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Santa Clara County v. Southern Pac. R. Co. 118 U. S. 394 (30: 118); California v. Central Pac. R. Co. 127 U. S. 1 (32: 150).

U. S. 34 (29: 785); Robbins v. Shelby Taxing cannot be sustained as a tax on the franDist. 120 U. S. 489, 496 (30: 694, 697); Fargo v. Michigan, 121 U. S. 230, 244 (30: 888, 894); Bowman v. Chicago & N. W. R. Co. 125 U. S. 465 (31: 700); Pullman Southern Car Co. v. Nolan, 22 Fed. Rep. 276, 281; People v. Allen, 42 N.Y. 404, 413; Re Deansville Cemetery Asso. 66 N. Y. 569; Re Jacobs, 98 N. Y. 98.

The declaration by the Legislature that this is a tax on franchise or business is not controlling. The name of this imposition is immaterial; it is the substance we are to consider.

Inman Co. v. Tinker, 94 U. S. 238 (24: 118). The franchises of a corporation may be taxed by ir posing a fixed sum, or a graduated contribution proportioned either to the value of the privileges granted, or to the extent of their exercise, or to the results of such exercise.

State Tax on Railway Gross Receipts, 82 U. 8. 15 Wall. 284 (21: 164); Delaware Railroad Tax, 85 U. S. 18 Wall. 206, 231 (21: 888, 896). These provisions of the Act do not impose a fixed sum. Nor do they impose a contribution proportioned to the extent of the exercise of the franchise to the amount of business done. The franchise is the right to use the tangible property in a special manner for purposes of gain.

State Railway Tax Cases, 92 U. S. 575 (23: 663).

It is itself a part of the property of the corporation, but quite distinct and separate from its tangible property.

Gordon v. App. Tax Court, 44 U. 8. 8 How. 133, 150 (11:529, 535); Wilmington R. Co. v. Reid, 80 U. S. 13 Wall. 264, 265 (30: 568).

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The cases relied upon by the State, to wit: Society for Savings v. Coite, 73 U. S. 6 Wall. 594 (18: 897); Provident Inst. v. Mass. 73 U. S. 6 Wall. 611 (18: 907), and Hamilton Co. v. Mass. 73 U. S. 6 Wall. 632 (18: 904),—have no present application.

They are controlled by Philadelphia & Southern Steamship Co. v. Pennsylvania, 122 U. S. 326 (30: 1200).

In that case, a state statute imposed a tax upon the gross receipts of a steamship company of the State, which were derived from the transportation of persons and property by sea between different States and to and from foreign countries. It was held that the tax was imposed not upon the franchise but upon the commerce itself from which the receipts arose, and was therefore unconstitutional.

Fargo v. Mich. 121 U. S. 230 (30: 888); Leloup v. Port of Mobile, 127 U. S. 640 (32: 311). Where a tax is upon the property in which the capital is invested, corporations upon which it is imposed are entitled to deduct their United States bonds from the amount of the assessment.

Bank of Commerce v. N. Y. 67 U. S. 2 Black, 620 (17: 451); Bank Tax Case, 69 U. S. 2 Wall. 200 (17: 793).

In matters of taxation, it is a sacred duty to impose the burdens equally.

People v. Comrs. of Taxes,76 N. Y. 64, 71.

Equality of taxation is a fundamental principle of our government, which no Legislature, in the absence of the most explicit provisions, will be presumed to have intended to violate. People v. Suprs. 20 Barb. 81, 88, affirmed 16 N. Y. 424.

It is a thing capable of appraisal and ascertainable by evidence, and is frequently made the subject of taxation by the sovereign power. It is a right separate and distinct from the capital and moneyed assets of a corporation, and as to the value of which they furnish no evidence. Conaughty v. Saratoga Bank, 92 N. Y. 401; Veazie Bank v. Fenno, 75 U. S. 8 Wall. 533, 547 (19: 482, 487); Monroe Savings Bank v. Rochester, 37 N. Y. 365, 367: Porter v. Rock-rate of dividend. ford R. Co. 76 Пl. 561, 578.

Its value is determined by subtracting from the total actual value of the capital stock the total value of all items of property other than the franchise. The remainder is the value of the franchise-the value of the right to use the tangible property in a special manner for the purposes of gain.

