Source: https://www.legalcrystal.com/case/98014/new-york-vs-united-states
Timestamp: 2017-04-27 00:11:33
Document Index: 571024245

Matched Legal Cases: ['§ 615', '§ 8', '§ 9', '§ 4', '§ 114', '§ 22', '§ 8']

New York Vs United States - Citation 98014 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize New York Vs. United States - Court Judgment	LegalCrystal Citationlegalcrystal.com/98014CourtUS Supreme CourtDecided OnJan-14-1946Case Number326 U.S. 572AppellantNew YorkRespondentUnited StatesExcerpt:
new york v. united states - 326 u.s. 572 (1946)
the state of new york, in the sale of mineral waters taken from saratoga springs, owned and operated by the state, is not immune under the federal constitution from the tax imposed on mineral waters by § 615 of the revenue act of 1932. pp.
326 u. s. 584
certiorari, 322 u.s. 724, to review the affirmance of a judgment for the united..... Judgment:
Section 615(a)(5) of the 1932 Revenue Act, 47 Stat. 169, 264, imposed a tax on mineral waters. [
] The United States brought this suit to recover taxes assessed against the New York on the sale of mineral waters taken
from Saratoga Springs, New York. [
] The State claims immunity from this tax on the ground that,
On the basis of authority, the case is quickly disposed of. When States sought to control the liquor traffic by going into the liquor business, they were denied immunity from federal taxes upon the liquor business.
. And, in rejecting a claim of immunity from federal taxation when Massachusetts took over the street railways of Boston, this Court, a decade ago, said: "We see no reason for putting the operation of a street railway [by a State] in a different category from the sale of liquors."
293 U. S. 227
. We certainly see no reason for putting soft drinks in a different constitutional category from hard drinks.
See also Allen v. Regents,
One of the greatest sources of strength of our law is that it adjudicates concrete cases, and does not pronounce principles in the abstract. But there comes a time when even the process of empiric adjudication calls for a more rational disposition than that the immediate case is not different from preceding cases. The argument pressed by New York and the forty-five other States who, as
have joined her deserves an answer.
Enactments levying taxes made in pursuance of the Constitution are, as other laws are, "the supreme Law of the Land." Art. VI, Constitution of the United States;
, 108 [argument of counsel, omitted},
. The first of the powers conferred upon Congress is the power "To lay and collect Taxes, Duties, Imposts and Excises. . . ." Art. I, § 8. By its terms, the Constitution has placed only one limitation upon this power, other than limitations upon methods of laying taxes not here relevant: Congress can lay no tax "on Articles exported from any State." Art. I, § 9. Barring only exports, the power of Congress to tax "reaches every subject."
. But the fact that ours is a federal constitutional system, as expressly recognized in the Tenth Amendment, carries with it implications regarding the taxing power as in other aspects of government.
See, e.g., Hopkins Federal Savings Assn. v. Cleary,
. Thus, for Congress to tax State activities while leaving
But the fear that one government may cripple or obstruct the operations of the other early led to the assumption that there was a reciprocal immunity of the instrumentalities of each from taxation by the other. It was assumed that there was an equivalence in the implications of taxation by a the governmental activities of the National Government and the taxation by the National Government of State instrumentalities. This assumed equivalence was nourished by the phrase of Chief Justice Marshall that "the power to tax involves the power to destroy."
. To be sure, it was uttered in connection with a tax of Maryland which plainly discriminated against the use by the United States of the Bank of the United States as one of its instruments. What he said may not have been irrelevant in its setting . But Chief Justice Marshall spoke at a time when social complexities did not so clearly reveal as now the practical limitations of a rhetorical absolute.
Long v. Rockwood,
277 U. S. 142
277 U. S. 148
. The phrase was seized upon as the basis of a broad doctrine of intergovernmental immunity, while at the same time an expansive scope was given to what were deemed to be "instrumentalities of the government" for purposes of tax immunity. As a result, immunity was, until recently, accorded to all officers of one government from taxation by the other, and it was further assumed that the economic burden of a tax on any interest derived from a government imposes a burden on that government so as to involve an interference by the taxing government with the functioning of the other government.
