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Matched Legal Cases: ['§ 213', '§ 1', '§ 27', '§ 4', '§ 2', '§ 9', '§ 210', '§ 213', '§ 1']

Evans v. Gore (full text) :: 253 U.S. 245 (1920) :: Justia U.S. Supreme Court Center Log In
› Evans v. Gore
Evans v. Gore 253 U.S. 245 (1920)
U.S. Supreme CourtEvans v. Gore, 253 U.S. 245 (1920)Evans v. GoreNo. 654Argued March 5, 1920Decided June 1, 1920253 U.S. 245ERROR TO THE DISTRICT COURT OF THE UNITED STATES
A tax upon the net income of a United States district judge, assessed under the Act of February 4, 1919, c. 18, 40 Stat. 1062, § 213 (passed since he took office), by including his official salary in the computation operates to diminish his compensation in violation Page 253 U. S. 246 of the Constitution, and is invalid. P. 253 U. S. 263. Peck & Co. v. Lowe, 247 U. S. 16; United States Glue Co. v. Oak Creek, id., 247 U. S. 321, distinguished.
Whether he could be subjected to such a tax in Page 253 U. S. 247 respect of his salary consistently with the Constitution is the matter in issue. If it be resolved against the tax, he will be entitled to recover what he paid; otherwise his action must fail. It did fail in the district court. 262 F. 550.
Stated in its broadest aspect, the contention involves the power to tax the compensation of federal judges in general, and also the salary of the President, as to which the Constitution (Art. II, § 1, cl. 6) contains a similar limitation. Because of the individual relation of the members of this Court to the question, thus broadly stated, we cannot but regret that its solution falls to us, and this although each member has been paying the tax in respect of his salary voluntarily and in regular course. But jurisdiction of the present case cannot be declined or renounced. The plaintiff was entitled by law to invoke our Page 253 U. S. 248 decision on the question as respects his own compensation, in which no other judge can have any direct personal interest, and there was no other appellate tribunal to which under the law he could go. He brought the case here in due course, the government joined him in asking an early determination of the question involved, and both have been heard at the bar and through printed briefs. In this situation, the only course open to us is to consider and decide the cause -- a conclusion supported by precedents reaching back many years. Moreover, it appears that, when this taxing provision was adopted, Congress regarded it as of uncertain constitutionality, and both contemplated and intended that the question should be settled by us in a case like this. [Footnote 1]
With what purpose does the Constitution provide that the compensation of the judges "shall not be diminished during their continuance in office?" Is it primarily to benefit the judges, or rather to promote the public weal by giving them that independence which makes for an impartial and courageous discharge of the judicial function? Does the provision merely forbid direct diminution, such Page 253 U. S. 249 as expressly reducing the compensation from a greater to a less sum per year, and thereby leave the way open for indirect, yet effective, diminution, such as withholding or calling back a part as a tax on the whole? Or does it mean that the judge shall have a sure and continuing right to the compensation, whereon he confidently may rely for his support during his continuance in office, so that he need have no apprehension lest his situation in this regard may be changed to his disadvantage?
"The executive not only dispenses the honors, but holds the sword of the community. The legislature not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated. The judiciary, on the contrary, has no influence over either the sword or the purse, no direction either of the strength or of the wealth of the society, and can take no active resolution whatever. It may truly be said to have neither force nor will, but merely judgment. . . . This simple view of Page 253 U. S. 250 the matter suggests several important consequences. It proves incontestably that the judiciary is beyond comparison the weakest of the three departments of power; that it can never attack with success either of the other two, and that all possible care is requisite to enable it to defend itself against their attacks."
"Advert, sir, to the duties of a judge. He has to pass between the government and the man whom that government is prosecuting; between the most powerful individual in the community and the poorest and most unpopular. It is of the last importance that, in the exercise of these duties, he should observe the utmost fairness. Need I press the necessity of this? Does not every man feel that his own personal security and the security of his property depends on that fairness? The judicial department comes home in its effects to every man's fireside: it passes on his property, his reputation, his life, his all. Is it not to the last degree important that he should be rendered perfectly and completely independent, with nothing to influence or control him but God and his conscience? . . . I have always thought, from my earliest youth till now, that the Page 253 U. S. 251 greatest scourge an angry Heaven ever inflicted upon an ungrateful and a sinning people was an ignorant, a corrupt, or a dependent judiciary."