State Railway Tax Cases, 92 U. S. 575, 602607 (23: 663, 669, 671); Spring Valley Works v. Schottler, 62 Cal. 69, 117; Burke v. Badlam, 57 Cal. 594: San José Co. v. January, 57 Cal. 614.

Here neither the value of this part of the property of the corporation nor the results of its use are in any way ascertained.

The tax is a percentage upon that part of defendant's income which it has distributed in dividends. This is a tax upon the property from which the income arises.

Bank of Kentucky v. Com. 9 Bush, 46; Opinion of the Justices, 53 N. H. 634; People v. Comrs. of Taxes, 90 N. Y. 63; Weston v. Charleston, 27 U. S. 2 Pet. 472, 475, 478 (7: 489, 490, 491); Philadelphia Co. v. Pennsylvania, 122 U. S. 326 (30: 1200).

As this tax includes property not taxable, it

The tax is a percentage upon the capital-upon the dividends which it has earned. The rate of tax increases or diminishes with the

Oswego Starch Factory v. Dolloway, 21 N. Y. 449; Com. v. Cleveland, P. & A. R. Co. 29 Pa. 370; Lehigh Crane Iron Co. v. Com. 55 Pa. 448; People v. Ferguson, 38 N. Y. 89.

The provisions of this Act were copied literally from a Statute of Pennsylvania (Laws of 1879, p. 114, sec. 4), and have long existed there in the same substantial form.

Laws of 1844, p. 498, sec. 33; Laws of 1859, p. 529; Laws of 1868, p. 109, sec. 4.

It is well settled there that they impose a tax upon the property of the corporation (Westchester Co. v. Chester Co. 30 Pa. 232; Lackawanna Iron & Coal Co. v. Luzerne Co. 42 Pa. 424, 430; Phænir Iron Co. v. Com. 59 Pa. 104; Com. v. Pittsburg, Fort Wayne & C. R. Co. 74 Pa. 83: Catawissa Co's App. 78 Pa. 59; Coatesville Gas Co. v. Chester Co. 97 Pa. 476, 481); and that the dividend of profit earned .by the stock is but a means of ascertaining its value.

Lehigh Co. v. Com. 55 Pa. 448, 451; Com. v. Standard Oil Co. 101 Pa. 119.

The Pennsylvania Statute was before this court in Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196 (29: 158), and was then regarded as imposing a tax upon the capital of corporations affected.

Bank of Commerce v. New York, 67 U. 8. 2 Black, 620 (17: 451); Bank Tax Case, 69 U. S. 2 Wall. 200 (17: 793).

Any question in the premises is finally disposed of by Philadelphia Co. v. Penn. 122 U. 326 (30: 1200).

If, however, defendant be taxable upon the basis of its entire capital, including the bonds, the tax is repugnant to the Fourteenth Amendment to the Constitution of the United States. The defendant is a person within the meaning of this provision.

Santa Clara County v. Southern Pac. R. Co. 118 U. S. 394 (30: 118); Pembina Co. v. Pennsylvania, 125 U. S. 181, 189 (31: 650, 655); Missouri Pac. R. Co. v. Mackey, 127 U. S. 205 (32: 107).

Inequality of taxation is a denial of equal protection.

Strauder v. West Va. 100 U. S. 303 (25: 664): California v. Central Pac. R. Co. 127 U. S. 1 (32: 150); San Mateo County v. Southern Pac. R. Co. 8 Sawy. 238, 13 Fed. Rep. 722; Exchange Bank v. Hines, 3 Ohio St. 1; People V. Weaver, 100 U. S. 539 (25: 705); Suprs. v. Stanley, 105 U. S. 305 (26: 1044); Evansville Bank v. Britton, 105 U. S. 822 (26: 1053).

The Legislature has power to classify corporations for purposes of taxation.

State Railway Tax Cases, 92 U. S. 575 (23: 663).

But there can be no classification by arbitrary rules among those engaged in the same business, in the same locality.

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manner control the operations of the national government.

McCulloch v. Maryland, 17 U. S. 4 Wheat. 316, 436 (4: 579, 609); Lane Co. v. Oregon, 74 U. S. 7 Wall. 71, 77 (19: 101, 104).