"is a very different thing. Such taxation involves an interference with the powers of a government in which other States and their citizens are equally interested with the State which imposes the taxation. [
away from the theoretical assumption that the National Government is burdened if its functionaries, like other citizens, pay for the upkeep of their State governments, and we have denied the implied constitutional immunity of federal officials from State taxes.
Graves v. New York ex rel. O'Keefe, supra.
See Gillespie v. Oklahoma,
, criticized in
285 U. S. 401
, and explicitly overruled in
Long v. Lockwood,
overruled in Fox Film Corp. v. Doyal,
overruled in Graves v. New York ex rel. O'Keefe, supra.
tax imposed generally on enterprises in which the State itself was also engaged. This problem did not arise before the present century, partly because State trading did not actively emerge until relatively recently, and partly because of the narrow scope of federal taxation. In
, immunity from a federal tax on a dispensary system whereby South Carolina monopolized the sale of intoxicating liquors was denied by drawing a line between taxation of the historically recognized governmental functions of a State and business engaged in by a State of a kind which theretofore had been pursued by private enterprise. The power of the federal government thus to tax a liquor business conducted by the State was derived from an appeal to the Constitution "in the light of conditions surrounding at the time of its adoption."
. That there is a Constitutional line between the State as government and the State as trader was still more recently made the basis of a decision sustaining a liquor tax against Ohio.
"If a state chooses to go into the business of buying and selling commodities, its right to do so may be conceded so far as the Federal Constitution is concerned, but the exercise of the right is not the performance of a governmental function. . . . When a state enters the marketplace seeking customers, it divests itself of its
and takes on the character of a trader, so far, at least, as the taxing power of the federal government is concerned."
292 U. S. 369
. When the Ohio case was decided, it was too late in the day not to recognize the vast extension of the sphere of government, both State and national, compared with that with which the Fathers were familiar. It could hardly remain a satisfactory constitutional doctrine that only such State activities are immune from federal taxation as were engaged in by the States in 1787. Such a static concept of government denies its essential nature.
. But this likewise does not furnish a satisfactory guide for dealing with such a practical problem as the constitutional power of the United States over State activities. To rest the federal taxing power on what is "normally" conducted by private enterprise in contradiction to the "usual" governmental functions is too shifting a basis for determining constitutional power, and too entangled in expediency to serve as a dependable legal criterion. The essential nature of the problem cannot be hidden by an attempt to separate manifestations of indivisible governmental powers.
Wambaugh, Present Scope of Government (1897) 20 A.B.A.Rep. 307; Frankfurter, The Public and its Government (1930).
The present case illustrates the sterility of such an attempt. [
] New York urges that, in the use it is making of
Saratoga Springs, it is engaged in the disposition of its natural resources. And so it is. But, in doing so, it is engaged in an enterprise in which the State sells mineral waters in competition with private waters the sale of which Congress has found necessary to tap as a source of revenue for carrying on the National Government. To say that the States cannot be taxed for enterprises generally pursued, like the sale of mineral water, because it is somewhat connected with a State's conservation policy is to invoke an irrelevance to the federal taxing power. Liquor control by a State certainly concerns the most important of a State's natural resources -- the health and wellbeing of its people.
. If, in its wisdom, a State engages in the liquor business and may be taxed by Congress as others engaged in the liquor business are taxed, so also Congress may tax the States when they go into the business of bottling water as others in the mineral water business are taxed, even though a State's sale of its mineral waters has relation to its conservation policy.
that of Art. IV, § 4, guaranteeing States a republican form of government,
see Pacific States Tel. & Tel. Co. v. Oregon,
, which this Court has deemed not within its duty to adjudicate.
We have already held that, by engaging in the railroad business, a State cannot withdraw the railroad from the power of the federal government to regulate commerce.
See also University of Illinois v. United States,
. Surely the power of Congress to lay taxes has impliedly no less a reach than the power of Congress to regulate commerce. There are, of course, State activities and State-owned property that partake of uniqueness from the point of view of intergovernmental relations. These inherently constitute a class by themselves. Only a State can own a Statehouse; only a State can get income by taxing. These could not be included for purposes of federal taxation in any abstract category of taxpayers without taxing the State as a State. But, so long as Congress generally taps a source of revenue by whomsoever earned and not uniquely capable of being earned only by a State, the Constitution of the United States does not forbid it merely because its incidence falls also on a State. If Congress desires, it may, of course, leave untaxed enterprises pursued by States for the public good while it taxes like enterprises organized for private ends.
