Mr. BARKLEY. To what extent do these American business concerns in the Philippines send their products to America?

Mr. SMOOT. Take the sugar crop: It virtually all comes here with the exception of some of the low-grade sugar that they produce, which they sell to China. It all comes in here free. Mr. BARKLEY. What is the amount of tax which they pay in the Philippines to the Philippine government?

Mr. SMOOT. The producers of sugar?
Mr. BARKLEY. Yes; the local taxes.
Mr. SMOOT. I do not know.

Mr. BINGHAM. Mr. President, with regard to the sugar companies which are owned by Americans

Mr. SMOOT. The Americans own a very small percentage of them.

Mr. BINGHAM. I was just about to say that a very small percentage of the sugar companies were owned by Americans; but the companies that are owned by Americans are almost without exception owned by Americans whose residence is in this country or in the Territory of Hawaii, where they pay their regular income taxes on all income derived from those sugar plantations.

Mr. BARKLEY. How does the local tax there compare with the local taxes in the States, counties, and cities of the United States which must be paid by business men who engage in business in the States, counties, and cities, and who also have to pay this Federal tax?

Mr. SMOOT. It is very much lower. It is a very, very low tax.

Mr. BINGHAM. May I call the attention of the Senator from Kentucky to this fact: What we do in the Philippines is just as though right here in the city of Washington there was a British or French or German concern across the street from a concern owned by Americans, and the one owned by Americans had to pay our income taxes, while the men across the street, competing with the Americans, did not have to pay income taxes. That is the situation. We put a burden on the fact of a man's being an American in our own territory, under our own flag.

Mr. BARKLEY. Take the Senator's illustration. We will say that a Frenchman is down here on Pennsylvania Avenue engaged in competition with some American. He pays the local District taxes.

Mr. BINGHAM. He does. Mr. BARKLEY.

He pays no taxes to the French Government.

Mr. BINGHAM. But he pays taxes to the American Government-just the same taxes that his competitor pays. Mr. BARKLEY. But, because he does not pay taxes to the French Government, does the Senator mean that we ought to relieve the American citizen on the other side of the street from the payment of taxes to the Federal Government, in order that he may not be loaded with a burden?

Mr. BINGHAM. Oh, no; all I am asking is that we shall treat the American exactly as we do the Frenchman.

Mr. SMOOT. That is just exactly what we are doing. Mr. BARKLEY. To do that we would have to relieve him of all Federal taxes; would we not?

Mr. SMOOT. No, Mr. President. The only case that I know about of a foreigner who might do business in the District of Columbia and be relieved from taxes at home is the case of a British national. The French, and the nationals of all the other governments, have to pay their tax. There is only one country that is an exception to the rule, and that is Great Britain.

Mr. BARKLEY. Is the Senator from Utah in favor of relieving Americans in the Philippine Islands from this Federal tax?

Mr. SMOOT. No; I am not in favor of the amendment. Mr. COPELAND. Mr. President, if the Senator will yield, I do not think the answer is quite responsive to what the Senator from Kentucky asked. He spoke about the taxes charged on materials brought in from the Philippines. It would not make any difference whether they were shipped in by Americans or by British.

Mr. SMOOT. That was admitted.

Mr. COPELAND. All right. The purpose the Senator from Connecticut has in mind is that Americans in the Philippines shall be placed upon exactly the same basis as the nationals of other countries.

Mr. SMOOT. The nationals of Great Britain.
Mr. COPELAND.

Yes. Certainly.

Mr. COUZENS. Mr. President, will the Senator yield?
Mr. BINGHAM.

Mr. COUZENS. If this is done for Americans doing business in the Philippines, why will we not have to do the same thing for our merchants doing business in competition with British

merchants, for example, in the Argentine and in all other countries?

I do not see how we can segregate Americans doing business in the Philippines from Americans doing business in any other country. In other words, if they are going to be exempt in the Philippines they ought to be exempt in the Argentine and all the rest of the world where they do business.

Mr. BINGHAM. But the difference is that we can not make laws for the Argentine, and we do make laws for the Philippines, and under the present law we penalize a man for being an American.

Mr. COUZENS. But we can exempt the American doing business in the Argentine from our Federal taxation and accomplish the same result that the British try to do when they exempt their merchants doing business in foreign countries. Mr. BINGHAM. That is another question.

Mr. COUZENS. If it is done in one case it ought to be done in all.

