The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1915-10-15
Withhold dingClauseisBitter
ly Attacked in the u. S.
Supreme Court
THE JUSTICES ADMIT
THEY ARE SURPRISED
counsel Do Not Claim That an Income
Tax Is Unconstitutional, But That It
Is a Discriminatory Statute and
Therefore Glass Legislation.

WASHINGTON, Oct. Is. - The
Withholding clause of the federal in
come tax law is under heavy fire in the
United States supreme court. Able
lawyers who heard the arguments YES
terday and the comments of the JUS
tees admit they would not be surprised
If the court held that feature to be nm
constitutional.
Otherwise the law seems able to
Withstand successfully attacks from
eminent counsel The attacking law
| yers have admitted i'll open court that
| they are not cOntending that an income
tax, as such, is unconstitutional. but
| they charge that the present law is n
| discriminatory statute and therefore
class legislation and that the operation
of the withholding clause under
which the government appears to be
taking private property for public use
without just compensation, is in vio-
lation of the due process clause of the
| federal constitution and that feature
ought to fall.
The comments from the bench were
not favorable to the law in the argu-
ments. Julien T. Davies of New York
had explained how a corporation might
| NitAiAAOiu blS ldA VI one Oh It's pond
holders as required by the law, not
knowing that he was exempt, and
choosing between that risk and the
greater one of mourning cumulative
penalties for not so doing.
| Later the corporation would learn
that the bOndholder was exempt, but
would discover that it could not re-
lcOver from the government, because it
IcOuld not sue for the benefit of the
Ibondholder, nor compel him to sue In
1.-THE case of a corporation like the Union
fPacifie Railroad company, which guar
lantees its bonds free of taxation of any
kind, the corporation would reimburse
the bondholder and at the same time
lose the amount it had paid the govern
ment.
Chief Justice White asked if the at,
torney meant to say that the govern
ment was doing that sort of thing. The
attorney replied that it was doing pre-
cisely that thing.
Preposterous! replied the chief
justice. 81 never heard of such q
thing
1t was pointed out in court that
under the Withholding clause the cor
porations in many instances were ex-
pending as high as $4,000 a year in
clerical help in an effort to collect the
government s taxes and it was main.
tanned that this amounted to a ''tak
ting' of property by the government
lwithout compensation.
The Withholding at the source is the
= keystone feature of the law, Secre
\ tary McAdoo and others having con
! tended that without it many incomes
I would escape the government dragnet
4 The efforts of a+tornpvS +o attack the
graduated surtaX as unconstitutiona
because it was graduated tax anC
! arbitrary and discriminatory were GU
short by the chief justice, who told the
attorneys that the supreme court ha(
4 upheld the graduated tax in the in
4 heritance tax case of Knowlton agains
\ Moore.
William d. Guthrie attacked the Law
4 as discriminatory in that it taxed tn,
1 accumulated profits of a partnership
\ or of the individual taxpayers highe
1 than it did those of the corporation
\ engaged in the same line of bushes
4 and under the same circumstances.
L Mr.. Guthrie appeared for Dodg
1 Bros. of Detroit, automobile manu-
4 facturers. He asserted that as a fac
l his clients had paid a tax of $4,000
I under the income tax act on an incom
4 that represented accumulated surplu
- turned back into the business. Will
corporation engaged in the same lin
of business paid $13, 900 through the eS
emptions allowed to corporations, bu
not given to individuals. Mr.. Guthri
argued that this was Discrimination
and unconditional. Arguments will e
on today.