The Vermont watchman. [volume] (Montpelier, Vt.) 1883-1911, 1884-01-09
The Corporation Tax Law.

In view of the general interest felt in
the subject and of the differing statements
from various sources as to what state
may and may not do in the way of taxing
corporations, we publish below extracts
from recent decisions of the supreme
court of the United States, bearing upon
this question, and fully covering, it is be-
lieved, the provisions of the revenue law
enacted by the legislature of this state at
its last session. We have entertained
this purpose for several weeks, believing
that reasonably full publication of the
points which have been decided would
serve a wholesome purpose and would
conduce to such a general understanding
of the subject as would put to rest any
doubts or fears which the efforts of the
opponents of the law may have raised.
In 1864, the legislature of Pennsylvania
passed law laying tax on each two
thousand pounds of freight carried by the
railroads, canals, and other transportation
companies doing business within the state.
On the products of mines the tax was
two cents, and three and five cents re-
spectively on other specified classes of
freight. The Reading railroad company,
a corporation of Pennsylvania, refused to
pay this tax, setting up that tax on
freight other than that both received and
delivered within the state was unconstitu-
tional, because it was in conflict with the
constitution of the United States, which
ordains that Congress shall have power
to regulate commerce with foreign ma.
tions, and among the several states" The
case was decided against the railroad by
the state courts, and it was taken to the
United States supreme court The court
held that
"Q) The transportation of freight, or OF the
subjects of commerce, is constituent part
of commerce itself. (2) A tax upon freight,
transported from state to state is a regula-
ton OF commerce among the states. Hence
statute of state imposing tax upon
freight, taken up within the state and carried
out of it, or taken up without the state and
brought within it, is repugnant to that pro-
vision of the constitution of the United States
which ordains that congress shall have power
to regulate commerce with foreign nations and
among the several states.
Justice Strong, delivering the opinion
of the court, said:
"The case presents the question whether the
statute in question-so far as 1t imposes tax
upon freight taken up outside the state and
delivered within 1t, or, In diff erent words upon
all freight other than that taken up and deliv-
cred within the state-is not repugnant to the
provision Of the constitution of the United
States which ordains that Congress shall have
power to regulate commerce with foreign
nations and among the several states, or in
conflict with the provision 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 execut-
ing its inspection laws The tax
imposed by this act is not tax imposed upon
the franchise or the property or the business of
the company, measured by the number of tons
of freight carried On the contrary, 1t is ex-
pressy laid upon the freight carried.
And this tax Is not proportioned to the business
done in transportation. 1t Is the same whether
, the freight be moved one mile or three hun
dred IL freight be put upon road and car
ried at all, the tax is to be paid upon 1t. The
transportation of freight, or of the subjects OF
commerce, for the purpose of exchange or sale,
Is constituent OF commerce itself . .
Then why Is not a tax upon freight transported
from state to state regulation of Interstate
transportation, and, therefore, a regulation OF
, commerce among the states -. The
legislature OF Pennsylvania has, In effect, de-
> clared that every ton of freight taken up in
: other states and brought within her limits,
shall pay a specified tax. The payment OF that
: tax Is a condition upon which Is made depend
. emit the prosecution of this branch OF commerce.
And as there is no limit to the rate Of taxation
she may impose, II she can tax at all, 1t is
obvious the condition may be made 80 onerous
that an Interchange OF commodities with other
states would be rendered impossible. The same
power that may impose tax of two cents per
ton upon coal carried out OF the state may
impose one Of five dollars. Such an imposi.
1 ton, whether large or small, Is a restraint OF
!, the privilege or right to have the subjects OF
commerce pass freely from one state to another
without being obstructed by the intervention
> of 1T tie lines 1t would hardly be
maintained, we think, that had the state estab.
lished custom houses on her borders wherever
a railroad or canal comes TO the state line, and
demanded at these houses duty for allowing