"Our courts are the balance wheel of our whole constitutional system, and ours is the only constitutional system so balanced and controlled. Other constitutional systems lack complete poise and certainty of operation because they lack the support and interpretation of authoritative, undisputable courts of law. It is clear beyond all need of exposition that, for the definite maintenance of constitutional understandings, it is indispensable alike for the preservation of the liberty of the individual and for the preservation of the integrity of the powers of the government, that there should be some nonpolitical forum in which those understandings can be impartially debated and determined. That forum our courts supply. There, the individual may assert his rights; there the government must accept definition of its authority. There, the individual may challenge the legality of governmental action and have it adjudged by the test of fundamental principles, and that test the government must abide; there the government can check the too aggressive self-assertion of the individual and establish its power upon lines which all Page 253 U. S. 252 can comprehend and heed. The constitutional powers of the courts constitute the ultimate safeguard alike of individual privilege and of governmental prerogative. It is in this sense that our judiciary is the balance wheel of our entire system; it is meant to maintain that nice adjustment between individual rights and governmental powers which constitutes political liberty."
"Next to permanency in office, nothing can contribute more to the independence of the judges than a fixed provision for their support. . . . In the general course of human nature, a power over a man's subsistence amounts to a power over his will. . . . The enlightened friends of good government in every state have seen cause to lament the want of precise and explicit precautions in Page 253 U. S. 253 the state constitutions on this head. Some of these, indeed, have declared that permanent salaries should be established for the judges; but the experiment has in some instances shown that such expressions are not sufficiently definite to preclude legislative evasions. Something still more positive and unequivocal has been evinced to be requisite. . . . This provision for the support of the judges bears every mark of prudence and efficacy, and it may be safely affirmed that, together with the permanent tenure of their offices, it affords a better prospect of their independence than is discoverable in the Constitutions of any of the states in regard to their own judges."
These considerations make it very plain, as we think, that the primary purpose of the prohibition against diminution was not to benefit the judges, but, like the clause in respect of tenure, to attract good and competent men to the bench and to promote that independence of action and judgment which is essential to the maintenance of the guaranties, limitations, and pervading principles of the Constitution, and to the administration of justice without respect to persons and with equal concern for the poor and the rich. Such being its purpose, it is to be construed not as a private grant, but as a limitation imposed in the public interest -- in other words, not restrictively, but in Page 253 U. S. 254 accord with its spirit and the principle on which it proceeds.
If the tax in respect of his compensation be prohibited, Page 253 U. S. 255 it can find no justification in the taxation of other income as to which there is no prohibition, for, of course, doing what the Constitution permits gives no license to do what it prohibits.
When we consider, as was done in those cases, what is comprehended in the congressional power to tax where its exertion is not directly or impliedly interdicted, it becomes additionally manifest that the prohibition now Page 253 U. S. 256 under discussion was intended to embrace and prevent diminution through the exertion of that power, for, as this Court repeatedly has held, the power to tax carries with it "the power to embarrass and destroy," may be applied to every object within its range "in such measure as Congress may determine," enables that body "to select one calling and omit another, to tax one class of property and to forbear to tax another," and may be applied in different ways to different objects so long as there is "geographical uniformity" in the duties, imposts and excises imposed. McCulloch v. Maryland, 4 Wheat. 316, 17 U. S. 431; Pacific Insurance Co. v. Soule, 7 Wall. 433, 74 U. S. 443; Austin v. The Aldermen, 7 Wall. 694, 74 U. S. 699; Veazie Bank v. Fenno, 8 Wall. 533, 75 U. S. 541, 75 U. S. 548; Knowlton v. Moore, 178 U. S. 41, 178 U. S. 92, 178 U. S. 106; Treat v. White, 181 U. S. 264, 181 U. S. 268-269; McCray v. United States, 195 U. S. 27, 195 U. S. 61; Flint v. Stone Tracy Co., 220 U. S. 107, 220 U. S. 158; Billings v. United States, 232 U. S. 261, 232 U. S. 282; Brushaber v. Union Pacific R. Co., 240 U. S. 1, 240 U. S. 24-26. Is it not therefore morally certain that the discerning statesmen who framed the Constitution and were so sedulously bent on securing the independence of the judiciary intended to protect the compensation of the judges from assault and diminution in the name or form of a tax? Could not the purpose of the prohibition be wholly thwarted if this avenue of attack were left open? Certainly there is nothing in the words of the prohibition indicating that it is directed against one legislative power and not another, and, in our opinion, due regard for its spirit and principle requires that it be taken as directed against them all.
