Court Opinion

ID: 3995961
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:54:19.427949+00
Date Added: 2024-06-11T14:18:42.884425
License: Public Domain

The question here to be decided is whether or not a state tax is exempt from the operation of §§ 3466 and 3186, Revised Statutes of the United States. It seems to me that it is.
The states existed before the United States. They created the Union, and by express constitutional provision that Union has only such powers as are expressly delegated to it or are necessary to carry into effect the delegated powers. All other governmental powers are expressly reserved to the states.
The Federal income tax is levied by authority of the constitutional amendment of 1913, which permits Congress to lay and collect taxes on incomes from whatever source derived, without apportionment among the several states. The record before us is silent upon the question of the source of the money now in the hands of the receiver. It is apparent, however, that the county tax was a lien on the specific property assessed as of the date of the assessment, while the Federal tax was a lien upon the income only. The income which the Federal government taxed has been dissipated and is gone. The money in the hands of the receiver stands in lieu of the specific property assessed, and the lien of the county tax has extended to it. Clearly, the Federal government had no power to levy a tax, directly or indirectly, on the money or property of the Culton-Moylan-Reilly Company as such; but the state or county has that right and had it at all times. Can the state's right, which had thus accrued, be displaced and superseded by the attempt of the Federal government *Page 189 
to convert its claim against the income to one against the property? Where there is a conflict between two sovereigns as to such a right as this, ought not each to be restricted to the thing taxed? In other words, the Federal government ought to have the first claim against the income, and the state the first claim against the property or its proceeds. If the income which the government taxes were still in existence, but the property had been dissipated, the government would no doubt contend that its tax on that income should be first paid, although the state could convert its claim under our laws to one against the income. And if that is a proper rule, why should it not work both ways? If Congress can enact a law making its tax a first claim against the property of an insolvent corporation, then it has power to make its tax a first claim against all property of solvent persons and corporations, and thereby take from the state its power to exist.
As I read the cases, the reasoning of the Federal Supreme court is contrary to the view of the majority. Ex parte Tyler,149 U.S. 164, 37 Law. Ed. 689; Lane County v. Oregon,74 U.S. 71, 19 Law. Ed. 101; Buffington v. Day, 11 Wall. (U.S.) 113, 20 Law. Ed. 122; McCulloch v. Maryland, 17 U.S. 316, 4 Law. Ed. 579.
Nor am I satisfied that the majority has correctly construed the Federal statutes involved. I cannot conceive of a state tax, which was a lien long before the Federal tax was assessed, being disregarded and held of less moment than the interest of a mortgagee, purchaser or judgment creditor.
I therefore dissent.
HOLCOMB, J., concurs with TOLMAN, J. *Page 190