Cf. Springfield Gas Co. v. Springfield,
257 U. S. 66
University of Illinois v. United States, supra,
. If Congress makes no such differentiation, and, as in this case, taxes all vendors of mineral water alike, whether State vendors or private vendors, it simply says, in effect, to a State:
The process of Constitutional adjudication does not thrive on conjuring up horrible possibilities that never happen in the real world and devising doctrines sufficiently comprehensive in detail to cover the remotest contingency. Nor need we go beyond what is required for a reasoned disposition of the kind of controversy now before the Court. The restriction upon States not to make laws that discriminate against interstate commerce is a vital constitutional principle, even though "discrimination" is not a code of specifies, but a continuous process of application. So we decide enough when we reject limitations upon the taxing power of Congress derived from such untenable criteria as "proprietary" against "governmental" activities of the States, or historically sanctioned activities of Government or activities conducted merely for profit, [
] and find
This method of solving a problem inherent in a federal constitutional system has been found equally inconclusive in Latin America.
Amadeo, Argentine Constitutional Law (1943) 97-103.
Attempts along similar lines to solve kindred problems arising under the Canadian and Australian Constitutions have also proved a barren process.
Australia Constitution Act, 1900, § 114, in Edgerton, Federations and Unions in the British Empire (2d ed., 1924) 225; Pond, Intergovernmental Immunity: A Comparative Study of the Federal System (1941) 26 Iowa L.Rev. 272; Kennedy & Wells, The Law of the Taxing Power in Canada (1931) 35-37.
Even where the Constitution of a federal system explicitly deals with the problem of intergovernmental taxation, as in Brazil, litigation is not escaped, and nice distinctions have to be made.
cases arising under Article 10 of the Constitution of 1891 and under Article 32 of the Constitution of 1937: Appelacao civel, No. 2.884, 13 Rivesta do Supremo Tribunal 203 (1917); Appelacao civel, No. 2.900, 14 Rivesta do Supreme Tribunal 44 (1918); Appelacao civel, No. 536, 19 Revista do Suprema Tribunal 76 (1919); Recuso de mandado de seguranca No. 617, 56 Archivo Judiciario 3 (1940); Agravo de peticao, No. 8.024, 59 Archivo Judiciario 85 (1941). Article 32 of the Constitution of 1937, the present Brazilian Constitution, provides: "The Union, the States, and the Municipalities are forbidden: . . . (
) to tax goods, income, or services of each other." Speaking of the earlier Constitution, a commentator notes:
may not be singled out for taxation when others performing them are not taxed or for special burdens when they are. What would happen if the state should take over a monopoly of traditionally private income-producing business may be left for the future, insofar as this has not been settled by
. Perhaps there are other limitations also, apart from the practical one imposed by the state's representation in Congress. If the way were open, I would add a further restricting factor, not of constitutional import, but of construction.
With the passing of the former broad immunity, I should think two considerations well might be taken to require that, before a federal tax can be applied to activities carried on directly by the states, the intention of Congress to tax them should be stated expressly, and not drawn merely from general wording of the statute applicable ordinarily to private sources of revenue. One of these is simply a reflection of the old immunity, in the presence of which, of course, it would be inconceivable that general wording, such as the statute now in question contains, could be taken as intended to apply to the states. [
] The other is that, quite apart from reflections of that immunity, I should expect that Congress would say so explicitly, were its purpose actually to include state functions, where the legal incidence of the tax falls upon the state. [
] And the concurring opinion of Mr. Justice Bradley in
84 U. S. 333
, indicates that he may have been of this general view.
such a rule of construction seems not to have been thought required. [
] Accordingly, although I gravely doubt that, when Congress taxed every "person," it intended also to tax every state, the ruling has been made, [
] and I therefore acquiesce in this case.
26 U.S.C. § 22(a), where Congress has specifically provided that compensation for personal service, includible in gross income, includes compensation for personal service as an officer or employee of a state, or any political subdivision thereof, or any agency or instrumentality of any one or more of the foregoing.
