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case be remanded, with instructions that further proceedings be had according to law and in conformity with this opinion, and it is so ordered.
Mr. Justice Brewer dissents from so much of the opinion as holds that a progressive rate of tax can be validly imposed. In other respects he concurs.
Mr. Justice Peckham took no part in the decision.
While I concur in the construction placed by the court upon the clause of the Constitution declaring that all duties, imposts and excises shall be "uniform throughout the United States," I dissent from that part of the opinion construing the 29th and 30th sections of the revenue act. In my judgment, the question whether the tax presented by Congress shall or shall not be imposed is to be determined with reference to
the whole amount of the personal property out of which legacies and distributive shares arise. If the value of the whole personal property held in charge or trust by an administrator, executor, or trustee exceeds $10,000 then every part of it constituting a legacy or distributive share, except the share of a husband or wife, is taxed at the progressive rate stated in the act of Congress. I do not think the act can be otherwise interpreted without defeating the intent of Congress.
Construed as I have indicated, the act is not liable to any constitutional objection.
Mr. Justice McKenna concurs in this dissent.
CORPORATION TAX CASES.
FLINT v. STONE TRACY COMPANY.
United States Supreme Court, March, 1911.
220 U. S., 611.
Congress by the Act of August 5, 1909, passed what is generally known as “The Corporation Tax Law.” Under the provisions of this law an annual tax of one per centum was imposed upon the entire net income over and above five thousand dollars of every corporation engaged in business in the United States and its territories. Fifteen appeals were taken to the Supreme Court from judgments for the taxes assessed under the Act in order to test its constitutionality. The tax was designated in the act as a "special excise tax," but it was contended by those appealing from the tax that the tax in question was a direct tax and should have been apportioned according to population as required by the Constitution. The cases were first argued in March, 1910, but subsequently
were reargued in January, 1911, and decided on March 13, 1911. The important section of the act is as follows:
"SEC. 38. That every corporation, joint stock company or association organized for profit and having a capital stock represented by shares, and every insurance company now or hereafter organized under the laws of the United States or of any State or Territory of the United States or under the Acts of Congress applicable to Alaska or the District of Columbia, or now or hereafter organized under the laws of any foreign country and engaged in business in any State or Territory of the United States or in Alaska, or in the District of Columbia, shall be subject to pay annually a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association or insurance company equivalent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources during such year, exclusive of amounts received by it as dividends upon stock of other corporations, joint stock companies or associations or insurance companies subject to the tax hereby imposed; or if organized under the laws of any foreign country, upon the amount of net income over and above five thousand dollars received by it from business transacted and capital invested within the United States and its Territories, Alaska and the District of Columbia, during such year, exclusive of amounts so received by it as dividends upon stock of other corporations, joint stock companies or associations or insurance companies subject to the tax hereby imposed.”
MR. JUSTICE DAY delivered the opinion of the court.
While the mere declaration contained in a statute that it shall be regarded as a tax of a particular character does not make it such if it is apparent that it cannot be so designated consistently with the meaning and effect of the act, nevertheless, the declaration of the law-making power is entitled to much weight, and in this statute the intention is expressly declared to impose a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or company. It is therefore apparent, giving all the words of the statute effect, that the tax is imposed not upon the franchises of the corporation irrespective of their use in business, nor upon the property of the corporation, but upon the doing of corporate or insurance business, and with respect to the carrying on thereof, in a sum equivalent to one per centum upon the entire net income over and above $5,000 received from all sources during the year; that is, when imposed in this manner it is a tax upon the doing of business with the advantages which inhere in the peculiarities of corporate or joint stock organization of the character described. As the latter organizations share many benefits of corporate organization it may be described generally as a tax upon the doing of business in a corporate capacity. In the case of the insurance companies the tax is imposed upon the transaction of such business by companies
organized under the laws of the United States or any State or Territory, as heretofore stated.
Having thus interpreted the statute in conformity, as we believe, with the intention of Congress in passing it, we proceed to consider whether as, thus construed, the statute is constitutional.
The Pollock case was before this court in Knowlton v. Moore, 178 U. S., 41. In that case this court sustained an excise tax upon the transmission of property by inheritance. It was contended there, as here, that the case was ruled by the Pollock case, and of that case this court, speaking by the present Chief Justice, said:
“Considering that the constitutional rule of apportionment had its origin in the purpose to prevent taxes on persons solely because of their general ownership of property from being levied by any other rule than that of apportionment, two things were decided by the court: First, that no sound distinction existed between a tax levied on a person solely because of his general ownership of real property, and the same tax imposed solely because of his general ownership of personal property. Secondly, that the tax on the income derived from such property, real or personal, was the legal equivalent of a direct tax on the property from which said income was derived, and hence must be apportioned. These conclusions, however, lend no support to the contention that it was decided that duties, imposts and excises, which are not the essential equivalents of a tax on property generally, real or personal, solely because of its ownership, must be converted into direct taxes, because it is conceived that it would be demonstrated by a close analysis that they could not be shifted from the person upon whom they first fall."
The act now under consideration does not impose direct taxation upon property solely because of its ownership, but the tax is within the class which Congress is authorized to lay and collect under Article 1, Section 8, Clause 1 of the Constitution, and described generally as taxes, duties, imposts and excises, upon which the limitation is that they shall be uniform throughout the United States.
Within the category of indirect taxation, as we shall have further occasion to show, is embraced a tax upon business done in a corporate capacity, which is the subject matter of the tax imposed in the act under consideration. The Pollock case construed the tax there levied as direct, because it was imposed upon property simply because of its ownership. In the present case the tax is not payable unless there be a carrying on or doing of business in the designated capacity, and this is made the occasion for the tax, measured by the standard prescribed. The difference between the acts is not merely nominal, but rests upon substantial differences between the mere ownership of property and the actual doing of business in a
The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing
business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi-corporate organization, or, when applied to insurance companies, for doing the business of such companies.
If we are correct in holding that this is an excise tax, there is nothing in the Constitution requiring such taxes to be apportioned according to population.
It is urged that this power can be so exercised by Congress as to practically destroy the right of the States to create corporations, and for that reason it ought not to be sustained, and reference is made to the declaration of Chief Justice Marshall in McCulloch v. Maryland that the power to tax involves the power to destroy.
The argument, at last, comes to this: That because of possible results, a power lawfully exercised may work disastrously, therefore the courts must interfere to prevent its exercise, because of the consequences feared. No such authority has ever been invested in any court. The remedy for such wrongs, if such in fact exist, is in the ability of the people to choose their own representatives, and not in the exertion of unwarranted powers by courts of justice. *
We have noticed such objections as are made to the constitutionality of this law as it is deemed necessary to consider. Finding the statute to be within the constitutional power of Congress, it follows that the judgments in the several cases must be affirmed.
One Aaron Ogden filed a bill praying for an injunction in the Court of Chancery of New York against Thomas Gibbons. The bill set out the several acts of the legislature of that State which secured to Robert R. Livingston and Robert Fulton the exclusive navigation of all the waters within the jurisdiction of the State, with boats moved by steam or fire, for a certain term of years, which had not expired at the time the suit was brought. The statutes also authorized the court to award an injunction, restrain
ing any person whatever from navigating those waters with boats of that description. Livingston and Fulton had assigned to one John R. Livingston, who in turn had assigned to the complainant, Ogden, the right to navigate the waters between Elizabethtown and other places in New Jersey and the City of New York. Gibbons, the defendant, in violation of the exclusive privilege held by Ogden, was running two steamboats between New York and Elizabethtown. The injunction prayed for was granted, but Gibbons in his answer stated that his boats were duly enrolled and licensed to be employed in carrying on the coasting trade, under an Act of Congress of February 18th, 1793, and he insisted on his right by virtue of such license to navigate the waters between the two ports. An appeal from the order granting the injunction was taken to the highest court of New York State, which upheld the injunction, from which decree the cause was carried to the United States Supreme Court.
CHIEF JUSTICE MARSHALL delivered the opinion of the court.
The appellant contends that this decree is erroneous, because the laws which purport to give the exclusive privilege it sustains, are repugnant to the Constitution and laws of the United States.
They are said to be repugnant
1. To that clause in the Constitution which authorizes Congress to regulate commerce.
2. To that which authorizes Congress to promote the progress of science and useful arts.
The State of New York maintains the constitutionality of these laws; and their legislature, their council of revision, and their judges, have repeatedly concurred in this opinion.
The words are: “Congress shall have power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes."
The subject to be regulated is commerce; and our Constitution being, as was aptly said at the bar, one of enumeration, and not of definition, to ascertain the extent of the power, it becomes necessary to settle the meaning of the word. The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce, undoubtedly, is traffic, but it is something more, it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse. The mind can scarcely conceive a system for regulating commerce between nations, which shall exclude all laws concerning navigation, which shall be silent on the admission of the vessels of the one nation into the ports of the other, and be confined to prescribing rules for the conduct of individuals, in the actual employment of buying and selling, or of barter.