Snyder v. Bettman/Opinion of the Court

This case involves the single question whether it is within the power of the Federal government, and within the spirit of the act of Congress of June 13, 1898 (30 Stat. at L. 448, chap. 448 U.S.C.omp. Stat. 1901, p. 2286), to impose a succession tax upon a bequest to a municipal corporation of a state for a corporate and public purpose.

The case is, to a certain extent, the converse of those of the United States v. Perkins, 163 U.S. 625, 41 L. ed. 287, 16 Sup. Ct. Rep. 1073, and Plummer v. Coler, 178 U.S. 115, 44 L. ed. 998, 20 Sup. Ct. Rep. 774. In the first of these we held it to be within the competency of the state of New York to impose a similar tax upon a bequest to the Federal government, incidentally deciding that the inheritance tax of the state was 'in reality a limitation upon the power of a testator to bequeath his property to whom he pleases, a declaration that, in the exercise of that power, he shall contribute a certain percentage to the public use;' and (2) that the tax was not a tax upon the property itself, but upon its transmission by will or descent. In Plummer v. Coler we held the incidental fact that the property bequeathed is composed in whole or in part of Federal securities did not invalidate the state tax or the law under which it was imposed, although it was accepted as undeniable that the state could not, in the exercise of the power of taxation, tax obligations of the United States, and, correlatively, that bonds issued by a state, or under its authority by its municipal bodies, were not taxable by the United States.

It is insisted, however, that the case under consideration is distinguished from those above cited, in the fact that the inheritance tax of New York was but a condition annexed to the power of a testator to dispose of his property by will, and that such power, being purely statutory, the state has the right to annex such conditions to it as it pleases. The case, then, really resolves itself into the question whether the authority to lay a succession tax arises solely from the power to regulate the descent of property, or, as well from the independent general power to tax, or, as expressed in the Constitution, art. I, § 8, 'to lay and collect taxes, duties, imposts, and excises.' The difficulty with this proposition of the plaintiff is that it proves too much. If it be true that the right to impose such taxes arises solely from the right to regulate successions, then a denial of such right goes to the whole power of the government to impose a succession tax, irrespective of the question whether the legacy is made to a private individual or to an agent of the state, and the cases in this court upholding the power of the Federal government to lay such tax were wrongly decided.

That question was exhaustively considered by this court in Knowlton v. Moore, 178 U.S. 41, 44 L. ed. 969, 20 Sup. Ct. Rep. 747, in which the constitutionality of this law was attacked upon four grounds: (1) That the taxes imposed were direct taxes, and not apportioned according to the population; (2) if not direct, they were levied on rights created solely by a state law, depending for their continued existence on the consent of the several states; (3) because they were not uniform throughout the United States; (4) that the rate of tax was determined by the aggregate amount of the personal estate of the deceased, and not by the sum of the legacies or distributive shares. It was held, following the cases of United States v. Perkins, 163 U.S. 625, 41 L. ed. 287, 16 Sup. Ct. Rep. 1073, and Magoun v. ''Illinois Trust & Sav. Bank'', 170 U.S. 283, 42 L. ed. 1037, 18 Sup. Ct. Rep. 594, that an inheritance tax was not one upon property, but upon the succession. The question involved here, as to the power of Congress to levy a succession tax, was considered, and it was said by Mr. Justice White (p. 56, L. ed. p. 975, Sup. Ct. Rep. p. 753): 'The proposition that it cannot rests upon the assumption that, since the transmission of property by death is exclusively subject to the regulating authority of the several states, therefore the levy by Congress of a tax on inheritances or legacies in any form is beyond the power of Congress, and is an interference by the national * government with a matter which falls alone within the reach of state legislation.' This proposition was pronounced a fallacy (p. 59, L. ed. p. 977, Sup. Ct. Rep. p. 755): 'In legal effect, then, the proposition upon which the argument rests is that wherever a right is subject to exclusive regulation, by either the government of the United States on the one hand or the several states on the other, the exercise of such rights as regulated can alone be taxed by the government having the mission to regulate.' In this connection was cited the power of the states to tax imported goods after they had been commingled with the general property of the state, as well as vehicles engaged in interstate commerce.

Continuing, it was further said (page 60, L. ed. p. 977, Sup. Ct. Rep. p. 755): 'It cannot be doubted that the argument, when reduced to its essence, demonstrates its own unsoundness, since it leads to the necessary conclusion that both the national and state governments are devested of those powers of taxation which, from the foundation of the government, admittedly have belonged to them. . . . Under our constitutional system, both the national and the state governments, moving in their respective orbits, have a common authority to tax many and diverse objects, but this does not cause the exercise of its lawful attributes by one to be a curtailment of the powers of government of the other, for if it did there would practically be an end of the dual system of government which the Constitution established.'

This case must be regarded as definitely establishing the doctrine that the power to tax inheritances does not arise solely from the power to regulate the descent of property, but from the general authority to impose taxes upon all property within the jurisdiction of the taxing power. It has usually happened that the power has been exercised by the same government which regulates the succession to the property taxed; but this power is not destroyed by the dual character of our government, or by the fact that, under our Constitution, the devolution of property is determined by the laws of the several states.

