Evening star. [volume], June 02, 1937, Page A-9, Image 9

About Evening star. [volume] (Washington, D.C.) 1854-1972

Image provided by: Library of Congress, Washington, DC

                
Tax Charges
Held Issued
as Screen
Used to Hide Federal
Error on Revenue,
Writer Says.
BY DAVID LAWRENCE.
PRESIDENT ROOSEVELT again
has come to grips with the
courts. As in Germany, where
the executive tells the courts
what rules to follow, Mr. Roosevelt has
Introduced the novel theory that the
courts of the United States must in
rucL u uian x iu
distinction be
tween tax avoid
ance and tax ;
evasion. He calls s
both unethical ;
and contrary to j
the spirit of the
law.
As contrasted
with this view, the
Supreme Court
of the United
States by unani
mous opinion as J
recently as Janu
R!*y i, 1935, said: David Lawrrnce.
“The legal
right, nf a taxpayer to decrease the
amount of what otherwise would be
the amount of his taxes, or altogether
avoid them, by means which the law
permits, cannot be doubted.”
Justice Holmes’ Statement.
Even the great liberal, Justice Oliver
Wendell Holmes, said in delivering an
opinion on behalf of the Supreme
Court of the United States:
“We do not speak of evasion, be
cause. when the law draws a line, a
case is on one side of it or the other,
and if on the safe side, it i- none the
worse legally that a party has availed
himself to the full of what the law
permits.
“When an art is condemned as an
evasion, what is meant is that it is
on the wrong side of the line indi
cated by the policy if not by the mere
letter of the law."
Thus evasion is a criminal affair,
while avoidance is a proper legal de
vice. Judge Learned Hand of the
Circuit Court of Appeals recently in
a case used this interesting language
on the same point:
“We agree with the Board of Tax
Appeals and the taxpayer that a trans
action, otherwise within an exception
of the tax law, does not lose its im
munity, because it is actua.Pd by a
desire to avoid, or, if one choose to
evade taxation. Any one may so ar
range his affairs that his taxes shall
be as low as possible: he is not bound
to choose that pattern which will best
pay the Treasury; there is not even
a patriotic duty to increase one's
taxes.”
Supreme Court Ruling.
In another instance <U. S. vs.
Isham) the Supreme Court of the
United States ruled:
“While his (the taxpayer's) opera
tions deprive the Government of the
duties it might reasonably expect to
receive, it is not perceived that the
practice is open to the charge of
fraud. He resorts to devices to avoid
the payment of duties, but they are
not illegal. He has the legal right to
split up the evidences of payment, and
thus to avoid the tax.”
President Roosevelt gave in his
extraordinary message to Congress
several examples in which some were
tax evasion and plainly open to pros
ecution under existing law and some
were tax avoidance and presumably
done with proper legal advice.
If the President is about to hold that
ell tax avoidance Is unethical, then
there are people rather close to the
administration, if not in it, who will
havp to turn into the Treasury a good
deal of what might be called con
science money. The President gave
anonymous examples. Here is one
which can be defended as legal so far
as the law is concerned but probably
contrary to the spirit of the law or
the ethics as Mr. Roosevelt outlines
the matter in his message.
A certain taxpayer does a great deal
of work of the same kind that other
persons do for pay. This work while
compensated for by the persons for
whom the work is done is or charity
and the checks are not made out to
the person who does the work but are
sent direct to the charities. This
avoids the tax altogether.
Tax Law on Case.
Now if anybody else in business
Were to get, let us say, $100,000 In
income and attempt to give it all to
charity, the tax law says that only
15 per rent is entitled to deduction or
immunity from tax and that the
other 85 per cent bears the regular
Income tux rates.
Would the President rail it tax eva
sion or tax avoidance or unethical Jor
such a person who wants to give his
whole income to charity if the bene
fartor in question writes to all the
companies from which he receives
salary or dividends and tells them to
make out the checks directly to the
charities?
This is probably being done on a
wide scale. Until now it has seemed
to be wholly legal and while subject
to the description of tax avoidance it
cannot be called tax evasion, though
some tax experts may differ on this
too.
Sees Device a Screen.
