Court Opinion

ID: 9653731
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:52:41.748689+00
Date Added: 2024-06-11T18:13:00.983297
License: Public Domain

L. HAND
(dissenting).
Section 418c of the Connecticut “Corporation Business Tax Act of 1935” imposes an excise upon the “franchise for the privilege of carrying on or doing business within the state.” The plaintiff has asked no leave of the state to do its business, and needs none; nor has it a “commercial domicile” within the state which would draw upon itself the state’s taxing powers. Moreover, some parts of the statute are clearly inapplicable to it: e.g. § 428c which forfeits the corporation’s “corporate rights and powers” after a delinquency of two years, and even terminates “its existence as a corporation.” Thus, we have before us in the barest possible form the effort of a state to levy an excise directly upon the privilege of carrying on an activity which is neither derived from the state, nor within its power to forbid. Concededly there is an unbroken line of decisions holding such a tax invalid; and in Anglo-Chilean Nitrate Sales Corp. v. Alabama, 288 U.S. 218, 53 S.Ct. 373, 77 L.Ed. 710, even the dissenting justices were careful to declare that the result might have been different if the corporation “had not sought for and obtained a privilege or franchise to do a local business in the state” (page 229 of 288 U.S., page 376 of 53 S.Ct., 77 L.Ed. 710). Moreover, the latest decision of the Supreme Court (Mayo v. United States, 319 U.S. 441, 63 S.Ct. 1137, 87 L.Ed. 1504) upset an excise, imposed directly upon an activity of the United States, by distinguishing situations in which the tax was upon an agent of the government (Graves v. New York ex rel. O’Keefe, 306 U.S. 466, 59 S.Ct. 595, 83 L.Ed. 927, 120 A.L.R. 1466), or upon property necessary to the activity (Alabama v. Boozer & King, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3, 140 A.L.R. 615), or in which a state statute regulated an agency which supplied the activity. Penn Dairies, Inc. v. Milk Control Commission of Pennsylvania, 318 U.S. 261, 63 S.Ct. 617. One ground at any rate for that distinction is that the state’s action may, or may not, impose a burden upon the federal activity, for no one can say what will be the final incidence of the charge; reasoning which has also been used to validate a tax which only “indirectly” burdens interstate commerce.
It seems to me clear that we are therefore not yet justified in supposing that the distinction between an excise upon a federal activity, and an excise upon some contributing activity has ceased to exist. If I were free to start afresh, I should not myself make that distinction; it is derived, I believe, either from the actual decision in McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579, or from the gloss that later cases have- put upon it, depending on how seriously one takes certain parts of the opinion. I think it a barren way to treat the distribution of power in a federation like ours to say that, if a state can tax a national activity, it follows that it must have the power to cripple or frustrate it. If I could, I should hold that, while Congress had a paramount power to prevent just that — or while in plain cases possibly the courts might themselves intervene — in ordinary situations the states were free to-tax all activities within their borders provided they did so equitably. The prevalent *823doctrine may perhaps be accounted for because in the early days of the Republic it was natural — possibly it was necessary — to set absolute boundaries in the distribution of political power. National sentiment was weak, Congress was not disposed to a strong assertion of federal powers; and it always gives an appearance of greater authority to a conclusion to deduce it dialectically from conceded premises than to confess that it involves the appraisal of conflicting interests, which are necessarily incommensurable. All that is now past; and the Supreme Court may eventually hold that Congress alone can say when such a tax is “reasonable”: conceivably, as I have suggested, it may in extreme cases undertake that duty itself. But it seems to me clear that, whatever the future may hold, it has not done so yet; but that, on the contrary, it still adheres to the old distinction.
I do not forget that the tax at bar is not levied upon an activity of the government, like the tax involved in Mayo v. United States, supra, 319 U.S. 441, 63 S.Ct. 1137, 87 L.Ed. 1504. Maybe there is a distinction between a governmental activity and an activity of individuals, like interstate commerce, though both are equally protected by the Constitution; it is certainly true that, as to regulation of interstate commerce, the notion of the paramountcy of Congress has already gained great headway. However, I can find no such incursion into the field of taxation, except in dissents; and while the doctrine I should like to see prevail may make its first advance in the “direct” taxation of interstate commerce, there appears to me to be great difficulty in finding an excuse for such a beginning that does not swallow the whole doctrine. Up to the present, so far as I can see, the immunity of interstate commerce from such taxation as such has rested upon the same considerations which still prevail as to the immunity of an activity of the United States. Moreover, the arguments which have been at times put forward - — mistakenly in my opinion — to justify the second, apply equally to the first: I mean that all federal powers were expressly granted by the states, and that they have a representation in Congress which the nation has not in their legislatures.
It is always embarrassing for a lower court to say whether the time has come to disregard decisions of a higher court, not yet explicitly overruled, because they parallel others in which the higher court has expressed a contrary view. I agree that one should not wait for formal retraction in the face of changes plainly foreshadowed; the higher court may not entertain an appeal in the case before the lower court, or the parties may not choose to appeal. In either event the actual decision will be one which the judges do not believe to be that which the higher court would make. But nothing has yet appeared which satisfies me that the case at bar is of that kind; and, as I have said, I can see no good reason for making any distinction be-. tween one kind of federal activity and another. The way out is in quite another direction, and includes both. Nor is it desirable for a lower court to embrace the exhilarating opportunity of anticipating a docrine which may be in the womb of time, but whose birth is distant; on the contrary I conceive that the measure of its duty is to divine, as best it can, what would be the event of an appeal in the case before it.