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The provisions of this statute are very similar to the one now upon our statute books taxing railroad companies upon their gross receipts. The case was very hotly contested by the State and the Merchants' Dispatch Transportation Company, a New York corporation. After we law had been upheld as valid by the Supreme Court of this State, the Supreme Court of the United States declared it invalid in the case of
Fargo, President, etc. vs. Stevens, Auditor General, 121 U. S. R. 230.
And in order that you may understand fully the position of the court, I quote at length from the decision of the court as follows, at page 157:
"The subject of the attempts by the State to impose burdens upon what has come to be known as interstate commerce or traffic, and what is called in the Constitution of the United States, “commerce among the states,' by statutes which endeavor to regulate the exercise of that commerce, as to the mode by which it shall be conducted, or by the imposition of taxes upon the articles of commerce, or upon the transportation of those articles, has been very much agitated of late years. It has received the attentive consideration of this court in many cases, and especially within the last five years, and has occupied congress for a time quite as long. The recent act approved February 4, 1887, entitled 'An act to regulate commerce,' passed after many years of effort in that body, is evidence that congress has at least undertaken a duty imposed upon it by the Constitution of the United States in the declaration that it shall have power to 'regulate commerce with foreign nations, and among the several states, and with the Indian tribes.' Congress has freely exercised this power, so far as relates to commerce with foreign nations and with the Indian tribes, but in regard to commerce among the several states it has, until this act, refrained from the passage of any very important regulations upon this subject except perhaps the stat utes regulating steamboats and their operation upon the navigable waters of the country."
"With reference to the utterance of this court, until within a very short time past, as to what constitutes commerce among the several states, and als as to what enactments by the state legislatures are in violation of the Constitutional provision on that subject, it may be admitted that the court las not always employed the same language and that all the judges of the court, who have written opinions for it, may not have meant precisely the same thing. Still we think the more recent opinions of the court have pretty clearly established the principles upon that subject which can be readily applied to most cases requiring the construction of a constitutional provision, and that these recent decisions leave no room to doubt that the statute of Michigan, as interpreted by its Supreme Court in the present case, is forbidden as a regulation of commerce among the states, the power to make which is withheld from the State."
In addition to holding that the Michigan statute which attempted to levy a tax upon the gross receipts of railroads for the carriage of freight or passengers into, out of or through the State, is a tax upon commerce among the states and therefore void, the court in the case cited held,--that while a state may tax the money actually within the state, after it has passed from the stage of compensation for carrying persons or property, as it may tax other property within its lumits, a tax upon receipts for this class of carriage specifically, is a tax upon the commerce out of which it arises, and if that be interstate commerce it is void under the statute. And the court further held that states cannot be permitted under the guise of tax upon business transacted within their borders to impose a burden upon commerce among the states, when the business so taxed is itself interstate commerce.
In the case of the State freight tax decision in the 15th of Wallace, page 232, the Supreme Court decided that the statute of the state of Pennsylvania, which imposed on all railroad corporations doing business within that state a specific tax on each two thousand pounds of freight carried, graduated according to the articles transported, was invalid. The court said upon the same subject;
"It is not at all material that the tax levied is upon all freight as well as that which is wholly internal, as that embarked in interstate trade. The state may tax its internal commerce; but if an act to tax interstate or foreign commerce is unconstitutional, it is not cured by including in its provisions subjects within the domain of the state. Nor is a rule prescribed for the carriage of goods through, out of or into the state, in the least a regulation of transportation, because the same rule may be applied to carriage which is wholly internal. If the state chooses to exact conditions for allowing the passage or carriage of persons or freight through, out of or into another state, the nature of the exaction is not changed by adding to it similar conditions for allowing transportation wholly within the state."
