Madison County Democrat. (London, Ohio) 19??-1958, 1950-06-20
* recurring .appointment.

tax requiring appointment.
With the adoption of the Six
teenth Amendment the questions
Immediately arose as to what was
a tax on income and when had
income become property. Such
questions would have seemed ac-
ademic some years back, but they
became very practical few
months ago when the House of Re-
presentatives passed a resolution
imposing a tax on the income
of the life insurance companies
for 1947, 1948 and 1949. This has
been called a retroactive income
tax since it sought to reach as
income that part of the taxpayers
funds which was equal to the So
called Income" of the earlier
years. The resolution in effect re-
defined taxable income for those
years and required the taxpayer to
make new returns in accordance
with the terms of the resolution.
That is clearly retroactive tax
alton which has never been pop
ular either with the cohrts or
with our legislative bodies.
- sTfs fkf
What we wish to point out is
that a Federal retroactive income
tax, as distinguished from retroa-
ctive excise tax, offers the pos
sibility of AVOIDING the constitut-
ional prohibition against a levy by
the National Government of dir
ect or capital taxes without the
apportionrnent among the states
which has heretofore been re-
quired. Il If that prohibition can
be avoided, then direct taxes on
property, which have up to now
been confined to the States and
their local subdivisions and have
been a substantial source of re-
venue for them, might be subject
to a competing Federal tax in the
guise. of an income tax. We must
emphasize that il can only result
in the further embarrassment of
local government if an important
constitutional provision protecting
the local taxing authorities from
invasion by the Federal Govern
ment' can thus be overcome.
There are also other ways in
which the powers of the local gov
ernments might be impaired as
a result Of congressional action
permitting the Federal tax auth
critics to expand their revenues.
For example, the right of the
taxpayer to deduct State and local
taxes in computing his Federal
income tax rests only on congress
sional, not constitutional, author
ity. The elimination of this ded-
uction would not only add some
thing to the Federal Treasury but
would make it harder for the
States and their local Subdivisions
to impose and collect the revenues
which they need to meet their ex-
panding functions and costs.
Then sagaints the loeal govern
ment has been able to borrow
money on better terms than
would otherwise be possible be-
cause their bond interest is not
subject to any Federal income tax.
This results from the fact that
the Federal income tax law ex-
cludes such interest from the in
come which it taxes. It may be
that a Federal tax on the interest
on State and municipal bonds
might be held to be an unconsti-
tutional interference with the con-
duct of the local governments, but
it is not difficult to foresee the
possibility that in seeking addition
al revenues for its expanding fun
ctions some National Government
might try to get rid of the con-
gressional and constitutional ex-
clusion of local bond interest from
Federal taxable income.
We began with emphasizing the
Importance of local government
in maintaining representative gov
ernment. 1t should also be empha-
y q