Mr. Choate's Argument for Appellants.

gress on the discussion of any tariff bill, and this is the rule of uniformity throughout the United States for which we contend as to all duties, excises, and imposts.

This brings me to say a few words upon a new doctrine which has been presented here by the representatives of the government and strongly urged by my friend Mr. Carter. The Attorney General says in his brief, at page 83, that the rule of uniformity has been practically violated in the act of 1894, but that the law must be regarded not as standing alone, but as a part of our general system of taxation, and that so regarded its effect is to bring about an approximation of equality of taxation. This is, as I understand it, an unequivocal admission that the law in itself is not equal or uniform in its operation, but that we may speculate that perhaps it works out uniformity of tax burden upon some theory or notion. of compensation or equivalents. Has such a doctrine ever before been advanced in this court? It amounts to the claim on the part of the government that an act of Congress violating the Constitution and utterly lacking in uniformity may be upheld because some other act or the general tariff laws. operate unequally. Is it true that under the Constitution you can compensate for intentional inequality of burden in one set of excises, duties, or imposts by imposing others which are inherently lacking in every essential element of uniformity? Is this court prepared to go that length and to enunciate any such construction of the Constitution? This is a doctrine worthy of a Jacobin club that proposed to govern France; it is worthy of a Czar of Russia proposing to reign with undisputed and absolute power; but it cannot be done under this Constitution.

What are the breaches of uniformity here? I shall treat them briefly in view of the clear and remarkably forcible presentation on the opening by Mr. Guthrie. In the first place, there is this exemption of everybody with an income less than $4000. What does this exemption really amount to? A man living with investments of $133,000 in bonds at 3 per cent is a subject of exemption. I hope that we shall all be able to leave our children each in as good condition

Mr. Choate's Argument for Appellants.

as that, and not have Congress claim that he or she should be classed among the lower middle classes because his or her income does not exceed $4000. My friend on the other side has made our argument easier because he has said this exemption might just as well have been $20,000, and he said it in earnest. Thus he has conceded that if this classification can stand, a man with $666,000 at 3 per cent or $500,000 at 4 per cent was a fit subject for exemption. It is, therefore, for you to decide whether that is a reasonable exemption.

If you now decline to adjudicate upon the question of reasonableness and hold that it is outside your province, no abuse hereafter when the limit is fixed at $20,000 or more can be checked. The reasonableness of the exemption is essentially a question of law. Reagan v. Farmers' Loan & Trust Co., 154 U. S. 362, 397-399. The discretion is in Congress, but the abuse of that discretion is not remediless.

One word as to the power of the court to adjudicate upon the reasonableness of an exemption. In the Chicago, Milwaukee, &c. Railway Company v. Minnesota, 134 U. S. 418, the court said that unquestionably the rate of charge for transportation by a railroad company, involving, as it does, the element of reasonableness both as regards the company and as regards the public, is eminently a question for judicial investigation, requiring due process of law for its determination. I need not refer to the cases there cited or those like the Reagan case, which have followed and applied that doctrine. We claim that this court is competent and that it is its duty to judge as to whether this is a reasonable exercise of the power of exemption or whether it is arbitrary and capricious.

The next ground of exemption of which we complain is the denial of the $4000 exemption to corporations simply because they are corporations.

Could this court justify the incorporation of a clause in a tariff act that a given brand of tea, if imported by an individual, should pay a duty of ten cents, but if imported by a corporation, twenty cents, and nothing if imported by a mutual association? I have never heard any suggestion from any liv

Mr. Choate's Argument for Appellants.

ing man that it could. I believe it must be absolutely conceded by everybody that it cannot. If it cannot do it as to a tariff duty, how can it do it as to an income excise?

Now I come to another ground. It is not necessary for me to dwell very elaborately upon this, because of the very clear and forcible manner in which it was presented in the opening by Mr. Guthrie and appears upon our brief. I say here was a deliberate, arbitrary, capricious (it is entitled to infinitely worse names and epithets than capricious or arbitrary) exclusion of certain great and wealthy corporations from the operation of this law, without justification, without warrant, without any principle of public policy whatever. The Attorney General says in respect of the exemption of these favored companies that there is a humane policy always acted on by civilized states. It is very curious that these civilized states, the United States of America, did not discover it until now. None of these institutions were exempted under the previous income-tax laws. Take Trinity church, for example, in New York, with its hundreds of parcels of real property and stores and houses and millions of property, from which it receives a fabulous income. Is there any public policy in exempting that income at the expense of the poorer sections of the country?

