|Pollock v. Farmers' Loan & Trust Company (Rehearing)
(No. 898, 894)
[ Fuller ]
[ Harlan ]
[ Brown ]
[ Jackson ]
[ White ]
Pollock v. Farmers' Loan & Trust Company (Rehearing)
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK
MR. JUSTICE HARLAN dissenting.
At the former hearing of these causes, it as adjudged that, within the meaning of the Constitution, a duty on incomes arising from rents was a direct tax on the lands from which such rents were derived, and therefore must be apportioned among the several States on the basis of population, and not by the rule of uniformity throughout the United States, as prescribed in the case of duties, imposts, and excises. And the Court, eight of its members being present, was equally divided upon the question whether all the other provisions of the statute relating to incomes would fall in consequence of that judgment.
It is appropriate now to say that however objectionable the law would have been, after the provision for taxing incomes arising from rents was stricken out, I did not then, nor do I now, think it within the province of the court to annul the provisions relating to incomes derived from other specified sources, and take from the government the entire revenue contemplated to be raised by the taxation of incomes, simply because the clause relating to rents was held to be unconstitutional. The reasons for this view will be stated in another connection.
From the judgment heretofore rendered, I dissented, announcing my entire concurrence in the views expressed by Mr. Justice White in his very able opinion. I stated at that time some general conclusions reached by me upon the several questions covered by the opinion of the majority.
In dissenting from the opinion and judgment of the court on the present application for a rehearing, I alluded to particular questions discussed by the majority, and stated that, in a dissenting opinion to be subsequently filed, I would express my views more fully than I could then do as to what, within the meaning of the Constitution, and looking at the practice of the government as well as the decisions of this court, was a "direct" tax to be levied only by apportioning it among the States according to their respective numbers.
By section 7 of the act of August 8, 1894, known as the [p639] Wilson Tariff act and entitled "An act to reduce taxation, to provide revenue for the government, and for other purposes," it was provided:
That from and after the first day of January, eighteen hundred and ninety-five, and until the first day of January, nineteen hundred, there shall be assessed, levied, collected, and paid annually upon the gains, profits, and income received in the preceding calendar year by every citizen of the United States, whether residing at home or abroad, and every person residing therein, whether said gains, profits, or income be derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any other source whatever, a tax of two percentum on the amount so derived over and above four thousand dollars, and a like tax shall be levied, collected, and paid annually upon the gains, profits, and income from all property owned and of every business, trade, or profession carried on in the United States by persons residing without the United States.
Section 28 declares what shall be included and what excluded in estimating the gains, profits, and income of any person.
The Constitution declares that
the Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States.
Art. I, Sec. 8.
The only other clauses in the Constitution, at the time of its adoption, relating to taxation by the general government were the following:
Representatives and direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three-fifths of all other person. The actual enumeration shall be made within three years after the first meeting of the Congress of the United States, and [p640] within every subsequent term of ten years, in such manner as they shall by law direct.
Art. I, Sec. .
No capitation, or other direct, tax shall.be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.
Art. I, Sec. 9.
No tax or duty shall be laid on articles exported from any State.
Art. I, Sec. 9.
The Fourteenth Amendment provides that
representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed.
It thus appears that the primary object of all taxation by the general government is to pay the debts and provide for the common defence and general welfare of the United States, and that, with the exception of the inhibition upon taxes or duties on articles exported from the States, no restriction is in terms imposed upon national taxation except that direct taxes must be apportioned among the several States on the basis of numbers (excluding Indians not taxed), while duties, imposts and excises must be uniform throughout the United States.
What are "direct taxes" within the meaning of the Constitution? In the convention of 1787, Rufus King asked what was the precise meaning of direct taxation, and no one answered. Madison Papers, Elliott's Debates 451. The debates of that famous body do not show that any delegate attempted to give a clear, succinct definition of what, in his opinion, was a direct tax. Indeed, the report of those debates upon the question now before us is very meagre and unsatisfactory. An illustration of this is found in the case of Gouverneur Morris. It is stated that, on the 12th of July, 1787, he moved to add to a clause empowering Congress to vary representation according to the principles of "wealth and numbers of inhabitants," a proviso "that taxation shall be in proportion to representation." And he is reported to have remarked on that occasion, that, while some objections lay against his motion, he supposed "they would be removed by restraining the rule to direct taxation." Elliott's Debates 30. But, on the 8th of August, 1787, the work of the Committee on Detail being before [p641] the convention, Mr. Morris is reported to have remarked, "let it not be said that direct taxation is to be proportioned to representation." Elliott's Debates 393.
If the question propounded by Rufus King had been answered in accordance with the interpretation now given, it is not at all certain that the Constitution, in its present form, would have been adopted by the convention, nor, if adopted, that it would have been accepted by the requisite number of States.
A question so difficult to be answered by able statesmen and lawyers directly concerned in the organization of the present government can now, it seems, be easily answered, after a reexamination of documents, writings, and treatises on political economy, all of which, without any exception worth noting, have been several times directly brought to the attention of this court. And whenever that has been done, the result always, until now, has been that a duty on incomes, derived from taxable subjects, of whatever nature, was held not to be a direct tax within the meaning of the Constitution, to be apportioned among the States on the basis of population, but could be laid, according to the rule of uniformity, upon individual citizens, corporations, and associations without reference to numbers in the particular States in which such citizens, corporations, or associations were domiciled. Hamilton, referring to the distinction between direct and indirect taxes, said it was "a matter of regret that terms so uncertain and vague in so important a point are to be found in the Constitution," and that it would be vain to seek "for any antecedent settled legal meaning to the respective terms." 7 Hamilton's Works, (orig. ed.) 845.
This court is again urged to consider this question in the light of the theories advanced by political economists. But Chief Justice Chase, delivering the judgment of this court in Veazie Bank v. Fenno, 8 Wall. 533, 542, observed that the enumeration of the different kinds of taxes that Congress was authorized to impose was probably made with very little reference to the speculations of political economists, and that there was nothing in the great work of Adam Smith, published shortly before the meeting of the convention of 1787, that [p642] gave any light on the meaning of the words "direct taxes" in the Constitution.
From the very necessity of the case, therefore, we are compelled to look at the practice of the government after the adoption of the Constitution, as well as to the course of judicial decision.
By an act of Congress, passed June , 1794, c. 4, 1 Stat. 373, specified duties were laid "upon all carriages for the conveyance of persons," that should be kept by or for any person for his use, or to be let out to hire, or for the conveying of passengers. The case of Hylton v. United States, 3 Dall. 171, decided in 1796, distinctly presented the question whether the duties laid upon carriages by that act was a direct tax within the meaning of the Constitution. If it was a tax of that character, it was conceded that the statute was unconstitutional for the reason that the duties imposed by it were not apportioned among the States on the basis of numbers. As the case involved an important constitutional question, each of the Justices who heard the argument delivered a separate opinion. Chief Justice Ellsworth was sworn into office on the day the decision was announced, but, not having heard the whole of the argument, declined to take any part in the judgment. It can scarcely be doubted that he approved the decision, for, while a Senator in Congress from Connecticut, he voted more than once for a bill laying duties on carriages, and, with Rufus King, Robert Morris, and other distinguished statesmen, voted in the Senate for the act of June 5, 1794. Annals of Congress, 3d Sess., 1793-1795, pp. 120, 849. .
It is well to see what the Justices who delivered opinions in the Hylton case said as to the meaning of the words "direct taxes" in the Constitution.
Mr. Justice Chase said:
As it was incumbent on the plaintiff's counsel in error, so they took great pains to prove that the tax on carriages was a direct tax; but they did not satisfy my mind. I think at least it may be doubted, and if I only doubted, I should affirm the judgment of the Circuit Court. The deliberate decision of the national legislature (who did not consider a tax on carriages a direct tax, but [p643] thought it was within the description of a duty) would determine me, if the case was doubtful, to receive the construction of the legislature. But I am inclined to think that a tax on carriages is not a direct tax within the letter or meaning of the Constitution. The great object of the Constitution was to give Congress a power to lay taxes adequate to the exigencies of government; but they were to observe two rules in imposing them, namely, the rule of uniformity, when they laid duties, imposts, or excises, and the rule of apportionment according to the census, when they laid any direct tax. . . . The Constitution evidently contemplated no taxes as direct taxes, but only such as Congress could lay in proportion to the census. The rule of apportionment is only to be adopted in such cases where it can reasonably apply, and the subject taxed must ever determine the application of the rule. If it is proposed to tax any specific article by the rule of apportionment, and it would evidently create great inequality and injustice, it is unreasonable to say that the Constitution intended such tax should be laid by that rule. It appears to me that a tax on carriages cannot be laid by the rule of apportionment without very great inequality and injustice. For example, suppose two States, equal in census, to pay $80,000 each by a tax on carriages of eight dollars on every carriage, and in one State there are 100 carriages, and in the other 1000. The owners of carriages in one State would pay ten times the tax of owners in the other. A in one State would pay for his carriage eight dollars, but B, in the other State, would pay for his carriage eighty dollars. . . . I think an annual tax on carriages for the conveyance of persons may be considered as within the power granted to Congress to lay duties. The term duty is the most comprehensive next to the general term tax, and practically in Great Britain (whence we take our general ideas of taxes, duties, imposts, excises, customs, etc.) embraces taxes on stamps, tolls for passage, etc., and is not confined to taxes on importation only. . . . I am inclined to think, but of this I do not give a judicial opinion, that the direct taxes contemplated by the Constitution are only two, to-wit, a capitation or poll tax, simply, without [p644] regard to property, profession, or any other circumstance, and a tax on land. I doubt whether a tax, by a general assessment of personal property within he United States is included within the term "direct tax."
Mr. Justice Paterson:
What is the natural and common or technical and appropriate meaning of the words "duty" and "excise" it is not easy to ascertain. They present no clear and precise idea to the mind. Different persons will annex different significations to the terms. It was, however, obviously the intention of the framers of the Constitution that Congress should possess full power over every species of taxable property, except exports. The term "taxes" is generical, and was made use of to vest in Congress plenary authority in all cases of taxation. The general division of taxes is into direct and indirect. Although the latter term is not to be found in the Constitution, yet the former necessarily implies it. Indirect stands opposed to direct. There may, perhaps, be an indirect tax on a particular article that cannot be comprehended within the description of duties, or imposts, or excises; in such case, it will be comprised under the general denomination of taxes; for the term "tax" is the genus, and includes: 1. Direct taxes. 2. Duties, imposts, and excises. 3. All other classes of an indirect kind, and not within any of the classifications enumerated under the preceding heads. The question occurs how is such tax to be laid, uniformly or apportionately? The rule of uniformity will apply, because it is an indirect tax, and direct taxes only are to be apportioned. What are direct taxes within the meaning of the Constitution? The Constitution declares that a capitation tax is a direct tax, and, both in theory and practice, a tax on land is deemed to be a direct tax. In this way, the terms direct taxes and capitation and other direct tax are satisfied. . . . I never entertained a doubt that the principal, I will not say the only, objects that the framers of the Constitution contemplated a falling within the rule of apportionment were a capitation tax and a tax on land. Local considerations and the particular circumstances and relative situation of the States naturally lead to this view of the subject. The provision was made in favor of the Southern States. They possessed a large number of slaves; they had extensive tracts of territory, thinly settled and not very productive. A majority of the States had but few slaves, and several of them a limited territory, well settled, and in a high state of cultivation. The Southern States, if no provision had been introduced in the Constitution, would have been wholly at the mercy of the other States. Congress, in such case, might tax slaves at discretion or arbitrarily, and land in every part of the Union after the same rate or measure: so much a head in the first instance, and so much an acre in the second. To guard them against imposition in these particulars was the reason of introducing the clause in the Constitution which directs that representatives and direct taxes shall be apportioned among the States according to their respective numbers. On the part of the plaintiff in error, it has been contended that the rule of apportionment is to be favored, rather than the rule of uniformity, and, of course, that the instrument is to receive such a construction as will extend the former and restrict the latter. I am not of that opinion. The Constitution has been considered as an accommodating system; it was the effect of mutual sacrifices and concessions; it was the work of compromise. The rule of apportionment is of this nature; it is radically wrong; it cannot be supported by any solid reasoning. Why should slaves, who are a species of property, be represented more than any other property? The rule, therefore, ought not to be extended by construction. Again, numbers do not afford a just estimate or rule of wealth. It is, indeed, a very uncertain and incompetent sign of opulence. . . . If a tax upon land, where the object is simple and uniform throughout the States, is scarcely practicable, what shall we say of a tax attempted to be apportioned among, and raised and collected from, a number of dissimilar objects? The difficulty will increase with the number and variety of the things proposed for taxation. We shall be obliged to resort to intricate and endless valuations and assessments, in which everything will be arbitrary and nothing certain. There will be no rule to walk by. The rule of uniformity, on the contrary, implies certainty, and leaves nothing to the will and pleasure of the assessor. In such case, the object and the sum coincide, the rule and thing unite, and, of course, there can be no imposition. The truth is that the articles taxed in one State should be taxed in another; in this way, the spirit of jealousy is appeased, and tranquillity preserved; in this way, the pressure on industry will be equal in the several States, and the relation between the different objects of taxation duly preserved. Apportionment is an operation on States, and involves valuations and assessments, which are arbitrary and should not be resorted to but in case of necessity. Uniformity is an instant operation on individuals, without the intervention of assessments or any regard to States, and is at once easy, certain, and efficacious. All taxes on expenses or consumption are indirect taxes.
Mr. Justice Iredell:
1. All direct taxes must be apportioned. 2. All duties, imposts, and excises must be uniform. If the carriage tax be a direct tax within the meaning of the Constitution, it must be apportioned. If it be a duty, impost, or excise, within the meaning of the Constitution, it must be uniform. If it can be considered as a tax, neither direct within the meaning of the Constitution nor comprehended within the term "duty, impost, or excise," there is no provision in the Constitution one way or another, and then it must be left to such an operation of the power, as if the authority to lay taxes had been given generally in all instances, without saying whether they should be apportioned or uniform, and, in that case, I should presume the tax ought to be uniform, because the present Constitution was particularly intended to affect individuals, and not States, except in particular cases specified, and this is the leading distinction between the articles of Confederation and the present Constitution. As all direct taxes must be apportioned, it is evident that the Constitution contemplated none as direct but such as could be apportioned. If this cannot be apportioned, it is, therefore, not a direct tax in the sense of the Constitution. That this tax cannot be apportioned is evident. . . . Such an arbitrary method of taxing different States differently is a suggestion [p647] altogether new, and would lead, if practised, to such dangerous consequences that it will require very powerful arguments to show that that method of taxing would be in any manner compatible with the Constitution, with which at present I deem it utterly irreconcilable, it being altogether destructive of the notion of a common interest, upon which the very principles of the Constitution are founded, so far as the condition of the United States will admit. . . . Some difficulties may occur which we do not at present foresee. Perhaps a direct tax in the sense of the Constitution can mean nothing but a tax on something inseparably annexed to the soil; something capable of apportionment under all such circumstances. . . . It is sufficient, on the present occasion, for the court to be satisfied that this is not a direct tax contemplated by the Constitution, in order to affirm the present judgment, since, if it cannot be apportioned, it must necessarily be uniform. I am clearly of opinion this is not a direct tax in the sense of the Constitution, and therefore that the judgment ought to be affirmed.
Mr. Justice Wilson:
As there were only four judges, including myself, who attended the argument of this cause, I should have thought it proper to join in the decision though I had before expressed a judicial opinion on the subject, in the Circuit Court of Virginia, did not the unanimity of the other three judges relieve me from the necessity. I shall now, how.ever, only add that my sentiments in favor of the constitutionality of the tax in question have not been changed.
The scope of the decision in the Hylton case will appear from what this court has said in later cases to which I will hereafter refer.
It is appropriate to observe in this connection that the importance of the Hylton case was not overlooked by the statesmen of that day. It was argued by eminent lawyers, and we may well assume that nothing was left unsaid that was necessary to a full understanding of the question involved. Edmund Pendleton, of Virginia, concurring with Madison that a tax on carriages was a direct tax, within the meaning of the Constitution, prepared a paper on the subject, and [p648] enclosed it to Mr. Giles, then a Senator from Virginia. Under date of February 7, 1796, Madison wrote to Pendleton:
I read with real pleasure the paper you put into the hands of Mr. Giles, which is unquestionably a most simple and lucid view of the subject, and well deserving the attention of the court which is to determine on it. The paper will be printed in the newspapers in time for the judges to have the benefit of it. I did not find that it needed any of those corrections which you so liberally committed to my hand. It has been thought unnecessary to prefix your name; but Mr. Giles will let an intimation appear, along with the remarks, that they proceed from a quarter that claims attention to them. . . . There never was a question on which my mind was more satisfied, and yet I have very little expectation that it will be viewed by the court in the same light it is by me.
2 Madison's Writings 77. And on March 6, 1796, two days before the Hylton case was decided, Madison wrote to Jefferson: "The court has not given judgment yet on the carriage tax. It is said the Judges will be unanimous for its constitutionality." 2 Madison's Writings 87. Mr. Justice Iredell, in his Diary, said:
At this term, Oliver Ellsworth took his seat as Chief Justice. The first case that came up was that of Hylton. v. The United States. This was a very important cause, as it involved a question of Constitutional law. The point was the constitutionality of the law of Congress of 1794 laying duties upon carriages. If a direct tax, it could only be laid in proportion to the census, which has not as yet been taken. The counsel of Hylton, Campbell and Ingersoll, contended that the tax was a direct tax, and were opposed by Lee aud Hamilton. The court unanimously agreed that the tax was constitutional, and delivered their opinions "seriatim."
The day before yesterday, Mr. Hamilton spoke in our court, attended by the most crowded audience I ever saw there, both Houses of Congress being almost deserted on the occasion. Though he was in very ill health, he spoke with astonishing ability and in a most pleasing manner, and was listened to with the profoundest attention. His speech lasted about three hours. It was on the question whether the carriage tax, as laid, was a constitutional one.
2 McRee's Life of Iredell 459, 461.
Turning now to the acts of Congress passed after the decision in the Hylton case, we find that, by the acts of July 14, 1798, c. 75, 1 Stat. 597; August 2, 1813, c. 37, 3 Stat. 53; January 9, 1815, c. 21, 3 Stat. 164, and arch 5, 1816, c. 24, 3 Stat. 255, direct taxes were assessed upon lands, improvement, dwelling-houses, and slaves, and apportioned among the several States. And by the act of August 5, 1861, c. 45, 12 Stat. 294, 297, entitled "An act to provide increased revenues from imports, to pay interest on the debt, and for other purposes," a direct tax was assessed and apportioned among the States on lands, improvements, and dwelling-houses only.
Instances of duties upon tangible personal property are found in the act of January 18, 1815, c. 22, 3 Stat. 180, imposing duties upon certain goods, wares, and merchandise manufactured or made for sale within the United States or the Territories thereof, namely, upon pig iron, castings of iron, bar iron, rolled or slit iron, nails, brads or sprigs, candles of white wax, mould candles of tallow, hats, caps, umbrellas and parasols, paper, playing and visiting cards, saddles, bridles, books, beer, ale, porter, and tobacco, and also in the act of January 18, 1815, c. 23, 3 Stat. 186, which laid a duty graduated by value upon "all household furniture kept for use," and upon gold and silver watches.
It may be observed in passing that the above statutes, with one exception, were all enacted during the administration of President Madison, and were approved by him.
Instances of duties upon intangible personal property are afforded by the Stamp Act of July 6, 1797, c. 11, 1 Stat. 527, which, among other things, levied stamp duties upon bonds, notes, and certificates of stock. Similar duties had been made familiar to the American people by the British Stamp Act of 1765, 5 Geo. 3, c. 12, 26. Pickering's Statutes at Large, 179, and were understood by the delegates to the Convention of 1787 to be included among the duties mentioned in the Constitution. 1 Elliott's Deb. 368; 5 id. 432.
The reason slaves were included in the earlier acts as proper [p650] subjects of direct taxation is thus explained by this court in Veazie Bank v. Fenno, above cited:
As persons, slaves were proper subjects of a capitation tax, which is described in the Constitution as a direct tax; as property, they were, by the laws of some, if not most, of the States, classed as real property, descendible to heirs. Under the first view, they would be subject to the tax of 1798, as a capitation tax; under the latter, they would be subject to the taxation of the other years as realty. That the latter view was that taken by the framers of the acts after 1798 becomes highly probable when it is considered that, in the States where slaves were held, much of the value which would otherwise have attached to land passed into the slaves. If, indeed, the land only had been valued without the slaves, the land would have been subject to much heavier proportional imposition in those States than in States where there were no slaves, for the proportion of tax imposed on each State was determined by population, without reference to the subjects on which it was to be assessed. The fact, then, that slaves were valued, under the act referred to, far from showing, as some have supposed, that Congress regarded personal property as a proper object of direct taxation under the Constitution, shows only that Congress, after 1798, regarded slaves, for the purpose of taxation, as realty.
8 Wall. 543.
Recurring to the course of legislation, it will be found that, by the above act of August , 1861, c. 4, Congress not only laid and apportioned among the States a direct tax of $20,000,000 upon lands, improvements, and dwelling-houses, but it provided that there should be
levied, collected, and paid upon the annual income of every person residing in the United States, whether such income is derived from any kind of property, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any source whatever, if such annual income exceeds the sum of eight hundred dollars, a tax of three percentum on the amount of such excess of each income above eight hundred dollars,
etc. 12 Stat. 292, 309.
Subsequent statutes greatly extended the area of taxation. By the act of July 1, 1862, c. 119, a duty was imposed on [p651] the gross amount of all receipts for the transportation of passengers by railroads, steam vessels, and ferry boats; on all dividends in scrip or money declared due or paid by banks trust companies, insurance companies, and upon
the annual gains, profits, or income of every person residing in the United States, whether derived from any kind of property, rents, interest, dividends, salaries, or from any profession, trade, employment, or vocation carried on in the United States or elsewhere, or from any source whatever,
etc. 12 Stat. 432, 473. The act of June 30, 1864, c. 173, as did the previous act of 1862, imposed a duty on gains, profits, or income from whatever kind of property or from whatever source derived, including "rents." 13 Stat. 223, 281. The act of March 3, 1865, c. 78, increased the amount of such duty. 13 Stat. 479. All subsequent acts of Congress retained the provision imposing a duty on income derived from rents and from every kind of property. Act of March 10, 1866, c. 15, 14 Stat. 4, 5; act of March 2, 1867, c. 169, 14 Stat. 471, 477, 480; act of July 14, 1870, c. 255, 16 Stat. 256.
What has been the course of judicial decision touching the clause of the Constitution that relates to direct taxes? And, particularly, what, in the opinion of this court, was the scope and effect of the decision in Hylton v. United States?
In Pacific Ins. Co. v. Soule, 7 Wall. 433, 446, the question was presented whether the duty imposed by the act of June 30, 1864, as amended by that of July 13, 1866, on the dividends and undistributed sums, that is, on the incomes, from whatever source, of insurance companies, was a direct tax that could only be laid by apportionment among the States. The point was distinctly made in argument that
an income tax is, and always heretofore has been, regarded as being a direct tax, as much so as a poll tax or a land tax. If it be a direct tax, then the Constitution is imperative that it shall be apportioned.
Mr. Justice Swayne, delivering the unanimous judgment of this court, said
what are direct taxes was elaborately argued and considered by this court in Hylton v. United States, decided in the year 1796. . . . The views expressed in this [that] case are adopted by Chancellor Kent and Justice [p652] Story in their examination of the subject. . . . The taxing power is given in the most comprehensive terms. The only limitations imposed are that direct taxes, including the capitation tax, shall be apportioned; that duties, imposts, and excises shall be uniform, and that no duties shall be imposed upon articles exported from any State. With these exceptions, the exercise of the power is, in all respects, unfettered. If a tax upon carriages, kept for his own use by the owner, is not a direct tax, we can see no ground upon which a tax upon the business of an insurance company can be held to belong to that class of revenue charges. . . . The consequences which would follow the apportionment of the tax in question among the States and Territories of the Union in the manner prescribed by the Constitution must not be overlooked. They are very obvious. Where such corporations are numerous and rich, it might be light; where none exists, it could not be collected; where they are few and poor, it would fall upon them with such weight as to involve annihilation. It cannot be supposed that the framers of the Constitution intended that any tax should be apportioned the collection of which on that principle would be attended with such results. The consequences are fatal to the proposition. To the question under consideration it must be answered that the tax to which it relates is not a direct tax, but a duty or excise; that it was obligatory on the plaintiff to pay it.
In Veazie Bank v. Fenno, 8 Wall. 533, 543, 544, 546, the principal question was whether a tax on state bank notes issued for circulation was a direct tax. On behalf of the bank, it was contended by distinguished counsel that the tax was a direct one, and that it was. invalid because not apportioned among the States agreeably to the Constitution. In explanation of the nature of direct taxes, they relied largely (so the authorized report of the case states) on the writings of Adam Smith and on other treatises, English and American, on political economy. In the discussion of the case, reference was made by counsel to the former decisions in Hylton v. United States and Pacific Ins. Co. v. Soule. Chief Justice Chase, delivering the judgment of the court, after observing (as I have [p653] already stated) that the works of political economists gave no valuable light on the question as to what, in the constitutional sense, were direct taxes, entered upon an examination of the numerous acts of Congress imposing taxes. That examination, he announced on behalf of this court, showed
that personal property, contracts, occupations, and the like, have never been regarded by Congress as proper subjects of direct tax. . . . It may be rightly affirmed, therefore, that, in the practical construction of the Constitution by Congress, direct taxes have been limited to taxes on land and appurtenances, and taxes on polls, or capitation taxes. And this construction is entitled to great consideration, especially in the absence of anything adverse to it in the discussions of the convention which framed, and of the conventions which ratified, the Constitution.
Referring to certain observations of Madison, King, and Ellsworth in the convention of 1787, he said:
All this doubtless shows uncertainty as to the true meaning of the term "direct tax," but it indicates also an understanding that direct taxes were such as may be levied by capitation, and on lands and appurtenances, or, perhaps, by valuation and assessment of personal property upon general lists. For these were the subjects from which the States at that time usually raised their principal supplies. This view received the sanction of this court two years before the enactment of the first law imposing direct taxes eo nomine.
The case last referred to was Hylton v. United States. After a careful examination of the opinions in that case, Chief Justice Chase proceeded:
It may be safely assumed, therefore, as the unanimous judgment of the court [in the Hylton case] that a tax on carriages is not a direct tax. And it may further be taken as established upon the testimony of Paterson, that the words "direct taxes," as used in the Constitution, comprehended only capitation taxes, and taxes on land, and perhaps taxes on personal property by general valuation and assessment of the various descriptions possessed within the several States. It follows necessarily that the power to tax without apportionment extends to all other objects. Taxes on other objects are included under the heads of taxes not direct, duties, imposts, and exercises, and must [p654] be laid and collected by the rule of uniformity. The tax under consideration is a tax on bank circulation, and may very well be classed under the head of duties. Certainly it is not, in the sense of the Constitution, a direct tax. It may be said to come within the same category of taxation as the tax on incomes of insurance companies, which this court, at the last term, in the case of Pacific Company v. Soule, 7 Wall. 433, held not to be a direct tax.
In Scholey v. Rew, 23 Wall. 331, 346, 347, the question was, whether a duty laid by the act of June 30, 1864, as amended, 14 Stat. 140, 141, upon successions was a direct tax within the meaning of the Constitution of the United States. The act provided that the duty shall be paid at the time when the successor, or any person in his right or on his behalf, shall become entitled in possession to his succession, or to the receipt of the income and profits thereof. The act further provided that
the term "real estate" should include "all lands, tenements, and hereditaments, corporeal and incorporeal," and that the term "succession" should denote "the devolution of title to any real estate."
That every past or future disposition of real estate by will, deed, or laws of descent, by reason whereof any person shall become beneficially entitled, in possession or expectancy, to any real estate, or the income thereof, upon the death of any person entitled by reason of any such disposition, a "succession;"
the interest of any successor in moneys to arise from the sale of real estate, under any trust for the sale thereof, shall be deemed to be a succession chargeable with duty under this act, and the said duty shall be paid by the trustee, executor, or other person having control of the funds.
It is important also to observe that this succession tax was made a lien on the land "in respect whereof" it was laid, and was to be "collected by the same officers, in the same manner, and by the same processes as direct taxes upon lands, under the authority of the United States." A duty was also imposed by the same act on legacies and distributive shares of personal property.
It would seem that this case was one that involved directly [p655] the meaning of the words "direct taxes" in the Constitution. In the argument of that case, it was conceded by the counsel for the taxpayer that the opinions in the Hylton case recognized a tax on land and a capitation tax to be the only direct taxes contemplated by the Constitution. But counsel said:
The present is a tax on land, if ever one was. No doubt it is to be paid by the owner of the land, if he can be made to pay it; but that is true of any tax that ever was or ever can be imposed on property. And as if to prove how directly the property, and not the property owner, is aimed at, the duty is made a specific lien and charge upon the land "in respect whereof" it is assessed. More than this: as if to show how identical, in the opinion of Congress, this duty was with the avowedly direct tax upon lands which it had levied but a year or two before, it enacts that this succession tax alone, out of a great revenue system, should be collected by the same officers, in the same manner, and by the same processes as direct taxes upon lands under the authority of the United States.
