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Tax on distiller's output construed and upheld as excise tax and constitutional. U. S. v. Singer, 15 Wall., 111.

Tax on foreign-held bonds.—A railroad company of Pennsylvania issued a large amount of bonds. They were held largely in foreign countries. The State legislature thought it an easy way to raise State revenue to tax the bonds and require the railroad treasurer to pay into the State treasury 5 per cent. of the interest which accrued on these bonds. In the case of R. R. Co. v. Penn., 15 Wall., 300, it was held that this law was void. The indebtedness owned by the railroad company was not property in the State of Pennsylvania. The property was where the bond was held. By a divided court the tax was held invalid. It impaired the obligation of the contract, and the real point is that it attempts to tax within a State property that is beyond its borders and outside of its jurisdiction.

The United States can tax in such cases.—But while the power was denied to the States to tax the interest on railroad bonds, the United States can impose such taxes. U. S. v. R. R. Co., 17 Wall., 322.

The States can tax the property of a railroad company chartered by the United States; but it can not tax its operations. R. R. Co. v. Peniston, 18 Wall., 5.

Taxing railroads, and their franchises.-Congress can make contracts with individuals, or corporations, for services to the government, and may exempt in

discretion the agencies employed in such service from State taxation which will impede the performance of the service; but in the absence of positive legislation prohibiting such taxation States may tax the property of such class in such service. Thomson v. R. R. Co., 9 Wall., 579. This case involved the taxation by State authority of the Union Pacific and other railroads and by the United States.

Taxing the notes of State banks.—The Act of July 13, 1866 (14 Stat. at L., 146), required every National bank, State bank or State banking association to pay a tax of 10 per cent. on all notes of State banks paid out by it. This law was intended to drive State bank notes out of circulation and force the bankers to organize as National banks, or at least give National banks and U. S. Treasury notes the whole field of circulation. It was held, as before noted, that this was a legitimate mode of Federal taxation and not a direct tax. Veazie Bank v. Fenno, 8 Wall., 533. This case arose in this way. The bank paid out State bank notes. On these the Federal authorities assessed the 10 per cent. tax and were about to make a distraint to collect. The bank paid under protest and then sued to get back the money, on the claim that the law imposing the tax was unconstitutional.

Tax on salaries of State officers.—In the stress of the war Congress taxed everything it could "lay hands on.” One statute (June 30, 1864, 13 Stat. at L., 281) provided a tax upon gains, profits and income of every person, residing in the United States, whether derived from any kind of property, rents, interests, dividends or salaries or from any profession, trade or employment. The tax was 5 per cent. on all over $1,000. Judge Day paid the tax under protest and sued to collect or to recover back the money. The Supreme Court held that it was incompetent to levy a tax upon a judicial officer of a State. The case followed Dobbins v. Erie Co., 16 Pet., 435, and held that it was not within the power of Congress to cripple the State governments by taxing salaries; because, if so, Congress could take all the salaries and thus break down the State administration. Collector v. Day, 11 Wall., 113.

State taxation of franchises granted by Congress.A statute of California provided for taxing the property and also the franchise of the railroad companies, which had been conferred by the United States. The court held that the taxing of franchises conferred by the United States was repugnant to the Constitution and void. California v. R. R. Co., 127 U. S., 1.

License tax cases.-An interesting question arose, when the Act of June 30, 1864 (13 Stats. at L., 223) required retail liquor dealers to pay a license tax to the United States, as a means of raising revenue. Penalties were imposed for failure to take out such license. This law was questioned as imposing a tax and granting a license to do things which the State laws had in some of the States forbidden. It was held, however, by the Supreme Court that:

(1) Where the State laws permitted such sale of liquors (and lottery tickets) the United States could impose a special tax.

(2) Where the States did not permit such sales, the Federal law could not override the State law, by levying such tax and that paying such Federal tax did not legalize the business.

(3) The power of the Federal government to tax a licensed business, does not impair the power of the State to control and regulate any business wholly, within its boundaries. License Tax Cases, 5 Wall., 462.

(4) A man indicted for selling liquor. contrary to State law can not plead as a bar that he had paid a license tax to the government. Id.

(5) That States may regulate or forbid the sale of intoxicating liquors within their respective borders. Pervear v. Com. of Mass., 5 Wall., 475.

Regulation of pilots and pilotage. — The State of Pennsylvania passed a law regulating pilots and pilotage, requiring every vessel arriving from or bound to any foreign port or place to receive a pilot, pay fees therefor, under penalty, and to pay half pilot fees to a society for the relief of old and decayed pilots, etc.

This law was held not void, as the grant of power to regulate commerce did not prevent the State from regulating pilots. Such State regulations may be made, without conflict with the power of Congress, where Congress has not prescribed otherwise. Cooley v. Wardens of Port of Philadelphia, 12 How., 299. See post,

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“To borrow money on the credit of the United States."

Notes.—“This power," says Story, "seems indispensable to the sovereignty and existence of a National government.” Story on Const., 5th Ed., Sec. 1054.

Federal decisions bearing on the power to borrow money.—(1) This power to borrow money is entirely beyond the interference, legislation and dominion of the States. Hence, the State can not tax the security by which the debt is evidenced. Bank Tax Cases, 2 Wall., 200. It was here held that a law levying a tax on the valuation of the capital stock paid in, when that stock or property consisted in stocks of the United States, is void. The granting of this power is incompatible with any restraining or controlling power; and the declaration of supremacy in the Constitution is a declaration that no such restraining or controlling

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