The point is that Mr. Roosevelt has
selected a few Instances and has
given the impression that lawyers who
advise their clients to avoid taxes by
legal methods are doing something
unpatriotic. If the tax laws of the
United States were fair and equitable
and if the people inside the adminis
tration were free from criticism on the
subject of tux avoidance, the message
to Congress might be regarded with
much more validity and with much
more weight than it will be in a world
of realism, especftlly in the National
Capital, where it is fully recognized
that the charges of avoidance and
' evasion are in truth but a smoke
screen to cover up the fact that the
President has miscalculated the tax
receipts and failed to balance the
budget. Some day, if the facts can
ever be established, it probably will
be discovered that all the tax evasions
and avoidances put together wouldn't
bring in enough revenue to balance the
budget. This is because the official
data on net income of persons in the
so-called "rich” class which Mr.
Roosevelt delights to attack are only
a drop in the bucket of Government
deficits even if 100 per cent of such
Income were confiscated. But it makes
i better headlines to blame it on the
rich. Some day when the fortunes
of the rich have been confiscated and
the purchasing power of wages has
been curtailed, it wil^ be interesting
to see what other scapegoats will be
Invented by the politlcans.
4 *
What’s Back of it All
Treasury Fears Congressional Action May Ffamper
Drive on Tax Dodgers.
BY H. R. RAUKHAGE.
WHILE the head that wears a yachting cap rests uneasy these
days as the Internal Revenue Bureau prepares to scour the
waters for pleasure craft flying corporation flags, there are
some migraines on Pennsylvania avenue, too.
In fact, there is an element in the Treasury which privately indulged
in a shudder of its own at the fanfare from the White House which shivered
tne timbers ot the evasive yachts
| men and other high bracketeers
accused of tax dodging.
A.
Not that these dissenting offi- £
cials are afraid to go after the
evaders. But they predict that a
horde of yippeeing riders (some on
| wild jackasses) will attach them- -
selves to the legislation proposed to ^
catch the culprits. If this happens,
they fear, present plans for round
ing up the tax dollars, docile and
r
Already a score of pet measures are snorting in congressional stables
ready to be hitched to the new bill.
* * * *
The problem which the Treasury faces Is complicated enough, the
complainers complain to each other. Looping up the loopholes whirh now
permit tax avoidance is, of course, routine. But transmuting unethical prac
tices into illegal acts, requires an approach perilously near the metaphysical.
To get the matter into Congress at this moment at all, especially against
the background of a possible lurid investigation, promises, to some, con
fusion worse confounded.
The point of the controversy seems to be simply this: Some of
the fical family brliei'e that they are better able to deal with this
matter inside the family circle than by calling in their neighbors on
Capitol Hill.
* * * *
This difference of opinion in regard to the whole subject of tax
evasion goes back to the time those optimistic Treasury estimates of revenue
were released last January.
Nobody paid any attention to it at the time, but one man, said to be as
smart a tax expert as there is in these parts (and there are some bright
onesi, resigned. He was an important member of the Division of Research
and Statistics of the Treasury, where fiscal futures are charted. He could
not, it is sain, swallow the favorable figures.
Just now another gentleman has left, temporarily, at least, and for
quite another reason. He took the rap and a vacation, it is said, for the
predictions of the more abundant windfall. However, there is plenty of
defense for his figures. His friends say you couldn't expect him to predict
that so many millions could have been conjured into exemptions the way
it now seems they were. Who could have envisioned the legal adviser's
fine frenzy which inspired the incorporation of a family (to say nothing
of a yacht) and the payment of huge salaries to the children for refusing a
second helping of pie or for other “services rendered?”
However that may be. while the job of selling Secretary Morgenthau
on the new battle against the revenue cutters wasn't approved bv all his
family, It was a good job of selling
| and promises plenty of fireworks.
* * * *
How the prospects of more
congressional debate affect Vice
President Garner is easy to guess.
He has been fingering that ticket
for Uvalde a bit uncertainly. He
isn't so sure now that he's going to
get in his fishing trip by the end of
: June.
IV so me, ne loonca a nmc wistful at the White House party
given for the press. The President seemed to be having a wonderful
time calling the figures in the Virginia reel danced by a group of cos
tumed celebrities, including the Secretary of the Treasury.
Suddenly. President Roosevelt thought of a good story. He first
whispered it in Mrs. Garner's ear. She laughed heartily Then he
reached bark and grabbed the vice presidential knee (Tile nearest part of
anatomy at hand) and pulled him over. Jack burst into an appreciative
roar.
Maybe it was a fish story.
* + * *
An inquiring reporter, noticing a group of travelers of more or less
distinguished men leaving Union Station, inquired of another reporter who
they might be.
