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no taxes, contribute something to the support of the Government. [Applause on the Democratic side.)

MR. LONGWORTH.—Oh, the gentleman advocates a class system of taxation.

MR. CLAYTON.-It is not a class system. Does not the gentleman admit that every corporation whose net income does not exceed $5,000 is exempt !

MR. LONGWORTH.-Most assuredly.

MR. CLAYTON.-Is not that the same principle that would exempt the individual in an income tax? What is the difference in principle! I should like to have the gentleman elucidate it.

MR. LONGWORTH.—The difference between investigating the personal affairs of an individual and the affairs of a corporation, which I think should be made public.

SWAGAR SHERLEY (Ky.).—If the gentleman is warranted in saying that the corporation tax is superior to an income tax, how is the gentleman warranted in not taxing bondholders in place of stockholders!

MR. LONGWORTH.-It was seriously considered in drafting this measure, as I understand it, whether constitutionally the bonds could be gotten at, but it was deemed that it would make the measure unconstitutional, and for that reason it was not

put in.

Mr. Speaker, that this measure discriminates between corporations and individuals is, to my mind, not a fault, but a virtue. I have heard over and over again this argument: Suppose A is a corporation engaged in doing business upon one corner of a street. B is a partnership doing a business precisely the same, both as to character and volume, on the other corner of the street. Is it fair that establishment A should pay a tax to the Government upon its net earnings, and that establishment B should go free? My answer is, “Yes." By virtue of having incorporated his business, A has certain advantages which B, managing his affairs as a partnership, has not. Among other things, his liabilities are limited, and he has the right of perpetual succession. He has paid something for the privilege of becoming a corporation and of enjoying these advantages, and hence has shown that he deems them to be of value. The members of the partnership have not asked from the Government any privileges that they are not entitled to as individuals, and it seems to me that they have the right to consider that their profits are their own private affair.

As to the constitutionality of this tax I shall have but little

to say, because I take it to be beyond argument. If anyone holds any doubt upon this question, I would recommend the reading of the speech recently made in the Senate by the junior Senator from New York (Mr. Root], in which he goes thoroughly into the question of the constitutionality of this legislation. His speech is a masterpiece of clearness and force, and leaves practically nothing to be said upon the subject.

But there is a feature of this measure which, to my mind, is of special importance, and that is the feature of publicity. This measure compels the corporations to state in general terms what their gross earnings have been, what has been charged off to repairs, renewals, maintenance, and overhead charges, and what remains which can reasonably be considered their net profit from the business every year. To my mind, it will be of immense advantage to the stockholders of corporations throughout the country. I venture to say that the vast majority of all the stockholders have no real idea of what their legitimate profits have actually been.

I have heard again and again urged against this measure the old argument that it will cut into the savings of the widows and orphans. This is the argument we always hear when any legislation is contemplated which affects a corporation. I believe this measure is for the direct benefit of the widows and orphans and all stockholders, to whose interest it is that the affairs of the corporations of which they are part owners shall be wisely and intelligently administered.

The junior Senator from New York, in his speech, called attention to another feature of this measure which I think is of the greatest importance, and that is the difficulty of making a well-considered protective tariff with the almost inconceivably meager information that we really have concerning the affairs of corporations which the tariff really affects.

I thoroughly believe that publicity in the affairs of corporations will be a benefit, not only to the public at large, not only for the benefit of the small stockholders, but for the benefit of the corporations themselves. I believe that a reasonable publicity will cause millions of the public's money to come out of hiding and seek investment in corporate stock, and that floods of money will come to this country from foreign investors.

I believe that this measure is in line with the great progressive measures which have been enacted by the Republican party in the past eight years for the supervision and regulation by the Government of corporate wealth, the question which, to my mind, together with the question of the conservation of our The vote was taken at once on Mr. Maguire's amendment to Mr. McMillin's amendment-yeas 6, nays 180.

Tom L. Johnson [O.] said:

Mr. Chairman, I desire to put on record the names of the gentlemen who have had the foresight and the patriotism to vote for this single-tax amendment. They are the gentleman from California, Mr. Maguire (the mover of the amendment); the gentleman from New York, Charles Tracey; the gentleman from New York, John DeWitt Warner; the gentleman from Ohio, Michael D. Harter; the gentleman from Kansas, Jerry Simpson, and myself.

Mr. McMillin's amendment was then passed, amid loud applause on the Democratic side, by a vote of 175 to 56. Mr. Cockran voted in the negative.

