(The statement referred to is as follows:) HON. A. C. SHALLENBERGER, HOUSE OF REPRESENTATIVES, Chairman, Subcommittee of the Ways and Means ? MY DEAR MR. SHALLENBERGER: On behalf of the people of the State of Arizona, I wish to most strenuously oppose any favorable action upon H.R. 8396, which relates to personal-income-tax returns and is designed to impose an unjust tax upon people residing in the so-called "community-property States ", of which Arizona is one. This proposed law is unfair, unjust, inequitable, and would discriminate against citizens of the State of Arizona in that it would impose an income tax upon the husband or wife, whoever may have control and management of the community property, or property and income not owned or legally received by such taxpayer. The theory of community property has been in effect in Arizona since that section of the country was under Spanish ownership and control. Under the laws of our State all property acquired during coverture except property received by gift or inheritance is community property and is owned share and share alike by each spouse. Marriage in the State of Arizona creates not only the customary status which is created in all states of the Union, but there is also immediately imposed a property partnership whereby each party to the marital contract becomes an absolute partner in all property acquired during the existence of the marriage state. Upon the dissolution of the marriage state, each of the partners take their respective one-half interest in the accumulations of the partnership. To require a spouse who has the management and control of the community property to pay a tax thereon as proposed by this bill would be assessing an income tax against such party for an income and property which she or he does not own. It would be the same as if a tax were imposed upon one of two parties in a voluntary copartnership, whereby one of the two partners would be called upon to pay the entire tax of the copartnership. The further inconsistency and injustice of the proposed legislation is further evidenced by the fact that upon the decease of either spouse, one half of the community property immediately passes to his or her estate and the estate must pay an inheritance tax thereon. This bill proposes that the spouse having management or control of the community property will be required, in one instance, to pay upon the same as if it were his or her separate estate, and then for the purpose of the inheritance tax, the Government recognizes the community division and immediately imposes an inheritance tax upon the share of the decedent, even though such decedent did not own or manage the property during his or her lifetime. The law is obviously unfair and unjust and imposes an unfair tax on the residents of community-property States, which States have burdens not imposed on the citizens not residing in community-property States. Very sincerely, ISABELLA GREENWAY. Mr. SHALLENBERGER. The first Member of Congress to be called this morning is Hon. Frank H. Buck, from California. Mr. Buck, the committee will hear from you. STATEMENT OF HON. FRANK H. BUCK, A MEMBER OF CONGRESS FROM CALIFORNIA Mr. BUCK. Mr. Chairman and members of the committee: I do not intend to take up a great deal of your time by going into a discussion of the cases which I think have been ably handled by the professional gentlemen who appeared here last week, or whenever we had the last sessions. I have taken the opportunity, as no doubt you have done during the recess since the last hearings, of reviewing the testimony, and I have come to the conclusion, insofar as the treatment of the cases is concerned, with the exception of a few which directly affect the California situation, which I shall discuss with you very briefly, they have been amply taken care of in the briefs which were submitted by Mr. Dunbar of Louisiana and in the testimony which was presented by Mr. Donworth of Washington. I do not think there would be any profit to you, or that it would do any more than take up your time, for me to go over and review these cases again. I believe I can say that it is the sense of the committee-and I know it is the sense of the Members of Congress-that we want to plug up all the loopholes that we can and cut out all the evasions of taxes that there are existing at the present time, and I think you have done that in your recent committee bill to a certain extent. I do not believe it is the desire of any of you gentlemen-and certainly not the desire of the Congress as a whole-to force a citizen to pay a tax which is not morally or legally due under the laws of the United States. Of course, you understand, gentlemen, that I appear here in opposition to the Treadway bill. I am sure that a review of the testimony of record will lead to the same conclusion, that is, that the proposed legislation is unconstitutional, unfair, and inequitable. Nevertheless, knowing the high character of the gentleman from Massachusetts who proposed this bill, I am convinced that it was proposed in the utmost good faith. As there was some discussion of the matter, which I have endeavored to follow