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EFFECT OF DECISIONS.
discussion, to petition our Government for redress of grievances, and to bear arms.
If this construction prevails, Congress can provide for searches and seizures of the persons dwelling in these acquisitions, and of their houses, papers and effects, in modes that have been recognized as illegal when employed in any American Commonwealth.1 But the new constitutional questions involved in the results of the Spanish-American war may well be left to the future for settlement.2
The decision in the Utah cases, far-reaching as their political effects might ultimately prove, did not attract great public attention at the time. It was not until 1895
1 "The People of the United States,” by Simeon E. Baldwin, LL. D., Yale Law Journal, January, 1899. But see Webster vs. Reid, 11 Howard, 460; American Publishing Co. vs. Fisher, 166 U. S., 464; Springville vs. Thomas, 166 U. S., 707; Reynolds vs. U. S., 98 U. S., 145.
2 Among these questions are the following respecting the new acquisitions:
Are the provisions of the Fourteenth and Fifteenth Amendments to be extended to their inhabitants? Are they citizens of the United States, and, therefore, entitled to all the immunities and privileges of such persons? Is manhood suffrage to be permitted among them? Does the Constitution authorize the organization of States, in the sense in which the word is used in American constitutional law, out of islands remote from the United States and having no ties or connection with this country? Can Congress organize a territorial and colonial government of a military type, for these possessions, and can it govern them in any other way than that which it has pursued in regulating the territories of the United States? The doctrine that the United States can acquire territory for the sole purpose of organizing it into States in the Union originated in the Decision of Chief-Justice Taney in the Dred Scott Case, 19 Howard, 393-446, 447. See Report on the Legal Status of the Territory and Inhabitants of the Islands Acquired by the United States During the War With Spain, Considered with Reference to the Territorial Boundaries, the Constitution, and Laws of the United States, by Charles E. Magoon, Law Officer, Division of Insular Affairs, War Department, Washington, Government Printing Office (February), 1900.
INCOME TAX CASES.
that the Court, through one of its decisions, aroused public interest to a degree scarcely inferior to that provoked twenty-eight years earlier by the Dred Scott case. In 1894 Congress passed a tariff act, known as the WilsonGorman law, containing a provision for an income tax, which, it was supposed, would produce about forty million dollars of revenue. To the extent of this amount the act reduced taxation on imports. The purpose of the law was to compel every person, whose yearly income from any source exceeded four thousand dollars, to pay a two per cent tax, from 1895 to 1900.1 A case soon reached the Court involving the constitutionality of the act.? The Court, in sustaining the law, in its decision handed down on the eighth of April, 1895, held that a tax on the rents or income of real estate is a direct tax within the meaning of the Constitution, and that a tax upon incomes derived from the interest of bonds issued by a municipal corporation, is a tax upon the power of the State and its instrumentalities to borrow money, and, consequently, is repugnant to the Constitution.
On other questions involved in the case, the Court was divided; these were, whether the provision as to rents and income from real estate invalidated the whole act; whether, as to the income from personal property as such, the act was constitutional because laying direct taxes; and whether any part of the tax, if not considered as a direct tax was invalid for want of uniformity on either of the grounds suggested. In so far as a decision was reached, the constitutionality of the act was sustained by five justices, but denied by four. Mr. Justice Field did not hesitate to say respecting the proposed tax on incomes, in the act, that the assault upon capital would be but the
1 Act of August 27, 1894; Statutes at Large, XXVIII, 553. 2 Pollock vs. Farmer's Loan and Trust Company, 157 U. S., 429.
INCOME TAX CASES.
beginning, and that political contests in the United States would become a war of the poor against the rich, "a war constantly growing in intensity and bitterness." It was his opinion that the whole act should be declared void. Mr. Justice White, who sustained the constitutionality of the act, pointed out the injustice and harm which must always result from the overthrow of practice long sanctioned by the decisions of the Court. Under the income tax laws of the past, which covered every conceivable source of income, vast sums, he said, had been collected from the people. "The decision here rendered,” observed he, "announces that those sums were wrongfully taken, and, thereby, it seems to me, creates a claim against the government for an enormous amount of money."
