INCOME TAX PROVISIONS

As Contained in the New Revenue Law.-Mr. McMillin's Report in House.

Sec. 27. That from and after the first day of January, eighteen hundred and ninety-five, and until the first day of January, nineteen hundred, there shall be assessed, levied, collected, and paid annually upon the gains, profits, and income received in the preceding calendar year by every citizen of the United States, whether residing at home or abroad, and every person residing therein, whether said gains, profits, or income be derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever, a tax of two per centum on the amount so derived over and above four thousand dollars, and a like tax shall be levied, collected, and paid annually upon the gains, profits, and income from all property owned and of every business, trade, or profession carried on in the United States by persons residing without the United States. And the tax herein provided for shall be assessed, by the Commissioner of Internal Revenue and collected, and paid upon the gains, profits, and income for the year ending the thirty-first day of December next preceding the time for levying, collecting, and paying said tax.

Sec. 28. That in estimating the gains, profits, and income of any person there shall be included all income derived from interest upon notes, bonds, and other securities, except such bonds of the United States the principal and interest of which are by the law of their issuance exempt from all Federal taxation; profits realized within the year from sales of real estate purchased within two years previous to the close of the year for which income is estimated; interest received or accrued upon all notes, bonds, mortgages, or other forms of indebtedness bearing interest, whether paid or not, if good and collectible, less the interest which has become due from said person or which has been paid by him during the year; the amount of all premium on bonds, notes, or coupons; the amount of sales of live stock, sugar, cotton, wool, butter, cheese, pork, beef, mutton, or other meats, hay, and grain or other vegetable or other productions, being the growth or produce of the estate of such person, less the amount expended in the purchase or production of said stock or produce, and not including any part thereof consumed directly by the family; money and the value of all personal property acquired by gift or inheritance; all other gains, profits, and income derived from any source whatever except that portion of the salary, compensation, or pay received for services in the civil, military, naval, or other service of the United States, including Senators, Representatives, and Delegates in Congress, from which the tax has been deducted, and except that portion of any salary upon which the employer is required by law to withhold, and does withhold the tax and pays the same to the officer authorized to receive it. In computing incomes the necessary expenses actually incurred in carrying on any business, occupation, or profession shall be deducted and also all interest due or paid within the year by such person on existing indebtedness. And all national, State, county, school, and municipal taxes, not including those assessed against local benefits, paid within the year shall be deducted from the gains, profits, or income of the person who has actually paid the same, whether such person be owner, tenant, or mortgagor; also losses actually sustained during the year, incurred in trade or arising from fires, storms, or shipwreck, and not compensated for by insurance or otherwise, and debts ascertained to be worthless, but exclu ling all estimated depreciation of values and losses within the year on sales of real estate pur

chased within two years previous to the year for which income is estimated: Provided, That no deduction shall be made for any amount paid out for new buildings, permanent improvements, or betterments, made to increase the value of any property or estate: Provided further, That only one deduction of four thousand dollars shall be made from the aggregate income of all the members of any family, composed of one or both parents, and one or more minor children, or husband and wife; that guardians shall be allowed to make a deduction in favor of each and every ward, except that in case where two or more wards are comprised in one family, and have joint property interests, the aggregate deduction in their favor shall not exceed four thousand dollars: And provided further, That in cases where the salary or other compensation paid to any person in the employment or service of the United States shall not exceed the rate of four thousand dollars per annum, or shall be by fees, or uncertain or irregular in the amount or in the time during which the same shall have accrued or been earned, such salary or other compensation shall be included in estimating the annual gains, profits or income of the person to whom the same shall have been paid, and shall include that portion of any income or salary upon which a tax has not been paid by the employer, where the employer is required by law to pay on the excess over four thousand dollars: Provided also, That in computing the income of any person, corporation, company or association there shall not be included the amount received from any corporation, company or association as dividends upon the stock of such corporation, company or association if the tax of two per centum has been paid upon its net profits by said corporation, company or association as required by this act.

Sec. 32. That there shall be assessed, levied, and collected, except as herein otherwise provided, a tax of two per centum annually on the net profits or income above actual operating and business expenses, including expenses for materials purchased for manufacture or bought for resale, losses, and interest on bonded and other ndebtedness of all banks, banking institutions, trust companies, saving institutions, fire, marine, life, and other insurance companies, railroad, canal, turnpike, canal navigation, slack water, telephone, telegraph, express, electric light, gas, water, street railway companies, and all other corporations, companies, or associations doing business for profit in the United States, no matter how created and organized, but not including partnerships.

