New-York tribune., 1910-01-08
OTHER EXEMPTIONS DESIRABLE.

Governor Hughes has fixed the atten-
tion of the country on one serious defect
in the income tax amendment-that it
fails to exempt from the taxing power
OF Congress income from the bonds of
states, counties and municipalities. 1t
has been decided by the Supreme Court
that interest received on such securities
ought not to be included in income tax
able by the general government. Ratifi-
cation of the amendment, In its present
form, would remove q salutary restric-
tion on the federal authority and reverse
a condition from which the states have
greatly benefited
1t has been suggested that the amend
ment might be made acceptable by
change of language which would exempt
returns from state. municipal and county
bonds from federal taxation. Such a
change would cure the one defect which
Governor Hughes emphasized. But there
are other defects of a similar character
which ought to be cured in any redraft
of the amendment. 1t would be well. we
think, TO extend the exemptions so that
Congress would find itself debarred, as
IT is now, from taxing the salary of the
President, of any federal judge or of any
state officer. 1t might be advisable also
to safeguard income from interest on
United States bonds. now exempted by
statute from taxation.
The Supreme Court has ruled in
several cases that it is derogatory to the
sovereignty of the state, and in violation
of the relations of mutual support which
should exist between the states and the
nation. that Congress should interfere in
any way with the compensation allowed
by the states TO their own officers. If
the pending amendment is faulty in sub
jecting the securities of the states to
federal taxation. it is also faulty in per-
mitting Congress to diminish the salaries
of state officers, now protected by con-
stitutional construction. The Constitu-
ton says that the Presidents compenSa-
ton shall not he increased or reduced
during his term of office and that the
compensation of federal judges shall not
be decreased during their terms. The
income tax law Of 1862 apparently in
Guided the salaries of federal Judges
among those subject to a 3 per cent
deduction at the hands of the Treasury
Department. and Chief Justice Taney
felt called upon TO write a letter to
Secretary Chase declaring that such a
penaliZation was in his opinion unconsti-
tutional. He explained that an informal
protest was necessary. because the judges.
being all concerned, could not properly
In dota ,i,,a in
ity the question of constitutionality. The
income tax section of the Wilson German
law Of 1894 specifically exempted the
compensation received by the President.
the federal judges and officers of states.
Had it not done so the Supreme Court
would undoubtedly have found three
more counts against it. Why should not
the proposed amendment recognize the
propriety of these established exemp-
tions, which everybody comedies to be
reasonable and desirable?
1t may he said that Congress will
never care to levy Il tax on interest de
rived from United States securities. Yet
the income tax laws of the Civil War
period did impose such a tax. Since the
refunding act, interest on the govern
ments bonds, except on its Pacific Rail-
road bonds. has been exempted by con-
tract with the holder. But that contract
would be at least potentially invahdated
by the ratification of an amendment to
the Constitution giving Congress power
to tax income from any source whateve
The government would be only taxing
itself if it imposed tax TO be collected
on the interest of bonds still to be float
ed 1t would he breaking Il solemn pledge
if it taxed interest on the bonds which
it had previously issued with a promise
of immunity from all taxation.