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14
The Commoner.
VOLUME 13, NUMBER 21
A Remarkable Income Tax Speech
Lwinls" tho condoling in
stallment of tho admirable speech
of lion. Cordoll Hull of Tennessee,
In tho houso of representatives,
Saturday, April 2G, 1013. First in
stallment appeared in Tho Commoner
May 1G; second installment, May
23. Ed.
Mr. Hull. Mr. Chairman, I deslro
beforo closing to allude to the
morlts of tho proposed tax of 1 per
cent per annum upon tho not profits
of insuranco companies. I presumo
that most of tho members of this
house arc policyholders. I may say
that I, and doubtless every member
of this houso, feel most kindly to
ward tho policyholders of this coun
try, and feel no prejudice against
tho insuranco companies. In dispos
ing of the merits of the proposed tax
I am satisfied no member has the
slightest desiro to oven remotely do
injustice or injury to any company
or policyholder.
I recall when tho income-tax law
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The Commoner,
Lincoln, Nebraska
I
mi
of 1894 was enacted these companies
came down hero and stirred up a
great deal of sentiment and excited
tho policyholders and procured their
exemption; but after the matter was
fully understood by tho country it
was tho occasion of about the most
severe criticism there was to the
bill. Now, some of tho companies
havo sent out alarming circulars to
the stockholders, which are calcu
lated to impress upon them that they
are about to be outraged or in some
other respect seriously injured by
some of the provisions to bo found
somewhere in the pending measure.
As a matter of fact, there is no tax,
as I said, upon the proceeds of life
insurance policies paid at the death
of another. There is no tax imposed
upon any individual with respect to
tho return of any sum or amount in
vested in insurance as a business
proposition during his life. Of course,
if there should bo actual earnings
coming back to him along with a re
turn of a portion of tho investment,
as in case of an annuity, for instance,
then as determined by tho expert
knowledge of tho actuary it would
constitute actual earnings such as
would arise from tho- interest on a
promissory note on a loan, and the
individual would be expected to
keep that in mind as a part of his
taxable income. As to the third
proposition, I explained that tho
$4,000 exemption which is granted,
three times ob much as that of any
other country, allows for an item of
expenditure such as premium pay
ments without mentioning them
separately; and, finally, tho mutual
insuranco companies desire to have
themselves entirely exempted as to
their net earnings from the 1 por
cent normal tax imposed upon cor
porations. Now, when this corpora
tion-tax law was enacted four years
ago it was drafted by a very skillful
hand; its chief author was reported
to havo been Attorney General
Wickersham, a gentleman who had
intimat knowledge of tho nature
and character of the business of
these insurance companies and of the
different classes and kinds of net
earnings and accumulations that
arise during the year; and it was ex
pressly provided in that law that in
suranco companies, mutual or other
wise, should not be permitted, in
computing their net income, to make
deductions for dividends paid to
policy holdeirs. Tho word "divid
ends" was expressly and definitely
inserted there upon the broad ground
of public policy and of justice; that
when insurance companies pay divid
ends out of the accumulations of the
character that these companies have
they should pay tho tax of 1 per cent
imposed on all corporations; but
they come In and say that that
should bo stricken out; that when
ever they declare a dividend to the
policyholder it is simply a return of
tho premium savings and constitutes
in no sense net earnincra in tho wnv
lof Interest savings or in the way of
excess or tno mortuary fund or from
tho other sources from which actual
accumulations or profits arise.
When tho corfloration-tax act had
gono into effect, somo of the insur
ance companies acquiesced in this
insuranco clause as just, others
objected to paying tho full amount
of tho tax. Treasury decision No
1743, which I will publish at the end
of my remarks, shows that hearings
wore had covering a period of almost
six months, durinc which nimnaf n
tho companies affected wero heard in
person or by brief. After a full con
s deration of the facts tho commis
sioner of internal revenue reached
tho conclusion that these companies
had made it a rule of thoir business
during past years, through their
literature, advertisements, agents
n f . to represent to the
public whoso business they solicited
that each policyholder at stated
periods shall bo entitled to a fiivu
end out of the surplus of tho L'
pany; that tho amount of the dl!5"
end was generally made the nZ
prominent feature of their adveiff
ments and solicitations for buslnw
that their policy contracts desigX
such amounts paid as dividends; and
that in their sworn reports to Z
states the word "dividend" in J!
ordinary commercial sense was to all
intents and purposes always used I
is clear from these recited facts' as
found by the department, and which
have not been denied to my know
ledge, that the term "dividend" as
thus used by the insuranco com
panies had long existed in the insur
ance world as embodying this term
in its broad commercial sense. It
was known that at times, at least
some companies had heretofore per
mitted profits to accumulate perman-
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