The Bridgeport times and evening farmer., 1918-10-01
KNOX URGES ) TAX ON INCOME
 OF BONDS
Declares Government Has Right to Levy on State
 and City Securities.

Washington, Oct. That the pow CT of the Federal Government to inn pose a tax on the income derived from State, county and municipal bonds was inherent and constitutional was the argument advanced yesterday by Senator Knox (Pa-) in g. speech deliv- cred in the Senate as a sort of parlia- mentary basis in the desert of suffrage debate. Quite apart from the suf- frage question was Senator Knox's disquisition on the subject of the tax ing power of the Government. He took occasion to confute the argu- ments presented by those who op- posed the extension of the taxing privilege under the pending revenue bill to cover State, county and muni- cipal securities.
 By the Constitution the States have committed to the national Govern. ment the whole responsibility for pre- serving and making provision for the union and the States themselves" said Senator Knox, and then quoting Ham ilton he read: The power of making that provision ought to know no other bounds than the exigencies of the na- tion and the resources of the com munity'
 It was Senator Knox's conclusion that ''the theory that the power to tax the borrowing power of the States Is the power to destroy the States, must yield to the fact that lacking much power the nation may fail to preserve the nation and the States"
 ''The borrowing power" continued MT. Knox, unlike the taxing power is not an essential function of sov- ereignty. It is at best only .. con- venient substitute for taxing the pow CT which is of course one of the greatest of the sovereign powers"
 Senator Knox held in spite of many adverse court decisions that the Fed eral government certainly in the midst of the exigency of war was possessed of the power to tax the income of state and other minor government bonds.
 Exemption of the income from state bonds from taxation in the hands of their holders is against a sound public policy" said Senator Knox. Tt frees vast fortunes from taxation by the Federal government without regard to the obligations or necessities of that government. The power of the states to make wealth free from national taxation is the power to destroy the nation. For is not to withdraw from Federal tax alton the capital of the country by means of tax immune bonds as much a menace to the nation as is the na- tion's power to tax income from such bonds in the holders hands a menace to the states?"
 Senator Borah took issue with Sem ator Knox, holding that the court de- cisions that state bonds should be and remain free from operation ot Income tax laws was as sound in war time as in peace. He held thai despite the fact that the opinions ad- verse to the right. of the Federal gov | ernment had been with regard to tax | ations imposed in peace times they were none the less constitutional and | just in war times.
 The issues joined was not conclu- sive1y discussed, but Senator Knoz has opened the way for what prom | ises to be one of the bitter debates of the coming discussion of the wal revenue law if the measure in this particular shall retain the provisions introduced by the House when | reaches the Senate.