Mr. Charles F. Tabor, Atty-Gen. of New York, for defendants in error:

The tax imposed upon the plaintiff in error was a tax upon its franchises, and not upon its property or capital stock.

Laws of 1880, 1881.

Franchises are special privileges conferred by government upon individuals.

Bank of Augusta v. Earle, 38 U. S. 18 Pet. 595 (10: 311).

The State may impose taxes upon the corporation as an entity existing under its laws.

Delaware Railroad Tax Cases, 85 U. S. 18 Wall. 206 (21: 888).

The privileges and franchises of a private corporation may be taxed by a State for the support of the state government.

Society for Savings v. Coite, 73 U. S. 6 Wall. 594 (18:897); State Railway Tax Cases, 92 U. S. 575 (23: 663); State Tax on Railroad Gross Receipts, 82 U. S. 15 Wall. 284 (21: 164).

This tax, being upon the franchise of the plaintiff, was lawful, and it matters not how its capital stock or property may be invested, whether in United States securities or otherwise.

People v. Comrs. 71 U. S. 4 Wall. 244 (18: 344); Louisville First Nat. Bank v. Com. 76 U. S. 9 Wall. 353 (19: 701); Van Allen v. Assessors, 70 U. S. 3 Wall. 573 (18: 229); Webber v. Virginia, 103 U. S. 350 (26: 567); Society for Savings v. Coite, 73 U. S. 6 Wall. 594 (18: 897); Provident Inst. v. Mass. 73 U. S. 6 Wall. 612 (18: 907); Hamilton Mfg. Co. v. Mass. 73 U. S. 6 Wall. 632 (18: 904); Mercantile Nat. Bank v. Mayor, 121 U. S. 158 (30: 903); Bank Tax Case, 69 U. S. 2 Wall. 209 (17: 795); Philadelphia C. Ins. Co. v. Com. 99 Pa. 53.

Kentucky Railroad Tax Cases, 115 U. S. 337 (29: 419); Missouri v. Lewis, 101 U. S. 22, 31 (25: 989, 992); Gilman v. Sheboygan, 67 U. S. 2 Black, 510 (17: 305); Albany City Nat. Bank v. Maher, 9 Fed. Rep. 884; Dundee M. T. Investment Co. v. School Dist. No. 1, 19 Fed. Rep. 359; Stuart v. Palmer, 74 N. Y. 183; State v. Township, 36 N. J. L. 66, 70; Lexington v. McQuillan, 9 Dana, 513; Howell v. Bristol, 8 Bush, 493, 498; Atty-Gen. v. Winnebago Co. 11 Wis. 35, 42; New Orleans v. Home Mut. Ins. Co. 23 La. Ann. 449; Re Ah Fong, 3 Sawy. 144, 145; Ah Kow v. Nunan, 5 Sawy. 552; Re Parrott, 6 Sawy. 349; Louisville & N. R. Co. v. Tennes- State Railway Tax Cases, 92 U. S. 575, 611 see Railroad Commission, 19 Fed. Rep. 679. (23: 663, 673); Kentucky Railroad Tax Cases, Upon principle the rule in regard to uni-115 U. S. 321 (29: 414); Com. v. Delaware Div. formity of taxation upon franchises must be the same as in regard to taxes upon any other property.

San Mateo County v. Southern Pac. R. Co. 8 Sawy. 256; Portland Bank v. Apthorp, 12 Mass. 252, 258; Com. v. People's Savings Bank, 5 Allen, 428, 431: Oliver v. Washington Mills, 11 Allen, 268; State v. Merchants Ins. Co. 12 La. Ann. 802; Parish of Orleans v. Cochran, 20 La. Ann. 373; East St. Louis v. Wehrung, 46 Ill. 392.

If the right to impose a tax at all exists, it is right which in its nature acknowledges no limits.

Bank of Commerce v. N. Y. 67 U. S. 2 Black, 320, 634 (15: 451, 455).

The power to tax involves the power to destroy.

California v. Central Pac. R. Co. 127 U. S. 1, 41 (32: 150, 163).

The States have no power, by taxation or otherwise, to retard, impede, burden or in any

The tax in question being upon the franchises of the plaintiff in error, the first section of the Fourteenth Amendment to the United States Constitution has no application.

