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cents on each; under the other acts, according to | two years before the enactment of the first law valuation by assessors. imposing direct taxes eo nomine.

This review 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 framers 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 States where there were no slaves; for the proportion of tax imposed on each State was determined by population, without reference to the subjects 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 the 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 adverse to it in the discussions of the convention which framed and of the conventions which ratified the Constitution.

What does appear in those discussions, on the contrary, supports the construction. Mr. Madison, says Mr. King, asked what was the precise meaning of direct taxation, and no one answered. On another day, when the question of proportioning representation to taxation, and both to the white and three-fifths of the slave inhabitants, was under consideration, Mr. Ellsworth said: “In case of a poll tax, there would be no difficulty;" and, speaking doubtless of direct taxation, he went on 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 understand ing that direct taxes were such as may be levied by capitation, and on lands and appurtenances; or, perhaps, by valuation and assessment of personal property upon general lists; for these were the subjects from which the States at that time usually raised their principal supplies.

This view received the sanction of this court

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 constitution convention, went more fully into the sense in which the words giving 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."+

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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 further 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 collectol 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.

ls 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 be 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 of 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 were 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 of 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 appro- | ary 25, 1791, prohibited the establishment of any priate legislation. To this end Congress has de- other by Congress during its charter, but said nied the quality of legal tender to foreign coins, nothing as to the State banks. A like prohibiand has provided by law against the imposition tion is contained in the act incorporating the of counterfeit and base coin on the community. Bank of the United States of 1816. The constiTo the same end Congress may restrain by suit- tutionality of a bank incorporated by Congress able enactments the circulation as money of any was first settled by the judgment of this court in notes not issued under its own authority. Without McCulloch vs. The State of Maryland, in 1819. this power, indeed, its attempts to secure a sound (4 Wheat., p. 316.) In that case both the counsel and uniform currency for the country must be and the court recognize the legality and constifutile. tutionality of banks incorporated by the States.

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 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. 804-904.)

The

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 The Xth amendment to the Constitution is as time of the adoption of the Constitution there follows: "The powers not delegated to the Uni- were four State banks in existence and in operated States by the Constitution, nor prohibited by tion-one in each of the States of Pennsylvania, it to the States, are reserved to the States respect- New York, Massachusetts, and Maryland. The ively or to the people." On looking into the one in Philadelphia had been originally chartered Constitution it will be found that there is no by the Confederation, but subsequently took a clause or provision which, either expressly or by charter under the State of Pennsylvania. reasonable implication, delegates this power to framers of the Constitution were, therefore, famithe federal Government, which originally belong-liar with these State banks and the circulation ed 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

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 any 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

counter. The State banks were left in this con- | thus established by incontrovertible authority to dition by the Constitution, untouched by any create State banking institutions, the next quesother provision. As a consequence they were tion is whether or not the tax in question can be gradually established in most or all of the States, upheld consistently with the enjoyment of this and had not been encroached upon or legislated power. against, or in any other way interfered with by The act of Congress of July 13, 1866, (14 U. S. acts of Congress, for more than three-quarters of Stats., 146, 89,) declares that the State banks shall a century-from 1787 to 1864. But, in addition pay ten per centum on the amount of their notes, or to the above recognition of the State banks, the the notes of any person, or other State bank, used question of their constitutionality came directly for circulation and paid out by them after the 1st before this court in the case of Briscoe vs. The Bank of August, 1866. In addition to this tax there of the Commonwealth of Kentucky. (11 Pet, is also a tax of five per centum per annum upon 257.) The case was most elaborately discussed all dividends to stockholders, (13 U. S. Stats., p. both by the counsel and the court. The court, 283, 120,) besides a duty of one twenty-fourth of after the fullest consideration, held that the States one per centum monthly upon all deposits, and the possessed the power to grant charters to State same monthly duty upon the capital of the bank. banks; that the power was incident to sovereign- (Ib., 277, 8110.) This makes an aggregate of some ty; and that there was no limitation in the fed-sixteen per cent. imposed annually upon these eral Constitution on its exercise by the States. banks. It will be observed the tax of ten per The court observed that the Bank of North Amer-centum upon the bills in circulation is not a tax ica and of Massachusetts, and some others, were on the property of the institutions. The bills in in operation at the time of the adoption of the circulation are not the property, but the debts of Constitution, and that it could not be supposed the bank, and, in their account of debits and credthe notes of these banks were intended to be in-its, are placed to the debit side. Certainly no govhibited by that instrument, or that they were considered as bills of credit within its meaning. All the judges concurred in this judgment except Mr. Justice Story. The decision in this case was affirmed in Woodruff vs. Trapnall, (10 How., 205;) in Danington vs. the Bank of Alabama, (13 ib., 12;) and in Curran vs. State of Arkansas, (15 ib., 317.)

