Great Debates in American History: Revenue: tariff and taxation - Google Books

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Marion Mills Miller

Current Literature Publishing Company, 1913

CHAPTER XVII

The Income Tax

SHORTLY after the outbreak of the Civil War, while the vexing question of raising revenue to supply a deficiency of $20,000,000 was before Congress, James R. Simmons [R. I.] advocated in the Senate "a moderate tax on all incomes exceeding $1,000.'' This tax, he declared, was well adapted to the purpose of providing the necessary money without public distress. It was heartily endorsed in both Houses as a fair and equitable measure.

Accordingly, on August 5, 1861, a provision was inserted in an internal revenue bill by which a general tax of three per cent was laid on annual incomes, $800 being exempted from taxation in each case. Foreign residents, however, paid five per cent, upon incomes, and all owners, whether at home or abroad, of Government securities paid only one and one-half per cent upon the interest from these.

Act of 1870.

When, in June, 1870, a bill to reduce internal revenue came before the House Dennis McCarthy [N. Y.] moved to strike out the income tax clause.

This tax is unequal, perjury-provoking, and crime-encouraging, because it is at war with the right of a person to keep private and regulate his business affairs and financial matters. The people demand that it shall not be renewed, but left to die a natural death and pass away into the future as pass away all the evils growing out of the Civil War.

Jacob H. Ela [N. Y.] opposed the motion.

I believe the income tax as at present paid is one of the most just taxes laid, and affects no person who has not received a net income above the amount required for the reasonable support of a family, while most other national taxes, except those from succession and legacies, come from people who are struggling to get the means of support

Mr. McCarthy's motion was defeated by a vote of 60 to 124.

On June 3 various amendments proposed were voted upon. The minimum amount of income was fixed at $2,000. It was also agreed that the statements of incomes be kept secret from all but the Internal Revenue Department. Substitutes for the measure, namely, a tax on Government bonds, and a tax on corporations, to be deducted from interest and dividends before payment, were voted down.

When the bill came before the Senate, Roscoe Conk-ling [N. Y.] opposed the income tax feature.

This tax breeds more jealousy, more discontent, more invidious and odious discrimination, and more demoralization, I undertake to say, than any other tax enforced by law.

John Sherman [0.] replied to Mr. Conkling.

The Senator says this tax is unequal, that rogues escape and honest men pay. Is not that so with all taxes in all the States ? Was there ever a tax that was fairly assessed and honestly collected in all respects?

But, sir, there never was so just a tax levied as the income tax. Why? The income tax is simply an assessment upon a man according to his ability to pay.

The Senate greatly modified the income tax provision, limiting the operation of the tax to two years, and reducing the rate to two and one-half per cent.

The house refusing to concur in all the Senate amendments, a conference committee was appointed. The committee in their report advised virtually the adoption of the Senate amendments in regard to the income tax. Both Houses concurred in the report, and the bill was signed by President Ulysses S. Grant on July 14, 1870.

Act of 1894.

On January 29, 1894, Benton McMillin [Tenn.], from the Committee on Ways and Means, offered in the House an amendment to the Wilson tariff bill, laying a two per cent, tax on incomes over $4,000 a year. In supporting his amendment he presented the following arguments:

1. An income tax would remove part of the great burden resting upon the consumer and place it upon accumulated wealth.
2. It was not unjust to tax wealth for the support of a government from which it receives protection.
3. The argument that an income tax is productive of perjury was not pertinent—to carry out this reasoning would be to advocate removing from our statute books every law that is enacted against crime.
4. A method was proposed by which the income tax was made less inquisitorial than customs and internal revenue taxes.
5. The amendment was so constructed that the income tax could not operate as a tax upon thrift. Each citizen was exempted from taxation to the extent of $4,000, and every income exceeding that amount was taxed at a uniform rate.
6. The adoption of an income tax would remove much of the discontent among the laboring classes.

Other speakers advanced various arguments in favor of an income tax. Uriel S. Hall [Mo.] said that one of its best features was the constant change in the amount of revenue collected under it.

Without an income tax the only method at your command for producing the proper flexibility of revenue to meet the flexible demands of the Government, without disturbing the busi-ness interests of the country, is to change your tariff schedule every two years.

Another argument presented by Mr. Hall was that the income tax would reach a certain class of men living outside of the cities who had their property invested in choses in action, which were not taxable under the laws of most of the States.

W. Bourke Cockran [N. Y.] spoke against the amendment. It was opposed, he said, to the principles of the Democratic party.

