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The Commoner.
A REMARKAI1LE INCOME TAX
SPEECH
(Continuod from Page 7.)
advanced payment. It belongs to
the individual and not to tbo com
pany. Mr. Hull. Tho amount of the
dividend returned to tho policy
holder has been represented to come
out of the surplus of the company,
but in any event it would not be re
duced any more than the 1 per cent
which the corporations now pay re
duces tho dividend to tho stock
holder. One ninety-ninth of the net
earnings from all sources has thus
"VOLUME 13, NUMBER U
far had no effect on it. This tax has
never affected the policyholder here
tofore. Mr. Madden. Will tho gentleman
yield for a further question?
Mr. Hull. Yes.
Mr. Madden. A great many people
have asked me whether a man own
ing a life insurance policy will under
the provisions of this bill be allowed
in c.hnren thn. nnniinl nrnmiums he
is required to pay against his in
come. Mr. Hull. I will deal with that in
a few moments if I can proceed.
Mr. Madden. And I would also
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I Addreii, THE COMMONER, Lincoln, Pfcbrk
liko the gentleman to answer an
other question, whether a widow
will be required to pay an income
tax on the money secured as the re
sult of her husband's death, or
whether that money will be con
sidered as property?
Mr. Hull. It never was con
templated to tax the proceeds of life
insurance policies.
Mr. Madden. It is not very clear
in the bill.
Mr. Hull. The last print of the
bill before it was introduced was by
inadvertence a little obscure on that
point.
Paragraph C exempts from the
law salaries of state- and local offi
cers and interest upon state and
local bonds. The supreme court has
often held that under our form of
government the states have no
power to tax the instrumentalities
of the federal government, and con
versely that the federal government
has no power under the constitution
to tax the instrumentalities of the
states; not desiring to raise any con
stitutional question, or to arouse
the antagonism of any of the states,
tnis provision was inserted.
Mr. Bartlett. May I interrupt the
gentleman?
Mr. Hull. Certainly.
Mr. Bartlett. It is a fact that in
my state and in a number of other
states, when this amendment was up
before the legislature for adoption,
many people opposed the adoption
of the amendment because there was
nothing specifically said in the
amendment; but the friends of the
amendment felt justified in assuring
them that except in great stress, ex
cept in time of war, congress would
never think it wise to tax the bonds
of the state or the subdivision
thereof.
Mr. Hull. Mr. Chairman, I think
the suggestion of the gentleman is
entirely pertinent.
Mr. Bartlett. In other words, the
people were assured by the friends
of this measure'that it would be only
in rare cases that congress would
ever be called upon to enact any law
which would tax the instrumentali
ties of a state or a subdivision
thereof.
Mr. Hull. I do not undertake to
express an opinion either way upon
the power of congress to impose
such tax by virtue of the recent con
stitutional amendment. It does not
necessarily arise in view of the pro
vision hKthe bill.
The salaries of the present presi
dent and the federal judges now in
office are exempted for another con
stitutional reason. As construed
heretofore the constitutional pro
vision to the effect that the salaries
of these officials can not be di
minished during their terms of office
has been held to exempt such
salaries until their successors as
sume office, when the tax would
apply. This is a constitutional pro
vision independent of any taxing
provision in the constitution. Dur
ing and subsequent to the civil war
period it was held that salaries of
these officials during their respective
Ti, Jl.umce coum not Q di
minished for any purpose, taxing or
otherwise, and it was so held with
respect to any attempt to assess
them for income tax. In view S? the
very small amount involved to
gether with the fact that it was not
SSfmlni0 raiS y stitutionai
argument over so small a matter it
was thought wiser to allow the suc
cessors of federal judges and of the
present president of the United
States to assume this tax rather than
provoke an argument by underbSr
ng to impose it now. should weeve"
have the power to do so
Paragraph D provides for thro
Und. of return of income ftax!
Second The rnti...
.. - -" "-mm Ol a Pits
dian, executor, and so forth forth"
person for whom he acts 9
Third The return of any nersnn
or corporation for a taxable individ
ual upon whose income such person
u u , " mquirea to with.
hold and pay tax-to the government
As I indicated a few momenTs 0
while England' collects aboSt 5
thirds to three-fourths of her nr 1
200,000,000 at the source 1 &
that, under the proposed measure
probably in the neighborhood of
two-thirds of the tax, including 0
course, that which would result in
directly from the individual, but
which is paid by a corporation as
to the normal tax at least two
thirds would be collected at the
source of the income, and this would
insure to that extent the collection
of the full tax without trouble to the
tax-payer, and without temptation to
mm to conceal or evade or with
hold any portion of his taxable in
come. Mr. Madden. Mr. Chairman, will
the gentleman yield there?
Mr. Hull. Yes.
Mr. Madden. The gentleman de
scribes a case now where the cor
poration pays the tax, and where the
stockholder who would get divid
ends from the company would not
be required to return his dividends
as part of his income.
Mr. Hull. Of the normal tax.
Mr. Madden. But the surtax he
will be required to pay.
Mr. Hull. As to the additional
tax, every individual makes personal
returns of all of his Income from
every . source, corporate or other
wise. Mr. Madden. Deducting the
amount of the original tax of 1 per
cent paid by the corporation in
which he is a stockholder.
Mr. Hull. Mr. Chairman, I under
took to state a while ago the method
of computing his income for the
purpose of the additional tax, and I
would prefer not to go over it again
just now, if the gentleman will par
don me.
This paragraph also directs the
exemption of $4,000 to every in
dividual taxpayer. The exemption
of $4,000 was fixed, for a number of
reasons. In the first place, as al
ready stated, the people with in
comes below $4,000 pay the princi
pal part not only of our tariff taxes,
but of the state and local taxes, and
there is no injustice in requiring
'those- with higher incomes to bear
th amount of taxes this bill would
impose; again, an exemption of this
amount made' it possible to omit a
number of deductions which are al
lowed in other countries, and which
would be allowed here, with a lower
exemption, such as a certain amount
for premiums paid on life insurance
policies, allowances to a person with
a large family, or to a person sup
porting indigent relatives, and so
forth.
In other countries that have $2o0
and in most cases not over $S00 ex
emption, their laws provide tlipse
special deductions, but in a law that
allows $4,000 exemption it is not
necessary to mention these items of
expenditures specifically.
Furthermore, like any new tax
law, it will be necessary for the
people to become acquainted with
tho proposed law and for it to be
come adjusted to the country be
fore extending its classifications,
abatements, deductions, exemptions,
and so forth, to that extent which in
all respects would make it as com
prehensive as It should later be
made. It was therefore deemed
sufficient at present that while the
bill should, contain the essential
features of a' modernized income-tax
law, no attempt should be made to
write into it the comprehensive
system of rates such as is found to
other countries, like England. Wit
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