Court Opinion

ID: 9418930
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:43:24.68671+00
Date Added: 2024-06-11T17:22:13.203282
License: Public Domain

*110Mr. Justice Sutherland,
dissenting.
I think the judgment should be reversed.
At the time the bonds here involved were purchased, the statutes of Iowa expressly provided that they “are not to be taxed” or “shall not be taxed” or “shall be exempt from taxation.” These are plain words, and there is no room for construction. When the language is clear, it is conclusive. “There can be no construction where there is nothing to construe.” This has been held so often by this court that it has become axiomatic. That the provisions with respect to the non-taxability of the bonds constitute a statutory contract with the purchaser of the bonds, and that any subsequent statute which violates these provisions impairs the obligation of the contract, is not a matter of dispute. The' solé question is whether the imposition of an income tax in respect of the interest derived from the bonds is a tax upon the bonds.
We are not concerned with the name given to the tax. The exemption is in unqualified terms, and includes all taxes. And I see no warrant for saying that the exemption must be limited to so-called ad valorem taxes. The exemption is not in the form or nature of a proviso to the section fixing the time and providing for the levy of such taxes, but is a substantive enactment standing independently and complete in itself. Nor do I see any ground for confining it to taxes then known to the Iowa law. Such an all-embracing exemption cannot be avoided by the invention of a new tax. To me, it seems evident that if any tax be imposed upon the bonds, the contract is impaired. It likewise seems evident that the tax here is imposed on the bonds themselves.
Of what does a bond for the payment of money consist? Certainly not the principal alone; for the promise to pay interest is as much a part of the obligation of the bond as the promise to pay the principal. A bond, for example, promises to pay the bearer at the end of ten years the sum of $1,000, and also interest at the rate of 5% per *111annum, to be paid semi-annually; that is to say, promises to pay $25 at the end of every six-months' period, and $1,000 at the end of ten years. There is no difference between the two promises in respect of their binding or legal quality. Both are obligations of the bond. If one cannot be violated, neither can the other.
There is no difference in principle between such a bond and one where the bond is issued upon a discount basis, as in the case of United States Savings Bonds (Treasury Department Circular No. 529, February 25, 1935). A United States Savings Bond for $1,000, payable in ten years “without interest,” may be purchased for the sum of $750 — the remaining $250 being deferred interest. Plainly, the $250 deferred interest is as much a part of the bond as the $750 originally invested; and a contractual obligation exempting the bond from taxation is equally applicable to each. Is the case different if the bond shall provide for the payment of $750, together with interest in the sum of $250 to be paid in installments or at the end of ten years? Certainly not, unless form is to be exalted and substance ignored.
The force of what has been said cannot be avoided by merely calling the tax an excise. If a tax falls upon the bond and lessens its proceeds, either in respect of principal or interest, it is a tax on the bond, and cannot be made something else by resort to the vocabulary or by employing some circuitous method of imposing it. It is well settled, at least generally, that “what cannot be done directly . . . cannot be accomplished indirectly by legislation which accomplishes the same result.” Fairbank v. United States, 181 U. S. 283, 294, 300, and cases cited. I am unable to subscribe to that philosophy which seems to teach that a forbidden result may nevertheless be achieved if only some delusive and devious way of achieving it can be found.
Me. Justice McReynolds and Mr. Justice Butler join in this opinion.