Court Opinion

ID: 5588937
Source: CourtListenerOpinion
Date Created: 2022-01-11 02:03:33.142045+00
Date Added: 2024-06-11T08:36:22.400435
License: Public Domain

Gilbert, J.,
dissenting. The original thirteen States possessed all sovereign powers, and in forming the Federal government, the United States, they created a government of limited powers. It was endowed with only such powers as were delegated to it, expressly or by necessary implication. The United States constitution went into effect on March 4, 1789. The first ten amendments were submitted to the several States by a joint resolution of Congress, September 25, 1789, under a preamble reciting: “The conventions of a number of States having at the time of their adopting the constitution expressed a desire, in order to prevent misconstruction or abuse of its powers, that further declaratory and restrictive clauses should be added. And as extending the ground of public confidence in the Government will best insure the beneficent ends of its institution.” The tenth amendment, intended to make clear that the States reserved all powers not delegated, is: “The powers not delegated to the United States by the constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” As other States were admitted the powers of the union remained limited to those delegated by the States. One of the chief purposes for creating the new government as declared in the preamble to the constitution was “to form a more perfect union.” The last and concluding words of that great document, excepting only the date and the names of the signing patriots, are “done in convention by the unanimous consent of the States present.” Wherever, therefore, the power to tax is delegated to the United States, unless the grant is made exclusive, the States retained con*221current power to tax. Eestrictions on the power of States to tax must be within the constitution, State or United States, or they can not possibly exist. See United States v. Boyer, 85 Fed. 430. “This government is acknowledged by all to be one of enumerated powers.. The principle that it can exercise only the powers granted to it would seem too apparent” to require argument, and “We admit, as all must admit, that the powers of the government are limited and that its limits are not to be transcended.” McCulloch v. Maryland, 4 Wheat. 404, 420 (supra).
It is universally admitted that the United States constitution is supreme over all the departments of the national government, and, to the extent of the powers delegated, over all who made themselves. parties to it, States as well as persons; it is supreme over the people of the United States aggregately and in their separate sovereignties. It constitutes a part of the law of each State, and is binding upon the people and authorities of the State. Dodge v. Woolsey, 18 How. 331, 347 (15 L. ed. 401); Farmers &c. National Bank v. Dearing, 91 U. S. 29, 35 (23 L. ed. 196); Shreveport v. Cole, 129 U. S. 36, 43 (9 Sup. Ct. 210, 32 L. ed. 589); Davis v. Burke, 179 U. S. 399, 403 (21 Sup. Ct. 210, 45 L. ed. 249); Cooper v. Telfair, 4 Dall. 14, 18 (1 L. ed. 721). The State has power, so long as it does not conflict with the constitutional inhibitions, to tax all persons, property, and business within its jurisdiction. Hughes v. Dundee Mortgage Co., 140 U. S. 98 (11 Sup. Ct. 727, 35 L. ed. 354); Dundee v. School Dist., 19 Fed. 359; High v. Coyne, 178 U. S. 111 (20 Sup. Ct. 747, 44 L. ed. 997); Rast v. Van Deman, 240 U. S. 342 (36 Sup. Ct. 370, 60 L. ed. 679, L. R. A. 1917A, 421); Tanner v. Little, 240 U. S. 369, 36 Sup. Ct. 379, 60 L. ed. 691); Van Allen v. Assessors, 3 Wall. 573 (18 L. ed. 229); Hamilton v. Massachusetts, 6 Wall. 632 (18 L. ed. 904); Oulton v. Savings Inst., 17 Wall. 109 (21 L. ed. 618); Barnes v. Railroads, 17 Wall. 294 (21 L. ed. 544); State Tonnage Tax Cases, 12 Wall. 204 (20 L. ed. 370); License Tax Cases, 5 Wall. 462 (18 L. ed. 497); Pervear v. Massachusetts, 5 Wall. 478 (18 L. ed. 608); Flaherty v. Hanson, 215 U. S. 515; U. S. v. Snyder, 149 U. S. 210 (13 Sup. Ct. 846, 37 L. ed. 705); Dodge v. Woolsey, supra; McGuire v. Commonwealth, 3 Wall. 387 (18 L. ed. 226; Hylton v. United States, 3 Dall. 171 (1 L. ed. 556); Scholey v. Rew, 23 Wall. 331 (23 L. ed. 99); Head Money Cases, 112 U. S. 580 (5 Sup. Ct. 247, 28 L. *222ed. 798); Knowlton v. Moore, 178 U. S. 41 (20 Sup. Ct. 747, 44 L. ed. 969); Patton v. Brady 184 U. S. 608 (22 Sup. Ct. 493, 46 L. ed. 713); Snyder v. Bettman, 190 U. S. 249 (23 Sup. Ct. 803, 47 L. ed. 1035); South Carolina v. United States, 199 U. S. 437 (26 Sup. Ct. 110, 50 L. ed. 261); Veazie Bank v. Fenno, 8 Wall. 533 (19 L. ed. 482).
