Evening star., 1935-01-14
TAX WOULD BAR
PROFITS IN GOLD.
Administration Could OBJ
tain Law to Take Care
of Any Verdict.
BY DAVID LAWRENCE.

No matter which way the Supreme
Court of the United States decides.
there's not going to be any gold profit
for any holders Of bonds with gold
clause.
If the Supreme Court should hold
that Congress had the right to de-
value, but that contracts payable In
the old-gold value must be met, then
the administration could obtain over
night the passage Of bill through
both houses of Congress taxing at 100
per cent all gold profit and agreeing
at the same time to reimburse any,
body who had to pay it.
Thus a sort of processing tax op-
Grafton could be set up and the in
come from gold profit taxed, and
when received by the Government it
would be paid right back to those who
had been compelled to pay it.
The effect of such law would be
to render superhuous all demands for
payment in the old-gold value. In
deed. the Government might impose
some sort of fee for handling the
transaction so that the trouble and
bother and expense involved would
discourage the transfer.
Before the gold devaluation law
was passed there was discussion inside
the administration Of a plan to tax
outright all gold profit. Indeed. the
Federal Reserve Banks had gold and
before it was formally seized the pro-
posal was that it be taxed 100 per
cent instead of being confiscated.
Really Capital Levy.
The gold profit" as the difference
In dollars between the old and new
gold units has been called, is really
a capital levy or tax. 1t Is collected
by the Government Just like any 9TH
er tax and would have hardly been
questioned had it been put into op-
Grafton as a tax.
It is one Of the rights of Congress
to coin money and regulate the value
thereof, so the present gold cases be-
fore the Supreme Court do not ques-
tion the powers of Congress, but the
situation that arises when the Con-
gress attempts to alter contracts in
existence that call for definite pay
ment in a particular standard Of
value.
The fact that much financial un-
certainty might arise If the Govern
ment lost its suit in the Supreme
Court has stirred up Nationwide
interest in the outcome, and already
the speculative minded believe the
outstanding bonds that have gold
clauses In them are worth more than
those which do not require payment
in gold.
Profit to Holder Blocked.
But all this has been anticipated by
the administration, and no matter
what the final decision Of the court,
the original holders of gold notes or
the beneficiaries of private contracts
payable in gold will not find them
selves any better off after than before
the courts decision.
The questions asked by Chief JUS
tice Hughes and other justices from
the bench also ought not be taken too
much as an indication Of the trend of
the court. Again and again ques-
tions are asked for the purpose of
compelling counsel to argue out a
point or develop a contention on
which it is essential to have more
light. There have been many in
stances in which lawyers made up
their minds from the comments of
the justices during the argument that
they were about to win a case, only
to find on decision day that they
were badly mistaken.
When the justices get together for
collaboration, they often answer
doubling points and come to a con-
clusion which earlier in the argument
they might not have held. .,
Decision Would Help,
The gold cases involve many points
on which clear-cut decision from
the Supreme Court would be helpful
indeed, as, for instance, the right of
Congress to alter a private contract
that existed before it took steps to
abrogate the gold payment clause.
Nearly all real estate mortgages for
many years have had gold clause in
them.
The Supreme Court Is faced with
delicate proposition, for even If it
might desire to find a way to sane
tion what has been done in devalua-
tion, it cannot afford to create prece-
dent that would break down contracts
or seem to give sanction to any un-
moral act as between debtors and
creditors, especially with the Govern
ment involved as a creditor for many
billions of dollars borrowed and to be
borrowed. For if the gold clause can
be repudiated without justification, so
can the total amount be scaled down
arbitrarily.
Truly the Supreme Court Is coming
into the limelight as just about the
most important influence in the course
Of the New Deal since it began its
series Of unprecedented experiments
with the economic and financial