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We were in the midst of a war which called | casion without being made a lawful tender for all these powers into exercise and taxed them debts. severely; a war which, if we take into account the increased capacity for destruction introduced by modern science and the corresponding increase of its cost, brought into operation powers of belligerency more potent and more expensive than any that the world has ever known.

All the ordinary means of rendering efficient the several powers of Congress above mentioned had been employed to their utmost capacity, and with the spirit of the rebellion unbroken, with large armies in the field unpaid, with a current expenditure of over $1,000,000 per day, the credit of the Government nearly exhausted, and the resources of taxation inadequate to pay even the interest on the public debt, Congress was called on to devise some new means of borrowing money on the credit of the nation, for the result of the war was conceded by all thoughtful men to depend on the capacity of the Government to raise money in amounts previously unknown. The banks had already loaned their means to the treasury. They had been compelled to suspend the payment of specie on their own notes. The coin in the country, if it could all have been placed within the control of the Secretary of the Treasury, would not have made a circulation sufficient to answer army purchases and army payments, to say nothing of the ordinary business of the country. A general collapse of credit, of payment, and of business seemed inevitable, in which faith in the ability of the Government would have been destroyed, the rebellion would have triumphed, the States would have been left divided, and the people impoverished. The national government would have perished, and with it the Constitution which we are now called upon to construe with such nice and critical accuracy.

That the legal-tender act prevented these disastrous results, and that the tender clause was necessary to prevent them, I entertain no doubt. It furnished instantly a means of paying the soldiers in the field and filled the coffers of the commissary and quartermaster. It furnished a medium for the payment of private debts, as well as public, at a time when gold was being rapidly withdrawn from circulation and the State-bank currency was becoming worthless. It furnished the means to the capitalist of buying the bonds of the Government. It stimulated trade, revived the drooping energies of the country, and restored confidence to the public mind.

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But what was needed was something more than the credit of the Government. That had been stretched to its utmost tension, and was clearly no longer sufficient in the simple form of borrowing money. Is there any reason to believe that the mere change in the form of the security given would have revived this sinking credit? On the contrary, all experience shows that a currency not redeemable promptly in coin, but dependent on the credit of a promiser whose resources are rapidly diminishing, while his liabilities are increasing, soon sinks to the dead level of worthless paper. As no man would have been compelled to take it in payment of debts, as it bore no interest, as its period of redemption would have been remote and uncertain, this must have been the inevitable fate of any extensive issue of such notes.

But when by law they were made to discharge the function of paying debts, they had a perpetual credit or value equal to the amount of all the debts, public and private, in the country. If they were never redeemed, as they never have been, they still paid debts at their par value, and for this purpose were then, and always have been, eagerly sought by the people. To say, then, that this quality of legal tender was not necessary to their usefulness seems to be unsupported by any sound view of the situation.

Nor can any just inference of that proposition arise from a comparison of the legal-tender notes with the bonds issued by the Government about the same time. These bonds had a fixed period for their payment, and the Secretary of the Treasury declared that they were payable in gold. They bore interest, which was payable semi-annually in gold, by express terms on their face, and the customs duties, which by law could be paid in nothing but gold, were sacredly pledged to the payment of this interest. They can afford no means of determining what would have been the fate of treasury notes designed to circulate as money, but which bore no interest, and had no fixed time of redemption, and by law could pay no debts, and had no fund pledged for their payment,

The legal-tender clauses of the statutes under consideration were placed emphatically, by those who enacted them, upon their necessity to the further borrowing of money and maintaining the army and navy.

It was done reluctantly and with hesitation, The results which followed the adoption of and only after the necessity had been demonthis measure are beyond dispute. No other ade- strated and had become imperative. Our statesquate cause has ever been assigned for the re- men had been trained in a school which looked vival of government credit, the renewed activity upon such legislation with something more than of trade, and the facility with which the Govern- distrust. The debates of the two houses of Conment borrowed in two or three years, at reason-gress show that on this necessity alone could this able rates of interest, mainly from its own citi-clause of the bill have been carried, and they zens, double the amount of money there was in also prove, as I think, very clearly the existthe country, including coin, bank notes, and the ence of that necessity. notes issued under the legal-tender acts.

