*257

revenues derived by the city of Baltimore from its ownership of stock in a railroad com- 14 *La. Ann. 197; 48 N. C. Appendix; N. C. pany. None of those decisions was put on Public Documents 1899, Doc. No. 8, p. 95; any express prohibition in the Constitution, In re Taxation of Salaries of Judges, 131 N. for there is none; but all recognize and gave effect to a prohibition implied from the independence of the states within their own spheres.

When we consider, as was done in those cases, what is comprehended in the congressional power to tax-where its exertion is not directly or impliedly interdicted-it becomes additionally manifest that the prohibition

*256

now under discussion was intended to embrace and prevent diminution through the exertion of that power; for, as this court repeatedly has held, the power to tax carries with it "the power to embarrass and destroy"; may be applied to every object within its range "in such measure as Congress may determine"; enables that body "to select one calling and omit another, to tax one class of property and to forbear to tax another"; and may be applied in different ways to different objects so long as there is "geographical uniformity" in the duties, imposts and exercises imposed. McCulloch v. Maryland, 4 Wheat. 316, 431, 4 L. Ed. 579; Pacific Insurance Co. v. Soule, 7 Wall. 433, 443, 19 L. Ed. 95; Austin v. The Aldermen, 7 Wall. 694, 699, 19 L. Ed. 224; Veazie Bank v. Fenno, 8 Wall. 533, 541, 548, 19 L. Ed. 482; Knowlton v. Moore, 178 U. S. 41, 92, 106, 20 Sup. Ct. 747, 44 L. Ed. 969; Treat v. White, 181 U. S. 264, 268, 269, 21 Sup. Ct. 611, 45 L. Ed. 853; McCray

C. 692, 42 S. E. 970; Purnell v. Page, 133 N. C. 125, 45 S. E. 534; and has strong sanction in the actual practice of the government, to which we now advert.

No attempt was made to tax the compensation of federal judges prior to 1862. A statute of that year, chapter 119, § 86, 12 Stat. 472, with its amendments, subjected the salaries of all civil officers of the United States Ito an income tax of 3 per cent. and was construed by the revenue officers as including the compensation of the President and the judges. Chief Justice Taney, the head of the judiciary, wrote to the Secretary of the Treasury a letter of protest (157 U. S. 701), based on the prohibition we are considering, and in the course of the letter said:

"The act in question, as you interpret it, diminishes the compensation of every judge three per cent. and if it can be diminished to that extent by the name of a tax, it may in the same way be reduced from time to time at the pleasure of the Legislature.

"The judiciary is one of the three great departments of the government, created and established by the Constitution. Its duties and powers are specifically set forth, and are of a character that requires it to be perfectly independent of the two other departments, and in order to place it beyond the reach and above even the suspicion of any such influence, the power to reduce their compensation is expresstheir powers of legislation. ly withheld from Congress, and excepted from

v. United States, 195 U. S. 27, 61, 24 Sup. Ct. "Language could not be more plain than that 769, 49 L. Ed. 78, 1 Ann. Cas. 561; Flint v. *258 Stone Tracy Co., 220 U. S. 107, 158, 31 Sup. used in the Constitution. It is moreover one Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; of its most important and essential provisions. Billings v. United States, 232 U. S. 261, 282, For the articles which limit the powers of the legislative and executive branches of the gov34 Sup. Ct. 421, 58 L. Ed. 596; Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 24-26, 36 for the protection of the citizen in his person ernment, and those which provide safeguards Sup. Ct. 236, 60 L. Ed. 493, Ann. Cas. 1917B, and property, would be of little value without 713, L. R. A. 1917D, 414. Is it not therefore a judiciary to uphold and maintain them, which morally certain that the discerning statesmen was free from every influence, direct or indiwho framed the Constitution and were so sed-rect, that might by possibility in times of politulously bent on securing the independence of ical excitement warp their judgments.

