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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, J 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.

At a later date, by the act of June 3, 1864, \ which was substituted for the act of February 25, 1863, authorizing national banking associations, the rate of tax on circulation was continued and applied to the whole amount of it, and the shares of their stockholders were also subjected to taxation by the States; and a few days afterwards, by the act of June 30, 1864,jj to provide 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 oi 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 acta, 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

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hank 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 hearing, 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 of the United States for the district of Maine, in a suit brought by the President, Directors, and Company of the Veazie Bank against Jeremiah Fenno, collector of internal revenue, for the recovery of the tax, penalty, and costs paid by the bank to the collector under protest and to avoid distraint.

The Veazie Bank is a corporation chartered by 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 hank 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, 1S66, 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, Ro 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.

* 13 U.S.Stats.,484. f 14U.S.Stats, 110."

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.

TJhe 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 discussions 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 lor 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 Constition.

And there are directions as to the mode of exercising the power. If Congress sees fit to impose a capitation or other direct tax, it must belaid in proportion to the census; if Congress determines 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. |

'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 ot the words direct taxes in the Constitution,

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.

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 fixed at $3,000,000 ;f in 1815, the amoun t of the third at $0,000,000, and it was made an annual tax;]: in 1816, the provision making the tax annual was repealed by the repeal of the 1st section of the act of 1815, and the total amount Wub 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, ia 1798,^ 1813,** 1815,ft 1816,it 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

* Act of July 14, 1798,1 U. S. Stats., 587: t Act of August 2,1813, 3 U S. Stats , 53. J Act ot July 9,1815, 3 U. 6. Stats., 164. § Act of March 5, 184S(.3U..ft.Stats., 255. I Act of August 5,1861,12 U.S. Stats., 29*.. f Act of July 9, 1798, 1 U. S. Stats., 586. **Act of Jtaly 22. 1613, 3 U. 3. Stats., 26. if 3 U. S, Stats, 166.. R3. U. a. Suits, 255.

cents on eaen; under the other acts, according to Valuation by assessors.

This renew shows that personal property, contracts, occupations, and the like, have never been regarded by Congress as proper subjects of direct tax. It has been supposed that slaves must be considered as an exception to this observation. But the exception is rather apparent than real. As persons, slaves were proper subjects of a capitation tax, which is described in the Constitution as a direct tax; as property, they were by the laws of some, if not most, of the States classed as real property, descendible to heirs. Under the first view, they would be subject to the tax of 1798 as a capitation tax; under the latter, they would be subject to the taxation of the other years as realty. That the latter view was that taken by the trainers of the acts after 1798 becomes highly probable, when it is considered that in the States where slaves were held much of the value which would otherwise have attached to land passed into the slaves. If indeed the land only had been valued without the slaves, the land would have been subject to much heavier proportional imposition in those States than in btates where there were no slaves; for the proportion of tax imposed on each State was determined by population, without reference to the Bubjects on which it was to be assessed.

The fact, then, that slaves were valued under the acts referred to, far from showing, as some have supposed, that Congress regarded personal property as a proper object of direct taxation under the Constitution, shows only that Congress, after 1798, regarded slaves, for the purpose of taxation, as realty.

It may be rightly affirmed, therefore, that in ihe practical construction of the Constitution by Congress, direct taxes have been limited to taxes on .land and appurtenances, and taxes on polls, or capitation taxes.

And this construction is entitled to great consideration, especially in the absence of anything adversetto it m the discussions of the convention which framed, and of the conventions which ratified the Constitution.

