Source: http://armstrongeconomics.com/research/rule-of-law/brushaber-v-union-pacific-r-co-240-u-s-1-1916/
Timestamp: 2014-07-28 10:19:13
Document Index: 88613226

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

Under proper averments, a stockholder’s suit to restrain a corporation from voluntarily paying a tax charged to be unconstitutional is not violative of Rev.Stat. § 3224, and the district court has jurisdiction to entertain the action. Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429.
In this case — that of a stockholder against a corporation to restrain the latter from voluntarily paying the income tax imposed by the Tariff Act of 1913 — the defendant corporation notified the government of the pendency of the action and the United States was heard as amicus curiae in support of the constitutionality of the Act.
of suits and the absence of all means of redress which would result if the corporation paid the tax and complied with the act in other respects without protest, as it was alleged it was its intention to do. To put out of the way a question of jurisdiction, we at once say that, in view of these averments and the ruling in Pollock v. Farmers’ Loan & Trust Co., 157 U. S. 429, sustaining the right of a stockholder to sue to restrain a corporation under proper averments from voluntarily paying a tax charged to be unconstitutional on the ground that to permit such a suit did not violate the prohibitions of § 3224 Rev.Stat. against enjoining the enforcement of taxes, we are of opinion that the contention here made that there was no jurisdiction of the cause, since to entertain it would violate the provisions of the Revised Statutes referred to, is without merit. Before coming to dispose of the case on the merits, however, we observe that the defendant corporation having called the attention of the government to the pendency of the cause and the nature of the controversy and its unwillingness to voluntarily refuse to comply with the act assailed, the United States, as amicus curiae, has at bar been heard both orally and by brief for the purpose of sustaining the decree.
that the confusion is not inherent, but rather arises from the conclusion that the Sixteenth Amendment provides for a hitherto unknown power of taxation — that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it, as follows: (a) The Amendment authorizes only a particular character of direct tax without apportionment, and therefore if a tax is levied under its assumed authority which does not partake of the characteristics exacted by the Amendment, it is outside of the Amendment, and is void as a direct tax in the general constitutional sense because not apportioned. (b) As the Amendment authorizes a tax only upon incomes “from whatever source derived,” the exclusion from taxation of some income of designated persons and classes is not authorized, and hence the constitutionality of the law must be tested by the general provisions of the Constitution as to taxation, and thus again the tax is void for want of apportionment. (c) As the right to tax “incomes from whatever source derived” for which the Amendment provides must be considered as exacting intrinsic uniformity, therefore no tax comes under the authority of the Amendment not conforming to such standard, and hence all the provisions of the assailed statute must once more be tested solely under the general and preexisting provisions of the Constitution, causing the statute again to be void in the absence of apportionment. (d) As the power conferred by the Amendment is new and prospective, the attempt in the statute to make its provisions retroactively apply is void because, so far as the retroactive period is concerned, it is governed by the preexisting constitutional requirement as to apportionment.
That the authority conferred upon Congress by § 8 of Article I “to lay and collect taxes, duties, imposts and excises” is exhaustive and embraces every conceivable power of taxation has never been questioned, or, if it has, has been so often authoritatively declared as to render it necessary only to state the doctrine. And it has also never
been questioned from the foundation, without stopping presently to determine under which of the separate headings the power was properly to be classed, that there was authority given, as the part was included in the whole, to lay and collect income taxes. Again, it has never moreover been questioned that the conceded complete and all-embracing taxing power was subject, so far as they were respectively applicable, to limitations resulting from the requirements of Art. I, § 8, cl. 1, that “all duties, imposts and excises shall be uniform throughout the United States,” and to the limitations of Art I., § 2, cl. 3, that “direct taxes shall be apportioned among the several states,” and of Art. I, § 9, cl. 4, that “no capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.” In fact, the two great subdivisions embracing the complete and perfect delegation of the power to tax and the two correlated limitations as to such power were thus aptly stated by Mr. Chief Justice Fuller in Pollock v. Farmers’ Loan & Trust Co., supra, at 157 U. S. 557:
“In the matter of taxation, the Constitution recognizes the two great classes of direct and indirect taxes, and lays down two rules by which their imposition must be governed, namely, the rule of apportionment as to direct taxes, and the rule of uniformity as to duties, imposts, and excises.”
by neither, no question has been anywhere made as to t