New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1911-05-29
INCOME TAX AMENDMENT
DR.. SeIigman Gives Views on
Certain Phases of Scheme.
ro the Editor Of The Tribune.

make a further contribution TO the discus
sion in the endeavor TO bring before the
public the precise nature OF the .contro-
versv? Although have discussed all these
questions fully in my seven-hundred-page
hook on the subject, your readers may
nerhaps be interested in a seven-hundred-
word presentation Of the point at Issue.
The real questions are: First. will the
words from whatever source derived
operate TO subject state and municipal
bonds 70 taxation and, second. II so. will
their taxation imperil the credit Of the
state and thus interfere with what Is con-
ce.ived 70 be the fundamental basis OF our
Constitution--sn indissoluble union Of in
destructible states?
7 omit the first question, which is an
svered in the negative by lawyers like
Senator Root and Senator Borah and in
the Affirmative by other great lawyers
Let us concede that there is at least
doubt about this and proceed 10 the second
question.
The doctrine 81 the inviolability OF state
agencies from taxation is not. as common
w stated. enc Of the original compromises
Of the Constitution II was first formu-
lated almost century after the adoption
Of the Constitution. Although Chief JUS
tee Marshall decided in 1919 in McCulloch
VS. Maryland that state tax on the Bank
Of the United States was unconstitutional,
ard although the same principle was ap-
piled in 1s29 in Weston VS.. Charleston TO
q local tax on federal bonds. il was not
until 1870 that in the case of Collector VS..
Day the reverse doctrine was applied.
namely that a federal tax on the salaries
OF state officers was unconstitutional. and
It was not until 1875 that II was held in the
Pollock case that state and municipal bonds
we're not subject TO federal taxation.
The reasoning in all these cases was 20
the effect that me power 10 tax Is the
power 70 destroy; that. as the court said
In Collector VS.. Day: ANY government
whose means employed in conducting its
operations. II subjected 10 the control Of
another and distinct government. can exist
only at the mercy OF that government, Of
what avail are these means II another
power may tax them az discretion" II
makes no difference IL the tax is small or
large because II the right 10 impose
small tax is admitted a prohibitive tax
may be imposed
~ JNSAlNc IltlQ -d4N III LlLlrG otdbco
vs. Railroad Company: IF they (the
agencies OF the states) may De taxed light
" they may be taxed heavily; 4, Justly
oppressively; their operation may be i'm
peded and may be destroyed If any inter
ference is permitted Hence. the beginning
Of such taxation is not allowed on the one
side, is not claimed on the other"
In the same way Governor Hughes in his
message states: To permit such securities
70 be the subject of federal taxation is 10
place such limitations upon the borrowing
power OF the state as 20 make the per-
Torrance OF the functions OF local govern
ment a matter OF federal grace
All these statements are based on the
theory that If We allow the slightest taxa
ton Of state securities by the federal gov
eminent there is theoretically no limit. II
part Of the value Of the securities may be
taken away. the whole may be taken. The
state is thus at the mercy Of the federal
government.
Now, all these propositions arc perfectly
true Of a special or exclusive tax levied on
state securities Such tax. no matter OF
how slight an amount. would indeed be Cd
noxious 10 the spirit OF the Constitution
and would be open 10 all the objections
raised. But are we in the presence Of such
A contingency? Not at all. What is con-
teu1plated by the proposed amendment Is 70
give the federal government power 70 levy
a general income tax. The very object Of
the words is 10 include the income from
all sources.
What now would be the result Of the I'm
position Of a general income tax? II the
amendment was so vorded as 10 preserve
the immunity OF state bonds from taxa
ton. the only result OF this exemption. al
ter the tax vas imposed, would be that
while all other securities and property
would preserve their relative level state
bonds would rise slightly. although very
slightly. in market value, as they would De
The only bonds ENJOYING SUCH an exemption
Il is true that federal bonds al present
DO enjoy such an exemption, but this Is
mere statutory not a constitutional, ex-
ar,ntion. and il Is very likely that this ex-
enption would soon disappear in the United
states as il has disappeared wellnign every
whore else As 70 existing state or mu-
nicipal bonds. therefore. in the case OF 'he
in,position of a general income tax con-
,inuance of the exemption would cause
them 10 rise in price; disappearance OF
the exemption would cause them to main
tain their present price.
The failure then, TO exempt state BONDS
from the income tax would at the very
worst. mean that in the case Of any future
emission Of state or municipal bonds they
would not enjoy this slight premium. BIZ
8, .hs tax were a general income tax, as
contemplated by the amendment, they
oould not possibly fall below the level OF
all other securities and property. The only
-aeul+ 81 their taxation would be 70 re-
nova privilege, but not TO impose an!
burden upon them as compared with every
thing else. The removal OF an advantage Il
one thing; the imposition OF a burden i
| another thing.
II now. these bonds by being SUBJECTED
~ general income tax could not possipil
| fau in value below the point az which the!
nour sell how can We speak OF destroylhe
| .ba credit OF the states or putting them
the mercy Of the national government
What the courts contemplated was suon
6estruction in whole or In part OF theN
| yalue as 10 imperil the credit Of the state
RI, II the worst that can happen is 10 pu'
such bonds on footing OF absolute equai'
NV with ali other investments and all othe'
property, how can the reasoning OF the
courts apply? What the courts originally
had IN mind in using the language quoted
vas the imposition Of a special tax upon
state securities What We have 20 deal "i'h
IN this amendment is the imposition OF a
General TAX on the income from all seeuri-
tics and from all property.
What almost every one does is 10 confuse
+bese two Things which are so entirely
asparate The imposition Of a special tax
:, cato securities may reduce their value