This view finds support in rulings in Pennsylvania, Louisiana, and North Carolina, made under like constitutional restrictions, Commonwealth ex rel. v. Mann, 5 Watts & S. 403, 415 et seq.; [Footnote 4] New Orleans v. Lea, 14 Page 253 U. S. 257 La.Ann.197; 48 N.C. Appendix; N.C. Public Documents 1899, Doc. No. 8, p. 95; In re Taxation of Salaries of Judges, 131 N.C. 692; Purnell v. Page, 133 N.C. 125, and has strong sanction in the actual practice of the government, to which we now advert.
"Language could not be more plain than that used in Page 253 U. S. 258 the Constitution. It is, moreover, one of its most important and essential provisions. For the articles which limit the powers of the legislative and executive branches of the government, and those which provide safeguards for the protection of the citizen in his person and property, would be of little value without a judiciary to uphold and maintain them which was free from every influence, direct or indirect, that might by possibility in times of political excitement warp their judgments."
The collection of the tax proceeded, and, at the suggestion of the Chief Justice, this Court ordered his protest spread on its records. In 1869, the Secretary of the Treasury referred the question to the Attorney General (Judge Hoar), and that officer rendered an opinion in substantial accord with Chief Justice Taney's protest, and also advised that the tax on the President's compensation was likewise invalid. 13 Ops.A.G. 161. The tax on the compensation of the President and the judges was then discontinued, and the amounts theretofore collected were all refunded -- a part through administrative channels and a part through the action of the Court of Claims and ensuing appropriations by Congress. Wayne v. United States, 26 Ct.Cls. 274; c. 311, 27 Stat. 306. Thus, the Secretary of the Treasury, the accounting officers, the Court of Claims, and Congress accepted and gave effect to the view expressed by the Attorney General. In the Income Tax Act of 1894, c. 349, § 27 et seq., 28 Stat. 509, nothing was said about the compensation of the judges, but Mr. Justice Field regarded it as included, and gave that as one reason for joining in the decision holding the act unconstitutional. 157 U.S. 157 U. S. 604-606. On the rehearing, the Attorney General (Mr. Olney) frankly said in his brief: "There has never been a doubt since the opinion of Attorney General Hoar Page 253 U. S. 259 that the salaries of the President and judges were exempt." The income tax acts of 1913, 1916, and 1917 (c. 16, 38 Stat. 168; c. 463, 39 Stat. 758, § 4, c. 63, 40 Stat. 329) severally excepted the compensation of the judges then in office -- also that of the President for the then current term. In short, during a period of more than 120 years, there was but a single real attempt to tax the judges in respect of their compensation, and that attempt soon was disapproved and pronounced untenable by the concurring action of judicial, executive, and legislative officers. And so it is apparent that, in the actual practice of the government, the prohibition has been construed as embracing and preventing diminution by taxation.
"The necessities which gave birth to the Constitution, the controversies which preceded its formation, and the Page 253 U. S. 260 conflicts of opinion which were settled by its adoption may properly be taken into view for the purpose of tracing to its source any particular provision of the Constitution, in order thereby to be enabled to correctly interpret its meaning."
Let us turn then to the circumstances in which this amendment was proposed and ratified, and to the controversy it was intended to settle. By the Constitution, all direct taxes were required to be apportioned among the several states according to their population, as ascertained by a census or enumeration (Art. I, § 2, cl. 3, and § 9, cl. 4), but no such requirement was imposed as to other taxes. And, apart from capitation taxes, with which we now are not concerned, no rule was given for determining what taxes were direct, and therefore to be apportioned, or what were indirect, and not within that requirement. Controversy ensued, and ultimately centered around the right classification of income from taxable real estate and from investments in taxable personal property. The matter then came before this Court in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429; 158 U. S. 158 U.S. 601, and the decision, when announced, disclosed that the same differences in opinion existing elsewhere were shared by the members of the Court, five, the controlling number, regarding a tax on such income as in effect a direct tax on the property from which it arose, and therefore as requiring apportionment, and four regarding it as indirect, and not to be apportioned. Much of the law then under consideration had been framed according to the latter view, and, because of this and the adjudged inseparability of other portions, the entire law was held invalid. Afterwards, to enable Congress to reach all taxable income more conveniently and effectively than would be possible as to much of it if an apportionment among the states were essential, the Sixteenth Page 253 U. S. 261 Amendment was proposed and ratified. In other words, the purpose of the amendment was to eliminate all occasion for such an apportionment because of the source from which the income came -- a change in no wise affecting the power to tax, but only the mode of exercising it. The message of the President [Footnote 5] recommending the adoption by Congress of a joint resolution proposing the amendment, the debates [Footnote 6] on the resolution by which it was proposed, and the public appeals [Footnote 7] -- corresponding to those in the Federalist -- made to secure its ratification leave no doubt on this point. And that the proponents of the amendment in drafting it lucidly and aptly expressed this as its object is shown by its words:
Thus, the genesis and words of the amendment unite in showing that it does not extend the taxing power to new or excepted subjects, but merely removes all occasion otherwise existing for an apportionment among the states of taxes laid on income, whether derived from one Page 253 U. S. 262 source or another. [Footnote 9] And we have so held in other cases.
