Taxable income

“ The equitable distribution of the costs of government through the medium of an income tax is a delicate and difficult task. In its performance experience has shown the importance of reasonable opportunity for the legislative body, in the revision of tax laws, to distribute increased costs of government among its taxpayers in the light of present need for revenue and with knowledge of the sources and amounts of the various classes of taxable income during the taxable period preceding revision. ”

“ The power to tax income like that of the new corporation is plain and extends to the gross income. Whether and to what extent deductions shall be allowed depends upon legislative grace; and only as there is clear provision therefor can any particular deduction be allowed.
The statutes pertaining to the determination of taxable income have proceeded generally on the principle that there shall be a computation of gains and losses on the basis of a distinct accounting for each taxable year ”

“ The 1942 Act articulated the purpose of Congress to wipe out every vestige of a policy which denied tax deductions for legitimate expenses incurred in producing taxable income. Taxation on net, not on gross, income has always been the broad basic policy of our income tax laws. Net income may be defined as what remains out of gross income after subtracting the ordinary and necessary expenses incurred in efforts to obtain or to keep it. ”

“ It is said that the gift became a capital asset of the donee to the extent of its value when received and, therefore, when disposed of by her no part of that value could be treated as taxable income in her hands.
'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.'
Income is the thing which may be taxed-income from any source. The amendment does not attempt to define income or to designate how taxes may be laid thereon, or how they may be enforced. ”

“ Does it not follow from all the preceding, that a single and universal Income-Tax would prove the best form of what is in its own nature a subtraction from the gains of the governed for the maintenance of Government? If the approximate amount of Income could in all cases be ascertained, and if no other form of tax were levied upon the same persons, this would seem to be a perfectly unexceptionable mode of Taxation. The only sources of Income are three: Wages, Profits, Rents. It does not seem that gifts are legitimately taxable; they lie outside the field of exchange ”

“ An includable element of the 'invested capital' is the 'accumulated earnings and profits as of the beginning of such taxable year.' § 718. It thus appears that by this method Congress intended, with minor exceptions not here relevant, to impose the excess profits tax on all annual net income in excess of 8% of a corporation's working capital, including its accumulated profits. ”

“ Circumstances wholly fortuitous may determine the year in which income, whenever earned, is taxable, and may thus affect the amount of tax. Receipt of income or accrual of the right to receive it within the tax year is the test of taxability, not the time it has taken the taxpayer to earn it nor the duration of his investments which have finally resulted in profit. ”

“ The income tax law levies on all citizens or residents of the United States a normal tax of 12 percent. upon the amount of income in excess of exemptions, except that on the first $4,000 of the taxable amount the rate shall be 6 percent. ”

“ Taxable incomes, partaking of the nature of a salary, and upon which a tax would have the character of a duty on capital, were required by the provisions of this new act to pay only one half as much as those incomes which arose from, and would be therefore added to, wealth already acquired. ”

“ If it be asked, Will an income tax on a person retired from business be diffused? the answer, beyond question, must be in the affirmative, if the tax is uniform on all persons and on all amounts, and is absolutely collected in minute sums. Would any one pay the same price for a railroad bond which is subject to an income tax as he would for it if it was free from tax? If one's land is taxed, either in the form of rent or income, will not the tenant have the burden primarily thrown upon him? And, finally, will not the consumer of the tenant's goods pay through or by reason of such consumption? ”

“ Five per cent per annum was then levied on all incomes above $600 and not in excess of $5,000; seven per cent on all incomes in excess of $10,000. In the income tax of the United States as it existed at one period there was, therefore, recognized the principle not only of exempting incomes below a certain amount from all taxation, which amount, in order to keep up the appearances of equity, was allowed to be equally deducted from all larger incomes ”

“ But, wholly apart from extrinsic circumstances, the statute itself in terms seems clearly to impose an income tax. The tax is not one upon the privilege of doing business, but it is an annual tax for the privilege of doing business, to be computed upon the basis of the net income for the year next preceding. ”

“ The second condition is, that incomes above the limit should be taxed only in proportion to the surplus by which they exceed the limit. Thirdly, that all sums saved from income and invested, should be exempt from the tax: or if this be found impracticable, that life incomes, and incomes from business and professions, should be less heavily taxed than inheritable incomes, in a degree as nearly as possible equivalent to the increased need of economy arising from their terminable character: allowance being also made, in the case of variable incomes, for their precariousness. ”

“ The equality of this tax can only be seriously questioned on two grounds. The first is, that a miser may escape it This objection applies to all taxes on expenditure: nothing but a direct tax on income can reach a miser. But as misers do not now hoard their treasure, but invest it in productive employments, it not only adds to the national wealth, and consequently to the general means of paying taxes, but the payment claimable from itself is only transferred from the principal sum to the income afterwards derived from it, which pays taxes as soon as it comes to be expended. ”

“ We believe that the Income Tax would be the fairest of all taxes, because it would take for the support of the government, not the property of the citizen, but a portion of the income which the citizen derives from that property, or from his individual exertions, and the tax would be proportioned to the income. ”

“ Reverting to income, as distinguished from accumulated wealth, it is illuminating to note that only one person out of every 50 in the United States has a net income of sufficient size to require him to pay a tax upon it to the Federal Government. About 2,500,000 persons, or 2 per cent of the population, pay all that is collected under the Federal income tax ”

