Source: https://en.wikisource.org/wiki/Pollock_v._Farmers%27_Loan_Traust_Company/Dissent_White
Timestamp: 2015-09-02 12:59:55
Document Index: 134680733

Matched Legal Cases: ['§ 3226', '§ 3224', '§ 3224', '§ 2', '§ 8', '§ 9', '§ 9']

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Pollock v. Farmers' Loan Traust Company/Dissent White
< Pollock v. Farmers' Loan Traust Company
Pollock v. Farmers' Loan Traust Company/Dissent White by Edward Douglass White
1187895Pollock v. Farmers' Loan Traust Company/Dissent White — DissentEdward Douglass White
My brief judicial experience has convinced me that the custom of filing long dissenting opinions is one 'more honored in the breach than in the observance.' The only purpose which an elaborate dissent can accomplish, if any, is to weaken the effect of the opinion of the majority, and thus engender want of confidence in the conclusions of courts of last resort. This consideration would impel me to content myself with simply recording my dissent in the present case, were it not for the fact that I consider that the result of the opinion just announced is to overthrow a long n d consistent line of decisions, and to deny to the legislative department of the government the possession of a power conceded to it by universal consensus for 100 years, and which has been recognized by repeated adjudications of this court. The issues presented are as follows:
Complainant, as a stockholder in a corporation, avers that the latter will voluntarily pay the income tax, levied under the recent act of congress; that such tax is unconstitutional; and that its voluntary payment will seriously affect his interest by defeating his right to test the validity of the exaction, and also lead to a multiplicity of suits against the corporation. The prayer of the bill is as follows: First, that it may be decreed that the provisions known as 'The Income Tax Law,' incorporated in the act of congress passed August 15, 1894, are unconstitutional, null, and void; second, that the defendant be restrained from voluntarily complying with the provisions of that act by making its returns and statements, and paying the tax. The bill, therefore, presents two substantial questions for decision: The right of the plaintiff to relief in the form in which he claims it, and his right to relief on the merits.
The decisions of this court hold that the collection of a tax levied by the government of the United States will not be restrained by its courts. Cheatham v. U.S., 92 U.S. 85; Snyder v. Marks, 109 U.S. 189, 3 Sup. Ct. 157. See, also, Elliott v. Swartwout, 10 Pet. 137; City of Philadelphia v. Collector, 5 Wall. 720; Hornthal v. Collector, 9 Wall. 560. The same authorities have established the rule that the proper course, in a case of illegal taxation, is to pay the tax under protest or with notice of suit, and then bring an action against the officer who collected it. The statute law of the United States, in express terms, gives a party who has paid a tax under protest the right to sue for its recovery. Rev. St. § 3226.
The act of 1867 forbids the maintenance of any suit 'for the purpose of restraining the assessment or collection of any tax.' The provisions of this act are now found in Rev. St. § 3224.
The complainant's attempt to establish a right to relief upon the ground that this is not a suit to enjoin the tax, but one to enjoin the corporation from paying it, involves the fallacy already pointed out,-that is, that a party can exercise a right indirectly which he cannot assert directly,-that he can compel his agent, through process of this court, to violate an act of congress.
The rule which forbids the granting of an injunction to restrain the collection of a tax is founded on broad reasons of public policy, and should not be ignored. In Cheatham v. U.S., supra, which involved the vaildity of an income tax levied under an act of congress prior to the one here in issue, this court, through Mr. Justice Miller, said:
'If there existed in the courts, state or national, any general power of impeding or controlling the collection of taxes, or relieving the hardship incident to taxation, the very existence of the government might be placed in the power of a hostile judiciary. Dows v. City of Chicago, 11 Wall. 108. While a fe e course of remonstrance and appeal is allowed within the departments before the money is finally exacted, the general government has wisely made the payment of the tax claimed, whether of customs or of internal revenue, a condition precedent to a resort to the courts by the party against whom the tax is assessed. In the internal revenue branch it has further prescribed that no such suit shall be brought until the remedy by appeal has been tried; and, if brought after this, it must be within six months after the decision on the appeal. We regard this as a condition on which alone the government consents to litigate the lawfulness of the original tax. It is not a hard condition. Few governments have conceded such a right on any condition. If the compliance with this condition requires the party aggrieved to pay the money, he must do it.'
