New-York tribune., 1920-12-19

ton of the law in certain cases.
revenue act of 1917 as interpreted by
the bureau, gives rise to one of the
most difficult and unsa tiSfactory situa-
tions in the admnist alton of the law,
since the result depends entirely on the
comparatives used, and the selection
of comparatives is wholly matter of
Judgment
The department. has endeavored to
meet the situatidN by classifying all
industry into majcr divisions, such as
manufacturing, trading. financial, trans
divided ng, for example,
into concerns manufacturing textiles,
iron and steel, etc, the process of sub
division being repeated until the
groups are comparatively narrow. 1t
is when we come to compare corpora
tions belonging in the same final group
that the difficulty begins. There are
so many factors entering into the prob
lem that the decision as to which
should be used in the final analysis is
more or less arbitrary. When the
grounds for applying these sections
has been some abnormality Of income
or invested capital, my own method of
approach has been to figure out what
the tax would have been had the alb
no,mality not existed, regarding the
amount so found as the equitable tax
and then selecting comparatives that
would result in approximately this fig
ure. This, however. is not always prac-
ticable.
Comparatives Not Possible
Since to disclose the names of the
comparatives used would, in effect, dis
close information as to their taxes,
which the law forbids. it is impossible
| in many instances to satisfy the tax
/ payer that he has been fairly dealt
with.
Perhaps it is misuse of terms 20
speak of the comm ttee on appeals and
review as one Of the relief provisions
of the law, since technically it is not
specifically authorized by the law itself,
/ but is a creation of the bureau to take
the place of the advisory tax board pro
vided by the law for q limited period
of time.
can perhaps best give you com
! prehensive view of the need for such
an organization by sketching for you as
background something of the develop
ment of internal taxation as imposed
! by the Federal government. Most of
us who have had no occasion to con-
slider or study the history of taxa
ton, are. | think, prone to regard
internal revenue taxes as something
which, like poverty, we have always
! had with us, as we surely always will
have in future. Such, however, is not
the case, and for long periods in the
history of the country, there have been
no internal Federal taxes imposed
Sources of Revenue
Excluding proceeds of borrowings
as not being in proper sense reve-
nues at all, and also excepting postal
revenues and some minor miscella-
neous sources. of income, the revenues
Of the Federal government are derived
from two sources: Duties on the i'm
portation of foreign merchandise into
the country, and internal taxes, the
latter being divisibl- into two classes,
direct taxes and indirect taxes.
Direct taxes have been specifically
imposed only twice during the history
OF the government and as they must
be apportioned among the states ac-
corclng to population, and not accord
ing to wealth, are not likely to be
resorted to again.
else tax on distilled spirits imposed
by an act of Conrgess passed early in
1874. This act met with much objec-
ton and opposition, which was carried
to such an extent that in 1894 it was
deemed necessary to call out the mill
TIA OF four states to the number Of
$4,000 men, to put down the so-called
whisky Rebellion" in Pennsylvania.
This act was followed by other laws
passed in 1894, levying taxes on car
rlages used as conVeyances, on licenses
TOR selling wines and foreign distilled
spirits, on snuff and sugar refined in
TINS country, and in 1897 imposing Ger
tain documentary stamp taxes
No Taxes for Ten Years
In 1902 all of these taxes were re-
peaieo' ana from that year until fol-
lowing the War of 1912 the country rot
along without internal Federal taxes
IN 1913, on account of the expense in
CURED during the War of 1912. most of
ehe taxes repealed in 1902 were rejm
posed with some additional ones. These
taxes remained in force from 1919 TO
lol {, when they were again repealed
ana then followed long period during
mhich 'he revenues from imports suf-
Hced 10 meet the revenue needs of the
country, and during which it was froe
rom internal revenue bedevilment
inns happy condition lasted indeed un-
III the outbreak of the Civil War made
~ necessary to use every possible avail
do4e means TOR raising the money nor
cssary to carry on the war In lS6. q,
act vas passed lcvving direct tax Of
SZo'oo0,o0O and also providing for an
income tax. The income tax fcatures
ot TINS act were never put in force and
ehe oNcerS provided for by it were
never appointed, as Congress in 1862
passed much more comprehensive
Schemc OF taxation. This act of 1869
provided for the creation and organi.
zation OF an internal revenue service
~hlch has existed with some modiGca-
tlons to this day
ms law was very broad in it's scone
p'o'iolng tor an income tax as we'll ne
1""ss on most occupations and com
u'op'o'eS m''', capable Of yielding revenue.
"l'h some smcndmcntg and modiGca
''ons 1t remained in force for sevar,i
Z 5o"fs and some of the commodities
.3EcG under It, aS for instance. dis
'h''o Sp'rits, fermented liquors, cigars
@no 'oDacco, nave borne the princjpal
burden Of iuternal revenue taxation nm
10 recent times. N'
Income Tax Not Attacked
me income tax provisions of this
e''' "h'en served az basis for the
dFaiting Of the later act Of 1919 vyoyc
continued IN force until 1872 Curi~
"ps'y enough, this income tax docx no,
app'Af 10 nave been attacked IA uncon-
hIfu'lohaI, at lcagt on the vround
"hich resulted IN the we'll known S',,
p'rIn" Court dcclsiou in tLo p,llor