Case Name: POLLOCK v. FARMERS' LOAN AND TRUST COMPANY. (Rehearing.); HYDE v. CONTINENTAL TRUST COMPANY. (Rehearing.)
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1895-05-20
Citations: 158 U.S. 601
Docket Number: Nos. 893, 894
Parties: POLLOCK v. FARMERS’ LOAN AND TRUST COMPANY. (Rehearing.) HYDE v. CONTINENTAL TRUST COMPANY. (Rehearing.)
Judges: 
Reporter: United States Reports
Volume: 158
Pages: 601–715

Head Matter:
POLLOCK v. FARMERS’ LOAN AND TRUST COMPANY. (Rehearing.) HYDE v. CONTINENTAL TRUST COMPANY. (Rehearing.)
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK.
Nos. 893, 894.
Argued May 6, 7, 8, 1895.
Decided May 20, 1895.
Hylton v. United States, 3 Dali. 171, further considered, and, in view of the '' historical evidence cited, shown to have only decided that the' tax on carriages involved was an excise, and was therefore an indirect tax.
In distributing the power of taxation the Constitution retained to the States the absolute power of direct taxation, but granted to the Federal government the power óf the same taxation upon condition that, in its exercise, ■ such taxes should be apportioned among the several States according to numbers; and this was done, in order to protect to the States, who were surrendering to the Federal government so many sources of income, the power of direct taxation, which was their principal remaining resource.
It is the duty of the court in this case simply to determine whether the income tax now before it does or does not belong to the class of direct taxes, and if it does, to decide the constitutional question which follows accordingly, unaffected by considerations not pertaining to the case in hand.
Taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.
Taxes on personal property, or on the income of personal property, are likewise direct taxes.
The tax imposed by sections twenty-seven to thirty-seven, inclusive, of the act of 1894, so far as it falls on the income of real estate and pf personal property, being a direct tax within the meaning of the Constitution, and,, therefore, unconstitutional and void because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.
These cases were decided on the 8fch of April, 1895, 157 U. S. 429. Thereupon the appellants filed a petition for a rehearing as follows, entitled in the two cases:
To the Honorable the Justices of the Supreme Court of the United' States:
Charles Pollock and Lewis H. Hyde, the appellants in these causes, respectfully present their petition for rehearing, and submit the following reasons why their prayer should be granted: -
I. The question involved in these cases was as to the constitutionality of the provisions of the' tariff act of August 15, 1894, (sections 27 to 37,) purporting to impose a tax upon incomes. The court has held that the same are unconstitutional,. so far as they purport to impose a tax upon the rent or income of real estate and income derived from municipal bonds. It has, however, announced that it was equally divided in opinion as to the following questions, and has expressed no opinion in regard to them:
(1) Whether the void provisions invalidate the whole act.
(2) Whether, as to the income from personal property as such, the act is unconstitutional as laying direct taxes.
(3) Whether any part of the tax, if not considered as a direct tax, is invalid for want of uniformity.
The court has reversed the decree of the Circuit Court and remanded the case, with directions to enter a decree in favor of complainant in respect only of the voluntary payment of the tax on the rents and income of defendant’s real estate and that which it holds in trust, and on the income from the municipal bonds owned or so held by it.
While, therefore, the two points above stated have been decided, there has been no decision of the remaining questions regarding the constitutionality of the act, and no judgment has been announced authoritatively establishing ahy principle for interpretation of the statute in those respects. Etting v. Sank of the United States, 11 Wheat. 59, 78; Durant v. Essex Co., '7 Wall. 107, 113.
This court, having been established by the Constitution,' and its judicial power extending to all cases in law and equity arising under the Constitution and laws of the United States, must necessarily be the ultimate tribunal for the determination of these questions. In all cases in which, such questions may arise, there can, therefore, be no authoritative decision in reference to the same except by this court.
II. The court early in its history adopted the practice of requiring, if practicable, constitutional questions to be heard by a full court in order that the judgment in such case might, if possible, be the decision of the majority of the whole court.
In Briscoe v. Commonwealth Bank, 8 Pet. 118, and City of New York v.-Miln, 8 Pet. 120, 122, this rule was announced by Chief Justice Marshall in the following language :
“ The practice of this court is, not (except in cases of absolute necessity) to deliver any judgment in cases where constitutional questions are involved, unless four judges concur in opinion, thus making the decision that. of a majority of the whole court. In the present cases four judges do not concur in opinion as to the constitutional questions which have been argued. The court therefore direct these cases to be reargued at the next term, under the expectation that a larger number of the judges may then be present.”
The same cases were again called at the next term of the court, and the'Chief Justice said the court could not know whether there would be a full court during the term; but as the court was then composed, the constitutional cases would not be taken up (9 Pet. 85). In a note to the cases upon that page, it is stated that during that term, the court was composed of six judges, the full court at the time being seven; there was then a vacancy occasioned by the resignation of Mr. Justice Duval, which;, had not yet been filled.
The rule laid down by Chief Justice Marshall has been frequently followed. Reference may be made to the case of Ilome Insurance Company v. New York, 119 U. S. 129, 148. Mr. Chief Justice Waite there announced that the judgment of the Supreme Court of the State of New York was affirmed by a divided court. At the time, Mr. Justice Woods was ill and absent during -the whole of the term, and took no part in any of the cases argued at that term. There were, therefore, only eight members of the court • present. A petition for reargument was-presented upon the ground that the principle announced by Mr. Chief Justice Marshall should be followed, and that the constitutional question involved was sufficiently important to demand a decision concurred in by a majority of the whole court. The petition was granted, 122 U. S. 636, and the case was not reargued until the bench was full. 134 U. S. 594, 597. This practice is recognized as established in Phillips’ Practice, at page 380.
III. It is respectfully submitted that no case could arise more imperatively requiring the application of the rule than the present. The precise question involved is the constitutionality of an act of Congress affecting the citizens of the country generally. That act has been held unconstitutional in important respects; its constitutionality has not been authoritatively decided as to the remaining portions. These complainants and appellants may well urge, that these serious constitutional questions should be finally decided before their trustee expends their funds in voluntary'payment of the tax. In addition, it is manifest that, until some decision is reached, the courts will be overwhelmed with litigation upon these questions, and the payment and collection of the tax will be most seriously embarrassed.
Every tax payer to any considerable extent will pay the tax under protest and sue to recover the same back, and if necessary sue out his writ of error to this court. The court will of necessity be burdened with rearguments of these questions without number until they are finally settled. Still further, as the matter now stands, it has been decided that a tax upon the income of land is unconstitutional, while the court has made no decision as to the validity of the tax upon income of personal property. Serious questions have, therefore, already arisen as to what is, in fact, to be deemed the income of real estate, and what is the income of real and what of personal property, in cases where both are employed in the production of the same income.
Your petitioners, therefore, respectfully pray that these cases be restored to the docket and a reargument be ordered as to the questions upon which the court was evenly divided in opinion. In case, however, this motion should be denied, your petitioners pray that the mandate be amended by order ing a new trial in the court below, so that the court below may now determine the questions (1) whether or . not the invalidity of the statute in the respects already specified renders the same altogether invalid, and (2) whether or not the act is constitutional in the respects not decided by this court.
The undersigned, members of the bar of this honorable court, humbly conceive that it is proper that the appeals herein should be reheard by this court, if this court shall see fit so to order, and they therefore respectfully certify accordingly.
Washington, April 15, 1895.
Joseph H. Choate, William D. Guthrie,
Clarence A. Seward, David Willcox, Benjamin H. Bristow, . Charles Steele,
Of counsel for appellants.
To this petition Mr. Attorney General made the following suggestion on the part of the United States:
The United States respectfully represents that, if a rehearing is granted in the above-entitled cases, the rehearing should cover all the legal and constitutional questions involved, and not merely those as to which the court are equally divided.
