tions of the national government,' nor on the salary of an officer of the national government.2 The same principle is applied to federal taxation. The means and instrumentalities used in conducting a State government are not subject to a tax by the federal government. The unimpaired existence of its powers is as essential in the one case as in the other. The salary of a State judge cannot be taxed. The right to establish and maintain the judicial department of a State government is an original inherent right, which was not granted to the federal government. It is one of those reserved rights, not delegated, but expressly reserved in the tenth amendment to the Constitution. As to this power, the federal government is not supreme, this power not being delegated to it. Upon the same principle, the salary of a State's attorney is exempt. The process of a State court is exempt, and cannot be required to be stamped, nor can a tax deed, which is one of the means of collecting the State revenue, nor the official bonds of State officers. In State v. Gaston it was said: "The powers of the State and national governments to tax are coextensive (except duties and imposts), but there is one limit to each; neither is to tax the agencies used by the other in the exercise of its governmental functions." The income of a State from a railroad owned, controlled, and managed by it is not liable to be taxed. The opinion in this case indicates that it was decided principally on the ground that it was not the intention of Congress to include a State by the use of the word corporation in the act. The principle has been extended to the municipalities of a State, so as to exempt the means used to carry on the municipal government. The city of Baltimore was, by the legislature, authorized to loan $5,000,000 to the Baltimore & Ohio Railroad Company, taking a mortgage to secure the loan. The act of Congress imposed a tax of five per cent. on interest and dividends of corporations, to be deducted by the company when paying the interest or dividends. This tax was a tax on the creditor receiving the interest, and not on the company. The creditor was the city of Baltimore, one of the subdivisions of 1 McCulloch v. Maryland, 4 Wheat. 316; ante, p. 120. Dobbins v. Commissioners of Erie, 16 Peters, 435; ante, p. 128. * Collector v. Day, 11 Wall. 113; Freedman v. Sigel, 10 Blatch. 327. • United States v. Ritchie, 4 Chicago Legal News, 139. 5 Barden v. Columbia Co. 33 Wisc. 445; Fifield v. Close, 15 Mich. 505; Union Bk. v. Hill, 3 Cold. 325; Smith v. Short, 40 Ala. 385. 6 Sayles v. Davis, 22 Wisc. 225. 8 Georgia v. Atkins, 35 Ga. 315. State v. Gaston, 32 Ind. 1. the State of Maryland, made for the more convenient administration of the State government. The State may build highways; a railroad is an improved highway; it may either build it directly, or delegate that power to a municipality. Whether the municipality builds the road or loans its credit, in either aspect it is performing one of the functions of the State, and its revenues are not subject to tax by the federal government.1 Justices Clifford and Miller dissented, on the ground that the private property of a corporation, owned as an individual would own property, is not within the principle of exemption; it is only the means and instrumentalities for conducting public affairs that are exempt. In Veazie Bank v. Fenno a most interesting question was discussed, arising out of the tax of ten per cent. on the circulation of State banks, used for currency and paid out by the national or State banks, or associations. The tax was considered an excise tax, and within the power delegated to the federal government. It was justified on the ground that Congress having in the exercise of an undoubted power undertaken to provide a currency for the whole country, may constitutionally secure the benefit of it to the people by appropriate legislation. To this end it may restrain by suitable enactments the circulation as money of any notes not issued under its own authority. Justices Nelson and Davis dissented, saying: "It is simply a mode by which the powers or faculties of the States to incorporate banks are subjected to taxation, and which, if maintainable, may annihilate these powers." This opinion and the dissenting opinion are indexes of the different views entertained as to the nature of the taxing power of the federal government, and the purposes for which that power may be exercised. It is not my purpose to discuss the question whether taxes may be imposed for the purpose of protection, and not for the purpose of revenue in its political aspects, but to treat it simply as a legal question. The opinion of the court asserts the proposition that Congress having the power to regulate the currency may use the taxing power for that purpose. It adopts that erroneous dogma, that the power to tax involves the power to destroy, and justifies Congress in using the taxing power to destroy the circulation of State banks, in order that it may preserve unimpaired the currency which it had adopted. What is the limit to the taxing power of the federal government, where there is no express limitation in the Constitution? This case 1 United States v. Railroad Company, 17 Wall. 322. Veazie Bk. v. Fenno, 8 Wall. 533. asserts the proposition, that there is none which can be enforced by the courts, the only remedy being in the elective franchise, that is, the people must change their representatives. How is it as to a State? Is there no limit except the limits in the Constitution of the State? It is claimed that the doctrine is one that is fully established, that the purpose of the tax must be public, it must be governmental. Revenue is to be raised to support the government, not to aid private parties, nor to encourage manufactories.' But it may be said that in these cases, the tax was applied directly to aid private parties, while in the case of the bank tax it was applied, like other revenues, to public purposes. The reason on which these cases are founded, goes further than this literal application; it requires that the agents of the people, clothed with this power, should use it alone for the purpose for which it was vested in them, to raise revenue for the support of the government. Here we are met by the opinion, it is said, of Chief Justice Marshall, that "the power to tax involves the power to destroy."" This dictum of this distinguished jurist, used in the heat of argument, has been adopted by many courts, as embodying the principles of that celebrated case, and justifying the uncontrolled exercise of the taxing power. A slight consideration of that case will show that it does not sustain the dictum. That