“In respect . . to property, business, and persons, within their respective limits,” the power of taxation of the States “remained and remains entire. . . The extent to which it shall be exercised, the subjects upon which it shall be exercised, and the mode in which it shall be exercised, are all equally within the discretion of the legislatures to which the States commit the exercise of the power. That discretion is restrained only by the will of the people expressed in the State constitutions or through elections, and by the condition that it must not be so used as to burden or embarrass the operations of the national government. There is nothing in the constitution which contemplates or authorizes any direct abridgment of this power by national legislation. To the extent just indicated it is as complete in the States as the like power, within the limits of the constitution, is complete in Congress.” Lane County v. Oregon, 7 Wall. 71, 77 (19 L. ed. 101).
“The power of taxation of each of the States over all persons and property within its jurisdiction is an inherent and not a delegated power, and knows no limits except those imposed expressly or by plain implication in the constitution of the United States. The power of taxation of each of the States is specifically restricted by the provisions of the constitution of the United States relating to imposts or duties on imports and exports, and duties of tonnage, and by the constitutional inhibition of State laws impairing the obligation of contracts, or discriminating against citizens of other States. The fourteenth amendment to the constitution of the United States, in providing that no State shall deprive any person of his property without due process of law, prevents any State from taxing persons, property, privileges, or occupations not within its jurisdiction; from raising money under the guise of taxation for purposes not public; and from employing arbitrary and oppressive methods of assessing and collecting taxes. The power of taxation by the States is further restricted by the provision of the Federal constitution to the effect that no State may tax the property or *223instrumentalities of the United States, impose a burden upon foreign or interstate commerce, or impose a tax in violation of a treaty of the United States.” 26 Ruling Case Law, 86, § 63.
In Thomson v. Pacific R. Co., 9 Wall. 579 (19 L. ed. 579), the Supreme Court had under consideration a suit instituted by Thomson and others as stockholders of a railroad company, seeking to enjoin the railroad company and the treasurers of several counties in the State of Kansas from the payment and collection of taxes levied by the State of Kansas on property of the railroad company; and the railroad company was originally chartered -by the territory of Kansas, subsequently affirmed and enlarged by the State of Kansas. Subsequently to that the railroad was incorporated by Congress with power to construct a railroad and telegraph westward through the territory of the United States, and for other purposes. The United States granted large bounties to the railroad company and in turn the company was bound to perform certain duties, such as carrying the mail, etc., and ultimately was to pay five per cent, of its net earnings to the United States. Complainants insisted the company would be greatly hindered and embarrassed in the performance of its obligations to the United States if the State of Kansas were permitted to impose and collect taxes. That is not a full statement of the case, but it is sufficient for present purposes. The Supreme Court affirmed the right of the State to levy and collect the tax, and in the opinion said in part: “No one questions that the power to tax all property, business, and persons, within their respective limits, is original in the States and has never been surrendered. It can not be so used, indeed, as to defeat or hinder the operations of the national government; but it will be safe to conclude, in general, in reference to persons and State corporations employed in government service, that when Congress has- not interposed to protect their property from State taxation, such taxation is not obnoxious to that objection. We perceive no limits to the principle of exemption which the complainants seek to establish. It would remove from the reach of State taxation all the property of every agent of the government. Every corporation engaged in the transportation of mails, or of government property of any description, by land or water, or in supplying materials for the use of the government, or in performing any service of whatever kind, might claim the benefit of ex-*224eruption. The amount of property now held by such corporations, and having relations more or less direct to the national government and its service, is very great. And this amount is continually increasing; so that it may admit of question whether the whole income of the property which will remain liable to State taxation, if the principle contended for its admitted and applied in its fullest extent, may not ultimately be found inadequate to the support of the State governments.”
