Evening star., 1935-04-15
COURT MAY DECIDE.
COTTON TAX FIGHT.
Recent Tobacco Decision
Has Bearing on Other
Price Tactics.
BY DAVID LAWRENCE.


Roosevelt and various Senators as to
the removal of the processing tax on
cotton may be solved some day by
another branch of the Government
the judiciary.
Judge Dawson's recent decision at
Louisville, in which he declares un-
constitutional the Kerr-Smith law fer
the control of the tobacco crop, has
a bearing not only on tobacco but on
the Bankhead cotton control law and
an indirect relationship. too, to the
whole processing tax question as well
as the proposed pay roll taxes en-
bodied in the social security legisla-
ton now before the House.
It embraces, in other words, one OF
the most important points now at
issue. namely whether the Federal
Government under the guise of
tax, can impose penalty that con-
trolls or prevents production and
whether the Federal Government,
also under the guise of tax, can
really donate a subsidy to special
class out of the so-called processing
tax funds.
Property Confscation Seen.
The legal argument against it is
that such a tax takes property from
one class of citizens for the direct
benefit of another class, contrary TO
the tenth amendment of the Consti-
tuition.
The Supreme Court of the United
States. in the famous child laeor
cases, held unconstitutional an act
of Congress which aimed to put
tax on goods manufactured by child
labor and moving in interstate COM
nlerce. The court held that the pur-
pose was not to raise revenue but by
subterfuge to prevent child labor and
that, no matter how beneficial the
purpose. such use of the taxing
power was unconstitutional.
If the Supreme Court felt that way
about anything so humane as the pre-
yention of child labor-and the recent
effort to get Federal constitutional
amendment to prohibit child labor
was a direct result of that decision
then it would seem to be necessary
to get a constitutional amendment to
sanction processing taxes or penalty
taxes such as are involved in the
agricultural adjustment act.
PAY Roll Tax Included.
The problem extends also to the
paw roll tax so essential to the work.
ings of the unemployment insurance
plan. The collecting of money from
a manufacturer and the disbursement
of the same funds to employees are
not in accordance with the precedents
of the Supreme Court in describing
proper use of the taxing power.
Some idea of the extremes to which
the use of this power might go, If the
processing tax idea or the proposed
pay roll tax we're held constitutional,
may be gained from the introduction
recently of a bill by Representative
John Hoeppel of California providing
tax on all machinery according to
the number of workers displaced by
the individual machine.
Mr.. Hoeppel calls this "technotax"
end blames the present economic
plight of the country on the use Of
machinery which results in over
production and unemployment.
Purpose to Be Real Crux.
The California Representative Is
Just as logical as are the defenders
of processing tax on articles of
manufacture. A long line of decisions
of the courts, however. uniformly in
dicates that. when the processing taxes
and the pay roll taxes or the penalty
taxes are up for judicial determina-
ton, the controlling issue will be what
Is their real purpose. Judge Dawson,
for instance, declared the tobacco tax
unconstitutional because its purpose
was to regulate the crop.
The Department of Agriculture
makes no secret of the fact that the
purpose of the processing tax and
the object of the cotton control and
other crop-control laws are to regu-
late farm prices. There is no power
in the Federal Constitution, explicit
or implied, by which prices can be
fixed and, even if this we're to be
derived from the power to regulate
commerce or from the so-called COM
In interstate commerce. there is no
justification for the contention that
the taxing power can be applied to
accomplish it.
The general basis of the present
legislation is that Congress has the
right to provide taxes for the general
welfare and that Congress can be the
judge of what is the general welfare.
The difficulty with this is that many
decisions of the Supreme Court have
limited the power of Congress to use
the taxing power at will to achieve
worthy objectives.
Processing Like Excise Tax.
The processing tax is just like an
excise tax when it is collected, but
the parallel ends there. Excise taxes
go into the general fund and every
appropriation is presumably for the
general welfare. In the case of proc
essing taxes. however-and it would
be the same with respect to pay roll
taxes-the disbursement is for the
benefit of specially selected group