Case: NEW YORK et al. v. UNITED STATES
Abbreviation: New York v. United States
Decision Date: 1946-01-14
Docket Number: No. 5
Citation: 326 U.S. 572
Volume: 326
Reporter: United States Reports
Court: Supreme Court of the United States
Jurisdiction: United States
Parties: NEW YORK et al. v. UNITED STATES.
Judges: Me. Justice Jackson took no part in the consideration or decision of this case.
Pages: 572–598

Head Matter:
NEW YORK et al. v. UNITED STATES.
No. 5.
Argued December 7, 8, 1944.
Reargued December 4, 1945.
Decided January 14, 1946.
Henry 8. Manley, Assistant Attorney General of New York, with whom Nathaniel L. Goldstein, Attorney General, Orrin G. Judd, Solicitor General, and Wendell P. Brown, First Assistant Attorney General, were on the brief, for the State of New York; and Mr. Irving I. Goldsmith was on the brief for the Saratoga Springs Commission and Saratoga Springs Authority, petitioners.
Mr. Paul A. Freund, with whom Solicitor General Fahy, Assistant Attorney General Samuel 0. Clark, Jr., Messrs. Sewall Key, Paul R. Russell and Miss Helen R. Carloss were on the brief, for the United States.
Orrin G. Judd, Solicitor General of New York, with whom Nathaniel L. Goldstein, Attorney General, Wendell P. Brown, First Assistant Attorney General, and Henry S. Manley, Assistant Attorney General, were on the brief, for the State of New York.
Mr. Pml A. Freund, with whom Solicitor General McGrath, Assistant Attorney General Samuel 0. Clark, Jr., Messrs. Sewall Key and Bernard Chertcoff were on the brief, for the United States.
By special leave of Court, Greek L. Rice, Attorney General of Mississippi, argued the cause for the following States as amici curiae: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. The Attorneys General of those States, together with Messrs. Austin J. Tobin and Leander I. Shelley, joined in the brief.
Separate briefs were also filed on behalf of the States of Illinois and Pennsylvania; the City of New York and the National Institute of Municipal Law Officers; and the American Public Power Association, as amici curiae.

Opinion:
Mr. Justice Frankfurter
announced the judgment of the Court and delivered an opinion in which Mr. Justice Rutledge joined.
Section 615 (a) (5) of the 1932 Revenue Act, 47 Stat. 169, 264, imposed a tax on mineral waters. The United States brought this suit to recover taxes assessed against the State of New York on the sale of mineral waters taken from Saratoga Springs, New York. The State claims immunity from this tax on the ground that "in the bottling and sale of the said waters the defendant State of New York was engaged in the exercise of a usual, traditional and essential governmental function." The claim was rejected by the District Court and judgment went for the United States. 48 F. Supp. 15. The judgment was affirmed by the Circuit Court of Appeals for the Second Circuit. 140 F. 2d 608. The strong urging of New York for further clarification of the amenability of States to the taxing power of the United States led us to grant cer-tiorari. 322 U. S. 724. After the case was argued at the 1944 Term, reargument was ordered.
On the basis of authority the case is quickly disposed of. When States sought to control the liquor traffic by going into the liquor business, they were denied immunity from federal taxes upon the liquor business. South Caro lina v. United States, 199 U. S. 437; Ohio v. Helvering, 292 U. S. 360. And in rejecting a claim of immunity from federal taxation when Massachusetts took over the street railways of Boston, this Court a decade ago said: "We see no reason for putting the operation of a street railway [by a State] in a different category from the sale of liquors." . Helvering v. Powers, 293 U. S. 214, 227. We certainly see no reason for putting soft drinks in a different constitutional category from hard drinks. See also Allen v. Regents, 304 U. S. 439.
One of the greatest sources of strength of our law is that it adjudicates concrete cases and does not pronounce principles in the abstract. But there comes a time when even the process of empiric adjudication calls for a more rational disposition than that the immediate case is not different from preceding cases. The argument pressed by New York and the forty-five other States who, as amici curiae, have joined her deserves an answer.
