The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-04-09
incomes Derived From Rents
and Bonds Declared to
=: Be Exempt.
SOME CAPITALISTS ESCAPE
Judge Field Says the Entire Law
Should Be Thrown Out and
"Roasts" Congress.


case was rendered to-day by Chief Justice
Fuller. The court knocked out the law as
far as it taxes incomes derived from rents
and also from State, county and municipal
bonds. By tie vote of the court the law
was sustained in other respects. The
courts conclusions, after reviewing the
historical and other phases of the question,
were as follows:
In Charles Pollock VS.. the Farmers Loan and
Trust Company ct al. it is established:
First-That by the constitution Federal taxa
ton is divided into two great classes-direct
taxes and duties, imposts and excuses.
Second-The imposition of direct taxes is
governed by the rule of apportionment among
the several States, according to numbers, and
imposition OF dut ties, imposts and excuses by
the rule OF uniformity throughout the United
States.
Third - That the principle that taxation
and representation go together was intended
to be and was preserved in the constitution by
the establishment Of the rule OF apportion-
ment among the several States, so that such
apportionment should be according TO num-
berS in each State.
Fourth-That the States surrendered their
power to levy imposts and to regulate COM
merce to the General Government, and gave
. 1t the concurrent power 10 levy direct taxes in
reliance on the protection afforded by the rules
prescribed, and that the compromises of the
constitution cannot be disturbed by legislative
action.
Fifth-That these conclusions result from the
text of the constitution, and are supported by
the historical evidence furnished by the cir
cumstances surrounding the framing and
adoption of that instrument and the views of
those who framed and adopted it.
SiXth-That the understanding and expecta-
ton at the time of the adoption of the consti-
tuition was that direct taxes would not be
levied by the General Government except
under the pressure of extraordinary exigency,
and such has been the practice down to August
10, 1894. II the power to 90 SO is 70 be exer-
cised as an ordinary and usual means of sup
ply that fact furnishes an additional reason for
circumspection in disposing of the present
case.
seventh-That taxes on real estate belong to
the class of direct taxes and with the taxes on
the rent or income of real estate which is the
incident OF its ownership belonging to the
same class.
Eighth-That by no previous decision OF this
court has this question been adjudicsted to the
contrary of the conclusions now announced.
Ninth-That- so much of the act of August Is,
1894 as attempts to impose tax upon the
rent or income OF real estate without appor-
tionment is invalid.
The court is further of the opinion
that the act of August Is, 1894,
is invalid so far as it attempts to levy tax
upon the income derived from municipal
bonds. As municipal corporation is the
representative of the State and one of the
instrumentalities of the State government
the property and revenues of municipal
corporations are not subjects of Federal
taxation, nor is the income derived from
State, county and municipal securities,
since taxation on the interest therefrom
operates on the power to borrow before it
is exercised and has sensible influence
on the contract. and therefore is a tax
on the power of the States and their in
strumentalities to borrow money, and con-
sequently repugnant to the constitution.
Upon each of the other petitions argued
at the bar, the Justices are equally divided,
and DO opinion is expressed, to wit:
First-Whether the void provisions as to rents
and incomes from real estate invalidates the
whole act.
standardization as to the income from per-
sonal property as such the act is unconstitu-
tional as laying direct taxes.
Thfrd-Whether any part of the tax if not
considered as direct tax, is invalid for want of
uniformity on either OF the grounds suggested.
The result is that the decree of the Cir
cult Court is reversed and the case re-
manded, with directions to enter a decree
in favor OF the complainant in respect
only to the voluntary payment of the tax
on rents and income of its real estate, and
that which it holds in trust and on the
income from the municipal bonds owned
or so held by it.
The announcement of the foregoing con-
illusions of the court was preceded by a re-
view of many opinions of the Supreme
Court from the time of Chief Justice
Marshall down to the celebrated Springer
case, brought by ex Representative
Springer of Illinois, and by an exhaustive
review of the nature of direct and indirect
taxation, in the course of which Chief Jus
tice Fuller reviewed the debates leading up
to the framing of the Federal constitution.
In conclusion the Chief Justice stated that
this opinion upon ''the Pollock case" COW
cred the other two cases. The delivery of
the opinion consumed just one hour.
Chief Justice Fuller was followed by Jus
tice Field, who read the first dissenting
opinion, speaking in low tone that con-
trasted noticeably with the loud delivery
Of Chief Justice. Justice Fields opinion
was largely devoted to a review OF the pro-
visions regarding rents and was vigorous
denunciation of the principle sought to be
established by the income law, his conclu-
sions being in conformity to those an
nounced by the Chief Justice. He also at
tackled the law on account of lack of uni
formity and dwelt upon its exemptions
and determinations, which was he said
class legislation. He devoted especial at
tention to the exemptions of savings banks,
mutual insurance companies and building
and loan associations. He quoted census
figures to show the extent of the operations
of these companies, and said that if these
facts were not convincing Congress could
not be convinced Though one rose from
the dead" He took issue with those who
contended that there could be no legiti-
mate limitation upon the power of Con-
gress to impose taxes.
Justice Field concluded by saying that he
was of the opinion that the entire law