The law as laid down in these decisions has become so well established that in a recent case decided in the Supreme Court of Dakota, being the Northern Pacific Railway Company vs. Raymond, Treasurer, the attorney general of that state, upon the 'hearing of that branch of the case relating to a tax upon the gross receipts of a company, arising from interstate business, admitted the invalidity of the Dakota law, and the court thereupon held that the Dakota statute, which provides for the levy and collection of a percentage of the gross earnings of railroad companies, in lieu of other taxes, is unconstitutional and invalid in so far as it imposes a tax upon the transportation of freight or passengers to and from points outside of the state, such traffic being interstate commerce subject only to the regulations of congress. The court says further that the act passed by the legislature of that state is an intermeddling with, and an effort to tax the earnings or proceeds arising from interstate commerce, is an attempt of usurpation of a power which under the Constitution is to be solely and exclusively exercised by congress, citing Fargo vs. Michigan;
Philadelphia S. S. Co. vs. Pa., 126 L. S. R., 326-347, and the cases therein cited;
Indiana vs. Pullman Palace Car Co., 11 Biss., U. S. R., 561;
Delaware and H. Canal Co. vs. Commonwealth, 37 American and English R. R. Cases, 359.
In the case of the Commonwealth vs. Lehigh Railway Company, 12 Atlantic Reporter, 179, the court held that where both or one of the terminal points of a railroad company is beyond the state, a tax laid on the gross receipts received from the transportation of freight or passengers within those points, is void, being a tax upon interstate commerce. This last decision will apply to railroad companies organized under the laws of this State, but having a corporate existence also in other states and in Canada. And in support of this general proposition, I also cite.
Philadelphia S. S. Co. vs. Pa., 126 U. S. 326; cited in 138 New York at page 1.
And again in the case of the People ex rel. vs. Wemple, 131 N. Y., 64, affirming 61 Hun, 83, the court said:
"It seems the property of a foreign corporation, engaged in the business of state and interstate transportation in this state, is subject to taxation here in common with domestic corporations engaged in the same business, but a tax or other burden imposed upon the property of either corporation upon its business carried on in this state, when it is exclusively the business of interstate commerce, is a regulation of commerce between the states, which is vested exclusively in congress."
It might be maintained that because the Michigan statute provides that the computation of tax of the gross earnings "shall be made upon the business actually done within this State, and computed by adding to the income derived from the business transacted by said company entirely within this state, such proportion of the income of said company arising from interstate business as the length of the road over which said interstate business is carried in this State bears to the entire length of the road over which said interstate business is carried," that therefore the tax was upon State commerce, and not upon interstate commerce. But this is not tenable and would be a mere evasion and an attempt by a division of interstate traffic into parcels, to maintain that neither the traffic outside of the State, coming into the State, or that going out of the State, constituted any portion of interstate traffic. In other words, it would be an attempt to maintain that the two parts do not constitute the whole.
And so in the case of the State ex rel. Car vs. Woodrull Sleeping and Parlor Car Company, 33 American and English R. R. Cases, 476, the court says:
"The attorney general ably and ingeniously argues that the statute is valid because it is competent for the state to tax the local occupation of appellant by the measures of its gross receipts for the proportionate amount of travel in the state. But this argument, while not without plausibility, is radically unsound under the laws authoritatively declared by the court of last resort that no tax in any form, or for any purpose, can be laid upon interstate commerce.”
And again on page 480, the court says in that case, the theory of the pleading is
“That the state may levy a tas upon the gross earnings of the corporation in the proportion that the distance traveled through this state bears to the entire distance for which fares were received. That theory is unsound, and the complaint bad.
A man on his way to the sea. board, who travels through Indiana, is carried in the course of the interstate commerce and not in the course of domestic commerce, and a fare received from him is received in the matter of interstate commerce. A fare thus received no state can tax.”
I need only to add a further illustration to that offered by the Supreme Court of Indiana, by saying that a carload of coal shipped from Ohio into Michigan, and a carload of grain from Minnesota into Michigan, and vice versa, are transactions of interstate commerce, and not domestic commerce.
