Court Opinion

ID: 9418979
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:44:19.733859+00
Date Added: 2024-06-11T17:22:14.024778
License: Public Domain

Mr. Justice Butler,
dissenting.
So far as concerns liability for federal income tax, the salaries paid by the Port Authority to its officers and employees are not distinguishable from salaries paid by *428States to their officers and employees. The judgment of the Circuit Court of Appeals should therefore be affirmed On the principle applied in McCulloch v. Maryland (1819) 4 Wheat. 316, that under the Constitution States are without power to tax instrumentalities of the United States and in Collector v. Day (1871) 11 Wall. 113, that the United States is . without power to tax the salary of a state officer. That principle has been followed in a long line of decisions. In Indian Motocycle Co. v. United States (1931) 283 U. S. 570, we held the United States without power to tax the sale of a motorcycle to a municipal corporation for use in its police service. The Court, speaking through Mr. Justice Van Devanter, said (p. 575):
“It is an established principle of our constitutional system of dual government that the instrumentalities, means and operations whereby the United States exercises its governmental powers are exempt from taxation by the States, and that the instrumentalities, means and operations whereby the States exert the governmental powers belonging to them are equally exempt from taxation, by the United States. This principle is implied from the independence of the national and state governments within their respective spheres and from the provisions of the Constitution which look to the maintenance of the dual system. Collector v. Day, 11 Wall. 113, 125, 127; Willcuts v. Bunn, 282 U. S. 216, 224-225. Where the principle applies it is not affected by the ampunt of the particular tax or the extent of the resulting interference, but is absolute. McCulloch v. Maryland, 4 Wheat. 316, 430; United States v. Baltimore & Ohio R. Co., 17 Wall. 322, 327; Johnson v. Maryland, 254 U. S. 51, 55-56; Gillespie v. Oklahoma, 257 U. S. 501, 505; Crandall v. Nevada, 6 Wall. 35, 44-46.”
Following that case, we recently applied the principle in N. Y. ex rel. Rogers v. Graves (January 4, 1937) 299 *429U. S. 401, to prevent the State of New York from taxing the salary of counsel of the Panama Railway Company, a federal instrumentality, and in Brush v. Commissioner (March 15, 1937) 300 U. S. 352, to prevent the United 'States from taxing the salary of the chief engineer of the bureau of water supply for the city of New York. In Helvering v. Therrell (February 28, 1938) 303 U. S. 218, holding that the federal government has power to tax compensation paid to attorneys and others out of corporate assets for necessary services rendered about the liquidation of insolvent corporations by state officers proceeding under her statutes, we said (p. 223):
“Among the inferences which derive necessarily from the Constitution are these: No State may tax appropriate means which the United States may employ for exercising their delegated powers; the United States may. not -tax instrumentalities which a State may employ in, the discharge of her essential governmental duties — that is those duties which the framers intended each member of the Union would assume in order adequately to function under the form of government guaranteed by the Constitution.
The Court seemingly admitting that it would be futile to attempt to-distinguish the cases now before us from the Brush case, overrules it by declaring that it must be limited, by what is now decided. The Solicitor General did not in any manner raise the point on which the Court puts this decision. . He sought reversal on the grounds that the Port Authority’s activities are proprietary in nature; that it is not an agency created by the States alone; that it operates in interstate commerce -subject to the paramount power of Congress. Indeed, he expressly disclaimed intention to ask re-.examinatioii- of the doctrine of immunity on which the Brush case rests. In substance, as well as in the language used, the decision just announced substitutes for that doctrine the *430proposition that, although the federal tax may increase cost of state governments, it may be imposed if it does, not curtail functions essential to their existence. Expressly or sub silentio, it overrules a century of precedents. Cf. James v. Dravo Contracting Co. (December 6, 1937) 302 U. S. 134, 152, 161; Helvering v. Mountain Producers Corporation (March 7, 1938) 303 U. S. 376. As they stood when the cases now before us were in the Circuit Court of Appeals, our decisions required it to hold that the salaries paid by the Port Authority to respondents are not subject to federal taxation. I would affirm its judgments.,
.Mr. Justice McReynolds concurs in this opinion.