The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-03-14
BRINGS SUIT TO TEST
INCOME TAX LAW
+. X. Brushaber Asks Injunc-
ton Against Collection Of
Money at Source.
CHARGES DISCRIMINATION
Cites Constitution in Effort to
Show Measure Is Not
Fair or Legal.

A sur 10 test the consti,ut,onaiity Of
the income tax Law. especially in It's rsia-
tion to the net incomes Of corporations.
Joint stock companies or associations and
Insurance companies. was begun ir the
United States District Court yesterday by
Frank r. Brushaber Of Brooklyn.
Brushaber. a. the holder Of 500 shares Of
stock In the Union Pacific Railroad Com
many. brings an equity action against that
company to restrain II from making any
returns on or deductins the income tax
BILE to Individual bondhoiders during the
period beginning March I. 1913, and
ended October 3. 1913.
While the suit, in the main. Is n pro-
test against the Withholding OF taxes At
the source Of income. II also In an ar
raignment OF the law clause by clause. II
was drawn up by Davies. Auei bach 4
Cornell OF - Nassau street. attorneys for
the plaintiff.
The chief contention Is that the in
come tax law IL retroactive In that II
was passed on October 3. 1919. and made
to take effect on March 1. 1919. Thus.
the plaintiff asserts. the incomes taxed dur
ing that period were. In reality. no longer
INCOMES. having been converted into
property.
The court Is asked to consider the law
unconstitutional In so far as It applies
TO the Union Pacific on the grounds that II
10 q violation Of the Fifth Amendment OF
the Constitution. prohibiting the taking
Of property without due process OF law I:
and also the third clause Of the seconi
section Of Article I. in the Constitution.
providing that Representative and direct
taxes shall be spportionsd among the
several States according to their respec-
tive numbers or population.
The Law. according 10 Mr.. Brushaber.
Ia repugnant In that, while II purports 10
provide a tax on incomes. II 10 in reality
a tax on real and personal property. 1t
Is class legislation. he says. In that Il
imposes the burden Of taxation on d few
and involves discrimination and clasei-
ncat.on founded on wealth"
The Withholding OF the TAX at the
source, the plaintiff contends. works an
added Injury in that 1t is likely to impose
tax on those who should be- exempt by
reason Of an income less than $1,000, or
~ 900 In year IN the case OF mar
ried person. The corporation withholding
the tax. he points out. has no mt ana OF
the amount Of the bondhold-
er's entire income.
The plaintiff also points out tina, Il
bondholder having paid his own income
tax Is forced to go TO the expense and
labor Of an application for a refund IN
order to get back the money withheld
at the source and during the interval OF
time between the payment OF his tax
and the success or his application he Il
deprived of the benefit OF his money.
Another evidence of discrimination in
Brushabers opinion is that an individual
Is not required to pay the normal tax
upon the amount received by him as
dividend upon the stock or net earnings
of any corporation which IL taxable upon
It's net income. whereas this feature OF
the law does not apply TO a corporation
The Union Pacific Railroad the plaintiff
says, will be affected by this as II owns
several million dollars worth OF stock
In other corporations. on the earnings OF
which II will have 10 pay n tax In spite
OF the fact that the tax was already
paid at It's source.