PRINCIPLES OF TAXATION. 473 



excise duty was also imposed upon income derived from any pro- 

 fession, trade, employment, or avocation. The tax upon persons 

 generally was not upon their entire income, but on the excess over 

 and above the sum of $4,000. All persons having incomes of $4,000 

 or under were exempt. The whole burden of the tax, it was esti- 

 mated, would fall on less than two per cent of the population of 

 the' country. That the Government practically conceded that such 

 a feature of the act was pre-eminently class legislation is evident 

 from the following extract from a statement made in a brief by 

 the Attorney General of the United States : " Congress," he says, 

 " has adopted as the minimum income for the purpose of taxa- 

 tion the limit of $4,000. This limit may be said to divide the 

 upper from the lower middle class, financially speaking, in the 

 larger cities, or to divide the middle class from the wealthy in the 

 country districts." (Opening argument ~by William D. Guthrie f 

 in support of the contention that the income-tax law of 1894 was 

 unconstitutional.) 



As might have been expected, the provisions of this enactment, 

 which could not be fairly considered pertinent and relevant to a 

 just and equitable system of income taxation, occasioned much of 

 dissatisfaction among business men and the financial authorities 

 of the country generally ; and measures were at once initiated to 

 test before the proper legal tribunals i. e., the courts of the 

 United States the constitutionality of the statute. The most 

 important and immediate representatives of this action were the 

 Farmers' Loan and Trust Company and the Continental Trust 

 Company, of New York two of the largest trust companies in 

 the United States. It is also worthy of note in this connection 

 that the above-named companies, before taking any steps to test 

 the validity of the act in question, complied with all its pro- 

 visions ; no collector of internal revenue or any public officer of 

 the United States having been made a party, or any injunction 

 sought from the courts, to restrain the collection of the tax. 



The basis of action of the above-named parties, as repre- 

 sented by some of the most eminent members of the legal pro- 

 fession in the country,* was substantially as follows : Each of 

 them, and a large number of other like organizations insurance 

 companies, savings banks, and trusts hold as investments of 

 capital stock, earnings, and profits, and as trustees for minors, 

 widows, individuals, copartnerships, and corporations too numer- 

 ous to mention, resident in the United States and elsewhere, large 

 amounts of real estate, situated in the various States of the Fed- 



* Messrs. Joseph Choate, Clarence A. Seward, William D. Guthrie, Benjamin H. Bristow, 

 David Wilcox, and Charles Steele. For the United States, James C. Carter and Richard 

 Olney, the Attorney General. 