Enactments levying taxes made in pursuance of the Constitution are, as other laws are, "the supreme Law of the Land." Art. YI, Constitution of the United States; Flint v. Stone Tracy Co., 220 U. S. 107, 153. The first of the powers conferred upon Congress is the power "To lay and collect Taxes, Duties, Imposts and Excises . . ." Art. I, § 8. By its terms the Constitution has placed only one limitation upon this power, other than limitations upon methods of laying taxes not here relevant: Congress can lay no tax "on Articles exported from any State." Art. I, § 9. Barring only exports, the power of Congress to tax "reaches every subject." License Tax Cases, 5 Wall. 462, 471. But the fact that ours is a federal constitutional system, as expressly recognized in the Tenth Amendment, carries with it implications regarding the taxing power as in other aspects of government. See, e. g., Hopkins Savings Assn. v. Cleary, 296 U. S. 315. Thus, for Congress to tax State activities while leaving untaxed the same activities pursued by private persons would do violence to the presuppositions derived from the fact that we are a Nation composed of States.
But the fear that one government may cripple or obstruct the operations of the other early led to the assumption that there was a reciprocal immunity of the instru-mentalities of each from taxation by the other. It was assumed that there was an equivalence in the implications of taxation by a State of the governmental activities of the National Government and the taxation by the National Government of State instrumentalities. This assumed equivalence was nourished by the phrase of Chief Justice Marshall that "the power to tax involves the power to destroy." McCulloch v. Maryland, 4 Wheat. 316, 431. To be sure, it was uttered in connection with a tax of Maryland which plainly discriminated against the use by the United States of the Bank of the United States as one of its instruments. What he said may not have been irrelevant in its setting. But Chief Justice Marshall spoke at a time when social complexities did not so clearly reveal as now the practical limitations of a rhetorical absolute. See Holmes, J., in Long v. Rockwood, 277 U. S. 142, 148, and in Panhandle Oil Co. v. Mississippi, 277 U. S. 218, 223. The phrase was seized upon as the basis of a broad doctrine of intergovernmental immunity, while at the same time an expansive scope was given to what were deemed to be "instrumentalities of government" for purposes of tax immunity. As a result, immunity was until recently accorded to all officers of one government from taxation by the other, and it was further assumed that the economic burden of a tax on any interest derived from a government imposes a burden on that government so as to involve an interference by the taxing government with the functioning of the other government. See Metcalf & Eddy v. Mitchell, 269 U. S. 514; Helvering v. Producers Corp., 303 U. S. 376; Graves v. N. Y. ex rel. O'Keefe, 306 U. S. 466, 480-81.
To press a juristic principle designed for the practical affairs of government to abstract extremes is neither sound logic nor good sense. And this Court is under no duty to make law less than sound logic and good sense. When this Court for the first time relieved State officers from a non-discriminatory Congressional tax, not because of anything said in the Constitution but because of the supposed implications of our federal system, Mr. Justice Bradley pointed out the invalidity of the notion of reciprocal intergovernmental immunity. The considerations bearing upon taxation by the States of activities or agencies of the federal government are not correlative with the considerations bearing upon federal taxation of State agencies or activities. The federal government is the government of all the States, and all the States share in the legislative process by which a tax of general applicability is laid. "The taxation by the State governments of the instruments employed by the general government in the exercise of its powers," said Mr. Justice Bradley, "is a very different thing. Such taxation involves an interference with the powers of a government in which other States and their citizens are equally interested with the State which imposes the taxation." Since then we have moved away from the theoretical assumption that the National Government is burdened if its functionaries, like other citizens, pay for the upkeep of their State governments, and we have denied the implied constitutional immunity of federal officials from State taxes. Graves v. N. Y. ex rel. O'Keefe, supra. See Gillespie v. Oklahoma, 257 U. S. 501, criticized in Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 401, and explicitly overruled in Helvering v. Producers Corp., 303 U. S. 376; Long v. Rockwood, 277 U. S. 142, overruled in Fox Film Corp. v. Doyal, 286 U. S. 123; Collector v. Day, 11 Wall. 113, and New York ex rel. Rogers v. Graves, 299 U. S. 401, overruled in Graves v. N. Y. ex rel. O'Keefe, supra.