Chancellor Kent observes that Mr. Justice Story, in his Commentaries on the Constitution, (vol. 3, p. 19,) seems to be of opinion that, independent of the long-continued practice, from the time of the adoption of the Constitution, the States would not, upon a sound construction of the Constitution, if the question was res integra, be authorized to incorporate banks with a power to circulate bank paper as currency, inasmuch as they are expressly prohibited from coining money. He cites the opinions of Mr. Webster, of the Senate of the United States, and of Mr. Dexter, formerly Secretary of War, on the same side. But, the chancellor observes, the equal if not the greater authority of Mr. Hamilton, the earliest Secretary of the Treasury, may be cited in support of a different opinion; and the contemporary sense and uniform practice of the nation are decisive of the question. He further observes, the prohibition (of bills of credit) does not extend to bills emitted by individuals, singly or collectively, whether associated under a private agreement for banking purposes, as was the case with the Bank of New York prior to its earliest charter, which was in the winter of 1791, or acting under a charter of incorporation, so long as the State lends not its credit, or obligation, or coercion to sustain the circulation.

In the case of Briscoe vs. The Bank of the Commonwealth of Kentucky, he observes this question was put at rest by the opinion of the court, that there was no limitation in the Constitution on the power of the States to incorporate banks, and their notes were not intended nor were considered as bills of credit. (1 Kent's Com., p. 409, marg. note A, 10th ed.)

The constitutional power of the States being

ernment has yet made the discovery of taxing both sides of this account, debit and credit, as the property of a taxable person or corporation. If both these items could be made available for this purpose a heavy national debt need not create any very great alarm, neither as it respects its pressure on the industry of the country, for the time being, or of its possible duration. There is nothing in the debts of a bank to distinguish them in this respect from the debts of individuals or persons. The discounted paper received for the notes in circulation is the property of the bank, and is taxed as such, as is the property of individuals received for their notes that may be outstanding.

The imposition upon the banks cannot be upheld as a tax upon property; neither could it have been so intended. It is simply a mode by which the powers or faculties of the States to incorporate banks are subjected to taxation, and which, if maintainable, may annihilate those powers.

No person questions the authority of Congress to tax the property of the banks, and of all other corporate bodies of a State, the same as that of individuals. They are artificial bodies, representing the associated pecuniary means of real persons, which constitute their business capital, and the property thus invested is open and subject to taxation with all the property, real and personal, of the State. A tax upon this property, and which, by the Constitution, is to be uniform, affords full scope to the taxing power of the federal Government, and is consistent with the power of the States to create the banks, and, in our judgment, is the only subject of taxation by this Government to which these institutions are liable.

As we have seen, in the forepart of this opinion, the power to incorporate banks was not surrendered to the federal Government, but reserved to the States; and it follows that the Constitution itself protects them, or should protect them, from any encroachment upon this right. As to the powers thus reserved, the

National Banks.

DECEMBER TERM, 1869.

The First National Bank of Louis- In error to the

ville, plaintiff in error,

VS.

court of appeals of the State of The Commonwealth of Kentucky. Kentucky. Mr. Justice Miller delivered the opinion of the court.