carefully, being present at nearly all the sessions, I am convinced that probably I had better talk a little bit about the development of this community property system so that you can understand that it is not a case where the States in the west and southwest are trying in any way to manipulate their laws as the gentleman from Massachusetts said in his opening statement, with respect to the income tax laws of the United States. I am a Californian of the third generation. I have gone through personally all the processes which are involved under the community property system, including the payment of income taxes. My father died intestate, leaving my mother surviving and I had to unscramble the question of the property involved, because my father inherited some of it from his father, my grandfather, and I know some of the difficulties under which those who live in community property States labor. Before following on with my remarks, for the benefit of those who may later read the record, and for the benefit of you gentlemen, I would like to touch on a few matters. As was called to your attention the other day, this matter was laid before the Ways and Means Committee in 1921, and in 1924. I think it would be well to read the illuminating debate occurring in the Sixty-first Congressional Record, pages 6872 and following Mr. HILL. What Record? Mr. Buck. Volume 61 of the Congressional Record, pages 6872 and following and pages 7229. That is with respect to the 1921 effort. In 1924 the Ways and Means Committee of the House gave full hearings on this subject and refused to accept a similar amendment. I refer you to hearings before the Committee on Ways and Means in 1924, as follows: Pages 194, 348-375, inclusive, and pages 478 to 482. The Senate committee on page 14 of its 1921 report on the revenue act 66 Mr. HILL. Senate Finance Committee? Mr. BUCK. The Senate Finance Committee on page 14 of its 1921 report on the revenue act spoke of the then pending amendment as designed to restore uniformity of treatment." This phrase I think is perhaps the keynote of the campaign that the proponents of this bill are making. I believe that it will not produce uniformity but that it will, instead, penalize the husband and wife in community property law States; that you would put yourself and the United States Government in the position of first recognizing the laws that create the marital community status and enforcing it, so far as it combines the earnings of the husband and wife and then arbitrarily making the combination income all the husband's. When this matter was up before the Supreme Court in what is the leading case at the present time and under the present act, the case of Poe v. Seaborn (282 U.S. Reports), the Court said as follows: Finally the argument is pressed upon us Mr. HILL. Did you give the page reference? Mr. BUCK. Thank you, Mr. Hill. It is page 117. Mr. HILL. Of what report? Mr. Buck. 282 United States. I think that already appears in the record. (Reading.) Finally the argument is pressed upon us that the Commissioner's ruling will work uniformity of incidents and operation of the tax in the various States, while the view urged by the taxpayer will make the tax fall unevenly upon married people. This argument cuts both ways. When it is remembered that a wife's earnings are a part of the community property equally with her husband's, it may well seem to those who live in States where a wife's earnings are her own, that it would not tend to promote uniformity to tax the husband on her earnings as part of his income. The answer to such argument, however, is that the constitutional requirement of uniformity is not intrinsic, but geographic. (Citing cases.) And the differences of State law, which may bring a person within or without the category designated by Congress as taxable, may not be read into the revenue act to spell out a lack of uniformity. It is easy for one who has been raised under the community property law to understand the idea that inhabitants of common law States have a different system. Unfortunately, it is not as easy for the gentlemen who have only had contact with common law States, who have been brought up under the common law to realize and grapple successfully with a body of substantive laws that is perhaps sui generis. It is not the presence of a community of property between husband and wife that requires any explanation-its absence does. In the normal course of events a community of interest between the husband and wife should crystallize into a community of property holdings, and such we find, on investigation, has in fact been the course of events in the majority of the world populated and governed by the white race. I will perhaps have to withdraw that word "majority" because since Russia has had a system of its own, it probably is not quite true. The theory of community property comes down through the ages from certain portions of Germanic law. At the same time that the Saxons in the wilds of the German forests were developing one form of marriage law and marriage property relationships-and those Saxons came over and settled England-the Visigoths, the Swabians, and the