Omaha daily bee., 1909-09-22

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noting the Industries Of the country. In
other words. the passage of the income
tax bill would have lent support probably
to the proposition to have a tariff for
revenue only and would have interfered
with the protective policy to which the
republican party is pledged
Question of COnstitutiOnaIity.
"One further objection to the income
tax amendment was that It had been de-
clared unconstitutional by the supreme
court and to invoke a second decision upon
that issue was to question the uniformity
/ Of the decisions Of the supreme court and
to drag the court into a political discus
sion which, whatever its decision. could
not make for it's standing impartial
| tribunal before the people. II indicated
diversity of view between congress and
| the court-two coordinate branches-with
| reference to the constitutionallty of the
| law which II seemed unwise to perpetuate
/ In a formal statute. But the income tax
amendment seemed quite likely to pass by
vote Of all the democrats and a sufficient
number Of republicans. Therefore, those
who were opposed to the income tax
amendment looked about to see IL a COM
promise could not be proposed less OBJ
jectonable than the income tax amend
ment which would satisfy enough repub-
licans who were inclined to favor the in
come tax to prevent the passage of that
amendment. Such compromise was found
in the present corporation tax and also
the joint resolution already referred to-
proposing an amendment OF the federal
constitution to the states authorizing the
general government to impose an income
tax without imposing it as a direct taxa
ton according to the proposition of the
states.
Tax Upon Success.
The provisions for the corporation tax in
the bill exempt all corporations whose net
income does not exceed $1,000 1t is. there
fore, In effect an income tax; that is it
taxes earnings actually made. 1t is tax
upon success and not failure.
THE most Objectionable feature of a
direct income tax is the premium upon
perjury which IL offers to those who are
willing to conceal their income-a matter
not at all difficult to do-and who thus sub
ject to much heavier proportionate bur
den those who are conscientious in making
their returns and who pay their tax as the
law intended. SO great was this evil In
the levy of an income tax in England that
when that tax imposed directly upon in
dividuals as was proposed here IN the so
called income tax amendment bill. il 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
corporation tax is, not upon the individuals
directly, but upon the income before It
comes into their hands. This is a practical
argument in favor of corporation income
tax as against an individual income tax,
that is altogether unansVerable.
In England, after a hundred years of
exceptional instances on the Individual d.
rectly 1t is first levied on the declared
dividends OF corporations; secondly, on
rents before they leave the hands Of the
tenants, and finally. on the individual
with respect to matters that are not COW
cred by rents and corporate investments.
Another distinction which is made in the
English law, and which commends itself
to everyone with a sense of justice. is
that the income tax on passive and perm
aneat Investments, Hka the stocks and
bonds in a corporation, should be higher
than on earned incomes-that is, incomes
earned by the services of the Individual
salary a professional income
Earned incomes thus described are really
the proceeds of an application of the cap
ital of individuals, which is being con-
sumed and will be entirely used up at
the end of his professional life of twenty
or thirty years. whereas the income from
corporate and business investments will
continue permanently without regard as to
whether the owner lives or dies, and will
pass on by succession of law undiminished
and without increasing capital. This dis
tinction justifes making a difference be-
tween tax upon the income of corpor-
atoms and that of individuals where they
am hall HWnEE
making the rate less or by not taking the
earned income at all. The latter is the ef-
feet of the corporation tax"
No Tax on Corporation Bonds.
Another criticism of the corporation tax
in the present bill is that only shares of
stock in corporate enterprises are thus
taxed and that those who own bonds Sc
cured by mortgages upon the entire prop
erty or plant of the corporation 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 II possible to impose tax upon
the bondholders who are only less interested
in the earnings and success OF the corpora
tions than are stockholders but the diff
Guilty of including them and of collecting
from the corporation before the payment
of interest on the bonds, an income tax
propOrtioned 70 percentage of the interest
to be paid on the bonds, was that congress
could not force a corporation to recoup it.
self in the payment of such a tax from
the interest to be paid. because thus to
impose a tax upon the bondholder propor-
toned TO the interest he received would be
in violation of the constitution as inter
preted by the supreme court as an income
tax not apportioned among the states.
Chance for Change.
Now, II the proposed amendment to the
constitution authorizing the imposition Of
an income tax without apportloning IT
among the states according to population
passes, II would be possible TO add to our
corporation tax the feature of imposing a
tax upon the bonded interest in that cor
poraton by a percentage tax on interest 70
be paid, thus reducing the amount of in
terest which the corporation would pay to
the bondholders to the extent OF the tax
collected. This 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 bondholders and stock
holders are all OF them in a sense Joint
investors and a corporation income tax
ought 10 include them all. Under the con-
ditions that existed with reference TO the