over which the United States have no authority or power of taxation. The Court were equally divided upon the questions whether the act, being so far unconstitutional, was wholly invalidated; whether as to the income from personal property as such, the act was unconstitutional as laying "direct taxes" without apportioning them among the States; and whether any part of the tax, if not considered as a "direct tax," was invalid for want of uniformity.1

A rehearing was applied for and granted before a full Court, whereupon it was further adjudged by a majority of the Court, adhering to the two points already decided, that the taxes levied without apportionment upon income derived from invested personal property were also "direct taxes," and therefore unconstitutional, and that the said sections of the act being unconstitutional in these particulars were wholly invalid.2

The grounds for the judgment of the Court are given in the two opinions delivered by the learned Chief Justice, and appear to be in brief as follows :

-

The equity of the bill is sustained because "The jurisdiction of a court equity to prevent any threatened breach of trust in the misapplication or diversion of the funds of a corporation by illegal payments out of its capital or profits has been frequently sustained." No reference is made by the Chief Justice to Rev. Sts. 3224, which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court."

4

The constitutional questions involved are approached and decided from the historical point of view. "It appears that prior to the adoption of the Constitution nearly all the States imposed a poll tax, taxes on land, on cattle of all kinds, and various kinds of personal property." The clause in the Constitution regarding direct taxes was the result of a compromise between conflicting views, "resting on the doctrine that the right of representation ought to be conceded to every community on which a tax is to be imposed, but crystallizing it in such form as to allay jealousies in respect of the future balance of power; to reconcile conflicting views in respect of the enumeration of slaves; and to remove the objection that, in adjusting a system of representation between the States, regard should be had to their relative wealth, since those

1

157 U. S. 586.

8

2 158 U. S. 637.

Dodge v. Woolsey, 18 How. 331; Hawes v. Oakland 104 U. S. 450; 157 U. S. 553 4 157 U. S. 559.

who were to be most heavily taxed ought to have a proportionate influence in the government. The compromise, in embracing the power of direct taxation, consisted not simply in including part of the slaves in the enumeration of population, but in providing that as between State and State such taxation should be proportioned to representation." It is then shown by various citations from the writings and speeches of members of the Constitutional Convention that it was expected that most of the revenue would be derived from duties on imports, and that divers of them used language in regard to the phrase "direct taxes" which would include direct taxes on personal property. The debate on the Act of June 5, 1794,2 which placed a tax upon carriages, is referred to, and reference is also made to Madison's opinion that that act was unconstitutional, and more weight seems to be given to Mr. Madison's opinion than to that of the Supreme Court in Hylton v. United States, which held that act to be constitutional, and no allusion is made to the fact that Madison apparently changed his opinion as to the constitutionality of such acts, since, when President, he signed several bills of like import.*

The learned Chief Justice, after citing all the acts of Congress which have levied either direct taxes or income taxes, asserts that all of them were passed as war measures. He then discusses the four cases of Pacific Insurance Co. v. Soule, Veazie Bank v. Fenno, Scholey v. Rew, Springer v. United States, and holds them to be either not in point or else not to be controlling. He then says that a tax upon the income derived from real estate is a tax upon real estate, because as Lord Coke says, "What is the land but the profits thereof?" 10 And therefore that the tax upon income derived from rents and real estate is a tax upon land, and that a tax upon land is a "direct tax " within the meaning of the Constitution, and unconstitutional because not apportioned.

The logical result of this was extended upon the rehearing to income derived from personal property,11 because "it would seem [to be] beyond reasonable question that direct taxation, taking the place as it did of requisitions, was purposely restrained to apportionment according to representation, in order that the former system 1 157 U. S. 563. 78 Wall. 533.

I Stat. 373.

8

2

23 Wall. 331.

102 U. S. 586.

as to ratio might be retained, while the mode of collection was changed."1 "The reasons for the clauses of the Constitution in respect of direct taxation are not far to seek. The States, respectively, possessed plenary powers of taxation. They could tax the property of their citizens in such manner and to such extent as they saw fit; they had unrestricted powers. . . . They gave up the great sources of revenue derived from commerce; they retained the concurrent power or [of] levying excises, and duties if covering anything other than excises; but in respect of them the range of taxation was narrowed by the power granted over interstate commerce, and by the danger of being put at disadvantage in dealing with excises on manufactures. They retained the power of direct taxation, and to that they looked as their chief resource; but even in respect of that, they granted the concurrent power, and if the tax were placed by both governments on the same subject, the claim of the United States had preference. Therefore, they did not grant the power of direct taxation without regard to their own condition and resources as States."2 "The founders anticipated that the expenditures of the States, their counties, cities, and towns, would chiefly be met by direct taxation on accumulated property, while they expected that those of the Federal government would be for the most part met by indirect taxes. And in order that the power of direct taxation by the general government should not be exercised, except on necessity; and, when the necessity arose, should be so exercised as to leave the States at liberty to discharge their respective obligations, and should not be so exercised, unfairly and discriminatingly, as to particular States or otherwise, by a mere majority vote, possibly of those whose constituents were intentionally not subjected to any part of the burden, the qualified grant was made." 3 "We find it impossible to hold that a fundamental requisition, deemed so important as to be enforced by two provisions, one affirmative and one negative, can be refined away by forced distinctions between that which gives value to property, and the property itself. Nor can we perceive any ground why the same reasoning does not apply to capital in personalty held for the purpose of income or ordinarily yielding income, and to the income therefrom." 4 "Nor are we impressed with the contention that, because in the four instances in which

