The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1911-03-13
Supreme Court So Rules To-
day, Fooling Standpatters,
Who Passed 1t Merely as
Sop to Public.
SIS, 100000 TO BE
ADDED TO REVENUES
Act Went Through with Tar
iff Law and Aldrich Then
Said He Expected 1t Would
Be Thrown Out.
(AmeriCan News Seryice)


Washington. March 1S.-The SUI
preme court today upheld the consti-
tutionality of the corporation tax law.
| This decision will add 100000 to
the United States revenues.
The corporation tax decision was
unanimous and sweeping in every de-
tail. every objection being overruled.
The decision was handed down by
Justice Day, and ruled that a corpora
ton tax is not direct tax on personal
or real property of corporations. but
that it is purely an excise tax, levied
by authority of congress on corpora
tions for right of doing business, the
same as revenue tax is levied on H.
quor dealers.
The tax is held not TO be an income
tax, but an excise tax and the opinion
states, falls clearly within the prov
ince and authority Of congress. The
opinion was also that the tax is not
a direct tax on shareholders, thus ov
erthrowing the chief claim of its foes.
The decision holds in regards to cor
porations doing an intrastate business
that the United States has a right to
levy the l per cent tax on these as
we'll as on interstate corporations, and
can tax all business in a state except
international functions of the state
government itself.
Origin Of the Law.
1t was as an adjunct to the Payne
Aldrich tariff law that the corpora
| ton tax came into existence. The
standpatters and the high protection
| lists in congress flung it as sop to
the people in the hope that the violent
clamor against the new tariff might
at least temporarily be halted. In
| this spirit it was enacted into a law
and Senator Aldrich frankly stated in
the course of debate in the senate
! that he expected it would be repealed
| inside of three years. Many of the
| reactionary senators voted for it, be-
cause they were confident it would be
declared unconstitutional when the
corporations started litigation over it.
! AS a revenue producer the corpora
tion tax has been success. 1t has
added approximately $25 200, 900 yearly
to the income of the internal revenue
office. The treasury was allowed to re-
tain this amount, subject to the deci-
sion of the supreme court.
| The First Test Suit.
The first suit to test the constitu-
the federal district court in Vermont
! January 1880. 1t was brought by
Stella p. Flint. a stockholder in the
| Stone-Tracey company, to restrain the
company from making returns on it's
business to the United States treasury
as required by the corporation tax
law.
In the first legal skirmish the gov
ernment won a decisive victory, as
the constitutionality of the law was
sustained. At the same time exactly
similar cases, eighteen in number,
were brought in the federal courts in
various states, and the corporations
lost in every case. They were all ap-
pealed to the United States supreme
court. These cases were argued
March 1918, 1910, and reargued jan
uary 17-1s-19. 1911.
From the first it was believed that
decisions of the lower federal courts,
because there was an almost exact
similarity in the decisions handed
down sustaining the tax
Government Argument.
Briefly the government argument
was that the corporation tax is not
a direct tax upon real or personal
property of corporations. If it we're
it would be unconstitutional 1t is an
excise tax, imposed upon the right of
carrying on or doing of business" by
the corporations. From this point of
view the measure is not an income
tax, which has been declared uncon-
stitutional by the supreme court. The
government also contends that it is
not a direct tax on the shares of
stockholders, or on the income from
shares, and that as true excise tax
it is uniform under the powers of the
constitution
The cases were argued before the
supreme court by some of the ablest
lawyers in the land A posthumous
brief by the late Solicitor General
lLlyod NJ. Bowers, was the bulwark OF
the governments case. Attorney
General Wickersham also made a bril-.
liant constitutional argument.
A reargument of the case was ne.
Icessary because OF the death of Chief
IJustice Fuller and Associate Justice
Brewer last year.