The rule of construction governing reserved powers is given by the court in Livingston v. Van Ingen, 9 Johns. (N. Y.) 507, in the following language: “When the people create a single, entire government, they grant at once all the rights of sovereignty. The powers are indefinite and incapable of enumeration. Everything is granted that is not expressly reserved in the constitutional charter, or necessarily retained as inherent in the people. But when a Federal government is erected with only a portion of the sovereign power, the rule of construction is directly the reverse, and every power is reserved to the members that is not, either in express terms or necessary implication, taken away from them, and vested exclusively in the Federal head. This rule has not only been acknowledged by the most intelligent friends to the constitution, but is plainly declared by the instrument itself. Congress have power to lay and collect taxes, duties and excises; but as these powers are not given exclusively, the States have a concurrent jurisdiction, and retain the same absolute powers of taxation which they possessed before the adoption of the constitution, except the power of laying an impost, which is expressly taken away. This very exception proves that, without it, the States would have retained the power of laying an impost; and it further implies that in cases not excepted the authority of the States remains unimpaired.”
In Bank of Commerce v. Tennessee, 161 U. S. 134, 146 (16 Sup. Ct. 456, 40 L. ed. 645), the Supreme Court said: “These cases show the principle upon which is founded the rule that a claim for exemption from taxation must be clearly made out. Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of any one to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded upon plain language. *225There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power.” With reference to the relinquishment of its taxing power by a State, it was said, in Providence Bank v. Billings, 29 U. S. 514 (7 L. ed. 939) : “It would seem that the relinquishment of such a power is never to be presumed. We will not say that a State may not relinquish it; that a consideration sufficiently valuable to induce a partial release of it may not exist; but as the whole community is interested in retaining it undiminished, that community has a right to insist that its abandonment ought not to be presumed in a case in which the deliberate purpose of the State to abandon it does not appear.” See also 2 Cooley on Taxation (4th ed.), § 672.
I shall now look to the constitution of the United States, the only authoritative source, to ascertain what powers have been delegated by the States to the United States to impose restrictions upon said taxation. There is a clear limitation of such power, found in art. 1, §§ 9, 10 (Civil Code (1910), §§ 6649, 6653) : “No State shall, without the consent of Congress, lay any imposts or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws. . . No State shall, without the consent of Congress, lay any duty of tonnage,” etc. In art. 1, § 8 (Civil Code (1910), § 6644), it is expressly declared that “The Congress shall have power — 1. To lay and collect taxes, duties, imposts, and excises; to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts, and excises shall be uniform throughout the United States.” This is an express power to tax, and contains no prohibition of State taxation. The States, therefore, as to this grant, retained concurrent power. The preamble to' the United States constitution recites, as a purpose for forming the Union to “provide for the common defense,” and art. 1, sec. 8 (Civil Code (1910), § 6644), grants power to “declare war,” “to raise and support armies,” “to provide and maintain a navy.” It is obvious that none of these contains any restriction on the taxing powers of the *226State, either express or implied. With reference thereto Mr. Justice Story says, in his work on the constitution, §§ 907, 908: “Do the words, ‘to lay and collect taxes, duties, imposts, and excises,’ constitute a distinct, substantial power; and the words, ‘to pay the debts and provide for the common defense and general welfare of the United States,’ constitute another distinct and substantial power? Or are the latter words connected with the former, so as to constitute a qualification upon them? This has been a topic of political controversy, and has furnished abundant materials for popular declamation and alarm. If the former be the true interpretation, then it is obvious that, under color of the generality of the words, ‘and provide for the common defense and general welfare,’ the government of the United States is in reality a government of general and unlimited powers, notwithstanding the subsequent enumeration of specific powers. If the latter be the true construction, then the power of taxation only is given by the clause, and it is limited to objects of a national character, ‘to pay the debts and provide for the common defense and the general welfare.’ ” Then the learned Justice proceeds to state in his own words how the constitutional provision would stand as construed by him, as follows: ‘“The Congress shall have power to lay and collect taxes, duties, imposts, and excises, in order to pay the debts, and to provide for the common defense and general welfare of the United States;’ that is, for the purpose of paying the public debts, and providing for the common defense and general welfare of the United States. In this sense Congress has not an unlimited power of taxation; but it is limited to specific objects, — the payment of the public debts, and providing for the common defense and general welfare. A tax, therefore, laid by Congress for neither of these objects would be unconstitutional, as an excess of its legislative authority.”