Again, in State Railroad Tax Cases, 92 U.S. 575, the court said:
'That there might be no misunderstanding of the universality of this principle, it was expressly enacted, in 1867, that 'no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.' Rev. St. § 3224. And, though this was intended to apply alone to taxes levied by the United States, it shows the sense of congress of the evils to be feared in courts of justice could, in any case, interfere with the process of collecting the taxes on which the government depends for its continued existence. It is a wise policy. It is founded in the simple philosophy derived from the experience of ages, that the payment of taxes has to be enforced by summary and stringent means against a reluctant and often adverse sentiment; and, to do this successfully, other instrumentalities and other modes of procedure are necessary than those which belong to courts of justice. See Cheatham v. Norvell, decided at this term; Nichols v. U.S., 7 Wall. 122; Dows v. City of Chicago, 11 Wall. 108.'
The contention that a right to equitable relief arises from the fact that the corporator is without remedy, unless such relief be granted him, is, I think, without foundation. This court has repeatedly said that the illegality of a tax is not ground for the issuance of an injunction against its collection, if there be an adequate remedy at law open to the payer (Dows v. City of Chicago, 11 Wall. 108; Hannewinkle v. Georgetown, 15 Wall. 547; Board v. McComb, 92 U.S. 531; State Railroad Tax Cases, 92 U.S. 575; Union Pacific Ry. Co. v. Cheyenne, 113 U.S. 516, 5 Sup. Ct. 601; Milwaukee v. Koeffler, 116 U.S. 219, 6 Sup. Ct. 372; Express Co. v. Seibert, 142 U.S. 339, 12 Sup. Ct. 250), as in the case where the state statute, by which the tax is imposed, allows a suit for its recovery after payment under protest (Shelton v. Platt, 139 U.S. 591, 11 Sup. Ct. 646; Allen v. Car Co., 139 U.S. 658, 11 Sup. Ct. 682).
Will it be said that, although a stockholder cannot have a corporation enjoined from paying a state tax where the state statute gives him the right to sue for its recovery, yet when the United States not only gives him such right, but, in addition, forbids the issue of an injunction to prevent the payment of federal taxes, the court will allow to the stockholder a remedy against the United States tax which it refuses against the state tax?
The assertion that this is only a suit to prevent the voluntary payment of the tax suggests that the court may, by an order operating directly upon the defendant corporation, accomplish a result which the statute manifestly intended should not be accomplished by suit in any court. A final judgment forbidding the corporation from paying the tax will have the effect to prevent its collection, for it could not be that the court would permit a tax to be collected from a corport ion which it had enjoined from paying. I take it to be beyond dispute that the collection of the tax in question cannot be restrained by any proceeding or suit, whatever its form, directly against the officer charged with the duty of collecting such tax. Can the statute be evaded, in a suit between a corporation and a stockholder, by a judgment forbidding the former from paying the tax, the collection of which cannot be restrained by suit in any court? Suppose, notwithstanding the final judgment just rendered, the collector proceeds to collect from the defendant corporation the taxes which the court declares, in this suit, cannot be legally assessed upon it. If that final judgment is sufficient in law to justify resistance against such collection, then we have a case in which a suit has been maintained to restrain the collection of taxes. If such judgment does not conclude the collector, who was not a party to the suit in which it was rendered, then it is of no value to the plaintiff. In other words, no form of expression can conceal the fact that the real object of this suit is to prevent the collection of taxes imposed by congress, notwithstanding the express statutory requirement that 'no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.' Either the decision of the constitutional question is necessary or it is not. If it is necessary, then the court, by way of granting equitable relief, does the very thing which the act of congress forbids. If it is unnecessary, then the court decides the act of congress here asserted unconstitutional, without being obliged to do so by the requirements of the case before it.
'(1) Representatives and direct taxes shall be apportioned among the several states, which may be included within this Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years and excluding Indians not taxed, three-fifths of all other persons.' Article 1, § 2, cl. 3. The fourteenth amendment modified this provision, so that the whole number of persons in each state should be counted, 'Indians not taxes' excluded.