“Those," he replied with an enigmatic smile, “were nine forgotten men.
They are going home, but they checked a lot of economic predilections
marked 'hold till October.’ ’•
(Copyright, 3 937, by the North American Newspaper Alliance.)
CTHE opinions of the writers on this page are their own, not
necessarily The Star's. Such opinions are presented in
The Star's effort to give all sides of questions of interest to its
readers, although such opinions may be contradictory among
themselves and directly opposed to The Star's
Spain’s Truth Elusive
With Propaganda Rampant, Prejudices Decide
While International Gang Law Reigns.
Hi UUKU1 M * THUNfnUNi
(i T -X THAT IS TRUTH?” asked
\ A / Pilate, and did not wait
\l \l for an answer. One
’ " might ask the same
question about Spain and wait pa
tiently for a long time and still not
learn the answer.
Over the events of the week end,
those whose minds are not already
made up by their
sympathies, their
prejudices and
their suspicions,
are left very
much in the dark,
despite the ener
getic efforts of a
fairly disinterest
ed press to ascer
tain not the
truth, but merely
the facts. The
Spanish govern
ment says that
the German
jxrcket battleship
Deutschland, as
Dorothy Thompson.
tensidly engaged in supporting non
intervention. was illegally in the rebel
controlled port of Iviza; that this
warship fired upon Loyalist airplanes
which were reconnoltering and that
the bombing of the German ship by
those Loyalist planes was an act of
self-defense.
The German government says that
the ship had complied with the neces
sary formalities of being in port; that
it never fired on Loyalist planes; that
its officers and men were at mess
when the shooting occurred, and that
the bombing of the port of Almeria
was Justified retaliation.
Tnreliable News.
The first thing that the true neu
tral must assert is that he does not
know which of these statements is
correct. And that there is no inter
national authority to which he can
appeal for an unbiased answer.
The Non-Intervention Committee
itself is unreliable by its very compo
sition. Because non-intervention in
Spain is an idiotic myth.
Non-intervention must imply, if it
is to mean anything at all, that the
nations engaged in enforcing it gen
uinely want the issue to be settled
between Spaniards, without outside
help. Obviously. Germany, Italy and
Russia want nothing of the kind.
This thoroughly disingenuous situ
ation is further complicated by the
prodigious propaganda which both
sides are conducting.
No Trustworthy Source.
There is no international authority
upon whom we can rely for plain fac
tual information. We cannot rely
upon the reporters, because they can
not cover both fronts. We cannot rely
on either side because they are en
gaged In propaganda. The Catholic
Church of God Is involved in the
propaganda—on the side of the rebels.
Even the question of the bombing
of Guernica Is not established to any
thing approaching general satisfac
tion. Supposedly independent reporters
asserted categorically that Guernica
was bombed by German planes. 1
This column made the greatest pos
sible effort to find out the truth, to
the extent of cabling journalists
abroad whom we have known for
years, in whose honesty and disin
terestedness we have complete belief,
and asking for entirely confidential
information. All of it confirmed that
the Germans did bomb Guernica. But
the statement is categorically made by
a large part of the Catholic press of
this country that Guernira was burned
by retreating Communists.
This column believes on the basis
of every scrap of evidence that could
be assembled that the Germans bombed
Guernica and machine-gunned women
and children, and that it was an inter
national outrage. But It does not
entirely trust, now, any source of
information.
Paradoxical Viewpoints.
The propaganda goes on In the
avowed interest of ‘‘the truth.” Tues
day morning Sir Walter Maxwell
Scott, decrying the enormous power of
propaganda, gave out an interview
which was a masterpiece of propa
ganda for Gen. Franco. Franco, he
says, Is not a Fascist, but the champion
of Christianity against Communism.
Meanwhile the Catholic Church which
Franco Is saving in Spain with the
assistance of the Vatican is being
persecuted in Germany against the
protests of the Vatican, while Germany
supports the Christian crusader in
Spain!
Our own official attitude is not in
the least simplified by our neutrality
legislation. It logically compels us to
decide in this hopelessly disingenuous
situation whether the German war
ship's bombing of Almeria w as or w as
not an act of war. If it was an act of
war. Senator Borah is quite right in
saying that under the law we should
immediately cease any shipment of
arms to Germany, with the possibility
of invoking further non-mandatory
legislation which would stop our trade
with Germany in many other materials
besides arms. If it was not an act of
war, then such action on our part
might be Interpreted by Germany as
an act of hostility.
