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the borrower, who puts it in the form of new buildings, or other improvements, upon which he pays a tax. Is not one assessment on the same property sufficient? But if you insist upon another assessment on the money lender, it requires no prophetic power to predict that he will add the tax in his transactions with the borrower. If a tax of ten per cent was levied and enforced on every bill of goods, or note given for goods, the tax would be added to the price of goods, and how would this form of tax be different from the tax on the goods ?

“Money property” except in coin is imaginary, and cannot exist. There are rights to property of great value. The right to inherit property is valuable; and a mortgage on land is a certificate of right or interest in the property, but it is not the property. Land under lease is as much “money property” as a mortgage on the same land; both will yield an income of money. Labor will command money, and is a valuable power to acquire property, but is not property. If we could make property by making debts, it cannot be doubted that a national debt would be a national blessing. Attacking the bugbear of “money property” is an assault on all property ; for “ money property” is the mere representative of property. If we tax the representative, the tax must fall upon the thing represented.

A travelerin the Okefanokee swamp slaps the mosquitoes off his right cheek only to find that they immediately alight upon his left cheek; and that when he has driven them from thence, they return and alight on his nose; and that all the time he loses blood as a genuine primary or secondary tax-payer. And so it is with taxation. If we live in any country not wholly barbarous, we cannot escape it; and it is the fate of man to bear his proportion of its burdens in proportion to his expense, property and consumption. The main question of interest and importance in connection with the subject, therefore, is, shall we have an economical system (and hence a species of labor saving machine), and a uniform and honest system; or one that is expensive and encourages dishonesty and is arbitrary and inquisitorial? In either case the tax collector will act the part of the mosquito, and will get blood from all; but in an honest and economical system he will get no unnecessary blood. .

Referring to the supplement to this report for a discussion in detail of some other point of importance, the commissioners would next ask attention to the code of laws, prepared in conformity with the instructions of the Legislature, as before cited.

SUPPLEMENT.

NATURE AND PROVINCE OF TAXATION, AND LIMITA

TIONS UPON THE POWERS OF THE FEDERAL AND STATE GOVERNMENTS IN RESPECT TO TAXATION.

The power of every complete sovereignty over the persons and property of its subjects is unlimited, and in every such sovereignty, therefore, the power to compel contributions for the service of the State, or as we may term it, “ to tax," must be unrestricted. In the United States, however, the powers of the national government, and the powers of the separate States are materially limited in many respects. On the one hand, in virtue of an agreement of union accepted by all the States, and known as the federal Constitution, and on the other, in virtue of certain original powers retained by the States, and not delegated by them in entering the federal Union, to any other or higher sovereignty. It is proposed to inquire how far these limitations of sovereignty affect the powers of the national and State governments in respect to taxation? And first, of the limitations on the taxing powers of the States recognized and maintained by the federal government.

TAXATION OF UNITED STATES AGENCIES. The most important of these limitations upon the taxing power of the separate States of the federal land, is that which excepts and exempts all agencies of the national government, of every name and nature. This limitation, the federal courts have held, exists by implication, not only in the Constitution of the United States, but in the structure of the national government itself; “ for otherwise the States might impose taxation to an extent that might cripple, if not wholly defeat the operations of the national authorities within their proper sphere of action."*

* In the celebrated case of McCulloch v. Maryland, 4 Wheaton, 431, where the question involved was the right of the State of Maryland to impose taxes upon the operations, within its limits, of the Bank of the United States, created by the authority of Congress, Chief Justice Marshall uses the following language: “If we apply the principle for which the State of Maryland contends to the Constitution generally, we shall find it capable of changing totally the character of that instrument. We shall find it capable of arresting all the measures of the government, and of prostrating it at the foot of the States. The American people have declared their constitution and the laws made in pursuance thereof, to be supreme; but this principle would transfer the supremacy, in fact, to the States. If the States may tax one instrument employed by the government in the execution of its powers, they may tax any and every other instrument. They may tax the mail; they may tax patent rights; they may tax the papers of the custom-house; they may tax judicial process; they may tax all the means employed by the goverament, to an excess which would defest all the ends of government. This was not intended by the American people. They did not design to make their government dependent on the States."

Can Congress authorize the States to tax national instrumentalities ?—In the popular discussions which have occurred during the last few years in reference to the taxing of United States securities, the position has not been unfrequently taken, that it would have been just and expedient on the part of Congress, at the time of the creation of the present national debt, to have allowed the separate States to tax the evidences of such debt (i. e., the bonds) in the possession of their citizens, subject to a limitation that the same should not be taxed at any different rate than other “moneyed capital.” A full consideration of the whole subject will, however, suggest a doubt whether Congress possesses the power to grant any such authorization, inasmuch as to have done so would have been equivalent to authorizing the States to do an act which in itself is unconstitutional, a thing which it is self-evident that Congress cannot do. Thus, “the power to tax," says Chief Justice Marshall, in giving the opinion of the supreme court denying the right of Maryland to tax the Bank of the United States, “ involves the power to destroy ;" and in the case of Weston v. The City of Charleston, the same court, by the same eminent authority, held further, " that if the right to impose a tax exists, it is a right which in its nature acknowledges no limits. It may be carried to any extent within the jurisdiction of the State or corporation which imposes it, which the will of such State or corporation may prescribe.For Congress, therefore, to have authorized the States to tax “ national agencies,” would have been equivalent to authorizing the exercise of a right to destroy; which right, the supreme court have held, cannot, from its nature, when once existing, be limited.

