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VOLUME' 9, NUMBER 24:
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tho tax commission, as under tho specific plan
proposed in this bill. And the present plan has
this vory decided advantago to thoN state, that
tho rovonucs are definitely determined and ex
penditures can bo made accordingly, while under
tho proposed plan thero would obtain a flexi
bility dangerous in its uncertainty, as tho
revenues would bo more or Iobs as tho compa
nies mined, much or little.
1 boliovo that tho bill, providing as it does, a
double system of taxation on one class of prop
erty, is wrong in principle, and for this and tho
reasons above cited 1 herewith return the same.
Very respectfully,
JOHN a. JOHNSON, Governor.
THE TARIFF IN THE SENATE
When the tariff bill's provision regulating the
payment of duties on commodities coming into
tho United States from the Philippine Islands,
tho languago of the paragraph relating to tho
free admission of products from tho Philippines
was changed to make clear that all manufac
tured articles imported into the United States
from tho Philippines should bo composed wholly
of products of tho islands or of tho United
States. Tho change was made upon suggestion
of Senators Bulkoley and Brandegee and was
intended to permit Connecticut cigar wrappers
to bo taken to tho islands and to bo imported
into tho United States as a part of a cigar free of
duty.
Tho provision requiring raw or refined sugar
to pay tho samo duty when imported into the
Philippines as when imported into the United
States aroused Senator Bristow, who thought
he saw in it an advantago to tho American Sugar
Refining company.
Sonator Aldrich said he had not heard such
an objection before and added that unless some
such regulation was mado sugar might be
shipped into these islands and then come Into
tho United States free of duty.
Mr. Bristow's amendment eliminating sugar
from the requirement tiff the payment of duty
on entering the Philippines was voted down by
a vote of 11 to 49. Other of Bristow's amend
ments met the same fate.
During the discussion on the Philippine tariff
Mr. Aldrich took occasion to say that President
Taft "is in favor of this identical legislation."
The sonato adopted by a vote of 42 to 28 tho
Philippine jfroo trada anotlon of tho tariff bill,
with amendments. Six republicans, Senators
Root, Borah, Bristow, Clapp, Crawford and
LaFolletto voted with the democrats against the
finance committee proposition.
On June 1G, President Taft carried out the
program outlined several days previously by the
newspapers as tho Aldrich program. He sent
a message to congress recommending a two per
cent tax on tho net income of corporations and
also tho adoption of an amendment to the con
stitution providing for the Income tax.
The text of the president's message is as
follows:
"To the Senate and House of Representatives:
It Is the constitutional duty of tho president
from time to time to recommend to the con
sideration of congress such measures as he shall
Judge necessary and expedient. In my inaugural
address, immediately preceding this present ex
traordinary session of congress, I invited atten
tion to tho necessity for a revision of tho tariff at
this session and stated the principles upon which
I thought tho revision should be affected I re
ferred to tho then rapidly Increasing deficit and
pointed out tho obligation on the part of the
framers of tho tariff bill to arrange the duty
B0 as, to secure an adoquato income and sug
gested if it was not possible to do so
by Import duties, new kinds of taxation
must bo adopted and among them I rec
ommended a graduated inheritance tax as cor
rect in prlcniple and as certain and .easy of
collection. Tho house of representatives has
adopted the suggestion and has provided in the
bill it passed for tho collection of such a tax
In the senate, the action of its finance commit
tee and tho course of the debate indicate that
it may not agree to this provision, and it is
now proposed to make up the deficit by tho
Imposition of a general income tax in form and
substance of almost exactly tho same character
as that which in tho case of Pollock vs. Farmers'
lffv rUBt comPany C15? U. S. 429) was
hold by tho supremo court to be a direct tv
and therefore not within tho power of the fed
eral government to impose unless apportioned
among tho several states according to popula
tion. This now. proposal, which I did not dis
cuss in my inaugural address or In my message
The Commoner;
to tho opening of the present session, makes It
appropriate for mo to submit to the congress
certain additional recommendations.
"Tho decision of the supreme court in tho
income tax cases deprives the national govern
ment of a power which by reason of previous de
cisions of the court, it was generally supposed
tho government had. It might be indispensable
to tho nation's life in great crises. Although I
havo not considered a constitutional amendment
as necessary to the exercise of certain phases
of this power, a mature consideration has satis
fied me that an amendment is the only proper
course for its establishment to its full extent.
I therefore recommend to the congress that
both houses, by a two-thirds vote, shall propose
an amendment to the constitution conferring
tho power to levy an income tax upon tho na
tional government without apportionment among
the states in proportion to population.
"This course is much to be preferred to the
one proposed of re-enacting a law'once judicially
declared to be unconstitutional. For the con
gress to assume that tho court will reverse itself,
and to enact legislation on such an assumption
will not strengthen popular confidence in the
stability of judicial construction of the consti
tution. It is much wiser policy to accept the
decision and remedy the defect by amendment
in duo and regular course.
"Again it is clear that by the enactment of
the proposed law, the congress will not be bring
ing money into the treasury to meet the present
deficiency, but by putting on tho statute books
a law already there and never repealed will
simply be suggesting to the executive officers
of the government their possible duty to invoke
litigation. If the court should maintain its
former view, no tax would be collected at all.
If it should ultimately reverse itself still no
taxes would have been collected until after pro
tracted delay.
"It is said the difficulty and delay in secur
ing tho approval of three-fourths of the states
will destroy all chance of adopting the amend
ment. Of course, no one can speak with cer
tainty upon this point, but I have become con
vinced that 'a great majority of the people of
this country are in favor of vesting the national
government with power to levy an income tax,
and that they will secure the adoption of tho
amendment in the states, if proposed to them.