the power of direct taxation has been exercised, Congress did not see fit, for reasons of expediency, to levy a tax upon personalty, this amounts to such a practical construction of the Constitution that the power did not exist, that we must regard ourselves bound by it." And the further argument is insisted upon by the learned Chief Justice, that, if a tax upon the income derived from municipal bonds is unconstitutional because it is a tax on the power of the States, the tax upon all incomes derived from invested properties must also be unconstitutional, because it is a "direct tax upon the sources from which the income is derived, and is not apportioned. 2

It is to be noted that in both the elaborate opinions delivered by the Chief Justice no case is cited by him in support of the conclusion of the Court. For it is to be observed that the three English cases, Attorney-General v. Queen Insurance Co.,3 Attorney-General v. Reed, and Bank of Toronto v. Lambe,5 cited to the point that an income tax is a "direct tax," are hardly apposite. In the first place, only the last one lays down the doctrine contended for, and that was apparently a self evident proposition, for the tax under consideration in that case was levied upon certain businesses by an act which professed to levy "certain direct taxes." The taxes under consideration in the first two cases were held not to be direct. In the second place, the question at bar was not what was or was not actually a direct tax, but what was a "direct tax" within the meaning of the Constitution of the United States. Furthermore, the assertion may be safely made that no case can. be cited in support of the conclusion of the majority of the Court.

In regard to the question of the jurisdiction of a court of equity to entertain such a bill as this, there could be, of course, no question, if it were not for Rev. Sts. § 3224, above referred to. That part of the opinion of the Court which deals with this point cannot be criticized or answered better or more forcibly than is done by Mr. Justice White in his remarkably lucid, logical and powerful dissenting opinion: "Neither of these authorities [viz.: Dodge v. Woolsey, 18 How. 331; Hawes v. Oakland, 104 U. S. 450], I submit, is in point. In Dodge v. Woolsey, the main question at issue was the validity of a State tax, and that case did not involve the Act of Congress to which I have referred [viz.: Rev. Sts.

§ 3224, Stat. 1867]. Hawes v. Oakland was a controversy between a stockholder and a corporation, and had no reference whatever to taxation." "The decision here is, that this court will allow, on the theory of equitable right, a remedy expressly forbidden by the statutes of the United States." 2

There can be no question as to the unconstitutionality of the tax upon the income derived from State and municipal bonds or upon the salaries of State or municipal officers. One sovereignty has no power of taxation on or over the instruments of government of another; and there was no controversy or difference, and there can be none, as to this, or as to the lack of power in the States to burden with taxation the instrumentalities of interstate or foreign commerce. But the argument deduced from this in the opinion of the Court, to the effect that, if such taxation is unlawful because it creates a burden upon a subject over which there is no right or power of taxation, it must be direct taxation, and therefore the tax upon all incomes derived from invested properties must also be "direct" and unconstitutional because not apportioned among the several States, is fallacious; indeed, it is doubly fallacious. In the first place, the attempted taxation of the instruments of government of another sovereignty, or the attempted placing of a burden by a State upon the instrumentalities of interstate or foreign commerce, has never been held to be direct taxation. That question could not possibly arise, for it is sufficient to make the tax invalid, if any burden, howsoever remote, is imposed. In the second place, it is one thing to hold that where there is no right of taxation at all, as in the case of one government taxing the instrumentalities of another sovereignty, any tax, however indirect, upon any money or property derived in any way from the legitimate exercise of those governmental functions is a burden upon them; and it is quite another thing to hold that, given the power and right to lay taxes upon certain subjects in certain ways, a tax is unconstitutional because it lays a burden indirectly, which it could not lay directly except by a different method. There can be no question that the government of the United States has the power and the right to lay and collect taxes in some way upon all the property within its jurisdiction and subject to its sovereignty, and no valid