Little Falls weekly transcript. (Little Falls, Morrison Co., Minn.) 1894-19??, 1895-04-12
Income From Rents and State,
County and Municipal
Bonds Exempt,
so SAYS THE SUPREME COURT.
Otherwise the Constitutional
ity Of the Income Tax
Law Is Upheld.


except regarding the incomes derived
from rents and from municipal bonds,
on which point the decision was that
the tax was unconstitutional.
The courts conclusions after review
ing the historical and other phases of
the question were as follows:
In Charles Pollock versus the Farm
is established:
l. That by the constitution federal
taxation is divided into two great
classes-direct taxes and duties, imposts
and excuses.
2. The imposition of direct taxes is
governed by the rule Of apportionment
among the several states, according to
numbers and the imposition of duties,
imposts and excuses by the rule OF uni
formity throughout the United States.
8. That the principle that taxation
and representation together was in
tended to be and was preserved in the
constitution by the establishment of the
rule Of apportionment among the sew
eral states, so that such apportionment
should be according to numbers in each
etate.
4. That the states surrendered their
power to levy imposts and to regulate
commerce to the general government
and gave it the concurrent power to
levy direct taxes in reliance on the pro-
lection afforded by the rules prescribed,
and that the compromises Of the consti-
tuition cannot be disturbed by legislative
action.
5. That these conclusions result from
the text of the constitution, and are
supported by the historical evidence
furnished by the circumstances sur
rounding the framing and adoption OF
that instrument and the views OF those
who frame and adoptedit.
6. That the understanding and ex-
pectation at the time of the adoption OF
the constitution was that direct taxes
would not be levied upon the general
government, except under the pressure
of extraordinary exigency and such has
been the practice down to Aug. 10,
1894. If the power to do SO is to be ex-
ercised as an ordinary and usual means
of supply, that fact furnishes an addi-
tional reason for circumspection in dis
posing of the present case.
7. That taxes on real estate belong
to the class Of direct taxes, and that the
taxes on the rent or income Of real es-
tate, which is the incident of its own
ership belong to the same class.
g.. That by no previous decision OF
this court has this question been adju-
Dictated to the contrary of the conclu-
sions now announced.
9. That so much Of the act Of Aug.
Is, 1894, as attempts to impose tax
upon the rent or income of real estate
without apportionment is invalid.
Yhe court is further Of opinion that
the act of Aug. Is, 1894, is invalid so
far as it attempts to levy a 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 sub
iects of federal taxation, nor is the in
come 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 a sensible influence on the contract,
and therefore such a tax is tax on
the power of the states and their instru-
mentatalities to borrow money, and
consequently repugnant to the constl-
tuition.
Upon each of the other petitions
argued at bar, to wit:
First-Whether the void provisions
as to rents and incomes from real estate
invalidates the whole act.
Second-Whether as to the income
from personal property as such, the act
is unconstitutional, as laying direct
taxes.
Third-Whether any part OF the tax,
if not considered as direct tax, is in
valid for want of uniformity on either
of the grounds suggested.
The justices who heard the argu-
ments are equally divided and there
fore no opinion is expressed.
The result is that the decree Of the
circuit court is reversed, and the case
remanded with directions to enter a
decree in favor of complainant in re-
spect only of 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 delivery of the opinion consumed
lust one hour. Chief Justice Fuller
began at 1906 and concluded at los.
He was followed by Justice Field, who
read the first dissenting opinion, speak
ing in a low tone that contrasted no.
ticeably with the loud delivery Of the
chief justice.
The decision applies to three cases,
the first of which was brought into
courts Of the District of Columbia by
John G.. Moore. to enioin the commits
sioner or internal revenue from the
collection of the income tax, while
the other two were those of Charles
Pollock versus the Farmers Loan
and Trust company, and Lewis
II. Hyde versus the Continental Trust
company. Both appealed from the de-
cision of the United States circuit court
for the Southern district of New York.