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ment of the court should have been placed exclusively upon that ground.

Strong doubts are entertained by me whether Congress possesses the power to levy any such tax; but whether so or not, I am clear that the State legislature cannot impose any such burden upon commerce among the several States. Such commerce is secured against such legislation in the States by the Constitution, irrespective of any congressional action.

The Chief Justice also dissents, and concurs in the views I have expressed.

Afterwards, on the 30th of April, 1866, the legislature of New York provided by law for refunding to the banking associations and other corporations in like condition the taxes of 1863 and 1864 collected upon that part of their capitals invested in securities of the United States exempt by law from taxation. The board of supervisors of the county of New York was charged with the duty of auditing and allowing, with the approval of the mayor of the city and the corporation counsel, the amount collected from each corporation for taxes on the exempt portion of its capital, together with costs, dam

On State Taxation of United States Certificates ages, and interest. Upon such auditing and al

of Indebtedness.

DECEMBER TERM, 1868.

The People of the State of New York, ex rel.
The Bank of New York National Banking
Association, plaintiffs in error,

No. 246.

vs.

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lowance the sums awarded were to be paid to the corporations severally entitled by the issue to each of New York county seven per cent. bonds of equal amounts. These bonds were to be signed by the comptroller of the city of New York, countersigned by the mayor, and sealed with the seal of the board of supervisors, and error attested by the clerk of the board.

to the
court of
appeals

of

the State of

N. York.

Mr. Chief Justice Chase delivered the opinion of the court in these causes.

Under this act the board of supervisors audited and allowed to the several institutions represented in the three cases under consideration their several claims for taxes collected upon the national securities held by them, including in this allowance the taxes paid on certificates of indebtedness, which the corporations claimed to be securities of the United States exempt from taxation.

But the comptroller, mayor, and clerk refused to sign, countersign, seal, and attest the requisite amount of bonds for payment, insisting that certificates of indebtedness were not exempt from

taxation.

of the supreme court of New York for the purA writ of mandamus was thereupon sued out

These three cases present, under somewhat different forms, the same question, namely: Are the obligations of the United States, known as certificates of indebtedness, liable to be taxed by State legislation? These three cases were argued and will be con-pose of compelling these officials to perform their sidered together. alleged duties in this respect. An answer was filed, and the court, by its judgment, sustained

the refusal.

of appeals of New York, by which the judgment An appeal was taken to the court

of the

supreme court was affirmed. Writs of error, under the 25th section of the judiciary act, bring these judgments here for revision.

In 1863 and in 1864 the proper officers of the State, acting under the laws of New York, assess ed certain taxes upon the capital stock of the several banking associations in that State. Some of these banking associations resisted the collection of the tax on the ground that, though nominally imposed upon their respective capitals, it The first question to be considered is one of was in fact imposed upon the bonds and obliga- fendants in error that the judgment of the New jurisdiction. It is insisted in behalf of the detions of the United States, in which a large pro-York court of appeals is not subject to review in portion of these capitals was invested, and which, under the Constitution and laws of the United States, were exempt from State taxation. This question was brought before the court of appeals, which sustained the assessments, and disallowed the claim of the banking associations.

From this decision an appeal was taken to this court, upon the hearing of which, at the December term, 1864, it was adjudged that the taxes imposed upon the capitals of the associations were a tax upon the national bonds and obligations in which they were invested, and, therefore, so far, contrary to the Constitution of the United States.*

A mandate in conformity with this decision was sent to the court of appeals of New York, which court thereupon reversed its judgment, and entered a judgment agreeably to the man date.

* 2 Wall., 210.

this court.

But is it not plain that, under the act of the legislature of New York, the banking associations were entitled to reimbursement by bonds of the taxes illegally collected from them in 1863

and 1864?

the process by which the associations sought to No objection was made in the State court to enforce the issue of the bonds to which they asserted their right. Mandamus to the officers charged with the execution of the State law seems to have been regarded on all hands as the appropriate remedy.

that the particular description of obligations, of But it was objected on the part of those officers the tax on which the associations claimed reimbursement, were not exempt from taxation. The associations, on the other hand, insisted that these obligations were exempt under the Constitution and laws of the United States. If they

were so exempt, the associations were entitled to the relief which they sought. The judgment of the court of appeals denied the relief, upon the ground that certificates of indebtedness were not entitled to exemption. Is it not clear that in the case before the State court a right, privilege, or immunity was claimed under the Constitution or a statute of the United States, and that the decision was against the right, privilege, or immunity claimed, and, therefore, that the jurisdiction of this court to review that decision is within the express words of the amendatory act of February 5, 1867? There can be but one answer to this question. We can find no ground for doubt on the point of jurisdiction.