The late Mr. Justice Miller, of the Supreme Court of the United States, at his death, left a carefully prepared manuscript of lectures upon the constitution of the United States, which were both scholarly and instructive. Among them was a lecture delivered on that clause of the Federal constitution, art. 1, § 8, with reference to the power delegated to Congress to lay and collect taxes to pay the debts and provide for the common defense and general welfare of the United States, quoted above. In that lecture he said: “It *227may be noted that the language is ‘to lay and collect taxes, duties, imposts, and excises/ and then there comes a comma, after which it continues, ‘to pay the debts and provide for the common defense and general welfare of the United States.’ . . This clause in regard to paying the debts and providing for the common defense and general welfare constitutes a proper qualification of the -power to collect taxes, . . so that it seems probable that the meaning is that Congress shall have power to lay these taxes and collect them in order ‘to pay the debts and provide for the common defense and general welfare.’ ” Miller on the Constitution of the United States, 230. “Power to tax for State purposes is as much an exclusive power in the States as the power to lay and collect taxes to pay the debts and provide for the common defense and general welfare is an exclusive power in Congress.” Ward v. Maryland, 12 Wall. 418, 427 (20 L. ed. 449). With .reference to the preamble to the Federal constitution Mr. Justice Story said, in his work on the Constitution, “And here we must guard ourselves against an error which is too often allowed to creep into the discussions upon this subject. The preamble never can be resorted to, to enlarge the powers confided to the general government, or any of its departments. It can not confer any power per se. It never can amount, by implication, to an enlargement of any power expressly given. It can never be the legitimate source of any implied power, when otherwise withdrawn from the constitution. Its true office is to expound the nature and extent and application of the powers actually conferred by the constitution, and not substantively to create them. For example the preamble declares one object to be ‘to provide for the common defense.’ No one can doubt that this does not enlarge the powers of Congress to pass any measures which they may deem useful for the common defense.” The common defense to which the preamble in the constitution refers is explicitly stated in art. 1, sec. 8, U. S. Constitution (Civil Code (1910), § 6644). Exclusive jurisdiction was delegated to the Federal government over interstate commerce. The Supreme Court has construed that section, art. 1, § 8, clause 3, to delegate to the Federal government a restriction upon State governments to the extent that no State shall lay, even under the guise of taxation, a burden upon interstate commerce. Postal Telegraph-Cable Co. v. Cordele, 139 Ga. 126 (76 S. E. 744, Ann. Cas. 1914A, 984); Crump v. McCord, 154 Ga. 147 (113 S. E. 534),
*228Chief Justice Marshall, in McCulloch v. Maryland, 4 Wheat. 405 (supra), said “-Should Congress, in the execution of its powers, adopt measures which are prohibited by the constitution, or should Congress, under the pretext of executing its powers, pass laws for the accomplishment of objects not intrusted to the government, it would-become the painful duty of this tribunal, should a case requiring such a decision come before it, to say that such an act was not the law of the land.” So, even if Congress enacted a statute to prohibit this State taxation, it would be declared “not the law of the land,” unless authorized by the constitution. Among the implied powers delegated to the Federal government, as construed by the Supreme Court, is that State governments may not tax agencies or instrumentalities of the United States government. In McCulloch v. Maryland, supra, the Supreme Court was considering, among other things, whether the legislature of Maryland could pass a law taxing a branch national bank located within the State, without violating the Federal constitution. The court held in substance that the States had no power, by taxation or otherwise, to retard, impede, burden, or in any manner control the operations of the constitutional laws enacted by Congress to carry into effect the powers vested in the national government.” But the court also held explicitly that the States were not deprived of resources which they originally possessed, and that they could lay a tax upon the real property of the bank in common with all other real property within the State. It also held that the State could impose a tax on the interest which the citizens of Maryland might hold in the bank, in common with other property of the same description throughout the State; and finally that a State has no power to tax an agency of the general government, for “the power to tax involves the power to destroy.” Numerous authorities might readily be cited, but it is known to” all courts from the rendition of that decision at that early date that its soundness has never been questioned. On the other hand it has been uniformly followed and reaffirmed.
