engaged in business, would share the burdens of government in proportion to the net income of the business, and all individuals would pay in the same proportion to their aggregate net income from all sources at progressive rates.

Why should not a system of this kind reach every person receiving a sufficient income to justify the government in exacting personal contribution from him, while reaching by means of consumption and other miscellaneous taxes the great mass of citizens receiving too small an income to tax on the personal basis?

It would be presumptuous to ask or expect the conference to commit itself to this program without full and careful consideration, and it is submitted only for that purpose.

CHAIRMAN MONTGOMERY: The hour is somewhat late but nevertheless the importance of the subject of federal taxation warrants some discussion of the paper of Dr. Adams and of the report of the committee. I am going to ask Mr. Henry Powell of New York to open the discussion.

HENRY M. POWELL OF NEW YORK: While I am hardly prepared to talk on the federal tax, the doctor made a statement yesterday in connection with the proposed course of the government in connection with federal taxes generally that I think may be of some interest to you all, and that is about the concurrent jurisdiction of the federal government and the state governments in connection with the transfer tax on inheritances. I presume that state authorities view with some

alarm encroachment upon their jurisdiction, and yet what holds true in connection with the inheritance tax or transfer tax also holds true of the federal income tax and state income tax. Judge Fowler, Surrogate of New York County, in a very important case, recently said that owing to the clash of jurisdiction of various states it had become almost impossible to determine questions of domicile with any degree of scientific or legal accuracy, and he trusted that the federal authorities would establish some authority or jurisdiction to take up this question of domicile; so I think what the doctor has said in connection with cooperation between the state and federal govvernment in relation to transfer taxes or inheritance taxes, should be given due weight and consideration. We have the same problem in connection with income taxes and I am going to speak in particular of the new personal income tax that we have just adopted in New York. I want to say here that I think that this new tax, whatever its merits or demerits, will be attacked on the ground of its constitutionality, first, because a great many lawyers and authorities believe it offends the constitution of the state of New York and, secondly, because authorities believe that so far as it attempts to tax nonresidents on their occupation, it offends in some respects the constitution of the United States. We have in the state of New York a rather peculiar provision, which I doubt is in another constitution, except perhaps in the state of Wisconsin, and that is what is known as the "home rule" provision. It existed in our various constitutions from the earliest times. It existed in the constitution of 1777, the first constitution that was framed in the state of New York. The new income tax law in the state of New York takes away from the local assessor the power to tax incomes and gives it to the state comptroller, a state officer. If therefore the power that existed in the local assessor to assess incomes-if he had that power-no longer exists, it may be said that taking away this power, is tantamount to depriving him of his office; at least the courts of our state have so held in some cases. The state of New York at a very early time, although it may not be known, had an income tax levied by local assessors. This was in 1778, when local assessors had the power to assess incomes derived

from the advantages gained or profits derived from merchandise traffic or manufacture, of every inhabitant of the state, to the extent of fifty pounds on each one thousand pounds. It will thus be seen perhaps that there may be some foundation for the reason to believe that the attempt to give this new power to the state comptroller may be an infringement upon the local assessor's power. In 1915 our state authorities in New York evidently believed that it was necessary to have a more strongly centralized tax system and in the constitutional convention that was assembled that year, for the purpose of proposing a new constitution, they submitted a provision by which the determination of the subjects of taxation were to be left to the legislature and it was to provide the methods and means of assessment and collection of taxes, notwithstanding the socalled "home rule" provision. This was submitted to the people of the state in 1915, and it met with a very signal defeat; in fact many said the defeat of the entire proposed constitution was due to this particular provision.

CHAIRMAN MONTGOMERY: Mr. Powell, your time under the rule has expired but I think with unanimous consent it will be extended for just a few minutes.