In the meantime, cases came here, as we have already noted, in which States claimed immunity from a federal tax imposed generally on enterprises in which the State itself was also engaged. This problem did not arise before the present century, partly because State trading did not actively emerge until relatively recently, and partly because of the narrow scope of federal taxation. In South Carolina v. United States, 199 U. S. 437, immunity from a federal tax on a dispensary system, whereby South Carolina monopolized the sale of intoxicating liquors, was denied by drawing a line between taxation of the historically recognized governmental functions of a State, and business engaged in by a State of a kind which theretofore had been pursued by private enterprise. The power of the federal government thus to tax a liquor business conducted by the State was derived from an appeal to the Constitution "in the light of conditions surrounding at the time of its adoption." South Carolina v. United States, supra, at 457. That there is a constitutional line between the State as government and the State as trader, was still more recently made the basis of a decision sustaining a liquor tax against Ohio. "If a state chooses to go into the business of buying and selling commodities, its right to do so may be conceded so far as the Federal Constitution is concerned; but the exercise of the right is not the performance of a governmental function . . . When a state enters the market place seeking customers it divests itself of its quasi sovereignty pro tanto, and takes on the character of a trader, so far, at least, as the taxing power of the federal government is concerned." Ohio v. Helvering, supra, at 369. When the Ohio case was decided it was too late in the day not to recognize the vast extension of the sphere of government, both State and National, compared with that with which the Fathers were familiar. It could hardly remain a satisfactory constitutional doctrine that only such State activities are immune from federal taxation as were engaged in by the States in 1787. Such a static concept of government denies its essential nature. "The science of government is the most abstruse of all sciences; if, indeed, that can be called a science which has but few fixed principles, and practically consists in little more than the exercise of a sound discretion, applied to the exigencies of the state as they arise. It is the science of experiment." Anderson v. Dunn, 6 Wheat. 204, 226.
When this Court came to sustain the federal taxing power upon a transportation system operated by a State, it did so in ways familiar in developing the law from precedent to precedent. It edged away from reliance on a sharp distinction between the "governmental" and the "trading" activities of a State, by denying immunity from federal taxation to a State when it "is undertaking a business enterprise of a sort that is normally within the reach of the federal taxing power and is distinct from the usual governmental functions that are immune from federal taxation in order to safeguard the necessary independence of the State." Helvering v. Powers, supra, at 227. But this likewise does not furnish a satisfactory guide for dealing with such a practical problem as the constitutional power of the United States over State activities. To rest the federal taxing power on what is "normally" conducted by private enterprise in contradiction to the "usual" governmental functions is too shifting a basis for determining constitutional power and too entangled in expediency to serve as a dependable legal criterion. The essential nature of the problem cannot be hidden by an attempt to separate manifestations of indivisible governmental powers. See Wambaugh, Present Scope of Government (1897) 20 A. B. A. Rep. 307; Frankfurter, The Public and its Government (1930).
The present case illustrates the sterility of such an attempt. New York urges that in the use it is making of Saratoga Springs it is engaged in the disposition of its natural resources. And so it is. But in doing so it is engaged in an enterprise in which the State sells mineral waters in competition with private waters, the sale of which Congress has found necessary to tap as a source of revenue for carrying on the National Government. To say that the States cannot be taxed for enterprises generally pursued, like the sale of mineral water, because it is somewhat connected with a State's conservation policy, is to invoke an irrelevance to the federal taxing power. Liquor control by a State certainly concerns the most important of a State's natural resources — the health and well-being of its people. See Mugler v. Kansas, 123 U. S. 623, 662; Crane v. Campbell, 245 U. S. 304, 307. If in its wisdom a State engages in the liquor business and may be taxed by Congress as others engaged in the liquor business are taxed, so also Congress may tax the States when they go into the business of bottling water as others in the mineral water business are taxed even though a State's sale of its mineral waters has relation to its conservation policy.
In the older cases, the emphasis was on immunity from taxation. The whole tendency of recent cases reveals a shift in emphasis to that of limitation upon immunity. They also indicate an awareness of the limited role of courts in assessing the relative weight of the factors upon which immunity is based. Any implied limitation upon the supremacy of the federal power to levy a tax like that now before us, in the absence of discrimination against State activities, brings fiscal and political factors into play. The problem cannot escape issues that do not lend themselves to judgment by criteria and methods of reasoning that are within the professional training and special competence of judges. Indeed the claim of implied immunity by States from federal taxation raises questions not wholly unlike provisions of the Constitution, such as that of Art. IV, § 4, guaranteeing States a republican form of government, see Pacific States Tel. & Tel. Co. v. Oregon, 223 U. S. 118, which this Court has deemed not within its duty to adjudicate.
We have already held that by engaging in the railroad business a State cannot withdraw the railroad from the power of the federal government to regulate commerce. United States v. California, 297 U. S. 175. See also University of Illinois v. United States, 289 U. S. 48. Surely the power of Congress to lay taxes has impliedly no less a reach than the power of Congress to regulate commerce. There are, of course, State activities and State-owned property that partake of uniqueness from the point of view of intergovernmental relations. These inherently constitute a class by themselves. Only a State can own a Statehouse; only a State can get income by taxing. These could not be included for purposes of federal taxation in any abstract category of taxpayers without taxing the State as a State. But so long as Congress generally taps a source of revenue by whomsoever earned and not uniquely capable of being earned only by a State, the Constitution of the United States does not forbid it merely because its incidence falls also on a State. If Congress desires,- it may of course leave untaxed enterprises pursued by States for the public good while it taxes like enterprises organized for private ends. Cf. Springfield Gas Co. v. Springfield, 257 U. S. 66; University of Illinois v. United States, supra, at 57; Puget Sound Co. v. Seattle, 291 U. S. 619. If Congress makes no such differentiation and, as in this case, taxes all vendors of mineral water alike, whether State vendors or private vendors, it simply says, in effect, to a State: "You may carry out your own notions of social policy in engaging in what is called business, but you must pay your share in having a nation which enables you to pursue your policy." After all, the representatives of all the States,-having, as the appearance of the Attorneys General of forty-six States at the bar of this Court shows, common interests, alone can pass such a taxing measure and they alone in their wisdom can grant or withhold immunity from federal taxation of such State activities.
The process of Constitutional adjudication does not thrive on conjuring up horrible possibilities that never happen in the real world and devising doctrines sufficiently comprehensive in detail to cover the remotest contingency. Nor need we go beyond what is required for a reasoned disposition of the kind of controversy now before the Court. The restriction upon States not to make laws that discriminate against interstate commerce is a vital constitutional principle, even though "discrimination" is not a code of specifics but a continuous process of application. So we decide enough when we reject limitations upon the taxing power of Congress derived from such untenable criteria as "proprietary" against "governmental" activities of the States, or historically sanctioned activities of government, or activities conducted merely for profit, and find no restriction upon Congress to include the States in levying a tax exacted equally from private persons upon the same subject matter.
Judgment affirmed.
Me. Justice Jackson took no part in the consideration or decision of this case.
"Sec. 615. Tax on Soft Drinks.
"(a) There is hereby imposed— . . .
"(5) Upon all natural or artificial mineral waters or table waters, whether carbonated or not, and all imitations thereof, sold by the producer, bottler, or importer thereof, in bottles or other closed containers, at over 12% cents per gallon, a tax of 2 cents per gallon."
The history of New York's relations to the springs at Saratoga may be briefly summarized. Under previous private operation the flow of the springs had been substantially diminished by excessive pumping. In 1911 the State of New York' began to acquire title to all the lands on which the mineral springs were located at Saratoga Springs. In order to conserve the springs for beneficial operation, the State took various measures until, in 1930, control over the springs in the State Reservation was given to the newly created Saratoga Springs Commission. In 1933, the Commission leased the springs! facilities and delegated their management to the Saratoga .Springs Authority, a public benefit corporation of New York.
