CHAPTER XXV.

THE GENERAL POWERS OF CONGRESS.

ARTICLE I.

The preceding sections constitute the two Houses of Congress and define some of their separate powers. We come now to a particular enumeration of what are called the general powers of Congress. Section 8 of Article I. is second in importance to no other section of the Constitution; its eighteen clauses are the engine that drives the whole machinery of the Government, and without them that machinery would never have moved. Professor Johnson has well said: "The most solid and excellent work done by the Convention was its statement of the powers of Congress (in section 8 of Article I.), and its definition of the sphere of the Federal judiciary (in Article III)." The several clauses of the section all depend upon the declaration, "The Congress shall have power."

I. TAXATION.

Section 2, Clause 3.-Representatives and direct taxes shall be apportioned among the several States which may be included within this union, according to their respective numbers, which shall be determined, etc.

Section 8, Clause 1.-The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States.

341. Necessity of this Power.-The National taxing power is very comprehensive, and properly stands at the head of the list of powers granted to Congress. Revenue is the life-blood of government. 'Without the possession of this power," says Justice Story, "the Consti

tution would have long since, like the Confederation, dwindled down to an empty pageant. It would have become an unreal mockery, deluding our hopes and exciting our fears. It would have flitted before us a moment, with a pale and imperfect light, and then have departed forever to the land of shadows."

342. Kinds of Taxes.-A tax is a regular pecuniary charge imposed by government upon the people for its own support. Capricious and arbitrary levies imposed by a conqueror or tyrant are not proper taxes. The Constitution makes two kinds of taxes, direct and indirect, although the second term is not used.1 The Supreme Court has decided that direct taxes are limited to poll or capitation taxes and taxes on land. All other taxes, or indirect taxes, are collectively called duties, imposts, and excises without discrimination. Direct taxes, like Representatives, are apportioned among the States according to their respective numbers of population (Article I., section 2, clause 3); indirect taxes must be uniform throughout the Union. In 1820 the Supreme Court decided that the power of Congress to levy and collect taxes is coextensive with the National territory, but that it is optional with Congress to extend the laws imposing them over the Territories and District of Columbia.3

343. Direct Taxes.-Such taxes have proved to be much less important than was anticipated in 1787. The tax-gatherer is never a welcome visitor, and least of all when he pries closely into people's private affairs. Taxes on consumption, as on imports collected at a seaport, or on liquors, tobacco, etc., collected at the place of manufacture, have proved more consonant with popular feeling than taxes paid at the citizen's own door. Consequently, Con

1 Writers on Political Economy, in distinguishing between direct and indirect taxes, do not draw the line where the Constitution draws it. As defined by them, a direct tax is one paid by the person on whom it is assessed, while an indirec tax is immediately paid by one person but ultimately paid by another.

2 Springer v. The United States, 102 U. S. 586. See paragraph 346. 3 Loughborough v. Blake, 5 Wheaton, 317.

gress has, in the main, abandoned the field of direct taxation to the States. Only five times in the history of the Government have direct taxes been levied: 1798, 1813, 1815, 1816, 1861. The several acts bearing these dates have declared the whole amount to be raised by the tax, as $2,000,000 in 1798 and $20,000,000 in 1861, and have apportioned the amounts among the States according to the constitutional rule; they have specified the property on which the tax shall be levied, and created machinery for its collection. The early acts placed the tax on slaves and lands, the last one placed it on lands alone. The tax of 1815 embraced the District of Columbia, and that of 1861 the Territories also. Some of these acts, as the last one, have offered the States the option of assuming the tax, coupled with a percentage for its collection. When this is done the State levies and collects the tax as it pleases. The States that formed the Southern Confederacy did not pay the tax of 1861 until the close of the War, and not then in full. In 1891 Congress refunded to the States, Territories, and District of Columbia what they had paid.

The two great sources of National revenue are customs and internal taxes. For the fiscal year ending June 30, 1894, the receipts from these sources respectively were $131,817,530 and $147,110,232; for the previous year the corresponding amounts were $203,355,016 and $161,027,623. The total revenue for 1894 was $372,802,498 and for 1893 it was $461,716,561.

344. Duties, Imposts, and Excises.-It is impossible to make close distinctions between these terms. The words no doubt include every form of indirect tax. Duties are customs levied on imported goods. Imposts are sometimes duties, but commonly the word is used in a broader sense, as synonymous with tax. Excises are internal taxes, as duties are external ones. The National taxes on whisky, malt liquors, and tobacco are all excises. It is said that the word excise is not found in the National laws, and in common speech internal taxes, or internal revenue, has taken its place. To distinguish between direct and

indirect taxes has given rise to much litigation, and the Supreme Court has decided that taxes on carriages,1 on the income of corporations, and on bank circulation3 are not direct taxes but excises.