The general question upon the merits is this: Were the obligations of the United States known as certificates of indebtedness liable to State tax

ation?

If this question can be affirmatively answered, the judgments of the court of appeals must be affirmed; if not, they must be reversed.

Evidences of the indebtedness of the United States, held by individuals or corporations, and sometimes called stock or stocks, but recently better known as bonds or obligations, have uni formly been held by this court not to be liable to taxation under State legislation.

The authority to borrow money on the credit of the United States is, in the enumeration of the powers expressly granted by the Constitution, second in place, and only second in importance, to the authority to lay and collect taxes. Both are given as means to the exercise of the functions of Government under the Constitution, and both, if neither had been expressly conferred, would be necessarily implied from other powers; for no one will assert that without them the great powers-mentioning no others to raise and support armies, to provide and maintain a navy, and to carry on war, could be exercised at all, or, if at all, with adequate efficiency.

And no one affirms that the power of the Government to borrow, or the action of the Government in borrowing, subject to taxation by the States.

There are those, however, who assert that, although the States cannot tax the exercise of the powers of the Government, as for example in the conveyance of the mails, the transportation of troops, or the borrowing of money, they may tax the indebtedness of the Government when it assumes the form of obligations held by individuals, and so becomes in a certain sense private property.

This court, however, has constantly held otherwise.

Forty years ago, in the case of Weston vs. The City of Charleston, this court, speaking through Chief Justice Marshall, said :*

"The American people have conferred the power of borrowing money upon their Government, and by making that Government supreme have shielded its action in the exercise of that power from the action of the local governments. The grant of the power is incompatible with a restraining or controlling power, and the declaration of supremacy is a declaration that no such

*2 Peters, 467.

restraining or controlling power shall be exercised."

And, applying these principles, the court proceeded to say:

"The right to tax the contract to any extent, when made, must operate on the power to borrow before it is exercised and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government. To any extent, however inconsiderable, it is a burden upon the operations of the Government. It may be carried to an extent which shall arrest them entirely."

And finally:

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A tax on Government stock is thought by this court to be a tax on the contract, a tax on the power to borrow money on the credit of the United States, and consequently repugnant to the Constitution."

Nothing need be added to this, except that in no case decided since have these propositions been retracted or qualified. The last cases in which the power of the States to tax the obligations of the Government came directly in question were those of the Bank of Commerce vs. The City of New York, in 1862,* and the Bank Tax Case,† in 1865, in both of which the power was denied.

An attempt was made at the bar to establish a distinction between the bonds of the Government expressed for loans of money and the certificates of indebtedness for which the exemption was claimed. The argument was ingenious, but failed to convince us that such a distinction can be maintained. It may be admitted that these certificates were issued in payment of supplies and in satisfaction of demands of public creditors. But we fail to perceive either that there is a solid distinction between certificates of indebtedness issued for money borrowed and given to creditors and certificates of indebtedness issued directly to creditors in payment of their demands; or that such certificates, issued as a means of executing constitutional powers of the Government, other than of borrowing money, are not as much beyond control and limitation by the States through taxation as bonds or other obligations issued for loans of money.

The principle of exemption is, that the States cannot control the national Government within the sphere of its constitutional power, for there it is supreme; and cannot tax its obligations for payment of money issued for purposes within that range of powers, because such taxation necessarily implies the assertion of the right to exercise such control.

The certificates of indebtedness in the case before us are completely within the protection of this principle. For the public history of the country and the acts of Congress show that they were issued to creditors for supplies necessary to the Government in carrying on the recent war for the integrity of the Union and the preservation of our republican institutions. They were received instead of money at a time when full money payment for supplies was impossible, and, according to the principles of the cases to which we have referred, are as much beyond the taxing

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power of the States as the operations themselves | at first for the emission of United States notes, in furtherance of which they were issued. and at a later period for the issue of the national bank currency.

It results that the several judgments of the court of appeals must be reversed.

