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About The commoner. (Lincoln, Neb.) 1901-1923 | View Entire Issue (Feb. 17, 1911)
"SW "" "l ""WwyVW FEBRUARY 17, 1911 The Commoner. 5 3 - H "WW - T-Ki 'fjpfJ' - F' i Prospects for Income Tax Law The prospect of ratification by the required number of state legislatures of the proposed sixteenth .amendment to the federal constitution, providing for ari income tax, is growing brighter daily. Only 'four states have rejected the pro posal ami of these the most powerful (New York) is giving signs of an inclination to re verse its former attitude. Governor Dix has expressed unequivocal approval of the measure and has announced that he will work for its ratification. On January 25 a' concurrent reso lution committing the state to the proposed amendment was reported favorably by the sen ate judiciary committee. When the amendment was up last May the senate adopted the Daven port resolution favoring the income tax, by a vote of twenty-six to twenty. It was defeated in the assembly by - a small majority. New York's action by no means is irrevocable, and if the matter should come to a vote once, more the governor's influence might avail to throw it into the progressive column. With the changed complexion of other legis latures, moreover, the classification of states , which were regarded as hostile or apathetic probably will require revision. Alabama, which was one of the few southern states originally Tegarded as doubtful on account of the enormous influence exercised there by New York capital, ratified the income tax last July after a spirited struggle which occupied the lower house for al most a week. New Hampshire, which wag bracketed with the other New England states as opposition territory, was urged to favorable action by Governor Bass in a special message. . on January 25 last the lower house passed an Income tax. resolution "by a viva voce vote and feaent it to the senate. k i The new yeatf has brought' acltfve support "by' a number of other assemblies. .Oni January 20 the Ohio house of representatives concurred in the action of. the senate, adopting a favorable resolution "by a vote of 100 to 3. The first meas ure to be passed by the Michigan senate was such a resolution. It is now pending in the house. The senates of North Carolina and Kan sas have approved the measure. The Arkansas house of representatives favored the. amendment J by a vote of eighty to three. -Illinois last year enjoyed thp distinction of being the first north ern state to express Its approval; there was so little opposition that the.' resolution passed Ithe house almost without debate. ''-.' , The prespnt alignment'of states, in .which both i senate and house have acted follows: i :I," ' FOR I . Alabama '., ' " Miss.ssippi: I South Carolina Ohio , f Georgia .. Oklahoma I Illinois Oregon f; . Kentucky , Texas i Maryland , i AGAINST Louisiana ' New York ' Massachusetts Rhode Island Ratification by three-fourths of the states must be obtained if the amendment is to be adopted. Twelve states ignoring or rejecting it will prevent it from becoming a law. In view of the fact that ratification or re jection of the proposed amendment is regarded generally as the most important single measure which, confronts legislatures at this time, a brief review of its more immediate history may not be untimely. The amendment Is designed to dissolve certain restrictions on the taxing power ofHhe federal government, contained In sections two and nine of article one of the con stitution, which reads as follows: Article 1, section 2 Representatives and di rect taxes shall be apportioned among the sev eral states which may be included within this 'union according to their respective numbers, etc. (Amended, but not in this respect by the Fourteenth amendment.) Article 1, section 9 No capitation or other direct tax shall be laid unless in proportion to the census or enumeration before directed to be taken. Direct taxes, then, under the reading of the constitution, must be laid in proportion to pop ulation. In 1895 an income tax law which was incorporated In the Wilson tariff measure of 1894 came before the supreme 'court in the case of Pollok va. the Farmers' Loan and Trust company. The case was heard twico. On the first hearing the court decided, two judges dis senting, that "a tax on incomes derived from real estate must be regarded as ri direct tax, be cause a tax on real estate itsejf would bo a direct tax. The judges divided oqually on tho question as to whether a tax on .incomes derived from personal property should be regarded as a direct tax and apportioned. On tho second hear ing, however, tho court decided by a vote of five to four that such tax must bo regarded as a direct tax. The effect of the decision was to leave the tax in full force so far as It rolated to incomes derived from business and occupa tions of whatever sort, while exempting land lords and bondholders. The practical effect of this decision, which rendered the act odious to the mass of tho peo ple, was to make it inoperative. It was recog nized at once thatlts purpose had been defeated and there was an' immediate clamor for its re peal. Justice Harlan, who prepared a dissenting opinion, said: "In its practical operation his decision with draws from national taxation not only incomes derived from real estate", but the personal prop erty of the whole country personal property, bonds, stocks, investments of all kinds, and the income that may be derived from such .property. This results from the fact that under tho deci sion of the court such incomes cannot be taxed otherwise than by apportionment among the states on the basis simply of population. No such apportionment can pbssibly bo made with out doing monstrous, wicked injustice to many for the benefit of the favored .few. In. particular states. Any. attempt upon the part of congress tq ' apportion taxation of incomes among the states, upo"h the basis of their population, would and properly ought to arouse such indignation Among the free men of America that it would never be repeated. The majority opinion prac tically decides that without an amendment to the constitution such incomes can never be made to contribute to tlie support of the national gov ernment." The evil to be remedied by the proposed amendment, .which, was' introduced into' congress i)i-ttie. summer of 1909, was the disability of the national government to collect taxes on real