Los Angeles herald., 1910-03-19
FATE OF TAX ON
CORPORATIONSIN
HANDS OF COURT
ARGUMENTS OVER C0NSTlTU-
TlONALITY AT END
FIGHT OVER QUESTION OF LAWS
AIM MARKS CLOSE
Measure Would Be Valid If Property
Not Used In Business Is Ex-
empt Is Contention
Of Some
Especial to The Herald.l

WASHINGTON, March 18.-The last
word by the lawyers on the constitu-
tionality of the corporation tax was
spoken this afternoon and the United
States supreme court took under con-
sideration the fifteen Gases in which
the question arose.
The day was consumed largely by the
| presentation of the governments de-
fense of the law by Solicitor General
| Bowers.
John J. johnson of Philadelphia
closed the attack on the tax just be-
fore court adpourned.
One of the biggest side fights in con-
nection with the great contest was pre-
cipitated when Mr.. Bowers insisted
that 1.-The net income from all sources
mentioned in the law as the basis OF
measuring the tax included all the
property of a corporation.
w d. Guthrie and his associates,
Howard Sinderan and W. r. Morawetsr
! insisted the law did not mean to in
clude the income derived directly from
| federal, state or municipal securities,
or from real or personal property not
used or employed in business. They
advanced this doctrine on the theory
that if the tax were not levied on such
constitutional.
Exempt Idle Property
Mr.. Bowers argued that corporations
cannot hold property that is not de-
voted to corporate business, either ac-
lively or passively. He cited the de-
cision of the supreme court holding the
| United States could levy an internal
revenue tax on the dispensary of South
Carolina as showing that the United
States may tax public utility corpora
tiOns.
In closing the solicitor said the pub
licity feature of the law was not raised
in the cases which involved only pri-
vate individuals as parties to them.
Mr. Guthrie, counsel for the Home
Life Insurance company, followed Mr..
Bowers, arguing that federal, state and
municipal bonds and property not ac-
lively engaged in business are not sub
| ject to the tax. He also spoke for the
constitutionality of the law as applied
| purely to a corporations property
| actively used in business.
In beginning his argument Mr.. John
son said the argument of the solicitor
general was one he would have been
glad to listen to had 1t not been on the
other side.
A WooIly Wolf
| AS to Mr.. Guthrie, Mr.. Johnson said
| he was q "wolf in sleeps clothing
whom he did not want on his side
! What made the law so obnoxious, Mr.
Johnson explained, was the publicity
| feature, whereby 1t was proposed t
"embalm" the returns as a public rec.
ord.
However" he added, "the act must
be cut off a little higher up"
His principal argument was to prove
the tax was an income and therefore
not an excise tax, according to the fam
Gus income tax decisions.
The wine given to Mark Twain to
drink on the Rhine did not satisfy his
! palate any the more, the counsel eX-
planned, because they changed the label
on the bottle from which 1t was
poured.
"Children, in making pictures OF
cows and horses said Mr.. Johnson
''have habit of writing below them
| cow and horse so you will know
what they are drawing. So congress, for
fear, if you were left to your own judg-
ment, you would not decide it was an
excise tax, labeled it,
Mr. Johnson urged that the tax was
on the power of state to "create'
| franchises. claiming state does
"create" them, instead of authorizing
them, as Mr. Bowers argued.
"It this law is upheld" he said. land
federal Incorporation law is passed
land I don't know to what extent the
fads now running wild will become
law the federal government may see
fit to tax state corporations out OF
existence.