Canal Co. 123 Pa. 594; San Mateo County v.
Southern Pac. R. Co. 13 Fed. Rep. 737.

The court has in many cases indicated the restrictions, limitations and qualifications which are to be applied to the words: Nor shall any State deny to any person within its jurisdiction the equal protection of the laws,"showing clearly that they cannot be given the broad construction sought for them.

Kirtland v. Hotchkiss, 100 U. S. 499 (25:562); Memphis Gas. Co. v. Shelby Co. 109 Ù. S. 400 (27: 977); Barbier v. Connolly, 113 U. S. 32 (28: 925); Soon Hing v. Crowley, 118 U. S. 709 (28: 1147); Missouri Pac. R. Co. v. Humes, 115 U. 8. 523 (29: 467); Davenport Bank v. Board of Equalization, 123 U. S. 83 (81: 94); Missouri P. R. Co. v. Mackey, 127 U. S. 209 (32: 108); Minneapolis R. Co. v. Beckwith, 129 U. S. 32 (32: 588); Nat. Bank of Redemption v. Boston, 125 U. S. 69 (31: 692).

Improper motives cannot be attributed to a State Legislature.

Amy v. Watertown, 130 U. S. 320 (32: 953).
A statute must be interpreted so as, if pos-
sible, to make it consistent with the Constitu-
tion and the paramount law.

Parsons v. Bedford, 28 U. 8. 3 Pet. 433 (7:
732); Grenada Co. v. Brogden, 112 U. S. 261
(28:704); Presser v. Illinois, 116 U. S. 252, 269
(29: 615, 620); Ogden v. Saunders, 25 U. S. 12
Wheat. 270 (6: 232).

Mr. Justice Field delivered the opinion of

[597] the court:

The contention of the plaintiff in error is that the tax in question was levied upon its capital stock, and therefore invalid so far as the bonds of the United States constitute a part of that stock. If that contention were well founded there would be no question as to the invalid[598] ity of the tax. That the bonds or obligations of the United States for the payment of money cannot be the subject of taxation by a State is familiar law settled by numerous adjudications of this court. It is a tax upon the exercise of the power of Congress to borrow money; a tax which, if permitted, could be limited in amount only by the discretion of the State, and might therefore be carried to an extent impairing, if not destructive of, the efficiency of the power, to the serious detriment of the general government. As held in McCulloch v. Maryland, 17 U. S. 4 Wheat. 436 [4: 608], the States have no power by taxation to impede, burden or in any manner control the operation of the Constitution and laws enacted by Congress to carry into execution the powers vested in the general government, a doctrine which, applied in Weston v. Charleston, 27 U. S. 2 Pet. 449 [7: 481], annulled a tax levied by the authority of a law of South Carolina on stock issued for loans to the United States.

themselves; and that therefore the Statute was
a regulation of commerce and void.

To the same purport is the familiar case of
Brown v. Maryland, 25 U. S. 12 Wheat. 419
[6: 678], so often cited in this court, where it
was contended that a license tax required of an
importer to sell his goods while held in bulk as
imported was a tax only upon his occupation.
But the court observed that this was only
changing the form without varying the sub-
stance of the tax, adding that "it is treating a
prohibition which is general as if it were con
fined to a particular mode of doing the forbid
den thing. All must perceive that a tax on the
sale of an article imported only for sale is a tax
on the article itself."

Looking now at the tax in this case upon the plaintiff in error, we are unable to perceive that it falls within the doctrines of any of the cases cited, to which we fully assent, not doubting their correctness in any particular. It is not a tax in terms upon the capital stock of the Company, nor upon any bonds of the United States composing a part of that stock. The Statute designates it a tax upon the "corporate franchise or business" of the Company, and reference is only made to its capital stock and dividends for the purpose of determining the amount of the tax to be exacted each year.