International Law Suspended.
And there Ls no international tri
bunal which can decide such questions
on grounds acceptable to all concerned.
We have a total suspension of inter
national law. and therefore any action
which President Roosevelt may take
is completely arbitrary. A game is
going on in which every nation is
playing according to its own rules,
which is a definition of international
anarchy. Whatever the facts may har e
been in the bombing of the German
battleship, the German retaliation in
bombarding the port of Almeria has no
justification in anything which has
traditionally been considered inter
national law.
But the Germans retaliated without
any such attempts, and actually re
taliated, not only against the Spanish
Loyalists, but against the Non-Inter
vention Committee, of which they are
a member! They did not ask the
committee to Investigate, and demand
a solid front on the basis of such an
This Changing World
Series of European Crises Forecast—Deutschland
Incident Seen Wanton Act of Loyalists.
BY CONSTANTINE BROWN.
FOR the next few weeks we may look forward to crises, followed by
temporary settlements, which in turn will be followed immediately
by other crises. There are so many abscesses on the European political
body that as soon as one is cured another one breaks out somewhere
else There is no doubt that the present situation closely resembles that
of July. 1914.
> *
The incident of the bombing of
the German battleship Deutsch
land was in all probability wanton
ly caused by the Spanish loyalist
government. For months they
have been arguing at Geneva and
elsewhere that this was no longer
a civil* war but an invasion by
foreign troops. Yet neither Geneva
nor London and Paris was willing
to accept that point of view of the
Valencia government because it
Old not suit their purpose. So the Spaniards decided to take the bull by the
horns and cause an international Incident.
The fact that so many German sailors were killed and wounded shows
clearly to those conversant with naval matters that the Germans were not
expecting such an attack. Neither did they intend to fire on the Spanish
airplanes. Had the commanding officer of the pocket battleship intended to
fight those planes he would have had all his men at their combat, posts and
there would have been no sailors loafing on deck. They would all have been
in the shelter of the turrets or below deck.
* * * *
The incident is over. That is to say. this particular incident is
Over. How many more will come up in the course of the next few
weeks none can say. It all depends on whether the powers which have
been keeping the Spanish civil war alive want to make it a cause for
general conflagration.
* * * *
There is a good deal of speculation as to whether the aviators who
bombed the Deutschland were Spaniards or Russians.
The doubt expressed in certain quarters that the Spaniards had done
the job is due to the fact that they failed so lamentably to hit the battle
ship Espana, a few weeks ago.
Official reports, which reached Washington recently, indicate that
the man-of-war had hit a mine amidship, and began to sink. Loyalist air
planes arrived immediately on the spot and dropped a number of 250
pound bombs, but none of them hit the sinking warship.
The Slate Department is working at the present moment to prevent
another international conflagration. Hints are dropped here and there,
both in Washington and in the European capitals, that the peace of the
world is one of the important parts of the program of this administration.
By implication various nations are given to understand the sympathies of
this Government will be on the side of those nations which are striving to
maintain peace.
* * + *
But'whrther these hints will prevent an outbreak of war is another
question. All disputants are adamant in their points of view that they
are right and the others are wrong. None wants to yield an inch to settle
Ul LUC pifseni/
European unrest. After all, it is
not the Spanish civil war alone
which is responsible for the chaotic
situation across the Atlantic. The
responsibility rests with those who
are keeping the strife alive. The
Spanish civil war and the other
troubles which might take place in
Europe in the course of this mo- g
mentous Summer are the effects
and not the causes of the illness.
rv> flU'UV U-ifh thp 'RHtich Tfa'non. rir
German-Russian and the German-French rivalry in Eastern Europe and
the Spanish civil war would come to an end within a fortnight.
* * * *
The suicide of Field Marshal J. B Gamarnick. one of the
important leaders of the Soviet army, throws another doubtful tight
on the organization of that army which at one time was reported to
be one of the best in the world.
Gamarnick was in charge of the political preparation of the Soviet
troops. He was responsible for their loyalty to the Communist ideals. But,
apparently, he himself was not so enthusiastic about the new trend of the
Stalin regime—too bourgeois probably—and joined the Trotskyists.
Now two of the Soviet field marshals have disappeared—Marshal
Tukatchewsky, probably the ablest soldier the Soviet army possessed, and
Gamarnick. the ablest organizer it had. The stories heard recently that
the Russian army is a giant with clay feet might, after all, be correct.
j investigation, but they simply inau
i gurated what, in domestic matters,
| is known as lynch law.
i The world today is not ruled by law.
