The sun., 1909-06-30
THE CORPORATION TAX.
Net an "ExcIse' Tax. but an Income
Tax.


To THE EDITOR OF The suN--sir: Does
The proposed statute levying q tax on the
income OF corporations make the tax ar
excise" tax by the use Of the word "ex'
clse.- or by saying in Section 4 that the
tax shall be paid with respect to the carry.
Ing on or doing business by such corpora.
tion." DO? Leave out these words and
,, .eave out excise. and the statute would
not thereby lose any operative words.
Does tax on income become an excise
tax by calling 1t such2 Is 1t case oi
hocus pocus?
The tax is not really on any described
business or occupation, but is tax or
Income ''' from all Sources less certain
deductions Suppose the income tal
statute held invalid by the Supreme Court.
had called that tax an excise" levied
with respect to the carrying on or doing
business" Tint would have made that
statute like the law now proposed but
would IL have changed the true nature OF
! the tax. which is what the Constitution and
the courts have to deal with and not with
| names given to q tax?
Under the proposed statute the mere
being a corporation Tor being q corporation
organized for profit, II that Is the true read
ing OF the statute) and having an income
OF over IS, 900 renders the corporation liable
to the tax. 1t Is not necessary that the cof-
poration engage in any specified business.
Existence as q corporation (or as business
corporetion) and having income is the test.
IL this Ia an -exclse- tax q !s new kind.
We are familiar with an excise tax which Is
tax upon engaging in certain specified
kinds OF business, as selling liquors or
tobacco. such excise tax having some re-
lation to the business done. The proposed
n haa alat IN h,,o h,,tn plx
TO the fact Of corporate existence with pos
sibly the condition that the corporation Is
organized for profit, and to the fact of hav-
ing income.
The engaging Ia business ls not what Ia
taxed Test the case: A partnership and a
corporation respectively engage In the same
kind OF business precisely. and the statute
taxes the corporation and not the partner
ship. Whether business shall be carried on
by corporation or by . partnership or an
individual is a matter with which Congress
has no concern. The States legalize the
existence Of corporations.
This is not an attempt to tax the carrying
on OF business, but to tax corporations on
their income. because they are corporations
and because they have income.
In the income tax case the Supreme Court
held that a tax upon the Income OF rea
estate or personal property Is a tax upon the
property itself. Is q direct" tax and can
not be levied without apportionment under
the rule Of the Constitution. The tax now
proposed is in large part at least really a
tax upon the income from real estate and
personal property. and is az much direct
tax as II the real estate and personal prop
erty were owned by an individ
Direct taxes cannot under the Consti-
tuition be levied on the property OF corpora
tons any more than upon the property
OF individuals without apportonment under
the rule prescribed by the Constitution.
Neither the Constitution nor the decision
OF the Supreme Court makes any distinc-
ton between a corporation and an indi-
vidual In this respect.
The tax proposed might have been made
to apply to individuals as W ell as TO corpora
tions-existence for profit and having in
come Is the test Under this proposed statute
and It's true nature a. an income tax
would not have been changed or rendered
any more obpoxious under the Constitu-
ton. rs
1t will be very interesting, to say the
least. to see what view the Supreme Court
Will take OF this novel attempt to make an
excise" tax. HARRY HUBBARD
DRIAncLIFr LODGE. June IL