“ A tax measured by the net income of residents is an equitable method of distributing the burdens of government among those who are privileged to enjoy its benefits. The tax, which is apportioned to the ability of the taxpayer to pay it, is founded upon the protection afforded by the state to the recipient of the income in his person, in his right to receive the income and in his enjoyment of it when received. ”

“ For example, a person whose tax payment, the tax he owes, is $1,000, will pay, under this proposal, an extra $60 over the 12-month period, or $5 a month. The overwhelming majority of Americans who pay taxes today are below that figure and they will pay substantially less than $5 a month. Married couples with two children, with incomes up to $5,000 per year, will be exempt from this tax--as will single people with an income of up to $1,900 a year. ”

“ A second and more important reason why a general income tax powerfully antagonizes popular sentiment is that its efficient administration, or revenue productiveness, requires that every person liable to taxation in respect to his annual net gains, profits, or income shall make to a Government official an exhibit of the financial condition of his estate, business, or profession ”

“ Let no one be deceived into feeling that this is a simple and easy way of saddling government expenses upon the rich.
Special taxes.—A multitude of minor devices are worthy of brief consideration. An occupation tax on business men is easily levied, but bears unequally upon the original payers, and in the end falls most heavily upon the poorest. A house tax, measured by the number of rooms, or the number of windows, or the number of fireplaces, has been supposed adjustable to actual income of the possessors. ”

“ The income tax is the fairest and most equitable of all the taxes. It is the one tax which approaches us in the hour of prosperity and departs in the hour of adversity. The farmer though he may have lost his entire crop must meet the taxes levied upon his property. The merchant though on the verge of bankruptcy must respond to the taxes imposed. The laborer who goes to the store to buy his food, though it be his last, must buy with whatever extra cost there may be imposed by reason of customs duties.
But the income tax is to be met only after you have realized your income. ”

“ The income-tax was originally proposed to supply the loss of revenue sustained in consequence of an over-reduction of the indirect taxes; and as a matter of equity it follows, that the supplies should be drawn, though in a different form, from the same portion of the community.
Is this the case? Can any man venture to say that the income-tax, as we have known it for the last five years, has been borne with equal [388] fairness by all classes of the community? Is it not, on the contrary, the most unequal, the most unjust, and the most oppressive tax that ever yet was levied? ”

“ Moreover, if we add to our income tax our so-called excess profit tax, which is merely an additional income tax on earnings derived from business, we shall find that the total tax to which rich men are subject is in the great majority of cases heavier here than in England or anywhere else. ”

“ Believing thus, the plain people of America see no good reason or argument in the cry that an income tax will be productive of perjury and that it is a sufficient reason to prevent its passage. And, therefore, a graded income tax becomes the most desirable measure possible to introduce for the advantage of the people who elected the incoming administration, November 8, 1892. ”

“ The income tax applies to net income from employment, and net profits from business. There is an absolute exemption of $1,500, except in the case of absentees, and companies whether absentees or not, and a further additional exemption up to $250 a year for life insurance premiums, if the citizen wishes to spend his money that way. All income derived from land or from mortgages, so far as they represent realty, is outside this tax, which affects only income from employment or business. The farmer, who derives all his income from land, pays no income tax. ”

“ In reality this tax, levied as it is in England, is little less than the revival of the Inquisition.
And, first of all, let me point out a great injustice, which I trust no Government will ever inflict on the American people or any other, and which is this: The income derived from property inherited, or any other which the idlest man may enjoy without having to work for it, is taxed exactly the same as the income which is derived from work in business, profession, or any other calling. ”

“ A tax upon the assets of a corporation is bad if obligations of the United States are included in the assessment. [25] A gross income tax is invalid to the extent that it is laid on income from federal securities. [26] The reason is that 'the tax * * * is a tax upon the contract subsisting between the government and the individual. ”

“ Indeed, it is obvious that an income tax, levied on the profits of any business, does not fall ultimately on the consumer or patron of that business, in any other sense than that in which a poll tax or land tax may be said ultimately to fall, or be charged over by the payer of those taxes upon the persons with whom and for whom they do business, or to whom they rent their lands. ”

“ But taxation is not so much concerned with the refinements of title as it is with actual command over the property taxed-the actual benefit for which the tax is paid. If a man directed his bank to pay over income as received to a servant or friend, until further orders, no one would doubt that he could be taxed upon the amounts so paid. ”

“ In many cases these taxes are paid by the sale of stamps to the manufacturer, who has to affix them to the article before it is sold. As with many other kinds of taxation, the public, the ultimate consumer, pays this tax.
The Income Tax is a tax on the income of a person. Many who do not own land or other tangible property enjoy an income. As a farmer has to pay a tax on his farm, so a lawyer who has a lucrative practice, but does not own land or stocks, and the man who has an income from investments, are all required to pay their share of government expenses. ”

“ Income taxes.—A favorite device in some countries, [pg 361] and often advocated in this, is a direct tax upon incomes above a certain amount, graduated so as to give a much larger rate upon large incomes than upon more moderate ones. The most obvious reason for such a distinction against the large incomes is the evident failure of our national system of taxation to distribute the burden according to ability. ”