The Colorado statesman., 1909-09-25
PRES. TAFT OPPOSES PERPETUATING
FORTUNESAND UPHOLDS INCOME TAX
Believes Government Should Be Supported in Its
Measure to Impose Corporation Tax of
One Per Cent on Profits

been said in favor of the federal in
heritance tax because the truth is that
even though the state and federal gCv-
ernment impose the Inheritance tax
at the rates proposed, both taxes
would not have been particularly
heavy. Still, with the inheritance tax
foreclosed, the question then arose as
to what tax should be imposed in or
der to make up the deficit. This uues-
tion arose in the Senate. For the in
heritance tax had passed the House,
and had been stricken out by the
finance committee of the Senate.
"a part of the Republicans and all
of the Democrats of the Senate united
in pressing for consideration general
income tax on individuals throughout
the United States. 1t left an exemp-
tion of those whose incomes did not
exceed $4,000, but upon the rest it i'm
posed a general income tax of 3 per
cent. 1t also imposed a tax under
the former income tax upon Inherit
ances, and it was as inquisit)rial as
possible in subjecting the business of
every individual in the community to
investigation, and permitted the exam
ination of his books and al private
evidences of what his business con-
sisted of and what his income was.
This investigation was to lie carried
on by the collectors and deputy col
lectors of the internal revenue. The
law was as near as it could be made
to the income tax law which had once
been considered by the supreme court
some ten years ago and which was
held to be unconstitutional by vote
of five to four. 1t was conceded that
the tax would probably raise $150,00O,
900 to $200,000,000, which was far in
excess of the needs of the govern
ment if the tariff bill was to retain
its general form, as proposed, and so
to produce revenues which should be
reasonably expected. Our friends, the
Democrats, favored the income tax
with view to substituting it for the
tariff as an income-producing measure,
thus minimizing the effect of the tariff
in protecting the industries of the
country.
Would Have lnterfered.
"In other words, the passage Of the
income tax bill would have lent sup
port probably to the proposition to
have a tariff for revenue only, and
would have interfered with the pro-
tective policy to which the RepuOli-
can party is pledged.
"One further objection to the income
tax amendment was that it had been
declared unconstitutional by the SUI
preme court, and to invoke a second
decision upon that issue was to ques-
tion the uniformity of the decisions
of the supreme court, and to drag the
court into a political discussion which
whatever its decision, could not make
for its standing as an impartial tribu-
nal before the people. 1t indicated
diversity of view between congress
and the court-two coordinate branch
es-with reference to the constitutions
ality of the law which it seemed un-
wise to perpetuate in a formal stat
nte. But the income tax amendment
seemed quite likely to pass by vote of
all the Democrats and sufficient
number of Republicans. Therefore
those who were opposed to the in
come tax amendment looked about to
see if compromise could not be pro-
posed less Objectionable than the in
come tax amendment, which would
satisfy enough Republicans who we're
inclined to favor the income tax to
prevent the passage of that amend
ment. Such compromise was found
i'll a proposal to pass the present cor
poration tax, and also the joint reso-
luton already referred to, proposing an
amendment of the federal constitu-
ton to the state authorizing the gen
eral government to impose an income
tax without appodtioning it as a di-
rect tax according to the population
of the states.
Constitution Does Not Forbid.
For sake of clearness, l may say
that the constitution does not for
bid the levying of an income tax by
the central government. The section
of the constitution involved in general
terms forbids the levy of direct tax
by the central government unless such
direct tax is apportioned among the
states according to their population.
The Supreme Court, in the last de-
cision referred to, held that the in
come tax was a direct tax, and If
levied at all by the central govern
ment, must be apportioned according
to the population of the states. This
made the imposition of such tax ut
terly impracticable, and so construed,
in effect, forbade a general tax at sll.
But there are decisions of the Su.
preme Court authorizing an excise ta1
to be levied on business corporations
and to be measured by the gross in
come or the net income OF the bust
ness; and therefore it seemed to the
general, as it has to a great many ex
cellent lawyers, entirely within the
decision of the Supreme Court as con
stitutional to provide that all corpora
tions engaged in business for profit to
pay to the central government an ex-
else tax equal to l per cent of their
net earnings. At first it was thought
that 2 per cent would produce about
S25 100000. Subsequent investigation
seemed to show that this was yer,
decided underestimate, and that l
per cent would produce that amount
and that that amount would be sufi-