Mr. BARKLEY. Mr. President, is it true that the British Government relieves Englishmen in China and in Japan and all other foreign countries from the payment of a domestic tax to the Government of Great Britain?

Mr. BINGHAM. Yes; the British Government believes in favoring the Britisher who goes into foreign countries to do trade, because they believe that their foreign trade is so valuable to them that they will do everything possible to encourage it; and the British Government, being the government over the people most engaged in foreign trade, follow the practice of encouraging their foreign traders by not obliging them to pay the local income tax.

Mr. BARKLEY. Then why should we not extend the same privilege to Americans in China and Japan and any other country where England relieves them of taxation?

Mr. BINGHAM. I shall be glad to vote to do that; but that is not what we are asked to do at the present time. What we are asked to do under this amendment, and under the substitute which I shall offer in a moment, is to see to it that we do not penalize an American for going to do business in one of our insular possessions, which is what we are actually doing now.

Mr. SMOOT. Mr. President, the amendment that is before the Senate at this moment applies only to the taxable years 1918. 1919, and 1920. I understand that the Senator is going to offer another amendment which shall apply hereafter. I do not know whether the Senator is going to offer that amendment or not; but this is the retroactive feature applying to those that have not paid the tax for 1918, 1919, and 1920. After the act of 1921, of course, there was no chance of a misunderstanding, because it was specifically provided that they should pay that tax. I think, and everybody else thought, that it did for 1918, 1919, and 1920, and it did under the law; but for those years the collection of the tax was thought to be under the officials of the Philippine Islands, and no effort was made to collect them.

Mr. BROUSSARD. Mr. President, I should like to ask the Senator from Connecticut a question.

A great deal of American capital has been invested in the Philippine Islands in the production of sugar, for instance, which competes with our sugar. Does the Senator believe we ought to exempt from taxation people who invest in the sugar industry in the Philippine Islands for the purpose of coming here and underselling our sugar?

Mr. BINGHAM. No, Mr. President. As I said a few moments ago I think the Senator was not in the Chamber at the time-practically all of those people to whom the Senator refers who have invested their money in sugar plantations in the Philippines are Americans who live in the United States or in the Territory of Hawaii, and pay the regular Federal income tax; and there is no effort whatever to relieve them of paying that. This is a matter which applies to Americans living in the Philippines, chiefly merchants and small industrialists who are engaged in business in the Philippines, in competition with Spaniards and others who are obliged to pay no tax to the United States Government at all. It is simply an effort to put those of our citizens who have the courage and the ambition to go out and help in the development of the Philippine Islands on exactly the same tax basis that the foreigners and nationals of other countries are on.

Mr. BROUSSARD. Suppose American citizens have gone into the Philippines and organized a corporation there. Would that corporation be exempt?

Mr. BINGHAM. If they lived in the Philippines.

Mr. BROUSSARD. That is just the same argument that can be advanced against Americans who invested in Cuba. We have done this for the Philippine Islands. Under the Underwood bill, their importations were limited to 300,000 tons.

Under the provisions of the Underwood Act, sugar was to go on the free list three years after the enactment of the law; and in the following year, 1914, that was repealed. It failed to reestablish the limitation on Philippine sugar. To-day we are receiving free of duty from the Philippines 500,000 tons of sugar, and if they double their production next year, we will have no limit at all. American capital goes there and produces sugar in a foreign country and imports it to this country; I say a foreign country because the Philippines are not a part of this country, as the Hawaiian Islands or Porto Rico are. They bring that sugar here and compete with us, without paying a cent of duty. I would not be willing to exempt the payment of taxes on corporations that they have organized in the Philippine Islands, in addition to the privilege they have to bring their sugar in free of duty. I think it is unfair to the domestic sugar producers. Doubtless there are other lines of industry producing agricultural products that come in and compete with American farmers. I am not in favor of that. I recall some years ago opposing such a provision in the case of China, because I knew that if we once adopted it we must apply it to other sections of the world that were friendly with us. I think the principle is vicious. I would not agree with it at all; I am much opposed to it.

Mr. BINGHAM. Mr. President, would the Senator be in favor of not taxing foreigners, Frenchmen, for instance, who were here in the city of Washington doing business, competing with our people, because they have to pay taxes at home? Would the Senator be willing to remit the income taxes of foreign concerns in the United States?

Mr. BROUSSARD. I do not think we should.

Mr. BINGHAM. Exactly. Then why does the Senator favor putting a penalty on Americans who are living under our flag in the Philippines, when he would not put that penalty on those who are living in the United States?

