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 The Federal Corporatlon Tax Constitutlonal? business which is subject to a federal excise, the income may be used as a

basis for computing the amount of the excise. This distinction is logical and sound. The principle on which is rests has been repeatedly aﬂirmed by the Supreme Court. It leaves the doctrine of the Income Tax cases unimpaired.

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case of McColloch v. Maryland,“ in 1819. The state of Maryland had levied a tax upon the issue of notes by the Bal timore branch of the bank of the United States.

The federal government had

incorporated the bank of the United States, not in pursuance of any asserted

authority to create corporations, but

Of course, the income must constitute a fair and reasonable measure of the value of the subject-matter, for if it

because Congress deemed it an appro priate means of exercising certain gov

cannot serve as the measure of the tax,

by the federal Constitution. Among them

the only possible function left for it to fulﬁll is that of the subject-matter itself.

taxes, of borrowing money, and of regu

ernmental functions imposed upon it were the right and duty of collecting

This qualiﬁcation would render it im

lating commerce.

possible to select arbitrarily a certain portion of its income as measuring the taxable value of a right or privilege

bank it created an agent for the purpose

productive of income from several other sources as well. Rather than accuse Congress of evad ing the limitations of the Constitution,

tax upon the operations of the bank,

let those who shut their eyes to a real

ment. Accordingly the court held the tax unconstitutional.

distinction,

founded

on

reason

and

authority, suggest a more equitable mode

By incorporating the

of expediting the discharge of the powers of government, and hence, in levying a

the state of Maryland was doing nothing more nor less than taxing the operation of a function of the national govern

In subsequent decisions,15 the taxing

of taxing a corporate franchise or busi

power of the federal government has,

ness than that adopted in the Act of 1909.

in the interest of the states, been subjected to the same lcind of restraint, so

If we are satisfied, then, that the law contemplates not a tax upon the cor

that there is now no principle more

porate income but an excise upon the

upon an implied restraint on the taxing

tional law than that neither the nation nor the states may impede the exercise of the proper functions of either, by the exercise of the power of taxation. Did Congress, in enacting the federal cor poration tax, contravene this well founded principle? That taxation by a state of the fran chise of a corporation created by the

power of both the nation and the states, incident to the distribution of the powers

federal government, excepting those cor porations chartered for general purposes

of government among them. The prin

in the territories and District of Colum bia, is invalid is more than probable.

corporate franchise or business, we are confronted with a further ground of attack, based, not on the omission to

assess the tax in accordance with the modes stipulated in the Constitution, but upon a complete absence of taxable

jurisdiction. This want of authority rests

ciple underlying this restraint is almost as old as the Constitution itself. It was enunciated contemporaneously with that of implied powers when the court, pre sided over by John Marshall, decided the

securely established in our constitu

But because the restraint itself is recip

rocal, that is to say, because it controls 1‘ 4 Wheat. 316. 1‘ Notably, Collector v. Day, 11 Wall. 113.