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The net profits or income of all corporations, companies, or associations shall include the amounts paid to shareholders, or carried to the account of any fund, or used for construction, enlargement of plant, or any other expenditure or investment paid from the net annual profits made or acquired by said corporations, companies, or associations.

That nothing herein contained shall apply to States, counties or municipalities; nor to corporations, companies or associations organized and conducted solely for charitable, religious or educational purposes, including fraternal beneficiary societies, orders or associations operating upon the lodge system and providing for the payment of life, sick, accident and other benefits to the members of such societies, orders or associations and dependents of such members; nor to the stocks, shares, funds or securities held by any fiduciary or trustee for charitable, religious or educational purposes; nor to building and loan associations or companies which make loans only to their shareholders; nor to such savings banks, savings institutions or societies as shall, first, have no stockholders or members except depositors and no capital except deposits; secondly, shall not receive deposits to an aggregate amount, in any one year, of more than one thousand dollars from the same depositor; thirdly, shall not allow an accumulation or total of deposits, by any one depositor, exceeding ten thousand dollars; fourthly, shall actually divide and distribute to its depositors, ratably to deposits, all the earnings over the necessary and proper expenses of such bank, institution or society, except such as shall be applied to surplus; fifthly, shall not possess, in any form, a surplus fund exceeding ten per centum of its ag gregate deposits; nor to such savings banks, savings institutions or societies composed of members who do not participate in the profits thereof and which pay interest or dividends only to their depesitors; nor to that part of the business of any savings banks, institution or other similar association having a capital stock, that is conduced on the mutual plan solely for the benefit of its depositors on such plan, and which shall keep its accounts of its business conducted on such mutual plan separate and apart from its other accounts.

Nor to any insurance company or association which conducts all its business solely upon the mutual plan, and only for the benefit of its policy holders or members, and having no capital stock and no stock or shareholders, and holding all its property in trust and in reserve for its policy holders or members; nor to that part of the business of any insurance company having a capital stock and s stock and shareholders, which is conducted on the mutual plan, separate from its stock plan of insurance, and solely for the benefit of the policy holders and members insured on said mutual plan, and holding all the property belonging to and derived from said mutual part of its business in trust and reserve for the benefit of its policy holders and members insured on said mutual plan.

That all State, county, municipal, and town taxes paid by corporations, companies, or associations, shall be included in the operating and business expenses of such corporations, companies, or associations.

Sec. 33. That there shall be levied, collected, and paid on all salaries of officers, or payments for services to persons in the civil, military, naval, or other employment or service of the United States, including Senators and Representatives and Delegates in Congress, when exceeding the rate of four thousand dollars per annum, a tax of two per centum on the excesss above the said four thousand dollars; and it shall be the duty of all paymasters and all disbursing officers under the Government of the United States, or persons in the employ thereof, when making any payment to any officers or perso s as aforesaid, whose compensation is determined by a fixed salary, or upon settling or adjusting the accounts of such officers or persons, to deduct and withhold the afore said tax of two per centum; and the pay roll, receipts, or account of officers or persons paying such taxes as aforesaid shall be made to exhibit the fact of such payment. And it shall be the duty of the accounting officers of the Treasury Department, when auditing the accounts of any paymaster or disbursing officer, or any officer withho ding his salary from moneys received by him, or when settling or adjusting the accounts of any such officer, to require evidence that the taxes mentioned in this section have been deducted and paid over to the Treasurer of the United States, or other officer authorized to receive the same. Every corporation which pays to any employee a salary or compensation exceeding four thousand dollars per annum shall report the same to the collector or deputy collector of his district and said employee shall pay thereon, subject to the exemptions herein provided for, the tax of two per centum on the excess of his salary over four thousand dollars: Provided, That salaries due to State, county, or municipal officers shall be exempt from the income tax herein levied.

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Sec. 3167. That it shall be unlawful for any collector, deputy collector, agent, clerk, or other officer or employee of the United States, to divulge or to make known in any manner whatever not provided by law to any person the operations, style of work or apparatus of any manufacturer or producer visited by him in his official duties, or the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth or disclosed in any income return by any person or corporation, or to permit any income return or copy thereof or any book containin any abstract or particulars thereof, to be seen or examined by any person except as provided by law; and it shall be unlawful for any person to print or publish in any manner whatever not provided by law, any income or part thereof or the amount or source of income, profits, losses, or expenditures appearing in any income return; and any offense against the foregoing provision shall be a misdemeanor and be punished by a fine not exceeding one thousand dollars or by imprisonment not exceeding one year, or both, at the discretion of the cour; and if the o ender be an officer or employee of the United States he shall be dismissed from office and be incapable thereafter of holding any office under the Goverment.

