New-York tribune., 1909-09-22

a nj 5r,,oSe6 as our corporation tax is. not upon
tNe individuals directly. but upon the income os
TORE n comes into their hands. This is a prac-
teal argument IN favor OF q corporation IL ~
Z come tax as against an individual h00iie ''
that IS altogether unanswerabie
IN Fngland after a hundred years ofsex-
perience. the income tsx is levied in only i eA
Ceptionsl instances on the individual olrsCG.
III Is frst levied on the declared divtoenos on
corporations: secondly. on rents DeIofe nv.
leave the hands OF the tenants. and. hnaliy' on on
the individual with respect TO matters MAJ. Ihat 81 9
not covered by rents and corporate inNeslineles, tents
Another distinction which Is nade IN tIle LIS L.tIs
fish law and which commends itself TO every
one with a sense of justice is that the income
tax on passive and permanent investments 1 IlSs =
the stocks and bonds IN a corporation SliOu-u a.
f l,e higher than on earned incoInes-that Is IN :
) comes earned by the services OF the hulNluu9l
as salary or as a professional income.
Earned incomes thus described are really the
proceeds Of an application OF the capital OF IN
dividusls. which is being consumed an9 iI VIII oT
life az twenty or thirty years, whereas the m
come from corporate and business investments
viii continue permanently without regard 10
whether the owner lives or dies and will pass
on by succession of law undimlnlshed ana WIN
ees rnakinE A affference between a tax upon
the income Of corporations and that or mol
viduals, where they earn their income py SER
taking the earned incomes at all The latter Is
the effect Of the corporation tax
DEFECT N LAW RECOGNIZED.
Another criticism OF the corporation tax in
the present bill IS that only shares of stock in
those who bonds secured by mortgages
upon the entire property or plant of the corpora
fion do not pay any tax at all This is true.
and the defect was fully recognized by those
who drafted the corporation tax. They would
have been glad if possible to impose tax upon
the hondhOlders who are only less interested in
she earnings and success of the corporations
than are stockholders, but the difficulty of in
cluding them and of collecting from the corpora
fion before the payment Of interest on the bonds
an income tax proportioned 70 a percentage Of
interest 10 be paid the bonds was that Con-
al not raf Inn n
5tseif in the payment Of such a tax from the
interest to be paid. because thus to impose a
tax or the bondhoder proportioned to the in
terest he received would be in violstion>of the
Constitution interpreted by the Supreme
Court - an income tax not apportiOned among
the STATES
Now il the proposed amendment 10 the Const-
tuition authorizing the imposing Of an income
tax without appoTtiOning il among the states
according To population passes, II will be pos
sible 10 add 10 corporation tax the feature
Of imposing tax on the bonded interest in
that corporation by percentage tax upon in
rerest TO he paid. thus reducing the amount Of
1nterest which the corporation would pay 10 the
bondholders to the extent Of the tax collected
ms would make the corporation tax more
beneficial measure and one reaching interests
that ought 10 be reached. because under modern
systems of financing corporations the bond
holders and stockholders are al Of them I'm a
sense Joint investors, and a corporation income
tax ought 10 include them AL.
Under the conditions that existed with rafeT-
ence 20 the Constitution IL seems 70 me clear
thar the corporation tax is equitable burden.
one reaching active business. not too heavy 10
retard il. but enough 10 collect a substantial
revenue from those who are successful in bust
mess II is easily cOllected-one that 40
corporation can escape-pne in which perjury
cannot play any important part at all in an
Another feature Of II is that incidentally il
viii give the federal government an oppor-
funitv to secure most valuable information in
respect 10 the conduct Of corporations. their
actual financial condition. which they re-
ouired TO show in general terms in public re-
TuTn. In addition. the law provides the mea rs
under proper limitations Of investigating fully
and in detail their course Of business Ind
Tectly il would help very much in another re
vision. whenever that shall come. because cor
porations engaged in business said 10 be affected
by the tariff viii have upon record in Washing
ton their exact financial condition from year -
yesr in the matter of their incomes. their eX-
pendtures and their debts.
THE INCOME TAX AMENDMENT
Having said this much with respect to the
corporation tax as il is, want 10 say few
words in favor Of the passag ge Of the income
T. tax amendment as proposed by Congress IN the
states Assuming the constitutional authority
70 have been given. ] opposed 2 general
J. great national stress. I opposed 10 il he
cause Of the difficulty already alluded IN. that
u puts such premium perjury n have led
. other governments To abandon that method of
|. lev9ing an income tax and Of imposing the tax
IN wherever possible on the sources Of income in
u the hands Of those who are not ultimately 10
~ pay it.
The instance 7 have already given If an in
crease Of Loo per cent in the proceeds of the
tax when changed from personal tax 10 ore
upon the sources Of income. like our corporation
tax is a most forCible argument in favor Of the
proposition that the inquisitOrial feature of an
.income tax levied directly upon the person. to-
gether with the inevitable opportunities for es-
cape from the tax by Of perjury, makes II
desirable, If possible TO avoid such a direct
method Of levying an income tax.
BUT am most strongly in favor of adoption
10y the states Of the amendment authorizing
congress 10 impose an income tax without APP
portioning IL among the states according 10
population; and ! am strongly in favor Of this
because in times Of great stress. If war or some
other calamity were TO visit this country and
we should need 20 strain our resources, the in
come tax would be one Of the essential instru-
5nents by which We could collect a large amount
of money tn enable US 10 meet the exigencies
IL the income tax amendment passes. as
hope II may we can then enlarge the corpora
tion tax TO include proper burden on
bondhoders in corporations as we'll upon the
,hereholders; and this viii make this instrr-
snent OF taxation even more equitable than II
now is.
CHECK on GREAT FORTUNES
have already considered in a speech which
made in Columbus in 1907 how great fort
Nnes could be divided without drastic confisca
tory methods II seems TO me now as il did
then. that the proper authority TO reduce the
'size of fortunes is the state rather than tbs
central government Let the state pass laws
OF inheritance which shall require the division
OF great fortunes between the children of the
neeedenfs, and shall not permit multi-million-
Hire 20 leave his fortune in trust as 10 keeT
81 an a mass; make much more drastic the rule
against perpetuities which obtain at common
law, and then impose a heavy and graduated
inheritance tax. which shall enable the state 10
share largely in the proceeds of such large ac-
cumuations OF wealth, which could hardly have
been brought about save through its protection
and Its aln Ia this way, gradually but effect
svely. the concentration Of wealth in one hand
or q few hands viii be neutralized. and the
danger 10 the Republic which has been antici-
pafSS~ by continuation through generations OF
1eSl 80 e-cirnulating fortunes will be obViated.
,noso SS ~ the income tax itself for this pur-