This interpretation of the Constitution was rejected by every member of this court. Mr. Justice Clifford, delivering the unanimous judgment of the court, said:
Support to the first objection is attempted to be drawn from that clause of the Constitution which provides that direct taxes shall be apportioned among the several States which may be included within the Union, according to their respective numbers, and also from the clause which provides that no capitation or other direct tax shall be laid unless in proportion to the census or amended enumeration; but it is clear that the tax or duty levied by the act under consideration is not a direct tax within the meaning of either of those provisions. Instead of that it, is plainly an excise tax or duty, authorized by section eight of article one, which vests power in Congress to lay and collect taxes, duties, imposts, and excises to pay the debts and provide for the common defence and general welfare. Such a tax or duty is neither a tax on land nor a capitation exaction, as subsequently appears from the language of the section imposing the tax or duty, as well as from the preceding section, which provides that the term "succession" shall denote the devolution [p656] of real estate, and the section which imposes the tax or duty also contains a corresponding clause, which provides the term "successor" shall denote the person so entitled, and that the term "predecessor" shall denote the grantor, testator, ancestor, or other person from whom the interest of the successor has been or shall be derived.
Whether direct taxes, in the sense of the Constitution, comprehend any other tax than a capitation tax and a tax on land is a question not absolutely decided, nor is it necessary to determine it in the present case, as it is expressly decided that the term does not include the tax on income, which cannot be distinguished in principle from a succession tax such as the one involved in the present controversy. Insurance Company v. Soule, 7 Wall. 446; Bank v. Fenno, 8 Wall. 546; Clark v. Sickel, 14 Int.L.Rev.Rec. 6. Neither duties nor excises were regarded as direct taxes by the authors of The Federalist, No. 36, p. 161; Hamilton's Works 847; License Tax Cases, 5 Wall. 462. . . . . Exactions for the support of the government may assume the form of duties, imposts, or excises, or they may also assume the form of license fees for permission to carry on particular occupations or to enjoy special franchises, or they may be specific in form, as when levied upon corporations in reference to the amount of capital stock or to the business done or profits earned by the individual or corporation. Cooley, Const.Lim. 495*; Provident Institution v. Massachusetts, 6 Wall. 611; Bank v. Apthorp, 12 Mass. 252. Sufficient appears in the prior suggestions to define the language employed and to point out what is the true intent and meaning of the provision, and to make it plain that the exaction is not a tax upon the land, and that it was rightfully levied, if the findings of the court show that the plaintiff became entitled, in the language of the section, or acquired the estate or the right to the income thereof by the devolution of the title to the same, as assumed by the United States.
The meaning of the words "direct taxes" was again the subject of consideration by this court in Springer v. United States, 102 U.S. 586, 599, 600, 602. A reference to the printed arguments in that case will show that this question was most [p657] thoroughly examined, every member of the court participating in the decision. The question presented was as to the constitutionality of the act of June 30, 1864, c. 172, 13 Stat. 218, as amended by the act of March 3, 1865, c. 78, 13 Stat. 469, so far as it levied a duty upon gains, profits, and income derived from every kind of property, and from every trade, profession, or employment. The contention of Mr. Springer was that such a tax was a direct tax that could not be levied except by apportioning the same among the States on the basis of numbers. In support of his position, he cited numerous authorities, among them all or most of the leading works on political economy and taxation. Mr. Justice Swayne, again delivering the unanimous judgment of this court, referred to the proceedings and debates in the convention of 1787, to The Federalist, to all the acts of Congress imposing taxation, and to the previous cases of Hylton v. United States, Pacific Ins. Co. v. Soule, Veazie Bank v. Fenno, and Scholey v. Rew. Among other things, he said:
It does not appear that any tax like the one here in question was ever regarded or treated by Congress as a direct tax. This uniform practical construction of the Constitution touching so important a point, through so long a period, by the legislative and executive departments of the government, though not conclusive, is a consideration of great weight.
Alluding to the observations by one of the Judges in the Hylton case as to the evils of an apportioned tax on specific personal property, he said:
It was well held that, where such evils would attend the apportionment of a tax, the Constitution could not have intended that an apportionment should be made. This view applies with even greater force to the tax in question in this case. Where the population is large and the incomes are few and small, it would be intolerably oppressive.
After examining the cases above cited, he concludes, speaking for the entire court:
All these cases are undistinguishable in principle from the case now before us, and they are decisive against the plaintiff in error. The question what is a direct tax is one exclusively in American jurisprudence. The text writers of the country are in entire accord upon the subject. Mr. Justice Story says [p658] that all taxes are usually divided into two classes -- those which are direct and those which are indirect -- and that "under the former denomination are included taxes on land or real property, and, under the latter, taxes on consumption." 1 Story Const. § 950. Chancellor Kent, speaking of the case of Hylton v. United States, says:
The better opinion seems to be that the direct taxes contemplated by the Constitution were only two, viz., a capitation or poll tax and a tax on land.
1 Kent Com. 257. See also Cooley, Taxation, p. 5, note 2; Pomeroy, Const.Law, 157, p. 230, 9th ed.; Sharwood's Blackstone 308, note; Rawle, Const. 30; Sergeant, Const. 305. We are not aware that any writer, since Hylton v. United States was decided, has expressed a view of the subject different from that of these authors. Our conclusions are that direct taxes, within the meaning of the Constitution, are only capitation taxes, as expressed in that instrument, and taxes on real estate, and that the tax of which the plaintiff in error complains is within the category of an excise or duty.
One additional authority may be cited -- Clarke v. Sickel etc., reported in 14 Int.Rev.Rec. 6, and referred to in the opinion of this court in Scholey v. Rew. It as decided by Mr. Justice Strong at the circuit in 1871. That case involved the validity of a tax on income derived from an annuity bequeathed by the will of the plaintiff's husband, and charged (as the record of that case shows) upon his entire estate, real and personal. The eminent jurist who decided the case said:
The pleadings in all those cases raise the question whether the act of Congress of June 30, 1864, c. 171, and its supplements, so far as they impose a tax upon the annual gains, profits, or income of every person residing in the United States, or of any citizen of the United States residing abroad, are within the power conferred by the Constitution upon Congress. If it be true, as has been argued, that the income tax is a "capitation or other direct tax" within the meaning of the Constitution, it is undoubtedly prohibited by the first and ninth sections of the first article, for it is not "apportioned among the States." But I am of opinion that it is not a "capitation or other direct tax" in the sense in which the [p659] framers of the Constitution and the people of the States who adopted it understood such taxes.
The significance of this language is manifest when the fact is recalled that the act of 1864 provided, among other things, that (with certain specified exceptions) a tax should be levied, collected, and paid annually upon the annual gains, profits, or income of every person residing in the United States, or of any citizen of the United States residing abroad, whether derived from any kind of property, rents, interest, dividends, salaries, or from any profession, trade, employment, or vocation, carried on in the United States or elsewhere, or from any other source whatever. 13 Stat. 281.
From this history of legislation and of judicial decisions, it is manifest --
That, in the judgment of the members of this court as constituted when the Hylton case was decided -- all of whom were statesmen and lawyers of distinction, two, Wilson and Paterson, being recognized as great leaders in the convention of 1787 -- the only taxes that could certainly be regarded as direct taxes, within the meaning of the Constitution, were capitation taxes and taxes on lands;
That, in their opinion, a tax on real estate was properly classified as a direct tax because, in the words of Justice Iredell, it was "a tax on something inseparably annexed to the soil," "something capable of apportionment," though, in the opinion of Mr. Justice Paterson, apportionment even of a tax on land was "scarcely practicable;"
That, while the Hylton case did not, in terms, involve a decision in respect of lands, what was said by the judges on the subject was not, strictly speaking, obiter dicta, because the principle or rule that would determine whether a tax on carriages was a direct tax would necessarily indicate whether a tax on lands belonged to that class;
That, in the judgment of all the judges in the Hylton case, no tax was a direct one that could not be apportioned among the States on the basis of numbers with some approach to justice and equality among the people of the several States who owned the property or subject taxed, for the reason, in [p660] the words of Mr. Justice Chase, that the framers of the Constitution cannot be supposed to have contemplated taxation by a rule that "would evidently create great inequality and injustice;" or, in the words of Mr. Justice Paterson, would be "absurd and inequitable;" or, in the words of Mr. Justice Iredell, would lead, if practised, to "dangerous consequences," and be " altogether destructive of the notion of a common interest, upon which the very principles of the Constitution are founded;"
That, by the judgment in the Hylton case, a tax on specific personal property, owned by the taxpayer and used or let to hire, was not a direct tax to be apportioned among the States on the basis of numbers;
That from the foundation of the government until 1861, Congress following the declarations of the judges in the Hylton case, restricted direct taxation to real estate and slaves, and in 1861 to real estate exclusively, and has never, by any statute, indicated its belief that personal property, however assessed or valued, was the subject of "direct taxes" to be apportioned among the States;
That, by the above two acts of January 18, 1815, the validity of which has never been questioned, Congress, by laying duties according to the rule of uniformity upon the numerous articles of personal property mentioned in those acts, indicated its belief that duties on personal property were not direct taxes to be apportioned among the States on the basis of numbers, but were duties to be laid by the rule of uniformity, and without regard to the population of the respective States;
That, in 1861 and subsequent years, Congress imposed, without apportionment among the States on the basis of numbers, but by the rule of uniformity, duties on income derived from every kind of property, real and personal, including income derived from rents, and from trades, professions, and employments, etc.; and, lastly,
That, upon every occasion when it has considered the question whether a duty on incomes was a direct tax within the meaning of the Constitution, this court has, without a dissenting [p661] voice, determined it in the negative, always proceeding on the ground that capitation taxes and taxes on land were the only direct taxes contemplated by the framers of the Constitution.
