A prudent man touches the question of woman suffrage gingerly. Many fingers have been burnt in that fire and its embers are not yet dead. Some mention of the Nineteenth Amendment seems necessary, however, in any discussion of federal encroachment on state power, and it may be possible to approach the suffrage movement from the standpoint of constitutional law without getting upon controversial ground.
The United States Constitution as originally adopted did not prescribe who should be entitled to vote. That matter was left entirely in the hands of the states. The Constitution provided[1] that, for the election of members of the House of Representatives, "the electors in each state shall have the qualifications requisite for electors of the most numerous branch of the state legislature." It was further provided that Senators should be chosen by the legislatures of the states[2] and that the President and Vice-president should be chosen by presidential electors appointed in such manner as the state legislatures might direct.[3] These were the only elective federal officials.
[Footnote 1: Article I, Section 2.]
[Footnote 2: Article I, Section 3.]
[Footnote 3: Article II, Section 1.]
While the states were thus left in full control, it does not follow that the matter was deemed wholly outside the proper scope of national authority. No argument is necessary to demonstrate that the regulation of the suffrage in national elections is or may be a matter of national concern. The question of prescribing the qualifications of voters in such elections was much debated in the Convention which framed the Constitution.[1] Some members were in favor of prescribing a property qualification and limiting the suffrage to freeholders. It was finally decided, however, to accept the qualifications prescribed by state law. In adopting this plan the Convention followed the line of least resistance. The qualifications of voters in the various states differed.[2] Most states required a property qualification, but some did not. It was felt that to attempt to impose a uniform rule on all the states would arouse opposition and create one more obstacle to be overcome in the formidable task of getting the Constitution ratified.
[Footnote 1: See e.g., Farrand, "Records of the Federal Convention,"Vol. II, p. 201 et seq.]
[Footnote 2: For a statement of the qualifications in the various states seeMinor v. Happersett, 21 Wall., 162.]
There the matter rested, with suffrage qualifications regulated entirely by state law, until after the Civil War. Meanwhile, the states had been abolishing property tests, and universal male suffrage had been written into state constitutions. The cry for woman suffrage had begun, but as yet it was only a still small voice, inaudible to legislators.
After the Civil War the problem of protecting the emancipated slaves had to be dealt with, and three constitutional amendments (Nos. XIII, XIV, and XV) were adopted with that end primarily in view. Number XIII, ratified in 1865, formally abolished slavery. Number XIV, ratified in 1868, extended citizenship to all persons born in the United States and provided (among other things) that no state should abridge the privileges or immunities of citizens of the United States. Number XV, ratified in 1870, provided that "the right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude." Here was the entering wedge of federal interference. The amendments did not purport to deal with woman suffrage, but the pioneers of the suffrage movement thought they discovered in them a means of advancing their cause and lost no time in putting the matter to the test. Susan B. Anthony voted at Rochester, N.Y., in an election for a representative in Congress, claiming that the restriction of voting to males by the constitution and laws of New York was void as a violation of the Fourteenth Amendment providing that "no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." She was indicted for voting unlawfully, and on her trial before Justice Hunt of the United States Supreme Court, sitting at Circuit, the Court directed the jury to find a verdict of guilty and imposed a fine of $100 and costs.[1]
[Footnote 1:United States v. Anthony, 11 Blatchford, 200.]
Mrs. Virginia Minor raised a similar question in the courts of Missouri. The Missouri constitution limited the right to vote to male citizens. Mrs. Minor applied for registration as a voter, and on being refused brought suit against the Registrar of Voters on the ground that this clause of the Missouri constitution was in violation of the Fourteenth Amendment. The Missouri state courts decided against her, and the case was taken to the Supreme Court of the United States where the decision of the state courts was affirmed.[1] The Supreme Court held in effect that while Mrs. Minor was a citizen that fact alone did not make her a voter; that suffrage was not coextensive with citizenship, either when the Constitution was adopted or at the date of the Fourteenth Amendment, and was not one of the "privileges and immunities" guaranteed by that amendment.
[Footnote 1:Minor v. Happersett, 21 Wall., 162.]
A similar decision was rendered in the matter of Mrs. Myra Bradwell's application for a license to practise law in Illinois.[1] The Supreme Court held that the right to practise law in the state courts was not a privilege or immunity of a citizen of the United States within the meaning of the Fourteenth Amendment, and affirmed the decision of the Illinois Court denying Mrs. Bradwell's application.
[Footnote 1:Bradwell v. Illinois, 16 Wall., 130.]
The failure of these attempts to turn the Fourteenth Amendment to the advantage of the woman suffrage movement in no wise checked the movement or discouraged its leaders. They redoubled their efforts among the separate states, and worked to such good purpose that the opposition presently began to take on the aspect of a forlorn hope. "Votes for Women" became an accomplished fact in many states, and appeared on the verge of accomplishment in most of the others. Some states, however, were still holding out when the leaders of the movement, impatient of further delay and determined to coerce the recalcitrants, took the matter into the national arena and procured the proposal and ratification of an amendment to the Federal Constitution. The amendment provides:
The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any state on account of sex.
In other words, it adopts verbatim the phraseology of the Fifteenth Amendment, merely substituting the word "sex" for the words "race, color, or previous condition of servitude."
So much for the historical background of the so-called Susan B. Anthony Amendment. It remains to consider just how far the amendment constitutes an encroachment by the Federal Government on the powers of the states.
In so far as it affects the qualifications of voters at national elections (i.e., for president, senators, representatives) the encroachment is more apparent than real. As has already been pointed out, this is essentially a national question, and the Constitution adopted the suffrage qualifications prescribed by state law, not as a matter of principle, but for reasons of expediency and convenience.
In so far, however, as the amendment imposes woman suffrage on the states in elections of state and local officials the situation is entirely different. That staunch advocate of national power, Alexander Hamilton, said in theFederalist:[1]
Suppose an article had been introduced into the Constitution, empowering the United States to regulate the elections for the particular states, would any man have hesitated to condemn it, both as an unwarrantable transposition of power, and as a premeditated engine for the destruction of the state governments?
[Footnote 1:FederalistLIX.]
What Hamilton scouted as impossible has been accomplished in the Nineteenth Amendment. It in effect strikes out the word "male" from the suffrage provisions of state constitutions. It overrides state policy and interferes with the right of states to manage their own affairs. From the theoretical standpoint a more serious inroad on state prerogatives would be hard to find. Control of the suffrage is one of the fundamental rights of a free state. It belonged to the North American states before their union, and was not surrendered to the National Government when the union was effected. Moreover, the encroachment has a very practical side. To confer the suffrage on the educated women of Connecticut was one thing; to confer it on the Negro women of Alabama was quite a different matter, involving different considerations. The amendment took no heed of such differences but imposed a uniform rule on all the states, regardless of local prejudices or conditions.