Permit me to repeat a few of the figures: Total number of mutual savings banks exempted, 646; total stock savings banks, 378. They do the same business; they take in the money of depositors for the purpose of investing it and making it bear interest with a profit upon it in the same way, and the 646 are exempted and the 378 are taxed. Total deposits in state banks and trust companies, $1,225,000,000; total deposits of savings banks, $1,748,000,000. That will give you some idea of what this exemption covers? How are those deposits used? Are they kept in the vaults of the banks? No, they are invested like anybody else's earnings, to make interest and to make profit on the money.

Now I come to the question of mutual insurance companies. My friend, Mr. Carter, got up a new idea. He said mutual companies were organized not to save the poor, but for the sole purpose of saving expenses and dividing losses. That is

Mr. Choate's Argument for Appellants.

his argument, and those, I think, were his very words. We had them taken down, at any rate. Here are his very words: "An organization," he said, "to divide the losses." So, I suppose, he thinks they are benevolent and charitable organizations. I should like to have him go to his friend the president of the Mutual Life Insurance Company in New York, whose company has accumulations of property, real and personal, amounting to $204,000,000, and tell him that this was an exemption secured for the purpose of enabling them to divide the losses that came upon them in the transaction of their business. To divide the losses! To divide the losses! Where is that phrase he uses Mr. Carter said: "They carry on the business simply to divide the losses among themselves."

Why, if the court please, the total property exempted of these mutual companies that merely carry on their business to divide the losses among themselves appears by the census reports to be over $2,000,000,000!

Now, is that within the exercise of a reasonable discretion on grounds of public policy, or is it caprice - is it arbitrariness?

I have trespassed altogether too long upon the attention of the court. There is nothing that stands in the way of the decision of this court which we urge. I do not mean to say there are not individual dicta. If you try to drive a case through dicta it is like trying to get yourself through a barbedwire fence without injury to your garments; but I say there has been no case decided in this court that will in the least interfere. These questions have never been weighed, have never been considered; certainly they have never been decided.

I will say just one word before I conclude about these municipal bonds, briefly to state the grounds on which we say they ought to be exempted, and that is exactly the ground on which United States bonds are exempted from a state tax. It is because it interferes with the sovereign power and the exercise of sovereign power by the States themselves. What is the answer to this? My friends on the other side say, why if you put it in a general income tax it will not be felt. So they said about the rents, if you put them into a general income tax it is not a tax on rents, it is not an unap

Opinion of the Court.

portioned tax. What possible difference in principle is there between a tax on the bond and a tax on its income?

But I have more than trespassed upon the kind indulgence of the court. I have felt the responsibility of this case as I have never felt one before and never expect to again. I do not believe that any member of this court ever has sat or ever will sit to hear and decide a case the consequences of which will be so far-reaching as this — not even the venerable member who survives from the early days of the civil war, and has sat upon every question of reconstruction, of national destiny, of state destiny that has come up during the last thirty years. No member of this court will live long enough to hear a case which will involve a question of more importance than this, the preservation of the fundamental rights of private property. and equality before the law, and the ability of the people of these United States to rely upon the guaranties of the Constitution. If it be true, as my friend said in closing, that the pas sions of the people are aroused on this subject, if it be true that a mighty army of sixty million citizens is likely to be incensed by this decision, it is the more vital to the future wel fare of this country that this court again resolutely and courageously declare, as Marshall did, that it has the power to set aside an act of Congress violative of the Constitution, and that it will not hesitate in executing that power, no matter what the threatened consequences of popular or populistic wrath may be. With the deepest earnestness and confidence we submit that all patriotic Americans must pray that our views shall prevail. We could not magnify the scope of your decision, whatever it may be. No mortal could rise above "the height of this great argument."

MR. CHIEF JUSTICE FULLER, after stating the case as above reported, delivered the opinion of the court:

The jurisdiction of a court of 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. Dodge v. Woolsey, 18 How. 331; Ilawes v. Oakland, 104 U. S. 450.