The Birmingham age-herald., 1905-12-05
PENSARIES MUST PAY FEDERAL TX Important Decision in South
 Carolina Case EFFECT IS FAR REACHING States Could Finally Assume All Busi- ness Ventures and Deprive Ma
 tionaI Government of
 All Revenue.


 All Revenue.
 Washington, December 1.-The supreme court of the United States today decided that the national government may prop erly tax the liquor dispensaries of Souh Carolina. The opinion was delivered by Justice Brewer in the case of the state of South Carolina vs. the United States. This action was instituted by the state of South Carolina to recover $20000 paid to the revenue officers of the national government on account of the sale of liquors by state and county dispensers under the dispensary law. The state took the position that as the dispensers sold liquor without profit they should not be taxed by the government but the tax has been collected since 1894.
 This is said to have been the first case in which a state mites in one undertak- ing the exercise of it's police power, to- gether with the prosecution of commercial business. The court of claims dismissed the petition on the ground the exercise of the police court was but thinly dis guised. holding that the real purpose was money-making, and this decision was sustained today The contention on behalf of the state that the United States is beyond the reach of state taxation, so is the state equally beyond the reach of United States taxation; that neither the property nor the agencies and instrument talities used by the state for the transac- tion of it's, business can be subjected to any burden of taxation by the United States. In support of the proceeding of the national authorities 1t was urged that while this may be true as to any strictly governmental functions, yet when the state engages in what was looked upon at the time of the adoption of the con stitution as a private business the indi- viduals acting for the state in the trans action of that business become amenahle to the taxing powers of the United States. The court sustains the latter conten- ton.
 Admitting that the delicate question of preserving the even balance between the national government and the state gov ernments was involved in the case, Jus tice Brewer laid down the general propo-  itation of the power of the general gov ernment to collect license taxes.
 Meant Power to Be Complete.
 Looking at the constitution in the light of the conditions surrounding it at the time of its adoption, 1t is obvious, he said that the framers in granting full power over license taxes to the national government meant that the power should be complete and never thought that the states by extending their functions could practically destroy 1t.
 .'rhe farmers of the constitution were not anticipating that state would att tempt to monopolize business heretofore may be noticed that the tax is not im- posed on any property belonging to the state, but is a charge of a business be- fore any profits are realized therefrom" '"
 Quoting various decisions, he deduced the following general conclusion:
 "These decisions while not controlling the question before us, indicate that the thought has been that the exemption of state agencies and instrumentalities from national taxation is limited to those which are of a strictly governmental character, and does not extend to those which are used by the state in the carrying on of an ordinary private business
 The opinion dwells at length upon the possible consequence of conceding the po- sition of South Carolina in the contro- versy as follows:
 'The right of South Carolina to control the sale of liquor by the dispensary sys- tenn has been sustained. The profits from the business in the year 1901 were over half a million dollars. Mingling the thought of profit with the necessity of regulation may induce the state to take possession in like manner of tobacco, oleomargarine and all other objects of internal revenue tax. If one state finds it thus profitable, other states may fol- low, and the whole body of internal rev enue tax be thus stricken down.
 Carried to Any Length. More than this, there is a large and growing movement in the country in fla vor of the acquisition and management by the public of what are termed public utilities including not merely the sup ply of gas and water, but also the entire railroad system. Would the state by talk ing into possession these public utilities lose it's representative form of govern ment?
 We may go even a step further There are some insisting that the state shall become the owner of all property and the manager of all business. Of course this is an extreme view. but it's advocates are earnestly contending that thereby the best interests of all citizens will be subserved. If this change should be made in any state, how much would that state contri- bute to the revenue of the national gov ernment? If this extreme action is not to be counted among the probabilities, con slider the result of one much less so. Sup pose a state assumes under it's police power the control of all those matters subject to the internal revenue tax. and also engages in the business of importing all foreign goods The same argument which would exempt the sale by state of liquor, tobacco. etc from license tax, would exempt the importation of mer- chandise by a state from import duty, While the state might not prohibit inn portations, as 1t can the sale of liquor by private individuals. yet paying no i'm port duty it could undersell all individ- uals and so monopolize the importation and sale of foreign goods.
 Obviously if the power of the state Is carried to the extent suggested and at the same time relieved from all federal taxation, the national government would be largely exercising their powers to the full extent, 1t would be almost impossible for the nation to collect any revenues. In other words in this indirect way it would be within the competnecy of the states to practically destroy the efficiency of the national government"
 Justices White, Peckham and McKenna dissented.
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 AmbroSia Flour.
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