By the term "corporate franchise or busi ness," as here used, we understand is meant (not referring to corporations sole, which are not usually created for commercial business) the right or privilege given by the State to two or more persons of being a corporation, that is, of doing business in a corporate capacity, and not the privilege or franchise which, when incorporated, the company may exercise. The right or privilege to be a corporation, or to do business as such body, is one generally deemed of value to the corporators, or it would not be sought in such numbers as at present. It is a right or privilege by which several individuals may unite themselves under a common name [600] and act as a single person, with a succession of members, without dissolution or suspension of business and with a limited individual liability. The granting of such right or privilege rests entirely in the discretion of the State, and, of course, when granted, may be accompanied with such conditions as its Legislature may judge most befitting to its interests and policy. It may require, as a condition of the grant of the franchise, and also of its continued exercise, that the corporation pay a specific sum to the State each year, or month, or a specific portion of its gross receipts, or of the profits of its busi

Nor can this inhibition upon the States be evaded by any change in the mode or form of the taxation provided the same result is effected —that is, an impediment is thereby interposed to the exercise of a power of the United States. That which cannot be accomplished directly cannot be accomplished indirectly. Through all such attempts the court will look to the end sought to be reached, and if that would trench upon a power of the government, the law creating it will be set aside or its enforcement restrained. Thus in Henderson v. New York City, 92 U. S. 259, 268 [23: 543], a Statute of New York provided that the master or owner of any vessel bringing passengers from foreign ports into the Port of New York should give a bond in the sum of $300 for each passenger landed, against his becoming a pub-ness, or a sum to be ascertained in any convenlic charge for four years thereafter, or pay within twenty-four hours thereafter $150 for each passenger, and that, if neither bond was given nor payment made, a penalty of $500 for such failure would be incurred, which should be a lien upon the vessel. It was contended that the object of the requirement was not taxation but protection against pauperism, and therefore valid as within the police power. But the court said that in whatever language [599] the statute may be framed its purpose must be determined by its reasonable and natural effect, and judged by that criterion the tax was either on the owners of the vessel for the right of landing passengers or upon the passengers

ient mode which it may prescribe. The valid-
ity of the tax can in no way be dependent upon
the mode which the State may deem fit to
adopt in fixing the amount for any year which
it will exact for the franchise. No constitu-
tional objection lies in the way of a legislative
body prescribing any mode of measurement to
determine the amount it will charge for the
privileges it bestows. It may well seek in this
way to increase its revenue to the extent to
which it has been cut off by exemption of other
property from taxation. As its revenues to
meet its expenses are lessened in one direction,
it may look to any other property as sources of
revenue, which is not exempted from taxation.

[601]

[602]

Its action in this matter is not the subject of
judicial inquiry in a federal_tribunal. As
was said in Delaware Railroad Tax Case, 85 U.
8. 18 Wall. 206, 231 [21: 888, 896]: "The State
may impose taxes upon the corporation as an
entity existing under its laws, as well as upon
the capital stock of the corporation or its sepa-
rate corporate property. And the manner in
which its value shall be assessed and the rate
of taxation, however arbitrary or capricious,
are mere matters of legislative discretion. It
is not for us to suggest in any case that a more
equitable mode of assessment or rate of taxa-
tion might be adopted than the one prescribed
by the Legislature of the State; our only con-
cern is with the validity of the tax; all else lies
beyond the domain of our jurisdiction." It is
true, as said by this court in California v. Pa-
cific R. Co., 127 U. S. 41 [32:157], that the tax-
ation of a corporate franchise has no limitation
but the discretion of the taxing power, and its
value is not measured like that of property,
but may be fixed at any sum that the Legisla-
ture may choose; it may be arbitrarily laid,
without any valuation put upon the franchise.
If any hardship or oppression is created by the
amount exacted, the remedy must be sought by
appeal to the Legislature of the State; it can-
not be furnished by the federal tribunals.

was unimportant in what manner the property
of the corporation was invested. And the
court added: "It is true that where a state
tax is laid upon the property of an individual
or corporation, so much of their property as is
invested in United States bonds is to be treated,
for the purposes of assessment, as if it did not
exist. But this rule can have no application to
an, assessment upon a franchise, where a refer-
ence to the property is made only to ascertain
the value of the thing assessed.' And again:
"It must be regarded as a sound doctrine that
the State, in granting a franchise to a corpora-
tion, may limit the powers to be exercised un-
der it and annex conditions to its enjoyment,
and make it contribute to the revenues of the
State. If the grantee accepts the boon it must
bear the burden."