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This case differs from those just disposed of in two particulars: (1) That the board of supervisors, which in the other cases allowed and audited the claims of the banking associations, refused to allow the claim made in this case; and (2) that the exemption from State taxation claimed in this case was of United States notes, while in the other cases it was of certificates of indebtedness.

The mandamus in the State court was therefore directed, in the case now before us, to the board of supervisors, instead of the officers authorized to issue bonds, as in the cases already

decided.

The judgment of the court of appeals sustained the action of the board, and the case is brought here by writ of error to that court.

Under the exigencies of the times it seems to have been thought inexpedient to attempt any provision for the redemption of the United States notes in coin. The law, therefore, directed that treasury of the United States, but did not prothey should be made payable to bearer at the vide for payment on demand. The period of payment was left to be determined by the public exigencies. In the meantime the notes were receivable in payment of all loans, and were, until after the close of our civil war, always practically convertible inte bonds of the funded debt, bearing not less than five per cent. interest, payable in coin.

The act of February 25, 1862, provided for the issue of these notes to the amount of $150,000,000. The act of July 11, 1862, added another $150,000,000 to the circulation, reserving, however, $50,000,000 for the redemption of temporary loan, to be issued and used only when necessary for that purpose. Under the act of March 3, 1863, another issue of $150,000,000 was authorized, making the whole amount authorized $450,000,000, and contemplating a permanent circulation, until resumption of payment in coin, of $400,000,000.

It is unnecessary here to go further into the history of these notes, or to examine their relation to the national bank currency. That history belongs to another place, and the quality of these notes, as legal tenders, belongs to another discussion. It has been thought proper

The general question requiring consideration is, whether United States notes come under another rule in respect of taxation than that which applies to certificates of indebtedness. The issues of United States notes were author-only to advert to the legislation by which these ized by three successive acts. The first was the notes were authorized in order that their true act of February 25, 1862;* the second the act character may be clearly perceived. of July 11, 1862;† and the third that of March 3, 1863.

That these notes were issued under the authority of the United States, and as a means to Before either of these acts received the sanc-ends entirely within the constitutional power of tion of Congress the Secretary of the Treasury the Government, was not seriously questioned had been authorized by the act of July 17, 1861, upon the argument. to issue treasury notes not bearing interest, but payable on demand by the assistant treasurers at New York, Philadelphia, or Boston; and about three weeks later these notes, by the act of August 5, 1861. had been made receivable generally for public dues. The amount of notes to be issued of this description was originally limited to fifty millions, but was afterwards, by the act of February 12, 1862,¶ increased to sixty

millions.

These notes, made payable on demand and receivable for all public dues, including duties on imports always payable in coin, were practically equivalent to coin; and all public disbursements, until after the date of the act last mentioned, were made in coin or these notes.

In December, 1861, the State banks (and no others then existed) suspended payment in coin; and it became necessary to provide by law for the use of State bank notes, or to authorize the issue of notes for circulation under the authority of the national Government. The latter alternative was preferred, and in the necessity thus recognized originated the legislation providing

*12 U. S. Stat., 345. †12 U.S. Stat., 532. 12 U. S. Stat., 709. 12 U. S. Stat., 259, 26. 12 U.S. Stat., 313, 5. 12 U.S. Stat., 338.

But it was insisted that they were issued as money; that their controlling quality was that of money; and that therefore they were subject to taxation in the same manner and to the same extent as coin issued under like authority.

And there is certainly much force in the argument. It is clear that these notes were intended to circulate as money, and, with the national bank notes, to constitute the credit currency of the country.

Nor is it easy to see that taxation of these notes, used as money and held by individual owners, can control or embarrass the power of the Government in issuing them for circulation more than like taxation embarrasses its power in coining and issuing gold and silver money for circulation.

Apart from the quality of legal tender impressed upon them by acts of Congress, of which we now say nothing, their circulation as currency depends on the extent to which they are received in payment, on the quantity in circulation, and on the credit given to the promises they bear. In these respects they resemble the bank notes formerly issued as currency.

But, on the other hand, it is equally clear that these notes are obligations of the United States.

Their name imports obligation. Every one of Our conclusion is, that United States notes are them expresses upon its face an engagement of exempt, and, at the time the New York statutes the nation to pay to the bearer a certain sum. were enacted, were exempt from taxation by or The dollar note is an engagement to pay a dol-under State authority. The judgment of the lar, and the dollar intended is the coined dollar court of appeals must therefore be reversed. of the United States-a certain quantity in weight and fineness of gold or silver, authenticated as such by the stamp of the Government. No other dollars had before been recognized by the legislation of the national Government as lawful money

Would, then, their usefulness and value as means to the exercise of the functions of government be injuriously affected by State taxation?

