New-York tribune., 1911-03-14

scective of their use in business. nor upon
tho pronortv ~ tho corporation. but upon
tho doinr of corporate or insurance busi-
moss and with rcspect to the carrying OF
therefore i'm a sum equivalent 10 l per
con.ur, or tho entire net income over and
above &, ooo received from all sources our
inc ,bo voar. that is. when imposed in this
manner II is n tax upon the doing of hus'-
ness with tho advantages wh'ch n"e'o ~
tha pcculiariies Of corporate or joint STOCK
organization Of tho character deS'rip'u' -
tho latter organizations share many ocne-
fits of corporate organization " may 'e
described generally az q tax npon the oo'ns
Of business in corporate capactE'
On Income frcm All Sources.
The opinion continues:
Thi. tax. il Is expressly stated IS 70 no
equivalent 10 per Ceuturi OF the enuI
net income over and above E,Ooj receive"
from all sources during the Near-tuiS
tho measure of the tax cHrr'l't au,Ii.od
by the statute. Tho Incom" W 10. ,''m'cd -
10 such as Is received from property uS'
in III, business. strictly speaklhs' ru,
exrressly declared 10 he upon the c','.
no, income above $500 from ah Sou,r
Guiding tho amounts rece,lSu ~ ioin, lock
~orlnapies or associations or ln~"'""''
companies also subject to the taN., ,,,r
In other words; the tex rs in,prar ih,,a"ier Dc.
scrihnd and thc measure OF mo faN ~
he tho income. with tho deduction ~ ~ -,
received not only from properly U.s. -
business. but from, every source; r,hou.a NV,
Of tho measure of the tax Is siTens l"eu
when We note that as 80 orsanizatonS ~. ~
der the laws of foreign connttle9 - ooo
amount OF nc, income over snn ancn ,r,ns.
i'm -ludes that received from business v;,nd
actions and capital invested I'm fne "n,s
states tho territories Alaska ana inc ''''
trict Of columbia
After Justice Day had thus given VIC III
tcrpret alton which tho court mad pu' "P'"
the provisions Of the act. hc proceeneo w
srsver tho various objections urged against
the constitutionality Of the tax. lie nrS'
,ook I'm the contention that II was direct
fax and unconstitutional for the same r's
sons tbs, tho famous Income tax law VAS
declared unconstitutional IN 1885,. He point
cd ont that the income tax was he'd ~ W.
direct because imposed upon properly SUN
ply because Of ,is ownership.
ON the present case. said Justice '"!'
tho tax is not payable unless there j.
carving on or doing Of business IN 1--WE
DESIGNATED capacity. and this Is nade '"'
occasion for the tax. measured ny '"o
standard rrescribcd Tho difference he
tween the acts is not merely nominal ou'
rests upon substantial difference het"oon
the mere ownership Of property ana inc
actual doing of business IN a certain way
States Rights Considered.
Uuet,ce Dav next took IN the objection
that the provisions in question leNied ''N
upon the exclusive right Of a. state to grant
corporate franchises. in that II taxed iran
chises which arc the creation ~ state IN
its sovereign right and authority
I've think" says tho opinion, IT Is tn'
result of the cases heretofore decided in
this court that such business acoV't'es'
though exercised because Of state created
franchises. are not beyond tho 'aN'ns
power Of the United States.
After reviewing cages hitherto decided by
the Supreme Court. Justice Day went on
10 say
IF IL he tine that the forming Of state
corporation would defeat this purpose oy
taking tho necessary steps required py the
state law 10 create q corporation and car
rving on business under rights granted ny
a state statute. the federal tax would pc-
come invalid and that source Of national
revenue he DESTROYED. except as 10 tho busi-
ness in tho hands OF individuals or part
norships II cannot be supposed that II WAS
intended that il should bc within the power
of individuals acting under state authority
70 thus impair and limit the exertion Of
authority which may he essential 10 ma
tional existence
Justice Day next addressed himseh 10
the objection that the tax was unequal ana
arbitrary. He first considered whether, as
claimed, the law made an unconstitutional
distinction between corporations ana part
nerships or individuals. lie said there was
a substantial difference between the carry
ing on OF business between corporations
taxed and tho same business when con
Quoted by a private firm or individual The
opinion continued:
The thing taxed is not tho mere dealing
in merchandise. in which tho actual trans
actions NAV be the same. whether conduct
ed by individuals or corporations, nut me
fay is laid upon the privileges which exist
in conducting business with the advantages
which inhere in the corporate capacity ol
those taxed and which are not enjoyed u!
private firms or individuals. ]heSc adVdh-
taces are obvious, and have led to the Tor
nation of such companies IN nearly All
branches Of trade
The continuity Of the business without
interruption 10y death or dissolution, the
transfer Of property interests by the dispO.
sition Of shares of stock the advantages oi
business controlled and managed by cor
norate directors. the general absence or IN
dividual liability, these and other Things
inhere in the advantages of business thus
conducted. which do not exist when the
same business is conducted py private III
Ia ms.
II is this distinctive privilege which Is the
subject of taxation, not the mere buying or
selling or handling Of goods. when may pe
the same. whether done ny Corporations VI
individuals.
Measurement Of tho tax by the net in
como Of tho corporation or the company re-
ceivod by it from all sources was next de-
Tended by Justice Day IN his opinion, as
not being so unequal and so arbitrary and
baseless as to fail outside Of tie authority
OF the taxing power.
.'We must not forget that the right 10 Sc
loct tho measure and objects OF taxation
devolves upon tho Congress. and not upon
the courts, and such selections arc valid UNI
loss constitutional limitations are over
stepped." TIC court was able To find no
euch violation of constitutional limitations.
Tax on Public Utilities.
The court held that il was no part Of the
essential governmental functions Of state
~ nrovidc means Of transportation supply
.r,iocjaI light. water and the like. There
fire il was determined tnat the Coney
Island & Brooklyn Railroad Company and
tho In,erboroush Rapid Transit Company.
Of New York. are subject to tho tax.
,Oor dealing at length with numerous
-nther objections 70 the law. Iustlcc Day