Bavarians and others in the same forests of Germany were developing what is known today as the community property law. The presence of it is to be found in Scandinavia and to be found. in the south and southwest of Germany. When the Visigoths conquered Spain, they brought it to that country, and it remains law there today. Through the Spanish Conquest of the Americas, it was brought over here. It was brought into France and by the sixteenth century, or earlier than that, by the fifteenth century, it had developed in various portions of the country, notably the south and southwest areas, and in Paris where it was known as the Custom of Paris, which is the same as we know it in the southwest and the west today. It came into Louisiana from France originally and was perpetuated through Spain. It came into Quebec through France. The charter of Crozat in 1712, creating the Territory of Illinois, provided that this community property law must be the law of the country. It was the law of Missouri until 1807. It was not abrogated in Michigan until 1810. It was the law of Arkansas, and Iowa, and Utah until the people decided through their legislatures to change over to the common law. There is not one single State in the southern tier of the United States that has not at some time had a community-property law in effect. Traces of it are found wherever the Spaniards and French exercised their influence on the colonization of the country. The southwest and western portions of the United States remained under the influence of Spain, as you gentlemen know, for a much longer time than the north and northwestern portions under the influence of the French. So that that law came directly to us through our inheritance from Spain, through Mexico. It has been suggested that this law was being taken advantage of in the light of the income-tax law. But, gentlemen, the Spanish law, the community-property law which we obtained from Spain, so far antedates any conception of an income-tax law that it is a most unfair and totally illogical statement to make. Now I come to California. California was obtained through the Mexican cession. Article IX of the Treaty of Guadalupe-Hidalgo, signed February 2, 1848, guaranteed the Mexicans within the ceded territory free enjoyment of their property under the laws then existing. Now, it is a principle of international law that the private law of the former sovereign remain unchanged by conquest or cession until set aside after that cession by new laws that are enacted. The chairman of the subcommittee asked Representative Evans the other day something about whether we had a constitutional provision for the community-property law in the State of California. I submit, in all fairness, that it is immaterial whether a State has a constitutional provision authorizing a community-property law or not, as long as there is nothing in its constitution which sets up a different status of marital property relationships. Obviously, the whole question of marriage, its status, and its property relationships have been left to the States. There is no claim that the United States Government has any control over that. As long as there is not a prohibition in a State Constitution against community property enactment, the legislature, in my opinion, is free to go ahead and make such laws and regulations as it sees fit. But, Mr. Chairman, the people of California, in their constitution of 1849, article XI, section 14, not only did not set aside the community-property law but they used the following language: All property, both real and personal, of the wife, owned or claimed by her before marriage and that acquired afterward by gift, devise or descent, shall be her separate property, and laws shall be passed more clearly defining the rights of the wife in relation as well to her separate property as to that held in common with her husband. Now, a reading of the discussion at the constitutional convention of 1849 and I give you a reference, "Debates in the convention of California on the formation of the State constitution ", in September and October 1849, published by J. Ross Brown, published in 1850, at pages 258 to 260, inclusive-will show that the founders were trying to protect the native Californians who were living and had lived there under the Spanish law, and that they premeditatively incorporated the law of community property into the constitution of 1849, because the debates show that there was a good deal of debate between the advocates of the common law and the civil law, and the advocates of the civil law finally prevailed. Similar language is used in the constitution of 1870, which had subsequently replaced the constitution of 1849. That this is so, gentlemen, is shown by the case of Dow v. Gould & Curry S. M. Co. (131 Calif. 629), at page 640, in which is was said: The only marked exception (to the adoption of the common law) is found in the section under consideration, providing for the separate property of the wife and the common property of both husband and wife. Now, the community system remained in California, by virtue of the Treaty of Guadalupe-Hidalgo. It has always been there. |