Clause making United States Notes a Legal Ten-
der for Debts has no reference to State Taxes.
No. 5-DECEMBER TERM, 1868.
The County of Lane, pl'ff in error,

vs.

In error to the supreme court of the State of Oregon.

The State of Oregon. Mr. Chief Justice Chase delivered the opinion of the court.

The State of Oregon, in April, 1865, filed a complaint against the county of Lane, in the circuit court of the State for that county, to recover $5,460 96 in gold and silver coin, which sum was alleged to have become due as State revenue from the county to the State on the 1st Monday of February, 1864.

It cannot be said, as we have already intimated, that the same inconveniences as would arise from the taxation of bonds and other interest-bearing obligations of the Government would attend the taxation of notes issued for cir culation as money. But we cannot say that no embarrassment would arise from such taxation. And we think it clearly within the discretion of To this complaint an answer was put in by the Congress to determine whether, in view of all county, alleging a tender of the amount claimed the circumstances attending the issue of the by the State, made on the 23d day of January, notes, their usefulness as a means of carrying on 1864, to the State treasurer, at his office, in the Government would be enhanced by exemp-United States notes, and averring that the lawtion from taxation; and within the constitutional power of Congress, having resolved the question of usefulness affirmatively, to provide by law for such exemption.

There remains, then, only this question: Has Congress exercised the power of exemption? A careful examination of the acts under which they were issued has left no doubt in our minds upon that point.

The act of February, 1862,* declares that "all United States bonds and other securities of the United States held by individuals, associations, or corporations, within the United States, shall be exempt from taxation by or under State authority."

We have already said that these notes are obligations. They bind the national faith. They are, therefore, strictly securities. They secure the payment stipulated to the holders by the pledge of the national faith, the only ultimate security of all national obligations, whatever form they may assume.

And this provision is re-enacted in application to the second issue of United States notes by the act of July 11, 1863.†

And, as if to remove every possible doubt from the intention of Congress, the act of March 3, 1863, which provides for the last issue of these notes, omits in its exemption clause the word "stocks," and substitutes for "other securities" the words, "Treasury notes or United States notes issued under the provisions of this act."

It was insisted at the bar that a measure of exemption in respect to the notes issued under this, different from that provided in the former acts in respect to the notes authorized by them, was intended. But we cannot yield our assent to this view. The rule established in the last act is in no respect inconsistent with that previously established. It must be regarded, therefore, as explanatory. It makes specific what was before expressed in general terms.

*12 U. S. Stat., 346, 2. †12 U. S. Stat., 546. 12 Stat.,

709.

ful money so tendered and offered was, in truth and fact, part of the first moneys collected and paid into the county treasury after the assessment of taxes for the year 1862.

To this answer there was a demurrer, which was sustained by the circuit court, and judgment was given that the plaintiff recover of the defendent the sum claimed in gold and silver coin, with costs of suit, and this judgment was affirmed upon writ of error by the supreme court of the State.

The case is brought here by writ of error to that court; and two propositions have been pressed upon our attention, ably and earnestly, in behalf of the plaintiff in error.

The first is, that the laws of Oregon did not require the collection in coin of the taxes in question, and that the treasurer of the county could not be required to pay to the treasurer of the State any other money than that in which the taxes were actually collected.

The second is, that the tender of the amount of taxes made to the treasurer of the State by the treasurer of the county in United States notes, was warranted by the acts of Congress authorizing the issue of these notes, and that the law of the State, if it required collection and payment in coin, was repugnant to these acts, and therefore void.

The first of these propositions will be first considered.

The answer avers substantially that the money tendered was part of the first moneys collected in Lane county after the assessment of 1863, and the demurrer admits the truth of the answer.

The fact therefore may be taken as established, that the taxes for that year in Lane county were collected in United States notes.

But was this in conformity with the laws of Oregon?