It is true that a somewhat similar encroachment on state power had been made by the Fifteenth Amendment, designed to enfranchise the Negroes. That amendment, however, had its origin in conditions growing out of the Civil War, and claimed its justification in the necessity for protecting the freed slaves against hostile state action. It was avowedly an emergency measure, and the success with which it has been nullified in some quarters testifies to the unwisdom of forcing such measures upon reluctant states.
The conditions surrounding the adoption of the Nineteenth Amendment were altogether different. Few people take seriously the alleged analogy between the women and the slaves. The constitutional method—action through the separate states—was being pursued with signal success. The states were rapidly falling in line. Most of them had already granted woman suffrage or were ready to grant it. There was no overmastering need for coercing the states that were not yet ready. An impartial student of the period will be apt to conclude that the Nineteenth Amendment was the product of impatience rather than necessity.
Someone may ask, "What effect will the granting of votes to women have on the problem of preserving the constitutional equilibrium?" The ultimate power lies with the voters, and the women with votes now equal or outnumber the men. What is the reaction of women voters likely to be toward questions of political theory?
Ours is a governmental scheme of extreme complexity. As with animal organisms so with political systems, the higher they rise in the scale of development the more complicated they tend to become. An absolute monarchy is simplicity itself compared with our dual system. To maintain the proper adjustment of such a machine requires intelligence of a high order. The machine will not run itself and male tinkers have abundantly demonstrated that it is not fool-proof. But something more is required than mere intelligence. There must be, at least among the leaders, an instinct for governmental problems as distinguished from those of a merely social or personal character; an ability to recognize and a willingness to conform to underlying principles.
How will the women voters meet this test? Granting (what few will dispute) that their intelligence at least equals that of the men, will they be as likely as men to look beyond the immediate social welfare problem to the governmental principle at stake? Will an abstract proposition hold its own in their minds against a concrete appeal?
We do not attempt to answer these questions, but they contain food for thought.
CONGRESSversusTHE SUPREME COURT—THE CHILD LABOR LAWS
The present Federal Revenue Act is noteworthy in more aspects than its complexity and the disproportionate burden cast on possessors of great wealth. To students of our form of government it is particularly interesting because of provisions[1] purporting to impose a tax on employers of child labor, for these represent an attempt by Congress to nullify a decision of the Supreme Court and grasp a power belonging to the states. The story of these provisions throws a flood of light on a method by which our Constitution is being changed.
[Footnote 1: Revenue Act of 1921, Title XII.]
The evils of child labor have long engaged the attention of philanthropists and lawmakers. In comparatively recent years child labor laws are said to have been enacted in every state of the Union. These statutes, however, lacked uniformity. Some of them were not stringent enough to satisfy modern sentiment. Moreover, commercial considerations entered into the reckoning. Industries in states where the laws were stringent were found to be at a disadvantage in comparison with like industries in states where the laws were lax, and this came to be regarded as a species of unfair competition. The advantages of uniformity and standardization seemed obvious from both the philanthropic and the commercial viewpoints, and Congress determined to take a hand in the matter.
No well-informed person supposed for a moment that the regulation of child labor was one of the functions of the General Government as those functions were planned by the makers of the Constitution. The United States Supreme Court had declared over and over again that such matters were the province of the states; that "speaking generally, the police power is reserved to the states and there is no grant thereof to Congress in the Constitution."[1] For some years, however, Congress had been finding ways to legislate indirectly upon matters which it had no power to approach directly. Under the grant of power in the Constitution "to regulate commerce with foreign nations and among the several States,"[2] Congress had enacted laws purporting to regulate commerce but in reality designed for the suppression or regulation of some other form of activity. These enactments had for the most part been sustained as constitutional by the Supreme Court (though with misgivings and sharp differences of opinion), the Court holding that it could not pass on the motives for congressional action. The enactment of a law regulating child labor seemed therefore but another step along a trail already blazed, and Congress determined to take that step.
[Footnote 1:Keller v. United States, 213 U.S., 138.]
[Footnote 2: Art. I, Sec. 8.]
The statute enacted by Congress[1] prohibited transportation in interstate commerce of goods made at a factory in which, within thirty days prior to their removal therefrom, children under the age of fourteen years had been employed or permitted to work, or children between the ages of fourteen and sixteen had been employed or permitted to work more than eight hours in any day, or more than six days in any week, or after the hour of 7 P.M. or before the hour of 6 A.M. The constitutionality of the act was at once challenged and suit brought to test the question. The Supreme Court held, by a vote of five to four,[2] that Congress had overstepped its power. The previous decisions which had upheld somewhat similar inroads on the police power of the states were distinguished and the act was declared unconstitutional.
[Footnote 1: Act of September 1, 1916, 39 Stat., 675.]
[Footnote 2:Hammer v. Dagenhart, 247 U.S., 251.]
The distinction drawn by the majority of the Court between this and previous decisions was a narrow one and its validity has been questioned by some writers. It has nowhere been more clearly explained than in an address delivered before a body of lawyers by a former member of the Court.[1] Mr. Hughes said:
There has been in late years a series of cases sustaining the regulation of interstate commerce, although the rules established by Congress had the quality of police regulation. This has been decided with respect to the interstate transportation of lottery tickets, of impure food and drugs, of misbranded articles, of intoxicating liquors, and of women for the purpose of debauchery. It was held to be within the power of Congress to keep "the channels of interstate commerce free from immoral and injurious uses." But the Court in this most recent decision has pointed out that in each of these cases "the use of interstate commerce was necessary to the accomplishment of harmful results." The Court, finding this element to be wanting in the Child Labor Case, denied the validity of the act of Congress. The Court found that the goods shipped were of themselves harmless. They were permitted to be freely shipped after thirty days from the time of removal from the factory. The labor of production, it was said, had been performed before transportation began and thus before the goods became the subject of interstate commerce.
The fundamental proposition thus established is that the power over interstate commerce is not an absolute power of prohibition, but only one of regulation, and that the prior decisions in which prohibitory rules had been sustained rested upon the character of the particular subjects there involved. It was held that the authority over interstate commerce was to regulate such commerce and not to give Congress the power to control the states in the exercise of their police power over local trade and manufacture.
[Footnote 1: Charles E. Hughes, President's Address, Printed in YearBook of New York State Bar Association, Vol. XLII, p. 227 et seq.]