The view I have given of Hylton v. United States is sustained by Mr. Justice Story's statement of the grounds upon which the court proceeded in that case. He says:
The grounds of this decision, as stated in the various opinions of the judges, were, first, the doubt whether an taxes were direct in the sense of the Constitution, but capitation and land taxes, as has been already suggested; secondly, that, in case of doubt, the rule of apportionment ought not to be favored, because it was a matter of compromise, and, in itself, radically indefensible and wrong; thirdly, the monstrous inequality and injustice of the carriage tax, if laid by the rule of apportionment, which would show that no tax of this sort could have been contemplated by the convention as within the rule of apportionment; fourthly, that the terms of the Constitution were satisfied by confining the clause respecting direct taxes to capitation and land taxes; fifthly, that, accurately speaking, all taxes on expenses or consumption are indirect taxes, and a tax on carriages is of this kind; and, sixthly (what is probably of most cogency and force, and of itself decisive) that no tax could be a direct one, in the sense of the Constitution, which was not capable of apportionment according to the rule laid down in the Constitution.
1 Story Const. 705, § 96.
If the above summary as to the practice of the government and the course of decision in this court fairly states what was the situation, legislative and judicial, at the time the suits now before us were instituted, it ought not to be deemed necessary, in determining a question which this court has said was "exclusively in American jurisprudence," to ascertain what were the views and speculations of European writers and theorists in respect of the nature of taxation and the principle by which taxation should be controlled, nor as to what, on merely economic or scientific grounds and under the systems of government prevailing in Europe, should be deemed direct [p662] taxes, and what indirect taxes. Nor ought this court to be embarrassed by the circumstance that statesmen of the early period of our history differed as to the principles or methods of national taxation or as to what should be deemed direct taxes to be apportioned among the States aud what indirect taxes, duties, imposts, and excises, that must be laid by some rule of uniformity applicable to the whole country without reference to the relative population of particular States. Undoubtedly, as already observed, Madison was of opinion that a tax on carriages was a direct tax within the meaning of the Constitution, and should be apportioned among the States on the basis of numbers. But this court, in the Hylton case, rejected his view of the Constitution, sustained that of Hamilton, and, subsequently, Madison, as President, approved acts of Congress imposing taxes upon personal property without apportioning the same among the States. The taxes which, in the opinion of Hamilton, ought to be apportioned among the States were not left by him in doubt, for, in a draft of the Constitution prepared by him in 1787, it was provided that
taxes on lands, houses, and other real estate, and capitation taxes, shall be proportioned in each State by the whole number of free persons, except Indians not taxed, and by three-fifths of all other persons.
Art. VII, Sec. 4. 2 Hamilton's Works 406. The practice of a century in harmony with the decisions of this court under which uncounted millions have been collected by taxation ought to be sufficient to close the door against further inquiry based upon the speculations of theorists, and the varying opinions of statesmen who participated in the discussions, sometimes very bitter, relating to the form of government to be established in place of the Articles of Confederation under which, it has been well said, Congress could declare everything and do nothing.
But this view has not been accepted in the present cases, and the questions involved in them have been examined just as if they had not been settled by the long practice of the government as well as by judicial decisions covering the entire period since 1796 and giving sanction to that practice. It seems to me that the court has not given to the maxim of stare decisis [p663] the full effect to which it is entitled. While obedience to that maxim is not expressly enjoined by the Constitution, the principle that decisions, resting upon a particular interpretation of that instrument, should not be lightly disregarded where such interpretation has been long accepted and acted upon by other branches of the government and by the public, underlies our American jurisprudence. There are many constitutional questions which were earnestly debated by statesmen and lawyers in the early days of the Republic. But having been determined by the judgments of this Court, they have ceased to be the subjects of discussion. While, in a large sense, constitutional questions may not be considered as finally settled unless settled rightly, it is certain that a departure by this court from a settled course of decisions on grave constitutional questions under which vast transactions have occurred and under which the government has been administered during great crises, will shake public confidence in the stability of the law.
Since the Hylton case was decided, this country has gone through two great wars under legislation based on the principles of constitutional law previously announced by this Court. The recent civil war, involving the very existence of the nation, was brought to a successful end, and the authority of the Union restored, in part, by the use of vast amounts of money raised under statutes imposing duties on incomes derived from every kind of property, real and personal, not by the unequal rule of apportionment among the States on the basis of numbers, but by the rule of uniformity, operating upon individuals and corporations in all the States, and we are now asked to declare -- and the judgment this day rendered in elect declares -- that the enormous sums thus taken from the people, and so used were taken in violation of the supreme law of the land. The supremacy of the nation was reestablished against armed rebellion seeking to destroy its life, but it seems that that consummation, so devoutly wished and to effect which so many valuable lives were sacrificed, was attended with a disregard of the Constitution by which the Union was ordained. [p664]
The policy of the government in the matter of taxation for its support, as well as the decisions of this court, have been in harmony with the views expressed by Oliver Ellsworth before he became the Chief Justice of this court. In the Connecticut Convention of 1788, when considering that clause of the proposed constitution giving Congress power to lay and collect taxes, duties, imposts, and excises, in order to pay the debts and provide for the common defence and general welfare of the United States, that far-seeing statesman -- second to none of the Revolutionary period, and whom John Adams declared to be the firmest pillar of Washington's administration in the Senate -- said:
The first objection is that this clause extends to all the objects of taxation. . . . The state debt, which now lies heavy upon us, arose from the want of powers in the Federal system. Give the necessary powers to the National Government, and the State will not be again necessitated to involve itself in debt for its defence in war. It will lie upon the National Government to defend all the States, to defend all its members from hostile attacks. The United States will bear the whole burden of war. It is necessary that the power of the general legislature should extend to all the objects of taxation; that government should be able to command all the resources of the country, because no man can tell what our exigencies may be. Wars have now become rather wars of the purse than of the sword. Government must, therefore, be able to command the whole power of the purse; otherwise, a hostile nation may look into our Constitution, see what resources are in the power of government, and calculate to go a little beyond us; thus, they may obtain a decided superiority over us and reduce us to the utmost distress. A government which can command but half its resources is like a man with but one arm to defend himself.
Flanders' Chief Justices, 150, 2d Series.
Let us examine the grounds upon which the decision of the majority rests, and look at some of the consequences that may result from the principles now announced. I have a deep, abiding conviction, which my sense of duty compels me to express, that it is not possible for this court to have [p665] rendered any judgment more to be regretted than the one just rendered.
Assuming it to be the settled construction of the Constitution that the general government cannot tax lands eo nomine except by apportioning the tax among the States according to their respective numbers, does it follow that a tax on incomes derived from rents is a direct tax on the real estate from which such rents arise?
In my judgment, a tax on income derived from real property ought not to be, and, until now, has never been, regarded by any court as a direct tax on such property within the meaning of the Constitution. As the great mass of lands in most of the States do not bring any rents, and as incomes from rents vary in the different States, such a tax cannot possibly be apportioned among the States on the basis merely of numbers with any approach to equality of right among taxpayers, any more than a tax on carriages or other personal property could be so apportioned. And, in view of former adjudications, beginning with the Hylton case and ending with the Springer case, a decision now that a tax on income from real property can be laid and collected only by apportioning the same among the States on the basis of numbers may, not improperly, be regarded as a judicial revolution that may sow the seeds of hate and distrust among the people of different sections of our common country.
The principal authorities relied upon to prove that a tax on rents is a direct tax on the lands from which such rents are derived are the decisions of this court holding that the States cannot, in any form, directly or indirectly, burden the exercise by Congress of the powers committed to it by the Constitution, [*] and those which hold that the national government cannot, in any form, directly or indirectly, burden the agencies [p666] or instrumentalities employed by the States in the exercise of their powers. [*] No one of the cases of either class involved any question as to what were "direct taxes" within the meaning of the Constitution. They were cases in which it was held that the governmental power in question could not be burdened or impaired at all or in any mode, directly or indirectly, by the government that attempted to do so. Everyone must concede that those cases would have been decided just as they were decided if there were no provision whatever in the Constitution relating to direct taxes or to taxation in any other mode. All property in this country, except the property and the agencies and instrumentalities of the States, may be taxed, in some form, by the national government in order to pay the debts and provide for the common defence and general welfare of the United States, some by direct taxation apportioned among the States on the basis of numbers, other kinds by duties, imposts, and excises, under the rule of uniformity applicable throughout the United States to individuals and corporations, and without reference to population in any State. Decisions, therefore, which hold that a State can neither directly nor indirectly obstruct the execution by the general government of the powers committed to it, nor burden with taxation the property and agencies of the United States, and decisions that the United States can neither directly nor indirectly burden nor tax the property or agencies of the State, nor interfere with the governmental powers belonging to the States, do not even tend to establish the proposition that a duty which, by its indirect operation, may affect the value or the use of particular property is a direct tax on such property within the meaning of the Constitution.
In determining whether a tax on income from rents is a direct tax within the meaning of the Constitution, the inquiry is not whether it may in some way indirectly affect the land or the land owner, but whether it is adirect tax on the thing [p667] taxed, the land. The circumstance that such a tax may possibly have the effect to diminish the value of the use of the land is neither decisive of the question nor important. While a tax on the land itself, whether at a fixed rate applicable to all lands without regard to their value or by the acre or according to their market value, might be deemed a direct tax within the meaning of the Constitution as interpreted in the Hylton case, a duty on rents is a duty on something distinct and entirely separate from, although issuing out of, the land.
At the original hearing of this cause, we were referred on this point to the statement by Coke to the effect that,
if a man seized of land in fee by his deed granteth to another the profits of those lands, to have and to hold to him and his heirs, and maketh livery secundum formam chartae, the whole land itself doth pass. For what is the land but the profits thereof; for thereby vesture, herbage, trees, mines, all whatsoever, parcel of that land doth pass.
Co.Lit. 45 (4b) 1 Har. & But. ed. § 1.
Of course, a grant, without limitation as to time, to a particular person and his heirs, of the profits of certain lands, accompanied by livery of seizin, would be construed as passing the lands themselves unless a different interpretation were required by some statute. In this connection, Jarman on Wills (Vol. 1, 5th ed. 798*) is cited in support of the general proposition that a devise of the rents and profits or of the income of lands passes the land itself both at law and equity. But the editor, after using this language, adds:
And since the act 1 Vict. c. 26, such a devise carries a fee simple; but before that act, it carried no more than an estate for life unless words of inheritance were added.