This is not a tax upon the men who have enjoyed any special benefit from the Government; it is a tax upon the men who have made the best use of the benefits which are common to alL The vast majority of the persons affected by this tax have never received any special benefit from the Government, but have been injured by the inequality of tariff laws.

Sir, I protest against this betrayal of our ancient principles. I protest against this treason to our faith, to our platform, to our traditions, to our heroes. I protest against partial laws, whether they be intended to favor the few or the many. I demand for all men the same equality before the law which they enjoy in the sight of God.

On January 31 James G. Maguire [Cal.] proposed as a substitute for the income tax that a direct tax of $31,311,125 be annually laid on the land values, exclusive of improvements (the single tax), in the United States, and apportioned to the States and Territories and District of Columbia, these values to be assessed at the full market rates.

The immediate purpose of my amendment is to provide a method better than the general income tax for $31,000,000 to meet a portion of the deficiency expected to arise under the Wilson tariff bill. The income tax, proposed by the gentleman from Tennessee [Mr. McMillin]. can nearly all be shifted from the immediate payers to the Aoulders of the poor, or comparatively poor, who consume the products of the industries out of which the incomes arise, or who borrow the money upon which incomes, in the form of interest, are paid.

The vote was taken at once on Mr. Maguire's amendment to Mr. McMillin's amendment—yeas 6, nays 180.
Tom L. Johnson [0.] 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.

Income Tax Decision of the Supreme Court

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,

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.

Consistency further required that the party in power introduce the proposition. Therefore, and with further appositeness, Nelson W. Aldrich [R. I.], the Republican leader in the Senate on the tariff bill, on June 28, 1909, while the tariff bill was still under discussion, reported from the Committee on Finance a joint resolution proposing the submission to the States of the following amendment to the Constitution:

Article XYI. The Congress shall have 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.

The resolution was based on one which had been offered on April 27 by Norris Brown [Neb.] and referred to the committee.

The resolution came up for discussion on July 3.

The Income Tax [Constitutional Amendment]

Senate, July 3, 1909

Anselm J. McLaurin [Miss.].—Mr. President, I do not believe that there is any necessity for any constitutional amendment to authorize the Congress of the United States to enact an income tax. Whatever may be the intention in bringing forward the proposed amendment, I think the effect will be to defer the enactment of any law providing for an income tax. I think the effect of it will be that there will be probably more than a fourth of the States of the Union which will refuse to ratify the action of Congress when this proposed amendment to the Constitution is presented to the States for ratification, and then I think that will be presented to the Supreme Court of the United States as an argument why an income tax should be held to be unconstitutional. I think it would be urged as a very plausible argument before the Supreme Court of the United States that the people are not in favor of an income tax and do not believe that an income tax would be constitutional.

I cannot conceive that there can be any necessity for any constitutional amendment. If I understood the vote yesterday, the proponent of this proposed constitutional amendment voted against the income tax.

Senator Brown.—I voted for an income tax.

Senator McLaurin.—The Senator from Nebraska, as I heard it, voted to substitute the corporation tax for the income tax.

Senator Brown.—I did. A corporation tax is a tax on incomes, which the court has sustained. I voted for that which the court sustained and rejected that which the court rejected.

Senator McLaurin.—I do not see that the Congress of the United States should be called upon to zigzag around the inconsistent rulings of the Supreme Court of the United States. Without intending any reflection upon that tribunal, it is composed of men just exactly as the Congress of the United States is composed of men. I believe there are just as good lawyers in the House of Representatives and in the Senate of the United States as there are on the Supreme Bench.

Senator Brown.—That is true; but they are not on the bench.

Senator McLaurin.—I know that the members of the Senate and the members of the House are not on the Supreme Bench, but that does not necessitate nor argue for the abnegation of the right of the Senators and Representatives in Congress to pass their judgment upon a constitutional question. It is for us to pass that which we consider to be a constitutional law, and it is for the Supreme Court to undo it or not, as it sees proper.

On July 5 William J. Stone [Mo.] supported the Brown resolution.

I wish to read a declaration contained in the Democratic national platform which was promulgated at Denver in 1908. It is as follows:

We favor an income tax as part of our revenue system, and we urge the submission of a constitutional amendment specifically authorizing Congress to levy and collect a tax upon individual and corporate incomes, to the end that wealth may bear its proportionate share of the burdens of the Federal Government.

