New-York tribune., 1910-01-06

In order that a market may be provided for
state bonds, and for municipal bonds, and
that thus means may be afforded for state
sno local administration. such securities
from time to time excepted from taxa
uon In this way lower rates of interest
are paid than otherwise would be possihle
10 permit such securities to be the subject
oI FEDERAL taxation is to place such limita-
uons upon the borrowing power of the
state as to make the performance of the
tunctions of local government a matter of
This has been repeatedly recognized. In
the case of The Collector agt Day III
van, On p. I'D. decided in 1870 the United
states supreme Court said:
1T Is admitted that there is no express
provision In the Constitution that prohibits
the general government from taxing the
means and instrumentalities of the states
nor is there any prohibiting the states from
taxing the means and instrumentalities of
that government. In both cases the exemp-
tion rests upon necessary Implication. and
is upheld by the great law of self-preserva-
ton; as any government whose means are
employed in conducting its operations, il
SUBJECT TO the control or another and dis
tinct government, can exist only at the
mercy Of that government. of what avail
are these means If another power mayytax
them al discretion"
In the case OF Pollock agt Farmers Loan
d Trust Co Q57 u. s.. on pp. 6S4-0, Chief
Justice Fuller said. referring to the tax,
upon incomes from municipal bonds, one OF
the matters there involved:
"A municipal corporation is the repre-
sentative of the state and one of the in
strumentalities OF the state government II
was long ago determined that the prop
erty and revenues of municipal corpora
tons are not subjects of federal taxation.
But we think the same want OF
power to tax the property or revenues OF
the states or their instrumentalities exists
IN IA relation 70 a tax on the income from
IN the same case Mr.. Justice Field said
I'D. On p. GOD:
These bonds and securities are as i'm
portant 10 the performance OF the duties
OF the state like bonds and securities of
the United States are important to the per-
formance OF their duties, and are as ex-
empt from the taxation of the United
states as the former are exempt from the
taxation OF the states.''
And the learned justice added quoting
% pany az Ws on pp sa 5 alrGoa as foows
The right of the states to administer
their own affairs through their legislative,
executive and judicial departments, in their
own manner through their own agencies. is
conceded by the uniform decisions of this
court. and by the practice OF the federal
carries with IL an exemption OF those agen-
Cies and instruments from the taxing power
taxed lightly, they may be taxed heavily:
II justly, oppressively. Their operation may
be inpeded and may be destroyed If any
interference is permitted. Hence, the be-
ginning Of such taxation is not allowed on
the one side, is not claimed on the other"
MUNICIPAL BONDS EXCLUDED.
While the justices of the court in the
Pollock case differed in opinion upon the
question whether a tax upon income from
property was a direct tax and as such
could not be laid without apporti 1nment,
they were unanimous in their conclusion
that no federal tax could be laid upon the
income from municipal bonds. MIR. Justice
White, who dissented in the Pollock case
with regard to other questions. as 10 this
said 90. S, on D. 652):
The authorities cited in the opinion are
decisive of this question. They are rele
want to one case and not TO the other,
power in the federal government to tax.
the only controversy being whether the
tax imposed is direct or Indirect: while
in the other there is no power whatever
in the federal government, and, therefore,
the levy, whether direct or indirect, is
beyond the taxing power"
II is certainly significant that the words,
from whatever source derived" have
been introduced into the proposed amend
1t impossible for the claim to be urged
that the income from any property, even
though it consist of the bonds OF the state
sf OF municipality organized by II, VIII
be removed from the reach of the taxing
power Of the federal government.
The immunity from federal taxation that
the state and its instrumentanties of
government now enjoy is derived not from
any express provision OF the the @ feoeraL as Gon1
to be necessary implication. Who can say
that any such implication with respect to
the proposed tax viii survive the adoption
OF this explicit and comprehensive amend
E:ent?
We cannot suppose that Congress will
not seek to tax incomes derived from
securities issued by the state and its
municipalities. 1t has repeatedly en-
deavored to lay such taxes and its efforts
have been defeated only by implied con-
stitutional restriction which this amend
ment threatens to destroy While We may
desire that the federal government may be
equipped with all necessary national
powers in order that IL may perform it's
national function, we must he equally
solicitous to secure the essential bases OF
state government
therefore deem II my duty as Governor
OF the state, TO recommend that this pro-
posed amendment should not be ratified.
CHARLES E. HUGHES.
Albany, Jan. 3. 1910