Another case involving the constitutionality of the act meanwhile came up, and because the first had not been heard by a full Court, and the Court had been evenly divided, the cases were re-argued before the full bench. A decision was given by Chief-Justice Fuller, on the twentieth of May, 1895. Public interest was now thoroughly aroused, and political parties were already aligning themselves on the possible decision. The case, like that of Dred Scott, in 1857, involved political issues, and, in this case, an interpretation of the meaning of direct taxes under the Constitution. The question before the Court, said the Chief Justice, involved the exercise of a great governmental power and brought into consideration, “as vitally affected by the decision, that complex system of government so sagaciously framed to secure and perpetuate ‘an indestructible Union composed of indestructible States.'12
Of scarcely less interest than the principle at issue was
1 Hyde vs. Continental Trust Company, 158 U. S., 601. 2 Texas vs. White, 7 Wallace, 700 (1868).
INCOME TAX CASES.
the manner in which the Chief-Justice approached its solution. He began with a quotation from one of Marshall's greatest decisions, that “in considering this question we must never forget that it is a Constitution that we are expounding." And again, that the words of the Constitution are to be taken in their obvious sense and to have a reasonable construction. For this reason the words, , direct taxes and duties, imposts and excises, were used in the Constitution in their natural and obvious sense. Here he discussed the views of Hamilton and Madison in one of the earlier cases, and referred to the construction of the Constitution by the authors of the Federalist as an authority which "should not and cannot be disregarded.” He inquired, whether, whatever speculative views political economists and revenue reformers might entertain, could it be properly held that the Constitution, taken in its plain and obvious sense and with due regard to the circumstances attending the formation of the government, authorizes a general unapportioned tax on the products of the farm and the rents of real estate; although the tax was imposed merely because of ownership and with no possible means of escape from payment, and belonged to a totally different class from that which included the property from which the income proceeded?
The Chief-Justice found it impossible to hold that a fundamental requisition respecting taxation deemed so important as to be enforced by two provisions in the Constitution, one affirmative and one negative, could be refined away "by forced distinctions between that which gives value to property and the property itself," and he could
1 McCullough vs. Maryland, 4 Wheaton, 316 and 407.
4 Constitution, Article I, Section 2, Clause 3, and Section 8, Clause I.
INCOME TAX CASES.
not conceive any ground why the same reasoning did not apply to capital in personalty held for the purpose of income and to the income arising from it. "All the real estate of the country, and of its invested personal property, are open to the direct operation of the taxing power, if an apportionment be made according to the Constitution.” This instrument, he said, does not declare that any direct taxation shall be laid by apportionment on any other property than land, but on the contrary "it forbids all unapportioned direct taxes," and he knew of no warrant for excepting personal property from the exercise of the power or any reason why an apportioned direct tax could not be assessed. Counsel in the case had held that an income tax was not a property tax at all; that it was not a real estate tax, nor a crop tax, nor a bond tax; but that it was "an assessment upon the tax paper on account of his money spending power as shown by his revenue for the year preceding his assessment." If this doctrine was true, remarked the ChiefJustice, then rents, crops and interest lost all connection with their sources, and though not taxable in their original source were transmuted into a new and taxable form. In other words, counsel held, "that income is taxable irrespective of the source whence it is derived." This construction of the principle of an income tax was applied by Mr. Pitt, in 1799, and was sustained, fifty-five years later, by Mr. Gladstone, as rational.
The Court was unanimous in the opinion that so far as the act of 1894 operated on the recepits from municipal bonds, it could not be sustained, because it would be a tax on the power of the States and their instrumentalities to borrow money, and therefore, repugnant to the Constitution. If, as counsel contended, the act, even in this respect, would be constitutional, and interest when received became