Evening star., 1938-05-24
New Tax Philosophy.

The Supreme Court, in upholding the
Federal tax on the incomes of three en-
ployes of the New York Port Authority,
admittedly a State instrumentality. has
unquestionably broadened the scope OF
the Federal taxing power. The opinion
eliminated many of the uncertainties
that have infested the field Of tax i'm
munity, and perhaps, as the minority
asserted, precedents of century's stand
ing were swept away.
But, granting all of that, it is difficult
to find language in the opinion justify
ing the assertion by Roswell Magiu,
Treasury Undersecretary, that the de-
cision is "the strongest kind of support
for President Roosevelt's recommended
tions."
Those recommendations are that Con-
gress, by legislative enactment, authorize
the Federal Government to tax the
salaries Of State employees and the in
come from State securities, extending
corresponding privilege to the States
with respect to Federal salaries and
securities.
Should Congress undertake that by
statute, it presumably would become the
subject of litigation, and the Supreme
Court, to uphold the statute, would have
to overrule its decision Of 1871 in Col
lector VS.. Day." which held that the
salary of State probate judge was I'M
mune from Federal tax. That the court
did not do that in the Port Authority
case is shown by the concurring opinion
of Associate Justice Black, who agreed
with the result reached by the majority
but found himself unable to reconcile
that result with the principle announced
in Collector VS.. Day"
Justice Black made 1t clear that he did
not feel that the ruling in the Port Au-
thority case was broad enough to permit
the taxation of State employees incomes
under the Sixteenth Amendment author
izing Congress to levy tax on incomes
from whatever source derived. That
amendment was stressed by Mr.. Roose-
velt in his message to Congress on tax
exemptions as being broad enough to
permit the legislation he desired.
The majority opinion avoided any ref
erence to the Sixteenth Amendment, but
turned instead on the respective powers
granted the Federal and State Govern
ments as of the time of it's adoption.
Since the decision in Collector vs..
Day" the court, in deciding the validity
of particular tax, has relied upon the
doctrine that incomes derived from ac-
tivities thought to be non-essential to
the preservation of the State are tax
able, while incomes from activities
deemed to be essential are not taxable.
Certainly, in the Port Authority case,
the court did not discard that doctrine.
The new question before the court was
whether the Constitution grants i'm
munity from Federal income tax to the
salaries of State employees performing,
at the expense of the State, services Of
the character ordinarily carried on by
private citizens" and the justices ruled
that it did not.
The court, however, did not state spe-
cifically that State employees performing
work not ordinarily done by private citi-
zens would be immune from such tax.
Seemingly, there was strong implica-
tion that the salaries Of State employees
performing purely State functions could
not be taxed by the central government,
but 1t is possible that the justices pur-
posely left the door ajsr for a ruling to
the contrary should such a case arise
in the future.