Congress did not receive this decision of the Supreme Court submissively. On the contrary, plans were laid to nullify it. The effort to legislate on child labor under cover of the power to regulate commerce having failed, recourse was had to the constitutional grant of power to lay taxes. Within six months after the decision of the Supreme Court declaring the act unconstitutional was announced, another statute similar in purpose and effect was enacted as part of a Federal Revenue Act.[1] This act provided for an additional tax of ten per cent. of the net profits received from the sale or distribution of the product of any establishment in which children under the age of fourteen years had been employed or permitted to work or children between the ages of fourteen and sixteen had been employed or permitted to work more than eight hours in any day or more than six days in any week or after the hour of 7 P.M. or before the hour of 6 A.M. during any portion of the taxable year. In other words, the law which had been declared void was substantially reënacted, with the substitution of a prohibitive tax for the clause prohibiting transportation in interstate commerce.
[Footnote 1: Revenue Act of 1918, Title XII.]
There was no pretense that this act was enacted for the purpose of raising revenue. The revenue feature was merely legislative camouflage. To quote the words of Justice Holmes in a recent case,[1] "Congress gave it the appearance of a taxing measure in order to give it a coating of constitutionality."
[Footnote 1:United States v. Jin Fuey Moy, 241 U.S., 394.]
The debate in the Senate was highly illuminating.[1] Its sponsors admitted that the measure was not expected or intended to produce revenue but was designed to regulate child labor and nullify the decision of the Supreme Court. Senators learned in the law conceded that if this purpose and effect were declared on the face of the act, or were necessarily inferable from its provisions, it must inevitably be declared unconstitutional. Reliance was placed, however, on the facts that the act was entitled "A bill to raise revenue," and that its provisions did not necessarily, on their face, belie this label. It was argued that the Supreme Court would be bound, under its own previous rulings, to treat the act as if it were what it purported on its face to be—a revenue measure—and to ignore common knowledge and senatorial admissions to the contrary. The measure passed the Senate by a substantial majority and was enacted as part of the revenue bill then under consideration, from which it has been carried forward into the present revenue law.
[Footnote 1: See "Congressional Record" of December 18, 1918.]
There the matter stands at this writing. A District Court judge has declared the new act unconstitutional but the question has not yet been passed upon by the Supreme Court.
It would be venturesome to attempt to predict what the Supreme Court will do about it. Many constitutional lawyers seem to think that Congress has succeeded in its attempt and that the act will be sustained. Certainly there are strong precedents pointing that way. Three in particular will be relied upon—the Veazie Bank case, the Oleomargarine case and the Narcotic Drug Act case.
In the Veazie Bank case[1] the Supreme Court upheld the validity of a so-called tax law whose purpose and effect were to suppress the circulation of notes of the state banks. In the Oleomargarine case[2] the Court upheld a tax whose purpose and effect were to suppress the manufacture and sale of oleomargarine artificially colored to look like butter. In the Narcotic Drug case[3] the Court upheld a tax imposed by the so-called Harrison Act[4] whose purpose was to regulate the sale and use of narcotic drugs. In each of these cases there could be no doubt in the mind of any intelligent man as to the motive for the enactment. The Court has uniformly maintained, however, that
when Congress acts within the limits of its constitutional authority, it is not the province of the judicial branch of the Government to question its motives.[5]
[Footnote 1:Veazie Bank v. Fenno, 8 Wall., 533, decided in 1870.]
[Footnote 2:McCray v. United States, 195 U.S., 27, decided in 1904.]
[Footnote 3:United States v. Doremus, 249 U.S., 86, decided in 1919.]
[Footnote 4: 38 Stat., 785.]
[Footnote 5:Smith v. Kansas City Title Company, 255 U.S., 180, 210.]
In the Narcotic Drug Act case[1] the Court held
While Congress may not exert authority which is wholly reserved to the states, the power conferred by the Constitution to levy excise taxes, uniform throughout the United States, is to be exercised at the discretion of Congress; and, where the provisions of the law enacted have some reasonable relation to this power, the fact that they may have been impelled by a motive, or may accomplish a purpose, other than the raising of revenue, cannot invalidate them; nor can the fact that they affect the conduct of a business which is subject to regulation by the state police power.
[Footnote 1:United States v. Doremus, 249 U.S., 86.]
It is true that, while the Supreme Court may not question congressional motives, it cannot escape the obligation to construe a statute in the light of its true nature and effect. The Court has said:[1]
The direct and necessary result of a statute must be taken into consideration when deciding as to its validity, even if that result is not in so many words either enacted or distinctly provided for. In whatever language a statute may be framed, its purpose must be determined by its natural and reasonable effect.
[Footnote 1:Collins v. New Hampshire, 171 U.S., 30.]
As already indicated, however, the nature and effect of a statute must ordinarily be determined from the form and contents of the act itself, rather than from outside sources, and the measure under consideration purports to be a revenue act.
In the light of the decisions and principles of interpretation to which reference has been made, the case against the constitutionality of the act may seem well-nigh hopeless. The fact remains, however, that Congress has not met the fundamental objection raised by the Supreme Court. The Court declared the former act unconstitutional, not only because it transcended the power of Congress under the particular provision of the Constitution then invoked, viz., the Commerce Clause, but also on the broad ground of state rights, because it "exerts a power as to a purely local matter to which the federal authority does not extend." It is difficult to see how this objection is obviated by reënacting the act as a revenue measure. Under the circumstances perhaps the apprehensive foes of federal encroachment should withhold their lamentations until the Supreme Court has spoken again.[1]
[Footnote 1: Since this chapter was put into print the Court has spoken. InBailey v. The Drexel Furniture Co.(decided May 15, 1922) the Child Labor Tax Law was pronounced unconstitutional. The Court, while conceding that it must interpret the intent and meaning of Congress from the language of the act, held that the act on its face is an attempt to regulate matters of state concern by the use of a so-called tax as a penalty. The opinion of the Court, written by Chief Justice Taft, is an emphatic assertion of the duty and function of the Court to preserve the constitutional equilibrium between nation and states.]
A century ago the United States Supreme Court was the bulwark of national power against the assaults and pretensions of the states. To-day it is the defender of the states against the encroachments of national power. Let no one suppose, however, that this is because the Court itself has faced about. On our revolving planet a ship may be sailing toward the sun at sunrise and away from the sun in the afternoon without having changed its course. The Supreme Court has been the most consistent factor in our governmental scheme. While there have been differences of viewpoint between liberal constructionists and strict constructionists among its members, the Court on the whole has steered a fairly straight course. What has really altered is the environment in which the Court moves. The earth has been turning on its axis. The frame of mind of the people who compose states and nation has changed.