"It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense -- an authority already possessed and never questioned -- or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the income was derived. Indeed, in the light of the history which we have given and of the decision in the Pollock case and the ground upon which the ruling in that case was based, there is no escape from the conclusion that the amendment was drawn for the purpose of doing away for the future with the principle upon which the Pollock case was decided -- that is, of determining whether a tax on income was direct not by a consideration of the burden placed on the taxed income upon which it directly operated, but by taking into view the burden which resulted on the property from which the income was derived, since, in express, terms the amendment provides that income taxes, from whatever source Page 253 U. S. 263 the income was derived, shall not be subject to the regulation of apportionment."
The court below concluded that the compensation was not diminished, and regarded this as inferable from our decisions in Peck & Co. v. Lowe, 247 U. S. 165, 247 U. S. 174-175, and United States Glue Co. v. Oak Creek, 247 U. S. 321, 247 U. S. 329. We think neither case tends to support that view. Each related to a business, one to exportation, the other to interstate commerce, which the taxing power -- of Congress in one case, of a state in the other -- was restrained from directly burdening, and the holding in both was Page 253 U. S. 264 that an income tax laid not on the gross receipts, but on the net proceeds remaining after all expenses were paid and losses adjusted, did not directly burden the business, but only indirectly and remotely affected it. Here, the Constitution expressly forbids diminution of the judge's compensation, meaning, as we have shown, diminution by taxation as well as otherwise. The taxing act directs that the compensation -- the full sum, with no deduction for expenses -- be included in computing the net income, on which the tax is laid. If the compensation be the only income, the tax falls on it alone, and if there be other income, the inclusion of the compensation augments the tax accordingly. In either event, the compensation suffers a diminution to the extent that it is taxed.
This is an action brought by the plaintiff in error against an acting collector of internal revenue to recover a portion of the income tax paid by the former. The ground of the suit is that the plaintiff is entitled to deduct from the total of his net income six thousand dollars, being the amount of his salary as a judge of the district court of the United States. The Act of February 24, 1919, c. 18, § 210, 40 Stat. 1057, 1062, taxes the net income of every individual, and § 213, p. 1065, requires the compensation received by the judges of the United States to be included in the gross income from which the net income is to computed. This was done by the plaintiff in error, and the tax was paid under protest. He contends that the requirement mentioned and the tax, to the extent that it was enhanced by consideration of the plaintiff's salary, are Page 253 U. S. 265 contrary to Art. III, § 1, of the Constitution, which provides that the compensation of the judges shall not be diminished during their continuance in office. Upon demurrer, judgment was entered for the defendant, and the case comes here upon the single question of the validity of the above-mentioned provisions of the act.
I see equally little in the letter of the clause to indicate the intent supposed. The tax on net incomes is a tax on the balance of a mutual account in which there always are some, and may be many, items on both sides. It seems to me that it cannot be affected by an inquiry into the source from which the items more or less remotely are derived. Obviously there is some point at which the immunity of a judge's salary stops, or, to put it in the language of the clause, a point at which it could not be said that his compensation Page 253 U. S. 266 was diminished by a charge. If he bought a house, the fact that a part or the whole of the price had been paid from his compensation as judge would not exempt the house. So if he bought bonds. Yet, in such cases, the advantages of his salary would be diminished. Even if the house or bonds were bought with other money, the same would be true, since the money would not have been free for such an application if he had not used his salary to satisfy other more peremptory needs. At some point, I repeat, money received as salary loses its specific character as such. Money held in trust loses its identity by being mingled with the general funds of the owner. I see no reason why the same should not be true of a salary. But I do not think that the result could be avoided by keeping the salary distinct. I think that the moment the salary is received, whether kept distinct or not, it becomes part of the general income of the owner, and is mingled with the rest, in theory of law, as an item in the mutual account with the United States. I see no greater reason for exempting the recipients while they still have income as income than when they have invested it in a house or bond.
"It is not laid on income from exportation . . . in a discriminative way, but just as it is laid on other income. . . . There is no Page 253 U. S. 267 discrimination. At most, exportation is affected only indirectly and remotely. The tax is levied . . . after the recipient of the income is free to use it as he chooses. Thus, what is taxed -- the net income -- is as far removed from exportation as are articles intended for export before the exportation begins."