Evening Star Newspaper, June 2, 1937, Page 9

Tax Charges Held Issued as Screen Used to Hide Federal Error on Revenue, Writer Says. BY DAVID LAWRENCE. RESIDENT 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 effect draw no .. distinction be- tween tax avoid- ance and tax evasion. He calis both unethical and contrary to the spirit of the law. As contr: with this viev Supreme Court of the United States by unani- mous opinion as recently as Ja ary 7, 1935, “The legal right of a taxpayer amount of what otherwise w be the amount of his taxes, or altogether avoid them, by me which the law | permits, cannot be doubted David Lawrence. to decrease the Justice Holmes' Statement. THE EVENING What’s Back of it All Treasury Fears Congressional Action May Hamper Drive on Tax Dodgers. BY H. R. BAUKHAGE. HILE 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 fl#gs, 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 the timbers of the evasive yachts- men and other high bracketeers accused of tax dodging. 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 otherwise, will be confused, delayed and disrupted. Already a score of pet measures are %snorting in congressional stables ready to be hitched to the new bill. * ok kK /7, 100KS LIKE NADL, GuFss MAHELBE® CANMANAGE Al The problem which the Treasury faces is complicated enough, the complainers complain to each other. Looping up the loopholes which now permit tax avoidance is, of course, routine. But transmuting unethical prac- tices into iliegal acts, requires an approach perilously near the metaphysical. To get the matter into Congress at thls moment at all, especially against the background of a possible lurid investigation, promises, to some, con- fusion worse confounded. The point of the contrdversy seems to be simply this: Some of the fical jamily believe that they are better able to deal with this matter inside the family circle than by calling in their neighbors on Capitol Hill. * ok kK ‘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. Even the great liberal, Justice Oliver Wendell Holmes in delivering an | opinion on behalf of the Supreme | Court of the United States | “We do not k 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 ne the | worse legally that a party has availed himself to the full of what the law | pel - | “When an act is conden d 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 er affair, while avoidance is a proper legal de- vice. Judge Learned Hand of the Circuit Court of Appeals recently in a case used this inte on the same point sting language | “We agree with the Board of Tax Appeals and t} action, otherwis of the tax I munity, because desire to avoid, or, if one ¢ evade taxat ¢ one may 5o ar- s taxes shall | : he is not bound n which will best there is not even to in se one’s range his affai be as low as pos:ib to choose that patter pay the Trea a pa 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, 1t is not perceived that the practice is open to the charge n|‘| fraud. He resorts to devices to avoid the payment of duties, but they are not illegal. He has the legal right to &plit up the evidences of payment, and thus to avoid the tax.” President Roosevelt gave in his extraordinary message to Congress &everal 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 #ll tax avoidance is unethical, then there are people rather close to the administration, if not in it, who will have to turn into the Treasury a good deal of what might be called con- &cience money. The President gave anonymous examples. Here is one | which can be defended as legal so far | es 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 cent is entitled to deduction or immunity from tax and that the other 85 per cent bears the regular income tax rates. Would the President call it tax eva- &ion or tax avoidance or unethical for such a person who wants to give his whole income to charity if the bene- factor 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 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 Jegal 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 tax 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, especfally 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 avoldances 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 8 drop in the bucket of Government deficits even if 100 per cent of such income were confiscated. But it makes 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 willybe interesting to see what other scapegoats will be davented by the politicans, i 3 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 ones), 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 said, swallow the favorable figures. Just now another gentleman has left, temporar 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 & 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 by all his family, it was a good job of selling and promises plenty of fireworks. * kK K 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. To some, he looked a little wistjul at the White House party given for the press. The President scemed 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 back and grabbed the vice presidential knee (The nearest part of anatomy at hand) and pulled him over. Jack burst into an appreciative roar. s Maybe it was a fish story. * ok % % 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 Octobe: (Copyrisht, 1937, by the North American Newspaper Alliance.) STAR, WASHINGTON D. C, V tI'HE opintons of the writers on this page are their own, not necessarily The Star’s. The Star’s effort to give all readers, although such opinions may be contradictory among themselves and directly Such opinions are presented in sides of questions of interest to its opposed to The Star’s. Spain’s Truth Elusive With Propaganda While International BY DOROTHY THOMPSON. AT IS TRUTH?” asked Pilate, and did not wait 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 pocket battleship Deutschland, os- tensibly engaged In supporting non- intervention, was illegally in the rebel- controlled port of Iviza; that this warship fired upon Loyalist mml;mosE which were reconnoitering 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 Dorothy Thompson. was justified retaliation. i* Unreliable Ne: The first thing that t true neu- | tral must assert is that he does n'w,‘ 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 author 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 {s 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. U Rampant, Prejudices Decide Gang Law Reigns. 