"Upon these grounds I regard an act of Congress retaining in the Treasury a portion of the compensation of the judges, as unconstitutional and void."

the judiciary intended to protect the compensation of the judges from assault and diminution in the name or form of a tax? Could not the purpose of the prohibition be wholly thwarted if this avenue of attack were left The collection of the tax proceeded, and, open? Certainly there is nothing in the words at the suggestion of the Chief Justice, this of the prohibition indicating that it is direct-court ordered his protest spread on its reced against one legislative power and not an- ords. In 1869 the Secretary of the Treasury other; and in our opinion due regard for its spirit and principle requires that it be taken as directed against them all.

This view finds support in rulings in Pennsylvania, Louisiana, and North Carolina, made under like constitutional restrictions, Commonwealth ex rel. v. Mann. 5 Watts & S. (Pa.) 403, 415, et seq.; New Orleans v. Lea,

The tax condemned was levied under a provision, in a general revenue law, charging a tax of 2 per cent. "upon all salaries and emoluments of office,

referred the question to the Attorney General (Judge Hoar), and that officer rendered an opinion in substantial accord with Chief Justice Taney's protest, and also advised that the tax on the President's compensation was likecreated or held by or under the Constitution or laws of this commonwealth, and by or under any incorporation, institution or company incorporated by

the said commonwealth, where such salaries or emoluments exceed two hundred dollars." Act No. 232, § 2, Penn. Laws 1840, p. 613; Act No. 117, § 9, Penn. Laws 1841, p. 310.

(40 Sup.Ct.)

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In Knowlton v. Moore, supra, 178 U. S. 95, 20 Sup. Ct. 768, 44 L. Ed. 969, this court said: "The necessities which gave birth to the Constitution, the controversies which preceded its formation, and the conflicts of opinion which taken into view for the purpose of tracing to were settled by its adoption, may properly be its source any particular provision of the Constitution, in order thereby to be enabled to correctly interpret its meaning."

wise invalid. 13 Op. A. G. 161. The tax on peril a constitutional principle so widely esthe compensation of the President and the teemed and so vital to our system of governjudges was then discontinued, and the ment as the independence of the judiciary is amounts theretofore collected were all re- not lightly to be assumed. funded a part through administrative channels and a part through the action of the Court of Claims and ensuing appropriations by Congress. Wayne v. United States, 26 Ct. Cl. 274; chapter 311, 27 Stat. 306. Thus the Secretary of the Treasury, the accounting officers, the Court of Claims and Congress accepted and gave effect to the view expressed by the Attorney General. In the Income Tax Act of 1894, c. 349, § 27 et seq., 28 Stat. 509, nothing was said about the compensation of the judges; but Mr. Justice Field regarded it as included and gave that as one reason for joining in the decision holding the act un constitutional. 157 U. S. 604-606, 15 Sup. Ct. 673, 39 L. Ed. 759. On the rehearing the Attorney General (Mr. Olney) frankly said in

his brief:

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"There has never been a doubt since the opinion of Attorney General Hoar *that the salaries of the President and judges were exempt."

This sound rule is as applicable to the amendments as to the provisions of the original Constitution.

[7] Let us turn then to the circumstances in which this amendment was proposed and ratified and to the controversy it was intended to settle. By the Constitution all direct taxes were required to be apportioned among the several states according to their population, as ascertained by a census or enumeration (article 1, § 2, cl. 3, and section 9, cl. 4), but no such requirement was imposed as to other taxes. And apart from capitation taxes, with which we now are not concerned, no rule was given for determining what taxes were direct and therefore to be apportioned, or what were indirect and not within that requirement. Controversy ensued and ultimately centered around the right classification of income from taxable real estate and from investments in taxable personal property. The matter then came before this court in Pollock v. Farmers' Loan & Trust Co., 157 U. S. 429, 15 Sup. Ct. 673, 39 L. Ed. 759; Id., 158 U. S. 601, 15 Sup. Ct. 912, 39 L. Ed. 1108, and the decision when announced disclosed that the same differences in opinion existing elsewhere were shared by the members of the court, five, the Does the Sixteenth Amendment authorize controlling number, regarding a tax on such and support this tax and the attendant dimi-income as in effect a direct tax on the propnution; that is to say, does it bring within erty from which it arose, and therefore as the taxing powers subjects theretofore ex- requiring apportionment, and four regarding cepted? The court below answered in the negative; and counsel for the government