That declaration, clear and explicit, is alone sufficient to determine my attitude with regard to the resolution to be voted upon to-day. I am gratified to note this one more example, in addition to those I have heretofore pointed out, of Republicans following in the wake of Democratic leadership and along lines blazed by our Democratic pioneers. The President has taken his stand on the Denver platform, and a Republican Senator has culled one of its declarations and formulated it into the legislative proposition now before the Senate.

Mr. President, fear has been expressed that more than one-fourth of the States will withhold their consent to the amendment and reject it, and then it is apprehended that an argument will be based on that circumstance to induce the Supreme Court to adhere to the doctrine announced in the Pollock case if ever the constitutionality of an income tax is again before that tribunal.

Mr. President, I cannot persuade myself that more than one-fourth of our American States will reject this proposed amendment to the Constitution. But if 12 States should by bare majorities in each reject the proposition, and 33 States should agree to it, as they would by large majorities, it would still be manifest that the great body of the people favored the amendment. If the Supreme Court should be called upon to review the Pollock case, and should be inclined to return to its earlier and, I think, sounder rulings, namely, that an income tax was within the Constitution, I can see no good reason why the court would hesitate to adopt that course even if this amendment should fail of ratification.

Joseph W. Bailey [Tex.] offered an amendment to the Brown resolution.

I move to strike out the word "legislatures," in line 5, and to substitute the word "conventions"; and in line 9, after the word "incomes," I move to add the words "and may grade the same."

Mr. President, of course the Senate will at once understand that the purpose of the first amendment is to submit the ratification of this proposed amendment to conventions called in each State for that purpose, rather than to the legislatures. Legislatures are elected with reference to many questions. Legislatures may be chosen upon local issues. The members may change their opinions, as members of the Senate have done upon this very question, between the time they are chosen to the legislature and the time when they are required to vote.

The second amendment, Mr. President, gives distinct and specific authority to graduate an income tax, and I think that necessary only as a matter of abundant caution. I would not, perhaps, have thought it necessary at all, except for the statement of Judge Brewer, in the case of Knowlton vs. Moore, where he dissents from the opinion of the court sustaining the validity of the inheritance-tax law upon the ground that Congress had no power to grade it.

Senator McLaurin.—There are many Senators who believe that it is not necessary to have any amendment to the Constitution.

The mischief in reference to an income tax in every discussion of it before the court has grown out of six words, three of them in clause 3 of section 2 of Article I of the Constitution, and three of them in clause 2 of section 9 of Article I of the Constitution. In the first place it says:

Representatives and direct taxes shall be apportioned among the several States—

The words "and direct taxes' in that instance, and in the next—

No capitation or other direct tax shall be laid.

The words "or other direct" are the words that make the mischief in this clause 4 of section 9. With these six words stricken out of the Constitution in the places where they occur, as I have indicated, there could be no trouble about the levying and collecting of an income tax.

Senator McLaurin therefore proposed as a substitute for the Brown resolution to strike out of the Constitution the words indicated.

Joseph M. Dixon [Mont] opposed the submission of the Amendment to State conventions.

In many of the States the expense of holding elections for delegates to a constitutional convention will be so large that the question of expense will be used as an argument against it. I think in my State it will cost the State $100,000 to hold its constitutional convention and the election for the choosing of delegates.

I am convinced this will complicate matters. On the other hand, if the joint resolution passes both the Senate and House, as it will undoubtedly, the governor of each State in the Union will certify to the next general assembly of the States the fact that the joint resolution has passed both Houses of Congress, and it will be brought directly and forcibly to the attention of the people in every State.

I for one believe that this amendment will carry in nearly every State of the Union. Suppose, as it has been intimated, that influences should be used in a State with the members of the legislature against it and that legislature returns and goes home without adopting the amendment, it makes it the burning live issue in that State. The joint resolution of Congress does not become functus officio because one legislature of a State at that time has not adopted it. It will rest on the legislatures that will assemble in the future, and whenever three-fourths have finally ratified it, whether it be one, two, three, five, or ten years, it then becomes a part of the fundamental law of the United States. I am thoroughly convinced that the convention method will complicate more than it will help.

Weldon B. Heyburn [Ida.].—Does the Senator contend that it might be submitted to an indefinite number of subsequent legislatures, or would the action, either positive or negative, of the legislature to which it was first submitted exhaust the right!

Senator Dixon.—I presume if the legislative action were positive or negative it would be exhausted in that State.

Senator Heyburn.—Then, if the legislature to which it was submitted failed to act that would be the equivalent of a rejection of the amendment.

Senator Dixon.—No; if the legislature failed to act, I do not think for a moment it would be.

Senator Brown.—Unless some good controlling reason is presented why we should change our method of amending the Constitution, I do not think we can justify our vote against following the usual method. The legislature is an existing institution in every State. A convention would have to be arranged for. The legislatures, by virtue of the several State constitutions, meet every two years in most of the States. We do not have to wait for somebody to call a convention. The legislature is already called. We do not have to worry about the expense of the legislature, because the expense is already incurred.

In addition to all these objections, Mr. President, there is one other which ought to cause Senators in this body to vote against the proposed amendment for ratification by conventions. I know the fight that has been made in a large majority of the States of this country for a primary law. There has been a fight of the people in a majority of the States of the Union to get away from legislators who are nominated in conventions, and in many States they are now nominated at a primary. Members of Congress who used to be nominated in conventions are now nominated at a primary. The members of the several legislatures of the States that have primary laws do not have conventions. They have no law for electing delegates to any convention at a primary.

Now, then, Mr. President, as to the other amendment offered by the Senator from Texas, where he asks that the words '4 and the right to grade" be put in, I think already the language of the joint resolution gives Congress the power to grade the income. The power to lay a tax includes the power to grade. Of that no doubt can reasonably exist, in my judgment.

Hernando D. Money [Miss.].—The difficulty that presents itself to my mind is to secure the 12 States which everybody admits are quite likely to defeat any amendment of this sort to the Constitution. The method presented by the Senator from Texas is probably the best, but the same influences that will control the votes of the legislature will prevent the legislature from calling a convention.

We had great difficulty in passing the last two amendments to the Constitution, which seemed to be so very necessary in our system of political economy as to fix the status of several million freedmen. I am one of those who do not believe that either the fourteenth or fifteenth amendment was ever validly made a part of the Constitution.

Mr. President, I do not believe that this amendment to the Constitution will ever be a part of it. I am willing to vote for it, and I should like to see it adopted, if possible; but I am quite sure that those influences which have prevented a vote on the income-tax amendment in this Senate will also prevent a vote in at least twelve of the legislatures of this Union. We can feel quite sure that an act of such far-reaching importance, that touches the pockets of very many rich people, is not very likely to become a part of the organic law of our Republic or of our confederation.

Senator Bailey.—Mr. President, if, instead of submitting this amendment to the legislatures, that may act and react, and go forward and recede, we submit it to a convention in every State, then every member of that convention will be selected solely with reference to this single question; he will be compelled to stand in the presence of the people whose suffrage he seeks and declare, upon his honor as a man and as a citizen, whether or not he favors this amendment. This procedure will be as nearly as possible a submission of the question to a direct vote of the people.

Now, a number of Senators have suggested to me that the question of expense might be an important one, and therefore I desire to say that, if the amendment I propose should be adopted and we should refer this joint resolution to conventions, instead of to the legislatures, I shall follow it with a resolution providing, out of the general treasury, for the expense of holding the conventions in every State.

Porter J. McCumber [N. D.].—If the legislature were composed of men who would naturally be against the amendment, would it not be more convenient and more easy for them to avoid the calling of a convention than it would to meet the matter directly!

Senator Bailey.—If I were a member of the Texas legislature, and this amendment were submitted for ratification by the legislature, and I were opposed to it, I should vote against it; and they might bring Gatling guns and train them on the capitol, but I would still vote against it if I were honestly opposed to it. But, sir, if the amendment were submitted to the ratification or disposition of a convention, I should feel in honor bound, both as a member of the legislature and as a citizen, to afford to the people of Texas an opportunity to pass in a lawful and an orderly way upon the question.

So I do not hesitate to say that there is a vast difference between a legislator who might vote against the ratification of the amendment if submitted to the legislature and one who would vote against submitting it to a convention in pursuance of the resolution of Congress.

Senator Heyburn.—As I read Article V of the Constitution, which is the article providing for amendments, a State legislature has nothing to do with the question whether or not an amendment shall be submitted to a convention. Congress is to say whether it shall be passed upon by the legislature or by a convention, and the legislature cannot refer it to a convention. Congress is clothed with the authority to adopt that course if it sees fit.

Albert J. Beveridge [Ind.].—How could the convention be called if the legislature did not call it!

Senator Heyburn.—The governor would call the convention if the act of Congress authorized him to do it.

