of a fraudulent purpose to enable its stockholders to escape the "additional income tax" which they would have to pay if those gains and profits were distributed among them. But to guard against doing possible injustice to persons in particular cases, the statute also provides that the mere fact that gains and profits are permitted to accumulate into a surplus, in the treasury of a corporation, joint stock company or association, shall not constitute evidence of a purpose to enable its stockholders to escape the "additional income tax"; unless the Secretary of the Treasury shall certify that, in his opinion, that particular accumulation is unreasonably large for the purposes of the business. And to enable the Secretary of the Treasury to form a correct opinion on this point, the statute provides that any corporation, joint stock company or association, shall furnish a correct statement of its accumulated profits, and of the names of the persons who would be entitled to receive them, if distributed, whenever the Commissioner of Internal Revenue, or any collector of internal revenue shall request such a statement.

The fact that the eighth deduction from the "personal gross income" which is allowed when ascertaining the "personal taxable income" which is subject to the normal tax, is not allowed when ascertaining the "personal taxable income" which is subject to the additional tax, is a logical and proper fact. For that eighth deduction refers to those complicated parts of the statute which relate to collecting the "normal income tax", which is due from particular persons, from those vicarious parties who have the custody of the taxed incomes at their respective sources. Inasmuch as those complicated parts of the statute are expressly confined to the "normal tax" upon the incomes of natural persons; the "additional income tax", is never collectable

at the source of the income upon which it is based, and is collectable only after that income reaches the hands of whoever is beneficially entitled thereto. And in order to impose the "additional income tax" upon that income in those hands; when ascertaining the "personal taxable income" for the purposes of the "additional income. tax," it is proper to ignore the eighth deduction from the "personal gross income" which is properly made when ascertaining the "personal taxable income" for the purpose of the "normal income tax."

SECTION 7.

THE RATES OF THE ADDITIONAL INCOME TAX.

The "personal taxable income" upon which the “additional income tax" is based, having been ascertained by the method explained in Section 2, or by that of Section 3, of this Chapter; the "additional income tax" is assessed on the following scale: the first $30,000, or fraction thereof at one per cent; the next $25,000, or fraction thereof at two per cent; the next $25,000, or fraction thereof at three per cent; the next $150,000, or fraction thereof at four per cent; the next $250,000, or fraction thereof at five per cent; and all income above that $250,000, at six per cent. This method of stating the scale is a translation into other words and figures, of the exact words and figures in which the same scale is expressed in the statute, and which figures and words are as follows:

"One per centum per annum upon the amount by which the total net income exceeds $20,000 and does not exceed $50,000, and two per centum per annum upon the amount by which the total net income exceeds $50,000 and does not exceed $75,000, three per centum per annum

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upon the amount by which the total net income exceeds $75,000 and does not exceed $100,000, four per centum per annum upon the amount by which the total net income exceeds $100,000 and does not exceed $250,000, five per centum per annum upon the amount by which the total net income exceeds $250,000, and does not exceed $500,000, and six per centum per annum upon the amount by which the total net income exceeds $500,000."

SECTION 8.

EXAMPLES OF TOTAL INCOME TAXES IN VARIOUS CASES.

A single man or a single woman having a taxable income of $10,000, as ascertained to be the basis of the normal income tax in that case, will be taxed one per cent on $7,000 or $70.

Any man having a taxable income of $40,000, as ascertained to be the basis of the additional income tax in his case, will, in addition to whatever tax is levied upon him as his normal income tax, pay an income tax of one per cent upon $20,000 or $200.

Any man having a taxable income of $70,000, as ascertained to be the basis for the additional income tax in his case, will, in addition to whatever tax is levied upon him as his normal income tax, pay a tax of one per cent upon $30,000, and two per cent upon $20,000, or $700.

Any man having a taxable income of $140,000, as ascertained to be the basis for his additional income tax, will, in addition to whatever tax is levied upon him as a normal income tax, pay a tax of one per cent upon $30,000, and two per cent upon $25,000, and three per cent upon $25,000, and four per cent upon $40,000, or $3,150 in all.

Any man having a taxable income of $250,000, as ascertained to be the basis for his additional income tax, will, in addition to whatever tax is levied upon him as the normal income tax, pay a tax of one per cent upon $30,000 and two per cent upon $25,000, and three per cent upon $25,000, and four per cent upon $150,000, or $7,550 in all.

Any man having a taxable income of $500,000, as ascertained to be the basis for the additional income tax, will in addition to whatever tax is levied upon him as a normal income tax, pay a tax of one per cent upon $30,000, and two per cent upon $25,000, and three per cent upon $25,000, and four per cent upon $150,000, and five per cent upon $250,000, or $20,050 in all.

And any man having a taxable income of more than $500,000, as ascertained to be the basis for the additional income tax, will, in addition to whatever tax is levied upon him as a normal income tax, pay a tax of $20,050, plus six per cent upon whatever amount that taxable income exceeds $500,000. For example, a man having such a taxable income of $40,000,000, will in addition to whatever tax is levied upon him as a normal income tax, pay an additional income tax of $2,390,050.

The amount of the normal tax in any of the foregoing cases, or in any other case, will partly depend upon the question whether the "gross personal income" in that case consists partly or wholly of dividends, or other amounts, received from the net earnings of corporations; or consists wholly or partly of money, derived directly from its sources, by those beneficially entitled thereto, without the intervention of any corporation, or other organization, which is taxable upon its net income.

For example, one man may have a net income of $3,003,000, which is wholly derived from rents on real estate owned by him; and such a man will pay a normal income

tax of one per cent on $3,000,000, amounting to $30,000; and will pay an additional income tax on $2,983,000, amounting to $169,030; and will thus have to pay an aggregate income tax of $199,030. And another man may have a net income of $3,003,000 which is derived wholly from dividends on railroad stocks owned by him; and such a man will not have to pay any "normal income tax," but will have to pay the same amount of "additional income tax" as the other man, namely $169,030.

For another example, one man may have a net income of $20,000, which is wholly derived from the profits of a mercantile establishment owned by him; and such a man if unmarried, will have to pay only a "normal income tax" of one per cent upon $17,000, amounting to $170. And another man may have a net income of $40,000, which is derived wholly from dividends on national bank stocks; and such a man will not have to pay any "normal income tax," but will have to pay an "additional income tax" on one per cent on $20,000, amounting to $200. ·

The foregoing differences between the proportionate burdens placed by the income tax law upon different persons, and all other differences which will develop from the application of the double plan of the "normal income tax" and the "additional income tax," are not unreasonable. Those differences all arise from the following ethical views entertained by Congress: First, persons having net incomes of not more than $20,000, which are wholly derived as dividends upon corporate stocks, ought not to be compelled to pay any income tax; because the corporate money which was divided between them, had already been subjected to an income tax, when it was in the treasuries of the corporations which issued those stocks. Second, persons having net incomes of more than $20,000, are wealthy persons, all of whom should be subjected to the "additional income tax," whatever may be the source