'(2) The congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defence and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States.' Article 1, § 8, cl. 1.
'(3) No capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.' Article 1, § 9, cl. 4.
'(4) No tax or duty shall be laid on articles exported from any state.' Article 1, § 9, cl. 5.
It has been suggested that, as the above provisions ordain the apportionment of direct taxes, and authorize congress to 'lay and collect taxes, duties, imposts, and excises,' therefore there is a class of taxes which are neither direct, and are not duties, imposts, and excises, and are exempt from the rule of apportionment on the one hand, or of uniformity on the other. The soundness of this suggestion need not be discussed, as the words, 'duties, imposts, and excises,' in conjunction with the reference to direct taxes, adequately convey all power of taxation to the federal government.
It is not necessary to pursue this branch of the argument, since it is unquestioned that the provisions of the constitution vest in the United States plenary powers of taxation; that is, all the powers which belong to a government as such except that of taxing exports. The court in this case so says, and quotes approvingly the language of this court, speaking through Mr. Chief Justice Chase, in License Tax Cases, 5 Wall. 462, as follows:
'It is true that the power of congress to tax is a very extensive power. It is given in the constitution with only one exception and only two qualifications. Congress cannot tax exports, and it must impose direct taxes by the rule of apportionment, and indirect taxes by the rule of uniformity. Thus limited, and thus only, it reaches every subject and may be exercised at discretion.'
In deciding, then, the question of whether the income tax violates the constitution, we have to determine, not the existence of a power in congress, but whether an admittedly unlimited power to tax (the income tax not being a tax on exports) has been used according to the restrictions, as to methods for its exercise, found in the constitution. Not power, it must be borne in mind, but the manner of its use, it the only issue presented in this case. The limitations in regard to the mode of direct taxation imposed by the constitution are that capitation and other direct taxes shall be apportioned among the states according to their respective numbers, while duties, imposts, and excises must be uniform throughout the United States. The meaning of the word 'uniform' in the constitution need not be examined, as the court is divided upon that a subject, and no expression of opinion thereon is conveyed or intended to be conveyed in this dissent.
In considering whether we are to regard an income tax as 'direct' or otherwise, it will, in my opinion, serve no useful purpose, at this late period of our political history, to seek to ascertain the meaning of the word 'direct' in the constitution by resorting to the theoretical opinions on taxation found in the writings of some economists prior to the adoption of the constitution or since. These economists teach that the question of whether a tax is direct or indirect depends not upon whether it is directly levied upon a person, but upon whether, when so levied, it may be ultimately shifted from the person in question to the consumer, thus becoming, while direct in the method of its application, indirect in its final results, because it reaches the person who really pays it only indirectly. I say it will serve no useful purpose to examine these writers, because, whatever may have been the value of their opinions as to the economic sense of the word 'direct,' they cannot now afford any criterion for determining its meaning in the constitution, inasmuch as an authoritative and conclusive construction has been given to that term, as there used, by an interpretation adopted shortly after the formation of the constitution by the legislative department of the government, and approved by the executive; by the adoption of that interpretation from that time to the present without question, and its exemplification and enforcement in many legislative enactments, and its acceptance by the authoritative text writers on the constitution; by the sanction of that interpretation, in a decision of this court rendered shortly after the constitution was adopted; and finally by the repeated reiteration and affirmance of that interpretation, so that it has become imbedded in our jurisprudence, and therefore may be considered almost a part of the written constitution itself.
In 1794 (1 Stat. 373, c. 45) congress levied, without reference to apportionment, a tax on carriages 'for the conveyance of persons.' The act provided 'that there shall be levied, collected, and paid upon all carriages for the conveyance of persons which shall be kept by, or for any person for his or her own use, or to be let out to hire, or for the conveying of passengers, the several duties and rates following'; and then came a yearly tax on every c oach, chariot, phaeton, and coachee, every four-wheeled and every two-wheeled top carriage, and upon every other two-wheeled carriage,' varying in amount according to the vehicle.