Among the authorities cited by the editor in reference to devises of the incomes of lands are Humphrey v. Humphrey, 1 Sim. (N.S.) 536, 540, and Mannox v. Greener, L.R. 14 Eq. 456, 462. In the first of those cases, the court held that " an unlimited gift of the income of a fund" passed the capital; in the other, that "a gift of the income of the land, unrestricted, is simply a gift of the fee simple of the land." So, in Fox v. Phelps, 17 Wend. 393, 402, Justice Bronson, speaking for the court, said:
An [p668] unlimited disposition of rents and profits or income of an estate will sometimes carry the estate itself. Kerry v. Derrick, Cro.Jac. 104; Phillips v. Chamberlaine, 4 Ves. 1. In Newland v. Shepard, 2 P. Wms. 194, a devise of the produce and interest of the estate to certain grandchildren for a limited period was held to pass the estate itself. But the authority of this case was denied by Lord Hardwicke in Fonereau v. Fonereau, 3 Atk. 315. The rule cannot apply where, as in this case, the rents and profits are only given for a limited period. Earl v. Grim, 1 Johns.Ch. 494.
But who will say that a devise of rent already due, or profits already earned, is a devise of the land itself? Or who would say that a devise of rents, profits, or income of land for any period expressly limited would pass the fee or the ownership of the land itself? The statute under examination in these causes expires by its own terms at the end of five years. It imposes an annual tax on the income of lands received the preceding year. It does not touch the lands themselves, nor interfere with their sale at the pleasure of the owner. It does not apply to lands from which no rent is derived. It gives no lien upon the lands to secure the payment of the duty laid on rents that may accrue to the landlord from them. It does not apply to rents due and payable by contract, and not collected, but only to such as are received by the taxpayer. But whether a grant or devise, with or without limitation or restriction as to time, of the rents and profits or of the income of land passes the land itself is wholly immaterial in the present causes. We are dealing here with questions relating to taxation for public purposes of income from rents, and not with any question as to the passing of title, by deed or will, to the real estate from which such rents may arise.
It has been well observed, on behalf of the government, that rents have nothing in common with land; that taking wrongful possession of land is trespass, while the taking of rent may, under some circumstances, be stealing; that the land goes to the heir while the rent money goes to the personal representative; one has a fixed situs; that of the other may be determined by law, but generally is that of the owner; [p669] that one is taxed, and can be taxed only, by the sovereignty within which it lies, while the other may be taxed, and can be taxed only by the sovereignty under whose dominion the owner is; that a tax on land is generally a lien on the land, while that on personalty almost universally is not, and that, in their nature, lands and rents arising from land have not a single attribute in common. A tax on land reaches the land itself, whether it is rented or not. The citizen's residence may be reached by a land tax, although he derives no rent from it. But a duty on rents will not reach him unless he rents his residence to someone else and receives the rent. A tax with respect to the money that a landlord receives for rent is personal to him, because it relates to his revenue from a designated source, and does not, in any sense -- unless it be otherwise provided by statute -- rest on the land. The tax in question was laid without reference to the land of the taxpayer; for the amount of rent is a subject of contract, and is not always regulated by the intrinsic value of the source from which the rent arises. In its essence, it is a tax with reference only to income received.
But the Court, by its judgment just rendered, goes far in advance not only of its former decisions, but of any decision heretofore rendered by an American court. Adhering to what was heretofore adjudged in these cases in respect of the taxation of income arising from real estate, it now adjudges, upon the same grounds on which it proceeds in reference to real estate and the income derived therefrom, that a tax "on personal property," or on the yield or income of personal property, or on capital in personalty held for the purpose of income or ordinarily yielding income, and on the income therefrom, or on the income from "invested personal property, bonds, stocks, investments of all kinds," is a direct tax within the meaning of the Constitution, which cannot be imposed by Congress unless it be apportioned among the States on the basis of population.
I cannot assent to the view that visible, tangible personal property is not subject to a national tax under the rule of uniformity, whether such uniformity means only territorial uniformity [p670] or equality of right among all taxpayers of the same class. When direct taxes are restricted to capitation taxes and taxes on land, taxation, in either form, is limited to subjects always found wherever population is found, and which cannot be consumed or destroyed. They are subjects which can always be seen and inspected by the assessor, and have immediate connection with the country and its soil throughout its entire limits. Not so with personal property. In Veazie Bank v. Fenno, above cited, it was said that personal property had never been regarded by Congress as subject to "direct taxes," although it was said that, in the opinion of some statesmen at the time of the adoption of the Constitution, direct taxes "perhaps" included such as might be levied "by valuation and assessment of personal property upon general lists," or, as expressed by Hamilton in his argument in the Hylton case, " general assessments, whether on the whole property of individuals, or on their whole real or personal estate." 7 Hamilton's Works 848. The statute now before us makes no provision for the taxation of personal property by valuation and assessment upon general lists.
In the Hylton case, this court -- proceeding, as I think, upon a sound interpretation of the Constitution and in accordance with historical evidence of great cogency -- unanimously held that an act imposing a specific duty on carriages for the conveyance of persons was a valid exercise of the power to lay and collect duties, as distinguished from direct taxes. The majority of the court now sustain the position taken by Madison, who insisted that such a duty was a direct tax within the meaning of the Constitution. So much pains would not have been taken to bring out his view of direct taxes, unless to indicate this court's approval of them, notwithstanding a contrary interpretation of the Constitution had been announced and acted upon for nearly one hundred years. It must be assumed, therefore, that the court, as now constituted, would adjudge to be unconstitutional not only any act like that of 1794 laying specific duties on carriages without apportioning the same among the States, but acts similar to those of 1815, laying duties, according to the rule of uniformity, upon [p671] specific personal property owned or manufactured in this country.
In my judgment -- to say nothing of the disregard of the former adjudications of this court, and of the settled practice of the government -- this decision may well excite the gravest apprehensions. It strikes at the very foundations of national authority, in that it denies to the general government a power which is, or may become, vital to the very existence and preservation of the Union in a national emergency, such as that of war with a great commercial nation, during which the collection of all duties upon imports will cease or be materially diminished. It tends to reestablish that condition of helplessness in which Congress found itself during the period of the Articles of Confederation, when it was without authority by laws operating directly upon individuals, to lay and collect, through its own agents, taxes sufficient to pay the debts and defray the expenses of government, but was dependent, in all such matters, upon the good will of the States and their promptness in meeting requisitions made upon them by Congress.
Why do I say that the decision just rendered impairs or menaces the national authority? The reason is so apparent that it need only be stated. In its practical operation, this decision withdraws from national taxation not only all incomes derived from real estate, but tangible personal property, "invested, personal property, bonds, stocks, investments of all kinds," and the income that may be derived from such property. This results from the fact that, by the decision of the court, all such personal property and all incomes from real estate and personal property, are placed beyond national taxation otherwise than by apportionment among the States on the basis simply of population. No such apportionment can possibly be made without doing gross injustice to the many for the benefit of the favored few in particular States. Any attempt upon the part of Congress to apportion among the States, upon the basis simply of their population, taxation of personal property or of incomes would tend to arouse such indignation among the freemen of America that it would never [p672] be repeated. When, therefore, this court adjudges, as it does now adjudge, that Congress cannot impose a duty or tax upon personal property, or upon income arising either from rents of real estate or from personal property, including invested personal property, bonds, stocks, and investments of all kinds, except by apportioning the sum to be so raised among the States according to population, it practically decides that, without an amendment of the Constitution -- two-thirds of both Houses of Congress and three-fourths of the States concurring -- such property and incomes can never be made to contribute to the support of the national government.
But this is not all. The decision now made may provoke a contest in this country from which the American people would have been spared if the court had not overturned its former adjudications, and had adhered to the principles of taxation under which our government, following the repeated adjudications of this court, has always been administered. Thoughtful, conservative men have uniformly held that the government could not be safely administered except upon principles of right, justice, and equality -- without discrimination against any part of the people because of their owning or not owning visible property or because of their having or not having incomes from bonds and stocks. But, by its present construction of the Constitution the court, for the first time in all its history, declares that our government has been so framed that, in matters of taxation for its support and maintenance, those who have incomes derived from the renting of real estate or from the leasing or using of tangible personal property, or who own invested personal property, bonds, stocks and investments of whatever kind, have privileges that cannot be accorded to those having incomes derived from the labor of their hands, or the exercise of their skill, or the use of their brains. Let me illustrate this. In the large cities or financial centres of the country, there are persons deriving enormous incomes from the renting of houses that have been erected not to be occupied by the owner, but for the sole purpose of being rented. Near by are other persons, trusts, combinations, and corporations, possessing vast quantities of personal property, including bonds and [p673] stocks of railroad, telegraph, mining, telephone, banking, coal, oil, gas, and sugar refining corporations, from which millions upon millions of income are regularly derived. In the same neighborhood are others who own neither real estate, nor invested personal property, nor bonds, nor stocks of any kind, and whose entire income arises from the skill and industry displayed by them in particular callings, trades, or professions, or from the labor of their hands, or the use of their brains. And it is now the law, as this day declared, that, under the Constitution, however urgent may be the needs of the Government, however sorely the administration in power may be pressed to met the moneyed obligations of the nation, Congress cannot tax the personal property of the country, nor the income arising either from real estate or from invested personal property, except by a tax apportioned among the States, on the basis of their population, while it may compel the merchant, the artisan, the workman, the artist, the author, the lawyer, the physician, even the minister of the Gospel, no one of whom happens to own real estate, invested personal property, stocks or bonds, to contribute directly from their respective earnings, gains, and profits, and, under the rule of uniformity or equality, for the support of the government.