"Second, the decision in tho Pollock case left
power in the national government to levy an
excise tax which accomplishes tho same purpose
as a corporation Income tax, and Is free from
' certain objections urged to the proposed income
tax measure.
"I therefore recommend an amendment to the
tariff bill Imposing upon all corporations and
joint stock companies for profit, except national
banks (otherwise taxed) savings banks and
building and loan associations, an excise tax:
measured by two per cent on the net income
of such corporations. This is an excise tax upon
the privilege of doing business as an artificial
entity and of freedom from a general partner
ship liability enjoyed by those who own the
stock. I am informed that a- two per cent tax
of this character would bring into the treasury of
the United States not less than $25,000,000.
"The decision of the supreme court in the
caso of Spreckles Sugar Refining Co. vs. McClaln
(192 U. S. 397) seems clearly to establish the
principle that such a tax as this is an excise
tax upon privilege and not a direct tax on prop
erty and is within the federal power without
apportionment according to population. The In
come tax on net income is preferable to one
proportionate to a percentage of the gross re
ceipts, because it is tax upon success and not
failure. It imposes a burden at the source of
the income at a1 time when the corporation is
well able to pay and when collection Is easy
Another merit of this tax is the federal super
vision which must be exercised In order to make
the law effective over the annual accounts and
business transactions of all corporations. While
the faculty of assuming a corporate form has
been of the utmost utility in tho business world!
it is also true that substantially all of the abuses
and all of the evils which have aroused the pub
lic to the necessity of reform were made -possible
by the use of this very faculty, if now by a
perfectly legitimate and effective system of tax
ation, we are incidentally able to possess the
government and the stockholders and the public
of tho knowledge of the real business transac
tions and the gains and profits of every occupa
tion In the country, we have made a long sten
toward that supervisory control of corporations
wh ch may prevent a further abuse of power
4aJ recommend, then, first, the adoption of i
Joint resolution by two-thirds of both houses.
proposing to the states an amendment to tho
constitution granting to the federal government
the right to levy and collect an income tax with
out apportionment among the states according
to population; and, second, the enactment aa
part of the pending revenue measure, either as
a' substitute for, or in addition to, the inherit
ance tax, of an excise tax upon all "corporations
measured by two per' cent of their net income
"(Signed) WILLIAM H. TAFT.
"The White House, June 16, 1909."
President Taft won over several republicans,
among them Senator Brown of Nebraska.
Senators Borah, Bristow, Cummins, LaFolletto
and Clapp held a conference following the presi
dent's message. Referring to the results of this
conference an Associated Press dispatch says:
They decided that the president's plan is not
inconsistent with their demands for adoption for
an amendment taxing incomes, and that both
may be adopted in harmony. They assume that
the president's plan as endorsed by leading re
publicans on the finance committee is designed
"to chloroform" the income tax amendment, but
nevertheless announce that they will continue
to fight for its adoption.
In a brief statement prepared by Messrs.
Borah and Bristow, the supporters of an income
tax amendment say:
"The friends of the income tax feel it a duty
to continue to put forth every effort to secure
the adoption of the measure. They will, there
fore, urge the adoption of the amendment. They
also stand ready to support a resolution provid
ing for an amendment to the constitution of
the United States. While they believe that the
supreme court will sustain the law, yet to pro
vide against any possible contingency that might
rise from an adverse decision, they gladly favor
the proposition to amend the constitution. They
do not feel satisfied with simply a corporation
tax.
"A tax upon the net income of corporations
only will imperfectly reach the desired result.
It will tax tens of thousands of stockholders
whose total incomes are very small, and will
exempt in large measure the immense personal
incomes of the country.
"The provision they favor, treats large in
comes exactly alike, whether received by cor
porations, or individuals, and whether arising
from interest, dividends, inheritances or other
wise. "The plan which they propose simply carries
the president's views to their legitimate end,
and Is as consistent with the decision of the
supreme court, as Is the tax on corporate in
comes alone. There is no reason for exempting
from this tax the vast incomes of individuals
like Carnegie, Rockefeller and others, a vory
large part of whose fortunes do not consist of
corporation stocks.
"It is also well known that corporations, es
pecially the larger ones, can in most Instances
shift the burden of the tax to the public by im
posing upon the people Increased charges and
prices.
"As to the publicity feature, there is no sub
stantial difference between the two measures.
In other words, there Is the same necessity for
securing information, and insuring publicity in
the Income tax as that of corporation tax.
"Every possible effort will be made to secure
the passage of the Income tax amendment."
The battle to place wood pulp and paper upon
the free list was led by Senator Norris Brown
(rep.) of Nebraska, which caused a lively
debate. Senator Brown undertook to withdraw
his amenament for free paper so as to place
himself in position to support the provision of
the house bill, which levied a duty of $2 instead
of ?4 a ton on paper as proposed by the finance
committee. Senator Aldrich interposed, which
objection made necessary an aye and no voto
5 Mr. Brown's amendment, which lost, 29 to
52. All the democrats except Mr. Bailey voted
for the amendment, while among the republi
cans only Senators Bristow, Beveridge, Brown,
and Burkett voted for it. Senator LaFolletto
then proposed an amendment containing a $4
a ton rate on print paper until June 1, 1912.
when the $2 a ton rate of the house should go
into effect, In order to give the Wisconsin mills
time to adjust their business to the lower rate,
I? mmeiLdment was also voted down, 31 to
1 The finance committee's amendment plac
ing the duty of $4 a ton on print paper was
then adopted by a vote of 44 to 32. Senator
laliaferro wa3 tho only democrat voting with
the republicans for the amendment, while Sen
ators Brown, Burkett, Bristow, Beveridge, Cum
S!nli Gunls' DolUver, LaFollette and Smith of
Michigan, republicans cast their votes agalns
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