The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1911-03-13
Is Sustained by Decision of the
q. S. Supreme Court.
OPINION is BY DAY.
Congress Had Right and Action
Is Constitutional.
The Case Has Been Before the
Judges for a Year.


Aldrich tariff act were sustained to-
day as constitutional by the supreme
court of the United States.
Thereby a source of income of ap-
proximately $25,OOO,OO0 annually was
assured to the government. OF all the
objections to the tax raised by suits
in all parts of the country, none of
them was found sufficient to nullify
the law. The court did hold that the
tax was not applicable to the real
estate trust of Boston, which is or
ganized not under any statute but un-
der the common law. The law was
held not applicable to the Minneapolis
syndicate, a real estate concern, on
the ground that it was not doing
business within the meaning of the
law.
Justice Day first announced that it
was within the power of the senate to
insert the corporation tax provisions
in the tariff law which originated in
the house and of which the tax pro-
visions are part.
Not on Franchises.
Near the outset of the opinion, as it
appears in printed form, is the state
ment that the tax is imposed not upon
the franchises of the corporations ir-
respective of their use in business nor
upon the property of the corporation,
but upon the doing of corporate or in
sLrance business and with respect to
the carrying on thereof, in a sum
equivalent to one per centum of the
entire net income over and above five
thousand dollars received from all
sources during the year; that is, when
imposed in this manner, il is a tax
upon the doing of business with the
advantages which inhere in the peculi-
arities Of corporate or joint stock or
ganization of the characters de-
scribed AS the latter organizations
share many benefits of corporate or
ganization, 1t may be described gener- |
ally as a tax upon the doing of busi-
ness in a corporate capacity
This tax, it is expressly stated, is |
to be equivalent to one per centum
of the entire net income over and |
above $4,000 received from all
sources, during the year-this is the
measure Of the tax explicitly adopted
by the statute.
1.-THE income is not limited to such
as is received from property used in
the business strictly speaking, but is
expressly declared to be on the entire
net income above $1,000 from all
sources excluding the amounts re-
ceived as dividends on stock in other
corporation joint stock companies, or
associations or insurance companies
also subject to the tax. In other words,
the tax is imposed on the doing Of
business of the character described
and the measure of the tax is to be
the income with the deduction stated,
received not only from property used
in business, but from every source"
Not a Direct Tax.
Justice Day then proceeded to an
sWer the objections urged against the
constitutionality of the tax. He first
took up the contention that it was a I
direct tax and unconStitutional for the |
same reason that the famous income
tax law was declared unconstitutional |
in 1895. He pointed out that the in
come tax was held to be direct be-
cause imposed upon property simply
because of its ownership.
"In the present case" said Justice |
Day, "the tax is not payable unless
there is a carrylng-on or doing of |
business in the designated capacity |
and this is made the occasion for the |
tax, measured by the standard pre-
scribed. The difference between acts |
is not merely nominal but rests on the |
substantial differences between the /
mere ownership of property and the |
actual doing of business in a certain |
way
. Justice Day next took up the objec-
ton that the provisions in question |
levied a tax on the exclusive right of |
a state to grant corporate franchises, |
In that it taxed franchises which are |
the creation of state in it's sovereign |
right and authority.
I'VE think" says the opinion. 1T |
ts the result of the cases heretofore |
decided in this court, that such busi-
ness activities though exercised he |
cause of state-created franchises. are
not beyond the taxing power of the
United States''
After reviewing cases hitherto de-
cided by this court, Justice Day went |
on to say:
''If it be true that the forming of a
state corporation would defeat this |
purpose, by taking the necessary steps
required by the state law to cre3G.e a |
corporation and carrying on business
under rights granted by a state stat |
ute the federal tax would become in |
valid and that source of national rev
enue be destroyed, except as to the |
business in the hands of individuals
or partnerships. 1t cannot be sup
posed that it was intended that r. |
should be within the power of individ-
uals acting under state authority
to thus impair and limit the exertion
of authority which may be essential
to national existence"
Corporations and Individuals.
Justice Day next addressed himself
to the objection that the tax was un-
equal and arbitrary. He first consid |
cred whether, as claimed the law
made an unconstitutional distinction
between corporations and partners
and individuals. He said there was a
substantial difference between tho co.,
<rying on of business between cornora-
uons taxed and the same business
when conducted by private firm or !
Individual
1.-THE thing taxed,' said he. sis NOT
the mere dealing in merchandise in
which the actual transactions NAV be |
the same, whether conducted by indi- |
viduals or corporations, but the tar ia |
laid on the privileges which exist in !
ages which inhere in the corporate