What doe&appear in those discussions, on the contrary,, supports the construction. Mr. Madison, says Mar.,King, asked what was the precise meaning o.f direct taxation, and no one answered. On another day,,when the question of proportioning representation, to taxation, and both to the .white and ,threerfifths of the slave inhabitants), ,was .under - consideration, Mr. Ellsworth said,: -"Incase .of .a pollrtax, there would be no difficulty;" and, speaking doubtless of direct taxation,, he.wention to observe, "The sum allotted to a.State .may be levied without difficulty, according to the plan used in the State for raising its own.-supplies. All this doubtless shows uncertainty as to .the true meaning of the term direct,tax; but it, indicates also an understanding that, direct, taxes .were such as may be levied by capitation, and on lands and appurtenances; Dr, perhaps, by valuation and assessment of per«onal .property upon general lists; for these were 'the subjects from which the States at that time usually raised their principal supplies.

This .view, received ithe sanction of this court

two years before the enactment of the first law imposing direct taxes eo nomine.

During the February term, 1796, the constitutionality of the act of 1794, imposing a duty on carriages, came under consideration in the case of Hylton vs. The United States.* Suit was brought by the United States against Daniel Hylton to recover the penalty imposed by the act for not returning and paying duty on a number of carriages for the conveyance of persons, kept by the defendant for his own use. The law did not provide for the apportionment of the tax, and, if it was a direct tax, the law was confessedly unwarranted by the Constitution. The only question in the case, therefore, was whether or not the tax was a direct tax.

The case was one of great expectation, and a general interest was felt in its determination. It was argued, in support of the tax, by Lee, Attorney General, and Hamilton, recently Secretary of the Treasury; in opposition to the tax, by Campbell, attorney for the Virginia district, and Ingersoll, attorney general of Pennsylvania.

Of the justices who then filled this bench, Ellsworth, Paterson, and Wilson had been members, and conspicuous members, of the constitutional convention, and each of the three had taken part in the discussions relating to direct taxation. Ellsworth, the chief justice, sworn into office that morning, not having heard the whole argument, declined taking part in the decision. Cushing, senior associate justice, having been prevented by indisposition from attending to the argument, also refrained from expressing an opinion. The other judges delivered their opinions in succession, the youngest in commission delivering the first, and the oldest the last.

They all held that the tax on carriages was not a direct tax within the meaning of the Constitution. Chase, J., was inclined to think that the direct taxes contemplated by the Constitution are only two: a capitation or poll tax, and a tax on land. He doubted whether a tax by a general assessment of personal property can be included within the term direct tax. Paterson, who had taken a leading part in the sonstitution convention, went more fully into the sense in which the words g'iving the power of taxation were used by that body. In the course of this examination he said:

"Whether direct taxes, in the sense of the Constitution, comprehend any other tax than a capitation tax and tax on land is a questionable point. If Congress, for instance, should tax, in the aggregate or mass, things that generally pervade all the States in the Union, then, perhaps, the rule of apportionment would be the most proper, especially if an assessment was to intervene. This appears from the practice of some of the States to have been considered as a direct tax. Whether it be so under the Constitution of the United States is a matter of some difficulty; but as it is not before the court, it would be improper to give any decisive opinion upon it. I never entertained a doubt that the principal—I will not say the only—objects that the framers of the Constitution contemplated as falling within the rule of apportionment were a capitation tax and a tax on land."f

*31,all, m. t3i>»iinm.

Iredell, delivering his opinion at length, concurred generally in the views of Justices Chase and Paterson. Wilson had expressed his opinions to the same general effect when giving the decision upon the circuit, and did not now repeat them. Neither Chief Justice Ellsworth nor Justice Cushing expressed any dissent; and it cannot be supposed if, in a case so important, their judgments had differed from those announced, that an opportunity would not have been given them by an order for reargument to participate in the decision.

It may be safely assumed, therefore, as the unanimous judgment of the court, that a tax on carriages is not a direct tax. And it may farther be taken as established, upon the testimony of Paterson, that the words direct taxes, as used in the Constitution, comprehended only capitation taxes and taxes on land, and perhaps taxes on personal property by general valuation and assessment of the various descriptions possessed within the several States.