The Attorney General of the United States very appropriately said that the constitutional exemption from taxation of incomes arising from the rents of real estate, otherwise than by a direct tax, apportioned among the States on the basis of numbers, was a new theory of the Constitution, the importance of which to the whole country could not be exaggerated. If anyone has questioned the correctness of that view of the decision rendered on the original hearing, it ought not again to be questioned, now that this court has included in the constitutional exemption from the rule of uniformity the personal property of the country and incomes derived from invested personal property. If Congress shall hereafter impose an income tax in order to meet the pressing debts of the nation and to provide for the necessary expenses of the government, it is advised, by the judgment now rendered, that it cannot touch the income from real estate nor the income from personal property, invested [p674] or uninvested, except by apportionment among the States on the basis of population. Under that system, the people of a State, containing 1,000,000 of inhabitants, who receive annually $20,000,000 of income from real and personal property would pay no more than would be exacted from the people of another State, having the same number of inhabitants, but who receive income from the same kind of property of only $5,000,000. If this new theory of the Constitution, as I believe it to be, if this new departure from the safe way marked out by the fathers and so long followed by this court, is justified by the fundamental law, the American people cannot too soon amend their Constitution.
It was said in argument that the passage of the statute imposing this income tax was an assault by the poor upon the rich, and, by much eloquent speech, this court has been urged to stand in the breach for the protection of the just rights of property against the advancing hosts of socialism. With the policy of legislation of this character, this court has nothing to do. That is for the legislative branch of the government. It is for Congress to determine whether the necessities of the government are to be met, or the interests of the people subserved, by the taxation of incomes. With that determination, so far as it rests upon grounds of expediency or public policy, the courts can have no rightful concern. The safety and permanency of our institutions demand that each department of government shall keep within its legitimate sphere as defined by the supreme law of the land. We deal here only with questions of law. Undoubtedly, the present law contains exemptions that are open to objection, but, for reasons to be presently stated, such exemptions may be disregarded without invalidating the entire law, and the property so exempted may be reached under the general provisions of the statute. Huntington v. Worthen, 120 U.S. 97, 102.
If it were true that this legislation, in its important aspects and in its essence discriminated against the rich because of their wealth, the court, in vindication of the equality of all before the law, might well declare that the statute was not an exercise of the power of taxation, but was repugnant to those [p675] principles of natural right upon which our free institutions rest, and, therefore, was legislative spoliation under the guise of taxation. But it is not of that character. There is no foundation for the charge that this statute was framed in sheer hostility to the wealth of the country. The provisions most liable to objection are those exempting from taxation large amounts of accumulated capital, particularly that represented by savings banks, mutual insurance companies, and loan associations. Surely such exemptions do not indicate sympathy on the part of the legislative branch of the government with the pernicious theories of socialism, nor show that Congress had any purpose to despoil the rich.
In this connection, and as a ground for annulling the provisions taxing incomes, counsel for the appellant refers to the exemption of incomes that do not exceed $4,000. It is said that such an exemption is too large in amount. That may be conceded. But the court cannot for that reason alone declare the exemption to be invalid. Everyone, I take it, will concede that Congress, in taxing incomes, may rightfully allow an exemption in some amount. That was done in the income tax laws of 1861 and in subsequent laws, and was never questioned. Such exemptions rest upon grounds of public policy, of which Congress must judge, and of which this court cannot rightfully judge, and that determination cannot be interfered with by the judicial branch of the government unless the exemption is of such a character and is so unreasonably large as to authorize the court to say that Congress, under the pretence merely of legislating for the general good, has put upon a few persons burdens that, by every principle of justice and under every sound view of taxation, ought to have been placed upon all or upon the great mass of the people. If the exemption had been placed at $1,500 or even $2,000, few, I think, would have contended that Congress, in so doing, had exceeded its powers. In view of the increased cost of living at this day, as compared with other times, the difference between either of those amounts and $,4000 is not so great as to justify the courts in striking down all of the income tax provisions. The basis upon which such exemptions rest is that [p676] the general welfare requires that, in taxing incomes, such exemption should be made as will fairly cover the annual expenses of the average family, and thus prevent the members of such families becoming a charge upon the public. The statute allows corporations, when making returns of their net profits or income, to deduct actual operating and business expenses. Upon like grounds, as I suppose, Congress exempted incomes under $4,000.
I may say, in answer to the appeals made to this court to vindicate the constitutional rights of citizens owning large properties and having large incomes, that the real friends of property are not those who would exempt the wealth of the country from bearing its fair share of the burdens of taxation, but rather those who seek to have everyone, without reference to his locality, contribute from his substance, upon terms of equality with all others, to the support of the government. There is nothing in the nature of an income tax per se that justifies judicial opposition to it upon the ground that it illegally discriminates against the rich or imposes undue burdens upon that class. There is no tax which, in its essence, is more just and equitable than an income tax if the statute imposing it allows only such exemptions as are demanded by public considerations and are consistent with the recognized principles of the equality of all persons before the law, and, while providing for its collection in ways that do not unnecessarily irritate and annoy the taxpayer, reaches the earnings of the entire property of the country, except governmental property and agencies, and compels those, whether individuals or corporations, who receive such earnings, to contribute therefrom a reasonable amount for the support of the common government of all.
We are told in argument that the burden of this income tax, if collected, will fall, and was imposed that it might fall, almost entirely upon the people of a few States, and that it has been imposed by the votes of Senators and Representatives of States whose people will pay relatively a very small part of it. This suggestion, it is supposed, throws light upon the construction to be given to the Constitution, and constitutes [p677] a sufficient reason why this court should strike down the provision that Congress has made for an income tax. It is a suggestion that ought never to have been made in a court of justice. But it seems to have received some consideration; for it is said that the grant of the power to lay and collect direct taxes was, in the belief of the framers of the Constitution, that it would not be exercised
unfairly and discriminately, as to particular States or otherwise, by a mere majority vote, possibly of those whose constituents were intentionally not subjected to any part of the burden.
It is cause for profound regret that it has been deemed appropriate to intimate that the law now before had it origin in a desire upon the part of a majority in the two Houses of Congress to impose undue burdens upon the people of particular States.
I am unable to perceive that the performance of our duty should depend in any degree upon an inquiry as to the residence of the persons who are required by the statute to pay this income tax. If, under the bounty of the United States, or the beneficent legislation of Congress, or for any other reason, some parts of the country have outstripped other parts in population and wealth, that surely is no reason why people of the more favored States should not share in the burdens of government alike with the people of all the States of the Union. Is a given body of people in one part of the United States, although owning vast properties, from which many millions are regularly derived, of more consequence in the eye of the Constitution or of the judicial tribunals than the like number of people in other parts of the country who do not enjoy the same prosperity? Arguments that rest upon favoritism by the lawmaking power to particular sections of the country and to mere property, or to particular kinds of property, do not commend themselves to my mind, for they cannot but tend to arouse a conflict that may result in giving life, energy, and power as well to those in our midst who are eager to array section against section as to those, unhappily not few in number, who are without any proper idea of our free institutions, and who have neither respect for the rights of property nor any conception of what is liberty regulated by law. [p678]
It is said that, if the necessity exists for the general government to raise by direct taxation a given sum of money, in addition to the revenue from duties, imposts, and excises, the quota of each State can be apportioned on the basis of the census, and the government can proceed to assess the amount to be raised on all the real and personal property, as well as the income, of all persons in the State, and collect the tax, if the State does not in the meantime pay its quota, and reimburse itself by collecting the amount paid by it according to its own system and in its own way. Of course, it is not difficult to understand that a direct tax, when assessed, may be collected by the general government without waiting for the States to pay the sum apportioned to their people, or that time may be given to the States to pay such amounts. But that view does not meet the argument that the assessment and collection of a direct tax on incomes -- such tax being apportioned on the basis merely of numbers in the respective States -- was never contemplated by the framers of the Constitution. Whether such a tax be collected by the general government through its own agents, or by the State, from such of the people as have incomes subject to the tax imposed, is immaterial to the discussion. In either case, the gross injustice that would result would be the same.
If Congress should lay a tax of a given aggregate amount on incomes (above a named sum) from every taxable source, and apportion the same among the States on the basis of numbers, could any State be expected to assume and pay the sum assigned to it, and then proceed to reimburse itself by taxing all the property, real and personal, within its limits, thereby compelling those who have no taxable incomes to contribute from their means to pay taxes assessed upon those who have taxable incomes? Would any State use money belonging to all of its people for the purpose of discharging taxes due from, or assessed against, a part of them? Is it not manifest that a national tax laid on incomes or on specific personal property, if apportioned among the States on the basis of population, might be ruinous to the people of those States in which the number having taxable incomes, or [p679] who owned that particular kind of property, were relatively few when the entire population of the State is taken into account? So diversified are the industries of the States composing the Union that, if the government should select particular subjects or products for taxation and apportion the sum to be raised among the States according to their population, the amount paid by some of the States would be out of all proportion to the quantity or value of such products within their respective limits.
It has been also said, or rather it is intimated, that the framers of the Constitution intended that the power to lay direct taxes should only be exercised in time of war, or in great emergencies, and that a tax on incomes is not justified in times of peace. Is it to be understood that the courts may annul an act of Congress imposing a tax on incomes whenever in their judgment such legislation is not demanded by any public emergency or pressing necessity? Is a tax on incomes permissible in a time of war, but unconstitutional in a time of peace? Is the judiciary to supervise the action of the legislative branch of the government upon questions of public policy? Are they to override the will of the people, as expressed by their chosen servants, because, in their judgment, the particular means employed by Congress in execution of the powers conferred by the Constitution are not the best that could have been devised, or are not absolutely necessary to accomplish the objects for which the government was established?
It is further said that the withdrawal from national taxation, except by apportionment among the States on the basis of numbers, of personal property, bonds, stocks, and investments of all kinds, and the income arising therefrom, as well as the income derived from real estate, is intrinsically just, because all such property and all such incomes can be made to bear, and do bear, their share of the burdens that come from state taxation. But those who make this argument forget that all the property which, by the decision now rendered, remains subject to national taxation by the rule of uniformity is also subject to be taxed by the respective [p680] States. Incomes arising from trades, employments, callings, and professions can be taxed, under the rule of uniformity or equality, by both the national government and the respective state governments, while incomes from property, bonds, stocks, and investments cannot, under the present decision, be taxed by the national government except under the impracticable rule of apportionment among the States according to population. No sound reason for such a discrimination has been or can be suggested.