This doctrine of the taxability of the fran-
chises of a corporation without reference to the
character of the property in which its capital
stock or its deposits are invested is sustained by
the judgments in Society for Savings v. Coite
and Provident Institution v. Massachusetts,
which were before this court at the December
Term, 1867. 73 U. S. 6 Wall. 594,611 [18:897,
907]. In the first of these cases it appeared that a
law of Connecticut of 1863 provided that savings
banks in that State should make an annual re-
The tax in the present case would not be af- turn to the controller of public accounts "of
fected if the nature of the property in which the total amounts of all deposits in them, re-
the whole capital stock is invested were changed spectively, on the first day of July in each suc
and put into real property or bonds of New cessive year," and should pay to the treasurer
York, or of other States. From the very nat- of the State a sum equal to three fourths of one
ure of the tax, being laid upon a franchise per cent on the total amount of deposits in such
given by the State, and revocable at pleasure, banks on those days, and that the tax should
it cannot be affected in any way by the charac-be in lieu of all other taxes upon the banks or
ter of the property in which its capital stock is
invested. The power of the State over the
corporate franchise, and the conditions upon
which it shall be exercised, is as ample and
plenary in the one case as in the other.

In some States the franchise and privileges of a corporation are declared to be personal property. Such was the case in New York with reference to the privileges and franchises of savings banks. They were so declared by a law passed in 1866, and made liable to taxation to an amount not exceeding the gross sum of the surplus earned and in the possession of the banks. The law was sustained by the Court of Appeals of the State in Monroe Sav. Bank v. Rochester, 37 N. Y. 365, 367, although the bank had a portion of its property invested in United States bonds. In its opinion the court observed that in declaring the privileges and franchises of a bank to be personal property the Legislature adopted no novel principle of taxation; that the powers and privileges which constitute the franchises of a corporation were in a just sense property, quite distinct and separate from the property which, by the use of such franchises, the corporation might acquire; that they might be subjected to taxation if the Legislature saw fit so to enact; that such taxation being within the power of the Legislature it might prescribe a rule or test of their value; that all franchises were not of equal value, their value depending, in some instances, upon the nature of the business authorized, and the extent to which permission was given to multiply capital for its prosecution; and that the tax being upon the franchises and privileges, it

their deposits. On the 1st day of July, 163,
the Society for Savings, one of the banks, had
invested over $500,000 of its deposits in securi-
ties of the United States, which were declared by
Congress to be exempted from taxation by state
authority, whether held by individuals, corpo-
rations or associations. (12 Stat. 346.) Upon
the amount of its deposits thus invested, the
society refused to pay the sum equal to the
prescribed percentage. In a suit brought by
the treasurer of the State to recover the tax, the
payment of which was thus refused, the Su-
preme Court of Connecticut held that the tax
was not on property but on the corporation as
such. The case being brought here, the judg-
ment was affirmed, this court holding that the
tax was on the franchise of the corporation and
not upon its property, and the fact that a part
of the deposits was invested in securities of the
United States did not exempt the society from
the tax. Said the court: " Nothing can be
more certain in legal decision than that the
privileges and franchises of a private corpora-
tion, and all trades and avocations by which
the citizens acquire a livelihood, may be taxed
by a State for the support of the state govern-
ment. Authority to that effect resides in the
State independent of the federal government,
and is wholly unaffected by the fact that the
corporation or individual has or has not made
investment in federal securities."

It was contended in that case that the depos
its in the bank were subjected to taxation from
the fact that the extent of the tax was deter-
mined by their amount. But the court said:
"Reference is evidently made to the total

[603]

[604]

amount of deposits on the day named, not as the subject matter for assessment, but as the basis for computing the tax required to be paid by the corporation defendants. They enjoy important privileges, and it is just that they should contribute to the public burdens. The views of the defendants are, that the sums required to be paid to the treasury of the State is a tax on the assets of the institution, but there is not a word in the provision which gives any satisfactory support to that proposition. Different modes of taxation are adopted in different States, and even in the same State at different periods of their history. Fixed sums are in some instances required to be annually paid into the treasury of the State, and in others a prescribed percentage is levied on the stock, assets or property owned or held by the corporation, while in others the sum required to be paid is left indefinite, to be ascertained in some mode by the amount of business which the corporation shall transact within a defined period. Experience shows that the latter mode is better calculated to effect justice among the corporations required to contribute to the public burdens than any other which has been devised, as its tendency is to graduate the required contribution to the value of the privileges granted and to the extent of their exercise. Existence of the power is beyond doubt, and it rests in the discretion of the Legislature whether they will levy a fixed sum, or if not, to determine in what manner the amount shall be ascertained." p. 608 [903].