I. Whether a tax on incomes generally, inclusive of rents and interest or dividends from investments of all kinds, is or is not a direct tax within the meaning of the Federal Constitution is a matter upon which, as an original question, the government has really never been heard.
Its position at the argument was that the question had been settled. — by an exposition of the Constitution practically contemporaneous with its adoption — by a subsequent unbroken line of judicial precedents — by the concurring and repeated action of all the departments of the government — and by the consensus of all text writers and authorities by whom the subject has heretofore been considered.
II. The importance to the government of the new views of its taxing power, announced in the opinion of the Chief Justice, can hardly be exaggerated.
First. Pushed to their logical conclusion, they practically exclude from the direct operation of the power all the real-estate of the country and all its invested personal property. They exclude it because, if realty and personalty are taxable only by the rule of apportionment, the inevitable inequalities resulting from such a plan of taxation are so gross and flagrant as to absolutely debar any resort to it.
That such inequalities must result is practically admitted, the only suggestion in reply being that the power to directly tax realty and personalty was not meant for use as an ordinary, every-day power; that the United States was expected to rely for its customary revenues upon duties, imposts, and excises; and that it was meant it should impose direct taxes only in extraordinary emergencies and as a sort of dernier resort.
It is submitted that a construction of the. Constitution of - such vital importance in itself and requiring in its support an imputation to its framers of a specific purpose which nothing in the text of the Constitution has any tendency to reveal, cannot be too carefully considered before being finally adopted.
Second. Though of minor consequence, it is certainly relevant to point out that, if the new exposition of the Constitution referred to is to prevail, the United States has under previous income-tax laws collected vast sums of money which on every principle of justice it ought to refund, and which it must be assumed that Congress will deem itself bound to make provision for refunding by appropriate legislation.
Respectfully submitted.
Richard Olney,
Attorney General.
Thereupon the following announcement was made, May 6, 1895.
The Chief Justice. In these cases appellants made application for a rehearing as to those propositions upon which the court was equally divided, whereupon the Attorney General presented a suggestion that if any rehearing were granted it should embrace the whole case. Treating this suggestion as amounting in itself to an application for a rehearing, and not desiring to restrict the scope of the argument, we set down both applications to be heard to-day before a full bench, which the anticipated presence of our brother Jackson, happily realized, enabled us to do. .No further argument will be desired. ¥e were obliged, however, to limit the number of counsel to two on each side; but as to the time, we await the suggestions of counsel.
Five hours were then granted to each side in the argument of these cases, on motion of Mr. Joseph H. Choate for the appellants.
Mr. William D. Guthrie and Mr. Joseph H. Choate for appellants. Mr. Clarence A. Seward, Mr. Benjamin R. Bristow, Mr. David Willcox, Mr. Victor Morawetz, and Mr¿ Charles-Steele were on their brief, which contained the following historical matter, not on the former briefs:
I, Early Laws of the Colonies and States showing the Subjects of Taxation.
New Hampshire. — The assessors were directed to take the estimated produce of the land as a basis;. while mills, wharves, and ferries were valued at one-twelfth of their yearly net income, after deducting repairs. Act of February 22, 1794, Laws of N. H. 1793, p. 471.
Massachusetts. — New Plymouth Colony, in 1643, instructed the assessors to rate all the inhabitants of that colony “ according to their estates or families, that is, according to goods, lands and improved faculties and personal abilities.” Records of Colony of New Plymouth, Pulsifer’s ed. XI, 42.
The Massachusetts Bay Company, by its order of 1646 (Colonial Records of Massachusetts Bay, II, 173, 213, and III, 88), assessed “laborers, artificers, and handicraftsmen, and for all such persons as by advantage of their arts and trades are more enabled to help bear the public charges than the common laborers and workmen, as butchers, bakers, brewers, victuallers, smiths, carpenters, tailors, shoemakers, joiners, barbers, millers and masons, with all other manual persons and artists, such are to be rated for returns and gains proportionable unto other men, for the produce of their estates.”
The law thus remained and was gradually extended to other forms of earnings than merely of “ manual persons and artists.” In 1706, .the tax was imposed on “incomes by any trade or faculty.” In 1738, the act was amended by adding the words “business or employment.” The act of 1777, which was continued by the state constitution, levied the tax on “incomes from any profession, faculty, handicraft, trade or employment.” This still remains the law, except that the word “ faculty ” has been omitted since 1821, and the word “handicraft” since 1849.
. All estates, real and personal, were to be rated in 1692 “at a quarter part of one year’s value or income thereof.” In 1693 it was provided' that “ all houses, warehouses, tan-yards, orchards, pastures, meadows and lands, mills, cranes and wharves be estimated at seven years’ income as they are or may be let for.” A. R. P., M. B. I., 29, 92, 413.
Ehode Island. — In 1774, the statute directed “that the assessors in all and every rate shall consider all persons who make profit by their faculties and shall rate them accordingly.” Acts and Laws of Rhode Island, Newport, 1845, p. 295. The rate makers.were “to take a narrow inspection of the lands and meadows and to judge of the yearly profit at their wisdom and discretion.” Colonial Records of R. I., III, 300.
Connecticut. — A faculty tax was placed on all manual persons and artists, following the Massachusetts law of 1646, and these provisions were frequently repeated in the laws of the seventeenth century. 1 Colonial Records, 548; see, too, Laws of Connecticut, published in 1769.
New York. — In 1743 the assessors took an oath to estimate the property by the product — a shilling for every pound. Oath of Assessors, Laws of 1743, sec. 13; Van Schaack’s Laws, 1691-1773.
New Jersey. — Not only property owners, but “also all other persons within this province who are freemen and are artificer’s or follow any trade or merchandizing, and also all innkeepers, ordinary keepers and other persons in places of profit within this province,” shall be liable to be assessed for the same according to the discretion of the assessors. Laws of New Jersey, 1664-1701, Jenning and Spicer, pp. 494, 1684.
Pennsylvania. — The statute of March 27, 1782, provided among other things that “ all offices and posts of profit, trades, occupations and professions (excepting ministers and schoolmasters), shall be rated at the discretion of the township, ward or district assessors, and two assistant freeholders .of the proper township, ward or district having due regard to the profits arising from them.” 2 Dallas’ Digest, 8.
Delaware. — Even after 1796, real estate was still valued according to the rents arising therefrom. State Papers, 1 Finance, 439.
Maryland. —In 1777, a law was passed which imposed an assessment of one-quarter of one per cent on “ the amount received yearly by every person for any public office or profit of an annuity or stipend, and on the clear yearly profit of every person practising law or physic, every hired clerk acting without commission, every factor, agent or manager trading or using commerce in. this State.” Maryland Laws of 1777, chap. 22, §§ 5-6.
Virginia. — In 1786, a tax was imposed upon attorneys, merchants, physicians, surgeons and apothecaries. 12 Henning’s Statutes, 283; 13, 114.
In 1793, the tax on city property was “ five-sixths of one per cent of the ascertained or estimated yearly rent or income.” Act of 1793, Shepherd’s Stat. at Large, Va., 1792, 1806, 1, 224; American State Papers, 1 Finance, 481.
South Carolina. — In 1701, a law was enacted which imposed a tax on the citizens according, to their estates, stocks and liabilities or the profits that any of them do make off or from any public office or employment. Two years later this tax was extended so as to assess individuals on “their estates, merchandises, stocks, abilities, offices and places of profit of whatever kind or nature soever.” Cooper Stat. at Large, S. S. 2, 36, 183.
II. Report of - Oliver Woleott, Jr., Secretary of the Treasury to the House of Representatives on Direct Taxes, Decemler 14, 1796.
This report (7 American State Papers, 1 Finance, 414-431) was made in obedience to a resolution of the House of Bepresentatives, passed on the 4th day of April, 1796. The report says: “ The -duty enjoined is to ‘ report a plan for laying and collecting direct taxes by apportionment among the several States agreeably to the rule prescribed by the Constitution; adapting the same as nearly as may be to such objects of direct taxation and such modes of collection, as may appear by the laws and practice of the States respectively to be most eligible in each,’ ” recommends a direct tax of $1,484,000, and states the apportionment thereof among the States. The report states among the articles taxed in States in addition to land as follows:
Yermont. — Cattle and horses, m,oney on hand or due, and obligations to pay money. Assessments proportioned to the profits of all lawyers, traders and owners of mills, according to the judgment or discretion of the listers or assessors (p. 418).
New Hampshire. — Stock in trade, money on hand or at interest more than the owner pays interest for, and all property in public funds, estimated at its real value; mills, wharves and ferries at one-t/welfth part of thei/r yearly net income, after deducting repairs.
Massachusetts. — Yessels, stock in trade, securities, all moneys on hand or placed out at mterest exceeding the sum due on interest by the individual creditor; silver plate, stock owned by stockholders in any bank, horses, cattle and swine (p. 420).
Rhode Island. — Polls and the collective mass of property, both real and personal (p. 422).
Connecticut. — Stock, carriages, plate, clocks and watches, credits on mterest exceeding the debts due on interest by the individual creditors ; assessments apportioned to the estimated gains or profits arising from any and all lucrative professions, trades and occupations (p. 423).
New Jersey. — Ferries, fisheries, vessels, carriages, personal taxes on shopkeepers, single men and slaves (p. 426).
.New York. — Assessments in the towns determined by a discretionary estimate of the collective and individual wealth of corporations and individuals (p. 425).
Pennsylvania. — Prior to 1789, the time of servitude of hound servants, slaves, horses and cattle, plate, carriages; ferries, all offices and posts of profit,-trades, occupations and professions, with reference to their respective profits. Subsequently ground rents, slaves, horses, cattle, provisions, trades and callings (pp. 427, 428).
Delaware. — Taxes have been hitherto collected of the estimated annual income of the inhabitants of the State, with reference to specific objects. A statute has been passed during the past year declaring that all real and personal property shall be taxed; provision is made for ascertaining the stock of merchants, traders, mechanics and manufacturers for the purpose of regulating assessments upon such persons, proportioned to their gains and profits; ground rents are estimated at one hundred pounds for every eight pounds of rent. Rents of houses and lots in cities, towns and villages at one hundred pounds for every twelve pounds of rent reserved (p. 429).
Maryland. — Taxes are imposed on the mass of property in general, there are licenses for attorneys at law for admission to the bar £3, and the like sum annually during his continuance to'practise; licenses to retail spirituous liquors; to keep taverns ; for marriage (p. 430).
Virginia. — A tax on lots and houses in towns, and the tenant or proprietor .was repaired to disclose on oath or affirmation the amount of rent paid or received' Toy them respectively; ordinary licenses; slaves, stud horses and jackasses, ordinary licenses, billiard tables, legal proceedings (pp. 431, 432).
North Carolina. — Slaves, stud horses, licensed ordinaries and houses for retailing spirituous liquors in small quantities, legal proceedings, billiard tables (pp. 433, 434). •
South Carolina. — On every £100 of stock in trade, factor-age, employment, faculties and professions, slaves, auction sales (p. 425).
Georgia. — Stock-in-trade, funded debt of the United States, slaves, all professors of law or physic and all factors and brokers, billiard tables (p. 438).
The report continues: “ Lands in Massachusetts and New Hampshire are taxed according to thei/r produce or supposed annual rent or profit.”
Stock employed in trade or manufactures and moneys loaned on interest are taxed on different principles in different States.
Assessments at discretion on th¿ supposed property or income of individuals are permitted in various degrees and under different modifications in some States. In other States all taxes attach to certain defined objects at prescribed rates.
It is assumed as a principle that all objects of income,, whether consisting of skilled labor or capital, bear certain relations to each other, which may be defined to be their natural value.
The value, therefore, is determined by the degree of labor,, skill and expense necessary to be bestowed on the subject (p. 437).
Taxes on stock employed in trade and manufactures and on moneys loaned at interest. It is believed that direct taxes on these subjects, except in extraordinary and temporary emergencies, a/re impolitic, unequal and delusive (p. 439).
Taxes on lands. Taxes proportioned to the value of improved lands, and taxes proportioned to their produce or actual income or rent a/re nearly, if not entirety, alike in principle (p. 439).
As the Constitution has established a rule of apportionment,, there appears to be no necessity that the principles of valuation should be uniform in all the States (p. 441).
In the schedule annexed to the report, under the head of “ The objects of taxation,” are the following, among others:
New Hampshire. — Money on hand or at interest ¡' three-quarters per cent (p. 442). .
Massachusetts. —> Funded securities. Securities of the State or United States ; money at interest; money on hand (p. 437).
Connecticut. — Amount of money at interest; assessments, on lawyers, shop-keepers, surgeons, physicians, merchants, etc. (p. 455).
Virginia. — Ordinary licenses (p. 459).
South Carolina. — On faculties, &c. (p. 464).
It should bé observed that while the secretary discusses in much detail the advantages and disadvantages of levying a direct tax upon the various kinds of personal properties, there is not a suggestion of doubt that- they could constitutiorially be taxed directly.
Mr. Attorney General ánd Mr. Assistant Attorney General Whitney for the United States.
Their briefs and argument on the rehearing contained among other things the following new matter bearing upon the direct.tax question, and in particular upon the question relating to the income of real and personal property:
I. Historical discussion. The tax clauses of the Constitution, when they left the committee on style, were worded with great care and with reference to some standard classification which it was assumed would solve all difficulties. The-classification was as- follows: direct taxes by apportionment; capitation taxes by apportionment; duties, imposts and excises by uniformity. The classification of capitation taxes among the direct taxes came in at the last moment by an amendment. The phrase- “ direct ” tax had then no legal meaning. It Was borrowed from political economy; and with some economists included only land taxes (Locke and Mercier de la Riviere), 'while with others it included also capitation taxes, but not taxes on the profits of money or .industry, etc. (Turgot). The word “ duties ” had, however, a legal signification which was appealed to by Mr. Wilson (afterwards Mr. Justice Wilson) speaking in the Constitutional Convention for the Committee on Detail (5 Elliott’s Debates, 432). He evidently referred to the familiar English use of the term found in Blackstone (1 Bl. Com. c. VIII) and in the English statute books. These duties, as summed up in*Mr. Pitt’s consolidated fund act of 1787, (27 Geo. III.’c. 13,) included the “duties on customs, excises and stamps ” and also t]ie duties on hackney coaches and chairs ; on hawkers and pedlars; on houses, windows and lights; oh inhabited houses; on salaries and pensions ; on shops; on coaches, etc.. The stamp duties, as shown by the famous stamp act of 1765, (5 Geo. III. c. 12,) included duties on. bonds for securing payment of money; on grants or deeds of land; on leases, conveyances, mortgages, records of deeds, etc. Pitt’s famous act of 1799 levied a duty on incomes. The only.“ tax” levied in Great Britain during.that century (capitation taxes being obsolete) was that known as the “ land tax.” In fact, in Great Britain the words “ tax” and “ duty ” had had legal definitions for a century, exclusive of each other, settled and unvarying in their statutory use. A tax was laid upon all property, or upon all real property, at a valuation, and always by a rule of apportionment. Everything that was not a tax in this restricted sense was a duty. No duties were laid by any.system of apportionment; all were laid by a rule of uniformity. .There was an accuracy and consistency in the statutory phraseology which is very rare to find. This is the more remarkable, as in colloquial parlance the words were used very loosely.
