The citizen. (Honesdale, Pa.) 1908-1914, 1911-03-22

Holds That Congress Has Complete
Taxing Power Rather Than Courts.
Corporation Tax Is In the Nature of
an Excise on Privileges Granted.
May Become Precedent of Farreach-
ing Consequences.
One of the most important infer
ences to be deducted from the corpo-
ration tax decision is the apparent
sympathy of the court as at present
organized with the decision that threw
out the income tax of 1894 as uncon-
stitutional. This expression, of course.
is indirect, but it leaves scarcely
doubt. AS the proposed constitutional
amendment expressly conveying to
congress the power to levy an income
tax without regard to population is
having rough road through the state
legislature, it is likely that when next
the subject of an income tax is agi-
tated in congress this decision will be
extensively quoted from. The distinc-
ton is pointed out sharply that where
the old tax was a levy on property
merely because of it's ownership this
levy is an excise tax upon the privi-
lege of doing business in a particular
way. On this point the court says:
"The tax under consideration as we
have construed the statute may be de-
scribed as an excise upon the particu-
lar privilege of doing business in Il
corporate capacity-i. e., with the ad-
No, 70 ,,rI,i ,;.
or quasi corporate organization - or
when applied to insurance companies
| for doing the business of such compa-
MES. The requirement to pay such
taxes involves the exercise of privi-
leges, and the element of absolute and
/ unequivocal demand is lacking. If
business is not done in the manner de-
scribed in the statute no tax is pay
| able'
| That is the heart of the courts an
swer to the plea that the tax is in eff
feet Il direct tax and therefore uncon-
| Stitutional.
No cogency is allowed by the court
to the argument against the right of
| congress to impose an excise tax upon
| franchises granted by the states.
''The constitution contains only two
| limitations on the right of congress to
| levy excise taxes" says the decision.
"They must he levied for the public
welfare and are required to be uni
form throughout the United States"
In affirming the federal power to tax
state corporations the court holds
that "the revenue of the United States
must be obtained in the same territory
from the same people. and excise tax
es must be collected from the same
activities as are also reached by the
states in order to support their local
governments"
Corporation Privileges Taxed.
The plea that the tax is not uniform
because it discriminates so sharply
against corporations in favor of bust
ness done by partnerships or private
persons the court answers simply by
stating that uniformity, in the sense
used by the constitution, means only
geographical uniformity. The practice
has always been to levy on some occu-
pations and to omit others, and this is
true of both the states and the federal
government. Besides this, the advan
tages to be derived from a corporate
existence are such as to make the
distinction very real and reasonable.
"The thing taxed" said Justice Day
sis not the mere dealing in merchan
disc, in which the actual transactions
may be the same, whether conducted
by individuals or corporations, but the
tax is laid upon the privileges which
exist in conducting business with the
advantages which inhere in the cor
porate capacity of those taxed anC
which are not enjoyed by private firms
: or individuals. These advantages are
obvious and have led to the formation
of such companies in nearly al
branches of trade. The continuity O.
the business without interruption b!
, death or dissolution, the transfer o
property interests by the disposition o
shares of stock, the advantages o
business controlled and managed b.
corporate directors, the general alb
sence of individual liability, these ant
: other things inhere in the advantage
of business thus conducted, which d.
not exist when the same business i
conducted by private individuals o
partnerships. 1t is this distinctly
privilege which is the subject of taxa
!, ton, not the mere buying or selling o
l handling of goods, which may be tn
: same, whether done by corporations o
individuals"
In holding that insurance companie
cannot escape the tax because so grea
d a part of their property is invested il
nontaxable municipal or state bond
the supreme court holds that "this al
gument confuses the measure of tn
tax upon privileges with direct taxa
: ton of the estate or thing taxed.
Such a measure, says the court, it |
> altogether within the power of cor
gress to choose, whether it has an in
l. mediate reference to the business don
or not.
u 1--WE must not forget" says the cour
u 'that the right to select the measur
y and objects of taxation devolves upo