It is now said, however, in the calm retrospect of these events, that treasury notes suitable for circulation as money, bearing on their face the pledge of the United States for their ultimate payment in coin, would, if not equally efficient, have answered the requirement of the oc

The history of that gloomy time, not to be forgotten by the lover of his country, will forever remain the full, clear, and ample vindication of the exercise of this power by Congress, as its results have demonstrated the sagacity of those who originated and carried through this measure.

Certainly it seems to the best judgment that I

can bring to bear upon the subject that this law | The latter is a means directly conducive to the was a necessity in the most stringent sense in end to be attained, a means which attains the which that word can be used. But if we adopt end more promptly and more perfectly than any the construction of Chief Justice Marshall and other means can do. The former is a remote and the full court over which he presided, a construc- uncertain means in its effect, and is liable to the tion which has never to this day been overruled serious objection that it interferes with State or questioned in this court, how can we avoid legislation. If Congress can, however, under its this conclusion? Can it be said that this pro- implied power, protect and foster this currency vision did not conduce towards the purpose of by such means as destructive taxation on State borrowing money, of paying debts, of raising bank circulation, it seems strange, indeed, if it armies, of suppressing insurrection? or that it cannot adopt the more appropriate and the more was not calculated to effect these objects? or that effectual means of declaring these notes of its it was not useful and essential to that end? Can own issue, for the redemption of which its faith it be said that this was not among the choice of is pledged, a lawful tender in payment of debts. means, if not the only means, which were left to Congress to carry on this war for national existence?

Let us compare the present with other cases decided in this court.

If we can say judicially that to declare, as in the case of the United States vs. Fisher, that the debt which a bankrupt owes the Government shall have priority of payment over all other debts is a necessary and proper law to enable the Government to pay its own debts, how can we say that the legal-tender clause was not necessary and proper to enable the Government to borrow money to carry on the war?

The creation of the United States Bank, and especially the power granted to it to issue notes for circulation as money, was strenuously resisted as without constitutional authority; but this court held that a bank of issue was necessary, in the sense of that word as used in the Constitution, to enable the Government to collect, to transfer, and to pay out its revenues.

It was never claimed that the Government could find no other means to do this. It could not then be denied, nor has it ever been, that other means more clearly within the competency of Congress existed, nor that a bank of deposit might possibly have answered without a circulation. But because that was the most fitting, useful, and efficient mode of doing what Congress was authorized to do, it was held to be necessary by this court. The necessity in that case is much less apparent to me than in the adoption of the legal-tender clause.

But it is said that the law is in conflict with the spirit if not the letter of several provisions of the Constitution. Undoubtedly it is a law impairing the obligation of contracts made before its passage. But while the Constitution forbids the States to pass such laws it does not forbid Congress. On the contrary, Congress is expressly authorized to establish a uniform system of bankruptcy, the essence of which is to discharge debtors from the obligation of their contracts; and in pursuance of this power Congress has three times passed such a law, which in every instance operated on contracts made before it was passed. Such a law is now in force, yet its_constitutionality has never been questioned. How it can be in accordance with the spirit of the Constitution to destroy directly the creditor's contract for the sake of the individual debtor, but contrary to its spirit to affect remotely its value for the safety of the nation, it is difficult to perceive.

So it is said that the provisions, that private property shall not be taken for public use without due compensation, and that no person shall be deprived of life, liberty, or property without due course of law, are opposed to the acts under consideration.

The argument is too vague for my perception by which the indirect effect of a great public measure, in depreciating the value of lands, stocks, bonds, and other contracts, renders such a law invalid as taking private property for public use or as depriving the owner of it without due course of law.

