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The Commoner.
13
MAT 23, 1913
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source in cases where one's taxes are
paid at the source. His deductions
for expenses, losses, and so forth,
which the gentleman seems to have
in mind, are left to the taxpayer to
bo claimed to the district collector,
or, if he should prefer, through the
person or corporation withholding
his tax at the source of his income.
Mr. Sherley. Is provision made
for the collector to return to the per
son the excess of tax which has been
collected at its source?
Mr. Hull. No tax has been col
lected up to the time the gentleman
seems to refer. This is only for the
purpose of assessment, and, as I
stated awhilo ago, both items merge
in the office of that collector. They
they go up to the office of the internal-revenue
colletcor, who assesses
the tax, computes the sum due, and
then sends notice of amount due to
matter has been discussed consider
ably in the press. It is a very im
portant question in that unless pro
vision is made by which the excess
of tax cn be refunded, or not col
lected at the source, an individual
may havo to disclose his entire pri
vate concerns to another individual.
Mr. Hull. The law, as the gentle
man read it there, is as plainly in
the alternative as it can bo made.
Mr. Sherley. Yes; that is all right;
but does not the man get penalized.,
in taking one alternative, by not get
ting his rebate.
Mr. Hull. The sole purpose of that
provision is to give him his rebate or
deduction. Otherwise the provision
would not bo there.
Mr. Madden. Mr. Chairman, will
the gentleman yield?
Mr. Hull. Yes.
Mr. Madden. I waB wondering if
those whose duty it is to pay the there ought not to be some means by
tax. !
Mr. Sherley. The gentleman does
not state what I understand to be
the requirements of law. The law
says that the lessee or 'corporation
shall withhold and shall pay. Now
they actually pay the tax to the gov
ernment. What I want to know is
whether there is any method where
by if a man does not desire to make
a disclosure of his deductions he is
entitled to to a private individual
is there any method by which the
government can repay to him the ex
cess tax that has been collected at
the source?
Mr. Hull. The gentleman's ques
tion assumes that the tax-payer is
obliged to discloso something relat
ing to his business to some other in
dividual, which is entirely inaccu
rate. It is optional with him.
Mr. Sherley. All right. Suppose
he does not do it to an individual,
but does it to the government; the
tax has all been paid at the source.
What I want to know is what pro
vision is there whereby the govern
ment, getting the information direct
ly, can return the deductions, can re
pay the excess collected at the
source?
Mr. Hull. In the first place, the
tax has not been paid at all at this
stage. This results merely in an
assessment of the tax, a preliminary
stage occurring some time before the
tax would necessarily bo paid. It re
lates to the determination of the
amount of the tax.
Mr. Sherley. Then, am I correct
in assuming that the gentleman im
'plies that, these deductions coming
to the knowledge of the government,
it shall then be the duty of the gov
ernment to inform the lessee in the
particular case cited that the man is
entitled to certain deductions?
Mr. Hull. To be sure; that is, in
the sense that the government would
notify him of the amount of the tax,
which would show that deductions
had been allowed.
Mr. Sherley. And that, therefore,
he, the lessee, is to pay to the gov
ernment only a certain proportion
of the tax?
Mr. Hull. They would send back
to the lessee, to take the gentle
man's case, along with the state
ment of his own taxes, the amount
of the assessment on the return he
had made for this other person.
Mr. Sherley. But do they give to
the lessee knowledge of deductions
that the lessor is entitled to, so as
to enable the lessee to pay a less tax
than ho would ordinarily pay for the
lessor; and if so, where is the pro
vision in the law for.it?
Mr. Hull. I am sorry that I can
not mako myself clear to the gentle
man. Mr. Sherley. . I do not want to em
barrass the gentleman.
Mr. Hull. There Is no embarrass
ment whatever.
Mr. Sherley. I am not asking for
which the individual who receives
the income should be permitted to
pay his own tax in the case of
property rent. Why should a lessee
be authorized to pay taxes for you
as a lessor?
Mr. Hull. That is, in effect, a
practice even now in a great many
states. The tax imposed upon in
dividuals is also paid by some other
person, as in the case of the tax on
Bhares of banks for its shareholders.
I believe that is the law in the
gentleman's state.
Mr. Madden. Let me cite this
case. I own a building in which
there are 50 tenants. The income
from that is, say, $6,000 a year. I
do not udertake to say what it is.
How would the tenants in that case
bo authorized to pay. the tax on the
revenue that I was to receive from
tho building?
Mr. Hull. No person is to with-
I 11.1..H
Tinld t.lio t.fttr fnr nnnthnr unlnnR hfi poiu-ies.
theso dividends, which they declare
annually to policy holders, in com
puting their net income, which Is the
construction that has been placed on
this law by tho government during
tho last few years.