States are as supreme as before they entered into | On the Right of the State Governments to Tax the Union, and are entitled to the unrestrained exercise of them. The question as to the taxation of the powers and faculties belonging to governments is not new in this court. The bonds of the federal Government have been held to be exempt from State taxation. Why? Because they were issued under the power in the Constitution to borrow money, and the tax would be a tax upon this power; and, as there can be no limitation to the extent of the tax, the power to borrow might be destroyed. So, in the instance of the United States notes or legal tenders, as they are called, issued under a constructive power to issue bills of credit, as no express power is given in the Constitution, they are exempt from State taxation for a like reason as in the case of Government bonds; and we learn The suit is brought, according to the practice from the opinion of the court in this case that of the courts of that State, by a petition, setting one step further is taken, and that is, that the forth the amount of the tax, and claiming a judgnotes of the national banks are to be regarded ment for the same. The answer, by the same as bills of credit, issued indirectly by the Gov-mode of practice, sets up four distinct defenses to ernment; and it follows of course from this the action. These are: that the banks used as instruments to issue and

put in circulation these notes are also exempt. We are not complaining of this. Our purpose is to show how important it is to the proper protection of the reserved rights of the States that these powers and prerogatives should be exempt from federal taxation, and how fatal to their existence if permitted. And also that, even if this tax could be regarded as one upon property, still, under the decisions above referred to, it would be a tax upon the powers and faculties of the States to create these banks, and therefore unconstitutional.

It is true that the present decision strikes only at the power to create banks, but no person can fail to see that the principle involved affects the power to create any other description of corporations, such as railroads, turnpikes, manufacturing companies, and others.

This is an action brought by the State of Kentucky in her own courts against the First National Bank of Louisville to recover the amount of a tax of fifty cents per share on the shares of its stock. The case resulted in a judgment in favor of the commonwealth in the court of appeals, to which this writ of error is prosecuted.

1. That defendant is not organized under the law of the State, but under the bank act of the Jnited States, and is not, therefore, subject to

State taxation.

2. That it has been selected and is acting as a depositary and financial agent of the Government of the United States, and, therefore, is not liable to any tax whatever, either on the bank, its capital, or its shares.

3. That its entire capital is invested in securities of the Government of the United States, and that its shares of stock represent but an interest in said securities, and therefore are not subject to State taxation.

4. That the shares of the stock are the property of the individual shareholders, and that the bank cannot be made responsible for a tax levied on those shares, and cannot be compelled to collect and pay such tax to the State.

This taxation of the powers and faculties of In the several recent decisions concerning the the State governments, which are essential to taxation of the shares of the national banks, as their sovereignty and to the efficient and inde- regulated by sections forty and forty-one of the pendent management and administration of their act of Congress of June 3, 1864, (13 U. S. Stats., internal affairs, is for the first time advanced as 111,) it has been established as the law governan attribute of federal authority. It finds no ing this court that the property or interest of a support or countenance in the early history of stockholder in an incorporated bank, commonly the government or in the opinions of the illus-called a share, the shares in their aggregate totaltrious statesmen who founded it. These states-ity being called sometimes the capital stock of men scrupulously abstained from any encroachment upon the reserved rights of the States, and within these limits sustained and supported them as sovereign States.

We say nothing as to the purpose of this heavy tax of some sixteen per centum upon the banks, ten of which we cannot but regard as imposed upon the power of the States to create them; indeed the purpose is scarcely concealed in the opinion of the court, namely, to encourage the national banks. It is sufficient to add, that the burden of the tax, while it has encouraged these banks, has proved fatal to those of the States; and, if we are at liberty to judge of the purpose of an action from the consequences that have followed it, it is not, perhaps, going too far to say that these consequences were intended.

[I am instructed to say that Mr. Justice Davis concurs in this opinion.]

the bank, is a different thing from the moneyed capital of the bank, held and owned by the corporation. This capital may consist of cash, or of bills and notes discounted, or of real estate combined with these. The whole of it may be invested in bonds of the Government, or in bonds of the States, or in bonds and mortgages. In whatever it may be invested it is owned by the bank as a corporate entity, and not by the stockholders. A tax upon this capital is a tax upon the bank, and we have held that when that capital was invested in the securities of the Government it could not be taxed, nor could the corporation be taxed as the owner of such securities.

On the other hand, we have held that the shareholders or stockholders, by which is meant the same thing, may be taxed by the States on stock or shares so held by them, although all the

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