Further Limitations upon Federal Income Taxation

Abstract

The decision of the United States Supreme Court denying the taxability of stock dividends as income under the Sixteenth Amendment' aroused a fever of interest before it was announced, culminating in the stock market flurry caused by the erroneous first report of it. Since its announcement it has been the subject of extensive comment, both favorable and adverse. It seems, however, to have been rather generally thought a blow to government revenues. A few weeks later the same Court without apparently stirring a ripple of interest announced a decision which to the mind of the writer hereof will mean an infinitely greater loss in revenue to the government and will have an infinitely greater effect upon our scheme of income taxation as a whole. In Evans v. Gore (1920, U. S.) 40 Sup. Ct. 550, which decided that the salary of a federal judge was not taxable as income, the court finally settled decisively that the Sixteenth Amendment added no new fields of taxation to those within the power of the federal government and expressly placed beyond the reach of that government all income received either as salary or interest on indebtedness from the various states and their local subdivisions. The opinion was by Justice Van Devanter. Justice Holmes filed a dissenting opinion, in which Justice Brandeis concurred.