Mr. HUTCHESON. I know of no State with such a rule of law. Mr. HILL. If I may interrupt, in a number of the cases the Treasury Department did attempt to require the tax to be paid on a single income.

Mr. HUTCHESON. Yes; they attempted to do it, but that was struck down. As a matter of fact, they tried to collect it in that way, and that was the cause of the case's going up.

The taxpayer paid it, as a matter of fact, and sued back for it and recovered it in the Supreme Court of the United States. It was an affirmative action by the taxpayer to recover the tax paid.

Mr. EVANS. That is exactly the Malcolm case.

Mr. HUTCHESON. That is right, exactly, and also the Hopkins case and other cases, and the only case in which they failed to recover back was in the Robbins case where, as I say, they held the California wife did not have a vested interest in the property at that time.

The other decision I want to present is a Treasury decision no. 3138, which relates to all of the other States except Texas, that being the second opinion. Both of those opinions were rendered during the administration, I believe, of Mr. David F. Houston as Secretary of the Treasury, and during the period of Mr. Wilson's incumbency as President.

If I may read an excerpt from the opinion of the Attorney General in the opinion on Texas, which is the first opinion that the Attorney General ever rendered on this service

Mr. HILL. What date was that?

Mr. HUTCHESON. This was August 24, 1920.

Mr. SHALLENBERGER. Who was Attorney General?

.

Mr. HUTCHESON. This is the opinion of Attorney General A. Mitchell Palmer, and he uses this language:

The business of the firm [talking about the community partnership] generally is transacted in the name of the husband and he prosecutes and defends its suits with the same effect as if his partner were named in the case, and although community property has not all of the incidents of partnership property, it has many of them and is commonly spoken of as partnership property Now, here is the exact thing on this point:

And though the management and disposal of community property during marriage is usually given to the husband, this is said to be for reasons of public policy and social economy, and not on the ground that the husband has any greater interest in it than the wife. Section 4622 Vernons Civil Statute as amended in 1913 set forth above provides that the personal earnings of the wife, rents from her estate, interest on bonds and notes belonging to her and dividends on stock owned by her shall be under the control, management, and disposition of the wife alone. The court of Texas held in Tannehill v. Tannehill that such amendment did not change the character of rents from the wifes separate property so as to make them her separate property, and that they continued to belong to the community estate, and the husband was the owner of one-half of the same.

Now, that was before the case of Arnold v. Leonard had been decided by the Supreme Court of Texas.

May I say in passing there, if you carry this determination to its logical conclusion, here is what you would have had to do in Texas at some periods and may have to do again.

Frequently, it has been true in Texas over long periods of years that the husband has been given the control of separate properties

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of the wife, exactly the same control that has been given over the community property.

Mr. SHALLENBERGER. You mean by statute.

Mr. HUTCHESON. Yes, by statute, which has been changed at the will of the legislature, and that statute has always been held to have nothing to do with the property rights of the wife.

Now, may I say that the Supreme Court of the United States in Warburton v. White used this language, speaking by Chief Justice White:

It is a misconception of that system (that is, the community-property system), to suppose that power was vested in the husband to dispose of the community acquired during marriage, as if it was his own, therefore, by law the community property belongs solely to the husband. The conferring on the husband of the legal agency to administer and dispose of the property involved no negation of the community since common ownership would attach to the result of a sale of a property.

In other words, it is purely an administrative-ageney proposition granted to the husband, as Judge Donworth said yesterday, because the wife presumably at least in prior days did not have quite the business experience and knowledge that the husband did, and somebody must manage the partnership. Who should it be? In those days, it seemed logical to be the husband. Tomorrow it may be the wife; in these days of transition, we may find the wife managing the husband's property, and I am not sure but that in some instances I know of, it would be a good plan.

Now, if I may say this further, after all, if this system is something you do not like, you can stay away from it. If it is something you do like, you can do one of two things: Either get your State legislature to adopt it, or if they won't do that, move to Texas.

