Evening star., 1938-05-29
Court Decision Slight Support
For Fight on Tax Exemptions
Presidents Quotation of 10th Amendment Omits
Clause Under Which Reciprocal Immunity
Was Upheld in Ruling

taxing power. The very fact that when
they are exercising 1t they are taxing them
selves serves to guard against its abuse.
Another reason rests upon the fact that
any allowance of tax immunity for the
protection of State sovereignty is at the
expense of the sovereign power of the
Nation to tax. Enlargement of the one
involves diminution of the other. When
enlargement proceeds beyond the necessity
OF protecting the State, the burden of the
immunity is thrown upon the National
Government with benefit only to a priv.
lleged class of taxpayers"
That is broad language and might seem
to justify an inference that the court
would support, although not under the
Sixteenth amendment, any Federal tax not
IN itself direct menace to State. It Is
difficult to see how, for example, the pres
ent income tax, as applied to State en-
ployeS, could constitute menace to the
sovereignty OF State, since it is already
being paid by other residents who do not
happen to be on the State pay rolls,
The pnraSeology of the opinion becomes
all the more significant in view of the fact
that twenty-five States, opposing the Fed
eral tax, advising the court in the Port
Authority case that a decision favorable
to the Treasury would tend to destroy the
usefulness to all of the States of the au-
thorlty or commission method of achieving
sound and efficient results.
Two Guiding Principles.
Justice Stone said the decisions Of the
court have definitely established two guild.
ing principles for holding the tax immunity
OF State instrumentalities to its proper
function. One, he said, excludes from the
immunity activities thought not to be essen
tlal to the preservation of State govern
ments even though the tax be collected
from the State treasury. The other prin-
clple, he stated forbids recognition of the
immunity when the burden on the State
Is SO speculative and uncertain that if al
lowed 1t would restrict the Federal taxing
power without affording any corresponding
tangible protection to the State govern
ment. 1t might be, he added, that the
function would be important enough to
demand immunity from a tax upon the
State itself, but it would not necessarily
follow that the private person being paid
by the State for performing the function
would be exempt from tax
1t might we'll be argued that under those
two testing principles clerk employed
in State department of health, or any
other similarly situated State employe,
could be compelled to pay Federal income
tax. The fact remains, however. that the
court has not placed itself definitely on
record to that effect and presumably there
can be no final decision of the question
until each class of State employment can
be individually tested. Should that prove
to be the case, it is safe to say that the
already confused question of who must and
who need not pay Federal income taxes
is apt to become even more involved.
Black Raises Point.
This point was forcefully stated by JUS
tice Black in concurring opinion in which
he agreed with the result of the majority
opinion, but expressed the belief the court
should re-examine the print pie that has
grown out of Collector VS.. Day.
Referring to two apparently inconsistent
decisions of the court he declared:
An implied constitutional distinction
which taxes income of an officer of
State-operated transportation system and
exempts income of the manager of a
municipal water works system manifests
the uncertainty created by the essential
and 'non-essential test.
There is not and there cannot be- any
unchanging line Of demarcation between
essential and non-essential governmental
functions Many governmental functions
of today have at some time in the past
been non-governmental.
Surely, the Constitution contains no
Or others-drawing equal salaries should
be divided into taxpaying and non-tax-
paying groups. Ordinarily such result
is discrimination. Uniform taxation upon
those equally able to bear their fair shares
of the burdens of Government is the OBJ
jective of every just Government. ="
No Agreement Voiced.
Justice Black, in language similar to
that employed by the President, expressed
his belief that the Sixteenth Amendment
is broad enough to accomplish that pur-
pose, but there was nothing in the ruling
to indicate that any of the other justices
agreed with him. (Justices Reed and Car
doza did not participate)
But it is difficult to see how there can
be any sound objection to the Presidents
insistence that tax-exempt bonds and sala-
ries be eliminated in the future. The sole
difficulty seems to be one of method.
Congressional leaders have indicated
they consider the problem too important
for adequate study and action at this ses-
sion but implied it will receive attention
when they return in January.
In view of the courts apparently SYM
pathetic, though still doubtful attitude, It
may be deemed advisable to attempt the
reform next year by statute, as urged by
Mr.. Roosevelt. But, since an element Of
doubt as to its validity exists, it would
seem the wiser course to prepare at Me
same time constitutional amendment spe-
cifically abolishing the exemptions. Il q
majority of the people desire to remove
the injustice inherent In tax exemptions.
it should not take long to ratify the
amendment.
Cas.Mask- W caring Record
Of CSR HO,urs C1aimo1