Source: https://caselaw.findlaw.com/us-supreme-court/301/308.html
Timestamp: 2019-04-20 01:25:56+00:00

Document:
[301 U.S. 308, 310] Mr. Alfred Bettman, of Cincinnati, Ohio, for petitioner Cincinnati soap co.
Mr. Frederick H. Wood, of New York City, for petitioner Haskins Bros . & Co.
Mr. Robert H. Jackson, Asst. Atty. Gen., for respondents.
Both petitioners are engaged in manufacturing soap and, at times stated in their petitions, used in its manufacture large quantities of coconut oil wholly the product of the Philippine Islands. In pursuance of section 602 1/2, they made returns and paid the amount of the tax as required by that section. Subsequently, each of them filed with the Bureau of Internal Revenue a claim for the refund of the tax, on the ground that the imposition was not within the constitutional power of Congress. Both claims were denied, and petitions at law were filed in federal district courts to recover the sums paid. Demurrers were interposed attacking the sufficiency of the petitions, and these demurrers were sustained by the trial courts. Appeals were taken to the respective circuit courts of appeal named in the title; and we granted writs of certiorari before a hearing or submission in those courts, because of the importance to the Philippine Islands of an early final decision of the question. Cincinnati Soap Co. v. United States, 300 U.S. 649 , 57 S.Ct. 493, 81 L.Ed. --; Haskins Bros. & Co. v. O'Malley, 300 U.S. 649 , 57 S.Ct. 494, 81 L.Ed. --.
The validity of the tax is assailed by petitioners upon a variety of grounds, developed at length in their respective briefs and by the oral arguments at the bar. So far as we find it necessary to consider the various contentions, they may be stated in general terms as follows: That the tax is not imposed for any purpose contemplated by the taxing clause of section 8, art. 1, of the Federal Constitution-that is to say, it is not imposed to pay the debts or provide for the common defense or general welfare of the United States; that, on the contrary, it is imposed for a purely local purpose, in violation of the Tenth Amendment; that the exaction violates the due process clause of the Fifth Amendment, because it is an arbitrary exaction from one group of persons for the exclusive benefit [301 U.S. 308, 312] of another; that the act does not impose a true tax, but is a regulatory measure outside the field of federal power; that it violates clause 7, 9, of art. 1 of the Constitution, which provides that 'No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law'; that the payment in bulk of the entire proceeds of the tax to the Philippines, with no direction as to the expenditure thereof, constitutes an unlawful delegation of legislative power. In dealing with these contentions, we find it convenient to do so without following the precise order in which they have just been stated. And certain of them are so interrelated that they may be joined for consideration in the same subdivision of the opinion which follows.
First. Plainly, the imposition of the tax in itself is a valid exercise of the taxing power of the federal government. It is purely an excise tax upon a manufacturing process for revenue purposes, and in no sense a regulation of the process itself. The Tenth Amendment is without application, since the powers of the several states over local affairs are not invaded or involved. This is disclosed upon the face of the act so clearly that discussion could not make it plainer. United States v. Butler, 297 U.S. 1 , 56 S.Ct. 312, 102 A.L.R. 914, relied upon by petitioner, is not in point. There we held that the sole aim of the statute, as shown by its terms, was to regulate a local situation, a matter wholly within the reserved powers of the states; and moreover that it amounted to a naked taking of the property of one group of persons for bestowal upon another group. The Child Labor Tax Case, 259 U.S. 20 , 42 S. Ct. 449, 21 A.L.R. 1432, and other cases cited, bear still more remotely upon the contention. It is enough to say that the feature of the present case which differentiates it from all those cited is that the exaction here, both in form and substance, is a true tax, imposed, as we presently shall show, for a [301 U.S. 308, 313] federal constitutional purpose. In that view the due process clause of the Fifth Amendment is not involved.
We inquire first: Is the proposed appropriation to the Philippine Treasury for a constitutional purpose? since an affirmative answer to that question will establish the constitutional purpose of the tax. The pertinent taxing clause provides in general terms (article 1, 8, cl. 1) that taxes may be laid 'to pay the Debts and provide for the common Defence and general Welfare of the United States.' Primarily, and in a very high degree, whether a tax serves any of these purposes is a practical question addressed to the lawmaking department. And it will require a very plain case to warrant the courts in setting aside the conclusion of Congress in that regard. Compare Nicol v. Ames, 173 U.S. 509 , 514-516, 19 S.Ct. 522. Nevertheless, such plain cases may exist; and the question is whether this is one of them.
The Philippine Islands and their inhabitants, from the beginning of our occupation, have borne a peculiar [301 U.S. 308, 314] relation to the United States. The Islands constitute a dependency over which the United States, for more than a generation, has had and exercised supreme power of legislation and administration, Posadas v. National City Bank, 296 U.S. 497, 502 , 56 S.Ct. 349, 351, a power limited only by the terms of the treaty of cession and those principles of the Constitution which by their nature are inherently inviolable. The possession of this well-nigh absolute power over a dependent people carries with it great obligations, as was pointed out by Mr. Root as Secretary of War in 1899. After referring to the practically unlimited power which we had over the Philippines, he said: 'I assume, also, that the obligations correlative to this great power are of the highest character, and that it is our unquestioned duty to make the interests of the people over whom we assert sovereignty the first and controlling consideration in all legislation and administration which concerns them, and to give them, to the greatest possible extent, individual freedom, self-government in accordance with their capacity, just and equal laws, and opportunity for education, for profitable industry, and for development in civilization.' Military and Colonial Policy of the United States, 161, 162.
