Court Opinion

ID: 9419248
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:47:56.943069+00
Date Added: 2024-06-11T17:22:16.616632
License: Public Domain

Mb. Justice Frankfurter,
concurring:
A case of this kind recalls us to first principles.
The taxing power is an incident of government. It does not derive from technical legal concepts. The power to tax is coextensive with the fundamental power of society over the persons and things made subject to tax. Each State of the Union has the same taxing power as an independent government, except insofar as that power has been curtailed by the federal Constitution.
The taxing power of the States was limited by the Constitution and the original ten amendments in only three respects: (1) no State can, without the consent of Congress, lay any imposts or duties on imports or exports, except as necessary for executing its inspection laws, Art. I, § 10 [2]; (2) no State can, without the consent of Congress, lay any tonnage duties, Art. I, § 10 [3]; and (3) by virtue of the Commerce Clause, Art. I, § 8 [3], no State can tax so as to discriminate against interstate commerce. (For present purposes, I put the Contract Clause to one side). None of these limitations touches the power of a State to create corporations and the incidental power to tax opportunities which such State-created corporations afford.
*183This phase of the taxing power, rooted in the established practices of the States in common with other governments, was not suddenly abrogated on July 28,1868, when the Fourteenth Amendment became the law of the land. On the contrary, taxes based on the States’ power over corporations of their own creation thereafter became an increasingly familiar source of revenue. Of course, the Due Process Clause has its application to the taxing powers of the States—a State cannot tax a stranger for something that it has not given him. When a State gives nothing in return for exacting a tax, it may be said that there is no “jurisdiction to tax.” But that phrase obscures rather than enlightens, for it only states a result and does not analyze the Constitutional problem. The right of a State to tax the effective acquisition of membership in a domestic corporation, wherever the piece of paper representing such a taxable interest may be physically located,—the immediate question before us—was not doubted until the decision of this Court only ten years ago in First National Bank v. Maine, 284 U. S. 312. That decision, as was made clear in its dissent, was an unwarranted deviation from unbroken legal history and fiscal practice. Drawn as the decision was “from the void of 'due process of law’, when logic, tradition and authority have united to declare the right of the State to lay” such a tax (Holmes, J., dissenting in Baldwin v. Missouri, 281 U. S. 586, 596), due regard for the Constitution demands that the deviation be not perpetuated and that the power erroneously withdrawn from the States be again recognized.
Modern enterprise often brings different parts of an organic commercial transaction within the taxing power of more than one State, as well as of the Nation. It does so because the transaction in its entirety may receive the benefits of more than one government. And the exercise by the States of their Constitutional power to tax may *184undoubtedly produce difficult political and fiscal problems. But they are inherent in the nature of our federalism and are part of its price. These difficulties are not peculiar to us. Kindred problems have troubled other constitutional federalisms. For Australia, see Report of the Royal Commission on the Constitution, Parliament of the Commonwealth of Australia (1929), p. 187 et seq.; for Canada, see 1 Report of the Royal Commission on Dominion-Provincial Relations (1940), p. 202 et seq.
“A good deal has to be read into the Fourteenth Amendment to give it any bearing upon this case.” Holmes, J., dissenting in Farmers Loan Co. v. Minnesota, 280 U. S. 204, 218. We would have to read into that Amendment private notions as to tax policy. But whether a tax is wise or expedient is the business of the political branches of government, not ours. Considerations relevant to invalidation of a tax measure are wholly different from those that come into play in justifying disapproval of a tax on the score of political or financial unwisdom.
It may well be that the last word has not been said by the various devices now available—through uniform and reciprocal legislation, through action by the States under the Compact Clause, Art. I, § 10 [3], or through whatever other means statesmen may devise—for distributing wisely the total national income for governmental purposes as between the States and the Nation. But even if it were possible to make the needed adjustments in the fiscal relations of the States to one another and to the Federal Government through the process of episodic litigation— which to me seems most ill-adapted for devising fiscal policies—it is enough that our Constitutional system denies such a function to this Court.
I agree, therefore, that First National Bank v. Maine should be overruled and that the tax imposed by Utah *185in this case is valid. To refuse to nullify legislation the frailties of which we think we see, is to respect the bounds of our Constitutional authority and not to indulge in a fiction. See James Bradley Thayer, The Origin and Scope of the American Doctrine of Constitutional Law, 7 Harv. L. Rev. 129. To allow laws to stand is to allow laws to be made by those whose task it is to legislate. The nullification of legislation on Constitutional grounds has been recognized from the beginning as a most “delicate” function, not to be indulged in by this Court simply because it has formal power to do so, but only when compelling considerations leave no other choice. To suggest that when this Court finds that a law is not offensive to the Constitution and that it must therefore stand, we make the same kind of judgment as when on rare occasions we find that a law is offensive to the Constitution and must therefore fall, is to disregard the role of this Court in our Constitutional system since its establishment in 1789.