PLAYING CARDS.

Sec. 38. That on and after the first day of August, eighteen hundred and ninetyfour; there shall be levied, collected, and paid, by adhesive stamps, a tax of two cents for and upon every pack of playing cards containing not more than fifty-four cards, manufactured and sold or removed, and also upon every pack in the stock of any dealer on and after that date; and the Commissioner of Internal Revenue, w th the approval of the Secretary of the Treasury, shall make regulations as to dies and adhesive stamps.

Report on the Income Tax.

Mr. McMillin, from the Committee on Ways and Means, submitted the following report on the income tax :

The wealt of this country amounts to more than $65,000,000,000, and the question arises whether it is not just and fair that a portion of this money should be raised by a tax on the earnings of wealth instead of imposing it all or nearly all on consumption. The committee believe that it is eminently just and proper that the amount proposed by this bill should be collected from a tax on incomes instead of placing all of it on the necessities of life, which are consumed by all but are not used in proportion to their ability to pay taxes, but according to the necessities of existence.

What just complaint can there be against placing thirty millions of this burden on wealth rather than all of it upon consumption? It is not proposed to raise all of it by an income tax. It is not even proposed to raise half, or one-fourth, or onetenth of it that way; but only a small per cent by an imposition of 2 per cent tax on the incomes over $4,000 of all individuals and the net incomes of all corporations. The committee see no hardship in requiring those who have incomes of more than $4,000 a year to pay 2 per cent of all in excess of that amount to carry on the Government under which it has been accumulated and by which it is protected. Corporations are by law given special privileges and advantages. Their stockholders in the main are freed from personal liability by the laws of their creation. They have almost perpetual life; they may sue or be sued as individuals. Through the courts of the country they are protected and enabled to carry on their operations. It has therefore been deemed by the committee not unjust to place a tax of 2 per cent on their net earnings. *

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. It is said that this tax cannot be collected. Against this assertion we place the facts of history. The following table shows the collections under the income-tax law in existence from 1862 to 1870, and the committee place this collection of $346, 000,000 against the assertion that it is impossible to collect this. Had this tax been retained, even at the reduced rates imposed in 1867, the public debt could have been extinguished from this source alone years ago.

NOTE.-After he year 1862 the collections during any given fiscal year were not confined to the previous calendar year, but naturally include amounts due and unpaid for any previous year. TREASURY DEPARTMENT, Internal Revenue Office, August 23, 1893.

The effort to carry on the administration of Government by taxing consumption alone has been tried in other countries and proven as unequal in its burdens and unsatisfactory in its results as here. Great Brita n tried the experiment for many years of encouraging and protecting manufacturers b the imposition of tariff duties. There, as here, it proved inadequate. In 1798 an income tax was imposed to supplement failing revenues. It was maintained until 1816, then the old system was returned to in the hope that it would be sufficient in times of peace But in 1842 Sir Robert Peel was forced to resort to an income tax. He believed that to equalize the burdens of taxation a greater share should be placed on wealth and less on things that had to be bought and consumed daily.

It was predicted then, as it is now, that the tax would be unsatisfactory; that it was inquisitorial, and would be, therefore, unpopular. But the courageous premier was willing to risk his party and his administration on the intrinsic justice of the measure. He succeeded in having it adopted. Notwithstanding a half a century has elapsed, and many political revolutions have swept over the country, carrying down the ministry with them, there has been no power strong enough even in that great monarchy to break it down and put all of taxation back on consumption. This, under peculiar institutions, favoring the accumulation of real estate, and where their possesson, in the hands of the ruling classes, is encouraged and thought to contribute to the stability of the governments.

Under that law only £150 ($750) is exempted from taxation. Great Britain derived from this source £13,290,000-about $66,500,000-last year. The rate imposed is 7 pence a pound.

Prussia, the greatest of the states composing the German Empire, imposed an income tax as far back as 1851, and has had that form of taxation for many years. There is only $225 income exempt. It is graduated from less than 1 to 4 per cent. For the year 1892-'93 there was derived from this source 124,842,848 marks-about $30,210,712. Almost all the twenty odd states of the German Union have imposed an income tax very similar to that of Prussia.

An income tax has existed in Austria since the beginning of the nineteenth cen tury, except the period between 1829 and 1849. In 1892 it yielded $10,000,000. In 1892 there was collected from incomes by the Italian Government $45,000,000. The rate is 12 per cent, and in addition thereto 1 per cent is levied for war pur poses.

Other governments have followed this tendency.