El Paso herald. (El Paso, Tex.) 1901-1931, 1913-05-17

was to take off many duties that had
been bringing in revenue and to raise
an amount equivalent to the lost rev
enue by the imposition of an income
tax
Cleveland Favored Tax
The first suggestion in favor of such
a tax came from president Cleveland.
in his annual message He said he
was satisfied that the proposed new
tariff, in the near future would pro-
duce enough revenue to take care Of
the expenditures but that there might
be a deficit for the time being. He
stated that the committee" had de-
cided to provide against any temporary
deficiencies in revenue by adding few
internal revenue taxes, including
small tax upon incomes derived from
certain corporate investments He
added that they had the double merit
OF being absolutely just and easily
borne and of being easy to remit with
out disturbing business just as soon rs
they were no longer needed
It is presumed that the committee"
to which Mr.. Cleveland referred was
the ways and means committee Of the
house, although senator David 3. Hill
declared afterward that neither the
committee nor the Democrats who
were members Of it had agreed upon
any income tax or other internal taxes
The probabilities are Mr.. Cleveland had
consulted with William l. Wilson and
a few other members Of the committee,
and did not mean what his message
seemed to imply
Tax in Tariff Bill Of 1894
When the house received the tariff
bill from the ways and means commit
tee there was no reference in II to an
income tax. The tariff bill was de-
bated for several week, and as late as
January p, 1894. chairman Wilson de-
clared that no income tax amendment
had yet been received by him. Seven
days later representative Benton No
Millin, Of Tennessee introduced an IN
come tax amendment It did not set
any date for the termination Of the
proposed law, however, and il pro-
vided not only a tax on net incomes
but on all dividends in scrip or money
and on all interest paid on Indebted
ness for which bonds had been issued
There was very little debate upon the
income tax amendment and three days
after its introduction il was passed as
a part of the tariff bill.
Long Debate in SENATE
The bill went to the senate the next
day, and remained with the finance
committee for some six weeks. When
the senate took up the consideration
Of the tariff act il considered 1t para
graph by paragraph. and 1t was not
until the later part of June that the
income tax provision was reached
Senator PETER, Of Kansas. POpulist, Of
fered some amendments providing for
the exemption OF mutual life insurance
companies, building and loan associa-
tiOns and other institutions of like
character. Senator HOar. Of Massa-
chusetts. offered an amendment eX-
Guiding the salaries Of federal judges.
and senator Peffer also offered an
amendment providing that the income
tax should be graduated in proportion
to income. Senator Hill. of New York.
attacked the amendment and he was
Joined by several other senators. hut
this opposition was easily brushed
aside. The first amendment ADOPTED
was one limiting the collection of the
tax to the first Of January. 1900.
Became Law Without Signature
Many amendments were offered de-
signed to nullify the rigOr of the tax
upon corporations and to render less
inpuisitOrial the methods of collection
of the tax and some Of them were &C
cepted.
After that the income tax provision
Travelled along with the tariff law
through the tOrtuOus channels Of con-
ferences on the disagreeing votes Il
the two houses. 1t finally passed, anu
along with the other parts Of the bill
became the law without the signature
of president Cleveland. although he
warmly favored that part of the meas
ure.
Rate of Taxation, Two Per Cent
The law was a comprehensive one,
made. il was thought. to conform TO
the decisions Of the courts from the
beginning OF the government down 70
the time of its enactment 1t provided
fiat rate Of two per cent upon the
incomes Of all citizens and OF every
other person residing in the United
States. where such income exceeded
$4,000 q year; and the tax was TO De
levied only on the portion Of the in
come in excess Of 81 600. Foreigners
residing abroad and having property
interests in the United States were re-
Guired TO pay taxes upon their incomes
from such property
There was explicit provision IN the
11r 70 hoy 81 he
mated. United States bonds were not
to be considered which provided by the
law of their issuance that both prln-
Cipal and interest should be exempt
from federal taxation. but all other IN
terest was. But when ii IS considered
that the tax was only two per cent, II
amounted to less than One-eight OF one
per cent on the principal value OF a SIX
per cent investment In estimating IN
come lie profits Utliyed Ircm the safe
% lands bought within two years pre-
viOus had TO be reckOned.
Taxed Only TIE Net Income
The profits OF all sales of live STOCK
wheat. hay. and other products OF the
farm had - Ee counted as income, but
as the farmer who makes $4,000 year
net income is the exception he WOuid
hardly have felt the imposition Of the
tax It also amounted to an inherit
ance tax. for the law reckOned inherit
ences as a matter OF income
The tax was intended TO be a net IN
come tax so far as businesses, pro-
LESSONS and vOcatiOns We're concerned,
and practically so in the case OF the
farmer. The law recited that in COM
putting incomes the necessary. expenses
actually incurred in carrying on busl-
ness profession or occupation, should
be deducted. Thus. a lawyer was en-
titled to deduct the cost of maintain
ing his law practic. the doctor the cost
Of keeping his office, his carriages, ana
the like. A man who received $1,000
income and had to pay out $1,000 OF II
in interest had no income tax to pay.
Penalty for NOn-RenditiOn
All persons having an income OF more
than $500 a year were required 10
render to the proper authorities, list
or return of the items making it up
Neglect 10 make this list or return
gave the tax collector or his assist
ant the right to fix the income from the
best information available and to add
80 Ter cent to the amount Of the tax
as a PENALTY for the failure. This pen
atty was also prescribed for those who
failed truthfully to state their incomes
Such portions OF incomes as were dc
rived from dividends of corporations,
joint stock companies. and other sim
liar organizations, which had paid IN
come taxes upon their net earnings
were exempted from inclusion in tax
able incomes, in order to prevent
double taxation. Building and loan as
sociatiOns. saving banks, charitable, re-
ligious and educational organizations,