In the second case mentioned, Provident In stitution v. Massachusetts, it appeared that the Statute of Massachusetts, passed in 1862, levy ing taxes on certain insurance companies and depositors in savings banks, provided that every institution for savings incorporated under its laws should pay to the Commonwealth a tax of one half of one per cent per annum on the amount of its deposits, to be assessed one half of said annual tax on the average amount of its deposits for the six months preceding the 1st day of May, and the other half on the average amount of its deposits for the six months preceding the 1st day of November. The Provident Institution for Savings in that State was authorized to invest its deposits in securities of the United States. Its average amount of deposits for the six months preced ing the 1st day of May, 1865, was over eight millions, of which over one million was invested in such securities. It paid all the taxes demanded except on the portion which was thus invested. Upon that it declined to pay the tax. In a suit brought by the Commonwealth to recover the same, the Supreme Judicial Court of the State held that the tax was one on the franchise of the company and not on property, and therefore gave judgment for the Commonwealth. The case being brought here, the judgment was affirmed. In deciding the case, this court said, referring to a section of the Statute under which the tax was levied: "Deposits, as the word is employed in that section, are the sums received by the institution from depositors, without regard to the nature of the funds. They are not capital stock in any sense, nor are they even investments, as the word is there used, which simply means the sums received wholly irrespective of the disposition

made of the same, or their market value." And speaking of the difference existing between taxes upon franchises and taxes upon [605] property it said: "Franchise taxes are levied directly by an Act of the Legislature; and the corporations are required to pay the amount into the state treasury. They differ from property taxes as levied for state and municipal purpose in the basis prescribed for computing the amount, in the manner of assessment and in the mode of collection;" and again, "Comparative valuation in assessing property taxes is the basis of computation in ascertaining the amount to be contributed by an individual, but the amount of a franchise tax depends upon the business transacted by the corporation and the extent to which they have exercised the privileges granted in their charter." pp. 631, 632 [913].

The court also referred to a decision made by the Supreme Court of the State to the effect that the assessment imposed was to be regarded as an excise or duty on the privilege or franchise of the corporation, not as a tax on the moneys in its hands belonging to the deposi tors. It was the corporation, it said, that was to make the payment, and if it failed to do so it was liable not only to an action for the amount of the tax, but might also be enjoined from the future exercise of its franchise until all taxes should be fully paid. Com. v. Peo ple's F. C. Sav. Bank, 5 Allen, 431.

And the court held that the valuation of the property had nothing to do with determining the amount of the tax, but that the amount depended on the average amount of deposits for the six months preceding the respective days named, and that there was no necessary rela tion between the average amount of the de posits and the amount of property owned by the institution, and not being a property tax it was to be considered as a franchise tax laid upon the corporation for the privileges co erred by its charter, which by all the au thorities it was competent for the State to tax irrespective of what disposition the institution had made of its funds, or in what manner they had been invested.

In Hamilton Mfg. Co. v. Massachusetts, 73 U. S. 6 Wall, 632 [18: 904], a Statute of Massachusetts which required corporations having a capital stock divided into shares, to pay a tax of a certain percentage upon the excess of [606] the market value of such stock over the value of its real estate and machinery, was sustained as a statute imposing a franchise tax, notwithstanding a portion of the property which went to make the excess of the market value consisted of securities of the United States, this court, however, placing its decision upon the fact that under the provisions of the State Constitution and the practice under it the tax had been so considered by the highest tribunal of the State. This decision goes much further than is necessary to sustain the judgment of the Court of Appeals of New York in the present case.

In this case we hold, as well upon general principles as upon the authority of the first two cases cited from 6 Wallace, that the tax for which the suit is brought is not a tax on the capital stock or property of the Company, but upon its corporate franchise, and is not

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