Mr. BROUSSARD. I assume that if it is a Frenchman, the French Government taxes him. If the French Government does not, there is no way for us to remedy that. The equities I think are entirely the other way.

Mr. SMOOT. The French Government does tax them.
Mr. BROUSSARD. I suppose they do.

Mr. COPELAND. Mr. President, I would like to say this to the Senator from Louisiana, that the sugar business in the Philippine Islands will be carried on because of the nature of the climate. If it is not carried on by Americans, it will be by somebody else. The Senator's relief, I think, lies not in opposition to the plan proposed by the Senator from Connecticut, but in a change in the tariff law on sugar.

Mr. BROUSSARD. I would like to tax every pound of sugar coming from the Philippines. There is no reason why it should come in here free of duty.

Mr. COPELAND. The matter we have to determine is whether Americans are going to exploit the Philippines and develop the country, or whether we are going to impose such hardships on them that they can not do business there, and the Dutch and the British and the French and other nationals will go in and do the business.

Mr. BROUSSARD. May I say this to the Senator from New York. Practically 90 per cent of the investments in sugar plants in Cuba are of American capital. We do not exempt them. We have a duty on their product, giving them a 20 per cent preferential. In the case of the Philippine Islands, we have no duty at all. So that to ask that the sugar from the Philippines shall come in free is asking quite a great deal more than the Americans who have a billion and a half dollars invested in Cuban sugar to-day are getting.

Mr. BINGHAM. May I say to the Senator from Louisiana that about 85 per cent of the Philippine sugar pays no tax to us at all, because the plants are owned and operated by the Filipinos or by foreigners. There is only about 15 per cent, as the Senator from Utah has said, that is owned by American capital, and nearly all of that capital is from people living in this country who pay the income tax.

66

Mr. COPELAND. Then the logic of what the Senator says is that no American can go into the Philippines, because if he does not raise sugar, he will raise lumber, or he will raise something else that will be in competition with Americans at home. Mr. BROUSSARD. I do not want them to compete in lumber. I do not want them to compete in anything we produce. Mr. COPELAND. The Senator does not want Americans to do business in the Philippines.

Mr. BROUSSARD. Yes; I do want Americans to do business in the Philippines.

Mr. COPELAND. How can they do it if they are not encouraged to go on with their work?

Mr. BROUSSARD. I think the Senator from New York would give them a bonus for going there.

Mr. SMOOT. Spaniards are building plants there right now. There are two going up now, with a capacity of 5,000 tons a day. The junior Senator from Montana knows what profits they are making, because I saw a statement made by the largest sugar factory to him in which it was said they were paying only 40 cents a day for their labor, and shipping their sugar here free of any duty whatever.

Mr. COPELAND. Then why does not the Senator from Utah, the great apostle of the tariff, correct that evil? If his plan were to be carried out, every American would be driven out of the Philippines.

Mr. SMOOT. I will tell the Senator what I would be perfectly willing to do in the Philippine Islands. There was provided a limit of 300,000 tons of sugar that might come in here free. It was stated before the committee in 1913 that at no time in all the history of the Philippine Islands would they raise 300,000 tons. They are producing now 587,000 tons, and I am perfectly willing to state to the sugar producers of the Philippine Islands, I do not care whether it is an American company manufacturing sugar or Spanish people manufacturing it, You can have a free market in the United States for 500,000 tons of sugar." The other they use at home. Whenever any Spaniard wants to go in there and make additional amounts of sugar, let him pay the tax on it. I would be perfectly willing to do that, giving Americans there every chance in the world. Mr. COPELAND. I do not see why the Senator, who is interested also in encouraging beet-sugar raising in this country, has not done that. But this is not the way to do it. Mr. SMOOT. I am perfectly aware of that.

Mr. COPELAND. This is not the way to do it, making it impossible for Americans to compete in the Philippines with the nationals of other countries.

Mr. SMOOT. The American has every advantage in the Philippines that the national of every other nation has, even if he has to pay the tax, just as citizens from every other country of the world pay a tax, with the exception of Englishmen. England, of course, depends upon her foreign trade. Her very life is wrapped up in it. She says, "You get out of England. We do not want you here. We want you to go to such and such a country and do business, and if you will do that, we will not tax you." All of the profits go back to England, there is no doubt about that. An Englishman who will go into a foreign country still has his love for his home, and his investments are nearly all made in English bonds or English loans.