There is absolutely no doubt we would welcome you, and I say that not facetiously, because our statute goes out of its way to say the same thing. They say in the statute if you want to come to Texas and let your wife own half of what you get from the day you come there and half of everything you acquire from that time on, just come down and we will welcome you, and we will apply the laws to you just exactly as we do to the man and woman who married in Texas.

We make no distinction in Texas, nor does any other State, between the husband and wife who are born and bred in the briar patch, and those who come there later and take advantage of the situation.

In addition to the matters we have just been discussing we have in Texas the rule established by our own constitution that you cannot enlarge the separate property of the wife, that what is prescribed in the constitution as hers is all that she can have as hers alone. So that if you can take away from her what she has in the community and you cannot give her any more than she has already got under the constitution, which is just what she brings into the marriage or acquires by gift devise or descent afterward, you will see that you are virtually stripping the wife of the very things that the commonlaw States have all gone out of their way to confer upon her.

Certainly it is true that if we must hark back to the basic principle underlying both of these laws, you will find that the fiction has been

increased by the common-law States and not by the community-law States.

You will find that in the common-law States, as you gentlemen from those States so well know, that the marriage conferred everything upon the husband, and even conferred the wife upon the husband; she was a chattel, and her properties and everything else went to her husband.

Of course, no enlightened common-law State is going to stay so far away from the community doctrine as not to give at least some right to the wife, and so her rights of separate ownership in rentals, and separate acquisitions has crept in by statute, or you might say by modified common law of the United States or of the States if there is such a thing, so that in all of the States she has property rights that are recognized and that are substantial.

As Mr. Dunbar said awhile ago, those common-law States not only recognize the wife there, but they recognize that any citizens from a community-property State may move into the common-law State and that she takes there her community-property right and treats it as her separate income from her separate property, just as though she had acquired it in that common-law State.

In other words, that would apply to the husband and wife from Washington, from Texas, or from any of the other communityproperty States.

Mr. HILL. You are using the words "common-law States" as synonymous with non-community-property States, and I assume you are using that as distinguished from the community-property State. Mr. HUTCHESON. Yes; that is the distinctition I intend to make; and when I refer to the common-law States I mean those States other than the community-property States. We in the communityproperty States distinguish by calling the others the common-law States.

Mr. HILL. I understand that, but others reading the record might not understand it, and that is the reason I said you mean the noncommunity-property States.

Mr. HUTCHESON. Yes; that is corerct, the non-community-property States I am referring to when I say the common-law States. Therefore, if we would give the husband and wife from Texas the absolute right to file separate returns when they remove from Texas to some other State, then the exodus would be the other way, and you would find that instead of the people from the common-law States coming to Texas, perhaps the people of Texas would be going to the common-law States to get their rights to file their returns separately.

Now, some reference has been made to the question of " enjoyment." In the brief filed in the Supreme Court of the United States at page 52 I see a reference to that same question, and if I may I would like to quote this brief extract for the record.

Mr. HILL. What brief is that?

Mr. HUTCHESON. This is the brief filed in the case of Hopkins v. Bacon in the United States Supreme Court, not the joint brief, but the separate brief which dealt only with the State laws, as contrasted with the joint brief.

The quotation from that brief is as follows:

The petitioner (which was the Government) asserts that the enjoyment of community income is a taxing criterion, but does not attempt to define enjoyment. Respondent is at a loss as to what is meant by the term. It could hardly be said that a wife who owns community income and has the management and control of a substantial part of it, who is supported by means of it, who finds that its slow increase through savings and investment is providing for her old age, who at all times has the right to legal action to prevent its unwarranted dissipation, and who may devolve it upon her devisees or heirs at law, may not be taxed for it because she does not enjoy it.

We say that every conception of income and taxation is founded upon ownership, and that is what the sixteenth amendment in every instance relates back to. As Judge Dunworth pointed out yesterday you may let a little of the ownership out, but you have got a string tied to it. There is not a Supreme Court case that does not adhere to the doctrine of going back to the real ownership in the beginning, and holding that ownership as the test for the tax.

