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CHAPTER V

POWERS OF CONGRESS

SECTION VIII

Clause 1.-Taxation

Congress shall have power:

To lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.

Taxes. Under the Articles of Confederation there was no national treasury. Congress had power to recommend that money be raised for various purposes, but it could not levy or collect a single dollar. Taxes are authorized by the Constitution to be raised for three purposes, for the payment of debts, to provide for the common defense and to promote the general welfare of the United States.

Direct Taxes. Taxes are classed as direct and indirect. By a clause of the Constitution already quoted, direct taxes must be levied upon the several states according to their population. Direct taxes, when apportioned to the states, are collected by the states, and the amount is then paid into the United States treasury. Direct taxes have always been unpopular in this country as a means of raising revenue for the general government, and this method has not been resorted to except in case of urgent necessity.

Direct taxes are levied upon the property of individuals, or upon the persons themselves, regardless of property. A

tax on property is called a property tax, and one on individuals, a poll or capitation tax.

Income Tax. An income tax is a tax levied on the income of individuals for the support of the government. It may be levied directly upon the person receiving an income, or in the form of a tax on dividends, interests, etc. The sixteenth amendment to the Constitution, ratified in 1913, legalizes an income tax. An income-tax law passed by Congress in 1894 was declared unconstitutional. Immediately after the adoption of the sixteenth amendment, Congress levied an income tax, exempting incomes under $3000 for every individual and $4000 for married couples.

Corporation Tax. In 1917 Congress passed another direct tax, known as the corporation tax. This is a tax of one per cent levied on the net earnings of corporations doing a net interstate business exceeding $5000 a year.

Indirect Taxes. Duties, imposts and excises are indirect taxes. They are levied upon certain articles imported into the country,and also upon articles, usually luxuries, manufactured in the country.

Duties are of two kinds-specific and ad valorem. A specific duty is levied upon goods without regard to value. An ad valorem duty is levied on goods at a certain percentage of their value in the country imported from.

Tariff. A law passed by congress to fix the rate of duty upon articles imported into the United States is called a tariff. The word "tariff" is a corruption of "Tarifa," the name of the southern cape of Spain. The Moors, during the Middle Ages, held this cape, and by means of it, they were able to control the entrance to the Mediterranean Sea. The tribute they exacted from merchantmen for passing through the Strait of Gibraltar without molestation was called a Tarifa tax, or a tariff.

Kinds of Tariff. The tariff has been a subject of much

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dispute in the United States, and upon it, political parties have been divided all through our history. Two theories have been advocated-one, a tariff for revenue only," and the other, "a tariff for protection." Those who favor the first plan argue that the tariff should be so regulated as to help defray the expenses of the government, and that it should be lowered or removed altogether, if the expenses can be met in other ways.

A tariff for protection is also a tariff for revenue, but in addition to that, the burden of taxation is placed upon those imported articles that are likely to be brought into competition with the same class of articles manufactured or produced in this country.

Export Duty Prohibited. The United States and the several states are prohibited from levying duties upon exports. Imposts are the same as duties, or customs, and this term might have been omitted from the Constitution without impairing the tax-levying power in any way.

Internal Revenue. Excises are taxes levied on tobacco, cigars, spirituous and malt liquors, patent medicines and other commodities produced within the country, according to the needs of the government. Many of these taxes are paid by stamps which the manufacturer or producer is required to purchase of the government and affix to the packages when they are placed on the market. Sometimes stamps are required on bonds, deeds, bills of sale, bills of lading, etc.

During the Civil War internal revenue taxes were very heavy, but most of them were repealed within a few years. after the close of the war. Stamp taxes were revived during the Spanish-American War and again in 1914, in consequence of the loss of revenue from customs occasioned by the war in Europe.

Expenses of Government. In times of peace, the

expenses of our government are enormous, and they would be very much increased in case of war. It now costs more than $1,000,000,000 to pay the expenses of the government for a single year.

The fiscal year ends June 30. For the year 1912-13 the total disbursements were $1,010,812,000, and the receipts were about $4,000,000 in excess of this amount.

Debts. During the Civil War, the sources of revenue were increased in many ways, but, in spite of this, the debt at the close of the war was nearly $3,000,000,000. A great part of this has been paid, but the common defense and general welfare demand the outlay of large sums of money annually. The subject of taxation has always been, and doubtless always will be, a troublesome one.

Clause 2.-Borrowing

To borrow money on the credit of the United States. Bonds. When our government wishes to borrow money, it issues bonds, redeemable in twenty, thirty or some other definite term of years. Bonds were issued in 1803 when Louisiana was purchased from Napoleon. Likewise, during each war in which the United States has been engaged bonds have been issued to provide funds.

In 1917, when the United States entered the great world war, Congress authorized a two billion dollar bond issue to enable our government to loan money to our Allies. These bonds were termed "Liberty Bonds" because of the principles of universal liberty for the defense of which we entered the war.

Clause 3-To regulate Commerce

To regulate commerce with foreign nations, and among the several states, and with the Indian tribes.

United States Commerce. One of the defects of the old government was that congress had no power to legislate in any way with reference to commerce. The states soon became jealous of each other, and restrictions were often placed upon the commerce of neighboring states, for no other reason than that of envy or jealousy.

The foreign commerce of the United States is very extensive, and it is largely controlled by congress. An Interstate Commerce Commission is regularly maintained by the general government, for the purpose of regulating commerce among the states. The commerce with Indian tribes is unimportant, but whatever there is, is under the direction of congress. The Department of Commerce and the Interstate Commerce Commission are important government agencies in regulating commerce between the states. The Federal Trade Commission, created in 1914, examines into the business methods and organization of large corporations.

Clause 4-Naturalization and Bankruptcy

To establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcy throughout the United States.

Naturalization. Naturalization is the legal process whereby an alien may become a citizen of the United States. Before aliens are permitted to enter our country, however, they must submit to an examination by immigration officers who are required to exclude all paupers, criminals, anarchists, and persons afflicted with insanity or a contagious disease. In 1917 Congress passed a law over the President's veto, requiring all adult immigrants to be able to read and write. The process of naturalization involves two steps, declaration of intention and petition for naturalization.

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