Mr. BINGHAM. Does the Senator think that the Englishman has any greater love for his country than the American has for his; or any more desire to go back to his home, or his taxes?

to pay

Mr. SMOOT. No; I do not think so. Mr. BINGHAM. Mr. President, the object of this amend ment, which I now send to the desk and ask to have read as a substitute for the amendment proposed, is merely to give the Americans doing business in the Philippines the same privileges that we give the Englishman doing business in the Philippines, and no greater.

Mr. WALSH of Montana. Mr. President, am I quite right in

my understanding that the contention is that our fiscal ought to be regulated by the English Parliament, and

policy

if the

it. If they had only 2 per cent, and we exempted them from the payment of tariff duty and then exempted them from the payment of the income tax, in a very short time the experience we would have in the Philippines would be that the American capital would control the sugar production of the Philippine Islands, and we would have much more trouble after that. I do not want to encourage the production of any agricultural or industrial product in any foreign country by remitting their taxes, or by granting special favors in the matter of tariffs.

Let our people go outside and compete with the home people

if they care to, but they must meet the conditions other people have to meet.

do business abroad the Congress of the United States out to

follow the precedent thus set and exempt Americans doing ness abroad?

busi

Mr. BINGHAM. Mr. President, the remarks of the Senator

from Montana would be entirely applicable if the proposa 1

were

that we should remit taxes to Americans doing business in

China, Argentina, or any other foreign country. the question at issue at all.

That is not We have our possessions in the Philippines. We desire to have our citizens go there and do to their credit and to their children's credit. But at the present

time we insist that they do business there, as compared

with

ment to induce people to export capital of the United States to the Philippines.

Mr. BINGHAM. Just how the Senator can say "exporting " when we follow the flag

Mr. WALSH of Montana. Am I quite correct in my understanding that the exemption to which the Senator refers is under what we call the China act, under which Englishmen may incorporate themselves under the laws governing Hong Kong, and those who are incorporated under that act are exempt from the British income tax?

Mr. SMOOT. That is true.

Mr. WALSH of Montana. That is the situation. In other words, as stated by the Senator from Utah. they offer a premium to the Englishman who will go out and incorporate himself under the laws of the island of Hong Kong.

Mr. BINGHAM. Yes. Mr. President; as I said to the Senator before, that would be apropos if we were asking for the same privilege for Americans doing business under foreign flags. But this is a question of Americans doing business under the American flag, and being put under a handicap in comparison with foreigners doing business in the same place.

Mr. WALSH of Montana. The English have a fiscal policy. and by reason of the fact that the English have a fiscal policy, it is argued that we ought to accommodate our fiscal policy to theirs.

Mr. BINGHAM. In so far as Americans under our own flag are concerned.

Mr. WALSH of Montana. Of course, that is all we can do. Mr. BINGHAM. We could do more.

Mr. WALSH of Montana. That we ought to accommodate our fiscal policy with reference to Americans who go abroad to do business to the English policy.

Mr. CARAWAY. If the Senator imagines that he has the same rights in the Philippine Islands that he has in the city of Washington, he would better read his history again. None of the smiles of wisdom will ever quite breach over the distinction. If you wanted to make things equal, if you did not want to do something for some particular person, you could make your tax laws apply to the foreigner in the Philippines. You can do that in exactly the same number of words that you use now in an attempt to extend a favor to somebody to get him to go to the Philippine Islands.

Mr. BINGHAM. If the Senator will introduce such an amendment, I shall be glad to vote for it. All I am seeking is to secure fair play for the American doing business in the Philippines.

Mr. CARAWAY. Is it not strange how particularly interested we are in somebody who will do business somewhere else instead of here? So much money has to be raised to run this country, but amendments are offered here to try to get the American business man to go somewhere else to do business. Mr. BINGHAM. There never was any effort under the law of 1913 or 1916 to oblige that money which was collected in the Philippines under the income tax law to be paid into the Treasury of the United States. There was no effort made to make Americans in the Philippines pay their taxes into the Treasury of the United States.

Mr. CARAWAY. There is none now.

Mr. BINGHAM. Oh, since 1918 there has been.
Mr. COPELAND. Mr. President, will the Senator yield?
Mr. BINGHAM. I yield.

Mr. COPELAND. The way it strikes me, if I may say to the Senator from Arkansas, is that by a wise fiscal policy we could encourage the development of the Philippine Islands by Ameri

Mr. WALSH of Montana. No; I regard the PhilippinesMr. BINGHAM. This relates only to the Philippines, and the Senator referred to going abroad to do business.

Mr. WALSH of Montana. I understand that perfectly well, but how can the Senator from Connecticut distinguish between a man who goes to the Philippines to do business and a man who goes to China to do business?

Mr. BINGHAM. If the Senator will look at the flag, he can see quite a difference. I ask that the amendment which I send to the desk be read.

The VICE PRESIDENT. The clerk will read.

The CHIEF CLERK. On page 161, immediately succeeding subdivision (3) of section 251, add the following subdivision:

(4) This subsection shall apply retroactively to the years 1918 to 1927, inclusive, and the Commissioner of Internal Revenue is hereby authorized to remit, refund, and pay back any excess of income or profit taxes paid for said years pursuant to the provisions of the revenue acts of 1918, 1921, 1924, and 1926: Provided, That a claim therefor is filed within one year after the enactment of this act, anything in section 322 to the contrary notwithstanding.

Mr. WALSH of Montana. If the Senator pursues his argument, then he ought to apply it to continental United States as well as to the Philippines.

Mr. BINGHAM. Mr. President, may I say to the Senator from Montana that in the continental United States to-day we tax the foreigner doing business, for instance, here in Washington, just the same as we tax the American across the street. whereas in the Philippines we tax the American across the street and do not tax the foreigner.

Mr. WALSH of Montana. The foreign country does not tax him.

Mr. BROUSSARD. They do not belong to this country, and we have no right to tax them.

velop the resources of that country, I think it would redound to our great financial advantage.

Mr. CARAWAY. How would it redound to our financial advantage if we are not going to tax them?

Mr. COPELAND.

We might be more considerate of them. Mr. CARAWAY. The Senator is very willing to encourage American people go over there and then, if they establish a hive of bees, take the honey away from them later on.

Mr. COPELAND. I am perfectly willing to have the Senator put it that way. If we have to have a further bounty to have our people go there, all well and good. It is true that Americans can not compete with foreigners in the Philippines unless we do make some concession to them.

Mr. CARAWAY. I have heard that same thing said about China, that an American can not do business anywhere unless we pay a bounty. If we are going to engage in the payment of bounties, we have lots of territory in the United States where we might offer bounties to get people to develop.

Mr. NORRIS. Mr. President, will the Senator from Arkansas yield to me?

Mr. CARAWAY. I yield.

Absolutely.

Mr. CARAWAY. Mr. NORRIS. We are giving to those people a subsidy that we do not give to our own people, or rather we are giving it to some of our own people who are doing business there. It seems to me we ought also consider in connection with those people who are doing business in China, the Philippines, Nicaragua, and other foreign countries, that it costs the taxpayers of the United States a whole lot of money to keep the marines there and to keep the Navy there. That is no idle dream. It has not been long since I read in the newspapers of a meet

Mr. BROUSSARD. They have subjected themselves to our jurisdiction.

Mr. BINGHAM. How about those going to the Philippines? Mr. BROUSSARD. That is an entirely different proposition. Mr. BINGHAM. Oh, no, Mr. President. When the act of 1913 and the act of 1916 were passed we applied them to foreigners doing business in the Philippines.

Mr. CARAWAY. Why do we not do that now?
Mr. BINGHAM. That would be the answer.

Mr. CARAWAY. Why does not the Senator offer an amendment to make the foreigner pay the same rate of tax that an

business in China, who had passed resolutions demanding that more marines be sent to China to protect them and their business relations there. If we are going to free them from taxes that we burden ourselves with, and if we are going to give them this subsidy, and in addition to that employ an army to enable them to continue their business in those foreign countries, we are giving them more than they have any right to ask.

Mr. CARAWAY. I do not know why those people who are so anxious about that do not go further and provide that if they pay local taxes, then we should let them do business absolutely free from any burdens whatsoever.

Mr. NORRIS. The only argument I have heard has been that foreign governments relieve their citizens of such taxes.

Mr. CARAWAY. No; there is one that does not do it. Mr. NORRIS. Other foreign governments give subsidies to their ships. But that is no reason why we should do it. It seems to me if an American citizen goes to China or to the Philippines or any other country, if he is patriotic, would not expect his country to relieve him from income taxes that people at home have to pay.

Mr. WHEELER. Mr. President

Mr. CARAWAY. I yield to the Senator from Montana.