2

345. Internal Revenue. -As already stated, what the Constitution calls excises are now called by the name of internal taxes or internal revenue. Such taxes did not cut a prominent figure in our fiscal history previous to the Civil War. From 1791 to 1803 some excises were imposed, and the Whisky Insurrection in Western Pennsylvania grew out of the tax then levied on whisky. In 1813 the Government again resorted to internal taxes, but abandoned them in 1817. The Civil War rendered them again necessary. In 1861 some such taxes were levied, and the next year the Internal Revenue Bureau was created. Taxes were imposed upon anything and everything that promised to yield revenue. A high foreign authority said, "No other nation would have endured a system of excise duties so searching, so effective, so troublesome." In 1866 the repeal of these taxes began, and in 1895 those on distilled and fermented liquors and tobacco are the principal ones that remain. In 1801 the income from this source was $1,048,000; in 1816, $5,124,000; in 1866, $309,226,000.*

346. Income Taxes.-To meet the needs of the Government growing out of the Civil War, Congress imposed in 1861 a tax of 3 per cent. on all incomes over $800. It was the first tax of the kind under the Constitution. The next year the tax was made 5 per cent. on incomes less than $5,000, with an exemption of $500 and house rent actually paid; 71⁄2 per cent. on incomes of $5 000 and not over $10,000, and 10 per cent. on all incomes in excess of the last named 1 Hylton v. U. S. 3 Dailas, 171.

2 Pacific Insurance Co. v. Soule, 7 Wallace, 433. See paragraph 346. 3 Veazie Bank v. Fenno, 8 Wallace, 533.

4 The In ernal Revenue taxes levied under existing laws (March, 1895,) are levied on the following commodities and persons: Distilled spirits, rectifiers of spirits, liquor dealers, manufacturers of stills and worms, stamps for distilled spirits intended for export, cigars, cigarettes, snuff, manufactured tobacco, fermented liquors, brewers, dealers in malt liquors, oleomargarine, manufacturers of ole omargarine, opium manufactured for smoking, playing cards, incomes of persons and corporations, bank circulation, banks, wine made in imitation of champaign, and rectified liquors in bottles.

sum. In 1869 a special income tax of 5 per cent. was laid on all incomes of $600. Subsequent legislation was had down to 1872, when the tax expired by limitation.

Income tax features were incorporated in the Act to reduce taxation, to provide revenue, etc., which took effect August 26, 1894, without the President's approval. The rate was made 2 per cent. on all incomes over $4,000, derived from property, salary, trade, etc., not including necessary expenses, taxes, and interest, carried on in the United States or elsewhere, and it applied to corporations, companies, and associations, as well as private individuals, but not including partnerships. By two decisions, which are popularly known as the Income Tax Cases, the Supreme Court completely nullified this legislation. It ruled in the decision rendered May 20, 1895, that taxes on the rents or income of real estate are direct taxes, equally with taxes on real estate itself; also that taxes on personal property, or on the income of personal property, are likewise direct taxes. The Court therefore held that the tax imposed on incomes by this act was unconstitutional, void, and invalid, because the act did not apportion it among the States according to their respective numbers, but rather treated incomes as excises. These conclusions are apparently at variance with previous decisions of the Court in regard to direct taxes. The Court was divided, five members voting against the law and four for it. (See paragraphs 343-344.)1

347. Question of Construction.-There is an old question concerning the interpretation of the first part of the second clause quoted above. Do the words "to pay the debts," etc., limit the words "to lay and collect taxes," or the words "shall have power?" In other words, has Congress power only to collect taxes in order to pay the debts and provide for the common defense and the general welfare, or has it power to collect taxes without reference to these objects? The one construction limits the taxing power to certain designated ends; the other imposes no limit whatever. There is little doubt that the first view is the true one. The question, perhaps, is rather more curious than practical.

II.

LOANS, COINAGE, AND CURRENCY.

Section 8, Clause 2.-To borrow money on the credit of the United States.

Section 8, Clause 5.-To coin money, regulate the value thereof, and of foreign coin.

coin money, emit

Section 10, Clause 1.-No State shall bills of credit, [or] make anything but gold and silver coin a tender in payment of debts.

1 Pollock v. Farmers' Loan and Trust Co., 157 U. S. 429; Pollock v. Farmers' Loan and Trust Company (rehearing), 158 U. S. 601.