New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1913-06-05
INCOME TAX CLAUSE
HAS A FATAL DEFECT
Provision Fixing the Date from
Which to Compute Declared
Unconstitutional.
ANTEDATES AMENDMENT
Bill Will Be Changed Before
Senate Acts on It-Life
Insurance Companies
Still Protesting.

Washington June Before the Senate
acts on the Underwood tariff bill the in
come tax section will be amended TO
remedy a defect which, ii was discovered
to-day. would make the measure uncon-
stitutional When the trainers 81 the in
come tax provision fixed January J. 1913
as the date from which TO compute in
come for taxation. they overlooked the
fact that the constitutional amendment
authorizing an income tax was not pro-
claimed as ratified until February O.. 1913
Aside from the constitutional defect
arguments have been presented IN favor
OF making ,he taxable income accrue FOR
the first year from July or later As
far as the constitutional Limitation is
concerned. 1t would be legal 10 compute
incomes for 1913 from March J.
Senator Williams'S subcommittee still
Is considering the scores Of protests fled
by officials Of mutual life insurance COM
panies against their inclusion under pro-
visions OF the income tax law, and the
committee stll is discussing an amend
ment which would give such concerns ex-
| emption II they are able TO prove that
they are not conducted for profit and that
all Of their surplus earnings are shared by
! their policyholders.
In reply Ia letter from u Steiner.
/ business man Of Birmingham. Ala. Nj
| Underwood chairman 81 the Ways and
Means Committee. wrote
you seem to overlook the fact entirely
! that these companies are being taxed un-
| der the present corporation tax law al eX-
actly the same amount as they will be
taxed In our income tax bill that We are
! lcvying no tax on them that they do not
| pay at present"
| To this Mr.. Steiner responded that the
J federal court holds. under the present
corporation tax, that so-called dividends
| in companies operating on the mutual
plan are not dividends. and can be de-
Quoted by a company In making it, re-
turn. The language Of the present bill
clearly directs that these so-called divi-
dends shall not be deducted. and there
fore that they shall enter into the net in
come Of company for purposes Of taxa
| ton.
Moreover. by implication at least, un-
der this oil every maturing endowment
and every cash surrender value amount
ing IN any mulNluudt vase 10 NttV'J VI oFtl
would be taxed. and If such payments,
plus the other income Of the recipient,
amount TO 1900. II will also be taxed.
This phase Of the tax would not fail on a
company's net income but would be
direct and heavy burden on individuals
TO whom the payments are made.
A member Of the WAYS and Means Com
mittee who assisted In the preparation OF
the income tax section replied tonight
TO the complaint Of the Secretary OF the
New York Tax Reform Association that
the income tax wOdlt be a Hen on real
estate sold by persons not having paid
such tax.
There are many erroneous impressions
Of the income tax. and this seems to be
just another one said the Representa-
tive. THE statement attributed IN Mr.
Pleydell seems first to assume that per-
sons Will seek TO avoid the tax. and
again. that a collector would take the
roundabout way Of attempting 10 attach
real estate previously sold rather than at
tach other property or incomes held by
the taxpayer II is safe TO assume that
any one making $500 or more year viii
have property easily accessible for the
internal revenue collector. and the real
estate lien talk is far fetched and irrele-
want