At the outset (to cling for a moment to our nautical metaphor) the Court was obliged to put forth on an unknown sea. Its sailing orders under the new Constitution were unique. Precedents, those charts and lighthouses of the judicial mariner, were lacking. Progress was tentative and groping. Little wonder therefore that at first the business of the Court was meager and membership in its body seemed less attractive than membership in the judiciary of a state. Robert Hanson Harrison, one of President Washington's original appointees to the Supreme bench, declined to serve, preferring to accept a state judicial office. John Rutledge, another of the original appointees, resigned after a few months, preferring the position of Chancellor of his native state to which he had been chosen. John Jay, the first Chief Justice, resigned to become Governor of New York, and later declined a reappointment as Chief Justice in words indicating entire lack of faith in the powers and future of the Court.
Nevertheless, the first period of the Court was by no means barren of achievement. A beginning was made. The supremacy of the national authority under the new Constitution was asserted. So stoutly indeed was it maintained in the memorable case ofChisholm v. Georgia,[1] that the country was thrown into a ferment. The Court had entertained a suit against a sovereign state by a private citizen of another state and rendered a decision in favor of the private citizen. The legislature of the sovereign state concerned (Georgia) responded by a statute denouncing the penalty of death against anyone who should presume to enforce any process upon the judgment within its jurisdiction. The matter was taken up in Congress and resulted in the proposal, and subsequent ratification by the states, of a constitutional amendment designed to prevent such actions in future.[2] It has been the fashion to speak of this incident as a striking example of the recall of judicial decisions. Such indeed it was. The decision did not suit the popular frame of mind and was promptly overruled in the method prescribed by the Constitution. It went a long way, however, toward establishing the Supreme Court as a power to be reckoned with on the side of national supremacy and authority.
[Footnote 1: 2 Dallas, 419, decided in 1793.]
[Footnote 2: Amendment XI.]
Three years later the Court again took occasion to assert the national supremacy in no uncertain fashion. The case wasWare v. Hylton[1] and the Court laid down the proposition that a treaty of the Federal Government (in this case the treaty of peace with Great Britain) nullified previous state laws dealing with the subject matter. It is an interesting circumstance that one of the counsel on the losing side in this case was John Marshall of Virginia, and that this was the only case he ever argued before the tribunal through which he was destined to play so momentous a part in history.
[Footnote 1: 3 Dallas, 199, decided in 1796.]
In the annals of the Supreme Court and the development of American constitutional law the name of John Marshall stands preëminent. He was appointed Chief Justice by President John Adams, and took his seat on the Bench at the beginning of the new century (February 4, 1801). He was without judicial experience, but his record in other fields of activity and his well-known Federalist principles pointed him out as a man to be reckoned with and explain the aversion with which he was viewed by Thomas Jefferson, the incoming President. The breach between the President and the Chief Justice was widened by some of the early decisions of the latter upholding the supremacy of the National Government and the powers of the Supreme Court, notably the famous case ofMarbury v. Madison,[1] in which was asserted the power of the Court to declare an act of Congress void as in conflict with the Constitution. Some years elapsed, however, before a case was decided which squarely involved a conflict between the powers of the Federal Government and the powers of a state. The issue came up in the case ofUnited States v. Judge Peters.[2] This case involved a conflict of jurisdiction between the federal courts and the authorities of the State of Pennsylvania over the distribution of some prize money. Marshall's decision was a strong assertion of the federal jurisdiction and power. The Governor of Pennsylvania, under sanction of the state legislature, called out the state militia to resist enforcement of the judgment of the Court. Matters were tense for a time and bloodshed seemed imminent but the state finally backed down.
[Footnote 1: 1 Cranch, 137.]
[Footnote 2: 5 Cranch, 115, decided in 1809.]
In the following year (1810) came the case ofFletcher v. Peck,[1] in which for the first time a statute of a state was held by the Supreme Court to be void as repugnant to the Federal Constitution. The State of Georgia had sought by statute to destroy rights in lands acquired under a previous act. It was held that the statute was unconstitutional as impairing the obligation of contracts within the meaning of the Constitution.
[Footnote 1: 6 Cranch, 87.]
InMartin v. Hunter's Lessee[1] was asserted the right of the Federal Supreme Court to overrule the judgment of a state court on questions arising under the Federal Constitution. The State of Virginia had denied that right and the Supreme Court reversed the judgment of the Virginia Court of Appeals.
[Footnote 1: 1 Wheat., 304 (1816.)]
InMcCulloch v. State of Maryland,[1] a case involving an attempt by the State of Maryland to tax the Bank of the United States, Marshall's doctrine of implied powers was elaborated, and the judgment of the state court upholding the tax was reversed.
[Footnote 1: 4 Wheat., 316 (1819).]
In theDartmouth College case[1] the doctrine of the inviolability of contracts against attack by state legislation was further developed. An act of the state legislature of New Hampshire had sought to alter the charter of Dartmouth College, and the New Hampshire courts had upheld the legislature. The Supreme Court reversed the state court and declared the statute unconstitutional under the clause of the Constitution which declares that no state shall make any law impairing the obligation of contracts.
[Footnote 1:Dartmouth College v. Woodward, 4 Wheat., 518 (1819).]
In the great case ofGibbons v. Ogden[1] the Court asserted the paramount jurisdiction of the National Government over interstate commerce. This was one of the most important and far-reaching of all Marshall's decisions. An injunction had been granted by Chancellor Kent and unanimously sustained by the Court of Errors of New York, restraining Gibbons from navigating the Hudson River by steamboats licensed by Congress for the coasting trade on the ground that he was thereby infringing the exclusive right, granted by the legislature of New York, to Robert R. Livingston and Robert Fulton to navigate the waters of the state with vessels moved by steam. The Supreme Court reversed the state courts and held the New York legislation void as an interference with the right of Congress, under the Constitution, to regulate interstate commerce.
[Footnote 1: 9 Wheat., 1 (1824).]
These were only a few of that series of great decisions which stand out like mountain peaks on the horizon of our national life. Marshall's judgments transformed a governmental experiment into something assured and permanent. They confirmed the national supremacy and made the Constitution workable.
Marshall is known to history for his work in vindicating the national power under the Constitution. That was the need in his day and he met it with superlative wisdom and skill. It would be a mistake, however, to suppose that he favored federal encroachment upon the powers reserved to the states. On the contrary, he rendered decisions in favor of state rights which would be notable were they not overshadowed by the greater fame of the decisions which went to the building of the nation.
With the passing of Marshall and the accession of Taney as Chief Justice a new chapter opened in the history of the Court. The Federalists had become extinct. Andrew Jackson had come into power and it had fallen to his lot to fill a majority of the seats upon the bench by appointments to vacancies. The result was at once apparent. Two cases[1] involving important constitutional questions, which had been argued during Marshall's lifetime but assigned for reargument on account of a division in the Court, were now decided contrary to Marshall's known views and in favor of a strict construction of national powers. Justice Story, Marshall's longtime associate on the bench, dissented strongly in both cases, lamenting the loss of Marshall's leadership and the change in the viewpoint of the Court.