The principles laid down in Knowlton v. Moore were reiterated in Murdock v. Ward, 178 U.S. 139, 44 L. ed. 1009, 20 Sup. Ct. Rep. 775, although the case was decided upon on the authority of Plummer v. Coler.

If it be true that it is beyond the power of Congress to impose an inheritance tax because the descent of property is regulated by state statutes, it would be difficult to support its power to impose stamp taxes upon commercial and legal instruments, since the conveyance, regulation, and transmission of all property is governed by the laws of the several states. Particularly would this be so with reference to stamp duties imposed upon documents connected with the devolution of the property of a deceased person. And yet, as stated in Knowlton v. Moore (page 50, L. ed. p. 973, Sup. Ct. Rep. p. 751) Congress, as early as 1797, imposed a stamp duty [1 Stat. at L. 527, chap. 11], not only upon receipts or other discharges for or on account of any legacy, or for a share of personal estate divided under the statute of distributions, proportioned to the amount of the legacy or such distributive share, but, in the internal revenue act of 1862 (12 Stat. at L. 432, 483, chap. 119, U.S.C.omp. Stat. 1901, p. 186), a tax was imposed upon the probate of wills and letters of administration, proportioned to the value of the estate. Not only this, but the same statute imposed a tax upon writs, or other original process, by which suits are commenced in any court of record, exempting only processes issued by justices of the peace, or in suits begun by the United States or any state. This act was treated as applicable to the state courts, although its constitutionality may well be doubted.

Referable to the same principle is the power of Congress to tax occupations which can only be carried on by permission of the state authorities and under conditions prescribed by its laws, such, for instance, as the profession of a lawyer or physician, or the business of dealing in spirituous liquors, for which licenses are required under the laws of nearly all the states. While the power of Congress to impose such taxes may never have been expressly affirmed by this court, it does not seem to have been seriously questioned, and is a legitimate inference from McGuire v. Massachusetts, 3 Wall. 387, 18 L. ed. 226; License Tax Cases, 5 Wall. 462, 18 L. ed. 497; Pervear v. Massachusetts, 5 Wall. 475, 18 L. ed. 608; and Royall v. Virginia, 116 U.S. 572, 580, 29 L. ed. 735, 737, 6 Sup. Ct. Rep. 510. See also Ould v. Richmond, 23 Gratt. 464, 14 Am. Rep. 139; Humphreys v. Norfolk, 25 Gratt. 97.

Conceding full that Congress has no power to impose a burden upon a state or its municipal corporations, the question in each case is whether the tax is direct or incidental; since we have had frequent occasion to hold that the imposition of a tax may indirectly affect the value of property to the amount of the tax without being legally objectionable as a direct burden upon such property. Thus in Van Allen v. The Assessors, 3 Wall. 573, ''sub nom. Churchill v. Utica'', 18 L. ed. 229, we held it to be within the power of the states to tax the shares of national banks, though a part or the whole of the capital of such bank were invested in national securities exempt from taxation, upon the ground that the taxation of the shares was not a taxation of the capital. So a tax upon deposits was upheld, though such deposits were invested in United States securities. Society for Savings v. Coite, 6 Wall. 594, 18 L. ed. 897; ''Provident Inst. for Savings v. Massachusetts'', 6 Wall. 611, 18 L. ed. 907;''Hamilton Mfg. co. v. Massachusetts'', 6 Wall. 632, 18 L. ed. 904. The same principle was extended to a statute of New York, imposing a tax upon corporations measured by its dividends, though such dividends were derived from interest upon government bonds. ''Home Ins. Co. v. New York'', 134 U.S. 594, 33 L. ed. 1025, 10 Sup. Ct. Rep. 593. As the tax in the case under consideration is collected from the property while in the hands of the executor (§ 30), who is required to liquidate it 'before payment and distribution to the legatees,' we do not regard it as a tax upon the municipality, though it may operate incidentally to reduce the bequest by the amount of the tax. Such incidental effects are common to many, if not all, forms of taxation,-indeed, it may be said generally that few taxes are wholly paid by the person upon whom they are directly and primarily imposed.

Having determined, then, that Congress has the power to tax successions; that the states have the same power, and that such power extends to bequests to the United States, it would seem to follow logically that Congress has the same power to tax the transmission of property by legacy to states or their municipalities, and that the exercise of that power in neither case conflicts with the proposition that neither the Federal nor the state government can tax the property or agencies of the other, since, as repeatedly held, the taxes imposed are not upon property, but upon the right to succeed to property.

If the position of the plaintiff be sound, it will come to pass that, with the same power to tax the subject-matter, i. e., the transmission of the property, the states are competent to limit the amount of bequests to the Federal government by requiring the prepayment of a succession tax as a condition precedent to the transmission of the property, while Congress is impotent to accomplish complish the same result with respect to legacies to states or their agents. We are reluctant to admit the inferiority of Congress in that particular.

The judgment of the Circuit Court is therefore affirmed.

Mr. Justice White, with whom concur Mr. Chief Justice Fuller, and Mr. Justice Peckham, dissenting: