Court Opinion

ID: 9418659
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:34:35.899449+00
Date Added: 2024-06-11T17:19:21.632897
License: Public Domain

Mr. Justice Stone;
dissenting.
While it may be conceded that the petitioner has been discriminated against, the discrimination occurs only in respect of an act of bounty. Petitioner’s only complaint is that Congress has not granted it as large an exemption— purely a matter of grace — as it has accorded to others, owning no tax-exempt securities.
*536In granting a bounty of any sort Congress had a particular purpose: the generous protection of insurance reserves in the interest of the policy holders. For that purpose an exemption of 4% of the reserves was considered sufficient. In the case of companies already entitled to an exemption of 4%, a further act of bounty was of course unnecessary to accomplish the end in view. Unless established principles require it, I do not think we should hold that Congress was powerless to act as generously as was necessary to achieve its useful purpose without granting additional and unnecessary bounties to insurance companies fortuitously in possession of tax-exempt bonds.
Thére is a distinction between imposing a burden and withholding a favor. By the Constitution or by contract the holders of tax-exempt securities are protected from burdens; but from neither source do they derive an affirmative claim to favors. If Congress voted to subsidize all insurance companies except those holding tax-exempt . bonds, whatever other objections might be made to such a course I do not think petitioner could complain because it had not been made the recipient of a gift. For the same reason I believe that its present contention is insubstantial.
But even though the result now reached, were to be deemed a logical implication of the doctrine announced in The Collector v. Day, 11 Wall. 113, that neither national nor state governments may tax the instrumentalities of the other, still,' as this Court has often held, that rule may not be' pressed to the logical extreme of forbidding legislation which affects only remotely or indirectly the holders of the other’s securities. See Metcalf & Eddy v. Mitchell, 269 U. S. 514, 523. As Mr. Justice Brandéis' has just pointed out, “ a state inheritance or legacy tax is valid although the tax is as high when the estate transmitted consists in part of bonds of the United States as when none are held”; and this Court has sustained statutes under which “ a corporation holding bonds of the United *537States was obliged to pay the same amount in taxes that it would have been required to pay if it had not been a holder of United States bonds.” Not all income earned in the.employment of a state is exempt from federal taxation, Metcalf & Eddy v. Mitchell, supra; instrumentalities affecting indirectly or remotely the functions of one government may nevertheless be taxed by the other, Gromer v. Standard Dredging Co., 224 U. S. 362; Baltimore Shipbuilding Co. v. Baltimore, 195 U. S. 375; Fidelity & Deposit Co. v. Pennsylvania, 240 U. S. 319.
Now, the rule which, under the decisions of this Court, has been thus narrowly limited, is extended into a new field; and the Government is forbidden to grant any benefit or immunity to a tax-payer unless it be extended in addition to the immunity already assured by reason of his possession of tax-exempt securities. Here, too, the remedy is not the cancellation of the benefits to others of which petitioner complains, but the grant to it of an added bounty which Congress has not authorized and which the Constitution, it seems to me, neither requires Congress nor permits this Court to give.
Mr. Justice Holmes and Mr. Justice Brandéis join in this dissent.