[Footnote 1:Mayor of New York v. Miln, 11 Peters, 102;Briscoe v.Bank of Kentucky, 11 Peters, 257, decided in 1837.]
It would serve no useful purpose to enter upon a detailed consideration of the various decisions upon constitutional questions made during the twenty-eight years of Taney's Chief Justiceship. They were marked by great diversity of views among the members of the Court. In some of them, notably the famous Passenger cases,[1] the Court fell into a state reminiscent of the confusion of tongues that arose at the building of the Tower of Babel. The scope of certain of Marshall's decisions was limited.[2] Upon the whole, however, the structure of constitutional law which Marshall had reared was not torn down or greatly impaired. The national supremacy was upheld. Taney and his associates were for the most part patriotic men and eminent lawyers, proud of the Court and its history and anxious to add to its prestige. It is regrettable that the merits of some of them have been so obscured and their memory so clouded by a well-meaning but unfortunate excursion into the field of political passions. In the Dred Scott case[3] they thought to quiet agitation and contribute to the peace of their country by passing judgment upon certain angrily mooted questions of a political character. The effort was a failure and brought upon their heads, and upon Chief Justice Taney in particular, an avalanche of misrepresentation and obloquy.
[Footnote 1: 7 Howard, 283 (1849).]
[Footnote 2: Not always for the worse: vide the Charles River Bridge case, 11 Peters, 420, imposing salutary restrictions on the doctrine of the Dartmouth College case.]
[Footnote 3:Dred Scott v. Sandford, 19 Howard, 393 (1857).]
The suppression of the Great Rebellion brought an enormous increase in the national power and in the popular will to national power. State rights did not loom large in the popular or the legislative mind in reconstruction days. Taney was dead. The Supreme Court had been practically reconstituted by appointments made by President Lincoln and his immediate successors and it seems to have been anticipated that the new Court would take the view of national powers prevailing in Congress and the country at large. In this the popular expectation was doomed to disappointment. The Court displayed an unexpected solicitude for the rights of the states and firmness against federal encroachment. Chief Justice Salmon P. Chase, who had been President Lincoln's war Secretary of the Treasury, went so far as to pronounce unconstitutional some of his own official acts performed under the stress of war.
In the great case ofState of Texas v. White[1] the rights of Texas as a sovereign state were asserted, though Texas had joined in the Rebellion and was not represented in the national legislature.
[Footnote 1: 7 Wall., 700 (1869).]
InThe Collector v. Day[1] it was held that Congress had no power to tax the salary of a state official.
[Footnote 1: 11 Wall., 113 (1871).]
In the Slaughter House cases[1] an act of the Legislature of Louisiana, granting to a corporation created by it exclusive rights to maintain slaughter houses for the City of New Orleans and other territory, was upheld, as a valid exercise of state police power, against claims that the legislation violated rights secured under the newly adopted amendments to the Federal Constitution (Amendments XIII, XIV, XV). The opinion of the Court delivered by a Northern judge (Miller of Iowa) stands as one of the bulwarks of state authority.
[Footnote 1: 16 Wall., 36 (1873).]
In a series of later cases various reconstruction acts of Congress involving encroachments upon state rights were either held unconstitutional or radically limited in their effect. For example, the decision inUnited States v. Cruikshank[1] greatly limited the effect of the so-called Federal Enforcement Act. The decision inUnited States v. Harris[2] declared unconstitutional portions of an act of Congress designed for the suppression of activities of the Ku-Klux variety. In the so-called Civil Rights cases[3] certain provisions of the federal Civil Rights Act, passed in furtherance of the purposes of the new constitutional amendments and designed to secure to persons of color equal enjoyment of the privileges of inns, public conveyances, theatres, etc., were held unconstitutional as an encroachment on the rights of the states.
[Footnote 1: 92 U.S., 542 (1875).]
[Footnote 2: 106 U.S., 629.]
[Footnote 3: 109 U.S., 3.]
These are but a few of the many decisions of the Supreme Court in the reconstruction period upholding the rights of the states against attempted federal encroachment arising from the conditions of the Civil War. The nation owes a debt of gratitude to the men who composed the Court at this time for their courage and firmness in the face of popular clamor and passion.
The solicitude of the Court for the rights of the states did not end with the reconstruction period. It has continued down to the present day. In the Income Tax cases[1] the Court held that a tax upon income from bonds of a state municipal corporation was repugnant to the Constitution as a tax upon the borrowing power of the state.
[Footnote 1:Pollock v. Farmers Loan & Trust Co., 157 U.S., 429 (1895).]
InKeller v. United States[1] the Court declared unconstitutional, as an encroachment on the police power of the states, an act of Congress making it a felony to harbor alien prostitutes, the Court declaring that "speaking generally, the police power is reserved to the states and there is no grant thereof to Congress in the Constitution."
[Footnote 1: 213 U.S., 138 (1909).]
In the Child Labor case[1] the Court held the federal Child Labor Law of 1916 unconstitutional as invading the police power reserved to the states. The Court said:
This Court has no more important function than that which devolves upon it the obligation to preserve inviolate the constitutional limitations upon the exercise of authority, federal and state, to the end that each may continue to discharge, harmoniously with the other, the duties entrusted to it by the Constitution.[2]
[Footnote 1:Hammer v. Dagenhart, 247 U.S., 251 (1918).]
[Footnote 2: An even stronger assertion of state rights is found in the Child Labor Tax Case (Bailey v. The Drexel Furniture Co.) decided May 15, 1922, after this chapter had been put into print.]
How is it then, someone may ask, if the Supreme Court is so zealous in defense of the rights of the states, that those rights are being encroached upon more and more by the National Government? The answer must be that there has been a change in the popular frame of mind. The desire for uniformity, standardization, efficiency, has outgrown the earlier fears of a centralization of power. Congress has found ways, under the constitutional grants of power to lay taxes and regulate interstate commerce, to legislate in furtherance of the popular demands. The Court is not strong enough (no governmental agency which could be devised would be strong enough) to hold back the flood or permanently thwart the popular will. In a government of the people everything has to yield sooner or later to the deliberate wish of the majority.
Some profess to view the recent encroachments of federal power as a triumph of the principles advocated by Alexander Hamilton and John Marshall over the principles of Thomas Jefferson. Such a claim does Hamilton and Marshall an injustice. While they both stood for a strong National Government, neither of them contemplated any encroachment by that government on the principle of local self-government in local matters or the police power of the states.
