Page:Harvard Law Review Volume 32.djvu/693

657 INDIRECT ENCROACHMENT ON FEDERAL AUTHORITY 657 The Stone Tracy case sustained the federal corporation tax of 1909 and sanctioned the inclusion of income from municipal bonds and other securities not directly taxable by the federal government. The distinction between the subject and the measure of the tax was the magician's wand used to wave away crucial difficulties and avoid analysis of pertinent issues. Referring to Galveston, H. b" S. A. R. Co. V. Texas ^^ and Western Union Telegraph Co. v. Kansas ^ Mr. Justice Day declared authoritatively: "There is nothing in these cases contrary, as we shall have occasion to see, to the former rulings of this court which hold that where a tax is lawfully imposed upon the exercise of privileges within the taxing power of the State or Nation, the measure of such tax may be the in- come from the property of the corporation, although a part of such income is derived from property in itself non-taxable. The distinction lies between the attempt to tax the property as such and to measure a legitimate tax upon the privileges involved in the use of such property." ^ Whether this distinction survived the Western Union case in sound logic we need not pause to inquire. It is enough for our present purpose that it survived that case in the mind of the Supreme Court. It is still available as an ever-present help in time of logi- cal trouble. It is quite as applicable to a state tax on the privi- lege of its citizens to be domiciled within the jurisdiction as to a federal tax on doing business in corporate form. If it seems wise to measure a personal income tax by all income, from whatever V. Farmers' Loan 6* Trust Co., 157 U. S. 429, 581; s. c. 158 U. S. 601, and Brushaber V. Union Pacific Railroad, 240 U. S. i, 16, 17, upon the nature of the tax here in question under the Constitution of the United States, no binding decision appears to us to require that this tax be declared invalid. There is nothing inconsistent with the conclusion here reached in Walker v. Treasurer 6* Receiver General, 221 Mass. 600. " The income tax is measured by reference to the riches of the person taxed actually made available to him for valuable use during a given period. It establishes a basis of taxation directly proportioned to ability to bear the burden. It is founded upon the protection afforded to the recipient of the income by the government of the Commonwealth of his residence in his person, in his right to receive the income, and in his enjoyment of the income when in his possession. That government provides for him all the advantages of living in safety and in freedom and of being protected by law. It gives security to life, liberty, and the other privileges of dwelling in a civilized community. It exacts in return a contribution to the support of that govern- ment measured by and based upon the income, in the fruition of which it defends him from unjust interference" (Ibid. 512-13). 82 210 U. S. 217, 28 Sup. Ct. Rep. 638 (1908), 32 Harv. L. Rev. 385/. '" 2i6 U. S. I, 30 Sup. Ct. Rep. 190 (1910), 31 Harv. L. Rev. 584/. " 220 U. S. 107, 163-64, 31 Sup. Ct. Rep. 342 (1911).