Evening star., 1939-03-28
Measure 10 Prevent
Retroactive Taxinq
Demanded in Senate
Act Would Protect
$500, 900 Stote Workers
Under High Court Ruling

dClOl Ol 0IACc WOTkeTS.
1t would be unfair, some Senators
said, for the Treasury to assert back
claims against 100000 State and
local employees. They said States
could impose back taxes on the
100000 Federal workers, but pre-
dicted this would not be done.
The general expectation was that
the first Federal tax would be levied
on the 1899 incomes Of State en-
ployes.
The 6-to-2 court ruling handed
down yesterday supported President
Roosevelt's contention that an
amendment to the Constitution was
not necessary to permit the Govern
ment and the States to tax each
others salaries. 1t reversed opin-
ions which had stood for more than
half century.
In the past, the Federal Govern
ment has imposed income taxes only
on its own workers and States have
taxed only State employees. officials
said 33 States have income tax
laws.
Norris Sees Securities Next.
Some legislators said the decision
undoubtedly would be broadened in
a future case to lift tax exemptions
from interest on State and Federal
bonds.
If you can tax the salaries, YOU
can tax the securities" said Senator
Norris, Independent, of Nebraska.
Il feel confident the court will so
rule"
Senator Brown, Democrat, of
Michigan said he would confer with
administration leaders soon in an
effort to obtain legislation to attain
this end.
Mr.. Brown, member of the
Senate Finance Committee, said he
interpreted the courts decision to
mean notwithstanding legislation
also would be constitutional. He
said his idea was to apply taxes only
to income from future issues Of
Federal and State securities.
Statistics gathered by Senator
Brown showed the Federal Govern
ment could collect about $4,000, 900
in income taxes from State employees
each year. State collections from
Federal employees would depend on
rates imposed by the various Legisla-
lures.
Some States-Virginia is one-now
specifically exempt Federal workers
from their income levies, and Treas
ury authorities said they assumed
these laws would be amended in
order to take advantage of the court
decision.
Many Workers Unaffected.
The removal of immunity will not
affect many Federal and State work.
ers. because their salaries are less
than the basic exemptions granted
in tax laws. Officials believed, how
ever, that, aside from these excep-
tions. all persons on public pay rolls
would be affected except possibly
Federal judges Some authorities
contended the constitutional provi-
sion against diminishing the salaries
of judges would prevent their being
taxed.
Justices Butler and McReynolds
dissented from the decision, which
was read by Justice Stone. Justice
Frankfurter, newest member of the
court, wrote concurring opinion of
his own.
Solicitor General Robert H. Jack
son said the decision completely
frees the State and Federal Gov
ernments so that they may tax the
salaries of public officers
A use-approved bill providing
for reciprocal Federal-State taxa
ton Of employees salaries is pending
before the Senate. 1t includes
section prohibiting retroactive taxa
ton, but Senators said yesterdays
decision would keep this provision
from binding the States.
Treasury Wants Approval.
Chairman Doughton of the House
Ways and Means Committee and
some members of the Senate FL
nance Committee declared the de-
cision had made passage of the bill
unnecessary, but Treasury officials
said they would like to see it ap-
proved as a declaration of con-
gressional intent.
The decision reversed ruling
by the Court Of Appeals of New
York holding that the pay of an
employe of the Home Owners
Loan Corp. was not subject to the
State income tax. A case from
Utah. where the Supreme Court of
the State had held that the pay of
an employe of the r. F. c. was not
subject to tax, was remanded be-
cause the State court had not passed
on a specific exemption embodied
in the law.
The Supreme Court specifically
overruled previous decisions holding
that Federal and State governments
could not tax the means and in
struments" of the other.
'No Basis for Difference"
Explaining that the court had re-
fused ito imply a constitutional
prohibition of Federal income taxa
ton of salaries of State employees"
in decision on the Port of New
York Authority, a year ago, Justice
Stone said: I'VE perceive no basis for
a difference in result whether the
taxed income be salary or some
other form of compensation, or
whether the taxpayer be an employe
of either a State or the National
Government or Of its instru-
Minority Sees Legislative Need.
In the dissent Justice Butler said
that under the majority opinion, 1T
appears that the United States has
always had power to tax salaries of
State officers and employees and that
free have been the States
to tax the salaries Of officers and en-
ployes of the United States. The
compensation for past as well as
future services to be taxed and the