The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-08-07
WIN
INCOME TAX FIGHT
Law Declared demonstrations
al So Far as 1t Applies
to Them.
DISCRIMINATION ILLEGAL
State Likely to Appeal Decis-
ion to U. s. Supreme
Court at Once.

plies to non-resldents was declared to
be unconstitutional and void yesterday
by John C. Knox. Federal Judge. The
dismiss the suit of the Yale & Towne
Manufacturing Company against Eugene
M. Travis. State Comptroller, to re-
strain enforcement Of the law 30 far at
II seeks to tax non residents:
Judge Knox In his opinion found the
law to be unconstitutional on the ground
that II goes against the constitutional
provinion decreeing equality between
citizens OF the different States. In re-
gard to the contention that Yale &
Towne, as employers of non-residents,
would be put to a burdensome expense
in acting as Withholding agents for the
percentage OF the salaries of non-resi-
dent employees claimed By the State the
court said that. assuming the States
power to tax non-reeidents, this require
msnt might be considered necessary to
the adequate enforcement of the law.
Law May he Amended.
Archibald Cox of counsel for the
plaintiffs said that the law probably WIN
be amended when the Legislature meets
In January. 1890, but unless the amend
ments are made retroactive non-resi-
dents will escape paying any tax for
the oslendar year OF 1919.
The decision OF Judge Knox 10 likely
to be taken directly to the United States
Supreme Court by the State on appeal
II 1t receives a quick hearing in that
court the decision may be available for
the guidance OF the Legislature at the
beginning of the regular session. In his
opinion Judge Knox said:
by reason of the decision / have
determined should be made in this case
It will be Unnecessary to enter upon a
discussion of the enactment In its en-
tirety. That the State possesses prac-
tlcally unlimited powers OF taxation
within the realm OF It's Jurisdiction; save
as circumscribed by constitutional limi-
tations, Is fundamental and income taxes
are no exception. .... ..
THE outstanding question. It seems to
me. OF this litigation is whether the
act. as drawn, transgresses upon, the
equal privileges and immunity provision
Of the Federal constitution, and II II
does. need not proceed any further. So
fa- as decided cases on this precise ques-
tion go. there appears to be none.
TT is necessary to consider more or
less original sources and resort is had
tn the case of Corfield Va. Coryell;
Washington Circuit Reports, ISL. The
lily OF this case, SO far as / know, have
been above question. and Justice Wash
ington there said that he had no hesita-
ton in combining the expression that The
citizens of each State shall be entitled
to all privileges and lmmunities of citi-
gems in the several States to those priv
lleges and immunities which were In
their nature fundamental which belong
o. right to citizens of all free Govern
~l-t - all ha..WN
enjoyed by the citizens of the several
States which compose the Union from
the time Of their becoming free, inde-
pendent and sovereign.
among these fundamental rights,
said Judge Washington. were
exemption from higher taxes or imposi-
tons then are paid by the other citizens
OF the State. 1t need not be argued that
the rights OF a corporation created by
one State within the borders Of another
state are not altogether similar to the
rights of natural person so circum-
stanced."
Cites Alabama Case.
Judge Knox cited a number of cases
where the principle was followed in
matters not of taxation. IN Alabama
before the civil war It was held that
the slaves Of non-residents could not be
taxed more than those of residents.
The court explained that he would
confine his discussion to the law as II
affects citizens of the United States
and not as II affects aliens.
He gave the following illustrations
OF how the law would work injustice:
1.-TWO persons are employed in this
State by the plaintiff. Their work is. IN
all respects. similar and each receives
a salary OF $4,000 per annum. Assume
that. each employee is married. One
lives with his wife in New York, the
other lives with his wife in Connecti-
cut Under the law. az 1t Is written. the
resident of New York would be ex-
empted from taxation, but the resident
OF Connecticut would be subjected to
tax OF 500.
Paragraph OF section 500 provides
that resident may deduct losses in
CURED In any transaction entered into
for profit though not connected with
the trade or. business but in the case
OF a taxpayer other than a resident OF
the State, only as to such transactions
within the State The result of this is
that two employees of the complainant.
each receiving a salary of $1,000 year,
may together enter into a business ven-
ture in another state. If the venture
within a year results in a loss of 5000
deduct the loss and pay no tax. but the
nonresident u subjected to the tax.
THAT there are in these provisions
of the law number Of problems as to
the character and place of income sought
to be taxed well worthy of serious con-
sideratIon is undeniable. But, in the
aggregate. am OF the opinion that.
as now framed, the statute cannot oper-
ate without depriving citizens of other
States of privileges and lmmunitiss
which are open to citizens and residents
OF New York.
THE difficulty has arisen, II would APP
pear, by the Legislature having assumed
that a citizen of the United States. re-
siding in q State other than New York,
sustains to the taxing power Of that
state the same relationship that n nom
resident alien sustains to the Federal
taxing power. There Is. however. a
distinction. Generally speaking, the
United States Government may pre-
scribe terms under which mn alien may
do business here or prevent him from
doing business here altogether
by the Fourteenth amendment, II Is
declared that all persons born or natu-
rallied in the United States and subject
- the Jurisdiction thereof are citizens
OF the United States and of the State
In which they reside and mo State
shall make or enforce any law which
shall abridge the privileges or immuni-
ties OF citizens OF the United States
Has United the People.
1T Is this provision of the Constitu-
ton, along with the second section Of