I am of opinion that, with the exception of capitation and land taxes and taxes on exports from the States and on the property and instrumentalities of the States, the government of the Union, in order to pay its debts and provide for the common defence and the general welfare, and under its power to lay and collect taxes, duties, imposts, and excises, may reach, under the rule of uniformity, all property and property rights in whatever State they may be found. This is as it should be, and as it must be, if the national government is to be administered upon principles of right and justice, and is to accomplish the beneficent ends for which it was established by the People of the United States. The authority to sustain itself, and, by its own agents and laws, to execute the powers granted to it, are the features that particularly distinguish the present government from the Confederation which Washington characterized as "a half-starved, limping government" that was "always moving upon crutches, and tottering at every step." The vast powers committed to the present government may be abused, and taxes may be imposed by Congress which the public necessities do not, in fact, require, or which may be forbidden by a wise policy. But the remedy for such abuses is to be found at the ballot box, and in a wholesome public opinion which the representatives of the people will not long, if at all, disregard, and not in the disregard by the judiciary of powers that have been committed to another branch of the government.
I turn now to another part of these cases. The majority having decided that the income tax provisions of the statute in question are unconstitutional insofar as they impose a tax on [p681] income derived from rents, or on income derived from personal property, including invested personal property, the conclusion has been reached that all the income tax provision of the statute, those that are valid as well as those held to be invalid, must be held inoperative and void. And so the judgment now to be entered takes from the government the entire revenue that Congress expected to raise by the taxation of incomes. This revenue, according to all the estimates submitted to us in argument, would not have been less than $30,000,000. Some have estimated that it would amount to $40,000,000 or $50,000,000.
The ground upon which the court now strikes down all the provisions of the statute relating in anywise to incomes is that it cannot be assumed that Congress would have provided for income tax at all if it had been known or believed that the provisions taxing incomes from rents and from invested personal property were unconstitutional and void.
In Allen v. Louisiana, 103 U.S. 80, 84, this court said that it was an elementary principle
that the same statute may be in part constitutional and in part unconstitutional, and that, if the parts are wholly independent of each other, that which is constitutional may stand, while that which is unconstitutional will be rejected. . . . The point to be determined in all such cases,
the court further said,
is whether the unconstitutional provisions are so connected with the general scope of the law as to make it impossible, if they are stricken out, to give effect to what appears to have been the intent of the legislature.
A leading case on this subject is Huntington v. Worthen, 120 U.S. 97, 102. The constitution of Arkansas of 1874 provided that all property subject to taxation should be taxed according to its value, to be ascertained in such manner as the general assembly might direct, making the same equal and uniform throughout the State, and that no one species of property from which a tax may be collected should be taxed higher than another species of property of equal value. The Constitution of the State further declared that all laws exempting property from taxation other than as provided in that instrument should be void. No part of the property of railroad [p682] companies was exempted by the constitution from taxation. A subsequent statute provided for the taxation of the property of railroad companies, excepting however, from the schedule of property required to be returned "embankments turnouts, cuts, ties, trestles, or bridges." This court held that the exemption of these items of railroad property was invalid, and the question arose whether the statute could be enforced. This court said:
The unconstitutional part of the statute was separable from the remainder. The statute declared that, in making its statement of the value of its property, the railroad company should omit certain items; that clause being held invalid, the rest remained unaffected, and could be fully carried out. An exemption, which was invalid, was alone taken from it. It is only when different clauses of an act are so dependent upon each other that it is evident the legislature would not have enacted one of them without the other -- as when the two things provided are necessary parts of one system -- the whole act will fall with the invalidity of one clause. When there is no such connection and dependency, the act will stand though different parts of it are rejected.
It should be observed that the legislature of Arkansas evinced a purpose not to tax embankments, turnouts, cuts, ties, trestles, or bridges, and yet their exemption of those items was disregarded, and such property was taxed. T he same rule could be applied to the present statute.
The opinion and judgment of the court on the original hearing of these cases annulled only so much of the statute as laid a duty on incomes derived from rents. The opinion and judgment on this rehearing annuls also so much of the statute as lays a duty on the yield or income derived from personal property, including invested personal property, bonds, stocks, investments of all kinds. I recognize that, with all these parts of the statute stricken out, the law would operate unequally and unjustly upon many of the people. But I do not feel at liberty to say that the balance of the act relating to incomes from other and distinct sources must fall.
It seems to me that the cases do not justify the conclusion [p683] that all the income tax sections of the statute must fall because some of them are declared to be invalid. Those sections embrace a large number of taxable subjects that do not depend upon, and have no necessary connection whatever with, the sections or clauses relating to income from rents of land and from personal property. As the statute in question states that its principal object was to reduce taxation and provide revenue, it must be assumed that such revenue is needed for the support of the government, and therefore its sections, so far as they are valid, should remain, while those that are invalid should be disregarded. The rule referred to in the cases above cited should not be applied with strictness where the law in question is a general law providing a revenue for the government. Parts of the statute being adjudged to be void, the injustice done to those whose incomes may be reached by those provisions of the statute that are not declared to be, in themselves, invalid, could, in some way, be compensated by subsequent legislation.
If the sections of the statute relating to a tax upon incomes derived from other sources than rents and invested personal property are to fall because and only because those relating to rents and to income from invested personal property are invalid, let us see to what result such a rule may logically lead. There is no distinct, separate statute providing for a tax upon incomes. The income tax is prescribed by certain sections of a general statute known as the Wilson Tariff act. The judgment just rendered defeats the purpose of Congress by taking out of the revenue not less than thirty millions, and possibly fifty millions, of dollars expected to be raised by the duty on incomes. We know from the official journals of both Houses of Congress that taxation on imports would not have been reduced to the extent it was by the Wilson act except for the belief that that could be safely done if the country had the benefit of revenue derived from a tax on incomes. We know from official sources that each House of Congress distinctly refused to strike out the provision imposing a tax on incomes. The two Houses indicated in every possible way that it must be a part of any scheme for [p684] the reduction of taxation and for raising revenue for the support of the government, that (with certain specified exceptions) incomes arising from every kind of property and from every trade and calling should bear some of the burdens of the taxation imposed. If the court knows, or is justified in believing, that Congress would not have provided an income tax that did not include a tax on incomes from real estate and personal property, we are more justified in believing that no part of the Wilson act would have become a law without provision being made in it for an income tax. If, therefore, all the income tax sections of the Wilson act must fall because some of them are invalid, does not the judgment this day rendered furnish ground for the contention that the entire act falls when the court strikes from it all of the income tax provisions, without which, as every one knows, the act would never have been passed?
But the court takes care to say that there is no question as to the validity of any part of the Wilson act except those sections providing for a tax on incomes. Thus, something is saved for the support and maintenance of the government. It nevertheless results that those parts of the Wilson act that survive the new theory of the Constitution evolved by these cases are those imposing burdens upon the great body of the American people who derive no rents from real estate, .and who are not so fortunate as to own invested personal property, such as the bonds or stocks of corporations, that hold within their control almost the entire business of the country.
Such a result is one to be deeply deplored. It cannot be regarded otherwise than as a disaster to the country. The decree now passed dislocates -- principally for reasons of an economic nature -- a sovereign power expressly granted to the general government and long recognized and fully established by judicial decisions and legislative actions. It so interprets constitutional provisions, originally designed to protect the slave property against oppressive taxation, as to give privileges and immunities never contemplated by the founders of the government. [p685]
If the decision of the majority had stricken down all the income tax sections, either because of unauthorized exemptions or because of defects that could have been remedied by subsequent legislation, the result would not have been one to cause anxiety or regret; for, in such a case, Congress could have enacted a new statute that would not have been liable to constitutional objections. But the serious aspect of the present decision is that, by a new interpretation of the Constitution, it so ties the hands of the legislative branch of the government that, without an amendment of that instrument, or unless this court at some future time should return to the old theory of the Constitution, Congress cannot subject to taxation -- however great the needs or pressing the necessities of the government -- either the invested personal property of the country, bonds, stocks, and investments of all kinds, or the income arising from the renting of real estate, or from the yield of personal property, except by the grossly unequal and unjust rule of apportionment among the States. Thus, undue and disproportioned burdens are placed upon the many while the few, safely entrenched behind the rule of apportionment among the States on the basis of numbers, are permitted to evade their share of responsibility for the support of the government ordained for the protection of the rights of all.
I cannot assent to an interpretation of the Constitution that impairs and cripples the just powers of the National Government in the essential matter of taxation, and at the same time discriminates against the greater part of the people of our country.
The practical effect of the decision today is to give to certain kinds of property a position of favoritism and advantage inconsistent with the fundamental principles of our social organization, and to invest them with power and influence that may be perilous to that portion of the American people upon whom rests the larger part of the burdens of the government, and who ought not to be subjected to the dominion of aggregated wealth any more than the property of the country should be at the mercy of the lawless. [p686]
I dissent from the opinion and judgment of the court.
* Brown v. Maryland, 12 Wheat. 419, 444; Weston v. Charleston, 2 Pet. 449; Dobbins v. Erie County Commissioners, 16 Pet. 436; Almy v. California, 24 How. 169; Railroad Company v. Jackson, 7 Wall. 262; Cook v. Pennsylvania, 97 U.S. 566; Philadelphia & Southern Steamship Co. v. Pennsylvania, 122 U.S. 326; Leloup v. Mobile, 127 U.S. 640; Postal Telegraph Cable Co. v. Adams, 155 U.S. 688.
* Collector v. Day, 11 Wall. 113; United States v. Railroad Co., 17 Wall. 322, 332; Van Brocklin v. Tennessee, 117 U.S. 161, 178; Mercantile Bank v New York, 121 U.S. 138, 162.