The income tax acts of 1913, 1916, and 1917 (chapter 16, 38 Stat. 168; chapter 463, 39 Stat. 758, § 4 [Comp. St. § 6336d] chapter 63, 40 Stat. 329 [Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 6336d]) severally excepted the compensation of the judges then in office -also that of the President for the then current term. In short, during a period of more than 120 years there was but a single real attempt to tax the judges in respect of their compensation, and that attempt soon was disapproved and pronounced untenable by the concurring action of judicial, executive and legislative officers. And so it is apparent that in the actual practice of the government the prohibition has been construed as embracing and preventing diminution by taxation.

say:

"It is not, in view of recent decisions, contended that this amendment rendered anything taxable as income that was not so taxable before."

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it as indirect and not to be apportioned. Much of the law then under consideration had been framed according to the latter view, and because of this and the adjudged inseparability of other portions the entire law was held invalid. Afterwards, . to enable Congress to reach all taxable income more conveniently and effectively than would be possible as to much of it if an apportionment among the states were essential, the Sixteenth *Amendment was proposed and ratified. In other words, the purpose of the amendment was to [5, 6] Preliminarily we observe that, unless eliminate all occasion for such an apportionthere be some real conflict between the Six-ment because of the source from which the teenth Amendment and the prohibition, in article 3, section 1, making the compensation of the judges undiminishable, effect must be given to the latter as well as to the former; and also that a purpose to depart from or im

We might rest the matter here, but it seems better that our view and the reasons therefor be stated in this opinion, even if there be some repetition of what recently has been said in other cases.

income came,-a change in no wise affecting the power to tax but only the mode of exercising it. The message of the President rec

Cong. Rec. vol. 44, p. 3344.

ommending the adoption by Congress of a joint resolution proposing the amendment, the debates on the resolution by which it was proposed, and the public appeals7-corresponding to those in the Federalist-made

to secure its ratification leave no doubt on

this point. And that the proponents of the amendment in drafting it lucidly and aptly expressed this as its object is shown by its words:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."

True, Gov. Hughes, of New York, in a message laying the amendment before the Legislature of that state for ratification or rejection, expressed some apprehension lest it might be construed as extending the taxing power to income not taxable before; but his message promptly brought forth from statesmen who participated in proposing the amendment such convincing expositions of its purpose, as here stated, that the apprehension was effectively dispelled and ratification followed.

income was derived. Indeed in the light of the history which we have given and of the decision in the Pollock Case and the ground upon which the ruling in that case was based, there is no escape from the conclusion that the amendment was drawn for the purpose of doing away for the future with the principle upon which the Pollock Case was decided, that is, of determining whether a tax on income was direct not by a consideration of the burden placed on the taxed income upon which it directly operated, but by taking into view the burden which resulted on the property from which the income was derived, since in express terms the amendment provides that income taxes, from whatev*263

er source the income was derived, shall not be

subject to the regulation of apportionment."

What was there said was reaffirmed and applied in Stanton v. Baltic Mining Co., 240 U. S. 103, 112, 113, 36 Sup. Ct. 278, 60 L. Ed. 546, and Peck & Co. v. Lowe, 247 U. S. 165, 172, 38 Sup. Ct. 432, 62 L. Ed. 1049, and in Eisner v. Macomber, 252 U. S. 189, 40 Sup. Ct. 189, 64 L. Ed. 521, decided at the present term, we again held, citing the prior cases, that the amendment "did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might Thus the genesis and words of the amend-exist for an apportionment among the states ment unite in showing that it does not ex- of taxes laid on income." tend the taxing power to new or excepted subjects, but merely removes all occasion otherwise existing for an apportionment among the states of taxes laid on income,

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whether derived from one *source or another. And we have so held in other cases.

