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LORD,DA Y & LORD
2 5

L U C IU S H. B E E R S
H E N R Y D E F O R E S T B A LD W IN
F R A N K L IN B . L O R D

BROAD WAY

ALLAN B. A. BRADLEY
ALLEN EVARTS FO STE R

NEW

YORK

G E O R G E DE FO R ES T LORD
PARKER M CCOLLESTER

C U N A R D

CABLE ADDRESS

LORDATTY

B U I L D I N G

NEW YORK

W A S H I N G T O N OFFICE

R A N D O L P H E .P A U L
S H E R M A N B A L D W IN

S O U T H E R N BUI LDI NG

J A M E S S .H E M IN G W A Y
H E R B E R T B R O W N E L L ,J R .
T H O M A S F. D A L Y
H A R R Y J . R U D IC K

October 9, 1941

Mr. Elliott Thurston,
Federal Reserve Board,
Washington, D. C.
Dear Mr* Thurston:
I enclose herewith a much rewritten copy of the
National Tax Association paper I sent you the other day.
You will see how I have benefited from material you have
furnished me and Marriner kccles' statements at various
points of time*
Will you write it down on the cuff to send me a
copy of whatever Marriner expects to say at the luncheon
on Tuesday?

I always like to keep up with his mobile

ideas.
öincerelf yours

REP/eh







October 15, 1941.

Dear Mr. Paul:
Let me take this occasion to thank you again
for your help in connection with the St. Paul speech
and for sending copies of your papers both to the
Chairman and to myself.
I am enclosing a mimeographed copy of the
Chairman’s speech, whicn was not ready in time to mail
to you before you had left to go to the associations
meeting.
Yours sincerely,

Elliott Thurston,
Special assistant
to the Chairman.
Mr. Randolph Paul,
Lord, Day It Lord,
25 Broadway,
New York.

Enclosure.

ET cm

LORD, DAY & LORD
25

L U C IU S H . B E E R S
H E N R Y D E F O R E S T B A LD W IN
F R A N K L IN B . L O R D
ALLAN B. A. BRADLEY
ALLEN EVARTS FO STE R

B ROADWAY
NEW YORK
C U N A R D

G E O R G E DE F O R E S T LO R D
PARKER M CCOLLESTER

C A BLE

A D D R E S S

LORDATTY
NEW YORK

B U I L D I N G

R A N D O L P H E .P A U L
S H E R M A N B A L D W IN

W A S H I N GT O N OFFI CE

J A M E S S .H E M IN G W A Y
H E R B E R T B R O W N E L L ,J R .
T H O M A S F. D A L Y
H A R R Y J . R U D IC K

S O U T H E R N BUI LDI NG

October 11, 1941

Hon. Marriner Eccles,
Federal Reserve Board,
Washington, D. C.
Dear Marriner:
I think I did an injustice to Surrey in a reference
to him in the statutory construction paper recently sent
to you, and I have revised three pages which are enclosed
herewith.

Will you substitute these pages for the cor­

responding ones in your copy?
You will see from the enclosed copy of another paper
to be delivered before the National Tax Association on
revenue revisions that I have borrowed freely from your
prolific ideas.
I am looking forward to seeing you in St. Paul.

REP/eh




-6 -

approaches are being taken for granted.

15

It is a definite

step forward when opinions on constitutional issues are
short and almost snappy.
The Bruun case

furnishes a striking example of how

little is left of the unreconstituted Constitution.

The few

pages of the opinion in that case, written by Mr. Justice
17
Roberts, courteously distinguish Eisner v. Macomber
out of
existence.

No longer will the concept of income be restrict­

ed to the paralyzing requirement that it must be something
proceeding from and severed from capital for the separate
use, benefit and disposal of the taxpayer»
may now answer the description.

