Evening star., 1924-05-31
REDUCED INCOME TAX
PAYMENT EXPLAINED
Treasury Moves to Prevent Com
plete Stoppage of Funds on June
Is if New Bill Is Signed.
ALLOW PARTIAL DEDUCTION
June Installment May Be Cut by
0ne-Haf.
BY DAVID LAWRENCE.

Treasury officials today explained the
method by which taxpayers would cal
culate their next payments on June 15
If the conference report adopted by Con
gress is approved by President Cool
dge, which now is certain
Instead of permitting the taxpayer
to take 25 per cent reduction on his
1928 taxes in a lump by omitting the
June installment, the new plan provides
for a scheme which will not make a hole
in Treasury receipts at this time.
The method is as follows: Tho
taxpayer has the option of paying hi
taxes in full, and if he did so on
March ID he will receive a credit of
one-fourth. If he pays his taxes IN
quarterly installments he will be al
lowed on his June Is payment cred
it Of one-fourth for that payment and
onefourth for the payment which h.
has made in March. In other words
the one-fourth reduction on 1922
taxes Will be allocated in four equal
parts, but in view of the fact that the
March payment has been passed, the
taxpayer Will get "A credit of one
half of his inStallment in June.
Cuts Payment to Half.
Thus a taxpayer who had a tax bill
of $1,000 to pay and who paid $500 on
March 10 last would ordinarily hav-
have had to pay another 5000 on JUNE
10, but instead he will be permitted
to deduct SIS for the payment he made
in March and SIS for the credit which
he is allowed in June, or total deduc-
tion of $50, SO that he actually will
pay only $3.50 in June. When the Sep
tember Is payment comes he viii
deduct only $75 from his 800 BILL
that the net payment will be 1925. On
December Is he will deduct the re-
naming SIS, SO that his bill then would
also be 1925.
In this way the government permits
the taxpayer to take the full one
fourth reduction in four equal parts
and the revenues coming into the
Treasury are not seriously disturbed
The whole thing may be reduced to Il
formula by taking one-half of what
was paid in March and subtracting il
from what would ordinarily be paid
in June. In December and September
each only one-fourth of the March in
stallment would be deducted.
Counts on Steady Income.
The Treasury Department depends
Treasury from income taxes and
when they fall short the government
has to borrow and pay interest, which
increases the expense. In order to
reduce borrowings to the minimum il
was thought best not to permit the
taxpayer to omit his June install
ment altogether. but to let him pay
a half of it then and take two other
credits in September and December.
All the features of the new law
will be retroactive to January / OF
this year. There is some doubt of the
power of the government to levy an
excise tax on gifts which were made
prior to the signing of the new law.
There have been some test cases
in which individuals contended that
they had a right to make a certain
transfer of property because no Law
was on the statute books and that
they might not have done SO had
they had knowledge of the tax that
would be later !,vied. The govern
ment in the past has won these test
cases on the ground that an excise
tax may be levied on any transaction
which has occurred. There is room
for difference of opinion on this
feature of the law. however. and it is
not unlikely that varying .circum-
stances will lead to litigation and
further testing of the constitution
ality of this provision.
Constitutionality Proved.
As for the retroactive effect on the
transactions of the taxpayer gem
orally, the government has no doubt
of the constitutionality of the new
provisions, for the individuals income
is supposed to he calculated on a
yearly basis, and the revenue act of
1918, which was not signed until
February, 1919. was retroactive to
January 1, 1918. without being upset
in the courts. There are other phases
of the new bill which. as usual. will
be open to attack in the courts, bur
they cannot be conjectured in advance.
for nearly every revenue act has
something in it which produces a
law suit.
The gift tax provision is probably
the principal one on which legal CON !
test will be made. The Treasury it,
self did not insert these ambiguous
provisions in the bill, but will be
compelled to defend them when once
ha 1av.