Pocahontas star herald., 1924-12-04
STATE INCOME TAX
LAW HELD INVALID

Holding that the Riggs gross income
tax of 1923 is unconstitutional on sew
aral points, and that it is absolutely
lnwOrkable,' Chancellor John Il. Mar
.ineau has issued an order permanent
ly enjoining State Comptroller Van b.
Sims from preceding with its enforce
ment, in Il case brought more than a
week ago by three residents of Little
Rock. attacking the validity of the
act on unconstitutional grounds.
Assistant Attorney General William
T. Hammock, representing the state.
asked and was granted an appeal to
the Supreme Court. 1t is expected
that the case will be given preference
on the Supreme Court docket, and will
be passed upon soou after the tran
script has been filed.
The courts action was made possible
when the state filed a demurrer to the
complaint of the plaintiffs, which was
overruled by the chancellor, who sus-
tained the demurrer filed to the states
answer. The legal point was raised
in this manner, although no evidence
was presented at the hearing.
The suit was brought by j. ID. All
rens. f. j. Lipscomb and j. W. Olson,
as residents of the state who had fail
ed to make payments on gross incomes.
They alleged that the law is uncOn-
stitutiOnal because it imposed taxes
upon gross receipts of every natural
person, if they exceed $1,000 per year.
without regard to the source from
which the income is derived. For that
reason it is declared void as privi-
lege tax, because such tax can be
levied only on receipts from Occupa-
tiOns which are not of common right,
and since these receipts are not separ-
able from other taxes imposed by the
tax, the entire act is void.
The provision pertaining to the gross
receipts tax on rents and real estate
and interests on money, is property
tax, and is alleged to he void as such
tax is assessed only against natural
persons, and not on corporations. in
violation of the provision of the CON
stitutiOn which requires all property
with certain exemptions not material
to be assessed for taxes, and requires
that receipts of natural persons and
not ON property of corporations shall
be assessed the same as individuals,
1t was declared. That section of the
law is declared void because as a prop
erty tax it violates the ad valorem pro-
visions of the constitution. and carries
the limit of such taxes beyond statu-
tory limitations. The court held the
law is an unjust and unconstitutional
discrimination between natural persons
and corporations because il imposed
a privilege tax on gross receipts of
natural persons and not on those of
corporations, although they are in di-
rect competition with each other.
Chancellor Martineau held the en-
forcement of the law and the manner
of its collection impracticable and un-
workable, as alleged in the complaint,
The exemption only of. incomes of ST.
600 is said to be so small that nearly
all wage earners, farmers. clerks and
all people of small earnings are com
PEELED to make reports so that the ex-
penses Of enforcing the tax absorbs all
taxes collected.
The method of collection. which
makes 1t the duty of those who pay
salaries or wages or other sums to
other persons to deduct the tax and
pay 1t to the comptroller, which might
necessitate the employment of an ex-
ira force of bOOkkeepers and other
employees, and said to be unsatisfac
tory.
Collection of the tax was begun last
May for the fiscal year ending March
81, 1924, and approximately 100000
had been collected, according to a re-
port yesterday. Attorneys said it is
likely that this money cannot be re-
turned to the taxpayers, even if the
decision of the chancellor is affirmed
except by special act of the General
Assembly, which is improbable.
John Riggs Of Hot Springs, who
framed the law, estimated that 1t
would produce revenue Of 81 ,OOO, 900.
The manner in which the law was
framed was attacked in the suit in
which it was contended that the law
was drawn by taking tax law of
another state and striking out the
words met income" and inserting the
words gross income