Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1911-03-13

( law levied a tax upon the exclusive
right of the state to grant corporate
/ franchises, in that 1t taxed franchis-
es which are the creation of a state
in its sovereign right and authority.
Day held that under the previous deci-
sions of this court, such business ac-
tivities, though exercised because of
state-created franchises, are not be-
yond the taxing power of the United
States.
IF il be true" says the court, that
the forming of a state corporation
would defeat this purpose. oy taking
the necessary steps required by state
law to create a corporation and car
rying on business under rights grant
ed by state statutes. A federal tax
would become invalid and that source
of national revenue be destroyed. ex-
cept as 10 business in hands of the
individual or a partnership. 1t can
not be supposed 1t was intended II
should be within the power of indivi-
duals acting under state authority TO
thus impair and limit the exercise of
authority which may be essential 10 a
national existence"
Is NOT UNEQUAL.
AS to the claim the tax is unequal
and arbitrary and made an unconsti-
tutionaI distinction between corpora
tfons and partnerships or individuals.
Day declared there is a difference
between business conducted by these
dffefent. elewsats THfe'H TAX IS laid
not upon actual transactions. the
court held but upon privilege and ad
vantage inherent in conducting ousi-
ness in corporate capacity, not enjoy
ed by private firms or individuals.
The measurement of the tax by the
net income of the corporation or COM
pany received by It from all sources
was defended by Day as not being so
unequal and so arbitrary and base
less as to fall outside of the authority
Of the taxing power
PUBLICITY PROPER
The court dealt at length with nu-
merous other objections to the law,
and then considered the publicity pro
visions. He upheld these provisions
on the ground that congress, having
legitimate power of levying taxes. II
also has the power TO determine what
means are appropriate and adapted
to the purposes of making such taxa
tion effeCtual.
FIGHT BEGUN IN 1909.
The fight against the constitution
ality of the corporation tax began al
most Immediately after the enact
ment of the Payne-Aldrich tariff law
of 9O9, of which il is a part. During
the long days Of wrangling in con-
gress over that measure. President
Taft originated a plan to raise part OF
the revenue necessary for the running
of the government by imposing a cor
poration tax. He is said TO have made
the first rough draft of the proposed
law and to have asked the department
Of justice TO perfect IL.
Scarcely Is years before. the su-
preme court of the United States had !
declared unconstitutional the income !
tax measure enacted by congress. In (
order TO have a valid tax, the errors /
of that law had 10 be avoided.
PART OF TARIFF ACT.
Finally the attention of members of /
the house and senate were called to /
the proposed corporation tax as a con
stiuutional measure II was urged as I.
preferable to another income tax
which, il was argued. probably would .
be declared unconstitutional and as
under the circumstances better legis-
lation than an inheritance tax When
the tariff bill was in the senate, the
corporation tax provisions were in
serted as an amendment to the Payne
bill passed by the house. They re-
NAMED there and became part of the
tariff act.