In the Veazie Bank vs. Fenno, decided at the A declaration of war with a maritime power present term, this court held, after full consider-would thus be unconstitutional, because the value ation, that it was the privilege of Congress to of every ship abroad is lessened twenty-five or furnish to the country the currency to be used thirty per cent. and those at home almost as much. by it in the transaction of business, whether this The abolition of the tariff on iron or sugar would was done by means of coin, of the notes of the in like manner destroy the furnaces, and sink the United States, or of banks created by Congress; capital employed in the manufacture of these arand that, as a means of making this power of ticles. Yet no statesmen, however warm an adCongress efficient, that body could make this vocate of high tariff, has claimed that to abolish currency exclusive by taxing out of existence such duties would be unconstitutional as taking any currency authorized by the States. It was private property. said "that having, in the exercise of undoubted constitutional power, undertaken to provide a currency for the whole country, it cannot be questioned that Congress may constitutionally secure the benefit of it to the people by appro- This whole argument of the injustice of the priate means." Which is the more appropriate law, an injustice which, if it ever existed, will be and effectual means of making the currency es- repeated by now holding it wholly void and of tablished by Congress useful, acceptable, perfect its opposition to the spirit of the Constitution, is -the taxing of all other currency out of exist- too abstract and intangible for application to ence, or giving to that furnished by the Gov-courts of justice, and is above all dangerous as a ernment the quality of lawful tender for debts? | ground on which to declare the legislation of Con

If the principle be sound, every successive issue of government bonds during the war was void, because by increasing the public debt it made those already in private hands less valuable.

gress void by the decision of a court. It would authorize this court to enforce theoretical views of the genius of the government, or vague notions of the spirit of the Constitution and of abstract justice, by declaring void laws which did not square with those views. It substitutes our ideas of policy for judicial construction, an undefined code of ethics for the Constitution, and a court of justice for the national legislature.

Upon the enactment of these legal-tender laws they were received with almost universal acquiescence as valid. Payments were made in the legal-tender notes for debts in existence when the law was passed to the amount of thousands of millions of dollars, though gold was the only lawful tender when the debts were contracted. A great if not larger amount is now due under contracts made since their passage, under the belief that these legal tenders would be valid payment. The two houses of Congress, the President who signed the bill, and fifteen State courts, being all but one that has passed upon the question, have expressed their belief in the constitutionality of

these laws.

With all this great weight of authority, this strong concurrence of opinion among those who have passed upon the question, before we have been called to decide it, whose duty it was as much as it is ours to pass upon it in the light of the Constitution, are we to reverse their action, to disturb contracts, to declare the law void because the necessity for its enactment does not appear so strong to us as it did to Congress, or so clear as it was to other courts?

Such is not my idea of the relative functions of the legislative and judicial departments of the Government. Where there is a choice of means, the selection is with Congress, not the court. If the act to be considered is in any sense essential to the execution of an acknowledged power, the degree of that necessity is for the legislature and not for the court to determine. In the case in Wheaton, from which I have already quoted so fully, the court says that "where the law is not prohibited, and is really calculated to effect any of the objects intrusted to the Government, to undertake here to inquire into the degree of its necessity would be to pass the line which circumscribes the judicial department, and to tread on legislative ground. This court disclaims all pretences to such a power." This sound exposition of the duties of the court in this class of cases relieves me from any embarrassment or hesitation in the case before me. If I had entertained doubts of the constitutionality of the law, I must have held the law valid until those doubts became convictions. But as I have a very decided opinion that Congress acted within the scope of its authority, I must hold the law to be constitutional, and dissent from the opinion of the court. I am authorized to say that Mr. Justice Swayne and Mr. Justice Davis concur in this opinion.

NOTE.-When this decision was made the court consisted of eight judges, there being one vacancy, caused by the death of Judge Wayne, of Georgia. The five who concurred in the decision are Chief Justice Chase and Associate Justices Nelson, Clifford, Grier, and Field. Of these, the first three are understood to hold the legal-tender clause unconstitutional for all purposes, and the latter two as unconstitutional as to prior contracts only. B

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Mr. Chief Justice Chase delivered the opinion of the court.