Senator Bailey.—The trouble with that is that it would be necessary to provide for the manner in which members should be elected, and the governor could hardly do that.

Senator Brown.—That would require a session of the legislature.

Senator Heyburn.—I merely gave out the suggestion be-cause it seemed naturally to grow out of the language of Article V.

Senator Brown.—Under the proposal of the Senator from Texas to refer the matter to a convention, we not only have the legislature still in the way, but we have the convention in the way. In other words, you have to have a legislature that is friendly enough to the proposition to pass a law that will be fair enough to allow the people to select delegates to a convention; and then you have to wait until the adjournment of the legislature, and until a convention is called, before you get any action either for or against the amendment. Will some Senator tell me the need of that postponement! In the West we can trust to the legislatures of the States.

Senator Bailey's first amendment was rejected by a vote of 30 yeas to 46 nays, and he withdrew his second amendment. Senator McLaurin's amendment was rejected. The joint resolution was passed by a vote of 77 to 0 on July 5, 1909.

The House referred the resolution to the Committee on Ways and Means, which reported it back on July 12.

The Income Tax [Constitutional, Amendment]

House of Representatives, July 12, 1909

Seeeno E. Payne [N. Y.].—I am utterly opposed to the general policy of an income tax. I believe with Gladstone that it tends to make a nation of liars; I believe it is the most easily concealed of any tax that can be laid, the most difficult of enforcement, and the hardest to collect; that it is, in a word, a tax upon the income of the honest men and an exemption, to a greater or less extent, of the income of the rascals; and so I am opposed to any income tax whatever in time of peace. But if this nation should ever be under the stress of a great war, exhausting her resources, and the question of war now being a question as to which nation has the longest pocketbook, the greatest material resource in a great degree, I do not wish to be left, I do not wish this nation to be left, without an opportunity to avail itself of every resource to provide an income adequate to the carrying on of that war.

I hope that if the Constitution is amended in this way the time will not come when the American people will ever want to enact an income tax except in time of war.

Samnel W. McCall [Mass.] opposed the income tax amendment. It abrogated, he said, one of the fundamental principles of the Constitution—the principle that direct taxes should be apportioned among the States according to population.

He continued:

While gentlemen say that they desire this power for time of war, we see to-day in time of peace an attempt to exercise the power to its utmost extent. Why not, then, limit it expressly to time of war! Why not, for the just protection and the equal rights of the people of New York and of the other great States of this Union, five of which probably will pay nine-tenths of an income tax, although they will have only one-ninth of the representation in the Senate—why not preserve the limitation upon the power of the central Government ! Why drag every government power to Washington so that a vast centralized government may devour the States and the liberty of the individual as well !

Mr. Speaker, believing that this amendment, with no compensation whatever, does away with an important part of the great compromise of the Constitution, and that it is not limited to the emergency for which it is said to be intended, I shall vote against it. The amendment has not carefully been considered by a committee of this House or by anybody else in the United States that I know of, unless possibly by Mr. William J. Bryan. [Applause.]

Champ Clark [Mo.].—The income tax is a Democratic proposition. We put it in the tariff bill of 1894. A very large majority of us have been in favor of it ever since. We wrote it in our platform of 1896 and have advocated it ever since. We proposed it as part of the war-tariff bill of 1898, and Republicans voted it down with practical unanimity. We are in favor of it now; and we welcome the conversion of the Republican party to another Democratic principle. [Loud applause on the Democratic side.] Better late than never. One by one the roses fall, and one by one you adopt the planks of our platform. [Renewed applause.] The whirligig of time brings its own revenges. What was denounced by Republicans in 1896 as anarchy is advocated by them to-day as sound political gos-pel. My own judgment is that the wit of man never devised a fairer or juster tax than a graduated income tax.

It is monstrous to say—I do not care what the gentleman from Massachusetts or anybody else says—it is monstrous to say that the accumulated wealth of this country shall not bear its just proportion of the public burdens. [Loud general applause.] The decision on the income-tax law of 1894, when the peculiar circumstances under which it was rendered are considered, is one of the great blots on the judicial system of this country. Everybody knows that we had two income-tax laws prior to the act of 1894. They were held to be constitutional. I believe firmly that if we had been engaged in a war with a first-class power in 1898, instead of in a war with Spain, Congress would "incontinently," as the gentleman from Massachusetts [Mr. McCall] says, have reenacted the income-tax law of 1894 and that the Supreme Court of the United States would have held it to be constitutional. [Applause.] Nobody had any doubt of that then, and nobody has any doubt of that now. The vast majority of the American people have always believed the income-tax law of 1894 constitutional.

