New-York tribune., 1909-06-17
VET EARNINGS TAT.


Taft's message to Congress which deals with
the income tax question there will be, think,
a general assent. The President marks out
safe and prudent policy when he advises can
did recognition of the effect of the Supreme
Courts decision in the income tax case. Though
he himself has felt and sa id that a new income
tax law might be so drawn TO escape the
objections which impelled the court TO declare
the income tax provisions of the Wilson-Gor-
man tariff law unconstitutional and void, he
now frankly urges Congress not TO assume the
questionable attitude of challenging the courts
wisdom and asking it to reverse itself. Comfy
between the different departments of the gov
ernment should discourage the legislative
branch from practically re-enacting law pro
nounced imperative by the judicial branch. with
the hint that the court should embrace the op-
portunity to confess ar error. It is more in
consonance with our system of divided powers
for Congress to accept the courts Judgment and
TO try TO overcome. in any new effort to levy
an income tax, the defects developed by earlier
legislation.
It is foolish to enact lawsuit The constt-
tutional impediments to an income tax can he
removed hy processes provided in the Consti-
tuition. IF II Is desired TO give Congress I'M
questioned power 10 lay direct taxes without
regard to an apportionment among the states
according 10 numbers the way is open through
an amendment to the Constitution. If the press
ure for that kind of federal taxation is as
strong as many of its advocates represent it 10
be- there will be no great difficulty in securing
a two-thirds vote In each house of Congress i'll
favor of submitting amendment and the
ratification of the amendment by three-fourths
of the states If the removal of the limitation
on direct taxation is held TO be wise and neces-
sary by great majority of the voters, their
will can be made effective in a proper and
orderly manner.
We think the country will be satisfied with
the programme suggested for testing the pro-
priety and desirabillty of an income tax.
questionable lawsuit involving the suspension
and possible failure of tax collections. is thus
avoided and limitations on the taxing power
are not ridden over rough shod. 1t will. per
haps be urged that a tax the net receipts
of corporations being also substantially tax
on incomes, is subject TO challenge and possible
annulment in the Supreme Court The Presi-
dent in advising Congress TO levy such tax.
describes # as an excise tax The technical
definition may weigh more than the intent and
the Supreme Court in the decision cited in yes
terday's message-the Spreckels Sugar Rein
ing Company agt. .McClan-undouhtedl showed
a disposition To exercise a liberal latitude
in defining excise taxes. Yet there m
question: bly, those who believe that the pro
posed tax VIII nave 70 pass Ine scrutiny OF lle
courts The Spreckels Sugar Refining Com
pany sued 10 recover taxes collected from it
under the provisions of the emergency war rev
enue law of June 13, 1898 That law imposed
companies refining petroleum sugar. II
their gross receipts exceeded S2J0.O00 year.
tax Of one-quarter Of l per cent on the gross
receipts beyond S250,00O. The plaintiff held
that such an impOst was direct tax. not levied
in accordance with the provisions of the federal
Constitution. The Supreme Court decided that
the tax not tax property but on buSi-
ness. privileges or emplOyments and hence
excise tax. 1t cited other federal taxes of
similar nature which had been sustained-the
10 per cent tax On the banknotes Of state
banks. the tax on sales of stocks or produce and
the tax on inheritances.
Said Justice Harlan in the opinion delivered
on February %. 1904:
In view OF these and other decided cases we
cannot hold that the tax imposed on the plaintiff
expressly with reference to its carrying
doing the business OF refining sugar" and which
to be measured by its gross annual receipts
in excess of named sum, is other than is de-
scribed in the act Of Congress- special excise
tax and not direct one TO be apportioned among
the states according to their respective numbers.
This conclusion is inevitable from the judgments
in prior cases. an fChich the coHTt has dealt lCifh
the distinctions. often rery difficult 10 be Cr-
pressed fn 4C0rdS, betgCeeH tGTcs that are direct
and those fchfch are to be regarded simply as
ments were rested need not be restated
examined. II would subserve useful purpose
TO do II must suffice now to say that they
clearly negative the idea that the tax here in
volved is direct one. to be apportioned among
the states according to numbers.
Justice Harlan also made this interesting
comment on the scope Of the income tax de-
cision:
1t is said that If regard be had to the decision
in the Income tax cases a different conclusion
from that just stated must be reached. On the
contrary, the precise question here was not
intended to be decided in those For in
the opinion the rehearing of the income tax
"sidered the act only in respect of the tax on
Income derived from real estate and from in
vested personal property, and have not COM
'mented much of it as bears on gains or
"ments in view OF the instances In which taxa
-tion on business privileges or employments has
assumed the guise of excise tax and been
sustained such"
IL is evident from the foregoing that the tax
on the net receipts of corporations, about TO be
disbursed as dividends, must be clearly shown to
wear the guise of excise tax before il can
pass muster as not conflicting with constitu-
tional requirements Perhaps that can be
shown. but, as Justice Harlan significantly re-
marked, the differences between direct taxes
and excise taxes are often difficult TO put in
WORDS even when the mind is able TO grasp the
idea that there are some technical differences.
The tax on the net receipts Of corporations de
serves TO be considered in al its bearings. ana
we hope TO see its merits and demerits as en-
economic device thoroughly weighed before Il is
Incorporated in the pending tariff bill Apart