The debates which took place at the passage of that act are meagerly preserved. It may, however, be inferred from them that some considered that whether a tax was 'direct' or not in the sense of the constitution depended upon whether it was levied on the object or on its use. The carriage tax was defended by a few on the ground that it was a tax on consumption. Mr. Madison opposed it as unconstitutional, evidently upon the conception that the word 'direct' in the constitution was to be considered as having the same meaning as that which had been attached to it by some economic writers. His view was not sustained, and the act passed by a large majority,-49 to 22. It received the approval of Washington. The congress which passed this law numbered among its members many who sat in the convention which framed the constitution. It is moreover safe to say that each member of that congress, even although he had not been in the convention, had, in some way, either directly or indirectly, been an influential actor in the events which led up to the birth of that instrument. It is impossible to make an analysis of this act which will not show that its provisions constitute a rejection of the economic construction of the word 'direct,' and this result equally follows, whether the tax be treated as laid on the carriage itself or on its use by the owner. If viewed in one light, then the imposition of the tax on the owner of the carriage, because of his ownership, necessarily constituted a direct tax under the rule as laid down by economists. So, also, the imposition of a burden of taxation on the owner for the use by him of his own carriage made the tax direct according to the same rule. The tax having been imposed without apportionment, it follows that those who voted for its enactment must have give to the word 'direct,' in the constitution, a different significance from that which is affixed to it by the economists referred to.
The validity of this carriage tax act was considered by this court in Hylton v. U.S., 3 Dall. 171. Chief Justice Ellsworth and Mr. Justice Cushing took no part in the decision. Mr. Justice Wilson stated that he had, in the circuit court of Virginia, expressed his opinion in favor of the constitutionality of the tax. Mr. Justice Chase, Mr. Justice Paterson, and Mr. Justice Iredell each expressed the reasons for his conclusions. The tax, though laid, as I have said, on the carriage, was held not to be a direct tax under the constitution. Two of the judges who sat in that case (Mr. Justice Paterson and Mr. Justice Wilson) had been distinguished members of the constitutional convention. Excepts from tne observations of the justices are given in the opinion of the court. Mr. Justice Paterson, in addition to the language there quoted, spoke as follows (the italics being mine):
'I never entertained a doubt that the principal-I will not say the only-objects that the framers of the constitution contemplated as falling within the rule of apportionment were a capitation tax and a tax on land. Local considerations and the particular circumstances and relative situation of the states naturally lead to this view of the subject. The provision was made in favor of the Southern states. They possessed a large number of slaves. They had extensive tracts of territory, thinly settled, and not very productive. A majority of the states had but few slaves, and several of them a limited territory, well settled, and in a high state of cultivation. The Southern states, if no provision had been introduced in the constitution, would have been wholly at the mercy of the other states Congress, in such case, might tax slaves at discretion or arbitrarily, and land in every part on the Union after the same rate or measure,-so much a head in the first instance, and so much an acre in the second. To guardt hem against imposition in these particulars was the reason of introducing the clause in the constitution which directs that representatives and direct taxes shall be apportioned among the states according to their respective numbers.'
It is evident that Mr. Justice Chase coincided with these views of Mr. Justice Paterson, though he was perhaps not quite so firmly settled in his convictions, for he said:
'I am inclined to think-but of this I do not give a judicial opinion-that the direct taxes contemplated by the constitution are only two, to wit, a capitation or poll tax simply, without regard to property, profession, or any other circumstances, and the tax on land. I doubt whether a tax by a general assessment of personal property within the United States is included within the term 'direct tax."
Mr. Justice Iredell certainly entertained similar views, since he said:
'Some difficulties may occur which we do not at present foresee. Perhaps a direct tax in the sense of the constitution can mean nothing but a tax on something inseparably annexed to the soil; something capable of apportionment under all such circumstances. A land of a poll tax may be considered of this description. * * * In regard to other articles there may possibly be considerable doubt.'