We would much prefer making an income tax part of the tariff bill than to vote for this joint resolution submitting an income-tax constitutional amendment for ratification to the States; but, as it has been demonstrated that we cannot secure the passage of an income tax through this Congress, we will do the best thing possible under the circumstances and vote for this joint resolution, hoping for the best.

The gentleman from Massachusetts [Mr. McCall] talks about the sacredness of the Constitution. I am glad to hear a Republican say something in that behalf. [Laughter on the Democratic side.] Of course the Constitution is sacred, but the fathers of the Republic acted according to their lights and according to the circumstances under which they lived.

We must act according to our own lights and the circumstances under which we live. At the time when those clauses that the gentleman from Massachusetts talks about were put into the Constitution population was about equally distributed, and wealth was also; but times change and men change with them, and things change, too.

The Constitution provides that you cannot levy a direct tax, except by making it a head tax. That is the plain English of it. No Congress is ever going to order a direct tax under that section of the Constitution except, perhaps, in the stress of a great war with a great power, because it is palpably unjust.

Arkansas has one-sixth as many people as New York has, and would under that provision of the Constitution pay one. sixth as much direct tax as New York would, but New York has thirty times as much property value as the State of Arkansas has.

The relative situation of people and of States having largely changed, there is no reason why we should longer adhere to that part of the Constitution relative to a head tax and population. Consequently, while Democrats revere the Constitution, they are in favor of amending it so that the swollen fortunes of the land can be justly taxed.

Ebenezer J. Hell [Conn.].—Mr. President and gentlemen of the House of Representatives, I shall vote against this amendment for the following reasons: In the first place, I do not believe that this extra session of Congress was called to completely change and revolutionize the taxation system of the United States. I think that a question of such magnitude should be submitted to the people and discussed in a campaign preparatory to the presentation of so important a matter as an amendment to the Constitution of the United States. This proposition was found in the Democratic platform and not in the Republican platform on which the presidential campaign of 1908 was won. My understanding is that Congress was called together for the sole purpose of revising the Dingley tariff law on the basis of the difference in the cost of production at home and abroad.

Stop a moment and consider what we are doing in voting to give this Government the power to lay an income tax in time of peace. I know of no better measure of the way in which this burden would fall on the various States in the Union than to judge of it by the inheritance tax laid to meet the expenses of the Spanish-American war.

Of the entire amount collected from the inheritance tax in the whole Union six States paid three-fourths of it.

All told, 35 States paid $31,000 less than the little States of Connecticut and Rhode Island, and yet you come and ask me in time of peace and to pay the ordinary current expenses of this Government to vote now for a constitutional amendment which will enable these 35 States to impose a far greater tax upon my people. But it is claimed that the property in the Eastern States escapes taxation. That is not true. In the State of Connecticut more than 80 per cent, of all the expenses of our State government is now paid by corporations, and during the past ten years no State tax has been laid upon our people, but the whole amount has been met by corporation, inheritance, and other forms of direct taxation imposed by the State. Every corporation in the State is taxed; every legacy under the inheritance-tax law, which we have, pays its fair share.

Is it fair now, after two hundred years of expenditure on our part, that you should come and ask us to vote to tax ourselves in time of peace for a duplication of these things in ail of the new and undeveloped States of the Union! It is not because our people desire to avoid taxation, and, as I have shown you, the accumulation of wealth in these Eastern States does not escape a fair and just charge upon it. We are ready to vote for an income tax to meet any emergencies which may arise in this Union and to stand by the Government in time of war; but do not ask us, at least without consultation with our people at home, to put this burden on them in addition to one already severe because of local expenditures, made necessary by our geographical position, but cheerfully assumed for the general good. [Applause.]

Ollib M. James [Ky.].—Mr. Speaker, I desire to say that the argument of the gentleman from Connecticut [Mr. Hill] does not appear to me to be one that will stand analysis. He tells us that Connecticut, which has been taxing all the rest of the people of the United States under the protective-tariff system until it has grown so rich, if this taxation upon incomes is placed upon her wealth, would pay more than 30 other States in the Union. Yet the gentleman is so patriotic that he is willing to state that when the poor man is willing to give his blood or his life when the Republic is in peril, when the battle is on, that not until then is he willing that his people shall make any contribution to sustain the Government out of the abundant fortunes they have piled up under the system of the protective tariff.

