Value-added tax

“ But this specification is not enough to restrict the effect of the general provisions of these acts which impose a tax on the income, including capital gains, of taxpayers. The use of the word cost does not preclude the computation and assessment of the taxable gains on the basis of the value of property, rather than its cost, where there is no purchase by the taxpayer, and thus no cost at the controlling date. ”

“ A tax on profits, like a tax on rent, must, at least in its immediate operation, fall wholly on the payer. All profits being alike affected, no relief can be obtained by a change of employment. If a tax were laid on the profits of any one branch of productive employment, the tax would be virtually an increase of the cost of production, and the value and price of the article would rise accordingly ”

“ Its failure to impose a tax upon the increase in value in the earlier years, assuming without deciding that it had the power, cannot preclude it from taxing the gain in the year when realized, any more than in any other case, where the tax imposed in upon realized, as distinguished from accrued, gain. If the gain became capital by virtue of the increase in value in the years before 1928, and so could not be taxed as income, the same would be true of the enhancement of value in any one year after the adoption of the taxing act, which was realized and taxed in another. ”

“ But uniformity in this connection is only another name for equality, for the provision is for 'levying a tax by valuation, so that every person and corporation shall pay a tax in proportion to the value of his or her property.' The value of the property being ascertained, the same rate of taxation must be laid upon all. ”

“ There is yet an even more important way by which, through its effect upon distribution, the taking of rent to public uses by taxation would stimulate the production of wealth. But reference to that may be reserved. It is sufficiently evident that with regard to production, the tax upon the value of land is the best tax that can be imposed. Tax manufactures, and the effect is to check manufacturing; tax improvements, and the effect is to lessen improvement; tax commerce, and the effect is to prevent exchange; tax capital, and the effect is to drive it away. ”

“ In general usage, and according to the terminology of political economy, a direct tax is one which is levied upon the person who is to pay it, or upon his land or personalty, or his business or income, as the case may be. An indirect tax is one assessed upon the manufacturer or dealer in the particular commodity, and paid by him, but which really falls upon the consumer, since it is added to the market price of the commodity which he must pay. ”

“ And, in my judgment, there can be no honest attempt at a fair adjustment of the burdens of a direct tax upon the general property of this or any other country which does not make a decent effort at an equalization in proportion to the true value of each article which is taxed. The true value of an article is necessarily its fair, full value, nothing more and nothing less. If we levy general property taxes, we are compelled to require by law that all property subject to the levy shall be taxed in proportion to its value, and such a rule is inevitably a law for a "full rendition." ”

“ It was the design of the Congress to permit the taxpayer to recover, tax free, the total cost to him of such capital assets; hence it recognized that this decrease in value-depreciation-was a legitimate tax deduction as business expense. It was the purpose of § 23 (l) and the regulations to make a meaningful allocation of this cost to the tax periods benefited by the use of the asset. In practical life, however, business concerns do not usually know how long as asset will be of profitable use to them or how long it may be utilized until no longer capable of functioning. ”

“ When the cost of production is increased artificially by a tax, the effect is the same as when it is increased by natural causes. If only one or a few commodities are affected, their value and price rise, so as to compensate the producer or dealer for the peculiar burden; but if there were a tax on all commodities, exactly proportioned to their value, no such compensation would be obtained; there would neither be a general rise of values, which is an absurdity, nor of prices, which depend on causes entirely different. ”

“ The real effect of a tax on profits is to make the country possess at any given period, a smaller capital and a smaller aggregate production, and to make the stationary state be attained earlier, and with a smaller sum of national wealth. It is possible that a tax on profits might even diminish the existing capital of the country. If the rate of profit is already at the practical minimum, that is, at the point at which all that portion of the annual increment which would tend to reduce profits is carried off either by exportation or by speculation ”

“ I recommend to Congress the abolition of the minimum principle, or assumed, arbitrary, and false values, and of specific duties, and the substitution in their place of ad valorem duties as the fairest and most equitable indirect tax which can be imposed. By the ad valorem principle all articles are taxed according to their cost or value, and those which are of inferior quality or of small cost bear only the just proportion of the tax with those which are of superior quality or greater cost. The articles consumed by all are taxed at the same rate. ”

“ The very essence of taxable income, as that concept is used in Section 22 (a) , is the accrual of some gain, profit or benefit to the taxpayer. This requirement of gain, of course, must be read in its statutory context. Not every benefit received by a taxpayer from his labor or investment necessarily renders him taxable. Nor is mere dominion over money or property decisive in all cases. In fact, no single conclusive criterion has yet been found to determine in all situations what is a sufficient gain to support the imposition of an income tax. ”

“ If an old or infirm person owns land or mortgages returning less than $1,000 a year, and can show that he is not able to supplement his income, and that the payment of the tax would be a hardship, the commissioner may remit the tax. Here the custom is quite the other way. The millionaire swears off his tax. Out of 110,000 land owners, in New Zealand, only 16,000 pay tax.
The graded tax begins when the unimproved value reaches $25,000. It rises from 1⁄4 of a cent on the pound of $25,000 to 16⁄4ths, or 4 cents, a pound on a million dollars, or more, of unimproved value. ”

