Evening star., 1939-04-03

tices McReynolds and Butler.
In the matter Of ending income
tax immunities, for current exam
pie, the court is out ahead of Con-
gress. 1t has been there for a con-
siderable time. In two or three de-
cisions narrowing the field of ex-
emptions, it virtually invited Con-
gress to put up to it a statute that
would wipe out the income tax
exemptions on Government salaries
and the revenue from public bonds.
1t showed itself-as many observers
believed-fully prepared to throw
judicial precedent overheard and
rule that the 18th amendment to
the Constitution, giving Congress
the power to levy taxes on incomes
from whatever source derived"
means what it says and not what
earlier Supreme Courts have said
it means.
Congress baked. For one reason
and another, mainly the ill-advised
pressure brought to bear by State
and municipal officeholders, 1t ig-
nored the Presidents call for
short and simple" statute to end
the immunities.
Last Monday the court. in one Of
it's historic shifts, assumed the lead
ership that the legislative branch
ought long ago to have assumed,
and declared that so far as public
salaries are concerned the old i'm
munity doctrine has no validity.
The decision is highly important in
itself; it is the more so because the
new court" announces through it
by clear implication, as Justice
Frankfurter in his separate concur
renee announces in terms. that the
"touchstone of constitutionality is
the Constitution itself and not what
we have said about it." That dictum
will have profound bearing on
great cases of the future.
Again the court. and this time in
clearer language than ever, appears
to have given laggard Congress
the go-ahead signal for the short
and simple. but inclusive, statute
recommended by the President.
4 X X +
If Congress fails to take steps
against the issuance of tax-exempt
securities by Federal. State and 10
cal governments, it will be fouting
recommendation not merely OF
President Roosevelt, but of his three
Republican predecessors and. as
Undersecretary of the Treasury
John w. Hanes lately pointed out
to special Senate committee, OF
practically all the spokesmen OF the
Treasury, including Andrew Mellon.
since progressive income taxation
was written into the laws.
The movement against exemp-
tions was retarded for years by the
large body of legal opinion which
held that only through an amend
ment to the Constitution could the
immunity doctrine be overcome. A
long line of Supreme Court de-
cisions gave weight to this view.
There is no longer any reason why
it should be controlling. And If.
perchance, the implications of last
weeks decision have been misread,
Congress should proceed to get at
| the facts as quickly as possible and.
if necessary, propose a constitutional
amendment.
Senator Clark of Missouri has Of
fered an amendment to the revenue
laws that will take care of the sit
uation. 1t is short and simple. 1t
ends tax exemption as to future
issues of public securities and leaves
untouched, as it should, the i'm
munities enjoyed by existing issues.
1t is appropriate that Senator Clark
should father this tax proposal, for
he has contended from the begin
ming of his service in the Senate
that the immunity problem should
be attacked frontally, by legislation.
| ~ i
The arguments for the change are
overwhelming. Space is lacking in
which to review them here. One.
however, which Mr.. Hanes has ef-
fectively emphasized. should be
mentioned because of its special per-
tinence at this time. He showed
that to the man with net income
of $50O,O0O from other sources, a 3
per cent fully tax exempt security
Is equal in net yield to a taxable
security yielding 1911 per cent. The
effect OF this condition is to drive
capital away from venturesome en-
terprises and into Government
bonds.
1T is highly important" observed
Mr.. Hanes, that capital should have
an adequate incentive to enter ven-
turesome enterprises"
New Dealers and non-New Dealers
alike should say amen to that.
(Copyright, 1939)