Marshall in one of his most powerful and far-reaching pronouncements in support of the national supremacy[1] speaks of
that immense mass of legislation, which embraces everything within the territory of a state not surrendered to the General Government;… inspection laws, quarantine laws, health laws of every description … are component parts of this mass.
[Footnote 1:Gibbons v. Ogden, 9 Wheat., 1, 203, 208.]
Later in the same opinion he refers to
the acknowledged power of a state to regulate its police, its domestic trade, and to govern its own citizens.
… The power of regulating their own purely internal affairswhether of trading or police.
Hamilton devotes an entire number of theFederalist[1] to combatting the idea that the rights of the states are in danger of being invaded by the General Government. In another place[2] he returns to the idea
that there is greater probability of encroachments by the members upon the federal head, than by the federal head upon the members
and concludes that it is to be hoped that the people
will always take care to preserve the constitutional equilibrium between the general and the state governments.
[Footnote 1:Federalist, Number XVII.]
[Footnote 2: Id., Number XXXI.]
That hope has failed of realization. The "constitutional equilibrium" of which Hamilton wrote is not being preserved. Some will say that this is an age of progress and we are improving upon Hamilton. Others, however, think we are forgetting the wisdom of the Fathers.
Had the World War come five years earlier the United States would have been much handicapped and embarrassed in financing its share of the struggle. One of the chief sources of national revenue during and since the war, the income tax, would not have been available. The federal income tax had been declared unconstitutional by the Supreme Court in 1895, and it was not until eighteen years later that the obstacle pointed out by that decision was removed through the adoption of an amendment to the Constitution. The Sixteenth or Income Tax Amendment was proposed by Congress to the legislatures of the several states in 1909 and took effect, having been ratified by three-fourths of the states, in 1913. Declared by its sponsors at the outset to be intended merely as a recourse in case of emergency, the tax authorized by the amendment was at once put into operation and there seems to be little likelihood that it will ever be abandoned.
Without the constitutional amendment no general income tax would be practicable. And yet the amendment conferred no new power of taxation on the National Government. To explain this seeming paradox it will be necessary to consider briefly the scope and limitations of the federal taxing power.
One of the chief defects, perhaps the most vital defect of all, in the Confederation which carried through the Revolutionary War and preceded the Union, was its inability to raise revenue directly by taxation. The Confederation was obliged to call upon the several states to furnish their respective contributions or quotas, and requisitions upon the states encountered delays and sometimes were ignored altogether. There were no effective means of compulsion.
With these facts before them the founders of the Union determined that the new government should not be wrecked upon this rock at any rate, and therefore insisted, against great opposition, in conferring upon it powers of taxation which were practically unlimited in their reach. The Constitution was made to provide that[1]
the Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.
[Footnote 1: Const., Art. I, Sec. 8, Clause 1.]
The only tax which Congress was expressly forbidden to lay was a tax on exports.[1] It was, however, provided that indirect taxes (duties, imposts, and excises) should be uniform throughout the United States,[2] and that direct taxes should be apportioned among the states according to population.[3] The last mentioned provision was a concession to the fears of the wealthier states lest their citizens be taxed unduly for the benefit of the poorer states, and represented one of the great compromises by which the ratification of the Constitution as a whole was secured.
[Footnote 1: Const., Art. I, Sec. 9, Clause 5.]
[Footnote 2: Id., Art. I, Sec. 8, Clause 1.]
[Footnote 3: Id., Art. I, Sec. 2, Clause 3. Sec. 9, Clause 4.]
The Constitution nowhere specified just what taxes were to be deemed "direct" (Madison in his notes of the Constitutional Convention records: "Mr. King asked what was the precise meaning of direct taxation? No one answd.")[1] or what kind of uniformity was intended by the provision that indirect taxes should be uniform, and more than a century was to elapse before either of these fundamental questions was finally settled. The answer to the latter question (that the term "uniform" refers purely to a geographical uniformity and is synonymous with the expression "to operate generally throughout the United States") was given by the Supreme Court in the year 1900 in the celebrated case ofKnowlton v. Moore,[2] and met with general approval. The answer to the question of what constitutes a direct tax within the meaning of the Constitution, given by the Supreme Court in 1895 in the Income Tax cases,[3] met with a different reception. The decision upset long-settled ideas, disarranged the federal taxing system, aroused popular resentment, and ultimately led to the enactment of the Sixteenth Amendment.
[Footnote 1: Farrand, "Records of the Federal Convention," Vol. II, p. 350.]
[Footnote 2: 178 U.S., 41.]
[Footnote 3:Pollock v. Farmers Loan & Trust Co., 157 U.S., 429.]
The question had arisen early in the life of the Republic in the case ofHylton v. United States, decided in 1796.[1] This litigation involved the validity of a tax on carriages which had been imposed by Congress without apportionment among the states. Alexander Hamilton argued the case before the Supreme Court in support of the tax. The Court adopted his view and sustained the tax, holding that it was a tax on consumption and therefore a species of excise or duty. The Justices who wrote opinions expressed doubt whether anything but poll taxes and taxes on land were "direct" within the meaning of the Constitution. That point, however, was not necessarily involved and was not decided, though later generations came to assume that it had been decided.
[Footnote 1: 3 Dallas, 171.]
The tax on carriages was soon repealed and many years elapsed before the question came up again. After the Civil War broke out, however, the need of revenue became acute and various statutes taxing income without apportionment among the states were enacted by Congress. These met with general acquiescence. It was felt that they were emergency measures necessitated by the war, and they were in fact abandoned as soon as practicable after the war. A well-known lawyer, however (William M. Springer of Illinois), did not acquiesce and refused to pay his income tax, on the ground that it was a direct tax not levied in accordance with the Constitution. In the action brought to test the question[1] it appeared that the income on which Mr. Springer had been taxed was derived in part from the practice of his profession as an attorney. To this extent it was clearly an excise or duty, i.e., an indirect tax. As it was incumbent upon Mr. Springer, by reason of the form of the action, to demonstrate that the tax was voidin totothe Court could not do otherwise than decide against him. In rendering its decision, however, the Court took occasion to discuss the question as to what were direct taxes within the meaning of the Constitution, and expressed the view that the term included only capitation or poll taxes, and taxes on real estate. There the matter rested until the year 1894 when Congress enacted another income tax law. This time the argument from necessity was lacking. The country was in a state of profound peace. Opposition to the tax among the moneyed interests was widespread. Test suits were brought and after most elaborate and exhaustive argument and reargument the Hylton and Springer cases were distinguished and the act was held unconstitutional.[2] The decision was by a closely divided Court (five to four), the majority finally holding that "direct taxes" within the meaning of the Constitution included taxes on personal property and the income of personal property, as well as taxes on real estate and the rents or income of real estate. This conclusion was fatal to the act. It was conceded that the tax, in so far as it affected income derived from a business or profession, was an indirect tax and therefore valid without apportionment among the states, but the provisions for taxing the income of real and personal property were held to be an essential part of the taxing scheme invalidating the whole statute.
