Omaha daily bee., 1912-03-16
in FAVOR OF AN INCOME TAX
Underwood Reports New Excise Bill
Back 10 House.
UNDER FIVE THOUSAND EXEMPT
Excise Impost ON Earnings or Rev.
enue over $1,000 n Year TO he
Collected from Source In
BIZ Goes Through.

WAShlS1lbNs MaASh ~
ing the oonstitutionality Of the proposed
excise tax hill. extending provisions OF
the corporation tax iaw to individuals
and co-partnerships, submitted as reNe-
nue. measure to replace customs duties on
sugar. Representative Underwood, chair
man of the ways and means committee.
made a report 10 the house today, urging
the passage Of the bill.
After arguing the eonstitutlonality OF
the proposed law. proclaiming II In alb
-olute conformity with supreme court
ccisions relating to the income tax. the
eport explains the provisions and scope
Of the measure as II would effect indi-
viduals.
while the bill" says the report, EN-.
bodies new application Of taxes. Il
carries all the modern philosophy OF tax
alton. II proposes to obligo tho citizen
to contribute annually a fair and Just
portion OF his net gains 10 the main
tenance OF the government As already
stated, this bill. IL enacted into law, win
accomplish In the main all the purposes
OF a general income tax law and at the
same time escape the disapproval Of the
supreme court, as il keeps well within
the principles laid down by that court
In sustaining the eonstltutlonality OF tho
eorporation-tax law.
TO illustrate the equitable adjustment
OF the excise tax recommended, a per-
son having an income OF less than $500
per year would pay nothing, while
person whose business earns $4,000 net
would pay no tax on the first 5000 and
on the second 5000 would pay only $50
n year"
The report calls the proposed bill d
combination of the excise tax OF 1885 and
the corporation tax law OF 1919, both OF
which "have been held valid In all re-
spects by the supreme court"
Not n Direct Tax.
That the proposed tax is constitutional
the ways and means committee demo.
Gratis believe for the following reasons,
which they argue can be sustained;
The proposed tax Is not direct tax
upon the property, real or personal. OF
the copartnershlps or individuals. but
special excise upon the carrying on or
doing business by such copartncrshlps
or individuals. and IL. therefore. needs
no apportionment among the states ac-
cording to population as required by the
constitution with reference 10 direct
taxes
THE proposed tax is uniform through
out the United States, IL II be true that
the tax is an excise its indirect char
acter is at once established.
The proposed tax Is an excise because:
THE tax Is legislatlvely intended as an
excise, as shown by the plain language
Of the bill. -
THE subject of the tax is the conduct
or transaction OF business. which. sc-
cording TO uniform line of decisions
by the supreme court Of the United States
10 proper subject OF excise tax.
THE fact that the tax Is to be meas
ured by the net income of the taxable
person or firm does not change its real
character" &c.,.
The report further asserts that the only
step the supreme court must take In
arder TO sustain the proposed law Is one
which is perfectly logical. II not abso-
iutely irresistible. and hold that a law
which lays an excise upon the carrying
on or doing of business OF all kinds
designates a proper subject OF excise
tax
Another feature or the report shows
that the bill provides specifically for the
collection Of taxes at the source. thus
providing effectiveness and economy IN
administrator" In the case Of saiaried
men, under this provision. the collection
would be made from the source Of their
salary.
The minority report presented by Rep
resentatlye Longworth declared the bill
unconstitutional In so far as II Ieyies a
tax on the income derived from real es-
tate. and added that even If held con-
stitutional the measure would raise not
more than small fraction Of the revenue
proposed.
Under this bill Mr.. Carnegie and
John d. Rockefeller. for instance, would
entirely escape taxation. and such great
real estate owners as the Astors. whether
living In America or abroad and whether
their incomes are spent In America or
diverted to foreign countries would be
exempted from taxation. while the men
carrying on active enterprise. and
their enterprise are giving EN-
pioyment TO their fellow men and az
fording the means Of livelihood, would
be subject to taxation"