Page:Harvard Law Review Volume 32.djvu/963

927 INDIRECT ENCROACHMENT ON FEDERAL AUTHORITY 927 missioners of Erie County, '^'^ and Collector v. Day,''^ and thus afford a convenient excuse for abandoning the decisions of earlier decades/^ Unfortunately for any such possibility, Congress insists on deny- ing to the states the power to tax income from federal securities. It thereby requires the states to lend their aid to the federal bor- rowing power. There seems, therefore, a strong poKtical argument in favor of continuing to forbid the United States to tax income from state securities. Indeed, the argument may be deemed an economic one. We may grant that the effect of exempting interest on state bonds from a general federal tax on net incomes is to confer a bounty on the state borrowing power. But this is not the whole of the story. Such bounty cannot be considered apart from the bounty which the states are required to bestow on the federal borrowiag power, to the consequent restriction of their own taxing power. The principle on which these limitations are based is that the federal system requires that neither the state nor the nation exercise their undoubted powers to the detriment of the undoubted powers of the other. No application of this principle can be con- sidered apart from the other applications. What is sauce for the goose should be sauce for the gander. It is a poor rule that does not work both ways. The states receive no more than fair economic treatment if, in return for the aid and comfort which they render the ^ Note 21, supra. ™ II Wall. (U. S.) 113 (1871). This case held that a federal income tax cannot be applied to the income of a state judicial ofl&cer. The court regarded the exemption of state salaries from a federal income tax as the necessary correlative of the exemption of federal salaries from state taxation, Mr. Justice Nelson observing: "And if the means and instnmientalities employed by that government to carry into operation the powers granted to it are, necessarily, and, for the sake of self-preservation, exempt from taxation by the States, why are not those of the States depending upon their reserved powers, for like reasons, equally exempt from Federal taxation? Their unimpaired existence in the one case is as essential as in the other. It is admitted that there is no express pro- vision in the Constitution that prohibits the general government from taxing the means and instrumentalities of the States, nor is there any prohibiting the States from taxing the means and instrumentalities of that government. In both cases the exemp- tion rests upon necessary implication, and is upheld by the great law of self-preserva- tion; as any government, whose means employed in conducting its operations, if subject to the control of another and distinct government, can exist only at the mercy of that government. Of what avail are these means if another power may tax them at discretion? (11 Wall. (tJ. S.) 113, 127.) ^^ For suggestions that the later decisions furnish the ground for overruling the earlier ones, see note on Peck & Co. v. Lowe, and the Oak Creek case, in 4 Bulletin OF THE National Tax Association, 26.