Vermont phÅ“nix. [volume] (Brattleboro, Vt.) 1834-1955, 1895-04-12
The Income Tax Decision.
The supreme Court Cuts out One-half
of the Law and Leaves the Rest on "A
Very Insecure Foundation

The Supreme Court Cuts out One-half
of the Law and Leaves the Rest on "A
Very Insecure Foundation
The decision of the United States Su-
preme court upon the consttutionality of
the income tax feature of the new tariff
law was announced Monday. The situa-
tion is peculiar. Affirmatively the court
holds, five to three, that incomes from real
estate, rents, and municipal bonds cannot
be taxed. Negatively the rest of the law is
left to stand the judges being tied four and
four in regard to it, the ninth judge being
i'll.
This destroys one-half of the law, and
leaves the other half in a dangerous posi-
tion. The treasury will lose half of the
estimated income tax revenue, and will be
seriously embarrassed in collecting the
other half, which may be cut off altogether
in the next fiscal year, either by another
decision of the court or by a repeating act
of Congress.
The decision with regard to the income
from rents and municipal bonds was read by
Chief Justice Fuller, the conclusions being
in substance these;
That by the constitution Federal taxa
! tion is divided into two great classes: di-
rect taxes and duties, imposts and eX-
cises.
That the imposition of direct taxes is
| governed by the rule of apportionment
among the several states, according to num-
| bers, and the imposition of duties, imports
and excises by the rule of uniformity
throughout the United States.
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 appor-
tionment among the several states, so that
such apportionment should be according to
numbers in each state.
That taxes on real estate belong to the
class of direct taxes, and that the taxes on
the rent or income of real estate, which is
the incident of its ownership belong to the
same class.
That so much of the act of Aug 10, 1894,
as attempts to impose a tax upon the rent
| or income of real estate without apportion-
ment is invalid.
The court is further of the opinion that
the act is invalid SO far as it attempts to
! levy tax upon the income derived from
municipal bonds. As a municipal corpora
tion is the representative of the state and
one of the instrumentalities of the state
government, the property and revenues of
municipal corporations are not the subjects
of federal taxation, nor is the income de-
rived from state, county and municipal Sc
curities, since taxation on the interest
therefrom operates on the power to borrow
before it is exercised and has a sensible in
Hnnnpn N ha OF tharafOrn
a tax is a tax on the power of the states
and their instrumentalities to borrow
money and consequently repugnant to the
constitution.
Upon each of the other questions argued,
namely
W Whether the void provisions as to
rents and income from real estate inyali-
dates the whole act; (2) whether as to the
! income from personal property as such, the
act is unconstitutional as laying direct
taxes; (3) whether any part of the tax, il
not considered as a direct tax, is invalid
| for want of uniformity on either of the
| grounds suggested-the justices who heard
! the argument are equally divided, and,
! Therefore, no opinion is expressed. This
caves those parts of the law upon which
no decision is given to stand-under the
old rule of law that where the court is di-
vided the law stands.
Associate Justice Field read an opinion
declaring the whole income tax provision
of the tariff law of 1894 to be uncOnstitu-
tional. Associate Justice White dissented
from the view of the court and protested
against reopening of the decisions of the
court of hundred years past. He con,
CURED with the majority of the court, how
ever, upon the question of the taxation OF
state and municipal bonds. Justice Har-
Ian was of the opinion that tax on gains,
profits and income derived from rent OF
lands was not direct tax; that under
numerous decisions of this court the in
come derived from municipal bonds was
not the subject of specific taxation in any
form by the United States. In other mat
ters he was in accord with Justice White.
1t is estimated that the total amount o.
state, territorial, municipal and county
bonds, the country over, which will thus
be exempted from the operation of the in
come tax amounts to 81, Isl, 100000. Al
a whole this decision will undoubtedly Gu
down by more than One-half the amoun
which it was expected that the income ta2
would bring into the government treasury
Estimates made at the treasury depart
ment by the most skillful experts since th'
courts decision, are that there is not likely
to be collected under the income tax Law
more than S12,0OO,OOO, instead of tn,
S30NOO,00O to $1OOOOO,OO which hac
been predicted for it.
The Issues as They Were Drawn.