Something else

Importance is all along

the line, but in the stock dividend area new test cases are
now being advanced so that common stock dividends upon com­
mon stock, with no other class of stock outstanding, may
18
soon be taxable income.
Mr. Stanley Surrey, Assistant Legislative Counsel of
the Treasury, has said, no doubt in the mood of hyperbole,
that the Sixteenth Amendment is ,an historic relic" and can
!
now "scaroely claim a place even in the attic of the Supreme

15.
See Helvering v. Northwest Steel Rolling Mills,
Inc., 311 U-S. 46, 52 (1940), to the effect that a corpora­
tion's charter, taken together with state law,.does not con­
stitute "an executed written contract expressly dealing with
the payment of dividends."
See 1936 Act, Sec. 26(c)(1).




16.

Helvering v. Bruun, 309 U.S. 461 (1940).

17.

252 U.S. 189 (1920).

18.

See, e.g., Frank M. Travis, BTA Docket No. 105950.

-7-

Court."

19

Some critics have called the "extreme economic

philosophy" of the "New Deal majority in the Court" a
"trend toward confiscation of private property . . .

in
on

violation of the letter and spirit of the Constitution."
Of course, such statements are gross exaggerations.

Con­

stitutional victories for taxpayers in the income tax field
have always been noted for their rarity.2^
-

It is true that

the Constitution needed some reinterpretation;

the old

interpretation of the Sixteenth Amendment has been the prin­
cipal impediment to the development of a sound income tax
system.

In the estate tax field the versatile Fifth Amendment22

has a quota of damage to its discredit;

moreover, in both

branches of taxation fears of unconstitutionality have freQ%
quently distorted the interpretative process.

19.
Surrey, The Supreme Court and the Federal Income
Tax:
Some Implications of the Recent Decisions, 35 111* L.R.
779, 792-3 (1941).
20. Lawrence, High Court "Captured" in Tax Cases,
The Evening Star, Washington, D. C», Oct* 9, 1940.
See
also Mr. Lawrence's discussion in the New York Sun, July
14, 1941.
21.
Eisner v. Macomber, 252 IKS? 189 (1920); Edwards
v. Cuba R.R. Co», 268 U.S. 628 (1925);
Evans v. Gore, 253
UoS* 245 (1920), overruled by O'Malley v. Woodrough, 307
U*S* 277 (1939).
22.

Frankfurter, Law and Politics, p. 54 (1939)*

23.
See, e.g*, Lucas v. Alexander, 279 U»Si 573,
577 (1929);
Lewellyn v. Frick, 268 U.S. 238 (1925);
Reinecke v. Northern Trust Co., 278 U.S. 339 (1929)•




8-

Speaking more broadly, in the earlier days of modern
taxation constitutional Issues were overmagnified and some
reaction was inevitable.

The Constitution was badly construed,

and the Court is now putting constitutional restraints at a
much more remote point.

It is easy at such a time to lose

perspective and to think that all restraints are gone.

It

would be more accurate to think that some of the gloss of the
Constitution - some of the judge-made law of the Constitution
nowhere found in the text of the Instrument - is going to the
attic.

To change the metaphor, the reconstituted Supreme Court

is chloroforming some of the old rabbits which their predeces­
sors had pulled out of the constitutional hat,

We have a rein­

terpreted Constitution, not no Constitution at all*

We shall

surely preserve a Constitution to implement the promise that the
pow er to

ta x

Court sits.

s h a l l n o t be t h e

pow er to

d e s tr o y w h ile

th e

Suprem e

24
Statutory Construction

Since our tax statute is anchored in statutory law,

25

the principal tax labors of the Supreme Court are in the
vineyards of statutory construction.

Here we may note in

24. Holmes, J., dissenting in Panhandle Oil Co. v«
Knox, 277 U.Se 218, 223 (1928); Frankfurter, J., concurring
in Graves v* New York ex rel. O'Keefe, 306 U.S. 466, 491-2
(1939).
25.
Surrey, The Supreme Court and the Federal Income
Tax:
Some Implications of the Recent Decisions, 35 111. L*R.
779, 804 (1941).