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merely money in the recipient's pocket and taxable as money without reference to the source from which it came, the question, said the Court, would be immaterial whether it had been originally taxed or not. Hence, it followed that if the revenue derived from municipal bonds could not be taxed, because the source could not be taxed, the same rule applied to revenue from any other source not subject to the tax; and the lack of power to levy any but an apportioned tax on real estate and personal property equally existed as to the revenue from them. Admitting that the act of 1894 taxed the income of property irrespective of its source, still the Court could not doubt that such a tax would be necessarily a direct tax in the meaning of the Constitution. Being direct tax, therefore, it must be laid by apportionment. If the necessity existed for raising any number of million dollars for the support of the government in addition to the revenue from duties, imposts and excises, Congress could apportion the quota of each State upon the basis of the census, and thus advise it of the payment which must be made, and proceed to assess the amount on all real estate or personal property and the income of all persons in the State.

Of course the inquiry arose, whether a general, unapportioned tax on the income of real and personal property could be sustained under the Constitution. It was argued that, if the fundamental law was strictly complied with, that method of taxation would have to be abandoned altogether, because of the inequalities which would necessarily accompany its application. The census of 1890 was utilized to prove that enormous assets of mutual insurance companies, building associations, mutual savings banks and ecclesiastical organizations were exempted from taxation to such an amount that if they had been taxed, the rate which it had been found necessary to fix would



have been reduced one-half. While the Court disclaimed that it was dealing with the Wilson-Gorman act from this point of view, it admitted that the data of the census were substantially reliable. It raised the question whether it might not be doubted, whether if the sum desired to be raised had been apportioned in a State which paid its quota and collected the amount by its own methods, would the State or could it, under its constitution, have allowed a large part of the property above mentioned to escape taxation. If so, a better measure of equality would have been attained than would otherwise have been possible, since, according to the argument of counsel who contended for the constitutionality of the act, “the rule of equality is not prescribed by the Constitution as to federal taxation and the observance of such a rule as inherent in all just taxation is purely a matter of legislative discretion.”

The counsel for the Government, who argued for the constitutionality of the act, labored to prove that as the United States was "a representative of an indivisible nationality, a political sovereign, equal in authority to any other on the face of the globe; equal to all emergencies, foreign or domestic, and having had its command for offense and defense and for all governmental purposes all resources of the Nation,” would be “but a maimed and crippled creation after all” unless it possessed the power to levy taxes without apportionment on the income of real and personal property throughout the country.

The Court conceded that Congress had power to tax real and personal property and the income from both, if there was an apportionment. Such a tax would be a direct tax in the meaning of the Constitution; yet while conceding this, the Court was asked to hesitate to enforce "the mandate of the Constitution which prohibits Con



gress from laying a direct tax on the revenue from property of the citizens without regard to State lines and in such manner that the States cannot intervene by payment in regulation of their own resources." And the Court was asked to hesitate lest a government of delegated powers should not be found equal to the demand put upon it. Whether an income tax was or was not desirable, or whether it would enable the government to diminish the tariff duties and to enter upon what, some maintained, would be a reform of its fiscal and commercial system, were questions with which the Court was not concerned. “Questions of that character,” said the Chief-Justice, “belong to the controversies of political parties and cannot be settled by judicial decision.” In the cases before the Court its province was to determine whether the income tax levied by the act of 1894, on the revenue from property, did or did not belong to the class of direct taxes. If it did belong to that class, it violated the Constitution, because it was unapportioned, and the Court must so declare it. President Cleveland had returned the act of 1894 to Congress without his signature, a fact to which the Chief Justice adverted; in his annual message of 1893 he had urged a reduction of the tariff duties and the imposition of an income tax "derived from certain corporate investments. The Democratic party, by his election in 1892, stood pledged to tariff reform and the WilsonGorman act was passed presumably in fulfillment of this pledge. The refusal of the President to approve the act, and its becoming a law without his signature, indicated that it did not comply with his ideas of reform. According to the census of 1890, the true valuation of real and personal property in the United States was sixty-five billions

1 December 4, 1893, Richardson IX, 460.



($65,037,091,197), of which thirty-nine billions ($39,544,544,333) constituted the value of the real estate.

Commenting on these data, in their relation to the act under consideration, the Chief-Justice observed, that in applying that portion of the act levying an income tax, unproductive property and all property whose net yield did not exceed four thousand dollars must be deducted from the real estate valuation. But even after such a deduction it was evident that the income from realty composed a vital part of the scheme for taxation embodied in the law. If the exempted property were struck out, and also the income from all invested personal property, bonds, stocks and investments of all kinds, it was "obvious that by far the largest part of the anticipated revenue would be eliminated, and this would leave the burden of taxation to be borne by professions, trades, employments or avocations, and in that way what was intended as a tax on capital would remain in substance a tax on occupations and labor."

The Court was unwilling to believe that such had been the intention of Congress. It did not mean to be understood as holding that an act, which by apportionment levied a direct tax on real estate and personal property, or the income of both, "might not also lay excise taxes on business, privileges, employments and vocations;" but the act of 1894 was not such an act "and the scheme must be considered as a whole.” Therefore, the Court adhered to the opinion it had announced in the earlier case, that taxes on real estate being indisputably direct taxes, taxes on the rents or incomes of real estate are equally direct taxes. It now held, in addition, that taxes on personal property, or on the income of personal property, are direct taxes also, and that the tax imposed by the act of 1894,

1 Sections 27-37 inclusive,



so far as it fell on the income of real estate and of personal property, was a direct tax within the meaning of the Constitution; and because it was not apportioned according to representation was unconstitutional and void. From this opinion four of the justices dissented.1

The final decision of the Court greatly disappointed many who had long been demanding a graduated income tax. These had complained that capital invested in franchises and corporations escaped paying its share of public taxation. The farming class and many of the smaller landowners throughout the country complained that too great a proportion of the burden of supporting the Government fell upon

land. The decision in the income tax cases was made a political issue in the campaign of 1896. The Democrats attributed the cause of the subsequent deficit in the public revenues to the annulment by the Supreme Court of the income tax clauses in the Wilson-Gorman act. The party declared that this law had been passed by a Democratic Congress "in strict pursuance of the uniform decisions of that Court for nearly one hundred years, that it was the duty of Congress to use all the constitutional power which remained after that decision, or which might come by its reversal by the Court, as the Court might thereafter be constituted, so that the burdens of taxation might be impartially laid and wealth bear its due proportions of expenses of the government. The Peoples Party, more explicit, pointedly demanded a graduated income tax in order that aggregated wealth should bear its just proportion of taxation, and denounced the recent

113 and

1 Justices Harlan, Brown, Jackson and White.

2 See National People's Party Platform, Omaha, July 2, 1892. Compare Democratic platform, Chicago, June 21, 1892; United Labor platform, Cincinnati, May 16, 1888; Greenback platform, Chicago, June 9-11, 1880.

8 Democratic platform, Chicago, July 8, 1896.

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