MR. POWELL (continuing): Just one minute more. Thus, so far as the state constitution is concerned, we probably have a point raised by the new personal income tax law. There is another point still more important and that is as to the provision of law which attempts to levy a tax on occupations of non-residents. This will undoubtedly be attacked because, in the opinion of many, it is contrary to the constitution of the United States. There is no doubt that a state may impose a tax on its own inhabitants on net income, no matter from what source the income is derived, whether from occupation, business or property and wherever it is made or derived, but so far as nonresidents are concerned, it may only impose a tax upon business, occupation or property within the state. We have under this new personal income tax law, an effort to tax the salaries of nonresidents of the state. The question then arises, have these salaries a situs or are they located within the state? Can it be said that a lawyer who lives in

Jersey, who perhaps writes his brief at his home, presents his bill in his New York office, and is taxed on his salary at his New York office-can he be said to be earning his salary within the state of New York? Or take the case of an editor who writes his editorial in his home in Connecticut, or who is employed by a newspaper in New York and sends his editorial from his home through the mail, can that be said to be taxable income from sources within the state? Two other income tax laws have recently been enacted,-the state of Missouri has, I believe, an income tax law taxing salaries, and Oklahoma has one. In Oklahoma a case was passed upon by the supreme court and went to the United States supreme court, but it wasn't a flat-footed case of salary. There was a question there of income derived from property within the state. I think in so far as income is derived from property within the state, there is no question about the right of the state to tax it. Here we have this important question, as to whether a state may tax something that apparently has a situs in the state because the employer or man who pays the salary, is there, but from the standpoint of the individuality of the person who receives the salary, the situs is practically without the state. The comptroller, I notice in his regulations, has said that the drummer or salesman may apportion his salary as between sources within and without the state, but how he is to apportion that salary, the comptroller does not disclose. It probably will not be definitely decided until the matter goes to the United States supreme court, whether a state may impose a personal income tax on income derived from salaries by a nonresident. Perhaps the fundamental question involved is the question of interstate commerce. May not a personal salary-personal service-be looked upon in the light of a commodity? It is quite true you cannot tax a drummer who merely sells a product within the state. I feel quite sure that the question is bound sooner or later to be brought up in the United States supreme court.

CHAIRMAN MONTGOMERY: There will be opportunity now to ask questions or enter into a discussion of any of the points raised in the report. Mr. Judson, do you wish to renew your question?

MR. JUDSON: I would like to hear from Dr. Adams.

MR. ADAMS: As you gentlemen all recall, in the excess profits tax of 1917 there was a provision that intangible property paid in for stock, should be accepted at only twenty per cent of the stock outstanding on March 3, 1917. The object of that, whether sound or not, was perfectly plain. It was believed that the watering of capital came, most usually, through the over-valuation of intangible assets, and it was designed to cut down the valuation of those intangible assets. The word "intangible" was very loosely used and its precise interpretation gave a very great deal of trouble. If this body, I fancy, had to vote on the question of the meaning of "intangible property" within the space of a two hour discussion, they would give an exceedingly wide interpretation of meaning to that phrase. I remember a good deal of ridicule was cast by this body on one occasion upon a senator of the United States who didn't understand, as we all thought we perfectly understood, exactly what was meant by "intangible property." Without any discussion, we would cast into the bundle of intangibles, stocks and bonds and securities of all kinds, and brands and copyrights, and patents probably; we would settle that question without any difficulty. Now when the subject became of enormous importance, the exact definition of that term became a matter of grave moment, and Mr. Judson, I think, has in a number of ways, been worried about its exact content. Other people have been worried. The federal authorities attempted to ascertain as far as possible, the intent and purport of the statute and give to the term a definition corresponding to that purport. Stocks and bonds, for instance, were not for that particular purpose, treated as intangible property, but whether certain classes of contracts; whether the circulation lists of newspapers, the subscription lists; whether the subscription lists of mail order houses, are tangible or intangible property, is an exceedingly nice question which we could discuss here until four o'clock tomorrow morning and then probably disagree. To answer the other question, why the scale was raised in the 1918 revenue act, that was done because patents and copyrights, which thereto