The necessity of adequate provision for the financial exigencies created by the late rebellion suggested to the administrative and legislative departments of the Government important changes in the systems of currency and taxation which had hitherto prevailed. These changes, more or less distinctly shown in administrative recommendations, took form and substance in legislative acts. We have now to consider, within a limited range, those which relate to circulating notes and the taxation of circulation.

At the beginning of the rebellion the circulating medium consisted almost entirely of bank notes issued by numerous independent corporations variously organized under State legislation, of various degrees of credit, and very unequal resources, administered often with great, and not unfrequently with little skill, prudence, and integrity. The acts of Congress then in force prohibiting the receipt or disbursement, in the transactions of the national Government, of anything except gold and silver, and the laws of the States requiring the redemption of bank notes in coin on demand, prevented the disappearance of gold and silver from circulation. There was then no national currency except coin; there was no general regulation of any other by national legislation, and no national taxation was imposed in any form on the State bank circulation.

The first act authorizing the emission of notes by the Treasury Department for circulation was that of July 17, 1861. The notes issued under this act were treasury notes, payable on demand in coin. The amount authorized by it was fifty millions of dollars, and was increased by the act of February 12, 1862, to sixty millions.

On the 31st of December, 1861, the State banks suspended specie payment. Until this time the expenses of the war had been paid in coin, or in the demand notes just referred to, and for sometime afterwards they continued to be paid in these notes, which, if not redeemed in coin, were received as coin in the payment of duties.

Subsequently, on the 25th of February, 1862, a new policy became necessary in consequence of the suspension and of the condition of the country, and was adopted. The notes hitherto issued, as has just been stated, were called treas

See the act of December 27, 1854, to suppress small notes in the District of Columbia, 10 U. S. Stats., 599. †12 U. S. Stats., 259. 12 U. S. Stats., 338. 12 U. S. Stats., 345.

ury notes, and were payable on demand in coin. | The act now passed authorized the issue of bills for circulation under the name of United States notes, made payable to bearer, but not expressed to be payable on demand, to the amount of $150,000,000; and this amount was increased by subsequent acts to $450,000,000, of which $50,000,000 were to be held in reserve, and only to be issued for a special purpose, and under special directions as to their withdrawal from circulation.* These notes, until after the close of the war, were always convertible into or receivable at par for bonds payable in coin, and bearing coin interest, at a rate not less than five per cent., and the acts by which they were authorized declared them to be lawful money and a legal tender.

This currency, issued directly by the Government for the disbursement of the war and other expenditures, could not, obviously, be a proper object of taxation.

But on the 25th of February, 1863, the act authorizing national banking associations† was passed, in which, for the first time during many years, Congress recognized the expediency and duty of imposing a tax upon currency. By this act a tax of two per cent. annually was imposed on the circulation of the associations authorized by it. Soon after, by the act of March 3, 1863, a similar but lighter tax of one per cent. annually was imposed on the circulation of State banks in certain proportions to their capital and of two per cent. on the excess; and the tax on the national associations was reduced to the same rates.

Both acts also imposed taxes on capital and deposits, which need not be noticed here.

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bank or State banking association paid out by them after the 1st day of July, 1866."*

The same provision was re-enacted, with a more extended application, on the 13th of July, 1866, in these words: "Every national banking association, State bank, or State banking association, shall pay a tax of ten per centum on the amount of notes of any person, State bank, or State banking association, used for circulation and paid out by them after the 1st day of August, 1866, and such tax shall be assessed and paid in such manner as shall be prescribed by the Commissioner of Internal Revenue."†

The constitutionality of this last provision is now drawn in question, and this brief statement of the recent legislation of Congress has been made for the purpose of placing in a clear light its scope and bearing, especially as developed in the provisions just cited. It will be seen that when the policy of taxing bank circulation was first adopted in 1863, Congress was inclined to discriminate for, rather than against, the circulation of the State banks; but that when the country had been sufficiently furnished with a national currency by the issue of United States notes and of national bank notes, the discrimination was turned, and very decidedly turned, in the opposite direction.