Mr. WHEELER. Since the Senator from Utah [Mr. SMOOT] called the attention of the Senate to the fact, it is rather amusing to me to hear the Senator from New York [Mr. COPELAND] talk about Americans not being able to compete over in the Philippines. The manager of one sugar company, for instance, with whom I talked not long ago told me that they work their men 12 hours a day and pay them one peso a day, which is approximately 50 cents, or something under 50 cents, a day. He said that they had an investment of $1,500,000 and that they made 33% per cent upon the investment.

Mr. SMOOT. It is more than that. I have their published annual statements, and one year they made over 100 per cent. Mr. CARAWAY. But they are not able to pay any taxes! Mr. SMOOT. Another year they made 90 per cent. I have a statement issued by the company showing exactly what they have made from year to year.

Mr. WHEELER. Not only that, but I talked with an American who is engaged in the lumber business and they are making enormous profits. He said they started without anything and that in the next 10 years they expect to make a million dollars. The same is true not only of sugar, but of coconuts and hemp and practically every line of industry over there. They are over there in the cattle business on a large scale and making huge profits. They are competing with the sugar people and cattle raisers and lumber people of this country, shipping their products in here free of charge. Not only that, but now it is proposed to give them an exemption so they will not have to pay any income tax. The Senator from Connecticut [Mr. BINGHAM] said that it is only citizens who go there and live, but that is not so. American citizens can go over there and organize a corporation under the law of the Philippine Islands, and that corporation will be exempted from all income tax under this provision.

Mr. BINGHAM. Does the Senator mean to imply that Americans whose money is invested in the Philippine Islands do not have to pay income taxes?

Mr. WHEELER. Oh, no, but the corporation would get away from the payment of taxes to the United States Government. Mr. BROUSSARD. Mr. President

Mr. CARAWAY. I yield to the Senator from Louisiana. Mr. BROUSSARD. I desire to call the attention of the Senator from Nebraska to the fact that over and above the many advantages he enumerated is the particularly significant fact that 500,000 tons of sugar are imported annually from the Philippine Islands, and although the regular duty on sugar is 2 cents, they do not pay one cent of duty.

Mr. SMOOT. That is true, and they have about one-half the freight rates from the west to Chicago that local growers in the United States have.

Mr. COPELAND. Mr. President, will the Senator from Arkansas yield to me?

Mr. WHEELER. The New York papers ought to carry the information. The people in New York are probably the last ones to get any information about what is going on outside of the city of New York.

Mr. CARAWAY. Or to care for it.

Mr. WHEELER. But the facts are, if the Senator would go to the Philippine Islands he would find the profits they are making are such that it would startle him. They are making enormous profits in sugar and everything else.

Mr. COPELAND. I hope the Senator will not give emphasis to that, because it is so attractive, so appealing, and so absurd, that in spite of this combination there might be a million New York citizens depart for the Philippines to-morrow.

Mr. CARAWAY. And the radio does not work over there.
Mr. COPELAND. Oh, yes; they have short wave lengths.
Mr. REED of Missouri. Mr. President-

Mr. CARAWAY. I yield to the Senator from Missouri.
Mr. REED of Missouri. I would like to ask the Senator from
Connecticut if there is anything in the bill that limits the profits
on wooden nutmegs?

Mr. CARAWAY. Not if they make them in the Philippines. Mr. BINGHAM. We do not ask for any protection on that product.

Mr. REED of Missouri. The Senator's State has a natural monopoly on them. [Laughter.] This is the first time I have ever known a bill to be introduced in Congress to encourage citizens of the United States to emigrate. I thought the Senator from Connecticut and his party were devoted to building up the home markets in the United States for our farmers to sell their goods.

Mr. BINGHAM. May I call the Senator's attention to the fact that when the Democrats were in power in 1913 and in 1916 and passed the income tax laws of those years they did not require Americans in the Philippines to pay any money into the Treasury of the United States on their incomes.

Mr. REED of Missouri. They forgot about it.

Mr. BINGHAM. Oh, no; they provided that the tax should be paid in the treasury of the Philippines.

Mr. NORRIS. Mr. President, I would like to inquire of the Senator from Utah about the amendment. If I understand it pending question, but merely a contemplated amendment? correctly, we have been discussing something that is not the

Mr. SMOOT. The Senator was out when I made the explanation. The Senator from Connecticut [Mr. BINGHAM] is compelled to leave the city to-night and he asked me to offer the amendment for him so that he could speak upon it tonight. Now he has offered another amendment to that amendment extending a further privilege than the first amendment contemplated.

Mr. NORRIS. Then the pending question is on the amendment to the amendment?

Mr. SMOOT. That is the pending question. In other words, the amendment means that any American in the Philippines who has paid income taxes shall be given back the tax that he has already paid.

Mr. NORRIS. Is that a committee amendment?

Mr. SMOOT. No. I offered it as an accommodation to the Senator from Connecticut.

Mr. NORRIS. I am glad to know the committee is not behind a thing of that kind. The first proposition is whether we shall make that general, as I understand.

Mr. SMOOT. No. The first proposition is applying only to the years 1918, 1919, and 1920.

Mr. NORRIS. But I understand the Senator from Connecticut has offered an amendment to that.

Mr. SMOOT. Yes; and we vote first on the amendment to the amendment.

Mr. COPELAND. Mr. President, I would like to ask the Senator from Utah a question. What does this language mean on page 160, line 15?

Mr. SMOOT. We are not quite through with committee amendments. This amendment was offered in order to accom modate the Senator from Connecticut.

Mr. BINGHAM subsequently said: I desire to give notice

that when the revenue bill shall be in the Senate, if I am

I shall call up the amendment offered by the Senator

here,

from

because he is making too much money in this country.

am not here, the Senator from Utah has agreed that he

Will

Mr. SMOOT. Mr. President, I call for the yeas and nays. Mr. BINGHAM. Mr. President, I ask to withdraw the amendment to the amendment offered by the Senator from Utah. After the explanations that have been made and objections which have been made to it, I shall not offer it. I ask that the vote be taken on the amendment offered by the Senator from Utah.

Mr. COPELAND. I am going to offer an amendment like the one the Senator has withdrawn.

Mr. BINGHAM. The Senator is at liberty to do it, but I hope he will let us get a vote on the other amendment first. The VICE PRESIDENT. The amendment to the amendment is withdrawn by the Senator from Connecticut. The question is on the amendment offered by the Senator from Utah.

Mr. LA FOLLETTE. Mr. President, section 262 of the existing law was written into law after a bitter fight when the 1921 tax bill was under consideration. The bill as originally reported from the committee provided that if a corporation did 80 per cent of its business in a foreign country it should be exempted from the provisions of the income tax law. That contest was waged in this Chamber by my father. The debate was protracted. I shall not endeavor at this time to summarize the arguments which were advanced in support of the contention made by him that the committee's amendment should be stricken from the bill.

Mr. BINGHAM. Mr. President, will the Senator from Wisconsin yield at that point?

Mr. LA FOLLETTE. I yield.

Mr. BINGHAM. The Senator is aware that the amendment regarding the 80 per cent clause has not been offered.

Mr. LA FOLLETTE. I understand that, Mr. President. Mr. BINGHAM. The amendment now before us has nothing to do with that.

Mr. LA FOLLETTE. I understand that; but, Mr. President, the amendment which the Senator from Connecticut intended to offer, and the amendment which the Senator from New York [Mr. COPELAND] has now stated he intends to offer, opens up this whole question, and I am satisfied that a majority of the Members of this Chamber will never give their consent to any such a proposition being written into the law of this country. It merely opens the way for corporations of the United States doing business in foreign countries to escape taxation. In a nutshell, that is what it comes down to.

Mr. President, in so far as the pending amendment is concerned, I should not find myself so much in opposition to that proposal. It merely provides that section 262 shall be made retroactive in so far as that act is concerned. The merits of the pending amendment I am not prepared to argue; but it does not raise the important question of public policy which is raised by the second amendment the Senator from Connecticut has sponsored and which the Senator from New York now advises the Senate he will sponsor.

Since the Senator from Connecticut has withdrawn his second amendment, I shall not discuss this subject at length at this time, because I wish to accommodate the Senator from Connecticut [Mr. BINGHAM] in a speedy disposition of the pending amendment; but I serve notice upon the senior Senator from New York, and upon any other Senator, that if the proposition is to be put forward here once more to write into the laws of this country the provision with regard to the exemption of corporations doing 80 per cent of their business abroad from the income tax law of this country, I shall prepare myself to debate that question at length with the Senator from New York or with any other Senator who desires to raise that issue in this Chamber.

