New-York tribune., 1909-07-09
CoPpoB4TJoy yAx ANENDMENT.

4 good deal of confusion seems Ia exist as 10
the purpose and effect Of the Clapp amendment
10 the corporation tax section OF the tarlH pliI'
accepted on Wednesday by Mr. Aldrich 1he
IMPRESSION was given that the amendment deaIt
only with holding companies in the strlc'T
SeDSe-that is with corporations organized 10
control and onerate subsidiary corporations and
deriving their income solely from the diTl-
dends declared by the subsidiary concerns 1t
NAV have neen the chief purpose of those VIII"
drew and supported the amendment TO make
sure that holding Companies, as such, should
NOT escape the tax levied on other corporations
YET in aiming at holding companies they hit
,o-rors rions Of all snrts-bsnks. insurance com
panies. railroads and industrial corporations
which have invested in the securities "f "ther
corporations. not for the sake Of controlling or
operating them. but for the sake OF me revenue
return on stocks or bonds.
NTr Clamp moved To strike out Of the corpora
tion tax section the exemption from the taxahie
receipts or profits of a corporation All amounts
received by il within the year as DIVIDENDS
'.llpon stock of other corporations, JOINT STOCK
..eoppanies or associations or insurance com
--panies, subject to the tax hereby imposed 1t
* clear that If holding company had no re-
ceints other than dividends already taxed II
would be exempt from any immediate taAaIl"h
under the original provision. It is equally
I
company were owned by a holding company
The profits or dividends accruing 10 ii would be
/ taxed twice under the provisions OF the CIapp
! substitute The Minnesota Senator ana those
who svmpathized with him declared 1t TO De
I their prime object 10 force such double taxa
/ ton saying that holding companies, against
which much prejudice already exists, woulu
( probably be able to avoid an efficient federal
inspection of their affairs if they were TO be
. oil to NAL IA Z
+ internal revenue showing no sources Of income
+ except those explicitly exempted from taIatlol-
/ Yet 10 reach the relatively few corporations
so situated the amendment subjects TO douple
taxation a very large number OF corporations
drawing & portion Of their income from invest
nents in the securities of other corporations
Such investments have been sanctioned Dy law
and have been beneficial in promoting industry
and enterprise and in opening field Tor the
employnent OF trust funds and surplus earn
fnps They have been made in good faith ana
with 10 idea Of using the device OF lncorpora-
lion 10 accomplish such ends as holding cohi-
panies pure and simple have been charged
with irving 10 accomplish. Every holder OF
stock IN bank. trust company, railroad "r
other corporate enterprise having such invest
nents will see the income from those invest
men1s taxed before il ches his company ana
then retaxed when it Is diSbursed by that con
CORN as dividends It was that sort OF double
taxation on special forms of income which
made the original corporation tax scheme 50
Objectionable Some Of the original inequalities
were removed But the Clapp amendment
serves 10 revive and aggrayate them.
II is curious circumstance that the inequlG
of the double tax was frankly admitted by
Senator Cummins and 10y other Senators who
/ were ready TO vote for 1t. In the Cumnlns-
Bailey income tax amendment. defeated in the
Senate Oh wednesday, the individual taxed on
! income was allowed 10 deduct from that income
dividends received from corporation on which
an income tax had already been paid. Mr..
Cummins justified that deduction in his own
measure and said of the Clapp amendment: L
/ .arree that If this 1.-THE corporation UX Is an
! Income tax It is duplication IF taxation and
! is unfair and unjust" Yet standing on the
technicaIitv that the same rules of equity should
not apnlv TO general income taxes as 10 corpora
ZION income taxes when labelled excise taxes,
! even though they might be identical In effect
| tbe Iowa Senator favored the Clapp substitute
and advocated a tax of even 10 or IL per cent on
| the profits of holding companies. Taxation the
orieS and legal distinctions are evidently being
employed 10 confuse situation and TO do a
practical injustice. Academic contentious should
be sacrificed TO secure the vital object Of avoid
/ ing an oppressive duplication Of taxation under
/ the Senate amendment