The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-04-25

ton is to become an ordinary and usual means
of supply, that fact furnishes an additional
reason for circumspection and care in dispos-
ing of the case
The opinion here reviews numerous de-
cisions under the act of 1861, including the
Springer case, which was largely relied
upon by counsel for the Government in
the present cases to sustain their conten-
ton. Chief Justice Fuller says:
at is conceded in all these cases from
that of Hilton to that of Springer that
taxes on land are direct taxes, and in none
of them is it determined that taxes on rents
or income derived from land are not taxes
on land"
Summing up. the Chief Justice says
among other things:
"The requirement of the constitution is
that no direct tax shall be laid otherwise
than by apportionment-the prohibition is
not against direct taxes on land, from
which the implication is sought to be
drawn that indirect taxes on land would
be constitutional, but it is against all di-
rect taxes-and it is admitted that tax on
real estate is direct tax. Unless, there
fore, tax upon rents or income issuing
out of lands is intrinsically so different
from tax on the land itself that it be-
longs to a wholly different class of taxes;
such taxes must be regarded as falling
within the same category as a tax on real
estate. The name of the tax is unim-
portant. The real question is, Is there any
basis upon which to rest the contention
that real estate belongs to one of the two
great classes of taxes and the rent or in
come, which is the incident of its owner
ship, belongs to the other2 We are un-
able to perceive any ground for the alleged
distinction. An annual tax upon the an
nual value or annual uses of real estate ap-
pears to US the same in substance as an
annual tax on real estate which would be
paid out of the rent or income. This law
taxes the income received from land and
the growth or product of the land.
Justice Patterson observed in Hilton's
case land independently of its products is
of no value, and certainly had no thought
that direct taxes were confined to unpro-
ductive land. If it be true that by varying
the form the substance may be changed,
| it is not easy to see that ANYTHING would
remain of the limitations of the constitu-
ton or of the rule of taxation and repre-
|
guarded in favor of the citizens of each
State. But constitutional provisions can
not be thus evaded. 1t is the substance
and not the form which controls, as has
indeed been established by repeated de
cisions of this court. 1t is not doubted
that property -owners ought to contribute
in Just measure to the expenses of the
Government. AS to the State and their
municipalities this is reached largely
through the imposition of direct taxes. AS
to the Federal Government it is attained in
part through excuses and indirect taxes
| upon luxuries and consumption, generally
to which direct taxes may be added to the
extent the rule of apportionment allows.
And through one mode or the other the
entire wealth of the country, real and
personal, may be made, as it should be, to
contribute to the common defense and gem
eral welfare. But the acceptance of the
rule of apportionment was one of the COM
promises which made the adoption of the
constitution possible and secured the
creation of that dual form of government,
SO elastic and so strong, which has thus
far survived in undated vigor.
''If, by calling a tax indirect when it is es-
sentially direct, the rule of protection could
be frittered away, one of the great land
marks defining the boundary between the
nation and the States of which it is com
posed would have disappeared and with it
one OF the bulwarks of private rights and
private property.
1--WE are of the opinion that the law in
question, SO far as it levies tax on the
rents or income OF real estate, is in viola
ton of the constitution and is invalid"
Comparatively brief space is devoted to
the question of tax on the income derived
from municipal bonds.
1.-THE constitution says the opinion,
'contemplates the independent exercise
by the nation and the States severally, of
our constitutional powers. AS the States
cannot tax the powers, the operations or
the property of the United States, nor the
means which they employ to carry their
powers into execution, SO it has been held
the United States has no power under the
constitution to tax either the instrument
talities or the property of State A NUM-
cipal corporation is the representative of
the State and one of the instrumentalities
of the State government. 1t was long ago
determined that property and revenues of
municipal corporations are not subjects of
Federal taxation"
After reference to the decision the opin-
ion proceeds, concluding as follows:
THE law under consideration provides
that nothing herein contained shall apply
to States, counties or municipalities. 1t
is contended that although the property
or revenues of the States or their instru-
mentalities cannot be taxed, nevertheless
the income derived from State, county and
municipal securities can be taxed. But we
think the same want of power to tax the
property or revenues of the States or their
instrumentalities exists in relation to tax
on the incomes from their securities, and
for the same reason, and that reason is
given by Chief Justice Maxwell in Weston
VS.. Charlestown, where he says: The
right to tax the contract to any extent
when made must operate on the power to
borrow before it is exercised and have
sensible influence on the contract. The
extent of this power depends on the will
of distinct Government. To any extent.
however inconsiderable, it is a burden on
the operations of government 1t may be