Los Angeles herald., 1909-12-20
THE CORPORATION TAX
Bv Frederic j. Haskin

great it's income, 1t cannot be touched
1t will be exempt. Another way TO
get around the tax levy is TO make
every stockholder, if there are but d
few of these, a salaried director. Ihese
salaries can be In lieu of net income,
and the government cannot go Dehlhd
the returns. Another way is to In
crease the amount of paid-up stock
so that the indebtedness may be in
creased, the law providing that i'll
terest paid out during the year on
bonded and other Indebtedness not eX-
ceedlng the amount of paid-up capital
may be deducted as an expense OF
| operation.
The big holding companies, which
have been regarded by many as the
most Objectionable of latter-day cor
porations, are exempted completely
from the corporation tax. In It's
anxiety to prevent any share of stock
! being forced to bear double burden,
congress provided that all income re-
ceived from stocks in other corpora
tions subject to the tax shall be
exempt from taxation.
! The corporation tax law viii fall
rather heavily on some of the stock
holders of the railroads of the United
States. The latest available statistics
gathered by the interstate commerce
| commission show that nearly ~ per
cent of all the railroad stocks in the
United States pay no dividend at all.
/ The tax on tho net income or thesa
roads will make il much longer betore
those who have their money tied up III
the stock will get dividends. These
stocks represent nearly two and half
| billion dollars.
How long the new tax will remain
| in effect is a question. If hght
| against its constitutionality IS MADE,
as the corporations say there viii be,
/ IL will be held up very shortly ana It's
enforcement will be suspended as soon
as the corporations can get 1t before
! the supreme court, pending maj
ascertainment of its constitutional
/ status. If IL proves to be constitution
al it may remain in force for only
year or two; indeed, that is the pro-
! gram of Senator Aldrich. who openly
confessed that he used 1t as club
/ to prevent the passage of an income
tax law.
The income tax law OF the civil war
period was not repealed for number
| of years, and during its operation
there was collected under its proVi-
sions the sum OF S350,000,000. Accord
/ ing to the decision of the supreme
court in the Pollock case, involving
the constitutionality OF the income
|
! tariff law, every cent of this was uncon-
stitutionally taken from the pockets of
| the people who paid the tax. 1t seems
passing strange that there was never
/ a case brought to the courts for he
restitution of some of this money AFR
the decision in the Pollock case. Thad
| Stevens, the great power behind the
| throne i'm congress during the clVll
war. was the author of the measure.
] fs. lnlnQf a.
man, and the Republicans were equal
| ly strong in their championship of II.
! The Democrats opposed IL then for
the same reasons that the Republicans
oppose an income tax now, and the
Republicans urged the same reasons
for the passage of the law that Demo-
Gratis urge now.
The case upon which the people who
| have faith in the consttutionality Of
the corporation tax base that belief Is
that in which Claus Spreckels sought
to overturn the portion of the war
revenue act of 1898, which imposed an
! excise tax upon the manufacture OF
petroleum and sugar products. The
ground upon which the constitutional
/ ity of that measure was attacked was
! that 1t was a tax upon the business
and therefore a tax not within the
! power OF congress " icNss iiS bp'T
ernment replied that 1t was not tax
upon the business of petroleum or
sugar refining at all, but upon the
privilege of engaging in such business.
! The supreme court sustained the con-
| tention of the government, and 1t is
argued that the present tax is on all
| fours with that of 1S9S-a tax upon
the privilege of doing business. Then
il was upon the privilege of doinS
certain kinds OF business; now it is
upon the privilege of doing business in
a certain way.
No one can forecast the attitude of
the court as it probably will be COM
posed when this question comes be-
/ fore it, fer that body viii be very
different one from that which passed
upon the income tax law of the second
! Cleveland administration, and also
different from that which rendered an
opinion on the Spreckels case. Only
Fuller Harlan and Brewer are left of
those who decided the income tax
question in the Pollock case, while
these three and White and McKenna
are the five survivors of the Spreckels
| decision.
TOmOrrOw-The Holy Land: Thrice
! Holy Palestine