New-York tribune., 1909-06-17
THO PER CENT ON NET
E4RNTNGS.
Urges Constitutional Amendment
Gimng Pouer to LeUy
Income Tar.
From The Tribune Bureau :

-esolutlGn IIppOS4llS u lAlS SNdtSS Oh eAll4IAN
-n.nt TO the Constitution authorizing Congress
10 impose Z tax on incomes He expresses the
cenviction that a great majority Of the people
of the United States are in favor of delegating
N congress the power TO levy an income tax,
hut submits that in view Of the decision of the
suurerne Court il would be wiser first TO amend
the Constitution He explains that an income
TAI IS not to be relied for revenue at any
time N the immediate future because OF the
litigation which such enactment would inevita-
hlv cause but states that a tax on the net
earnings Of corporations will yield about S25.-
eoooa0 revenue. and that being tax on priv
fsee It is within the authority Of the federal
government to impose such a tax He cites a
decision Of the Supreme Court Of the United
States in support Of his contention
TEXT OF THE MESSAGE.
The text Of the message is as follows:
TO the Senate and House Of Representatives:
Il is the constitutional duty OF the President
from time 10 time to recommend 10 the Consid-
Grafton Of Congress such measures as he shall
Judge necessary and eXpedient- In my inaugural
address Immediately preceding this present eX-
traordinary session of Congress ] invited at
tention to the necessity for revision of the
tariff at this session. and stated the principles
upon which | thought the revision should be Ell
fected. ] referred 10 the then rapidly increas-
inE deficit. and pointed out the obligation on the
nan Of the trainers Of the tariff bill arrange
the duty SO 10 secure an adequate income.
and suggested that if il was not possible TO do so
hv import duties. new kinds OF taxation must be
adopted. and among them / recommended a
graduated inheritance tax as correct in principle
and as certain and easy of collection
The House Of Representatives has adopted the
suggestion. and has provided 1r the bill II passed
for the collection of such q tax In the senate
the action Of its Finance Committee and the
course Of the debate indicate that il may not
agree to this provision, and II Is now proposed
70 make up the deficit by the imposition OF a
general income tax in form and substance OF al
most exactly the same character as that which
in the case Of Pollock agt Farmers Loan ana
Trust Company Cl57 L. 8. 429) was held by the
Supreme Court to be a direct tax. and therefore
net within the powers Of the federal government
70 impose unless apportio0ed among the sew
ersl states according n population This new
proposal. which did not discuss IN my lnaug-
f-sl address or in my message at the opening
of tie present session. makes il appropriate for
n 70 submit 10 the Congress certain additional
Recommendations.
: The decision Of the Supreme Court in the in
come tax cases deprived the national govern
rnent Of q power which. by reason of previous
-te government had II is undoubtedly power
She national government ought 10 nave y In. t
he indispensable 70 the natlons IRE III siedI
crises Although ] have not considered con-
stitutonal amendment as necessary 10 the OK
srcise Of certain phases Of tins power a nlaluts
consideration has satisfied me that an amend
rnent is TIE only proper course for Its estaDlSfl
rneut 10 It's full extert. ] therefore recommend
60 the Congress that both houses, by q two
thirds vote shall propose an amendment 10 the
Constitution confeTring the power 70 levy an m
come tn5 DSllDflal S'N-- ''iNi'
out apportionment among the states IN pfopor-
tion 10 population
REMEDY THE DEFECT BY AMENDMENT
This course is much to be preferred TO the
one proposed Of re-enacting law once JudlclaIiy
declared 10 be unconstitutional For the Con
sress 10 assume that the court VIII reverse II
self and 70 enact legislation on such an aSSuinI-
ton. viii nor strengthen popular commence IN
me stability Of judicial construction o1 lli- or or
stitutioT. II is much wiser pollcy 10 acceLI II,
decision and remedy the defect by amendment
IN due and regular course
Again. il is clear that by the enactment OF lHe
proposed law the Congress will not be bringing
rnonev into the Treasury TO meet the present
os5cency. but. by putting on the statute oook
lax already there and never repealed VIII Simply
be suggesting TO the executive officers of the
government their possible duty TO invoke lltlga-
ton II the court should maintain its former
view no tax would be collected at all II II
Should ultimately reverse itself still no taXeS
would have been collected until after protracted
DELAY
i is said the difficulty and delay in securing
the approval 81 hree-fourths Of the states VIII
destroy all chance Of adopting the amendment
Of course. can speak with certainty upon
this point but have become convinced tfat a
great majority Of the people Of this country are
IN favor Of vesting the national government
with power 10 levy an income tax. and that they
Will secure the adoption Of the amendment in
The states If proposed 10 them
Second. the decision in the Pollock case leIt
power in the national government TO levy an
excise tax which accomplishes the same pun pose
as z corporation income tax and is free from
certain objections urged 70 the proposed income
TAX measure
therefore recommend an amendment TO the
arlh bin imposing upon ali corporations ana
2oint stock companies for profit except IlaLol1a i
5snks otherwise taXed)- savings banks ana
building and loan associations, an excise tax
measured by per cent on the net income OF
tach corporations This is excise tax upon
lhe privilege Of doing business as an artlhclal
entity and Of freedom from general partner
stock
an informed that a per cent tax Of TINS
ggaeracter would bring into the Treasury OF tiie
Onated States not less than S25'00o0Oo-
an EXCISE TAX UPON PRIVILEGE
The decision Of the Supreme Court in the
ssse Of Spreckels Sugar Refining Company agI
neClain (Is2 L. S. 397) seems clearly to estao-
hsh the principle that such a tax as this is an
excise tax upon privilege. and not direct TAX
on property, and is within the federal power
,~itnout appoYtioament according TO population.
Inc tax on net income IS preferable to one pro-
portonate TO percentage Of the gross receipts
seeaose II is tax upon success. ana hoI idhuI e
:. imposes burden at the source OF Iiie income
al e time when the corporation is well able 10
psf and when collection is easy
another merit Of this tax is the federal super
Vision which must be exercised IN oroer 10
.aaKe the law effective over the annual accounts
1ao business transactions Of all corporations.
sshle the faculty Of assuming corporate FORM
- seen or the utmost uuNty IN Ihe Dusiii
morso, II is also true that substantially All OF
ne abuses and all OF the evils which nave
e1oesed the public to the necessity OF REFORM
nere made possible by the use Of this very Iac-
sgs. II now. by perfectly iegllnf.te anu i
siectfve system Of taxation, are incidental y
s 70 possess the government and the stockholdI,
- and :he public Of the knowledge Of the real
BUSINESS transactions and the gains and pTonts
- every corporation in the country. we nave
.Laoe q long step toward that supervisory con-
ao OF corporations which may prevent a fur-
Sr abuse Of power.
recommend. therefore, first, the adoption of
5olnt resolution by two-thirds Of both houses
rr3pNsing 20 the states an amendment 10 the
.+ohstltution granting 10 the federal government