It is ruled, over vast areas, quite simply
by gangs, whose rules are merely the
rules o( the gang.
(Copyright. 1P37.)
Headline Folk
and What
They Do
Gov. Horner Finds
Chicago Labor Situa*
tion Difficult.
BY LEMUEL F. PARTOX.
GOV. HORNER of Illinois mad*
peace with Mayor Edward J.
Kelly and Pat Nash. Con
sidering the virulence of this
Intramural Democratic row of last
year, it seems that he should 1*? able
to fix up a mere steel strikp, pven after
the shooting starts. Like Gov. Murphy
oi m i c n 1 g a n,
meeting similar
problems, he is a
former judgo,
with a record of
humane den
, sions and a social
! point of vie w.
But this Chicago
labor situation
seems a tougher
nut to crack.
This writer's
I novitiate as a
newspaper man
tt'9 5 cr»r>rvt nviinl»r
Gov. Hornvr. dodging chunks
of slag and scrap
iron at Hegeswich. where the same
missiles, plus bull* ts, are still flying,
after all these years, Chicago goes in
for a ruction of any kind with verve
and abandon this observer never has
seen equaled elsewhere, and it would
seem that Gov. Horner has a bigger
handful than even Gov. Murphy.
A few months after Hegeswich. I
observed, at Springfield. 111., thp State
Legislature going through its decen
nial refusal to reapportion That left
Chicago with its moth-eaten old char
ter. 456 taxing bodies and a still
spreading Jungle of graft and rack
eteering. This, too, Ls unchanged, and
Illinois is a lovely clinical specimen of
a State that can't govern, hamstrung
by rotten boroughs, living in the con
stitutional no-man's land, between the
Federal outreach and archaic State
organization. This is old stuff, but it
leaves a town like Chicago ripe for
blood-letting, and here it is.
Conservative and Legalistic.
Considering all this. Gov. Horner
has done well in his five years’ in
cumbency. A writer in the London
Statesmen recently remarked that
"politics is the art of the possible,
rather than the science of perfection.”
As judge of the Cook County Probate
Court, the largest court in the world,
Henry Horner was never a perfectionist
—a humanist, rather—although of a
conservative and legalistic turn of
mind. Running for Governor, in 1932,
he disclosed unsuspected political sa
gacity. and he had the courage to as
sail prohibition in the dry southern
areas of the State.
He was horn in Chicago in 1373, and
attended the Universities of Michigan
and Chicago and the Chicago-Kent
Law School. He is a bachelor, too busy
to get married, he says. Today, he be
gins an earnest effort to settle the
strike.
tCopyrlatit. IPS?.I
Spruce has been considered king
of American pulpwocds for nearly a
hundred years.
COMMUNISM, SIT-DOWNS
AND COURT PLAN HIT
Sons of American Revolution
Urged to Combat “Subver
sive Movements.’’
By the Associated Press.
BUFFALO, N. Y„ June 2.—Com
munism, sit-down strikes and Presi
dent Roosevelt's Supreme Court plan
were criticized yesterday at the 48th
annual congress of the Sons of the
American Revolution.
President Messmore Kendall of New
York called on the more than 300
delegates to combat militantly “any
and every subversive movement aimed
at reducing in any small degree the
form of government which has stood
since the Revolution."
“Communism is a doctrine foreign
to the purpose for which we stand,”
he said.
He put forward an “America for
Americans” program, saying “only
those who undertake the duties of
citizenship are entitled to the oppor
tunities and benefits of our country.”
-•
“KNEEL” STRIKE ENDS
First Legal Mass in Three Years
Said in Sonora.
NOGALES, Sonora, Mexico, June 2
(/P).—Hundreds of worshippers crowded
into the Catholic Church here yester
day for the first legal mass in nearly
three years.
The church, closed with others in
Sonora in September, 1934, by order
of the government, reopened with offi
cial permission from high Mexican au
thorities.
This ended the “kneel doum” strike
of 200 worshippers which started
Thursday night and continued until
the official reopening order was re
ceived from Mexico City. All Sonora
churches are reported reopened.
-» - -- .
Gasoline Stock Compulsory.
Every automobile owner at Nanking
has been ordered to keep a reserve
stock of 50 gallons of gasoline, which
will become government property in
case of war.
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