Mr, Burko of South Dakota. I
understand, but I will ask tho gentle
man again, Is the pending bill the
same in this respect as tho bill H. It.
Mr. Hull. Tho only change is that
wo have attempted to mako the lan
guage a little clearer, and the lan
guage is spociflc onough to provent
tho companies from shifting these
earnings from one category to an
other if they should bo inclined to
do so, and In that way escape the
tax.
Mr. Burko of South Dakota. What
ever criticism has been made has
been on tho provision in II. B. 10.
Now, the pending bill having modi
fied that to some exent, I was desir
ous, if poBsible, to ascertain whether
the change had met any of this criti
cism, so that tho criticism no longer
lies. In other words, I am anxious
to know in just what respect tho
provision in the pending bill differs
from the way the provision appears
in H. B. 10.
Mr. Hull. I will say to tho gentle
man it Is Bimply an issue whether
tho company shall pay the tax on
their annual net earnings without
making deductions as they have
claimed heretofore In this contro
versy.
Mr. Hardy. Will tho gentleman
yiold? In order that I may be able
to write clearly, I want to see if I
can write in condensed form. As I
understand, tho gentleman does not
think this bill levies any tax on the
proceeds on death payment of the
the purpose of trying to confuse the
owes that person exceeding $4,000
arising from an annual transaction.
Mr. Madden. Owes him $4,000;
but the rule is that where a man
leases a building or a piece of prop
erty he gets his income monthly, and
it is not at all likely that any person
leasing a building would owe $4,000
at tho end of any fiscal year.
Mr. Hull. Then a personal return
would be made if tho annual rental
should bo less than $4,000. If the
rent, based on a yearly contract,
should in the aggregate amount to
over $4,000, even though payable at
shorter periods, the lessor would be
gin to withhold the tax whenever the
amount paid exceeds $4,000.
Mr. Burke of South Dakota. Mr.
Chairman, will the gentleman yield?
Mr. Hull. Certainly.
Mr. Burke of South aDkota. Mr.
Chairman, I havo received, and I
presume every other member has
received, more or less complaints
criticisms of the hill so far as it
affects insurance companies life in
surance companies, mutual fire in
surance companies, and so far and
the criticisms are based, as I under
stand it, upon the provision in H. B.
No. 10, and I understand that in tho
pending bill there have been some
chancres made. Will the gentleman
state to what extent the bill as It is
now before the house differs from
the provision in the bill No. 10?
Mr. Hull. Mr. Chairman, I will
oblige the gentleman as to this en
tire insurance controversy as best I
can, although I feel I am imposing
very much on the committee.
Mr Ttnrkfi of South Dakota. Mr.
Chairman, the gentleman perhaps
did not quite understand my ques
tion. I am laboring under the ap
prehension that tho provision which
the gentleman has just been discus
sing in the pending bill has been
changed in some respect from what
it Is in house hill No. 10.
Mr. Hull. It proposes simply to
imnnRe a tax on the net earnings of
insurance companies without per
nio purpose oi xryiug to uuulubo mo i uidu. , AaAnnHnhn fnr
gentleman or tricking him, but this mjttlng them to have deductions for
Mr. Hull That Is expressly stated.
Mr. Hardy. And in no case it
exempts no tax on death dividends
and annuities. On that portion, the
death dividends and annuities, tho
experts shall determine. So death
receipts are placed on tho same
basis as other taxes?
Mr. Hull. There Is no tax pro
posed, except on the net earnings
of insurance companies
Mr. Hardy. I understand that
many insurance policies aro in tho
nature of an investment, and if there
is an earning, that earning is taxed.
Mr. Hull. That is true.
Mr. TrJbble. Will the gentleman
yield?
Mr. Hull. I will.
Mr. Tribble. I understand tho
gentleman to say this amount that is
paid in case of an emergency Dy mu
tual firo insurance companies is re
turned to the policy holder, and is
not taxed in this bill?
Mr. Hull. That is taken care of
Mr. Tribble. In tho present bill.
That Is the point I wanted to know.
Mr. McKellar. As I understand,
there is no distinction made between
the so-called mutual companies and
the profit-making Insurance com
panies? Mr. Hull. No. They aro taxed on
their net earnings.
Mr. Murray of Oklahoma. I do not
understand that the question, either
by the gentleman from South Da
kota (Mr. Burko) or the gentleman
from Texas (Mr. Hardy), disclosed
fully what was sought to be brought
out. My understanding was that tho
criticism of H. R. 10 beforo the cau
cus was that it seemed a tax was
levied upon an insurance policy If
paid during the life of the holder
and upon tho beneficiary of a policy,
after death, and that in the caucus
the language was straightened out so
as to show clearly that no tax was
levied upon the beneficiary of a
policy or upon tho amount paid, such
as on a 20-year policy, hut that the
net earnings of the company or any
other net earnings were continue
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