In taxation there was no uniform system or approach to a uniform system among the States. The terminology differed in different States; and there was nowhere a recognized definition of “duties” to which Mr. Wilson’s explanation can have referred. Eor this reason, and for the reason that the English classification was well settled, familiar to American lawyers, and based on the distinction between the system of apportionment and the system of uniformity, it is believed that the word “ duties ” in the Constitution is used in the broad English sense. This theoiy is entirely consistent with the Hylton, Pacific Insurance, Veazie Bank, Scholey and Springer cases. It also explains why the debate turned not upon what taxes should be apportioned, but upon how the apportionment should be made; not upon what duties should be laid by the rule of uniformity, but whether they might be local (like the English duty upon hackney coaches in London and vicinity), or must extend throughout the United States. It is also to be noticed that a general property tax in a large State or nation, if laid by valuation, must necessarily be apportioned, . This is because the valuing must be done by local people. Each assessor endeavors to favor his own locality by a low rating. Each of the three great English systems of general property taxes (the “ fifteenths and tenths,” the “ subsidies” and the land tax of William and Mary) very quickly reachéd the stage of a permanent apportionment, for the same reason that such taxes in America have usually been executed by means of periodical valuations or an annual equalization by a board of state officers.
Hence, by the words “direct tax,” as distinguished from duties, the delegates had in mind a general apportioned tax upon property by valuation. As some of the American systems included all personalty as well as land in such a tax, doubts afterwards arose whether a general personalty tax by valuation was a direct tax. • There is no sufficient foundation for the theory that any specific duties, whether upon real or personal property, were included in the term, and the then unknown general income tax remained to be classed by analogy when it should be discovered.
The proceedings of the state conventions of 1788 are not competent evidence upon this point. Aldridge v. Williams, 3 How. 1, 24; United States v. Union Pacific Railroad, 91 U. S. 72, 79; Taylor v. Taylor, 10 Minnesota, 107. Few are reported at all; and those not fully. The most important part of the debates is often omitted. 2 Elliott’s Debates, 101, 104, 109. The controversial literature of that time is also incompetent; nor do these proceedings and literature afford any evidence against our theory, except from Madison and a few others, whose own theories were squarely overruled by the Hylton case.
The departmental reports and the proceedings and acts of Congress during the first decade after th¿ Constitution confirm our theory of the case. They show that the word “ duty ” was used in the broad English sense and applicable to specific indirect taxes upon real and personal property, such as taxes on conveyances, successions, auction sales, etc.; and also that there was 'no principle forbidding such duties, or direct taxation of any kind, in times of peace. Acts of March 3, 1791, c. 15; June 9, 1794, c. 65; July 6, 1797, c. 11; Report of Ways and Means Committee, Annals of Congress, 1796, p. 791; and see other debates and reports in Annals of Congress 1789-98 Mr. Madison seems to have been the only prominent member of the Constitutional Convention who took a different view.
II. Personal property tames. There was never any doubt that taxes on ehoses in action were indirect taxes or duties. They were “ stamp duties ” as shown by the famous English stamp act of 1765 and the other similar acts of that century, and by the United States stamp act of 1797. See also 1 Elliott’s Debates, pp. 368-9. The question debated in the Hylton case concerned duties on ehoses in possession.
III. Rentals. Rentals actually collected can be subjected to a duty laid by the rule of uniformity, for the 'following reasons: A specific tax on a specific class of real property, laid by the rule of uniformity, as on houses or windows, was a duty under the legal definitions of the last century; such a tax cannot have been intended to be apportioned; it has no relation to either the quantity or the valuation of the land; it is a tax not resting on the land, but placed on the landlord or ex-landlord with respect to the land. See Platt on Covenants, pp. 222-3, 215; Jeffrey’s Case, 5 Rep. 66 b; Theed v. Starkey, 8 Mod. 314; Case v. Stephens, Fitzgibbon, 297; Palmer v. Power, 4 Irish C. L. (1854) 191; Van Rensselaer v. Dennison, 8 Barb. 23; it is not a direct tax in political economy, as a tax on house rent falls largely on the occupier, 2 Mill’s Political Economy, ed. 1864, pp. 429-431; Seligman on Shifting and Incidence of'Taxation; Secretary Wolcott’s Report, 1796, 7 American State Papers; it is less direct than a succession tax, and therefore within the Scholey ease.
It is said that what cannot be doné directly cannot be done indirectly. This is undoubtedly true when correctly interpreted. It cannot mean in a broad sense that whatever is taxed directly cannot be taxed, indirectly, because the very distinction under consideration is one between direct and indirect taxation. The correct application of this rule, as we understand it, is that no tax can be laid under the rule of uniformity which in its actual incidence is substantially or approxi‘mately the same as the tax which the Constitution intends should be levied by the' rule of apportionment. There is no such identity between a tax on rents actually collected, and a general land tax by valuation. If it could be separately considered, it would be analogous not. to a property tax, but to an occupation duty.
It is not, however, a tax on rentals at all. It is not a tax measured by anything present. It is measured simply by the taxpayer’s ability to pay as indicated by his income for the previous year. The rentals have become moneys inextricably mingled with the other funds of the taxpayer.

Opinion:
Mr. Chief Justice Fueler
delivered the opinion of the court.
Whenever this court is required to pass upon .the validity of an act of Congress as tested by the fundamental law enacted by the people, the duty imposed demands in its discharge the utmost deliberation and care, and invokes the deepest sense of responsibility. And this is especially so when the question involves the exercise of-a great governmental power, and brings into consideration, as vitally affected by the decision, that complex system of government, so sagaciously framed to secure and perpetuate " an indestructible Union, composed of indestructible States."
We have, therefore, with an anxious desire to omit nothing which might- in any degree - tend to elucidate the questions submitted, and aided by further able arguments embodying, •.the fruits of elaborate research, carefully reexamined these cases, with the result that, while our former conclusions remain unchanged, their scope must be enlarged by the acceptance of their logical consequences.
The -very nature of the Constitution, as observed by Chief Justice Marshall,1 in one of bjs greatest judgments, "requires that, only its great outlines should be marked, its important objects designated, and the minor ingredients which compose those objects be deduced from the nature of the objects themselves." " In considering this question, then, we must never forget, that it is a Constitution that we are expounding." McCulloch v. Maryland, 4 Wheat. 316, 407.
As -heretofore stated, the Constitution divided Federal taxa tion into two great classes, the class of direct taxes, and the class of duties, imposts, and excises; and prescribed two rules which qualified the grant of power as to each class.
.The power to. lay direct taxes apportioned among the several States in proportion to their representation in the popular branch of Congress, a representation based on population as ascertained by the census, was plenary and absolute.; but to lay direct taxes without apportionment was forbidden. The power to lay duties, imposts, and excises was subject- to the qualification that the imposition must be uniform throughout the United States.
Our previous decision was confined to the consideration of the validity of the tax on the income from real estate* and on the income from municipal bonds. The question thus limited was whether such taxation was direct or not, in the meaning of the Constitution; and the court went no farther, as to the tax on the income from real estate, than to hold that it fell within the same class as the source whence the income was derived, that is, that a tax upon the realty and a tax-upon the receipts therefrom were alike direct; while as to the income from municipal bonds, that could not be taxed because of want of power to tax the source, and no reference was made to the nature of the tax as being direct or indirect.'
We are now permitted to broaden the field of inquiry, and' to determine to which of the two great classes a tax upon a person's entire income, whether derived from rents, or products, or otherwise, of real estate, or from bonds, stocks, or other forms of personal property, belongs; and we are unable to conclude that the enforced subtraction from the yield of all the owner's real or personal property, in the manner prescribed, is so different from a. tax upon the property itself, that it is not á direct, but an indirect tax, in the meaning of the Constitution.
The words of the Constitution are to be taken in their obvious sense, and to have a reasonable construction. In Gibbons v. Ogden, Mr. Chief Justice Marshall, with his usual felicity, said: " As men, whose intentions require no concealment, generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed onr Constitution, and the people who adopted it must be understood to have employed words in their natural sense, and to have intended what they have said." 9 Wheat. 1, 188. And in Rhode Island v. Massachusetts, where the question was whether a controversy between two States over the boundary between them was within the grant of judicial power, Mr. Justice Baldwin, speaking for the court, observed: " The solution of this question must necessarily depend on the words of the Constitution; the meaning and intention of the convention which framed and proposed it for adoption and ratification to the conventions of the people of and in the several States; together with a reference to such sources of judicial information as are resorted to by all courts in construing statutes, and to which this- court has always resorted in construing the Constitution." 12 Pet. 657, 721.