University of Illinois v. United States,
See Manhattan Co. v. Blake,
, the Court said, in another connection:
, we would find it difficult not to sustain the tax in this case, even though we regard as untenable the distinction between "governmental" and "proprietary" interests on which those cases rest to some extent. But we are not prepared to say that the national government may constitutionally lay a nondiscriminatory tax on every class of property and activities of States and individuals alike.
is that a federal tax which is not discriminatory as to the subject matter may nevertheless so affect the State, merely because it is a State that is being taxed, as to interfere unduly with the State's performance of its sovereign functions of government. The counterpart of such undue interference has been recognized since Marshall's day as the implied immunity of each of the dual sovereignties of our constitutional system from taxation by the other.
4 Wheat. 316. We add nothing to this formula by saying, in a new form of words, that a tax which Congress applies generally to the property and activities of private citizens may not be in some instances constitutionally extended to the States merely because the States are included among those who pay taxes on a like subject of taxation.
If the phrase "nondiscriminatory tax" is to be taken in its long accepted meaning as referring to a tax laid on a like subject matter, without regard to the personality of the taxpayer, whether a State, a corporation or a private individual, it is plain that there may be nondiscriminatory taxes which, when laid on a State, would nevertheless impair the sovereign status of the State quite as much as a like tax imposed by a State on property or activities of the national government.
-448. This is not because the tax can be regarded as discriminatory, but because a sovereign government is the taxpayer, and the tax, even though nondiscriminatory, may be regarded as infringing its sovereignty.
like business of the citizen. It gives merely an accustomed and reasonable scope to the federal taxing power. Such a withdrawal from a nondiscriminatory federal tax, and one which does not bear on the State any differently than on the citizen, is itself an impairment of the taxing power of the national government, and the activity taxed is such that its taxation does not unduly impair the State's functions of government. The nature of the tax immunity requires that it be so construed as to allow to each government reasonable scope for its taxing power,
. The national taxing power would be unduly curtailed if the State, by extending its activities, could withdraw from it subjects of taxation traditionally within it.
293 U. S. 225
Ohio v. Helvering, supra; South Carolina v. United States, supra, and see Murray v. Wilson Distilling Co.,
213 U. S. 173
, is to stand, the present judgment would have to be affirmed. For I agree that there is no essential difference between a federal tax on South Carolina's liquor business and a federal tax on New York's mineral water business. Whether
reaches the right result is another matter.
is usually the wise policy, because, in most matters, it is more important that the applicable rule of law be settled than that it be settled right."
. But, throughout the history of the Court,
has had only a limited application in the field of constitutional law. And it is a wise policy which largely restricts it to those areas of the law where correction can be had by legislation. Otherwise, the Constitution
states the correct rule. A State's project is as much a legitimate governmental activity whether it is traditional, or akin to private enterprise, or conducted for profit.
Cf. Helvering v. Gerhardt,
304 U. S. 426
-427. A State may deem it as essential to its economy that it own and operate a railroad, a mill, or an irrigation system as it does to own and operate bridges, street lights, or a sewage disposal plant. What might have been viewed in an earlier day as an improvident or even dangerous extension of state activities may today be deemed indispensable. But, as Mr. Justice White said in his dissent in
any activity in which a State engages within the limits of its police power is a legitimate governmental activity. Here, a State is disposing of some of its natural resources. Tomorrow it may issue securities, sell power from its public power project, or manufacture fertilizer. Each is an exercise of its power of sovereignty. Must it pay the federal government for the privilege of exercising that inherent power? If the Constitution grants it immunity from a tax on the issuance of securities, on what grounds can it be forced to pay a tax when it sells power or disposes of other natural resources?
