The National tribune., 1910-01-27
THE FEDERAL CORPORATION TAX.

| We are in the way to have very
definite expression from the Supreme
Court as to the judicial merit of the
Federal Corporation Tax. The case has
been made up by the lawyers on both
sides to bring a test case. In order
to make this simple and clear and so
as to incorporate only the merits of
the law an incident of small proper
tions has been selected for the pur-
pose. It was a motion made in the
Federal Court in Vermont Jan. 18th by
Stella P. Flint, to enjoin the Stone
& Tracy Company from making
| the returns on its business required
under the tax law. With the consent
of the courts the case has been ad-
yanced until it has now reached the Su-
preme Court and efforts, which will
probably be successful. are being made
! TO have the case advanced to an i'm
mediate hearing. The questions raised
in the briefs submitted, and which they
expect the court will pass upon, are:
whether the tax is direct in the con-
stitutional sense. and is void because
not apportioned among the States in
proportion to their population.
Whether the tax improperly inter-
feres with the general taxing power
of the state to create corporations.
"Whether the tax is Invalid IN so
far as the net income of corporation
may be attributable to State or mu-
nicipal bonds held by the corporation
as part OF its business capital.
whether the tax is invalid in the
case of public service corporations
chartered by State.
whether the taxing act makes an
improper distinction between corpora
t;oRs on the one hand and partnerships
and individuals on the other hand, en-
gagged in the same business.
'Whctncr the exemptions enumera-
ted in the statute are sustainable.'
The first Of these questions is of eX-
treme Importance. Section 2, Article
l, Of the Constitution of the United
States reads, in part:
Representatives and direct taxes
shall he apportioned among the sew
eraI States which may be included
within this Union. according to their
respective numbers, which shall be de-
termined by adding to the whole num-
her of free persons. including those
bound to service for a term of years,
and excluding Indians not taxed. three
ffths Of al other persons"
Heretofore the only apparent evas-
ions of this rule have been in the In
ternaI Revenue duties and the National
Bank Act It has been held constitu-
tiOnaI that the Government had the
right to impose direct taxes on whiskey,
beer and tobacco for the purposes of
revenue Under this revenue produc-
ing power a tax of ten per cent. was
lad on 'ssucs of State banks in order
to drive them out of circulation. The
revenue production was, in this case,
the most transparent of fictions, since
the Government did not expect or want
any revenue from these sources, but to
get rid of the wildcat currency. The
same was true in regard to the tax on
oleomargarine. This was ostensi bly, a
revenue law, the men behind it who
secured the passage of the act only
wanted to stamp out artificial but
ter and not to produce revenue for the
Government. The question is whether
the Supreme Court will view with equal
favor q measure apparently for the
protection of revenue but really inten-
led for the regulation of corporations
and trusts.
Next n Importance is the question of
the invasion of the States sources of
reveuu- by the general Government. AS
we have always held, the States have
much more need of revenue than the
Government and greater trouble in get
dug Il. This will undoubtedly enter
into the Supreme Courts considera-
tiOn of the law.