rVT
-
The Commoner.
MAY 16, 1913
11
tho English rates this bill would
yield probably $400,000,000.
Tho treasury regulations will
classify tho character of income and
tho persons or corporations in all
cases where returns aro required to
be mado for another and the tax
withheld at tho source. As I have
indicated, the tax will only bo thus
stopped at tho source of annual in
come which is fixed or determinable
and is derived from yearly transac
tions or continuous business connec
tions or relationships extending
through the year. This will argely
embrace income from interest, rent,
and salaries, dividends not being in
cluded in return of income for tho
purpose of the normal tax. All other
classes of income accruing during
the year will be embraced in a per
sonal return of -tho taxpayer. Tho
work of administering the proposed
law will be done by the internal
revenuo department. In making re
turns tho taxpayer, or the person or
corporation making return for him,
will pursue very much tho same
course practiced with respect to the
assessment of state or local taxes.
Tho internal-revenuo department
will send blank return to each
person supposed to have net income
over $4,000 and to each person or
company through whoso hands a
liko sized income is supposed to
pass. Should such taxpayer be
overlooked it would be his duty, as
in tho case of state taxes, to request
a blank return and execute and file
with the district collector of the dis
trict in which tho taxpayer resides.
A person or corporation required to
withhold tax and make return for
another only returns tho income in
his or its hands and makes no in
quiry as to other income of tho tax
payer, tho latter being a matter be
tween the taxpayer and the govern
ment. All returns shall bo mado
and filed by March 1 next and subse
quent to December 31, arid the tax
accrues to tho government after De
cember 31, and tho machinery for its
assessment and collection extending
over some months Is only ono means
of getting the tax into the treasury.
Paragraph E prescribes tho time
and manner of paying tho tax as
computed upon each of the three re
turns heretofore described. Any per
son or corporation required to with
hold and pay for a taxable person
would not withhold any tax until the
annual payments exceeded $4,000,
except where tho same is derived
from Interest on corporate or United
States bonds; neither would the tax
upon incomes from net earnings of
corporations subject to like tax be
withheld. No part of the tax Im
posed on corporations Is stopped at
the source. In many cases the tax
able person will receive income from
several sources at which the tax will
be withheld, and, in order that one
of the persons or corporations so
withholding may understand, that
the taxpayer shall be allowed his
$4,000 exemption thereon, tho tax
payer is required to claim tho same
by filing affidavit to that effect
within 30 days next before return
is made for him. The other persons
or corporations likewise withhold
ing tax upon the income of the same
taxpayer would understand, in the
absence of such claim for exemption,
that when the" Income exceeded $4,
000 per annum they would retain
the taxes due without including any
exemption. In cases where tax is
stopped at the source, as I have de
scribed, if tho tax-payer has deduc
tions for expenses, interest, taxes,
and so forth, which he desires to
have the benefit of, he may file the
same with the collector of the dis
trict In which he resides if ho has
other Income exceeding those deduc
tions, otherwise he would bo obliged
to file the same either with the col
lector of the district in which his
Income is returned by another for
him and tho tax withheld or with
tho person or corporation whoso
duty It is thus to mako return for
him. This will bo optional with tho
taxpayer. These two latter methods
would bring his entiro iucomo and
claim for deductions together in tho
hands of tho district collector, so
that when tho samo reached tho
office of tho commissioner of inter
nal revenue for assessment all tho
facts pertaining to the samo would
bo together.
The first provision in paragraph E
requires tho tax to bo withheld from
incomo derived from interest upon
corporate and United States bonds
and other indebtedness, even though
tho incomo does not exceed $4,000.
This is tho only availablo means of
collecting taxes from this source of
income. Tho interest on most cor
porate bonds is represented by
coupons payablo to bearer. Any
holder of these coupons, no matter
how largo tho amount, could easily
divjde them into amounts under tho
exemption of $4,000 and send thorn
through different sources for collec
tion or otherwise disposo of them so
that when they reached the corpora
tion owinc tho samo no a'nnreciablo
tax could probably be collected
therefrom.
Tho latter part of tho proviso I
havo mentioned simply contains a
provision of tho English law de
signed to intercept the tax from in
como of a taxable person derived
from tho dividends upon tho stock
or interest upon tho bonds of foreign
corporations doing business In
foreign countries, tho samo being
payable outside of tho United States.
This provision likewise relates to in
terest ojn bonds of foreign countries
payablo outside of tho United States.
Paragraph G imposes a like nor
mal tax upon tho net profits, gains,
or incomo of corporations without
exemption. Tho provisions and ad
ministrative machinery of tho
present corporation tax law aro, in
tho main, reenacted. However, the
language Imposing the tax is made
more comprehensive so as to cm
braco all corporations and Joint
stock companies or associations,
whether or not having capital stock.
A largo number of corporations that
should be subject to tax havo
escaped under the present corporation-tax
law. Tho dividends re
ceived by ono corporation from tho
stock of another corporation are not
exempted from tho tax. This pro
vision was based upon the policy that
if a corporation desires to hold stock
in another corporation, with all tho
corporate and business advantages
arising therefrom, it should not
object to paying taxes accordingly.
Upon this ground no provision is
made for exemDtions to Individual
taxpayers deriving income from cor
porate earnings.
Labor, agricultural, charitable,
and other organizations and socle
ties exempt under tho present corporation-tax
law aro likewise exempt
from taxation under the proposed
measure. Mutual savings banks not
having capital stock represented by
shares would also be exempt.
With respect to mutual fire Insur
ant comnanies. a slight relaxation
of the corporation-tax law as con
strued by the treasury department is
made in tho proposed bill. It is rep
resented that factory mutual fire in
surance companies require, a pre
mium deposit of from ten to twenty
times as great as experience shows
would bo needed to pay tho fire
losses and all their expenses of the
year. This presents a different state
of facts from thoso relating to mu
tual insurance companies who seek
exemption, In effect, from the opera
tion of tho proposed income tax.
Mr. Chairman, I regret that time
does not permit mo to go further
into the details of this measure.
Mr. Mann. Mr. Chairman, will
tho gentleman yield for a question?
Mr. Hull. Yes.
Mr. Mann. Supposo ono has an
Income of $5,000 from either divid
ends or intorost payablo by corpora
tions, and that that is hi entire In
come, mado up, say, $500 from oue
company, $C00 from another, $70f
from anothor, $800 from another, t
and on up enough to mako $5,000.
How doos ho got his exemption of
$4,000 and in which company?
Mr. Hull. Mr. Chairman, tho
(Continued on Pago 12.)
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