In Rucker v. Merck, 172 Ga. 793 (supra), this court dealt with the same question as that in the present case. The Justices were not unanimous, and neither the majority nor the minority seem to have dealt with the question exhaustively. No authorities were cited, and the rulings were made in what would seem to be very general terms. It was said; “Under that war-making power con*229ferred by the Federal constitution, Congress is empowered to'adopt any means which, it may deem necessary to contribute to the success of the undertaking.” This is true, with the proviso that Congress does not resort to the exercise of any power not delegated to it by the States and contained in the Federal constitution. For the purpose of waging successful war it may resort to all species of taxation authorized by the constitution, and it may do anything else so authorized; but it is quite another thing to say that in order to successfully wage war it may prohibit the State from exercising its power of taxation, with which it has never parted. Certainly it has never expressly parted with the power of taxing such property within its jurisdiction. Can it be said to have parted with it by implication? No court and no statesman, so far as I am aware, has maintained the affirmative of that proposition. In Rucker v. Merck that specific assertion was not made. How can it be said that it is necessarily implied, in order that the United States Government may successfully carry out war, that it has the power to prohibit a State from taxing such property. The very magnitude and far-reaching effects of such a conception, it would seem, is sufficient to disprove that the States ever intended such delegation of power. It is so far-reaching that it can not in reason be implied. This country has engaged in many wars, and in the course of time may engage in others. It has fought the revolutionary war, the second war with England in 1813, the Indian wars, the war with Mexico, the war between the States, the Spanish-American war, and finally the world war. After the conclusion of each of these wars the government has responded generously in appreciation of the services of its soldiers; but if in an effort to exercise such generosity the Congress, under the spur of eager and in most cases needy ex-soldiers, could and should undertake to apply the provisions of this act to all soldiers, past and future, the effect would be calamitous. If the property sought to be taxed in this case is declared constitutionally exempt, what is to prevent other species of property, similarly purchased, from being likewise declared exempt from State taxes. I have shown that power to declare war is connected in the constitution with the power to lay taxes for that purpose, and no power to prohibit taxation by the State is contained therein. I have quoted the interpretation of Mr. Justice Story, which seems unanswerable, that no such power is given'in the preamble of the constitution.
*230There can be found nowhere within the limits of the Federal constitution any delegation of power to the United States government, either express or implied, which will authorize the Federal government to prohibit a tax, such as the tax sought to be imposed in this case. It must necessarily follow, from what has been shown above, that no power has ever been delegated to the United States government which would authorize it to deprive the States of the power of taxing money already paid as a bounty or otherwise to a former soldier or any one else, whether such fund be in the hands of the recipient or where the latter has invested it in other property. The State has unlimited power to tax such fund or the property into which it has been invested, without let or hindrance from the Federal government. It does not matter who owns the property. While entertaining no doubt as to the soundness of what has just been said, I am justified in saying that the Congress of the United States (in 38 U. S. C. A. 317, § 545; U. S. Com. Stat. 1935, § 9137 1/3-33) has not undertaken to deprive the States of the power of taxing property such as that sought to be taxed in this instance. It will be noted that the United States statute under consideration contains the following language: “Compensation, insurance, and maintenance and support allowance payable [emphasis ours] . . shall not be assignable; . . shall be exempt from all taxation.” Using words in their ordinary every-day sense, we are driven to the conclusion that the proper construction of the statute is that the exemption from taxation applies to such compensation only as has not been paid. That provision can not be changed by arbitrary construction to mean that after the fund is paid to the recipient, and after he has invested it in property, the fund in his hands or the property in which he has invested it can not be taxed by the State government or a municipality created by the State. In Webster’s Dictionary the word “payable” is defined: “1. That may, can, or should be paid; justly due;” 3 (Law) a. That may be discharged or settled by delivery of value, b. matured; now due.” The fact that the statute also provides that compensation shall not be assignable shows that the Congress intended to deal only with the right of that claimant while the fund was due and before payment. It surely did not mean to prohibit the assignment after the money had been paid. If so, the recipient could not use or invest it.