In Brushaber v. Union Pacific R. R. Co., 240 U. S. 1, 17, 18, 36 Sup. Ct. 236, 241 (60 L. Ed. 493, Ann. Cas. 1917B, 713, L. R. A. 1917D,

414), where the purpose and effect of the

amendment were first drawn in question, the Chief Justice reviewed at length the legislative and judicial action which prompted its adoption and then, referring to its text and speaking for a unanimous court, said:

After further consideration, we adhere to that view and accordingly hold that the Sixteenth Amendment does not authorize or support the tax in question.

[8] Apart from his salary, a federal judge is as much within the taxing power as other men are. If he has a home or other property, it may be taxed just as if it belonged to another. If he has an income other than his salary, it also may be taxed in the same way.

And, speaking generally, his duties and obthose of his neighbors. But for the common ligations as a citizen are not different from good-to render him, in the words of John Marshall, "perfectly and completely independent, with nothing to influence or control him but God and his conscience"-his compensation is protected from diminution in any form, whether by a tax or otherwise, and is

"It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense-an authority already possessed and never questioned-or to limit and distinguish between one kind of in-assured to him in its entirety for his support. come taxes and another, but that the whole purpose of the amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the

In passing the income tax law of 1919 Congress by a state or any of its counties or municipalities as within the taxing power, Cong. Rec. vol. 57, pp. 553, 774-777, 2988; chapter 18, § 213, 40 Stat. 1065; and in the regulations issued under that law the administrative officers recognize that the salaries litical subdivisions are not taxable by the United States. Reg. 45, published 1920, pp. 47, 313.

refused to treat interest received from bonds issued

and emoluments of the officers of a state and its po

The court below concluded that the compensation was not diminished, and regarded this as inferable from our decisions in Peck & Co. v. Lowe, 247 U. S. 165, 174-175, 38 Sup. Ct. 432, 62 L. Ed. 1049, and United States Glue Co. v. Oak Creek, 247 U. S. 321, 329, 38 Sup. Ct. 499, 62 L. Ed. 1135, Ann. Cas. 1918E, 748. We think neither case tends to support that view. Each related to a business, one to exportation, the other to interstate commerce, which the taxing power-of Congress in one case, of a state in the other-was restrained from directly burdening; and the *264 holding in both was *that an income tax laid, not on the gross receipts, but on the net proceeds remaining after all expenses were paid and losses adjusted, did not directly burden

(40 Sup.Ct.)

that all other men have to pay cannot possibly be made an instrument to attack his independence as a judge. I see nothing in the purpose of this clause of the Constitution to indicate that the judges were to be a privileged class, free from bearing their share of the cost of the institutions upon which their well-being if not their life depends.

the business, but only indirectly and remote- | ties of a citizen, which he shares with all ly affected it. Here the Constitution express- others. To require a man to pay the taxes ly forbids diminution of the judge's compensation, meaning, as we have shown, diminution by taxation as well as otherwise. The taxing act directs that the compensation -the full sum, with no deduction for expenses-be included in computing the net income, on which the tax is laid. If the compensation be the only income, the tax falls on it alone; and, if there be other income, the inclusion of the compensation augments the tax accordingly. In either event the compensation suffers a diminution to the extent that it is taxed.

We conclude that the tax was imposed contrary to the constitutional prohibition, and so must be adjudged invalid. Judgment reversed.

Mr. Justice HOLMES dissenting.

The

This is an action brought by the plaintiff in error against an acting Collector of Internal Revenue to recover a portion of the income tax paid by the former. ground of the suit is that the plaintiff is entitled to deduct from the total of his net income six thousand dollars, being the amount of his salary as a judge of the District Court of the United States. The Act of February 24, 1919, c. 18, § 210, 40 Stat. 1057, 1062 (Comp. St. Ann. Supp. 1919, 8 6336%e), taxes the net income of every individual, and section 213, p. 1065, requires the compensation received by the judges of the United States to be included in the gross income from which the net income is to computed. This was done by the plaintiff in error and the tax was paid under protest. He contends that the requirement mentioned and the tax, to the extent that it was enhanced by consideration of the plaintiff's salary, are

*265

*contrary to article 3, section 1, of the Constitution, which provides that the compensation of the judges shall not be diminished during their continuance in office. Upon demurrer judgment was entered for the defendant, and the case comes here upon the single question of the validity of the abovementioned provisions of the act.

The decision below seems to me to have been right for two distinct reasons: that this tax would have been valid under the original Constitution, and that if not so, it was made lawful by the Sixteenth Amendment. In the first place I think that the clause protecting the compensation of judges has no reference to a case like this. The exemption of salaries from diminution is intended to secure the independence of the judges, on the ground, as it was put by Hamilton in the Federalist (No. 79) that "a power over a man's subsistence amounts to a power over his will." That is a very good reason for preventing attempts to deal with a judge's salary as such, but seems to me no reason for exonerating him from the ordinary du

I see equally little in the letter of the clause to indicate the intent supposed. The tax on net incomes is a tax on the balance of a mutual account in which there always are some and may be many items on both sides. It seems to me that it cannot be affected by an inquiry into the source from which the items more or less remotely are derived. Obviously there is some point at which the immunity of a judge's salary stops, or to put it in the language of the clause, a point at which it could not be said that his

*266

com*pensation was diminished by a charge.
If he bought a house the fact that a part or
the whole of the price had been paid from
his compensation as judge would not exempt
the house. So if he bought bonds. Yet in
such cases the advantages of his salary
would be diminished. Even if the house or
bonds were bought with other money the
same would be true, since the money would
not have been free for such an application
if he had not used his salary to satisfy oth-
er more peremptory needs. At some point,
I repeat, money received as salary loses its
specific character as such. Money held in
trust loses its identity by being mingled with
I see no
the general funds of the owner.
reason why the same should not be true of
a salary. But I do not think that the re-
sult could be avoided by keeping the salary
distinct. I think that the moment the sal-
ary is received, whether kept distinct or not,
it becomes part of the general income of the
owner, and is mingled with the rest, in theo-
ry of law, as an item in the mutual account
with the United States. I see no greater
reason for exempting the recipients while
they still have income as income than when
they have invested it in a house or bond.

The decisions heretofore reached' by this Court seem to me to justify my conclusion. In Peck & Co. v. Lowe, 247 U. S. 165, 38 Sup. Ct. 432, 62 L. Ed. 1049, a tax was levied by Congress upon the income of the plaintiff corporation. More than two-thirds of the income were derived from exports and the Constitution in terms prohibits any tax on articles exported from any state. By construction it had been held to create "a freedom from any tax which directly burdens the exportation." Fairbanks v. United States, 181 U. S. 283, 293, 21 Sup. Ct. 648, 652 (45 L. Ed. S62). The prohibition was unequivocal and express, not merely an inference as in the present case. Yet it was held unanimously that the tax was valid. "It is not laid on in

in a dis- erty and certain indebtedness, though the corporation has neither tangible property nor papers evidencing the ownership of intangible property within the state, does not violate rights guaranteed by the Fourteenth Amendment, whether the tax is regarded as a property tax or a franchise tax.

Action by the County of Grand Forks, N. Mr. Justice BRANDEIS concurs in this D., against the Cream of Wheat Company. opinion.

CREAM OF WHEAT CO. v. GRAND FORKS County v. Cream of Wheat Co., 170 N. W.

Comp. Laws N. D. 1913, §§ 2077, 2102, 2103, 2110, which as construed by the state Supreme Court, imposes a tax on the value of the outstanding stock of domestic corporations in ex- [1] By the statutes of North Dakota, as cess of the value of the real and personal prop-construed by the Supreme Court of the state,

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes