Evening star., 1909-07-08
TEST new TAX LAW
Corporations to Make Fight
on Constitutionality.
MAY HOLD UP REVENUES
Treasury Officials Worried Over
Prospect of Deficit.
COLLECTIONS MAY BE ENJ0INED
Cash Account In No Condition to
Spare Expected Revenue-Anx-
ious to Avoid Bond Issue.
MAY HOLD UP REVENUES
COLLECTIONS MAY BE ENJ0INED

Officials of the administra tion. espe-
cially those of the Treasury. have re-
ceived Information of the intention OF
the corporations OF the country. notably
the big ones in New York to make a
long and thorough test of the constitu-
tionality Of the corporation tax about
to be made into law by Congress.
Treasury officials are worried over this.
for the reason that IL means the holding
up of collections of revenue from this
source for an indefinite period and a
probable serious deficit in the Treasury
until conditions bring In sufficient rev.
enue from customs and internal revenue.
President Taft conceived the tax as an
aid to the new tariff law in bringing
in enough money to meet the expendi-
lures of the government. He and his
advisers. including Attorney General
Wickersham, recognized as one of the
ablest lawyers on corporation subjects in
the country, are fully satisfied that the
law will be constitutional.
They considered that phase of the
question ahead of any other. and they
have never had even slight doup,s
about its legality. Their opinions, how
ever. will not prevent the corporations
bringing their heaviest legal batteries
to bear upon the law, with the hope of
smashing 1t into fragments. The pos
sible effect of this will be to hold the
collection of the taxes in the air for
several years. while the Treasury is
hungry for money to meet eNpendt-
lures.
May Seek Injunction.
1t would be within the province OF
the courts before which the attack L.
taken to permit the taxes to be col.
lected. subject to refund, but the prob
able move of the corporations will be {,
ask the courts to issue injunctions
against the collections pending final de-
termination by the highest court of the
land. They would seek this course III
view of the well known fact that money
| once paid into the Treasury Is exceed
ingly hard to get back, generally re-
quiring an act Of Congress and the
hardest sort of work. The natural and
proper process of the courts, also. is 20
hold up collections pending final ad-
judication.
Treasury officials have hoped TO prevent
any interference with the income expected
under all laws. The cash account is in no
condition to spare revenue during lhe
next six months. The Treasury Will soon
have in its possession about all the money
that can well be taken from national
bank depositaries. Secretary MacVeagh
having recently called on these deposi-
| taries for about $25,OO0.0O0 of funds. and
reducing their deposits of government
money to a minimum figure. With this
addition to the working balance there Will
be fairly snug amount Of cash on hand,
something like s50.O00,O0O. A few months
of deficit, including July. with its heavy
expenditures and comparatively light re-
ceipts. will draw upon this working bal
ance to a rather alarming extent, leaving
toward the fall months a working bal
ance that will be down to rock bottom.
Then Secretary MacVeagh will have to re-
,.at1. Nln 0f tiy9cr In Oh
He has authority to issue Panama canal
bonds to whatever amount he desires. but
he wishes to stave this off as long as pos
sible because of the low price of govern
ment bonds at this time. These bonds are
lower now than they have been for years,
and the government would get little above
par, even if any premium, III large block
were marketed. 1t is also within the author
ity of the Secretary to issue short-term
certificates of Indebtedness. paying J per
cent. running year. Secretary CortelyOu
did this during the panic of 190I-0S to Sc
cure the money to deposit In national
banks, so that the stringency of cash
might not bring on a more serious blow
to business. These certificates have since
been retired
Fear a Bond Issue.
A regular bond issue would be possible.
but the administration would try to avoid
this if possible. 1t was the issuing and
sale of bonds by the Cleveland admins
tration that was used with such dis
astrous effect by the republicans against
the democrats in 1896. A regular bond
issue in time of peace would furnish the
democrats with ammunition for years to
come. Even the issue of > per cent cer-
tificates of Indebtedness might prove a
bad political move, but all these things
loom ahead for the administration and
tlx- <,f
the corporations looking TO stopping the
collection of the corporation tax will be
bad news to administration officials Iav-
ing to do with the revenues of the gov
ernment.
Senator Aldrich himself is optimistic
i'm his views that bond issue will be
avoided by the Treasury, and he Is bank
ing upon the new tariff law bringing in
more revenues than generally expected.