There are two methods of computing net income,what is known as the book, or credit or accrued basis, and the cash basis. Differences of opinion among members of the two Houses of Congress and expert accountants and others, are responsible for the lack of harmony of terms prescribing in each instance the exact basis upon which accounting shall be made. I think the accrued or credit basis will apply to corporations and associations with most convenience, and the cash basis will be more desirable for individuals. The taxpayer is entitled to employ the same basis in accounting for his income and in making claim for deductions, otherwise an injustice would result. I have the impression that the Treasury Department will administer the law on the accrued or credit basis.

GRADUATED TAX ON HOLDING CORPORATIONS

The Corporation Excise Tax Law was merged into the new law. The same administrative machinery and substantially the taxing provisions of the former are retained. Only a few changes were made. One change is designed in effect to impose a graduated tax upon corporations holding stock in other corporations by reason of the superior business advantages derived therefrom. This is not an unreasonable graduation. All that class of corporations falling without the scope of the Excise Tax Law are embraced under the new law. The existence of a large number of corporations best adapts any country to the successful administration of the income tax. Their agency can be utilized to secure the safe collection of the income tax from the stockholders, bondholders and their employees. Probably one-half the large incomes of the country are derived from corporate dividends. There are more than 300,000 corporations in the United States, and less than 50,000 in England.

NECESSITY FOR A LAW WITH COMPREHENSIVE GENERAL PROVISIONS

An income tax looks to the individual according to his ability to pay. Ability to pay, as demonstrated by worldwide experience, is best measured by net income. The abilities of persons are infinitely varied. The many complications of business that arise in this country require a law of great range, administered through flexible treasury regulations. The new law undertakes to reach every item of gain or profit intended to be taxed by its general provisions, and leaves to the regulations to apply them in a manner most convenient to the government and the taxpayers. Foreign laws are far more complex than our law. When carefully read it is less intricate than Schedule K, or the cotton, or silk schedules of our tariff or many of the state general property tax systems. It is somewhat complex because only a law containing numerous safeguards can successfully reach the hidden wealth of the country and render certain the payment of its fair share of the taxes. All other tax laws have failed to accomplish this end. The public mind will not longer accept taxation that is unfair, harsh, discriminating and immoral, upon the theory that there may be more convenience in its assessment and collection.

LARGEST TAXING POWER OF THE GOVERNMENT. The income tax method embraces the largest single feasible taxing power of the government. If the present English peace rates were applied here, the revenue yield would easily reach $500,000,000. The largest tariff yield was $333,000,000. To-day this country possesses more than $175,000,000,000 of national wealth an amount so fabulous as to be beyond human conception. Its income is

greater than many have believed. The present tax, in my judgment, will yield from last year's assessment several millions more than have been estimated.

LAW SHOULD BE GIVEN BROAD PRACTICAL CONSTRUCTION Under the rules of computation prescribed by the new law there are, in my opinion, more than 700,000 incomes in the United States of $3,500 and over. The new tax will be paid by several million stockholders under the corporation provision, and by 500,000 to 600,000 other individuals.

Decisions construing our former income tax laws have often been narrow and harshly technical. The tax was then in its infancy. Now that this law in comprehensive form is to become an important and permanent part of our fiscal system, it should be dealt with along correspondingly broad and practical lines, so as to give proper effect to its legitimate scope and application.

To those disposed to criticise the law upon the theory that it is too complex, I may reply that it would be easy to cite as many and as strong criticisms that have been made against every other method of taxation as have been offered against the income tax. While denying the justice of other taxes, none deny the fairness of this tax, but only object to certain of its administrative features. This objection was strenuously urged for years against the English income tax. However, we find that later it was acquiesced in and pronounced as satisfactory in its administration as any other tax law. Mr. Gladstone, who had opposed it during earlier years, pronounced the income tax "an engine of gigantic power." A later English statesman characterized it as "in reality the center and sheet anchor of our financial system.”

The people should not be too impatient in their effort to apply this law to every intricate business condition in advance of the revised treasury regulations, and reasonable time in which to understand it. This course has been necessary as to all new laws.

TAX NOT UNFAIR TO ANY SECTION

I am well aware that in the past the greatest opposition to an income tax in the United States has come from the eastern section of the country, upon the theory that it would unjustly contribute more taxes than any other section. From this view I respectfully dissent for the reason that New York, for example, is the great center of commerce of the nation. It is a great distributing center. Hundreds of thousands of citizens of other states come here to reside. Her great incomes are drawn from all sections of the country. These concentrated profits are chiefly the product of the great industries throughout the nation. I deny the right of wealth anywhere to segregate itself and then upon the plea of segregation to exempt itself from its fair share of taxes. The people of other sections do not envy New York and other states similarly situated their good fortune. It is only asked that while enjoying these and other superior blessings, their people shall cheerfully acquiesce in a tax law everywhere conceded to be just and fair.

In conclusion, I would say that in my judgment this law will here, as it has elsewhere, commend itself to the best thought, conservative citizenship, and patriotism of the country.

And, having faith in the entire good will and the sound sentiment of the enlightened public with respect to this sincere effort to lighten and fairly to distribute the bur

dens of taxation, I expect an approving public opinion will soon dismiss all thought of the fault findings and precipitate judgments of those who, in most cases harboring a hostile spirit, have not taken the pains to learn and understand the law. (Applause.)

Francis Lynde Stetson, of New York:

Mr. President, I move that the cordial thanks of the Association be tendered to Mr. Hull for his conscientious, faithful and illuminating exposition of this law.

The motion was duly seconded and carried unanimously. The President:

In behalf of the Association, I desire personally to thank you for coming to us. Report of the Committee on Judicial Statistics.

Charles A. Boston, of New York:

Mr. President, I shall ask the indulgence of the Association for a few words of explanation before I enter upon a slight exposition of the report, and supplement that with a statement of what has occurred since the report was forwarded, under the By-Laws, to the members of the Association. I shall not speak at any length and shall not think of reading the report if that can be dispensed with, for the reason that it has gone out by mail to every member of the Association.

This is an important subject. It has been adequately dealt with in other communities and is most inadequately dealt with in the State of New York. It is for that reason that we urge upon the attention of the Association the desirability of getting into line with the best and most advanced communities in the matter of judicial statistics.

By way of preliminary explanation let me say that the attention of this Association was directed to the necessity