[Footnote 1:Springer v. United States, 102 U.S., 586.]
[Footnote 2:Pollock v. Farmers Loan & Trust Co., 157 U.S., 429; same case on rehearing, 158 U.S., 601.]
This momentous decision was almost as unpopular with Congress and the general public as the decision inChisholm v. Georgiahad been a hundred years earlier. Many legislators were in favor of enacting another income tax law forthwith and endeavoring to coerce the Court, through the force of legislative and popular opinion, to overrule its decision. Calmer counsels prevailed, however, and plans were initiated to get over the difficulty by a constitutional amendment. Meanwhile, steps were taken to eke out the national revenue by various excise taxes, notably the so-called Federal Corporation Tax. This novel tax, which was thought by many to involve a very serious encroachment by the Federal Government on the powers of the states, will be discussed more at length in later chapters.[1]
[Footnote 1: See Chapters X and XI, infra.]
The constitutional amendment as proposed by Congress and ratified by the states provided:
"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."
Thus far we have dealt only with such limitations upon the federal taxing power as are expressly imposed by the Constitution. As has been seen, the only express limitations are that direct taxes shall be apportioned among the states, that indirect taxes shall be uniform, and that exports shall not be taxed at all. There are, however, certain other limitations which we proceed to notice briefly.
The Constitution provides[1] that the compensation of federal judges "shall not be diminished during their continuance in office." There is a similar provision as to the compensation of the President.[2] No attempt seems to have been made to tax the compensation of federal judges prior to 1862. A statute of that year subjected the salaries of all civil officers of the United States to an income tax and was construed by the revenue officers as including the compensation of the President and the judges. Chief Justice Taney, the head of the judiciary, wrote the Secretary of the Treasury a letter[3] protesting against the tax as a virtual diminution of judicial compensation in violation of the constitutional provision. No heed was paid to the protest at the time but some years later, upon the strength of an opinion by Attorney General Hoar, the tax on the compensation of the President and the judges was discontinued and the amounts theretofore collected were refunded. There the matter rested until after the Income Tax Amendment, when Congress again sought to impose a tax upon the income of the President and the judges. A federal judge of a Kentucky district contested the tax and the question came up before the Supreme Court for final decision. On behalf of the revenue department it was urged that a general income tax, operating alike on all classes, did not involve any violation of the constitutional provision. It was also contended that such a tax was expressly authorized by the Sixteenth Amendment giving Congress power to tax incomes "from whatever source derived." The Court in an exhaustive opinion[4] overruled both these contentions and held the tax to be a violation of the Constitution.
[Footnote 1: Art. 3, Sec. 1.]
[Footnote 2: Art. 2, Sec. 1, Clause 6.]
[Footnote 3: See 157 U.S., 701.]
[Footnote 4:Evans v. Gore, 253 U.S., 245.]
It has often been asserted that a limitation of the federal taxing power is found in the "due process" clause of the Fifth Amendment of the Constitution, providing that no person shall "be deprived of life, liberty, or property without due process of law." This amendment relates to the powers of the General Government. A similar limitation on the powers of the states is found in the Fourteenth Amendment. Taxing laws have frequently been attacked in the courts on the ground that, by reason of some inequality or injustice in their provisions, the taxpayer was deprived of his property without due process of law. In cases involving state laws such objections have sometimes been sustained.[1] There seems, however, to have been no case in which a federal taxing law was declared invalid on this ground, and the Supreme Court has recently remarked that it is "well settled that such clause (viz., the due process clause of the Fifth Amendment) is not a limitation upon the taxing power conferred upon Congress by the Constitution."[2] Nevertheless, it is believed that if a federal tax were clearly imposed for other than a public use, or were imposed on tangible property lying outside the national jurisdiction, or were so arbitrary and without basis for classification as to amount to confiscation, relief might be obtained under the due process clause of the Fifth Amendment.
[Footnote 1: See, e.g.,Union Tank Line Co. v. Wright, 249 U.S., 275.]
[Footnote 2:Brushaber v. Union Pacific R.R., 240 U.S., 24.]
By far the most important and interesting of the implied limitations of the federal taxing power remains to be noticed. That is the limitation which prohibits the National Government from burdening by taxation the property or revenues or obligations of a state, or the emoluments of a state official, or anything connected with the exercise by a state of one of its governmental functions. In other words, while the National Government may tax income from bonds issued by England or France or their cities, it is powerless to tax the income from bonds of Rhode Island or the smallest of its towns.
This implied limitation, nowhere categorically expressed but enunciated in a series of decisions of the Supreme Court, has not always met with acquiescence from the executive and legislative branches of the Government. In fact, Congress is now engaged in an effort to do away with it, at least in so far as concerns the right to tax the income from state and municipal bonds. To-day, however, it still stands as one of the most striking and unique characteristics of our governmental system. It will be discussed more at length in the next chapter.
That is a question which is agitating a good many people just now. Congress from time to time has seemed disposed to try it, in spite of misgivings as to the constitutionality of such legislation.[1] A recent Revenue Bill contained provisions taxing the income of future issues of such obligations, and a motion for the elimination of those provisions was defeated in the House 132 to 61. Meanwhile, protests were pouring in from state and municipal officers assailing the justice and expediency of such a tax.
[Footnote 1: See, e.g., H. Report No. 767, 65th Cong., 2d Sess., accompanying House Revenue Bill of 1918 as reported by Mr. Kitchin from the Committee on Ways and Means, page 89.]
It is not the purpose of this chapter to discuss the questions of justice and expediency (as to which there is much to be said on both sides) but rather to deal with the strictly legal aspects of the matter and indicate briefly why such a tax cannot be laid without a change in our fundamental law.
Let it be said at the outset that no express provision of the United States Constitution forbids. On the contrary, that instrument confers on Congress the power to lay taxes without any restriction or limitation save that exports shall not be taxed, that duties, imposts, and excises shall be uniform throughout the United States, and that direct taxes must be apportioned among the states in proportion to population. The obstacle lies rather in an implied limitation inherent in our dual system of government and formulated in decisions of the Supreme Court.
