Mr. SHALLENBERGER. If either earns it, the other gets one half? Mr. DOCKWEILER. There is nothing peculiar there. I happen to have three of the greatest moving-picture studios in the world in my district. Ninety-five percent of the moving pictures are made in my district, Metro-Goldwyn-Mayer, the Fox studio with all the Fox studio engineers, and the First National. All these people live in and around the studios. The actresses which are highly paid have homes, like Harold Lloyd in Beverly Hills, and the Fairbanks estate is in Beverly Hills. Of course, it is true if the woman in the family makes $100,000 a year, if she is married, she is entitled to divide that up.

Mr. SHALLENBERGER. Here is the point I want to bring out: Is she required to divide it up?

Mr. DOCKWEILER. No; she is not required to do so. the return as she sees fit.

She can make

Mr. SHALLENBERGER. There is no discrimination in the law between the husband or wife, whichever one earns the salary, their rights under the law of your State are exactly similar. Is that right?

Mr. DOCKWEILER. You are correct. We have had a case where moving-picture actresses have gotten into big money, and they get divorces because they are not living in a happy state, and before they get into big money they usually get divorced from their husband, because we have had the experience of the husband going into the court asking for a divorce and securing an alimony judgment and making their wives support them. The community interest goes that far.

Mr. SHALLENBERGER. I thought I read from the testimony here that in some cases the husband's control of the income was sufficient so as to raise a question about the wife retaining absolutely her one half of the income. Of course, under an ordinary common law, such as the law under which I was raised, the husband being a little more supreme in the management of the family than the wife was, that situation would not prevail. I wondered whether in your interpretation of the law you had considered or had affected that right of the husband in any way in the matter of earnings. Mr. DOCKWEILER. Yes, sir; she has a distinct estate. Mr. SHALLENBERGER. They are the same?

Mr. DOCKWEILER. For instance, if he got a divorce on the ground of adultery, he could have a division of the community property in my State.

Mr. SHALLENBERGER. You do not attempt to protect the wife in any way in her full control of the property adverse to the husband because she is the wife and he the husband?

Mr. DOCKWEILER. No, sir.

Mr. SHALLENBERGER. You consider them the same in either case? Mr. DOCKWEILER. They are regarded in that way. You are right in your view on that.

Mr. HILL. If they are citizens of California, and the earnings are made in California, it is community property?

Mr. DOCKWEILER. Yes, sir.

Mr. HILL. Whether it is the husband or wife which earned it? Mr. DOCKWEILER. That is right.

Mr. COCHRAN. As a matter of information, suppose the husband and wife are not legal residents of California, but are actually living there, and the wife is a moving-picture actress with one of these large salaries. Is the husband entitled to one half of her salary?

Mr. DOCKWEILER. No. Hers would be a very determinative case. The case of Greta Garbo, for instance, who is in there temporarily under a 6 months' contract, if she would make $100,000 during that period, even though her husband came and resided with her in California, he would not have a right to compel a division of those earnings as community property. Of course, the idea of residence is difficult to determine because it is a question of intention.

Mr. SHALLENBERGER. The determinative factor is whether or not they are citizens of California?

Mr. DOCKWEILER. Yes, sir; and to become a citizen of my State is purely a question of intent. That is why the men who come to my State, particularly the rich men, do not want to leave any indicia of residence. We have had so many cases where our State inheritance tax evolved entirely upon the question of voting, trying to find some signs which existed to determine whether a man was a resident of my State, and the courts have decided that where there is a record of voting, that the preponderance of the evidence was to the effect that the man lived there and was a resident of the State, if he voted.

These men avoid every act on their part which might be indicative of their being residents of the State.

Mr. SHALLENBERGER. I guess "domiciled" is a better word.

Mr. DOCKWEILER. Yes, sir; domiciled. There was a point brought out by my colleague, Mr. Buck, that a wife has a right to make a will. One of the most disconcerting things about the communityproperty law, as it stands in California, is that a wife has the right to make a will, and a man might be in perfectly good health and his wife sickly, and she might desire to turn over one half of her end of the property, which is one half of the estate, assuming that it is one half of the estate, if it is all community-she might turn it over to her sister or her sister's family. That has caused a great many uncomfortable situations in California because the wife has made a will and the husband finds after the funeral arrangements are all over, that the wife has given away one half of the estate to her sister's children, and he may find himself in a position where he has to dispose of the domicile, the home, which is one half hers, in order to liquidate the property for the heirs of the wife.

All is not gold that glitters. We, because of certain agreements started out on this community-property law, and more or less the civilian law, and the definition of civil rights, and, of course, we cannot change. You gentlemen in the far-eastern States have started out on the other foot, the common law interpretation, and all your laws have developed along that line, and you could not change to our rule if you wanted to, without disturbing property rights that have grown up, valuable rights which have grown up in the States. We are not so happy about our community-property law. It has been interpreted and reinterpreted by the courts until it has finally refined itself down to a point where it has been a

discomforting thing to the citizens of California unless they are living in perfect connubial happiness, and that condition does not seem to prevail, that condition of human affairs does not prevail quite as universally as it did in your father's time and in my father's

time.