This is the language of the United States Supreme Court, which I quote from this brief:

With respect to taxation, usually, if not necessarily, property and its ownership are inseparable. Taxes are assessed against persons on the property which they own, not on property which others own. Home Savings Bank v. Des Moines (205 U. S. 501).

This is our language, the wife in Texas owns and enjoys an equal share of community property and income.

In the case of Hopkins v. Bacon, the Supreme Court of the United States said:

They provide, as usual in States having the community system, that the husband shall have the power of management and control, that he may deal with community property very much as though it were his own. In spite of this, however, it is settled in Texas that the wife has a present vested interest in such property. Arnold v. Leonard, 114 Tex. 535. Her interest is said to be equal to the husband.

Now, this is the Supreme Court speaking; not me. If something is equal, how can it be so unequal so that you can treat it as hers and not his.

Here is what the Supreme Court further says:

It is held that the spouses' rights of property in the effects of the community are perfectly equivalent to each other.

(If there is any doubt about "equal", perhaps, then, there is no doubt about "perfectly equivalent.”)

It is further held in reference to the wife's interest that "if the husband as agent of the community acts in fraud of the wife's rights, she is not without remedy in the courts."

I say, gentlemen, that the Supreme Court of the United States in unmistakable words has said that you cannot tax control, and has said that the control amounts to nothing which you could tax, because it does not deprive her of equal rights, equivalent exactly to each other, and has held that if the husband acts in fraud of the wife's rights, she is not without remedy in the court.

Mr. SHALLENBERGER. I asked one of the gentlemen from Seattle yesterday if there was any difference in the definition of the different kinds of ownership.

You have discussed and illustrated the very broad control that the husband has in some community-property States over that property.

Now, in the State of Nebraska, I would never have control over the property of my wife at all, without she gives it to me, and that would seem to me to be a different sort of ownership which might carry with it a further interpretation of that. Have you anything to say about that point?

Mr. HUTCHESON. Yes; I will be glad to deal with that, Mr. Chairman. In the first place, she can confer that authority on you by power of attorney. That is unquestioned, so that she can do by a simple act of her own what the legislature has done for every husband and wife in every community-property State.

Mr. SHALLENBERGER. In my case she might not want to do it, but in your case she has it anyway.

Mr. HUTCHESON. Yes; but what is done by contract or by law, it is done, and it cannot be set aside except by volition of the parties in the common-law State, and it cannot be set aside at all in the community-property State. So that it is an element of control that is vested by the legislature, not by the party.

Now, as to the State of Nebraska and the State of Ohio, which is familiar to you gentleman from those States, as distinguished from the State of Washington, for illustration, you will find that in both of your States that you can make a partnership contract with the wife, and the Treasury Department has so ruled, and both the States of Ohio and Nebraska are in the list of noncommunity-property States, where those partnership contracts are recognized and given full force and effect.

Not only can you deed your wife something and she can deed you something, but you can enter into an agreement of partnership whereby your earnings and hers shall be joint income and can be separately returned in those States, and the Treasury Department recognizes that.

However, you can never do that in Texas. You cannot do anything more than the legislature has already done for you.

So, I would say in the first place, that completely, to my mind, offsets the proposition that you have not the control, because it would seem to me what one can do by contract, the State, if it has the constitutional power, can do for them by statute. That is the only difference in the two situations, as far as that question is concerned.

However, it is true that in Texas also the husband has no management of the separate property of the wife, but that is purely a matter of legislative control, and whenever they see fit to change it they can do so.

Mr. SHALLENBERGER. That is an interesting fact. You maintain, then, that this control of the wife, in a sense surrendered to the husband in the community-property State, is something that is only there by gift after all, and can be taken away from her.

Mr. HUTCHESON. Yes; in the sense that she submits herself to the jurisdiction of Texas when she marries or when she moves there. It is in a sense the adoption of a marital contract, or a marital rule or regulation. She comes into that State knowing she gets half