Here Mr. James dwelt at length on the constitutionality of a tax upon wealth. He quoted the dissenting opinions upon the income tax case of Justice Harlan and Justice Brown, and the arguments for constitutionality given by William J. Bryan in his speech in Madison Square Garden, New York City, in 1896. Of Mr. Bryan's stand on this question Mr. James said in conclusion:

Here we behold, Mr. Speaker, this patriot throwing down the gage of battle in the very citadel of wealth. He was ma-ligned and slandered then, but what a glorious victory he is having upon this question! What a marvelous vindication he is receiving now! The whole nation upon tiptoe now approving his stand on the question of an income tax! And, sir, when those who have maligned him have been forgotten, this man who bore three times with honor and with courage the standard loved by millions of his countrymen, battling for equality of taxation, equality of opportunity, striving for the righteousness a republic owes to its people, obedience to law by the great and small, that the tax gatherer should visit alike the cabin and the palace, the hut, and the mansion, I say, sir, that, when the flunkeys and the adulators shall no longer find favor in their fawning nor pay for their abuse, the principles advocated by William J. Bryan, the lover of men and of the rights of men, will live in the Constitution and shine in the statute laws of the land.

To my mind the income tax is the most equitable of all systems of taxation. It is the ideal way to support the Government. Let those who prosper little pay little, for they are least indebted to the Government; let those who prosper more pay more; let those who prosper most pay most; let those who prosper greatly pay greatly, for certainly they have been most blessed and are therefore most indebted to the Government. What man is so ungrateful to his country that he is unwilling to pay a small tax upon his income above $5,000 to help sustain and perpetuate the Government under which he enjoys such success? Many bills have made such provision, but to meet defeat at the hands of the Republican party, which has always opposed taxing wealth in any degree.

Who is prepared to defend as just a system of taxation that requires a hod carrier, who for eight long hours each day wends his way to the dizzy heights of a lofty building with his load of mortar or brick, to pay as much to support this great Republic as John D. Rockefeller, whose fortune is so great that it staggers the imagination to contemplate it and whose property is in every city and State in the Republic and upon every sea protected by our flag. [Applause on the Democratic side.]

How men can defend a system of taxation in a republic which requires of the poor all of its taxes and exempts the rich absolutely I am totally unable to see. In the everyday walks of life we expect more for church, for charity, for the uplifting of society, and education from those who are most prosperous, most wealthy, most able to give.

I have heard it urged by some gentlemen upon the Repub-lican aide that the passage of an income-tax law would undermine and at last destroy the protective-tariff system. This, Mr. Speaker, is equivalent to saying that in order to give a few monopolists and manufacturers the right to reach into the pockets of all the people, you have kept the tax gatherer from reaching into the pockets of the few, the fortunate few, the intrenched few, the successful few; but you have driven the tax gatherer to the same pockets which monopolies pillaged under the protective tariff for taxes to sustain the Government. The protective-tariff system is vicious enough in itself without adding to it the iniquity of saying that in order to perpetuate it you must place the taxing burden of the Government upon the masses of the people, who must also bear the heavy burden the protective-tariff system inflicts upon them.

Mr. Speaker, this battle for an income tax will go on. This is the people's Government and the right will prevail. During all these years the mighty rich—an army of millionaires—have been exempted from taxation, but the people are now aroused. There are two lines of battle drawn for this great contest. Under which flag will you stand—the flag of democracy or the flag of plutocracy!

We shall win, for—

Still, Truth proclaims this motto
In letters of living light:
No question is ever settled
Until it is settled right.

[Applause on the Democratic side.]

And I would scorn, Mr. Speaker, a government whose taxing power provides that Lazarus must divide his crumbs with the tax gatherer, but that Dives shall not give of his riches. [Great applause on the Democratic side.]

J. Warren Keifer [0.].—If there ever is any necessity for an income tax, of course it is when the nation is at war. I want to say, Mr. Speaker, with the utmost kindness, that so far as history shows the Democratic party has not been in favor of an income tax in time of a great war, and it might well be that it should stand converted now. In the Civil War, in the most trying period of it to the Union, when the question of an income tax was voted upon on this floor, every Democrat present and voting voted against it and denounced it as unconstitutional. [Applause on the Republican side.]

Not a single Republican, as the Congressional Record shows, voted against it.