After presenting the above line of argument, and the leading case bearing upon the question, permit me to call your attention to certain cases which without a proper analysis might appear to authorize a tax upon the gross earnings of corporations engaged in interstate commerce, by saying that in none of the cases herinafter referred to are gross earnings taxed, although in the process of taxing the corporatoins, parties to the suits, the earnings have been used as a basis upon which to determine either the value of the property or the value of the franchises exercised within the particular tax jurisdiction in which the tax was spread.
In the case of Maine vs. Grand Trunk Railway Company, reported in 142 U. S. R. at page 217, the suit was brought for the collection of an excise tax upon the defendant corporation for the privilege of exercising its franchises within the state of Maine; the tax to be determined by the amount of its gross earnings, and not to be levied upon the gross earnings themselves.
Mr. Justice Field in delivering the opinion of the court bears out this view at page 229 of the opinion in the following language:
“There is no levy by the statute on the receipts themselves, either in form or fact; they constitute, as said above, simply the means of ascertaining the value of the privilege conferred."
So in the case of the Western Union Telegraph Company vs. Massachusetts decided in 125 U. S. R., at page 530. The question arises under the law of Massachusetts, imposing a tax upon the Western Union Telegrauh Company on account of the property owned and used by it within that state, the value of which was ascertained by comparing the length of its lines in that state with the length of its entire lines.
Mr. Justice Miller in delivering the opinion of the court says:
“The tax in the present case, though nominally upon the shares of the capital stock of the company, is in effect a tax upon that organization on account of property owned and used by it in the state of Massachusetts, and the proportion of the length of its lines in that state to their entire length thoughout the whole country is made the basis for ascertaining the value of that property."
The same view was expressed by Mr. Justice Gray in the case of Massachusetts vs. Western Union Telegraph Company, reported in 141 U. S. R., at page 40. And the same view was held in the case of Pullman's Palace Car Company vs. Pennsylvania, reported on page 18.
In the case of People ex rel. P. R. R. Co. vs. Wemple, reported in 138 New York, at page 15, the court affirmed many of the cases which I have quoted above, in its opinion, and distinguishes them from the cases last above cited, and says:
“The case of Maine vs. Grand Trunk Railway Company was decided on the ground that the tax imposed under the statute of Maine in that case was a franchise tax upon corporate privileges conferred by the legislature of the state on the defendant corporation, and that it did not invalidate the tax because the amount was apportioned with reference to the gross receipts for transportation over its whole line, which extended beyond the state. The dissent in that case proceeded upon a different view taken by the minority of the court as to the character of the tax, their opinion being in substance that it was a tax on the business of interstate commerce. These cases do not disturb the general principle of the other cases.”
In conclusion it can be said that the case of Fargo vs. Michigan, the leading case, held invalid statutes similar to the one under which this State taxes railway properties, and it has never been overruled or modi. fied, but has been affirmed many times since. And not only the weight of authority, but all authority of the courts of last resort are against the validity of the Michigan statute taxing railway corporations upon their gross receipts, and as well the amendment known as the "Merriman Bill," recently passed by the legislature; and so far as it attempts to tax the gross earnings of corporations not organized under the laws of this State but doing business therein, is a usurpation of the power of congress which has exclusive right to regulate commerce among the states.
Commissioner of Railroads. The message was ordered spread on the Journal.
Mr. Lusk moved that the consideration of the message be made the special order for 10:30 o'clock this evening,
Which motion prevailed, two-thirds of the members present voting therefor.
MESSAGES FROM THE SENATE.
The Speaker announced the following:
Lansing, May 28, 1897. "To the Speaker of the House of Representatives:
Sir-I am instructed by the Senate to return to the House the follow. ing bill:
House bill No. 339 (file No. 476), entitled
A bill to limit the liability of sureties on bonds given on appeal from justice courts;
In the passage of which the Senate has concurred by a majority vote of all the Senators elect, and by a vote of two-thirds of all the Senators elect has ordered the same to take immediate effect.
Secretary of the Senate.
Lansing, May 28, 1897. To the Speaker of the House of Representatives:
Sir-1 am instructed by the Senate to return to the House the follow. ing bill: