The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1937-06-01
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Continued from Page II
utilize tax avoidance devices, but
are actively using these devices
in their own personal affairs.
We hear too often from lawyers,
as well as from their clients, the
sentiment it is all right to do
it if you can get away with it,"
Quotes Justice Holmes
Again, as in a number of former
messages, the President quoted
from the late Justice Oliver Wen
dell Holmes, whose dissenting
opinions on the Supreme bench
constitute a brilliant chapter in
American jurisprudence. This
time, he quoted Justice Holmes as
saying:
Taxes are what we pay for
civilized society,""
There are three claSSifications OF
tax avoidance, the President said
those that have the appearance
of legality, others on the borderline
of legality, and still others which
are plainly contrary to even the
letter of the law. He added:
"All are alike in that they are
definitely contrary to the spirit
of the law. ALI are alike in that
they represent a determined ef-
fort on the part of those who use
them to dodge the payment Of
taxes which Congress based on
ability to pay. All are alike in
that failure to pay results in
shifting the tax load to the
shoulders of others less able to
pay, and in mulcting the Treas
ury of the Governments just
due"
BIames Skill Of Lawyers
Mr.. Roosevelt intimated that
the failure of Treasury estimates
to come up to expectations this
year-even though income tax re-
ceipts we're 10 per cent higher
than last year-was due to the
skill of the lawyers in finding ways
for their clients to beat the spirit
of the law.
He did not, however, mention
those decisions by the Supreme
Court which have held that State
and municipal incomes are not
subject to Federal tax, and Fed
eral incomes are not subject to
State taxes-a convenient ruling
by which several millions of per-
sons manage to escape the taxes
to which the ordinary citizen is
liable.
The letter from Secretary of the
Treasury Morgenthau. which Mr..
Roosevelt incorporated in his mes
sage, enumerated various devices
by which corporate and personal
wealth evade taxes.
Lists Means of Evasion
In this enumeration, the Secre.
tary of the Treasury listed the
following:
The setting up of personal
holding corporations in foreign
countries.
The setting up of foreign in
Surance companies.
The establishment of domestic
holding companies.
The device of incorporating
yachts and country estates.
The device of artificial deduc-
tiOnS for interest, losses, etc.
The creation of multiple
trusts for dependents and rela-
tiveS.
The device of partnerships
among relatives.
The device of pension trusts.
Names Are Omitted
Under each heading, the Secre-
tary of the Treasury related Spe.
cific examples, without names.
Thus he disclosed that a retired
American Army officer, to escape
the income tax laws, became a
naturalized Canadian citizen and
organized four Bahama corpora
lions to hold his securities. Per
sonal holding companies and the
formation of foreign insurance
companies have become common
Morgenthau reported. Wealthy
people are even Incorporating their
country places and town houses
to avoid taxes. he said, adding:
"One thrifty taxpayer has
formed Ga trusts for the benefit
of four members of his imme.
diate family, and thereby claims
to have saved them over $685.
900 in one year in taxes"
Still another case cited was q
New York brokerage firm which
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