In the Senate of the United States at that time every Democrat voted against an income tax save Mr. McDougal, of California—one only in both Houses. Now I congratulate the Democratic party after these many years on a conversion to the income tax so that it may be levied in time of war.

Now, Mr. Speaker, there is something said about the necessity of an income tax to reach the idle rich; but, if we had only the idle rich, I think I would rather like the program; but there are in this country thousands and tens of thousands of enterprising spirits who have gone forth with energy, industry, and by displaying economy have acquired fortunes, and they are the persons who are to be reached by an income tax; and I am willing that they shall be reached when the trying times come.

While it may be true that those who by their ability and providence amass an estate are secure, an income must bear a proportionately great share of the government taxes; it should not be imposed upon them merely as a punishment.

Adam M. Bykd [Miss.].—Mr. Speaker, I am afraid that the unanimous passage of this measure through the Senate and the favor with which it is being received in this House by your party are too hopeful of good to be accepted with a full measure of confidence. I am afraid that this is a case of "Greeks bearing gifts." It was introduced in the Senate for the avowed purpose of defeating the Bailey-Cummins income-tax bill, and I am apprehensive that after it shall have been rushed through this House and goes to the States for ratification all the power and influence that can be marshaled against it by sordid wealth and Republican chicanery will be used to compass its defeat. It is necessary to debauch the legislatures of only 12 States to secure its rejection, and the same evil influences that have corrupted and carried so many elections have already started a crusade against its adoption by the States.

We were warned by the gentleman from Connecticut [Mr. Hill], in his speech a few moments ago, what opposition might be expected from New England. He boldly contends that it is unjust to tax the wealth of those favored States for the support of the common country, stating that that section, because of its great prosperity, was now compelled to contribute more than its part of the internal-revenue tax. The inconsistency of such an argument is only excelled by the seeming avarice that prompted it. New England, that has bled the country of its wealth for quite half a century; that has her millionaires by the thousands—made so by virtue of the infamous policy of pro-tection—should be the last section of the Union to reject this righteous measure. With her millions invested* in manufactures, protected by the tax of from 50 to more than 100 per cent., it would be the height of political ingratitude for any statesmen from that section, whether Democrat or Republican, to act otherwise than to urge a speedy ratification of this amendment.

Richmond P. Hobson [Ala.].—I believe that this measure is a wise movement in the direction of substituting direct taxation for indirect taxation. A prime advantage of the direct method is that the people know when they are being taxed. Today I am sure that the great masses of the American people have not the slightest idea how many times in the day they are being taxed for all the comforts, conveniences, and necessities of life. If the people were fully informed they would not submit to such tariff schedules as have been in effect for many years and such as are now carried by the present bill.

Another prime advantage of a direct tax is that it enables a people to know how much they are being taxed, and only when they have such knowledge can they prevent abuse of the taxing power.

To-day I do not believe our people have the slightest idea of the amount of taxation that is levied upon them. One, 2, 3 per cent, is considered a sore burden, yet to-day our people are taxed 10, 20, even 30 per cent., and do not know it.

Still a third prime advantage of a direct tax is that we know where the tax goes. In the present juncture the bulk of the taxation of the American people does not go to the Government of the American people. I will illustrate: There are about 200,000 tons of pig iron imported into the United States in a year. The indirect tariff tax causes the Government to get the impost duty from 200,000 tons. The country consumes about 25,000,000 tons, the price of all of which is raised to the extent of the tariff. The net result is that the pig-iron tariff gives the tax on 200,000 tons to the Government and the tax on 24,800,000 tons to certain favored individuals, practically giving over to individuals the sovereign right of taxation that can only reside justly in the Government itself. When the people are taxed, they ought to know who gets the tax, and they would know under a system of direct taxation.

A fourth prime advantage of direct taxation is that it would be more adjustable to the legitimate needs of the Government, and it would tend to a more economical and efficient administration of the Government.

Robert L. Henry [Tex.] offered an amendment to the joint resolution to provide that the proposed constitutional amendment be submitted to the conventions of the States instead of the legislatures. The Speaker [Joseph G. Cannon] ruled the amendment out of order as violating the agreement between the party leaders of the House that debate be limited and a vote be reached at a specified time. This ruling was sustained by the House.

The bill then (on July 12, 1909) passed by a vote of 318 to 14. Having received a two-thirds majority in both Chambers it became effective without the signature of the President.

The constitutional amendment (Article XVI) was declared ratified by more than the necessary three-fourths of the States on February 25,1913.