The general question now before us is, whether or not the tax of ten per cent., imposed on State banks or national banks paying out the notes of individuals or State banks used for circulation, is repugnant to the Constitution of the United States.

It is presented by a certificate of division of opinion between the judges of the circuit court At a later date, by the act of June 3, 1864, % of the United States for the district of Maine, in which was substituted for the act of February a suit brought by the President, Directors, and 25, 1863, authorizing national banking associa- Company of the Veazie Bank against Jeremiah tions, the rate of tax on circulation was continued Fenno, collector of internal revenue, for the reand applied to the whole amount of it, and the covery of the tax, penalty, aud costs paid by shares of their stockholders were also subjected the bank to the collector under protest and to to taxation by the States; and a few days after-avoid distraint.

wards, by the act of June 30, 1864,|| to provide The Veazie Bank is a corporation chartered by ways and means for the support of the Government, the tax on the circulation of the State banks was also continued at the same annual rate of one per cent., as before, but payment was required in monthly installments of one-twelfth of one per cent., with monthly reports from each State bank of the amount in circulation.

It can hardly be doubted that the object of this provision was to inform the proper authorities of the exact amount of paper money in circulation, with a view to its regulation by law.

The first step taken by Congress in that direction was by the act of July 17, 1862,¶ prohibiting the issue and circulation of notes under one dollar by any person or corporation. The act just referred to was the next, and it was followed some months later by the act of March 3, 1865, amendatory of the prior internal revenue acts, the 6th section of which provides: "That every national banking association, State bank, or State banking association, shall pay a tax of ten per centum on the amount of the notes of any State

* Act of July 11, 1862, 12 U. S. Stats., 532; act of March 3, 1863, 12 U. S. Stats., 710. † 12 U. S. Stats., 670. 12 U. S. Stats., 712. 13 U. S. Stats., 111. ||13 U. S. Stats., 277. 12 U. S. Stats., 592.

the State of Maine, with authority to issue bank notes for circulation, and the notes on which the tax imposed by the act was collected were issued under this authority. There is nothing in the case showing that the bank sustained any relation to the State as a financial agent, or that its authority to issue notes was conferred or exercised with any special reference to other than private interests.

The case was presented to the circuit court upon an agreed statement of facts; and upon a prayer for instructions to the jury the judges found themselves opposed in opinion on three questions, the first of which is this:

"Whether the second clause of the 9th section of the act of Congress of the 13th of July, 1866, under which the tax in this case was levied and collected, is a valid and constitutional law?"

The other two questions differ from this in form only, and need not be recited.

In support of the position that the act of Congress, so far as it provides for the levy and collection of this tax, is repugnant to the Constitution, two propositions have been argued with much force and earnestness.

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The first is that the tax in question is a direct tax, and has not been apportioned among the States agreeably to the Constitution.

The second is that the act imposing the tax impairs a franchise granted by the State, and that Congress has no power to pass any law with that intent or effect.

The first of these propositions will be first examined.

The difficulty of defining with accuracy the terms used in the clause of the Constitution which confers the power of taxation upon Congress was felt in the convention which framed that instrument, and has always been experienced by courts when called upon to determine their meaning.

It may be said, indeed, that this observation, however just in its application to the general grant of power, cannot be applied to the rules by which different descriptions of taxes are directed to be laid and collected.

Direct taxes must be laid and collected by the rule of apportionment; duties, imposts, and excises must be laid and collected under the rule of uniformity.

Much diversity of opinion has always prevailed upon the question, what are direct taxes? Attempts to answer it by reference to the definitions of political economists have been frequently made, but without satisfactory results. The enumeration of the different kinds of taxes which Congress was authorized to impose was probably made with very little reference to their speculations. The great work of Adam Smith, the first comprehensive treatise on political economy in the English language, had then been recently published; but in this work, though there are passages which refer to the characteristic difference between direct and indirect taxation, there is nothing which affords any valuable light on the use of the words direct taxes in the Consti

We are obliged, therefore, to resort to historical evidence, and to seek the meaning of the words in the use and in the opinion of those whose relations to the government and means of knowledge warranted them in speaking with authority.