IMPORTED GOODS IN ORIGINAL PACKAGES. Another restriction upon the taxing powers of the States, imposed by implication by the Constitution of the United States, and directly by the decision and interpretation of the supreme court, bas reference to imported goods in original packages, in the possession of the merchant importer. As this restriction upon the powers of the States has been recently called in question by officials in Massachusetts,* and practically denied by the actual assessment in that State of such property, the commissioners ask attention to the following recent exposition of this subject by a recognized anthority. “The Constitution of the United States declares that “no State shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws." Under this prohibition some difficulty has been experienced in indicating with sufficient accuracy for practical purposes, the point of time at which articles brought into the country from abroad cease to be regarded as imports in the sense of constitutional protection, and become liable to State taxation; but it has been said generally, that where the importer has so acted upon the thing imported, that it has become incorporated, and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty upon imports to escape the prohibition in the Constitution. And it was also declared in the same case (Brown v. Maryland), that a State law, which for revenue purposes required a merchant to take a license, and pay fifty dollars, before he should be allowed to sell a package of imported goods, was equivalent to laying a tax upon imports. And it has been held in another case, that a stamp duty imposed by the legislature of California upon bills of lading for gold and silver, transported from that State to any port or place out of the State, was in effect a tax upon exports, and the

*The case relied on by the commissioners in their former report, to sustain their position in respect to the right of a State to tax imported goods, was that of Brown v. The State of Maryland (12 Wheaton, 449); the question involved being the legality of a license tax imposed by the State as a prerequisite to the right to sell an imported article. The court (Chief Justice Marshall) held, that this tax, though indirect in form (i. l., a license on the person of the importer), was in fact equivalent to a duty on imports, and therefore illegal; and that the right to import carried with it the right to sell.

In reply to this, the chairman of the board of assessors of the city of Boston (see auditor's report of the city of Boston, 1871) makes the following stateinent:

"There is certainly a broad distinction between the prohibition of the right to sell an imported article, and the right to tax the same as property. The decision of the United States court was to the effect that the State could not enact a law that would prevent the sale of such property, and did not touch the question of the right to tax. In a recent decision of the supreme judicial court of Massachusetts (Dunbar v. Boston, 101 Mass., 317), where the question was raised that the commonwealth could not tax a stock of liquors, the sale of which, by her laws, she had declared illegal, the court sustained the tax, upon the ground that the case did not show that the goods could not be legally sold. As the law stood at the time the decision was given, but one class of the plaintiff's stock of intoxicating liquors could legally be sold; and that was his importations in the original packages."

law was consequently void.”* (Cooley's Constitutional Limitations.)

LIMITATIONS ON THE TAXING POWER OF THE FEDERAL GOVERNMENT IN

RESPECT TO THE STATES. But if the States cannot tax the agencies or instrumentalities by which the federal government performs its functions, it would seem to clearly follow that for the same reasons the federal government cannot tax State instrumentalities or agencies. And so the courts of the United States have held, whenever this question has been brought before them for adjudication. Thus, in a case of recent decision (Day v. Buffington, U. S. Circuit Court, Mass. District), it was held that the salary of a State official, in this particular instance a judge of probate, could not be legally subjected to assessment for an income tax, under the laws of the United States authorizing the assessment and collection of internal revenue; and Congress, some years since, acting under the advice of the United States Supreme Court, repealed so much of the internal revenue act as previously required the affixing of stamps to State processes, warrants, commissions, etc. In the case of Warren v. Paul, 22 Ind., 279, the court used the following language: “The federal government may tax the governor of a State or the clerk of a State court and his transactions as an individual, but not as a State officer. This must be so, or the State may be annihilated at the pleasure of the federal government. The federal government may, perhaps, take by taxation most of the propery in a State if exigencies require, but it has not a right by direct or indirect means to annihilate the functions of the State government."

* This case (Almy v. California, 24 Howard U.S. Reports, p. 169), arose under a statute of California, which imposed a stamp tax on bills of lading for the transportation of gold and silver from any point within the State to any point without the State. The question, as presented to the Supreme Court of the United States under this statute, was stated to be as follows: Is this stamp act, so required to be paid by State authority, an impost, or an expost, within the meaning of the constitutional prohibition upon the States ? It was held by an unanimous bench that the tax fell within the terms of the prohibition, or was in conflict with the clause of the Constitution giving Congress the right to regulate commerce with foreign nations. In a subsequent review of this case, 1868, Mr. Justice Miller stated that the case was well decided, but on a different ground, viz. : “That such a tax was a regulation of commerce ; a tax imposed on the transportation of goods from one State to another, over the high seas, in conflict with that freedom of transit of goods and persons between one State and another, which is within the rule laid down in Crandall v. Nevada (6 Wallace U. S. Reports, 382), and with the authority of Congress to regulate commerce among the States." It, therefore, follows that bills of lading given for goods transported from one State to another are inter-State instruments, and as such cannot be subjected to State taxation; and it would further seem that bills, drafts, bonds, etc., made in one State and payable in another, are similar inter-State instruments, and as such cannot be taxed by State authority any more than bills of lading, the taxa tion of which by States, as above shown, has been decided to be unconstitutional.

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