We know of no reason for holding otherwise than that the words "direct taxes," on the one hand, and "duties, imposts and excises," on the' other, were used in the Constitution in their natural and obvious sense. Nor, in arriving at. what those terms embrace, do we perceive any ground for enlarging them beyond, or narrowing them within, their natural and obvious import at the time the Constitution was framed and ratified.
And, passing from tbe text, we regard the conclusion reached as inevitable, when the circumstances which surrounded the convention and controlled its action and the views of those who framed and those who adopted the Constitution are considered.
We do not care to retravel ground already traversed; but some observations may be added.
In the light of the struggle in the conven non as to whether or not the new Nation should be empowered to levy taxes directly on the individual until after the States had failed to respond to requisitions — a struggle which did not terminate until the amendment to that effect, proposed by Massachusetts and concurred in by South Carolina, New Hampshire, New York, and Rhode Island, had been rejected — it would seem beyond reasonable question that direct taxation, taking the place as it did of réquisitions, was purposely restrained to apportionment according to representation, in order that- the former system as to ratio might be retained, while the mode of collection was changed.
This is forcibly illustrated by a letter of Mr. Madison of January 29, 1789, recently published, written after the. ratification of the Constitution, but before the organization of the government and the submission of the proposed amendment to Congress, which, while opposing the amendment as calculated to impair the power, only to be exercised in extraordinary emergencies," assigns adequate ground for its rejection as substantially ufinecessary, since, he says, "every State which chooses to collect its own quota may always prevent a Federal collection, by keeping a little beforehand in its .finances, and making its payment at once into the Federal treasury."
The reasons for the clauses of the Constitution in respect of direct taxation are not far to seek. The States, respectively,, possessed plenary powers of taxation. They could tax the property of their citizens in such manner and to such extent as they saw fit; they had unrestricted powers to impose duties or imposts on imports from abroad, and excises on manufactures, consumable commodities, or otherwise. They gave up the -great sources of revenue derived from commerce; they retained the concurrent power or levying excises, and duties if covering anything other than excises; but in respect of them the range of taxation was narrowed by the power granted -over interstate- commerce, and by the danger of being put at •disadvantage in dealing with excises, on manufactures. They retained the power of direct taxation, and to that they looked as their chief resource; but even in respect of that, they granted the concurrent power, and if'the tax were placed by both governments on the sanie subject, the claim of the United States had preference. Therefore, they did not grant the power of direct taxation without regal'd to their own condition and resources as States; but they granted the power of apportioned direct taxation, a power just as efficacious to serve the needs of the general government, but securing to the States-the opportunity to pay the amount apportioned, and to recoup-from their own citizens in the most feasible way, and in harmony with their systems of local self-government. If, in the-changes of wealth and population in particular States, apportionment produced inequality, it was an inequality stipulated for, just as the equal representation of the States, however small, in the Senate, was stipulated for. The Constitution-ordains affirmatively that each State shall have two members-of that body, and negatively that no State shall by amendment, be deprived of its equal suffrage in the Senate without its consent. The Constitution ordains affirmatively that representatives and direct taxes shall be apportioned among the several States according to numbers, and negatively that no direct tax shall be laid unless in proportion to the enumeration.
The founders anticipated that the expenditures of the States,, their counties, cities, and towns, would chiefly be met by direct taxation on accumulated- property, while they expected that those of the Federal government would be for the most, part met by indirect taxes. And in order that the power of direct taxation by the general government should not be exercised, except on necessity; and, when the necessity arose, should be so exercised as to leave the States at liberty to-discharge their respective obligations, and should not be so exercised, unfairly and discriminatingly, as to particular States or otherwise, by a mere majority vote, possibly of those whose constituents were intentionally not subjected to any part of the burden, the qualified grant was 'made. Those who made it knew that the power to tax involved the power to destroy, and that, in the language of Chief Justice Marshall, in McCulloch v. Maryland, " the only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature'acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation." 4 Wheat. 428. And they retained this security by providing that direct taxation and representation in the lower house of Congress should be adjusted on the same measure.
Moreover, whatever the reasons' for the constitutional provisions, there they are, and they appear to us to speak in plain language.
It is said that a tax,on the whole income of property is not a direct tax in the meaning of the Constitution, but a duty, and, as a duty, leviable without apportionment, whether direct or indirect. We do not think so. Direct taxation was not restricted in one breath, and the restriction blown to the winds in another.
Cooley (On Taxation,'p. 3) says that the word "duty" ordinarily ' iñeans an indirect tax imposed on the importation, exportation or consumption of goods$ " having " a broader meaning than custom, which is a duty imposed on imports or exports; " that " the term impost also signifies any tax, tribute or duty, but it is seldom applied to any but the indirect taxes. Ap' excise duty is an inland impost, levied upon articles of manufacture or sale, and also upon licenses to pursue certain trades.' or to deal in certain commodities."
>' In the Constitution, the words " duties, imposts and excises" are put in antithesis to direct taxes. G-ouverneur Morris recognized this in his remarks in modifying his celebrated motion, as did Wilson in approving of the motion as modified. 5 Ell. Deb. (Madison Papers) 302. And Mr. Justice Story, in his Commentaries on the Constitution, (§ 952,) expresses the view that it is not unreasonable to presume that the word " duties " was used as equivalent to " customs " or " imposts " by the framers of the Constitution, since in other clauses it was provided that " No tax or duty shall be laid on articles exported from any State;" and that " No State shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws; " and he refers to a letter of Mr. Madison to Mr. Cabell, of September 18, 1828, to that effect. 3 Madison's Writings, 636.
In this connection it may be useful, though at the risk of repetition, to refer to the views of Hamilton and Madison as thrown into relief in the pages of the Federalist, and in respect of the enactment of the carriage fax act, and again to briefly consider the Hylton case, 3 Dall. 171, so much dwelt on in argument.
The act of June 5, 1794, c. 45, 1 Stat. 373, laying duties upon carriages, for the conveyance of persons, was enacted in a time of 'threatened war. Bills were then pending in Congress to increase the military force of the United States, and to authorize increased taxation in various directions. It was, therefore, as much a part of a system of taxation in wartimes, as was the income tax of the war of the rebellion. The bill passed the House on the twenty-ninth of May, apparently after a very short debate. Mr. Madison and Mr. Ames are the only speakers on that day reported in the Annals. " Mr. Madison objected to this taxon carriages as an unconstitutional tax; and, as an unconstitutional measure, he would vote against it." Mr. Ames said: " It was not to be wondered at if he, coming from so different a part of the country, should have a different idea of this tax from the gentleman who spoke last. In Massachusetts, this tax had been long known; and there it was called an excise. It was difficult to define whether a tax is direct or not. He had satisfied himself that this was not so." Annals, 3d Cong. 730.
On the first of June, 1794, Mr. Madison wrote to Mr. Jefferson : " The carriage tax, which only struck at the Constitution, has passed the House of Representatives." 3 Madison's Writings, 18. The bill then went to the Senate, where, on the third day of June, it " was considered and adopted," Annals, 3d Cong. 119, and on the following day it received the signature of President Washington. On the same third day of June the Senate considered "an act laying certain duties upon snuff and refined sugar; " " an act making further provisions for securing and collecting the duties on foreign and domestic distilled spirits, stills, wines, and teas;" "an act for the more effectual protection of the Southwestern'frontier; " "an act laying additional duties on goods, wares and merchandise, etc.'; " " an act laying duties on licenses for1 selling wines and foreign distilled spirituous liquors by retail.; " and " an act laying duties on property sold at auction."
It appears then that Mr. Madison regarded the carriage tax bill as unconstitutional, and accordingly gave his vote against it, although it was 'to a large extent, if not altogether, a war measure.
Where did Mr. Hamilton stand? At that time he was' Secretary of the Treasury, and it may therefore be assumed, without proof, that he favored the legislation. But upon what ground? He must, of course, have come to the conclusion that it was hot a direct tax. Did he agree with Fisher Ames, his personal and political friend, that the tax was an excise ?. The evidence is overwhelming that he did.
In the thirtieth number of the Federalist, after depicting the helpless and hopeless condition of the country growing out of the inability of the confederation to obtain from the States the moneys assigned to its expenses, he says: " The more intelligent adversaries of the new Constitution admit the force of this reasoning; but they qualify their admission, by a distinction between what théy call internal and external taxations. The former they would reserve to the state governments ; the latter, which they explain into commercial imposts, or rather duties on imported articles, they declare themselves willing to concede to the Federal head." In the thirty-sixth number, while still adopting the division of his opponents, he says : " The taxes intended to be comprised under the general denomination of internal taxes, may be subdivided into those of the direct and those of the indirect kind. . As to the latter, by which must be -understood duties and. excises on articles of consumption, orífe is at a loss to conceive, what can be the nature of the difficulties apprehended." Thus we find Mr. Hamilton, while writing to induce the adoption of the Constitution, first,- dividing the power of taxation into- external and internal, putting into the former the power of imposing duties on imported articles and into the latter all remaining powers; and, second, dividing the latter into direct and indirect, putting into the latter, duties and excises on articles of consumption.
It seems to us to inevitably follow that in Mr. Hamilton's judgment at that time all internal taxes, except, duties and excises on articles of consumption, fell into" the category of direct taxes.
Did he, in supporting the carriage tax bill, change his views in this respect ? His Argument in the Hylton case in- support of the law enables us to answer this question. It was not reported by Dallas, but was published in 1851 by his son in the edition of all Hamilton's .writings except the Federalist. After saying that we shall seek in vain for any legal meaning of the respective terms " direct and indirect taxes," and after forcibly stating the impossibility of collecting the tax if it is to be considered as a direct tax, he says, doubtingly: " The following are presumed to be the only direct taxes. Capitation or poll taxes. Taxes -on lands and buildings. General assessments, whether on the whole property of individuals, or on their whole real or personal estate; all else must of necessity be considered as indirect taxes." " Duties, imposts wq,cL excises appear to be contradistinguished from taxes." " If the meaning of the word excise is to be sought in the British statutes, it will be found to include the duty on carriages, which is there considered as an ^excise." "Where so important a distinction in the Constitution'is to be realized, it is fair to seek the meaning of terms in the statutory language of that country from which our jurisprudence is derived." 7 Hamilton's Works, 848. Mr. Hamilton therefore clearly-supported the law which Mr. Madison opposed, for the same reason that his friend Fisher Ames did, because it was an excise, and as such was specifically' comprehended by the Constitution. Any loose expressions in definition of - the word " direct," so far as conflicting with his well-considered views in the Federalist, must be regarded as the liberty which the advocate usually thinks himself entitled to take with his subject. He gives, however, it appears to us, a definition which covers' the question before us. A tax upon one's whole income is a tax upon the annual receipts from his whole property, and as such falls within the- same class as a tax upon that property, and is a direct tax, in the meaning of' the Constitution. And Mr. ¿Hamilton in his report on the public credit, in referring to contracts with citizens of a foreign country, said: " This principle, which seems critically correct, would exempt as well the income as the capital of the property. It protects the use, as effectually as the thing. What, in fact, is property, but a-fiction, without the beneficial use of it? In many cases, indeed, the income or anrmity is the property itself." 3 Hamilton's Works, 34.
We think, there is nothing in the Hylton case in conflict with the foregoing. The case is badly reported. The report does not give the names of both the judges before whom the case was argued in the Circuit Court. The record of that court -shows that Mr. Justice Wilson was one and District Judge Griffin of Virginia was the other. Judge Tucker in his appendix to the edition of Blackstone published in 1803, (Tucker's Blackstone, vol. 1, part 1, p. 294,) says: "The question was tried in this State,, in the case of United States v. Hylton, and the court being divided in opinion, was carried to the Supreme Court of the United States by consent. It was there argued by the proposer of it, (the first Secretary of the Treasury,) on behalf of the United States', and by the present Chief Justice of the United States, on behalf of the defendant. Each of those gentlemen was supposed to have defended his own private opinion. That of the Secretary of the Treasury prevailed, and the tax was afterwards submitted to, universally, in Virginia."
We are not informed whether Mr. Marshall participated in the two days' hearing at Bichmond, and there is nothing of record to indicate that he appeared in the case in this court; but it is quite probable that Judge Tucker was aware of the opinion which he entertained in regard to the matter.
Mr. Hamilton's argument is left out of the report, and in place of it it is said that the argument turned entirely upon the point whether the tax was a direct tax, while his brief shows that, so far as he was concerned, it turned upon the point whether it was an excise, and therefore not a direct tax.
Mr.' Justice Chase thought that the tax was a tax on expense, because a carriage was a consumable commodity, and in that view the tax on it was on the expense of the owner. He expressly declined to give an opinion as to what were the direct taxes contemplated by the Constitution. Mr. Justice Paterson said: "All taxes on expenses or consumption are indirect taxes; a tax on carriages is of this kind." He quoted copiously from Adam Smith in support of his conclusions, although it is now asserted that the justices made small account of that writer. Mr. Justice Iredell said: "There is no necessity, or- propriety, in determining what is or is not, a direct, or indirect, tax, in all cases. It is sufficient, on the present occasion, for the court to be satisfied, that this is not a direct tax contemplated by the Constitution."
What was decided in the Hylton case was, then, that a tax on carriages was an excise, and, therefore, an indirect tax. The contention of Mr. Madison in the House was only so far disturbed by it, that the court classified it where he himself would have held it constitutional, and he subsequently as President approved a similar act. 3 Stat. 40. The contention of Mr. Hamilton in the Federalist was not disturbed by it in the least. In our judgment, the construction given to the Constitution by the . authors of the Federalist (the five numbers contributed by Chief Justice Jay related to the danger from foreign force and influence, and to the treaty-making power) should not and cannot be disregarded.
The Constitution prohibits any direct tax, unless in proportion to numbers as ascertained by the census; and, in the light of; the circumstances to which we have referred, is it not an evasion. of that prohibition to hold that a general unapportioned tax, imposed upon all property owners as a body for or in respect of their property, is not direct, in the meaning of the Constitution, because confined to the income therefrom?
Whatever the speculative views of political economists or revenue reformers may be, can it be properly held that the Constitution, taken in its plain and obvious sense, and with due'regard to the circumstances attending the formation of the government, authorizes a general unapportioned tax on the products of the farm and the rents of real estate, although imposed merely because of ownership and with no possible means of escape from payment, as belonging to a totally different class from that which includes the property from whence the income proceeds %
There can be but one answer, unless the constitutional restriction is to be treated as utterly illusory and futile, and the object of its framers defeated, ¥e find it impossible to hold that a fundamental requisition, deemed so important as to be enforced by two provisions, one affirmative and one negative, can be refined away by torced distinctions between that which gives value to property, and the property itself.
Nor can we perceive any ground why the same reasoning does not apply to -capital in personalty held for the purpose of income or ordinarily yielding income, and to the incoma, therefrom. All the real estate of the country, and all its invested personal property, are open to the direct operation of the taxing power if an apportionment be made according to the Constitution. The Constitution does not say that no direct tax shall be laid by apportionment on any other property than land; on the contrary, it forbids all unapportioned direct taxes; and we know of no warrant for excepting personal property from the exercise of the power, or any reason why an apportioned direct tax cannot be' laid and assessed, as Mr. Gallatin said in his report when Secretary of the Treasury in 1812, " upon the same objects, of taxation on which the direct taxes levied under the authority of the State are laid and assessed."
Personal property of some kind is of general distribution; and so are incomes, though the taxable range thereof might be narrowed through large exemptions.
The Congress of the Confederation found the limitation of the sources of the contributions of the States to "land, and the buildings and improvements thereon," by the eighth article of July 9, 1778, so objectionable- that the article was amended April 28,. 1783, so that the taxation should be apportioned in proportion to the whole number' of white and other free citizens and inhabitants,, including those bound to servitude for a term of years and three-fifths of all other persons, except Indians not paying taxes; and Madison, Ells-worth, and Hamilton in their address, in sending the amende ment to the States, said: " This rule, although not free from objections, is liable to fewer than any other that could be devised." 1 Ell. Deb. 93, 95, 98.
Nor are we impressed with the contention that, because in the four instances in which the power of direct taxation has been exercised, Congress did not see fit, for reasons of expediency, to levy a tax upon personalty, this amounts to such a practical construction of the Constitution that. the power did not exist, that we must regard ourselves bound by it. We ¡should regret to be compelled to hold the powers of the general government thus restricted, and certainly cannot accede to the idea that the Constitution has become weakened by a particular course of inaction under it.
The stress of the argument is thrown, however, on the ¡assertion that an income tax is not a property tax at all; that it is not a real estate tax, or a crop tax, or a bond tax; that it is an assessment upon the taxpayer on account of his money-spending power as shown by his revenue for the year preceding the assessment; that rents received, crops harvested, interest collected, have lost all connection with their origin, and although once not taxable have become transmuted in their new form into taxable subject-matter; in other words, that income is taxable irrespective of the source from whence it is derived.
This was the view entertained by Mr. Pitt, as expressed in his celebrated speech on introducing his income tax law of 1799, and he did not hesitate to carry it to its logical conclusion. The English loan acts provided that the public dividends should be paid " free of all taxes and charges whatsoever ; " but Mr. Pitt successfully contended that the dividends for the purposes of the income tax were to be considered simply in relation to the recipient as so much income, and that the fund holder had no reason to complain. And this, said Mr. Gladstone, fifty-five years after, was the rational construction of the pledge. Financial Statements, 32.
The dissenting justices proceeded in effect upon this ground in Weston v. Charleston, 2 Pet. 449, but the court rejected it. That was a state tax, it is true; but the States have power to lay income taxes, and if tt>9 source is not open to inquiry, constitutional safeguards might be easily eluded.
¥e have unanimously held in this case that, so far as this law operates on the receipts from municipal bonds, it cannot be sustained, because it is a tax on the power of the States, and on their instrumentalities to borrow money, and consequently repugnant to the Constitution. But if, as contended, the interest when received has become merely money in the recipient's pocket, and taxable as such without reference to the 'source from which it came, the question is immaterial whether it could have been originally taxed at all or not. This' was admitted by the Attorney General with characteristic candor; and it follows that, if the revenue derived from municipal 'bonds cannot be taxed because the source cannot be, the same rule applies, to revenue from any other source not subject to the tax; and the hick of power to levy any but an apportioned tax on real and personal property equally exists as to the revenue therefrom.
Admitting that this act taxes the income of property irrespective of its source, still we cannot doubt that such a tax is necessarily a direct tax ih-the meaning of the Constitution.
In England, we do not understand that an incoma tax has ever been, regarded as other than a direct tax. In Dowell's History of Taxation and Taxes in England, admitted to be the leading authority, the evolution of taxation in that country is given, and an income tax is invariably -classified ás a direct tax. 3 Dowell, (1884,) 103, 126. The author refers to the grant of a fifteenth and tenth and a graduated income tax in 1435, and to many subsequent compar ¿tively ancient statutes as income tax laws. 1 Dowell, 121. It is objected that the taxes imposed by these acts were not, scientifically speaking, income taxes at all,, and that although there was a partial income tax in 1758, there was no 'general income tax until Pitt's of 1799. Nevertheless, the income taxes levied by these modern acts, Pitt's, Addington's, Petty's, Peel's, and by'existing laws,.are all classified as direct taxes; and, so.far as the income tax we are considering is concerned, that view is "Concurred in by the cyclopsedists, the lexicographers, and the political economists, and generally by the classification of Européan governments wherever an income tax obtains.
In Attorney General v. Queen Insurance Co., 3 App. Cas. 1090, which arose under the British North America act of 1867, (30 and 31 Vict. c. 3, § 92,) which provided that the provincial legislatures could only raise revenue for provincial purposes within each province, (in addition to licenses,) by direct taxation, an.-act of the Quebec legislature laying a stamp duty came under consideration, and the judicial committee of the Privy Council, speaking by Jessel, M. R., held that the words " direct taxation " had " either a technical meaning, or a general, or, as it is sometimes called, a popular meaning. One or the other meaning the words must have; and in trying to find out their meaning we must have recourse to the usual sources of information, whether regarded as technical words, words of art, or words used in popular language." And considering " their meaning either as words used in the sense of political economy, or as words used in jurisprudence of the courts of law," it was concluded that stamps were not included in the category of direct taxation, and that the imposition was not warranted.
In Attorney General v. Reed, 10 App. Cas. 141, 144, Lord Chancellor Selbourne said, in relation to the same act of Parliament: "The question whether it is'a direct or an indirect tax cannot depend upon those special events which may vary in particular cases; but the best general rule is to look to the time of payment; and if at the time the ultimate incidence is uncertain, then, as it appears to their lordships, it cannot, in this view, be called direct taxation within the meaning of the second section of the ninety-second clause of the act in question."
In Bank of Toronto v. Lambe, 12 App. Cas. 575, 582, the Privy Council, discussing the same subject, in dealing with the argument much pressed at the bar, that a tax to be strictly direct must be general, said that they had no hesitation in rejecting it for legal purposes. " It would deny the character óf a direct tax to the income tax of this country, which is always spoken of as sucn, and is generally looked upon as a direct tax of the most obvious kind;' and it would run counter to the common understanding of men on this subject, which is one main clue to the meaning of the legislature."
At the time the Constitution was framed and adopted, under the systems of direct taxation of many of the States, taxes were laid on incomes from professions, business, or employments, as well as from " offices and places of profit; " but if it were the fact that there had then been no income tax law,. such as .this, it' would not be of controlling importance. A direct tax cannot be taken out of the constitutional rule because, the particular tax did not exist at the time the rule was prescribed. As Chief Justice Marshall said in the Dartmouth College case: " It is hot enough to say, that this particular case was not in the mind of the convention, when the article was framed, nor of the American people, when it was adopted. It is necessary to go further, and to say that, had this particular case been suggested, the language would have been so varied, as to exclude it, or it would have been made a special exception. The case being within the words of the rule, must be within its operation likewise, unless there be something in'the literal construction so obviously absurd, or mischievous, or repugnant to the general spirit of the instrument, as to justify those who expound the Constitution in making it an exception." 4 Wheat. 518, 644.
Being direct, and therefore to be laid by apportionment, is there any real difficulty in doing so? Cannot Congress, if .the necessity exist of raising thirty, forty, or any other number of million dollars for the support of the government, in addition to the revenue from duties, imposts, and excises, apportion the quota of each State upon the basis of the census, and thus advise it of the payment which must be made, and proceed to assess that amount on all the real and personal property and the income of all persons in the State, and collect the same if the State does not in the meantime assume and pay its quota and collect the amount"'according to its own system and in its own way ? Cannot Congress do this, as respects either or all these subjects of taxation, and deal with each in such manner as might be deemed expedient, as indeed was done in the act of July 14, 1798, c. 75, 1 Stat. 597? Inconveniences might pos sibly attend the levy of an income tax, notwithstanding the listing of receipts, when adjusted, furnishes its own valuation ; but that it is apportionable is hardly denied, although it is asserted that it would operate so unequally as to be undesirable.
In the disposition of the inquiry whether a general unapportioned tax on the income of real and personal property can be sustained, under the Constitution, it is apparent that the suggestion that the result of compliance with the fundamental law would lead to the abandonment of that method of taxation altogether, because of inequalities alleged to necessarily accompany its pursuit, could not be allowed to influence the conclusion; but the suggestion not unnaturally invites attention to the contention of appellants' counsel, that the want of uniformity and equality in this act is such as to invalidate it. Figures drawn from the census are given, showing that enormous assets of mutual insurance companies; of building associations ; of mutual savings banks; large productive property of ecclesiastical organizations; are exempted, and it is claimed that the exemptions reach so many hundred millions that the rate of taxation would perhaps have been reduced one-half, if they had not been made¡ We are not dealing with the act from that point of view; but, assuming the data to be substantially reliable, if the sum desired to be raised had béen apportioned, it may be doubted whether any State, which paid its.quota and collected the amount by its own methods, would, or qould under its constitution, have allowed a large part of the- property alluded to to escape taxation. If so, a better measure of -equality would have been attained than would be otherwise possible, since, according to the argument for the government, the rule of equality is not prescribed by the Constitution' as to Federal taxation, and the observance of such a rule as inherent in all just taxation is purely a matter ' of legislative discretion.
Elaborate argument is made as to the efficacy and merits of an income tax in general, as on the one hand, equal and just, and on the other, elastic and certain; not that it is not open to abuse by such deductions and exemptions as might make taxation under it so wanting in uniformity and equality as .in substance to amount to deprivation of property without due process of law ; not that it is not open to fraud and evasion and is inquisitorial in its methods; but because it is preeminently a tax upon the rich, and enables the burden of taxes on consumption .and of duties on imports to be sensibly diminished. And it is said that the United States as " the representative of an indivisible nationality, as a political sovereign equal in authority to any other on the face of the globe, adequate to all emergencies, foreign or domestic, and having at its command for offence and defence and for all governmental purposes all the resources of the nation," would be " but a maimed and crippled creation after all," unless it possesses the power to lay a tax on .the income of real and personal property throughout the United States without apportionment.
The power to tax real and personal property and the income from both, there being an apportionment, is conceded; that such a tax is a direct tax in the meaning of the Constitution has not been, and, in our judgment, cannot be successfully denied ; and yet we are thus invited to hesitate in the enforcement of the mandate of the Constitution, which prohibits Congress from laying a direct tax on the revenue from property of the citizen without regard to state lines, and in such manner that the States cannot intervene by payment in regulation of their own resources, lest a government of delegated powers should be found to be, not less powerful, but less absolute, than the imagination of the advocate had supposed.
"We are not here concerned with the question whether an income tax be or be not desirable, nor whether such a tax would enable the government to diminish taxes on consumption and duties on imports, and to enter upon what may be believed to be a reform of its fiscal and commercial system. Questions of that character belong to the controversies of political parties, and cannot be settled by judicial decision. In these cases our province is to determine whether this income tax on the revenue from property does or does not belong to. the class of direct taxes. If it does, it is, being unapportioned, in violation of the Constitution, and we must so declare.
Differences have often occurred in this court -— differences exist now — but there has never been a timé in its history when there has been a difference of opinion as to its duty to announce its deliberate conclusions unaffected by considerations not pertaining to the case in hand.
If it be true that the Constitution should Rave been so framed that a tax of this kind could be laid, the instrument defines, the way for its amendment. In no part of it was greater .sagacity displayed. Except that no State, without its consent, can be deprived of its equal suffrage in the Senate, the Constitution may be amended-upon the concurrence of'two-thirds of both houses, and the ratification of the legislatures- or conventions of the several States, or through a Federal convention when applied for by the legislatures of two-thirdb of. the States,-and upon like ratification. The ultimate sovereignty may be thus called into play by a slow and deliberate process, which gives time for mere hypothesis and opinion tO' exhaust themselves, and for the sober second thought of every part of the country to be asserted.
We have considered the act only in respect of the -tax on income derived from real estate, and from invested personal property, and have not commented on so much of it as bears, on gains or profits from business, privileges, or employments, in view of the instances in which taxation on business, privileges, or employments has assumed the guise of an excise tax and been sustained as such.
Being of opinion that so much of the sections of this law as lays a tax on income from real and personal property is invalid, we -are brought to the question of the effect of that, conclusion, upon these sections as a whole.
It is elementary that the same statute may be in part constitutional and in part unconstitutional, and if the parts are wholly independent of each other, that which is constitutional may stand while that which is unconstitutional will be rejected. And in the case before us there is no question as to the validity, of this act, except sections twenty-seven to thirty-seven, inclusive, which relate to the subject which has been under discussion; and as to them we think the rule laid down by Chief Justice Shaw in Warren v. Charlestown, 2 Gray, 84, is
applicable, that if the different parts " are so mutually connected with and dependent on each. other, as conditions, considerations or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that, if all could.not be carried into effect, the legislature would not pass the residue independently, and some parts are unconstitutional, all the provisions which are thus dependent, conditional or connected must fall with them." Or, as the point is put by Mr. Justice Matthews in Poindexter v. Greenhow, 114 U. S. 270, 304: " It is undoubtedly true that there may be cases where one part of a statute may be enforced as constitutional, and another be declared inoperative and void, because unconstitutional; but these are cases where the parts are so distinctly separable that each can stand alone, and where the court is able to see, and to declare, that the intention of the legislature was that the part pronounced valid should be enforceable, even though the other part should' fail. To hold otherwise would be to substitute, for the law intended by the legislature, one they may never have been willing by itself toLenact." And again, as stated by the same eminent judge in, Spraigue v. Thompson, 118 U. S. 90, 95, where it was urged that certain illegal exceptions in a section of a statute might be disregarded, but that the rest could stand: " The insuperable difficulty with the application of that principle of construction to the present instance is, that by rejecting the •exceptions intended by the legislature of Georgia the statute is made to. enact what confessedly the legislature never meant. It confers upon the statute a positive operation beyond the legislative intent, and beyond what any one can say it would have enacted in view of the illegality of the exceptions."
According to the census, the true valuation of real and personal property in the United States in 1890 was 165,037,091,-197, of which real estate with improvements thereon made up $39,544,544,333. Of course, from the latter must be deducted, in applying these sections, all unproductive property and all property whose net yield does not exceed four thousand dollars; •but, even with such deductions, it is evident that the income from realty formed a vital part of the scheme for taxation em bodied therein. If that be stricken out, and also the income from all invested personal property, bonds, stocks, investments of all. kinds, it is obvious that by far the largest part of the anticipated revenue would be eliminated, and this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way what was intended as a tax on capital would remain in substance a tax on occupations and labor. We cannot believe that such was the intention of Congress. We do not mean to say that an, act laying by apportionment a direct tax on all real estate and personal property, or the income thereof, might not also lay excise' taxes on business, privileges, employments, and vocations. But this is not such an act; and the scheme must be considered as a whole. Being invalid as to the greater part, and falling, as the tax would, if any part were held valid, in a direction which could not have been contemplated except in connection with the taxation considered as an entirety, we are constrained to conclude that sections twenty-seven to thirty-seven, inclusive, of the act, which became a law without the signature of the President on August 28, 1894-, are wholly inoperative and void.
Our conclusions may, therefore, be summed up as follows:
First. We adhere to the opinion already announced, that, taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes.
Second. We are of opinion that taxes on personal property, or on the income of personal property, are likewise direct taxes.
Third. The tax imposed by sections twenty-seven to thirty-seven, inclusive, of the act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax within the meaning of the Constitution, and, therefore, unconstitutional and void because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid. •
The decrees hereinbefore entered in this court will be vacated ; the decrees below toill be'reversed, and the cases remanded, with instructions to 'grant the relief frayed.
By Mr. Worthington C. Ford in The Nation, April 25, 1895; republished in 51 Albany Law Journal, 292.