The passage of the Wilson bill by the House carried with it this amendment. The income tax feature was upheld by the Senate, though strenuously opposed by David B. Hill [N. Y.] and others.


On March 7, 1895, a suit [the Pollock case) was begun in the Supreme Court to test the constitutionality of the Income Tax law. On April 7 the Court decided:

(1) That taxes on the rent or income of real estate are direct taxes.

(2) That so much of the Act of 1894 as attempts to impose a tax upon the rent or income of real estate without apportionment (among the several States according to their population) is invalid.

These questions were decided by a vote of 6 to 2. The Court further decided that the tax upon income derived from municipal bonds was invalid. This tax, they declared, was a tax on the power of the States and their instrumentalities to borrow money, and was therefore unconstitutional. On this point the vote was unanimous.

On the other features of the law of 1894 the Court was evenly divided, and hence no opinion was expressed.

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William D. Guthrie [Cal.], who had argued against the law before the Court, became impressed with the idea that, upon a rehearing, a majority of the Court could be induced to declare the entire act invalid. This led to an application for a rehearing, which was granted. The Court convened again to consider the case on May 7, 1895.

On May 11, by a majority of 1, the Court declared the Income Tax law constitutional. Chief Justice Fuller began at once to prepare the opinion of the minority. Later, however, Justice Shiras, who, ever since the first hearing on the case had seemed in doubt on many points, changed his vote, thus turning a minority into a majority, and deciding adversely the fate of the entire Income Tax law. The final vote of the Court was as follows: Against the law-Chief-Justice Melville W. Fuller [Dem.], Justices Stephen J. Field [Dem.], Horace Gray [Rep.), David J. Brewer [Rep.], and George Shiras, Jr. [Rep.). Dissenting-Justice John M. Harlan (Rep.), Henry B. Brown (Rep.), Howell E. Jackson [Dem.], and Edward D. White [Dem.].

The decision of the majority was taken on the ground that the taxes on income from real estate, as well as those on bonds, stocks, and investments of all kinds, were direct taxes not apportioned among the several States, and were therefore repugnant to the Constitution. And these taxes, they said, “formed a vital part of the whole scheme." If they were stricken out,

This would leave the burden of the income tax to be borne by professions, trades, employments, and vocations, and in this way what was intended as a tax on capital would remain in substance a tax on occupations and labor. We cannot believe that such was the intention of Congress.

Justice Harlan delivered the principal dissenting opinion. He argued that the main feature of the income tax, viz.: the tax on income derived from rents, was not a direct tax. He also declared:

The judgment just rendered defeats the purpose of Congress by taking out of the revenue not less than thirty and possibly fifty million dollars. We know that taxation would not have been reduced to the extent it was by the Wilson act, but for the belief that if the country had the benefit of revenue derived from a tax on incomes it could be safely done. If all the income tax sections of the Wilson act must fall because some of them are invalid, does not the judgment this day rendered furnish ground for the contention that the entire Wilson act falls when the court strikes from it all of the income tax provisions, without which the act would never have been passed?

This dissenting opinion of Justice Harlan was considered remarkable, not only for its arguments, but for its delivery. Said the New York Herald:

He began in a low and distinct tone, but it soon became evident that there was a good deal of feeling in his words. He raised his voice and gesticulated with considerable violence to the members of the bar in front of him. It is doubtful if ever before in the history of the Supreme Court there has been witnessed a scene as remarkable as this, or if ever before a justice has gone to such lengths in criticizing and denouncing the action of a majority of a tribunal of which he was a member. Some of Justice Harlan's phrases almost caused consternation among the members of the bar who sat before him. His impassioned denunciation of the decision, and some of the criticisms he made on the reasoning of the justices who prepared it, indicated that his opinions had a strong leaning toward advanced socialism,

As we have seen in the debate on the Payne-Aldrich revenue bill, [see page 376ss], a strong desire arose in Congress in April, 1909, to embody in the general tariff bill an income tax provision that could not be construed by the Supreme Court as unconstitutional. This method, however, was finally discarded as impracticable—it was urged that, no matter how the provision might be formulated, the tax would be declared unconstitutional.

The logic of the situation, therefore, was that Congress, to be consistent, should place the constitutionality of the admittedly desirable tax beyond question. This could be done only by proposing an amendment to the Constitution, especially declaring that an income tax might be levied by the national legislature.

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