Mr. KING. Mr. President, the amendment offered by my colleague, if I understand it, seeks to apply retroactively for the taxable years 1918, 1919, and 1920 complete exemption from taxation to American citizens who were doing business in the Philippine Islands. The amendment means that American citizens who derive incomes from investments or property or personal service in the Philippine Islands during the years just mentioned, and who have not paid the taxes due from them to the United States under the revenue laws in force during those years, shall be relieved from any liability whatever, notwithstanding the fact that some American citizens did pay to the United States taxes derived during the same years from their investments and services in the Philippine Islands. The American citizens who paid their income taxes, if this amendment is adopted, are penalized. Those who ignored the law and made no returns, thus preventing the running of the statute of limitations, are to be forgiven and relieved from all liability.

The Senator from Wisconsin [Mr. LA FOLLETTE] has just indicated that there may be some merit to the proposition that the

1918, 1919, and 1920 and collect the heavy war taxes imposed under the revenue laws of those years.

Retroactive legislation must have strong reasons, indeed, compelling reasons, to justify it. I am not persuaded that such reasons exist in behalf of the proposal embodied in the amendment under consideration. Moreover, Mr. President, there is a movement of no small proportions in favor of exempting all incomes received by American citizens from investments in foreign countries, whether such incomes are derived in the form of dividends from corporations or from personal services, or individual investments. It is also the purpose to apply this principle to incomes derived by American citizens from the Philippine Islands, and Porto Rico.

Mr. NORRIS. Mr. President, will the junior Senator from Utah yield?

Mr. KING. I yield.

Mr. NORRIS. I have not been able to hear all of the debate, but I should like to say to the Senator that anyone who is going to sponsor an amendment that will be retroactive in its effect as to a certain class of people ought to establish by at least a preponderance of evidence the justice or equity of such a proposal. I should like to have the Senator tell me why any persons should be put in a preferential class and why we should pay back their taxes.

Mr. KING. Mr. President, as I understand the facts, they are substantially as follows: In 1918, 1919, and 1920 some American citizens who had investments in the Philippine Islands and some of whom resided there took the position that the revenue laws of the United States then in force did not require them to pay into the Treasury of the United States either income taxes or corporate taxes received from their investments in the Philippine Islands. Other American citizens believed they were subject to the revenue laws and paid their income and corporate taxes to the United States. Those who did not believe the revenue laws applicable to them made no returns to the Treasury, By failing to do so they are not protected by the running of the statute of limitations.

Mr. NORRIS. How was the matter decided? Which of the classes was right?

Mr. KING. The court decided four or five years ago, as I recall, that the revenue laws applied and that the Government was entitled to collect income and corporate taxes from the investments in the Philippine Islands.

Mr. NORRIS. Why should they not all pay?

Mr. KING. I am inclined to think they should. It is true the Government was perhaps derelict in enforcing the law and by its inactivity tended to confirm the views of the nonpaying taxpayers that they did not come within the provisions of the law. Perhaps the Treasury officials believed that the Philippine officials would collect an equivalent tax. At any rate, the tax was not collected from a number of individuals and corporations, and they now appreciate the fact that at this late date they are liable and that the Government may proceed and enforce payment of the delinquent taxes for the years mentioned. It would seem that if those who refused to make returns or omitted to make returns are freed from taxes legally due for the years 1918, 1919, and 1920, then there would be a moral obligation upon the part of the United States to refund the taxes collected from those citizens who responded to the provisions of the law and paid their taxes into the Treasury of the United States. Mr. NORRIS. And some have paid and some have not. This proposed action, it seems to me, will be giving credit to those who did not pay their tax.

Mr. KING. The amendment in effect is equivalent to a premium to those who were slothful or indifferent or recalcitrant, who did not pay taxes justly and legally due, and it operates to penalize and punish those who did their duty and discharged their obligations to the Government. It seems to me, Mr. President, that it would constitute a bad precedent and would justify demands being made upon the Government in a multitude of cases where strict compliance with the law, instead of being a virtue, will result in serious disadvantages.

Mr. EDGE. Mr. President, will the Senator yield?
Mr. KING. Yes.

Mr. EDGE. I am seeking information. I do not recall the facts, and am inclined to think the Senator from Utah is more familiar with them. I desire to ask what was the law we passed a few years ago in connection with the tax exemption of certain American citizens doing business in China?

Mr. KING. Does the Senator refer to what was called the China trade corporation act?

Mr. EDGE. That is what I have in mind.

Mr. KING. My recollection is that American citizens who were stockholders in corporations organized for the purpose of carrying on business in China obtained certain deductions