The founders of this republic established a form of government wherein the states, though subordinate to the Federal Government in all matters within its jurisdiction, nevertheless remained distinct bodies politic, each one supreme in its own sphere. In the famous phrase of Salmon P. Chase, pronouncing judgment as Chief Justice of the Supreme Court[1]:
The Constitution in all its provisions looks to an indestructible Union, composed of indestructible states.
[Footnote 1:Texas v. White, 7 Wall., 700, 725.]
In a later case[1] another eminent justice (Samuel Nelson of New York) put the matter thus:
The General Government, and the states, although both exist within the same territorial limits, are separate and distinct sovereignties, acting separately and independently of each other, within their respective spheres. The former, in its appropriate sphere, is supreme; but the states within the limits of their powers not granted, or, in the language of the 10th Amendment, "reserved", are as independent of the General Government as that government within its sphere is independent of the states.
[Footnote 1:The Collector v. Day, 11 Wall., 113, 124.]
It follows that the two governments, national and state, must each exercise its powers so as not to interfere with the free and full exercise by the other of its powers. To do otherwise would be contrary to the fundamental compact embodied in the Constitution—in other words, it would beunconstitutional.
This proposition was affirmed at an early day by Chief Justice John Marshall in the great case ofMcCulloch vs. The State of Maryland,[1] which involved the attempt of a state to tax the operations of a national bank. That case is one of the landmarks of American constitutional law. While it did not expressly decide that the Federal Government could not tax a state instrumentality but only the converse, i.e., that a state could not tax an instrumentality of the nation, the Court has held in many subsequent decisions that the proposition enunciated by the great Chief Justice works both ways. For example, it has declared that a state cannot tax the obligations of the United States because such a tax operates upon the power of the Federal Government to borrow money[2] and conversely, that Congress cannot tax the obligations of a state for the same reason;[3] that a state cannot tax the emoluments of an official of the United States[4] and conversely, that the United States cannot tax the salary of a state official;[5] that a state cannot impose a tax on the property or revenues of the United States[6] and conversely, that Congress cannot tax the property or revenues of a state or a municipality thereof.[7]
[Footnote 1: 4 Wheaton, 316.]
[Footnote 2:Weston v. City of Charleston, 2 Pet., 449.]
[Footnote 3:Mercantile Bank v. New York, 121 U.S., 138, 162.]
[Footnote 4:Dobbins v. Commissioner of Erie County, 16 Pet., 435.]
[Footnote 5:Collector v. Day, 11 Wall., 113.]
[Footnote 6:Van Brocklin v. Tennessee, 117 U.S., 151.]
[Footnote 7:United States v. Railroad Co., 17 Wall., 322.]
The Supreme Court has said (and many times reiterated in substance) that the National Government "cannot exercise its power of taxation so as to destroy the state governments, or embarrass their lawful action."[1] One of the most distinguished writers on American Constitutional law (Thomas M. Cooley, Chief Justice of the Supreme Court of Michigan and afterward Chairman of the federal Interstate Commerce Commission) has said:
There is nothing in the Constitution which can be made to admit of any interference by Congress with the secure existence of any state authority within its lawful bounds. And any such interference by the indirect means of taxation is quite as much beyond the power of the national legislature as if the interference were direct and extreme.[2]
[Footnote 1:Railroad Co. v. Peniston, 18 Wall., 5, 30.]
[Footnote 2:Cooley's Constitutional Limitations, 7th Ed., 684.]
The question as to the right of Congress to levy an income tax on municipal securities came up squarely in the famous Income Tax Cases[1] involving the constitutionality of the Income Tax Law of 1804. While the Supreme Court was sharply divided as to the constitutionality of other features of the law, it was unanimous as to the lack of authority in the United States to tax the interest on municipal bonds.
[Footnote 1:Pollock v. Farmers Loan & Trust Co., 157 U.S., 429; same case on rehearing, 158 U.S., 601.]
The decision in those cases is the law to-day (except in so far as it has been changed by the recent Sixteenth Amendment) with one possible limitation. It has been held that state agencies and instrumentalities, in order to be exempt from national taxation, must be of a strictly governmental character; the exemption does not extend to agencies and instrumentalities used by the state in carrying on an ordinary private business. This was decided in the South Carolina Dispensary case.[1] The State of South Carolina had taken over the business of selling liquor and the case involved a federal tax upon such business. The Court, while reaffirming the general doctrine, nevertheless upheld the tax on the ground that the business was not of a strictly governmental character. This decision suggests the possibility that if an attempt were made to tax state and municipal bonds the Court might draw a distinction based on the purpose for which the bonds were issued, and hold that only such as were issued for strictly governmental purposes were exempt.
[Footnote 1:South Carolina v. United States, 199 U.S., 437, decided in 1905.]
It remains to consider the effect of the Sixteenth Amendment.
After the Supreme Court had held the Income Tax Law of 1894 unconstitutional on the ground that it was a direct tax and had not been apportioned among the states in proportion to population the Sixteenth Amendment to the Constitution was proposed and ratified. This amendment provides that
the Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
When the amendment was submitted to the states for approval some lawyers apprehended that the words "incomes from whatever source derived" might open the door to the taxation by the Government of income from state and municipal bonds. Charles E. Hughes, then Governor of New York, sent a special message to the Legislature opposing ratification of the amendment on this ground.
Other lawyers, notably Senator Elihu Root, took a different view of the scope of the amendment, holding that it would not enlarge the taxing power but merely remove the obstacle found by the Supreme Court to the Income Tax Law of 1894, i.e., the necessity of apportionment among the states in proportion to population. This latter view has now been confirmed by the Supreme Court. In a case involving a tax on income from exports the Court said:[1]
The Sixteenth Amendment … does not extend the taxing power to new or excepted subjects, but merely removes all occasion, which otherwise might exist, for an apportionment among the states of taxes laid on income, whether it be derived from one source or another….
[Footnote 1:Peck v. Lowe, 247 U.S., 165.]
In a case decided a little earlier[1] the Court, speaking through ChiefJustice White, had said:
By the previous ruling (i.e., inBrushaber v. Union Pacific Railway Co., 240 U.S., 1) it was settled that the provisions of the Sixteenth Amendment conferred no new power of taxation….
[Footnote 1:Stanton v. Baltic Mining Co., 240 U.S., 103, 112.]
From what has been said it will be evident that the doctrine of exemption of state and municipal bonds from federal taxation is firmly embedded in our law and has not been affected by the Sixteenth Amendment.
Whether it is a doctrine suited to present-day conditions is a question outside the scope of this paper.
The fear of federal encroachment, so strong in the minds of the makers of our Constitution, has become little more than a tradition. To many it doubtless will seem that any rule of law which operates to prevent the nation, in the great exigency of war, from taxing a portion of the property of its citizens is pernicious and should be changed.