*231The Congress has undertaken to exempt from taxation the compensation while it is “payable.” That and similar language has been frequently construed by the courts, among them, the case of State ex rel. Smith v. Board of Tax Commissioners, 132 Kan. 233 (294 Pac. 915). Attention is particularly called to the able and convincing opinion in that case. Among the cases therein cited is Cranz v. White, 27 Kan. 319 (41 Am. R. 408), in which the opinion was written by Mr. Justice Brewer, afterwards a Justice of the United States Supreme Court. In McIntosh v. Aubrey, 185 U. S. 122 (22 Sup. Ct. 561, 46 L. ed. 834) the Supreme Court said: “The plaintiff in error claims that the property having been purchased with pension money it was exempt from seizure and sale on execution under § 4747 of the Eevised Statutes of the United States. . . The language of the section of itself seems to present no difficulty; and if doubt arises at all it is only on account of the decisions of courts whose opinions are always entitled to respect. Crow v. Brown, 81 Iowa, 344 (46 N. W. 993, 11 L. R. A. 110, 25 Am. St. R. 501); Yates County Nat. Bank v. Carpenter, 119 N. Y. 550 (23 N. E. 1108, 7 L. R. A. 557, 16 Am. St. R. 855). But, notwithstanding, we think the purpose of Congress is clearly expressed. It is not that pension money shall be exempt from attachment in all of its situations and transmutations. It is only to be exempt in one situation, to wit, when ‘due or to become due.’ From that situation the pension money of plaintiff in error had departed. The simplicity and directness of the statute are impaired by attempts to explain it by the use of other terms than its own. That money received is not money due, and that real estate is not money at all, would seem, if real distinctions be regarded, as obvious enough, without explanation. Nor are legal fictions applicable. Undoubtedly the law often regards money as land and land as money, and, through all the forms in which property may be put, will, if possible, trace and establish the original ownership. But these are special instances depending on special principles, and can not be made a test of the purpose of Congress in enacting § 4747. We concur, therefore, with the learned judge of the court of common pleas of Pennsylvania, that ‘the exemption provided by the act protects the fund only while in the course of transmission to the pensioner. When the money has been paid to him it has “inured wholly to his benefit,” and is liable to seizure as opportunity pre*232sents itself.’ Pages 124, 125 of 185 U. S., 22 S. Ct. 561, 562.” To the same effect see State v. Fairton Savings Fund & Building Association, 44 N. J. L. 376; Faurote v. Carr, 108 Ind. 123 (9 N E. 350); State v. Wright (Ala.), 140 So. 584; Martin v. Guilford County, 201 N. C. 63 (158 S. E. 847); Lambert v. Guilford County, 201 N. C. 67 (158 S. E. 849); the last two cases dealing directly with the same question with which we are dealing in connection with the world war veterans’ act, and both holding that property purchased by a world war veteran with money paid him by the government under the act mentioned is not exempt from State taxation.
The court should have sustained the demurrers and dismissed the petition. It was also error to admit the evidence referred to in the third headnote. Mr. Justice Atkinson concurs in this dissent.
Since the decision of the above case, my attention has been directed to the case of State ex rel. Smith v. Board of Commissioners of Shawnee County, 132 Kan. 233 (294 Pac. 915), and to the fact that the Supreme Court of the United States denied certiorari. 283 U. S. 855. That is tantamount to an approval by the Supreme Court of the judgment of the Supreme Court of Kansas, which is in line with Martin v. Guilford County, cited in the foregoing dissenting opinion.