amendment passes
as I hope it may, we can then enIarge
sEasA=a