The general intent of the Constitution, however, seems plain. The general government, administered by the congress of the Confederation, had been reduced to the verge of impotency by the necessity of relying for revenue upon requisitions on the States, and it was a leading object in the adoption of the Constitution to relieve the government to be organized under it from this necessity, and confer upon it ample power to provide revenue by the taxation of persons and property. And nothing is clearer, from the dis-tution, cussions in the convention and the discussions which preceded final ratification by the necessary number of States, than the purpose to give this power to Congress, as to the taxation of everything except exports, in its fullest extent. This purpose is apparent, also, from the terms in which the taxing power is granted. The power is "to lay and collect taxes, duties, imposts, and excises, to pay the debt and provide for the common defence and general welfare of the United States." More comprehensive words could not have been used. Exports only are by another provision excluded from its application. There are, indeed, certain virtual limitations arising from the principles of the Constitution itself. It would undoubtedly be an abuse of the power if so exercised as to impair the separate existence and independent self-government* of the States, or if exercised for ends inconsistent with the limited grants of power in the Consti

tion.

And, considered in this light, the meaning and application of the rule as to direct taxes appears to us quite clear.

It is, as we think, distinctly shown in every act of Congress on the subject.

In each of these acts a gross sum was laid upon the United States, and the total amount was apportioned to the several States according to their respective numbers of inhabitants, as ascertained by the last preceding census. Having been apportioned, provision was made for the imposition of the tax upon the subjects specified in the act, fixing its total sum.

In 1798, when the first direct tax was imposed, the total amount was fixed at $2,000,000;* in 1813, the amount of the second direct tax was And there are directions as to the mode of ex- fixed at $3,000,000;† in 1815, the amount of the ercising the power. If Congress sees fit to impose third at $6,000,000, and it was made an annual a capitation or other direct tax, it must be laid tax; in 1816, the provision making the tax anin proportion to the census; if Congress deter-nual was repealed by the repeal of the 1st section mines to impose duties, imposts, and excises, they must be uniform throughout the United States These are not strictly limitations of power. They are rules prescribing the mode in which it shall be exercised. It still extends to every object of taxation except exports, and may be applied to every object of taxation to which it extends in such measure as Congress may determine.

The comprehensiveness of the power thus given to Congress may serve to explain, at least, the absence of any attempt by members of the convention to define, even in debate, the terms of the grant. The words used certainly describe the whole power, and it was the intention of the convention that the whole power should be conferred. The definition of particular words therefore became unimportant.

*County of Lane v. State of Oregon, 7 Wall., 73.

of the act of 1815, and the total amount was fixed for that year at $3,000,000. No other direct tax was imposed until 1861, when a direct tax of $20,000,000 was laid and made annual;|| but the provision making it annual was suspended, and no tax except that first laid was ever apportioned. In each instance the total sum was apportioned among the States by the constitutional rule, and was assessed at prescribed rates on the subjects of the tax. These subjects in 1798,¶ 1813,** 1815,†† 1816,‡‡ were lands, improvements, dwelling-houses, and slaves; and in 1861 lands, improvements, dwelling-houses only. Under the act of 1798, slaves were assessed at fifty

gust 2, 1813, 3 U S. Stats, 53. Act of July 9, 1815, 3 U. *Act of July 14, 1798, 1 U. S. Stats., 597. Act of AuS. Stats., 164. Act of March 5, 1846, 3 U.S.Stats., 255. Act of August 5, 1861, 12 U.S. Stats., 294.. Act of July 9, 1798, 1 U. S. Stats., 586. **Act of July 22, 1813, 3 U. Š. Stats., 26. 3 U. S..Stats., 166.. U.S..Stats., 255.

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