Later decisions of this court have followed that view. United States v. Cook, 257 U.S. 525 , 42 S.Ct. 200; Marion & R.V. Ry. Co. v. United States, 270 U.S. 280, 284 , 46 S.Ct. 253, 255. The determination of Congress to recognize the moral obligation of the nation to make an appropriation as a requirement of justice and honor, is obviously a matter of policy and discretion not open to judicial review unless in circumstances which here we are not able to find. United States v. Realty Co., supra, 163 U.S. 427 , at page 444, 16 S.Ct. 1120.
It does not follow that because a federal tax levied for the express purpose of paying the debts or providing for the welfare of a state might be invalid (Passenger Cases (Smith v. Turner), 7 How. 283, 446) that such a tax for the uses of a territory or dependency would likewise be invalid. A state, except as the federal Constitution otherwise requires, is supreme and independent. It has its own government, with full powers of taxation and full power to appropriate the revenues derived therefrom. A dependency has no government but that of the United States, except in so far as the United States may permit. The national government may do for one of its dependencies whatever a state might do for itself or one of its political subdivisions, since over such a dependency the nation possesses the sovereign powers of the general government plus the powers of a local or a state government in all cases where legislation is possible. Compare Stoutenburgh v. Hennick, 129 U.S. 141, 147 , 9 S.Ct. 256; National Bank v. County of Yankton, 101 U.S. 129 , 133; Late Corporation of the Church of Jesus Christ, etc., v. United States, 136 U.S. 1, 42 , 10 S.Ct. 792; Utter v. Franklin, 172 U.S. 416, 423 , 19 S.Ct. 183. To say that the federal government, with such practically unlimited powers of legislation in respect of a dependency, is yet [301 U.S. 308, 318] powerless to appropriate money for its needs, is to deny-what the foregoing considerations forbid us to deny-that the United States has, in that regard, the equivalent power of a state in comparable circumstances.
This was followed, March 5, 1901, by a cable from the Secretary of War to the Philippine Commission containing the following laconic order: 'Until further orders government will continue under existing instructions and orders.' Report, Secretary of War, 1901, p. 54. The comprehensive Spooner Amendment, and these instructions and orders, virtually constituted for many months the charter of government for the Philippine Islands. In 1902, Congress provided for a complete system of civil government under the original Philippine Organic Act (32 Stat. 691). By degrees, the active powers of the dependency have been enlarged, and those of the federal government decreased. But the authority which conferred additional power might at any time have withdrawn it. This brief resume demonstrates both the completeness and flexibil- [301 U.S. 308, 319] ity of the national power over the Philippines, and the high character of the moral obligations which the possession of such power correlatively imposes. With the extension of power to the islands, our moral obligations may have grown less; but whether, or to what extent, this has been the case is a question for the determination of the political departments of the government.
But it is contended that the passage of the Philippine Independence Act of March 24, 1934, c. 84, 48 Stat. 456 (48 U.S.C.A. 1231 et seq.), and the adoption and approval of a constitution for the Commonwealth of the Philippine Islands have created a different situation; and that since then, whatever may have been the case before, the United States has been under no duty to make any financial contribution to the islands. Undoubtedly, these acts have brought about a profound change in the status of the islands and in their relations to the United States; but the sovereignty of the United States has not been, and, for a long time, may not be, finally withdrawn. So far as the United States is concerned, the Philippine Islands are not yet foreign territory. By express provision of the Independence Act, we still retain powers with respect to our trade relations with the islands, with certain exceptions set forth particularly in the act. We retain powers with respect to their financial operations and their currency; and we continue to control their foreign relations. The power of review by this court over Philippine cases, as now provided by law, is not only continued, but is extended to all cases involving the Constitution of the Commonwealth of the Philippine Islands.
Thus, while the power of the United States has been modified, it has not been abolished. Moral responsibilities well may accompany the process of separation from this country; and, indeed, they may have been intensified by the new and perplexing problems which the Phil- [301 U.S. 308, 320] ippine people now will be called upon to meet as one of its results. The existence and character of the consequent obligations and the extent of the relief, if any, which should be afforded by the United States in respect of them, are matters, not for judicial but for congressional consideration and determination.
It is not improbable that a failure to exercise control over imports from the Philippines would injuriously affect the industries of this country; and, on the other hand, an exercise of the power to tax imports might prove injurious to the people of the islands. Congress, in passing the legislation here under consideration, is not forbidden to balance these respective probabilities. The tax itself, it is said, was imposed for the purpose of protecting certain industries in this country; and it is challenged on that ground. That Congress has power to levy a tax with the collateral purpose of thereby protecting the industries of the United States is no longer open to doubt. Hampton & Co. v. United States, 276 U.S. 394, 411 , 48 S.Ct. 348, 352. But, in exercising the power here with that purpose, Congress may have concluded that it would thereby impose a hardship upon the Philippines which it was the moral duty of Congress to redress so far as possible. In that situation, we see no constitutional objection to a discharge of the duty by the appropriation of an amount equivalent to the tax in order to offset the anticipated burden. Certainly, this court cannot judicially declare that justice and fair dealing in respect of a people, not yet completely independent of our authority, does not warrant such action.
Nor do we see any objection to the plan because the payment of the funds is subject to the condition that the Philippine Government shall not provide for any subsidy to be paid to the Philippine producers of coconut oil and the other products named in section 602 1/2 of the act. [301 U.S. 308, 321] It is perfectly plain that since Congress may levy the tax with the collateral purpose of protecting the industries of this country, it may in appropriating the proceeds put such restriction upon their use as will prevent the purpose from being nullified. This, we think, is the aim and the effect of the proviso.
Fourth. The contention that there has been no constitutional appropriation, or that any attempted appropriation is bad, because the particular uses to which the appropriated money are to be put have not been specified, is without merit. The provision of the Constitution ( clause 7, 9, art. 1) that, 'No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law,' was intended as a restriction upon the disbursing authority of the Executive department, and is without significance here. It means simply that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress. Reeside v. Walker, 11 How. 272, 291; 2 Story on the Constitution (4th Ed.) 1348, 1349; 1 Willoughby on the Constitution, 63, p. 105. We deem it unnecessary to elaborate the point. The petitions for certiorari, filed in January of the present year, inform us that none of the proceeds of the tax in question has been transmitted to the Philippine Treasury. Evidently the moneys in the form of a trust fund, as the government asserts, are still in the Treasury of the United States. If Congress has not made an appropriation, it may still do so (Head Money Cases (Edye v. Robertson), 112 U.S. 580 , 599-600, 5 S.Ct. 247); and, all other considerations aside, the interjection of the question into the present cases is premature.
But all this aside, the important point is that Congress was here dealing with a dependency for which it had provided a complete system of government to administer the affairs of a population for whose welfare the United States was under a high degree of moral responsibility, as we already have seen. The proceeds of the tax under consideration are to be paid into the treasury of a government which Congress itself thus created, to be expended by that government, except as the act otherwise directs, in accordance with its judgment as to specific necessities. The congressional power of delegation to such a local government is and must be as comprehensive as the [301 U.S. 308, 323] needs. Compare United States v. Heinszen & Co., 206 U.S. 370, 384 , 385 S., 27 S.Ct. 742, 11 Ann.Cas. 688. In dealing with the territories, possessions and dependencies of the United States, this nation has all the powers of other sovereign nations, and Congress in legislating is not subject to the same restrictions which are imposed in respect of laws for the United States considered as a political body of states in union. Dorr v. United States, 195 U.S. 138, 140 , 142 S., 24 S.Ct. 808, 1 Ann.Cas. 697.
Congress has power to create a local legislature for the Philippines; and it has done so. Congress has power to authorize the legislature to impose taxes for all the lawful needs of the islands, and to appropriate the proceeds for such uses and in such amounts as the legislature may determine (compare Leitensdorfer v. Webb, 20 How. 176, 182); and this it has done. Congress has power to appropriate the moneys here in question, and cause them to be paid from the national treasury into the Treasury of the Philippine Islands; and for this it has provided. It would result in a strange anomaly now to hold that Congress had power to devolve upon the Philippine Government the authority to appropriate revenue derived from local taxation as the government saw fit, but that Congress was without power to confer similar authority in respect of moneys which lawfully will come into the Philippine Treasury from the Treasury of the United States or from other sources apart from taxation. It is true, as already appears, that the uses to which the money is to be put are not specified. But in all instances where funds shall come into the Philippine Treasury, we may indulge the presumption, in favor of a responsible and duly-constituted legislative body, that the funds will be appropriated for public purposes and not for private uses.
Whether the payment to the Philippines of the large sums of money which will flow from this tax is unwarranted in fact; whether the present or prospective needs [301 U.S. 308, 324] of the islands require it; and other queries directly or indirectly challenging the wisdom or necessity of the congressional action, are all matters, as we repeatedly have pointed out, with which the courts have nothing to do. We find the legislation to be free from constitutional infirmity; and there both our power and responsibility end.
[ Footnote * ] Act March 8, 1902, c. 140, 32 Stat. 54; Act Aug. 5, 1909, c. 6, 36 Stat. 11, 84, 85; Act Oct. 3, 1913, c. 16, 38 Stat. 114, 193; Act Sept. 21, 1922, c. 356, 42 Stat. 858, 935; Act of June 17, 1930, c. 497, 46 Stat. 590, 686, 26 U.S.C.A. 1463 and note.

References: v. 
 v. 
 art. 1
 art. 1
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 art. 1
 v. 
 v. 
 v. 
 v. 
 v.