New-York tribune., 1920-03-09
Tax ON Stock
Dividends Is
Held Illegal
Continued from pauo ono

themselves against the payment of
their just share of taxation.
Individuals can avoid taxation Of
the supertax by holding the stock
dividend and living on the increasing
value of it without selling it.
In war times Congress cannot find
sources of revenue such as q super
tax, because stockholders of war
profit-making and other corporations
can successfully shield themselves.
The court decision goes long
way toward preventing equality in
the application of the income tax
laws to all classes of taxpayers.
These opinions arc held generally
by members of the House and Senate
to-day, but it was admitted that there
is no other resource open to them ex-
cept to initiate a further mendment
to the Constitution permitting the tax
alton Of stock dividends.
1t is recalled that when the original
income tax law was declared unconsti-
tutional in 1893 it was killed by a di-
vided court. Five justices stood against
1t was after the decision of 1893 that
the movement began for an amendment
to the Constitution which resulted
more than twenty years later in the
ratification of the Sixteenth Amend
ment
Loss May Reach Billion
Immediately upon being informed of
the ruling of the Supreme Court, the
Treasury Department began to calcu-
late upon the loss of revenue which
would be sustained in the future and
upon the amount of money which would
have to be refunded. Treasury officials
confessed tonight, however, that they
were totally unable to determine even
approximately how much money had
been illegally collected. They agreed
that the amount would run into the
hundreds of millions Of dollars in all
Likelihood and might even approach a
billion.
The original enactment on this sub
iect was in 1916. The provision was
seenacted in 1917, again in the war rev.
cnue act of the same year, and fourth
time in the final revenue bill of Con-
gress. The section was not attacked in
the courts at the time of it's original
enforcement. Not until the war was
over did the plaintiffs in the present
case press the issue for final decision,
but the effect of the decree is retro
active to 1916.
During the last four years. tens of
thousands of persons have paid income
taxes upon stock dividends, and much
Of this, if not most Of it, is repre-
sented in the supertaxes. For that
reason the Treasury Department has
no specific classification of the amount
of money it has received from this
source. The amount of money in
volved cannot be determined, there
fore, until all the claims for refund
have been made and have been settled.
1t will be months, if not years, Treas
ury officials said to-day, before all the
claims will be listed, paid and the
total outlay arrived at.
Separate Bureau for Claims
The machinery for the refunding of
the illegally collected tax is even now
in motion. A separate bureau in the
Treasury Department has been estab-
lshed for handling such claims. All
that claimant needs to do, it was ex-
planned, is to file his papers showing
how much tax he has paid on stock
dividends, citing all the facts. This
may be submitted through any col
lcctor of internal revenue or direct to
the commission in Washington, who
will put it through the mill, and if
verified the money involved will be
refunded.
In view Of the assertion Of Congress
sional leaders that the opinion Of the
court would result in a great number
of corporations declaring stock divi-