estate and personal property which resulted from the supreme court decision of 1895. The amendment, reads: 0 Article 16 The congress shall havo power to lay and collect taxes on incomes, from whatever source derived, without apportionment among, the. several- states and 'without regard to any. census . or enumeration. It-was rumored that powerful interests were conspiring to insure the defeat of the measure. Opposition was concentrated in New York and Massachusetts. The opponents received sup port from an unexpected source -when former Governor Hughes objected to the income tax on state's rights grounds. While admitting that the United States ought to have tho power to lay an income tax without apportionment, he contended that such a' measure as that proposed would place states and municipalities "at the mercy of the federal taxing power," and. thus - impair their borrowing power. This ingenius argument was met by. many able constitutional lawyers, including Senators Root and Borah, and it is interesting to note that Justice Harlan, in his first dissenting opin ion, had touched upon that phase. "I am of the opinion," ho said, "that under numerous decisions of this court, the interest or income derived from bonds issued by a munici pal corporation of a state is not the subject of specific taxation in any form or for any purpose by the United States any more than the Interest or income directly derived from state bonds is the subject of national taxes. The states can not tax the instrumentalities of the United States nor can the United States tax the instru mentalities of the state. Under the deci sions of this court the United States cannot by any form of taxation impose burdens on the in strumentalities employed by the states in execu tion of the poweraja-wfully committed to them." Senator Root cited Judge Cooley's authori tative work on constitutional law, in which the author, summarizing his argument to the effect that the federal government cannot tax the in strumentalities of the state, says: "The taxing power of the federal government does not, there fore, extend to the means or agencies through or by tho employment of which tho states per form their essential functions, etc." "This rulo or construction," said Senator Root, "has been maintained for generations. Undor It, from tho earliest times of our government, tho apparently unlimited taxing power con ferred by tho torms of tho constitution has been 9 held not to apply to the Instrumentalities of tho state. Under it acts of congress, "which by tholr express terms appeared to includo Instrumentali ties of state governments, havo uniformly boon hold -not to Includo them. This uniform, long established and Indisputable rule, applied to tho construction of our constitutlon-a rule which has boon declared to bo essential to a continu ance of our dual system of government for bids that the words of tho instrument confer ring tho power of taxation shall be deemed to apply to anything but the proper subjects of national taxation. Undor it wo are forbidden to apply the words 'from whatover source do-, rived' in the proposed amendment to any of tho instrumentalities of state government." Turning to the practical phaoo of tho igsuo, Mr. Root urged ratification of the Now York resolution in these terms: "The circumstances that originally justified tho establishment of the rulo of apportionment have long since passed away. It Is universally conceded that its application would be so un just and Jnequitablo as to bo impossible. The power of taxation which the rulo makes Jfc.Jm t possible for the nation to exercise may be again. as it has onco been (during tho civil war), vital to the preservation of national existence. It wo.uld bo most unfortunate if the several states of tho union were to insist upon tho continu- ance of this unjust and useless limitation upon the necessary powers originally hd .wisely granted to the national government." . s. Senator Borah, charging in a powerful speech", that there was a plan to defeat the amendment, concluded his appeal for its adoption by saying: "Tho scheme and plan is to defeat this amend ment. Having as a legislative body declared our acceptance o this construction of the con stitution (that delivered by tho supremo court In 1895), thereby making it practically Impose siblo again to appeal to the courts, now if, this amendment can be defeated, this government of the people, for the pepple and bytho people will stand alone among the civilized nations of the earth, shorn .of the power to divide the bur den," of government between consumption and the' various forms of wealth." . Although arguments by constitutional lawyers have been accorded respectful hearing by the press and the legislatures, the question gener-, ally has been discussed by both on grounds which are not technical. The importance of providing the federal government with, a means of distributing a tax; in time of need, more equitably than can bo done under the present constitutional restrictions has been the main consideration. Alabama was the first southern state to take favorable action. It was followed by South Carolina. No question of "state rights" was raised in either assembly. The matter was re garded as a practical one and was so dealt with. Louisiana rejected the proposal, but this wag ascribed largely to , the influence of eastern capital In the northern states of the west and middle west the majorities in favor of an income tax have been large. In Illinois tho senate ratified it by a vote of 40 to 0, the house concurring by a vote of 80 to 8. The vote in the Ohio house has been given. Oregon showed a similar strength In support of the measure. The senti ment of such states as Michigan, Kansas, Wis- . consln, etc, is not a matter of doubt. Chicago Record-Gerald. CUTTING DOWN SALARIES The big corporations are beginning to cut down salaries. It is a wise. move. There Is no sense In paying presidents of banks, Insur ance companies, and other largo corporations the princely salaries they have been receiving. The steel corporation has reduced the president's salary from $100,000 to $50,000, and with Paul Morton's death the salary of the president of the Equitable comes down from $80,000 to $50,000. Retrenchment seems- to be tho order of the day. If tho Lorimer whitewash goes through the people will be justified in concluding that they have overestimated tho character required for tho senate. S M&i . 4fJi '- iU ,