It follows necessarily that the power to tax without apportionment extends to all other objects. Taxes on other objects are included under the heads of taxes not direct, duties, imposts, and excises, and must be laid and coliectwl by the rule of uniformity. The tax under consideration is a tax on bank circulation, and may very well be classed under the head of duties. Certainly it is not in the sense of the Constitution a direct tax. It may be said to come within the same category of taxation as the tax on incomes of insurance companies, which this court, at the last term, in the case of Soule vs. the Insurance Company,* held not to be a direct tax.

Is it, then, a tax on a franchise granted by a State, which Congress, upon any principle exempting the reserved powers of the States from impairment by taxation, must be held to have no authority to lay and collect?

We do not say that there may not be such a tax. It may be admitted that the reserved rights of the States, such as the right to pass laws, to give effect to laws through executive action, to administer justice through the courts, and to employ all necessary agencies for legitimate purposes of State government, are not proper subjects of the taxing power of Congress. But it cannot be admitted that franchises granted by a State are necessarily exempt from taxation; for franchises are property, often very valuable and productive property; and, when not conferred for the purpose of giving effect to some reserved power of a State, seem to be as properly objects of taxation as any other property.

But in the case before us the object of taxation is not the franchise of the bank, but property created or contracts made and issued under the franchise or power to issue bank bills. A railroad .company, in the exercise of its corporate franchises, issues freight receipts, bills of lading, and passenger tickets; and it cannot be doubted that the organization of railroads is quite as important to the State as the organization of banks. But it will hardly he questioned that these contracts of the company are objects of taxation

7 Wall., 453.

within the powers of Congress, and not exempted by any relation to the State which granted the charter of the railroad. And it seems difficult to distinguish the taxation of notes issued for circulation from the taxation of these railroad contracts. Both descriptions of contracts are means of profit to the corporations which issue them; and both, as we think, may properly be made contributory to the public revenue.

It is insisted, however, that the tax in the case before us is excessive, and so excessive as to indicate a purpose on the part of Congress to destroy the franchise of the bank, and is, therefore, beyond the constitutional power of Congress.

The first answer to this is that the judicial cannot prescribe to the legislative departments of the government limitations upon the exercise of its acknowledged powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected. So if a particular tax bears heavily upon a corporation or a class of corporations, it cannot, for that reason only, be pronounced contrary to the Constitution.

But there is another answer which vindicates equally the wisdom and the power of Congress.

It cannot be doubted that under the Constitution the power to provide a circulation of coin is given to Congress. And it is settled by the uniform practice of the Government and by repeated decisions, that Congress may constitutionally authorize the emission of bills of credit. It is not important here to decide whether the quality of legal tender in payment of debts can be constitutionally imparted to these bills; it is enough to say that there can be no question of the power ot the Government to emit them, to make them receivable in payment of debts to itself, to fit them for use by those who see fit to use them in all the transactions of commerce, to provide for their redemption, to make them a currency uniform in value and description, and convenient and useful for circulation. These powers until recently wore only partially and occasionally exercised. Lately, however, they have been called into full activity, and Congress has undertaken to supply a currency for the entire country.

The methods adopted for the supply of this currency were briefly explained in the first part of this opinion. It now consists of coin, of United States notes, and of the notes of the national banks. Both descriptions of notes may be properly described as bills of credit, for both are furnished by the government; both are issued on the credit of the government, and the government is responsible for the redemption of both; primarily as to the first description, and immediately upon default of the bank as to the second. When these bills shall be made convertible into coin at the will of the holder, this currency will perhaps satisfy the wants 6f the community in respect to a circulating medium as perfectly as any mixed currency that can be devised.

Having thus, in the exercise of undisputed constitutional powers, 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 appropriate legislation. To this end Congress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community. To the same end Congress may restrain by suitable enactments the circulation as money of any notes not issued under its own authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile.

Viewed in this light, as well as in the other light of a duty on contracts or property, we cannot doubt the constitutionality of the tax under consideration.

The three questions certified from the circuit court of the district of Maine must therefore be answered affirmatively.

Dissenting Opinion.

Mr. Justice Nelson dissenting.

