El Paso herald. (El Paso, Tex.) 1901-1931, 1913-05-09
NOEscape From Income Tax
Lew ExemptS $1,000 in Every In
cOmc-DOubIc Taxation For
Big Holding Companies.
-By Frederic J. HasI<fn--
AsHINGTON. D. c. Nav

-
NJ The proposed income tax law
as drawn mainly by represen-
>ac-Ce COrdeH Hull. of Tennessee. and
adopted by the ways and means com
mlttee rs part of the Underwood
tariff bill, largely follows the English
ideas Of income taxation although
there are some features Of the EDelis,
law. such as the differentiation be-
tween earned and unearned incorne-
that are omitted from the UnderV-ood
measure. The bill takes cognizance Of
the recent supreme court decision ex-
empting from the corporation tax cor
poratlons which simply hold leases on
property they have rented to other peO-
pie or corporations. 1t also prevents
corporations from counting as an one
rating expense the taxes they will have
10 pay on bonds which contain clauses
eNempting the holders Of the bonds
from taxes.
Double Taxation on Trusts.
Inese two Items are important more
especially the latter, because if such
provisions We're not made Mr. Carne-
gle's bonds would escape taxation md
thousands of other coupon clippers
would be in the same boat The sII-
preme court decision that a railroad
company merely owning a railroad
property which il leases to others is
not doing corporate business has de-
prlVed the treasury OF nearly $1,000 600
OF corporation tax year. Still another
Tar reaching provision in the bill DO
Woes that corporations holding stock
IN other corporations shall pay tax
upon the dividends from those stocks
IN spite of the fact that the income Of
The corporation paying the dividend al
ready has been taxed. This is intended
10 place a burden of double taxation
upon Dig holding companies or trusts
The bill makes numerous Changes
from the income tax law Of 1894 Under
Uhat law, for instance. personal prop
erty inherited was rated as income: but
under the proposed law only the In
come from such property is taxed.
Likewise profits upon real estate
transactions are reckOned as they are.
and not arbitrarily. If a man bought
a farm 10 years ago for $4,000 and
SELLS II for $4,000. in fixing his profit
the average Of the 10 years will be
taken andt his income tax upon the
transaction viii be reckoned upon
$1,000.
Law Exempts $4,000 Incomes.
Inc law eXempJS $4,000 from taxa
ton in every income. so that a man
pays his tax only upon that part Of
MS income that is in excess of the
$4,000 exemption. This applies TO
everybody except the FOREIGNER who
lives abroad and enjoys an income
from American property; he must pay
the tax upon every cent Of his income
The committee calls the tax of one
per cent the normal rate and this ap-
on all incomes exceeding $40 600 and
not exceeding $4,000 ii provides an
additional tax OF one per cent for
that part Of the income exceeding $40
900; between $4,000 and 100000 the
additional tax" becomes , per cent.
and for all income in excess of $780,
QUO the additional tax" is 3 per cent.
The definition or income is so com
prehenslYe that one can scarcely i'm
aSlne anything escaping under it. In
computing net incomes deductions
from gross income is made to include
the necessary expenses OF a business,
but not personal. living or family ex-
peuSeS- Deduction for payable interest
Is allowed, as are deductions for taxes
other than the national income taxes.
for losses in the conduct Of business. !
Tor depreciation. and for worthless
debts.
Presidents Salary Exempt.
President Wilson viii get his salary
exempted because the constitution for
pldS increasing or diminishing a pres
ldent's salary during his term Of office.
The same is true OF the existing judges
of the United states courts and for
the same reason. but other government
officials are not exempted although
the officials and employees Of state and
local governments are exempt. IN
drafting the bill the principle of hold
ing immune from taxation the instru-
mentalities of the state and local gov
ernments was recognized, including
both officials and securities.
The law cannot be lodged by the
head Of the family giving a portion If
his income to his wife and each of his
minor children. for il expressly pro
Yldes that the income of husband. wife
and minor Children living together
shall be reckoned as one income. A
wife permanently living apart from her
husband is entitled TO a separate IL I
come.
May be Effective This Year.
no L. 81
the people subject to it will have to pay
a tax upon their incomes for the cal /
endar year of 1913. The question has (
Deen raised whether or not q tax that Z
would be imposed upon income received J
prior to the enactment of the law
might not be held unconstitutional as
being retroactive, but the ways and Z
means committee thinks not
only those persons who enjoy a net 1
income Of $500 are required to make a !
return Of their incomes to the cOllec-
tors Of the internal revenue. Those (
who are required to make these re
turns must give their gross incomes, I
their deductions. and their net incomes,
making itemized statements Of each. I
Double taxation is avoided by a pro-
vision that dividends received from
corporations and other artificial per
sons which have paid an income tax
upon their net earnings are not to be
included IN returns of net income IT !
IS provided further however. that
where a person enjoys an income Of
less than $4,000 and part of it is made
up Of income from dividends or other
profits subject to taxation at the
source, he cannot claim exemption for
this latter part Of his income unless he
shall, not less than 80 days before the
return Of his income is due. file with
the person who would otherwise be re-
quired to withhold and pay the tax for
him. an affidavit claiming the benefit
Of such exemption.
Penalties Provided.
The bill provides that returns SHAH /
be made under oath or affirmation by
the first of March. that assessments
must be made and the taxpayers no
titled by the first of June Of the [
amount Of their assessments. and that l
shall be made before the /
first of July. A penalty of > per cent
and interest at one per cent a month I
is added for taxes not paid within 0 /
days of the tax collectors demand 1
therefor.
Any person liable to the additional I
tax" is required to make a return Of 4
his entire income. and must pay this I
additional tax" upon his corporate in 1
come which has already been taxed I
at the normal rate before reaching his 4
hands.
While individuals are required TO 4
make returns 10 cover the calendar Z
year. corporations and other artificial ]
persons may make returns for their {
fiscal, or bookkeeping year These T.