Evening star., 1924-01-07
.RECAPTURE CLAUSE
IN RAIL ACT UPHELD
U. S. Supreme Court Hands
Down Decision on Ap-
peal From Texas.

The recapture Of excess earnings
clause of the transportation act was
declared valid and contitutional to-
day by the Supreme Court.
The decision was handed down In
case brought by the Dayton Goose
Creek Railway Company of Texas.
and in which q number of important
railways Joined. pleading that the
provision would result in confsca-
tion.
The first. concerted attack by the
railroads upon the transportation act
of 1920. enacted when the railroads
! were returned to private ownership
after operation under government
control during the world war, reached
the supreme court in an appeal
brought by the Dayton-Goose Creek
halfway Company to test the consti-
tutionality of the "recapture clause"
under which railroads are required to
return to the government one-half of
Ine!r earnings IN excess of per cent
on tine value OF their property used in
! number of the larger railroad
companies Joined the Dayton Goose
Creek Company in it's attack, con-
tending that the returns from rates
! fixed by the Interstate Commerce
Commission must be assumed to be
I fair and reasonable, and TO consti-
J tute only such revenue as the car
! rlers are entitled to receive. Other
| roads. however. were not of this view,
and refrained from Joining in the case.
Roads Lose in Texas Court.
| Located entirely within the state or
Texas, the Dayton-Goose Creek road
! instituted it's challenge in the federal
I district court for the eastern district
| OF that state and lost.
| The court held that while not de-
| nominated a tax, the law requiring
! a return TO the government of a part
| OF the excess earnings was in effect
an excise tax, and clearly within the
! taxing powers of Congress. In ap
| ealing to the Supreme Court the
! contended II was beyond the power
! of Congress to determine what they
should do with their earnings, and
! that to deprive them of legitimate
! prse4,s was confiscation.
| ~ne National Association of Own
/ e1s OF Railroad Securities, claiming
| TO represent large proportion OF the
! outstanding securities of the Ameri-
i can railways. with the permission Of
| the Supreme Court, joined in defend
| ing the clause under attack.
! Pres dent Coolidge Quoted.
| President Coolidge in his message
! to Congress in December, 1923, di
rected attention TO the case, suggest
| ing that the decis on of the Supreme
! Court should be awaited before any
/ IuTlEer FdilTOdQ ieS4SldbiOH WAS ell
/ acted.
Those attacking the "recapture
clause contended broadly that the
constitutional power of Congress in
| regulating rates to be charged by
icommon carriers was confined to pro-
| tGcting the public against unreaSon-
| able or discriminatory charges, and
! that the railr ads, without regard to
any action Congress might take. were
! guaranteed protection In the courts
Eainst unconstitutional confiscation
| Of their property
, Directing also to the determination
by Congress that they should be per-
! mitted to earn only per cent, the
railroads insisted that suhh deci-
! sion was open to the perogatives OF
i the courts and declared that no part
of their earning could be taken away
/ until the courts had determined to
/ what extent, IL any, their earnings
! had been excessive.
! !" Government Makes Reply.
In reply the government contendcd
! the close of government control war
I ranted the enactment of the trans
portation act, whose object was to
+! restore the transportation lines to
] sound financial operation.
! To maintain an adequate national
Z. railway system, the government de-
| clared. Congress provided that the
! Interstate Commerce Commission, in
prescribing rates. should use as
! basis the aggregate value OF the rail-
road property Of the carriers in each
rate group used in the transportation
service.