case settled the principle that a State could not tax the means or instrumentalities of the national government, because a State must levy its contributions for the support of its government upon the persons and property of its citizens, over whom it has jurisdiction and control. It has no jurisdiction over a separate and distinct government, and having no control over such government, it cannot fetter the means and instrumentalities used by such government in conducting its public affairs, by levying contributions on them. It will be noticed that in this case it was conceded that the State could tax the real estate of the bank, and the shares of those who owned stock; it was the franchise or privilege created by the national government that it could not tax. This concession destroys the dictum, for if the land and shares can be taxed, the bank can as well be destroyed by a heavy tax on the land and shares as by a tax on its franchise. This is self-evident; but the case decides that the bank is an agency which the national government may use in its fiscal operations, and its agencies or instrumentalities must be untrammeled and free from the control of any other government. But if the dogma that the power to tax involves the power to destroy be true, then that instru 1 Ch. 2, § 25, and cases cited. 2 McCullock v. Maryland, 4 Wheat. 316. mentality of the national government might have been destroyed simply by changing the nature of the tax from one on the franchise to one on the real estate of the bank, or the shares of its stockholders. This is catching at the husk of the opinion of that great jurist, while the kernel is lost sight of. The substance of the opinion was that the instrumentalities of the federal government are not capable of being fettered by a tax of the States, in any form of taxation. It The proposition that the power to tax is the power to destroy is in opposition to the fundamental principles of free government. asserts the broad doctrine that the power to tax, one of the legislative powers, is unlimited and arbitrary. It is claimed that there is no such thing as arbitrary power in this country; that the form of government being republican, those who exercise the powers of government, whether executive, legislative or judicial, are clothed with a trust which is not to be executed in accordance with mere whim, or in an arbitrary manner, but according to the purpose of its creation. The power of taxation is one of the legislative powers to be used to raise revenue for governmental purposes. It is not to be used for private purposes, nor to depress one branch of industry, or to foster another, and when such appears to be clearly the purpose of a tax law, it has been declared void. In the language of Justice Miller, "It must be conceded that there are such rights in every free government beyond the control of the State. A government which recognized no such rights, which held the lives, the liberty and the property of its citizens subject at all times to the absolute disposition and unlimited control of even the most democratic depositary of power, is after all but a despotism. True, it is a despotism of the many, of the majority, if you choose to call it so, but it is none the less a despotism. The theory of our governments, State and national, is opposed to the deposit of unlimited power anywhere. The executive, the legislative and the judicial branches of these governments are all of limited and defined powers. There are limitations on such powers which grow out of the essential nature of all free governments." 2 He then proceeds to argue that one of these limits growing out of the nature of the governments, is that the purpose must be public. The doctrine that the power to tax is the power to destroy, acknowledges no limit. The tax may be imposed, not to raise revenue for governmental purposes, but for the sole purpose of destroying the interest that is taxed. 1 Ante, § 25, and cases cited; Loan Asso. v. Topeka, 20 Wall. 655. * * * The question under discussion is not so broad as that in the case of State taxation. There it is limited to a public purpose from the nature of the power. But when we come to the case of federal taxation, the power is not, as in the case of a State, inherent. It lies in grant, and if the grant were a general one it could well be claimed that it had certainly the same limit as State taxation, and that it should be limited to raising revenue for the public or governmental purposes of such federal government. The framers of the Constitution did not leave that matter in doubt. The grant of the power contains also the limit, which is "to pay the debts and provide for the common defense and general welfare of the United States"-in other words, to raise revenue to defray the expenses of the federal government. The debts of the new government thus formed, must be paid, as also must the expenses of its defense in time of war, and of conducting the government in times of peace. These are essential to the general welfare of the States united in the federal government. That general welfare is provided for by the powers delegated in this Constitution. The cost of conducting this government, created to secure the general welfare of the States, is a legitimate object for which taxes may be imposed. These are the three objects for which the federal taxing power was delegated. Hamilton, in enumerating the objects of federal taxation, speaks of them as the national defense, the national civil list, and the payment of the national debts contracted. The civil list, or the expenses of the government in times of peace, is contrasted with the expenses in times of war, or of preparation for that event; the expense of this government in executing its delegated powers is the civil list of Hamilton. Can this power of taxation, delegated for certain specific purposes, be used avowedly for other and distinct purposes? Can it be used to destroy rights created and protected by the States ? These rights were created by the States, in the exercise of powers which it is admitted were reserved at the formation of the Constitution. It seems to be admitted that the States have the right to incorporate banks. If this power of taxation can be used to tax banks out of existence, why not other corporations? Railroads, for instance, might be taxed out of existence; and Congress, on the plea of regulating interstate commerce, could charter national roads; and so any calling might be taxed so heavily that it could not be pursued. What becomes of the doctrine as to the license tax if this theory 1 Federalist, No. 29, p. 186; Duer's Constitutional Jurisprudence, pp. 210, 211; Federalist, No. 40, Madison. |