In this court the construction given by the State courts to the laws of a State relating to local affairs is uniformily received as the true construction, and the question first stated must have

been passed upon, in reaching a conclusion upon | be made. Coin was then and is now the only the demurrer, both by the circuit court for the legal tender for debts less than one dollar. county and by the supreme court of the State. Both courts must have held that the statutes of Oregon, either directly or by clear implication, required the collection of taxes in gold and silver

coin.

In the view which we take of this case this is not important. It is mentioned only to show that the general words "all debts" were not intended to be taken in a sense absolutely literal.

We proceed then to inquire whether, upon a sound construction of the acts, taxes imposed by State government upon the people of a State are debts within their true meaning.

Nor do we perceive anything strained or unreasonable in this construction. The laws of Oregon, as quoted in the brief for the State, pro-a vided that the sheriff shall pay over to the county treasurer the full amount of the State and school taxes in gold and silver coin;"* and that "the several county treasurers shall pay over to the State treasurer the State tax in gold and silver coin."†

It is certainly a legitimate if not a necessary inference that these taxes were required to be collected in coin. Nothing short of express words would warrant us in saying that the laws authorized collection in one description of money from the people and required payment over of the same taxes into the county and State treas uries in another.

If, in our judgment, however, this point were otherwise, we should still be bound by the soundest principles of judicial administration and by a long train of decisions in this court to regard the judgment of the supreme court of Oregon, so far as it depends on the right construction of the statutes of that State, as free from error.

The second proposition remains to be examined, and this inquiry brings us to the consideration of the acts of Congress authorizing the issue of the notes in which the tender was made.

The first of these was the act of February 25, 1862, which authorized the Secretary of the Treasury to issue, on the credit of the United States, $150,000,000 in United States notes, and provided that these notes "shall be receivable in payment of all taxes, internal duties, excises, debts, and demands due to the United States, except duties on imports, and of all claims and demands against the United States of every kind whatsoever, except interest on bonds and notes, which shall be paid in coin; and shall also be lawful money and legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest as aforesaid."

The second act contains a provision nearly in the same words with that just recited, and under these two acts two-thirds of the entire issue was authorized It is unnecessary, therefore, to refer to the third act, by which the notes to be issued under it are not in terms made receivable and payable, but are simply declared to be lawful money and a legal tender.

In the first act no emission was authorized of any notes under five dollars, nor in the other two of any under one dollar. The notes, authorized by different statutes, for parts of a dollar, were never declared to be lawful money or a legal tender.”

It is obvious, therefore, that a legal tender in United States notes of the precise amount of taxes admitted to be due to the State could not

*Statutes of Oregon, 438, 832. †Ibid., 441, 246. 112 U. 8. Stat., 592; Ibid., 711.

In examining this question it will be proper to give some attention to the constitution of the States and to their relations as United States. The people of the United States constitute one nation, under one government; and this government, within the scope of the powers with which it is invested, is supreme. On the other hand, the people of each State compose a State, having its own government, and endowed with all the functions essential to separate and independent existence. The States disunited might continue to exist. Without the States in union there could be no such political body as the United States.

Both the States and the United States existed before the Constitution. The people, through that instrument, established a more perfect union, by substituting a national Government, acting, with ample power, directly upon the citizens, instead of the confederate government which acted with powers, greatly restricted, only upon the States. But in many articles of the Constitution the necessary existence of the States, and, within their proper spheres, the independent authority of the States, is distinctly recognized. To them nearly the whole charge of interior regulation is committed or left; to them and to the people all powers not expressly delegated to the national Government are reserved. The general condition was well stated by Mr. Madison, in the Federalist, thus: "The federal and State governments are in fact but different agents and trustees of the people, constituted with different powers and designated for different purposes."

Now, to the existence of the States, themselves necessary to the existence of the United States, the power of taxation is indispensable. It is an essential function of government.

It was exercised by the colonies; and when the colonies became States, both before and after the formation of the confederation, it was exercised by the new governments.

.

Under the articles of confederation the Government of the United States was limited in the exercise of this power to requisitions upon the States, while the whole power of direct and indirect taxation of persons and property, whether by taxes on polls, or duties on imports, or duties on internal production, manufacture, or use, was acknowledged to belong exclusively to the States, without any other limitation than that of noninterference with certain treaties made by Con

gress.

The Constitution, it is true, greatly changed. this condition of things. It gave the power to tax, both directly and indirectly, to the national Government, and, subject to the one prohibition of any tax upon exports and to the conditions of uniformity in respect to indirect and of propor

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