The Ogden standard. [volume] (Ogden City, Utah) 1902-1910, 1910-03-15
Stress is Placed Upon the Declaration That
the Tax is Not Direct Tax or an Infrac=
ton Of General Powers of States

Washington. March 15.-The gov
eTnments defense of the constitution
ality OF the corporation tax provision
OF the now tariff law was submitted
today i'm printed form TO the supreme
court OF the United States II Is the
work of LLOYD w Bowers, solicitor
general, but bears the signature also
OF his chief. Attorney General Wick
eshnm. Upon IL the government will
shape its oral defense OF the law
when the corporation tax cases come
up for argument. probably Tuesday.
The first point sought 10 he made
it that the tax Is not a direct tax upon
property but Ia an excise tax upon
tho carrying on or doing business
The declarations OF the statute. as
well as decisions of the courts are re-
lied upon TO support this point
AS TO the statute, ,Mr. Bowers says
in his brief that it shows the trans
action OF business TO be the subject OF
the tax and that the income of busi-
ness Is used merely as measuring the
amount of tax which rests. not upon
that income. but upon the occnpa-
ton from which 1t Is derived,
These reasons. together with the
decision Of the supreme court in the
Spreckels case, which the solicitor
general explains as holding that 4
tax declared In the statute TO be laid
oil business in an amount equivalent
to certain percentage OF income Us
an excise tax OIL tho business ara
taken BY him as sufficient TO show
that the corporation tax is an excise
on the transaction OF business. How
ever, he proceeds 10 cite cases TO
prove that. although the taX were
laid on the income of business It
would still be an excise upon the
business. a list of inheritance tax
cases are cited to show it Is an cX-
else tax.
II a tax upon the right To receive
property, personal or real by inherit
ance Is not direct tax or the prop
orty, though las was true OF all the
federal inheritance tax laws) the In
heritance tax is measured by the val
uc OF the inherited property said
the solicitor general. "it must be
equally true that tax upon the or
ercise of the right TO use property
ia one or another kind of business
especially under the peculiar condi-
tions and disadvantages OF corporate
business-is not direct tax.
In his consideration OF cases bear
ing upon the point whether the cor
poration tax was a direct tax or an
excise. Mr.. Bowers refers to the fam
Gus income tax cases. He says these
cases have been interpreted, undoubt-
dly with the concurrence Of the en-
tire supreme court, as referring to
tax imposed on property solely py
reason OF its ownership,
That must mean" says the solicit
OF general a tax upon property bS
reason OF Its mere existence or or
dinary enjoyment. though the prop
erty is not put 10 some special use
A tax upon business is not tax inn
posed upon property solely by reason
of It's ownership. for II the property Is
not put to business use, no tax iallS
upon II or its income.
IL Is In the argument that the tax
is not a direct one, that MIR. Bowers
first considers the claim that. mas
much as the tax Is not levied upon
partnerships or individuals, but Is
put on corporations and joint stock
companies and IL Is. therefore. as,
sesscd on franchises.
The distinction between partner
ships and individuals on the one hand
and corporations and joint stock CONF
panics on the other is explained ns
rot proceeding from the presence or
absence Of franchises. but from the
wide and important diversity OF
legal rules affecting the TWO kinds OF
business, of these two groups.
Even II this tax were regarded
merely as q tax upon the exercise oil
use of franchises" continues Mr..
Bowers. instead OF being a tax on
the entire conduct or transaction OF
business under many special condi-
tions. 1t would be altogether differ
ent from a direct tax on the fran
chises themselves. tax upon the
use of franchises In business is no
more a direct tax upon tho franchises
than a tax upon the use OF property
In business Is a direct tax upon the
property so used"
Finally. on this point. MIR Bowers
contends that franchises cannot be
the specific subject OF the tax as no
tax Is imposed IN any way unless bust
ness is actually done
The second point Mr., Bowers seeks
to make is that the tax is not a di-
rect tax upon the shares of the stock
holders. nor upon tho income, The
reason for tho tax not being a direct
tax on property is held 10 apply to
the claims that It is not a direct tax
OF tho shares or income Of the stock
holders
The third point Is that the tax does
rot become direct in the special case
OF company engaged In the business
OF handling OF dealing in real
estate. Five OF the fifteen casss t9f