' During the.years .1932 to 1934, for which the tax is'asserted, the Commission and the Authority operated the Reservation as á health resort and spa. There are recreation facilities, bath houses,. drink halls, a research laboratory, and other buildings on the grounds. Some of the mineral waters of the springs that have a medicinal value are bottled and sold to distributors, retailers, and directly to consumers. The sales are promoted by advertising and customarily yield a profit which is applied to meeting in part the expenses of operating the other facilities. The remainder of those expenses is met by annual legislative appropriations.
The views of Mr. Justice Bradley have been so vindicated by time and experience that his whole compact opinion deserves to be recalled:
"I dissent from the opinion of the court in this case, because, it seems to me that the general government has the same power of taxing the income of officers of the State governments as it has of taxing that of its own officers. It is the common government of all alike; and every citizen is presumed to trust his own government in the matter of taxation. No man ceases to be a citizen of the United States by being an officer under the State government. I cannot accede to the doctrine that the general government is to be regarded as in any sense foreign or antagonistic to the State governments, their officers, or people; nor can I agree that a presumption can be admitted that the general government will act in a manner hostile to the existence or functions of the State governments, which are constituent parts of the system or body politic forming the basis on which the general government is founded. The taxation by the State governments of the instruments employed by the general government in the exercise of its powers, is a very different thing. Such taxation involves an interference with the powers of a government in which other States and their citizens are equally interested with the State which imposes the taxation. In my judgment, the limitation of the power of taxation in the general government, which the present decision establishes, will be found very difficult of control. Where are we to stop in enumerating the functions of the State governments which will be interfered with by Federal taxation? If a State incorporates a railroad to carry out its purposes of internal improvement, or a bank to aid its financial arrangements, reserving, perhaps, a percentage on the stock or profits, for the supply of its own treasury, will the bonds or stock of such an institution be free from Federal taxation? How can we now tell what the effect of this decision will be ? I cannot but regard it as founded on a fallacy, and that it will lead to mischievous consequences. I am as much opposed as any one can be to any interference by the general government with the just powers of the State governments. But no concession of any of the just powers of the general government can easily be recalled. I, therefore, consider it my duty to at least record my dissent when such concession appears to be made. An extended discussion of the subject would answer no useful purpose." Collector v. Day, 11 Wall. 113, 128-29.
This method of solving a problem inherent in a federal constitutional system has been found equally inconclusive in Latin America. See Amadeo, Argentine Constitutional Law (1943) 97-103.
Attempts along similar lines to solve kindred problems arising under the Canadian and Australian Constitutions have also proved a barren process. See Australia Constitution Act, 1900, § 114, in Egerton, Federations and Unions in the British Empire (2d ed., 1924) 225; Pond, Intergovernmental Immunity: A Comparative Study of the Federal System (1941) 26 Iowa L. Rev. 272; Kennedy & Wells, The Law of the Taxing Power in Canada (1931) 35-37.
Even where the Constitution of a federal system explicitly deals with the problem of intergovernmental taxation, as in Brazil, litigation is not escaped and nice distinctions have to be made. See cases arising under Article 10 of the Constitution of 1891 and under Article 32 of the Constitution of 1937: Appellagáo Civel, No. 2.884,13 Revista do Supremo Tribunal 203 (1917); Appellagáo Civel, No. 2.900, 14 Revista do Supremo Tribunal 44 (1918); Appellagáo Civel, No. 2.536, 19 Revista do Supremo Tribunal 76 (1919); Recurso de mandado de seguranga No. 617, 56 Archivo Judiciario 1 (1940); Agravo de petigáo, No. 8.024, 59 Archivo Judiciario 85 (1941). Article 32 of the Constitution of 1937, the present Brazilian Constitution, provides: "The Union, the States and the Municipalities are forbidden: . . . c) to tax goods, income or services of each other." Speaking of the earlier Constitution, a commentator notes: "These limitations on the federal taxing power are all taken from our own jurisprudence, either by direct transcription from the Constitution of the United States or by the incorporation of principles laid down in decisions of our [the United States] supreme court, as is the case with the last-named prohibition" — "the prohibition against taxing the property, revenues, or services of the states." James, Federal Basis of the Brazilian System (1923) 45.