I am unable to concur in the opinion of a majority of the court in this case.

The Veazie Bank was incorporated by the Legislature of the State of Maine in 1848, with a capital of $200,000, and was invested with the customary powers of a banking institution ; and among others the power of receiving deposits, discounting paper, and issuing notes or bills for circulation. The constitutional authority of the State to create these institutions, and to invest them with full banking powers, is hardly denied. But it may be useful to recur for a few moments to the source of this authority.

The Xth amendment to the Constitution is as follows: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people." On looking into the Constitution it will be found that there is no clause or provision which, either expressly or by reasonable implication, delegates this power to the federal Government, which originally belonged to the States, nor which prohibits it to them. In the discussions on the subject of the creation of the first bank of the United States in the first Congress and in the Cabinet of Washington, in 1790 and 1791, no question was made as to the constitutionality of the State banks. The only doubt that existed, and which divided the opinion of the most eminent statesmen of the day, many of whom had just largely participated in the formation of the Constitution, the government under which they were then engaged in organizing, was, whether or not Congress possessed a concurrent power to incorporate a banking institution of the United States.

Mr. Hamilton, in his celebrated report on a national bank to the House of Representatives, discusses at some length the question whether or not it would be expedient to substitute the Bank of North America, located in Philadelphia, and which had accepted a charter from the Legislature of Pennsylvania, in the place of organizing a new bank. And, although he finally came to the conclusion to organize a new one, there is not a suggestion or intimation as to the illegality or unconstitutionality of this State bank.

The act incorporating this bank, passed Febru

ary 25,1791, prohibited the establishment of any other by Congress during its charter, but said nothing as to the State banks. A like prohibition is contained in the act incorporating the Bank of the United States of 1816. The constitutionality of a bank incorporated by Congress was first settled by the judgment of this court in McCulloch vs. The State of Maryland, in 1819. (4 Wheat., p. 316.) In that case both the counsel and the court recognize the legality and constitutionality of banks incorporated by the States.

The constitutionality of the Bank of the United States was again discussed and decided in. the case of Osborn vs. United States Bank, (9 Wheat., 738.) And in connection with this was argued and decided a point in the case of the United States Bank vs. The Planters' Bank of Georgia, which was common to both cases. The question was whether the circuit courts of the United States had jurisdiction of a suit brought by the United States Bank against the Planters' Bank of Georgia, incorporated by that State, and in which the State was a stockholder. (9 Wheat., pp. S04-904.)

The court held in both cases that it had. Since the adoption of the Constitution down to the present act of Congress and the case now before us, the question in Congress and in the courts has been, not whether the State banks were constitutional institutions, but whether Congress had the power conferred on it by the States to establish a national bank. As we have said, that question was closed by the judgment of this court in McCulloch vs. The State of Maryland. At the time of the adoption of the Constitution there were four State banks in existence and in operation—one in each of the States of Pennsylvania, New York, Massachusetts, and Maryland. The one in Philadelphia had been originally chartered by the Confederation, but subsequently took a charter under the State of Pennsylvania. The framers of the Constitution were, therefore, familiar with these State banks and the circulation of their paper as money, and were also familiar with the practice of the States, that was so common, to issue bills of credit, which were bills issued by the State exclusively on its own credit, and intended to circulate as currency, redeemable at a future day. They guarded the people against the evils of this practice of the State governments by the provision in the 10th section of the first article, "that no State shall" "emit bills of credit," and in the same section guard against an} abuse of paper money of the State banks, in the following words: "Nor make anything but gold and silver coin a tender in payment of debts" As bills of credit were thus entirely abolished, the paper money of the State banks was the only currency or circulating medium to which this prohibition could have had any application, and was the only currency, except gold and silver, left to the States. The prohibition took from this paper all coercive legislation, and left it to stand alone upon the credit of the banks.

It was no longer an irredeemable currency, as the banks were under obligation, and including, frequently, that of its stockholders, to redeem their paper in circulation in gold or silver at the

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