Let us see whether the United States would gain a great deal by trying to enact this law and impress the people of the communityproperty States with the necessity of making one report for the entire income of the family. Of course, a man would be a fool not to say that it was done under protest, particularly in the light of the evidence which you have had here, which casts sufficient doubt upon the legality of the law. As to whether it would be good, there is sufficient doubt in the matter so that a man would not pay except under protest. I know none of my clients would pay any income tax under such an arrangement unless he paid it under protest. What have you got? You would have a good many million dollars in the Treasury, but it is earmarked immediately and is not worth a whole lot when you have got to pay it back.

I recall during the war that the excess-profits tax provided for things which resulted in huge incomes for the United States, amounting to a certain figure, but I am afraid to express the figures because it has faded from my mind-but these excess war profits taxes were levied, and what happened in the last decade? It was found that the law was not good as to a particular manufacturer or concern and it did not cover the items, and for the last 10 or 12 years we have been giving that money back.

It was money which was not worth anything because we have had to dig down into the taxpayers' pocket to give it back. Through the Mellon regime we gave back almost all we secured under the Wilson excess-profits war taxes, as I remember from reading an article.

What would be the good of levying a tax on States when eventually there is a grave possibility that this money would have to be given back if the Supreme Court found that the statute was illegal?

There would be this benefit: You would be getting it for the time being, during a depression period, but would have to pay it back, and I hope when you pay it back we would have more prosperity. What are you really trying to tax here? What you are really trying to tax is not the distinct income of the wife and husband, but you are trying to attack the idea of management of agency. If the husband in California, or in the State of Washington, or one of these other community-property States, has the right to control the income of the community, why, therefore, we will just levy the tax against that man or that person who has that control.

It might not always be the wife or the husband. It might be the wife. The husband might be a sick man and not attend to affairs, and the wife might be making all the money in the family. Whoever it is, you are taxing that agency of control. You are trying to levy a tax against connubial management or agency. I do not think that that is good law. I do not think that you gentlemen or the Ways and Means Committee or the Congress want to pass a tax law of that character.

You will say, "Well, are we going to continue to let the community-property States have this advantage over the common-law States of the Union, over the other 40 States in the Union?"

Of course, you might get at it from the standpoint of letting all husband and wives throughout the 48 States of the Union divide their income. That would be in the nature of community income. Then all of those States are on a par. That would result in this: You would have income treated alike. That would be a fair means rather than singling out a State of the 48 States and saying, "Here, you fellows have an advantage because of the divisions which you have of your community property, and since you have that advantage we must find some way to wrest it from you."

I do not think that is a good way to make laws. I think the best laws are laws which are universal in application.

I don't know whether I make myself clear, and I do not know just exactly how I would prepare the law, but I would say, revise your formula for applying the tax law so that there will be no advantage to Californians rather than striking at Californians and the citizens of the other seven community-property law States. Mr. COCHRAN. That is just the purpose of this bill.

Mr. DOCKWEILER. As I said, Californians are not "slackers." They have not had this law just for the purpose of income-tax payments. The law has been with us since we were born and was with us from time immemorial, and we take the situation as it is. We will take advantage of that situation because it has disadvantages, as I have pointed out.

Mr. HILL. The taxpayers in the other 40 States have the power and the right to divide their incomes and make separate returns and they do it?

Mr. DOCKWEILER. Yes, sir.

Mr. HILL. Now, then, if you force upon the 8 community-property States the restriction that they must return their income in one lump sum and tax it in one lump sum, are you not imposing upon them a disadvantage that does not apply to the other 40 States?

Mr. DOCKWEILER. Yes, sir. As you say, the other States have a right to reframe their statutes. They could go right back in the next legislature, and even though the particular laws of their States were not of such character, they would have a right to redivide income, to write such a bill and enact it into statute.

Mr. HILL. They have the right under existing law to divide property between themselves and subsequently make separate returns on the income from that property.

Mr. DOCKWEILER. Yes, sir. I was surprised to hear the previous testimony just before I stood up here.

Mr. HILL. You are not trying to get away from that right under the law here, but this bill would deprive the eight community-property States of a similar right.

Mr. DOCKWEILER. I made a note relating to letting the other States do what California, Washington, New Mexico, Arizona, and Texas do, if they want this advantage. When we get to the point where the United States is universally blanketed, with every State having done what California and Washington has done, then it is up to the Ways and Means Committee, as a proper committee to function for

that purpose, to devise ways and means for income, and then to revise the United States statutes so that the rest of the people would be treated 100 percent the same. If everybody is cutting their income in half and giving the wife a chance to file a return and the husband to file a return, dividing the tax levied, it is up to Congress to take care of those changing conditions and the evolution that develops and revise the law to take care of the particular picture as it presents itself, the economic picture in the United States.

I do not believe I have anything further to say. I had some cases here, but I did not want to argue the matter so much from the standpoint of the cases and the decisions and precedents, as from the practical standpoint. Thank you.

Mr. SHALLENBERGER. Thank you very much, Mr. Dockweiler. (Thereupon the subcommittee adjourned at 11:45 a.m. to meet Wednesday morning, May 23, 1934, at 10 o'clock.)