The Washington herald., 1909-06-22
SENATE TO ACCEPT
TAFT'S TAX PLAN
Wickersham and Root Work
ing on Measure.
REPUBLICAN, SUPPORT ASSURED
President and Members of Finance
Committee VIII Confer Tonight,
when Terms OF Proposed LeEisln-
tiOn Affecting Corporations VIII Be
Perfected-May Adopt Amendment.

Although there will be another confer
ence on the subject between President
Taft and the Republican members Of the
Finance Committee, the terms OF the
amendment 10 the tariff bin 10 provide
tax on the net incomes of corporations
have been agreed on. and the amend
ment is in course OF preparation.
4 It will be submitted TO the President
this evening, and the present expectation
is that il will be proposed in the Senate
tomorrow and immediate consideration
requested.
There is stin considerable opposition 70
the corporation tax among regular Re
pubHcans OF the Senate, but this Opposi-
tion is not OF such q character as to
indicate that they will vote against the
amendment. Before sending IN his mes
sage the President conferred not only
with the Finance Committee, but indi-
vidual Senators, Including Brown, OF
Nebraska: Curtis, Of Kansas. and others.
who gave approval TO the proposition.
Most OF those among the Republican
regulars who have expressed opposition
declare that as the amendment is an
administration measure they will sup
port H. 10 be in accord with the policy
OF their leaders, and 70 give the Taft
administration loyal aid and assistance in
everything within reason that il proposes
in the way Of legislation.
An Administration Measure.
The Republican regulars OF the Senate
refer 20 the amendment as an admins
tration measure. and apparently are
anxious to emphasize that it emanated
from 0Ir Taft and not from the Senate
organization. The widespread willing
ness among Republican Senators 10 be
IN accord with the President. even in such
a case as this. where the proposition does
not meet with the approval OF many OF
them. is one Of the remarkable develop
nents OF the present situation.
The basic feature Of the amendment will
be a ? per cent tax on the net incomes OF
all corporations. even those doing bust
ness entirely within a State with a
proviso that net incomes below the sum
OF 5000 shall be exempt. A corporation
which does not have an income OF $500
will not be obliged 10 pay any tax. and
a corporation Of. say, $4,000 would be
required 10 pay the tax on $4,000 OF this
amount In the same manner a corpora
ton with a net income Of 500, 900 would be
obliged 10 pay the tax on $95.000.
In his message on the subject last week
President Taft referred to the tax as ap-
piled 70 national banks in language which
indicated a recommendation on his part
that the net incomes OF national banks
should be exempt from the imposition
Of the corporation tax.
II has been determined however. that
the net incomes OF national banks, as
well as those OF all other Incorporated
banking Institutions, shall be assessed at
the per cent rate Provision will be
made in. the amendment however for
deducting from the national bank income
tax the amount paid by each bank as a
tax on the circulating notes issued by II.
The proposition 10 tax funds Of cor
porations put aside for the purpose OF
paying interest on bonds has been aban-
doned Many objections we're made 70
this proposal. the most emphatic being
that a tax on such interest funds would
in many cases amount 10 a double tax.
IN the first place. the tax would be
levied on the interest fund itself It was
contended that IN order 20 replenish the
interest fund by the amount paid to the
government for taxation on Il. the pro-
portion OF net income to be devoted TO
be curtailed by the amount Of the tax on
he interest fund
Direct Imposition.
Then. again. the dividend fund itself.
being part OF the net income or a cor
poration. would be subject to a direct
imposition Of the per cent tax. and
this would result in corresponding loss
TO the stockholder. But it was pointed
out that in addition TO these results the
funds OF corporations which were paying
interest on bonds would be taxed again
in many instances. Bonds OF corpora
tons It was explained. were in the hands
Of incorporated holding companies and
in the possession Of other corporations.
and these holding companies and otbe.
corporations would be obliged to paw a
tax on the bonded interest received by
them. because Il would form part OF
their net incomes.
Members Of the Finance Committee said
yesterday the amendment would define
clearly what constituted the net income
Of a corporation. and that the Interstate
Commerce Commission which had stan
darized methods OF ascertaining the
earnings Of interstate, State. and munIcl-
pal railways. would be called on TO give
advice in this connection. Other members
OF the committee declared, however. thar
the amendment trainers had found II so
easy TO define what constituted net in
come that the services Of the Interstate
Commerce Commission would not be
utilized.
The Republican members NJ tho
Finance Committee have given some con-
sideration 10 suggestions that unless the
FUNDS set aside by corporations 10 nav
interest on their bonded Indebtedness
we're made subject 20 the tax. many cor
porations would convert their stock into
bonds, or devise other means OF esoaD-
ing payment Of the tax.
1t was said that the committee knew
Of several methods that would prevant
corporations from gaining any benefit hv
a conversion Of stock into bonds ana
that the amendment would make nro-
vision for meeting anything OF that char
scter.
As to the matter OF revenue % bA
realized under the proposed tax, the Fl
nance Committee estimated originally
that a per cent tax on the net income
or all corporations without anv ex-
emption whatever would bring 10 the
Treasury about $40,0O0OO0 annually. Since
the decision was reached TO exempt cor
poration net incomes below 5000 there has
been necessary revision Of this esti-
mate. and ii is now figured that with
the 5000 exemption the revenue to be
realized viii be about SIS. .OOOO 900 annually.
VIII Cover Excess.
This, It is declared. VIII be ample to
cover any possible excess Of expendI-
lures over receipts during the first year
National EIonfvicaI