“ The present tax, as administered, is levied upon an assessment of the full amount of capital stock and surplus. It is a tax on the net value of the corporation less allowable deductions, reached by taking liabilities from gross value of assets and subtracting exempt items from the remainder. ”

“ This is the whole of the tax question, as I see it—to deal justly with every man in the sight of God—to tax every person as nearly as possible in proportion to his ability to pay. And under any ad valorem system the measure of the ability of each individual and the only approximately fair measure which the ingenuity of man has ever been able to devise is found in the reasonable, full value of the taxable property of every owner. ”

“ If money be not taxed, and therefore be permitted to preserve its value, whilst every thing else is taxed, and is raised in value, the hatter, the farmer, and clothier, each employing the same capitals, and obtaining the same profits, will pay the same amount of tax. If the tax be 100l., the hats, the cloth, and the corn, will each be increased in value 100l. ”

“ The estimated revenue from these sources was $877,500, affording a small excess over the sum which would be required to pay the interest on the assumed debt. The policy of the measure was discussed in a well-digested and able argument, detailing many motives, in addition to those assigned in his original report, for preferring the system now recommended to accumulated burdens on commerce or to a direct tax on lands.
A new tax is the certain rallying point for all those who are unfriendly to the administration or to the minister by whom it is proposed. ”

“ It is spread over so vast a surface among consumers, that its weight is not felt; being mixed up with the price of the article sold, its weight is not perceived. We pay in this way half the taxes of America, Germany, and all the countries to whom we chiefly export our manufactures. Let us return them the compliment, and adopt a system which will make them pay the half of ours. The whole, or nearly the whole, of the Income Tax, which now produces L.5,400,000 a-year, would by this change be spent in increased purchases in the home market, and sensibly relieve its sinking state. ”

“ To provide that taxation shall fall entirely on income, and not at all on capital, is beyond the power of any system of fiscal arrangements. There is no tax which is not partly paid from what would otherwise have been saved; no tax, the amount of which, if remitted, would be wholly employed in increased expenditure, and no part whatever laid by as an addition to capital. All taxes, therefore, are in some sense partly paid out of capital; and in a poor country it is impossible to impose any tax which will not impede the increase of the national wealth. ”

“ As compared with the company deriving its income only from taxable sources, the enterprise with the same total amount of investment income derived partly from exempt and partly from taxable sources would pay more tax per dollar of taxable gross income, i.e., taxable income before deduction for the reserve. ”

“ 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. ”

“ A tax on land values does not add to prices, and is thus paid directly by the persons on whom it falls; whereas, all taxes upon things of unfixed quantity increase prices, and in the course of exchange are shifted from seller to buyer, increasing as they go. If we impose a tax upon money loaned, as has been often attempted, the lender will charge the tax to the borrower, and the borrower must pay it or not obtain the loan. If the borrower uses it in his business, he in his turn must get back the tax from his customers, or his business becomes unprofitable. ”

“ It being beyond dispute, therefore, that the sum of taxation in this case was fixed almost exclusively by the gross earnings from interstate commerce, who, may I ask, can point out the distinction between taxing the gross earnings derived from interstate commerce and taxing a valuation based on such earnings? The elementary principle so often applied by the court, that a tax which may not be imposed directly cannot be levied indirectly, is decisive. ”

“ The increasing rate of taxation upon superfluous wealth, is a sacred principle for which every reformer should contend.
But even this is not fortified against evasion, and we need the most efficient tax of all—the progressively accumulating tax on wealth, which will gather a large rental from all the superfluous millions, compelling the holders to use them profitably. A three per cent. tax on all over ten millions would not only enrich the commonwealth, but stimulate industry in millionnaires. How long will the millionnaires be able to defeat such legislation? ”

“ Every new tax becomes a new charge on production, and raises natural price. A portion of the labour of the country which was before at the disposal of the contributor to the tax, is placed at the disposal of the state. This portion may become so large, that sufficient surplus produce may not be left to stimulate the exertions of those who usually augment by their savings the capital of the state. Taxation has happily never yet in any free country been carried so far as constantly from year to year to diminish its capital. ”

“ Taxation would not then fall unduly on the man of moderate means; and while none would be entirely exempt from assessment, all, in proportion to their pecuniary abilities, would contribute toward the support of the State. A modification of the internal-revenue system, by a large reduction in the number of articles now subject to tax, would be followed by results equally advantageous to the citizen and the Government. ”

“ We should contend for an income tax not simply for the purpose of raising revenue but for the purpose of framing a revenue system which will distribute the burdens of government between consumption and accumulated wealth, which will enable us to call upon property and wealth not in an unfair and burdensome way but in a just and equitable way to meet their proportionate expenses of the government, for certainly it will be conceded by all that the great expense of government is in the protection of property and of wealth. ”

“ Producers and dealers and bankers and companies add the tax demanded from them, and sometimes more than the tax under color of it, to the price of their wares. But it is not true that they can always realize the whole of this enhanced price. Generally they can, sometimes they cannot. If the article be one of necessity, or a luxury that has become equivalent to a necessity, and there be no other source of supply than the taxed one, then, as a rule, the tax falls wholly on the consumer, and is a matter of indifference to the producer or dealer. ”