New-York tribune., 1909-07-21
THE CORPORATION TAX.

The changes made by Ine conference boAIiii''
tee in the corporation tax section Of the tarln
bill undoubtedly soften the hardships imposed
on the class specially legis!ated against by that
section. The rate of taxation is reduced from
y Der cent TO l per cent. The revenue to be
raised by a . per cent charge on corporation
dividends or income would probably have e1-
eeeded the sum needed TO supplement the gov
ernment's receipts from customs and lhterhdl
revenue After the corporation tax amendment
was accepted by the Senate ii was decided To
increase the internal tax on certain mahuIacl
ures Of tobacco. If that advance is approved
by the House Of Representatives several million
dollars will be added TO the Treasurys annual
income. A / per cent tax on corporation divi-
dends therefore. promises reinforcement
enough If a miscalculation is made and Il
deficit should be shown in 1909-'10 and 1901
the rate could easily be advanced 10 1i2 or
per cent.
The dropping of the Clapp amendment alned
st holding companies. is also an improvement
Whether or not sound public policy IS served DE
penalizing holding companies in the strict sense,
the Clapp amendment. striking at them missed
its mark bv burdening with double taxation the
stockholders of large number of corporations
which cannot be legitimately classed as holding
companies 1t annulled the reasonable eXeInp-
zion from taxation of all funds derived by cor
porations as dividends from other corporations
Such an annument might be justified as an al
tack on the practice Of vesting the control Oh
MANY subsidiary corporations in one propre-
tarv concern But in imposing double taxation
On the dividends received by banks, trust com
panies and railroads on investments made oy
them in good faith for investment purposes anu
with no idea Of exercising control while avoid
ing direct responsibility, it contemplated fur
ther Injustice 10 the holders Of one kind OF
nersonalty already singled out from the mass
of owners of securities 10 bear the burden OF
the new special tax While bond owners ana
preferred stock holders escape taxation on the
income from their investments in corporation
securities. it would be grossly unfair to expect
the common stock holder TO meet first. the TAX
on interest paid on bonds in excess OF capital
stock then the charge on his own dividend tund'
and then n third charge on that portion of his
dividend fund which had come from the treas
urv of another corporation.
We hope that at least one more improvement
will be made before consideration Of the cor
poration tax section is concluded The extent
Of the publicity aimed at by the trainers of the
section is not entirely clear IN a recent state
mont giving his reasons for opposing the cor
poratfon tax Representative Bennett, OF this
city. said;
II will not give corporation publicity, though
Il urornises il. BY the terms Of Section 3 no IN
Formation concerning corporation can be made
1,ylbIic e,cent b-- express direction Of the Presi
dent Of the United States The lodging or TINS
terrific power in any office Is SraVeIy uh"lse'
Mr. Bennet's criticism shows that the pub
Iicity provisions of the corporation tax scheme
are not well understood. 1t is provided in the
Senate's amendment that the return OF a cor
Doration showing its resources, expenditures
and taxable income, together with any cor
rections made by the Commissioner, snail be
filed i'm the office of the Commissioner of In
ternal Revenue and there become public rec
ord But ii is also provided that 1t snail ne I'M
lawful for any collector. deputy collector.
s.agent clerk or other officer emplOye Of the
United States to dfvulge make known in
.any manner whatever not provided by law to
"snv Derson any information obtained by him
ain fbe discharge Of his official duty. or to
"divulce or make known in any manner not pro
..yided bv law nHy document received, evidence
taken or report made under this section cx-
"cept upon the special direction of the Presi-
dent"
There seems TO be some ground for question
ing how much publicity is here intended and
some ambiguity about the phrase mot provided
bv law" It is important that the rights of
nriVacy of corporatiOnS in way affected with
A public interest should be preserved to them;
for sinister and uIinous use of business Sc
crets might ne made by trade rivals intent on
driving weaker concerns to the wall. No pub
lie advantage can come from the exposure 70
business enemies Of the private affairs of pri-
vatc corporations. We trust that adequate safe
guards will be provided against the betrayal OF
facts which the government Is TO be en-
powered TO obtain but which business COM
petitorS have no right TO know.
-~---~