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 Guernica 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 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. Mean e 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 Spain! Our own official attitude is not in | the least simplified by our neutrality legislation. It logically compels us to decide in this hopelessly dls]n:f‘).vmus‘ ation whether the German war- | 1p's bombing of Almeria was or was | not an act of war. If it was an act of war, Senator Borah is quite rig| saying that under the law we shoul immediately cease a: shipment in the in of | arms to Germany, the possibility | of invoking further non-mandator legislation which would stop our trade with G besides ar war, then might be an act of International Law Suspended. And there s no i bunal which can det ! on grounds acceptable to all concerned. n, in many oth ater We have a total of inter- national law, and therefore any action which Pre Roosevelt may take is completely arbitrary. A game is which to g0 on ev playing according whi is a def anarchy. Whates been in the bom of the German battleship, the German retaliation in bombarding the po; f Almeria has no Jjustification in anything which has traditionally been considered inter- national law But the Germans retaliated without mpts, and actually re- ted. not only against the Spanish Loyalists, but against the Non-Inter- vention Committee, of whi they are & member! They did not ask the committee to investigate, and demand & solid front on the basis of such an | its on of internat e facts m own This Changing World Series of European Crises Forecast—Deutschland Incident Seen Wanton Act of Loyalists. BY CONSTANTINE BROWN. OR the next few weeks we may look forward to crises, followed by temporary settiements, 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. * ok % % & 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 & civil* war but an invasion by foreign troops. Yet ueither Geneva nor London and Paris was willing to accept that point of view of the o Valencia government because it did 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. * ok K K 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, * X ok K 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- round bombs, but none of them hit the sinking warship. The State 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. * * ok % But® whether 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 vield an inch to settle the major causes of the present | 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- mentous Summer are the effects and not the causes of the illness. Do away with the British Italian rivalry in the Mediterranean, with the German-Russian and the German-French rivalry in Eastern Europe and the Spanish civil war would come to an end within a fortnight. * ox % The suicide of Field Marshal J. B. Gamarnick, one of the important leaders of the Soviet army, throws another doubtful light 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 fleld 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. ROPAS ARARIES | investigation, but they simply inau- | gurated what, in domestic matters, | 15 known as lynch law. It is ruled, over vast areas. quite simply by gangs, whose rules are merely the rules of the gang. | spreading | stitutional no-man Headline Folk and What They Do Gov. Horner Finds Chicago Labor Situa- tion Difficult. BY LEMUEL F. PARTO) OV. HORNER of Tllinois mada peace with Mayor Edward .J. Kelly and Pat Con« sidering the vi 5 intramural Democratic row of last year, it seems that he should he able to fix up a mere stecl strike, even after the shooting sta Like Gov. Murphy of Michigan, meeting similar problems, he is a former judge, a record of humane deci- sions and a social 7 point of view, But this Chicagn labor situation seems a tougher nut to crack This writer's novitiate as a newspaper man was spent main! dodging chunk3 of slag and scrap Chicago goes in | for a ruction of any kind with verve |and abandon this observer never has seen e ewhere, and it would seem that Gov. Horner has a bigger | handful than even Gov. Murphy A few months ter Hegeswich, 1 observed, at Spr 1d. 111, the Stata Legislature going through its decens nial refusal to reapportion. That left Chicagn with its m eaten old chare ter. 456 taxing bodies and a gle of graft and racke . t00, 15 unchanged, and cal speci t govern, ham. living in the cone s land. between the and ar c State s is old stuff, but 1% Chicago ripe for Federal outreach organization. T! leaves a town Conservative and Legalistic. Consid has done well cumbency. A recently the art possible, r than the science of perfection ” As judge of the Cook County Probats Court, the largest court in the world, igh of a turn of in 1932, suspected political sa= he ha e courage to ase mind. Runn; he disclosed He was born in Chicago in attended the Universit and Chicago and Law School 1378. and ies of Michizan the Chicago-Kent He is a bachelor, too busy to get mar: Today. he bee gins an earnest to settle the strike, (Copyrignt, 1837.) g e Spruce has been considered of American pulpwoods for near The world today is not ruled by law. (Copyright, 1937.) COMMUNISM, SIT-DOWNS AND COURT PLAN HIT | of Revolution | Urged to Combat “Subver- | Sons American 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 & 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 i of the government, reopened with offi- 2 cial permission from high Mexican au- thorities. This ended the “kneel down” 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. 2054 Atlantic 1415 now. Plant 826 Bladensburg Road N.E. 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, CHIFFON PRINTS $8.95 NO MONEY DOWN 4 MONTHS TO PAY g ;. One of many delight- | fully cool print dresses. Dainty puff sleeves, flower trim at the neck- line and navy taffeta sash. Very dressy, yet inexpensive. Charge it at no extra cost at Eiseman’s. Misses sizes. 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