The morning news. [volume] (Savannah, Ga.) 1887-1900, 1895-04-09
FLAWS IN THEI INCOME TAX LAW
THE SUPREME COURT FINDS SOME
OF ITS PROVISIONS ILLEGAL.

Provided Tor IN the Present Law
VncOnstitutfOnaI-T Taxation of
state and Municipal Bonds Also
UncOnstftutiOnaI-T Dfscrimina-
lions in the Law Also PaIpabIe
Violations of the Constitutions In
tent.
Washington, April S-The announcement
Of the decision of the supreme court of
the United States in the income tax cases
to-day was made in the presence of a
crowded court room. the spectators lob
by being thronged to its utmost capacity.
Public interest in the case has drawn an
attendance every decision day since the ar
gument took place that has taxed the
power and ingenuity of the officials to
care for. Among those within the rail
to-day were Attorney General Oiney. AS
sistant Attorney General Whitney and W.
d. Guthrie of New York, who took part in
the argument; J. NJ. Wilson of Washing
ton Of the counsel for j. G. Moore. who
sought an injunction to restrain Internal
Revenue Commissioner Miller from pro-
ceeding to carry out the law; Senator
David B. Hill of New York, who so per-
sistently fought the insertion of the
tax provision in the tariff law; ex-Secre-
tary of the Treasury Boutwell,; r. B.
Bowler. comptroller of the treasury; Sen
ators Mitchell and Hunton, ex-Attorney
General Garland. Hon. George C. Cor
man, and a great number of attorneys
more or less interested in the action of the
court.
The members of the court, except Mr..
Associate Justice Jackson, entered the
chamber promptly at noon. A few cases
Of minor Importance were disposed of and
the chief justice announced that at the
conclusion Of the sitting on Thursday the
court would adjourn over Good Friday.
and read several orders Of the court, af-
ter which the great cause Of the day
was read by him. He said. amidst an al
most painful stiffness:
Il am charged with the duty of an
nouncing the opinion and judgment of
the court in the case of Charles Pollock
VS., the Farmers Loan and Trust Company
ct al"
The conclusions of the court were stated
10 be as follows:
l. That by the constitution federal tax
ation is divided into two great classes:
cises
That the imposition of direct taxes
Is governed by the rule of apportlonment
among the several states according to
numbers, and the imposition of duties,
lmposts and exeises by the rule of uni
4oImlty throughout the United States.
d That the principal that taxation and
representation go togther was intended
70 be, and was prescribed in the constitu-
uoh by the establishment OF the rule of
apportlonment among the several states,
so that such apportionment should be
according to numbers in each state.
L. That the states surrendered their
power to levy imposts and to regulate
commerce to the general government, and
II gave the concurrent power to levy
Afforded by the rules prescribed, and that
the compromises of the constitution can
not be disturbed by legislative action.
5. That these conclusions result from
the text of the constitution and are sup
ported by the historical evidence fur
ing the framing and adoption Of that
instrument, and the views of those who
framed and adopted it.
6. That the understanding and expecta-
tion at the time of the adoption Of the
constitution 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 Is, 1894. If the power to
do so is to be exercised as an ordinary
and unusual means of supply, that fact
furnishes an additional reason for cir
eumspection In disposing of the present
case.
Z. 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 it's ownership,
belong TO the same class.
8. That by no previous decision of this
court has this question been adjudicated
10 the contrary of the conclusions now
announced. That so much of the act of
August 15 1894. as attempts to impose a
tax upon the rent or income of real estate
without apportionment 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 in
come derived from municipal bonds. AS
q municipal corporation is the representa-
tive of the state and one of the instru-
mentaAties of the state government the
property and revenues of municipal cor
porations are not the 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 a sensible in
ftuence on the contract, and therefore,
such tax is a tax on the power of the
state and their instrumentalities to bor-
row money, and consequently repugnant to
the constitution.
Upon each of the other questions argued
at the bar to-wit
l. Whether the void provisions as to
rents and income from real estate invali-
date the whole act?
2. Whether as to the income from per-
sonal property as such, the act is unconsti-
tutonal as laying direct taxes?
3. 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 justices who heard the argument
Ion Is expressed.
The result is that the decree of the cir
cult court is reversed and the cause re-
manded, with directions to enter a decree
IN favor of the complainant in respect only
OF the voluntary payment of the tax on
me rents and income of its real estate and
mat which it holds in trust, and on the
income from the municipal bonds owned
or so held by it.
The chief justice said that the jurfdic-
uon OF courts of equity to prevent diver
sion of funds by breach of trust, or il
legal payments of the funds, had been
frequently affirmed by the court The
question was not raised in the court be-
low, but had been explicitly waived on
the argument of the case, and the court
ielt justified in proceeding to a decision
OF the case on its merits. He said that
the power TO decide a law unconstitutional
was used with reluctance. but the respon-
sibility could not be evaded when the
necessity arose. The contentious respect
ing this law were: a That tax on rents
was a tax on real estate, and that not be-
ing laid according to apportionment il
was invalid; (2) That IL was not uniform
and a violation of the constitutional re-
qutrement that such taxes shall be laid
with uniformity. Under this head came
the exceptions in favor Of those persons
who We're not in possession Of an income
OF $4,000; Of mutual insurance companies,
savings banks, and partnerships, all or