One view, just announced, purports to reject the distinction which
drew between those activities of a State which are, and those which are not, strictly governmental, usual, or traditional. But it is said that a federal tax on a State will be sustained so long as Congress "does not attempt to tax a State because it is a State." Yet, if that mean that a federal real estate tax of general application (apportioned) would be valid if applied to a power dam owned by a state but invalid if applied to a statehouse, the old doctrine has merely been
Woodrow Wilson stated the starting point for me when he said [
The Supremacy Clause, Article VI, clause 2, applies to federal laws within the powers delegated to Congress by the States. But it is antagonistic to the very implications of our federal system to say that the power of Congress to lay and collect taxes, Article I, § 8, includes the power to tax any state activity or function so long as the tax does not discriminate against the States. [
] As stated in
marginal enterprises where private capital refuses to venture. Add to the cost of these projects a federal tax, and the social program may be destroyed before it can be launched. In any case, the repercussions of such a fundamental change on the credit of the States and on their programs to take care of the needy and to build for the future would be considerable. To say the present tax will be sustained because it does not impair the State's functions of government is to conclude either that the sale by the its mineral water is not a function of government or that the present tax is so slight as to be no burden. The former obviously is not true. The latter overlooks the fact that the power to tax lightly is the power to tax severely. The power to tax is indeed one of the most effective forms of regulation. And no more powerful instrument for centralization of government could be devised. For, with the federal government immune and the States subject to tax, the economic ability of the federal government to expand its activities at the expense of the States is at once apparent. That is the result whether the rule of
be perpetuated, or a new rule of discrimination be adopted.
The Constitution is a compact between sovereigns. The power of one sovereign to tax another is an innovation so startling as to require explicit authority if it is to be allowed. If the power of the federal government to tax the States is conceded, the reserved power of the States guaranteed by the Tenth Amendment does not give them the independence which they have always been assumed to have. They are relegated to a more servile status. They become subject to interference and control both in the functions which they exercise and the methods which they employ. They must pay the federal government for the privilege of exercising the powers of sovereignty guaranteed them by the Constitution [
] whether, as here, they are disposing of their natural resources or tomorrow they issue securities or perform any other acts within the scope of their police power.
from the field of private enterprise. Is the tax immunity to be denied because a tax on the municipality would not curtail the municipality more than it would the prior private owner? Is the municipality to be taxed whenever it engages in an activity which once was in the field of private enterprise, and therefore was once taxable? Every expansion of state activity since the adoption of the Constitution limits the reach of federal taxation if state immunity is recognized. Yet none would concede that the sovereign powers of the States were limited to those which they exercised in 1787. Nor can it be said that, if the present tax is not sustained, there will be withdrawn from the taxing power of the federal government a subject of taxation which has been traditionally within that power from the beginning. Not until
was it held that so-called business activities of a State were subject to federal taxation. That was after the turn of the present century. Thus, the major objection to the suggested test is that it disregards the Tenth Amendment, places the sovereign States on the same plane as private citizens, and makes the sovereign States pay the federal government for the privilege of exercising the powers of sovereignty guaranteed them by the Constitution.
4 Wheat. 316, the Court held unconstitutional a state tax on notes of the Bank of the United States. The statement of Chief Justice Marshall (pp.
-430) is adequate to sustain the case for the reciprocal immunity of the state and federal governments:
Those who agreed with
had the fear that an expanding program of state activity would dry up sources of federal revenues, and thus cripple the national government. 199 U.S. pp.
-455. That was in 1905. [
] That fear is expressed again today when we have the federal income tax, from which employees of the States may not claim exemption on constitutional grounds.
Helvering v. Gerhardt, supra.
The fear of depriving the national government of revenue if the tax immunity of the States is sustained has no more place in the present decision than the spectre of socialism, the fear of which, said Holmes "was translated into doctrines that had no proper place in the Constitution or the common law." [
-185, the immunity of state instrumentalities from federal taxation
That fact distinguishes those cases where a citizen seeks tax immunity because his income was derived from a State or the federal government. Recognition of such a claim would create a "privileged class of taxpayers" (
) and extend the tax immunity of the States or the federal government to private citizens. It was in protest to the recognition of such a derivative immunity that Mr. Justice Bradley dissented in
, where the Court held unconstitutional a federal tax on the salary of a judicial officer of a State. As Mr. Justice Bradley stated, "No man ceases to be a citizen of the United States by being an officer under the State government." 11 Wall. p.
And see Graves v. O'Keefe,
, holding that salaries of federal employees may be constitutionally included in a nondiscriminatory state income tax.
As the Solicitor General of New York points out, in the year when
was decided, over one-fourth of the entire annual income of the federal government was derived from taxes on spirits and fermented liquors.
Annual Report, Secretary of the Treasury (1905), pp. 7, 26.