That case, however, established that a tax levied without apportionment on an object of personal property was not a 'direct tax' within the meaning of the constitution. There can be no doubt that the enactment of this tax and its interpretation by the court, as well as the suggestion, in the opinions delivered, that nothing was a 'direct tax,' within the meaning of the constitution, but a capitation tax and a tax on land, were all directly in conflict with the views of those who claimed at the time that the word 'direct' in the constitution was to be interpreted according to the views of economists. This is conclusively shown by Mr. Madison's language. He asserts not only that the act had been passed contrary to the constitution, but that the decision of the court was likewise in violation of that instrument. Ever since the announcement of the decision in that case, the legislative department of the government has accepted the opinions of the justices, as well as the decision itself, as conclusive in regard to the meaning of the word 'direct'; and it has acted upon that assumption in many instances, and always with executive indorsement. All the acts passed levying direct taxes confined them practically to a direct levy on land. True, in some of these acts a tax on slaves was included, but this inclusion, as has been said by this court, was probably based upon the theory that these were in some respects taxable along with the land, and therefore their inclusion indicated no departure by congress from the meaning of the word 'direct' necessarily resulting from the decision in the Hylton Case, and which, moreover, had been expressly elucidated and suggested as being practically limited to capitation taxes and taxes on real estate by the justices who expressed opinions in that case.
These acts imposing direct taxes having been confined in their operation exclusively to real estate and slaves, the subject-matters indicated as the proper objects of direct taxation in the Hylton Case are the strongest possible evidence that this suggestion was accepted as conclusive, and had become a settled rule of law. Some of these acts were passed at times of great public necessity, whn revenue was urgently required. The fact that no other subjects were selected for the purposes of direct taxation, except those which the judges in the Hylton Case had suggested as appropriate therefor, seems to me to lead to a conclusion which is absolutely irresistible,-that the meaning thus affixed to the word 'direct' at the very formation of the government was considered as having been as irrevocably determined as if it had been written in the constitution in express terms. As I have already observed, every authoritative writer who has discussed the constitution from that date down to this has treated this judicial and legislative ascertainment of the meaning of the word 'direct' in the constitution as giving it a constitutional significance, without reference to the theoretical distinction between 'direct' and 'indirect,' made by some economists prior to the constitution or since. This doctrine has become a part of the hornbook of American constitutional interpretation, has been taught as elementary in all the law schools, and has never since then been anywhere authoritatively questioned. Of course, the text-books may conflict in some particulars, or indulge in reasoning not always consistent, but as to the effect of the decision in the Hylton Case and the meaning of the word 'direct,' in the constitution, resulting therefrom, they are a unit. I quote briefly from them.
Chancellor Kent, in his Commentaries, thus states the principle:
'The construction of the powers of congress relative to taxation was brought before the supreme court, in 1796, in the case of Hylton v. U.S. By the act of June 5, 1794, congress laid a duty upon carriages for the conveyance of persons, and the question was whether this was a 'direct tax,' within the meaning of the constitution. If it was not a direct tax, it was admitted to be rightly laid, under that part of the constitution which declares that all duties, imposts, and excises shall be uniform throughout the United States; but, if it was a direct tax, it was not constitutionally laid, for it must then be laid according to the census, under that part of the constitution which declares that direct taxes shall be apportioned among the several states according to numbers. The circuit court in Virginia was divided in opinion on the question, but on appeal to the supreme court it was decided that the tax on carriages was not a direct tax, within the letter or meaning of the constitution, and was therefore constitutionally laid.
'The question was deemed of very great importance, and was elaborately argued. It was held that a general power was given great was held that a general power was given to kind or nature, without any restraint. They had plenary power over every species of taxable property, except exports. But there were two rules prescribed for their government,-the rule of uniformity, and the rule of apportionment. Three kinds of taxes, viz. duties, imposts, and excises, were to be laid by the first rule; and capitation and other direct taxes, by the second rule. If there were any other species of taxes, as the court seemed to suppose there might be, that were not direct, and not included within the words 'duties, imposts, or excises,' they were to be laid by the rule of uniformity or not, as congress should think proper and reasonable.
'The constitution contemplated no taxes as direct taxes but such as congress could lay in proportion to the census; and the rule of apportionment could not reasonably apply to a tax on carriages, nor could the tax on carriages be laid by that rule without very great inequality and injustice. If two states, equal in census, were each to pay 8,000 dollars by a tax on ca