The Washington times., 1928-12-19
BANKS OPPOSE
CHANGE IN
STATUTES
By HARRY GUsACK
Financial Editor

The American Bankers Associa
tion has endorsed the stand takeE
by, the Comptroller of the Cur
rency J. w. Pole in his report te
Congress in opposition to all pend
ing proposals amending the Federal
statutes, relating to taxation. d
national banks, according te
Thomas B. Patton, general counsel
of the organization in a statemen:
issued today.
He pointed out that the present
taxation provision known as Sec.
ton 5215 United States Revised
Statutes affords ample opportunity
for the equitable taxation of ma
tional banks by the states, at ths
same time protecting them from
unjust discrimination. and that ii
indirectly gives similar protectio !
in regard to state chartered banks
ggI wish to call attention to the
clear.cut position which the Comp
frolIer has taken on this question,
Mr.. Patton said. "As he points out
pending proposals to amend the
statute have. for their purpose the
removal of the safeguard which
mas SAlSlGu O7 YSdIS
ing the States from taxing shares
of national banks at rates higher
than those imposed upon competing
moneyed capital. The existing legis.
1ation is both permissive and re
gtrictfve and is thoroughly fair both
to the banks. which are desirous of
bearing their full share of the cost
of government through taxation. and
to the States, which generally have
no desire to exact from the banks
more than their share.
las the Comptroller makes clear
national banks, as instrumentalities
of the Federal Government. can be
taxed by the States only with the
consent of the Government. which,
recognizing that the power to tax
is the power to destroy. has rightly
safeguarded them by limitations
upon State taxation on them. but
the tax authorities of some. States
are now asking Congress to do away
with these safeguards. Some pro.
posals seek to have Congress limit
the taxation of national bank shares
only by the taxation Of capital EN-
pIoyed in the business of banking
thus placing banking IN class Dy
itself for taxation purposes. Other
bills seek to place banks in a class
with mercantile real estate, which
is equally dangerous and tmprac-
tical
1T is contended that since the
States would not impose an undue
burden of taxation on their own
state chartered banks, national
banks would be amply protected
thereby. On this point cannot do
better than quote the Comptroller,
as follows:
asWhite the State tax authorities
are undoubtedly sincere in their
contention, the fact remains that
the States would have the right to
place an undue burden upon ma
ffonal and their own banks to such
an extent as would make banking
improbable or at least burdensome
which in the last analysis is to
the right to destroy a Federal in
strumentality. National banks are
the only compulsory and the most
humorous members OF the Federal
Reserve System. To place the
power in individual Gtates to wreck
a Federal instrumentality which IS
the foundation of the Federal Re-
serve System, is not only unwise
but dangerous and fundamentally
unsound. -
"'It is often difficult to reach
the property of individuals for tax
alton purposes and when the bur
den on .moneyed capital employed by
individuals becomes too great it
can and usually does leave the
State. On the other hand. the
banks property can be easily reached.
it cannot leave the State and must
either pay the tax or cease to do
business. Moreover. the Individual
will favor heavy taxation on banks
when the result is to tighten his
taxes, thus giving the legislature
strong temptation to impose heavy
burdens on the banks. The safety
of the Federal banking structure
should not be left to the power of
the legislature to resist such a
temptation.