§ 498. Porto Rican Tariff of 1900 not tax on exports.

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An interesting case in the" Series of Insular Decisions" involved a consideration of the clause prohibiting a duty on exports, with reference to the duties levied under the Foraker Act of 1900 on goods shipped from New York to Porto Rico. It was strongly contended that, if Porto Rico is a foreign country," these duties were clearly duties upon exports, and, on the other hand, if it is a domestic country and part of the United States, the duties were illegally exacted, because the act was an interference with the internal commerce of the country and a preference of one port thereof over another, in violation of the Constitution. The court denied this contention by the same division as in the other Insular Cases. Justice Brown, in his opinion, held that Porto Rico was not a foreign country within the meaning of the tariff act. The fact that the duties were not paid into the treasury of the United States, but held as a separate fund to be used for the purposes and benefit of Porto Rico, subject to repeal by the legislative assembly of that island, showed that the tax was not intended as a duty upon exports. But he added that he did not intend, by his opinion, to intimate that Congress could lay a tax upon the merchandise carried from one State into another.

Chief Justice Fuller, and Justices Harlan, Brewer and Peckham dissented, saying, page 175:

view of the frequent legislation by Congress and its enforcement for nearly a century, the question must have arisen if it had been supposed by any one that such legislation infringes the constitutional rights of the citizen.

1 Art. I, sec. 9, par. 5: "No preference shall be given by any regulation of commerce or revenue to the ports of one State over those of another."

2 Dooley v. United States, 183 U. S. 151. There is an interesting critical review of the decisions in this case, and also of Woodruff v. Parham, supra, § 110, in a paper by Edward B. Whitney of New York, ex-Ass't Attorney-General of the United States, on the Insular Decisions in the Columbia Law Review of February, 1902.

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Congress may lay local taxes in the territories, affecting persons and property therein, or authorize territorial legislatures to do so, but it cannot lay tariff duties on articles exported from one State to another, or from any State to the territories, or from any State to foreign countries, or grant a power in that regard which it does not possess. But the decision now made recognizes such powers in Congress as will enable it, under the guise of taxation, to exclude the products of Porto Rico from the States as well as the products of the States from Porto Rico; and this notwithstanding it was held in DeLima v. Bidwell, 182 U. S. 1, that Porto Rico after the ratification of the treaty with Spain ceased to be foreign and became domestic territory."

§ 499. Act conferring reciprocity powers on President sustained.

The Tariff Act of 1890 gave authority to the President to equalize duties on imports, by suspending the free introduction of certain commodities, when satisfied that any country producing such articles imposes duties or other exactions upon the agricultural or other products of the United States, which he may deem to be reciprocally unequal or unreasonable. All of the judges concurring held that, even if this reciprocal provision was invalid, it would not invalidate the other provisions of the act.1 But it was held also, Chief Justice Fuller and Justice Lamar dissenting, that the provision was not open to the objection that it delegated legislative power to the President; that weight should be given to the fact that such powers had been given to the President with reference to trade and commerce since the foundation of the government; and that no discretion was allowed to the President, but it

1 Field v. Clark, 143 U. S. 649.

was made his duty to act when he ascertained the facts. The court said, at page 693:

"He had no discretion in the premises except in respect to the duration of the suspension so ordered. But that related only to the enforcement of the policy established by Congress. As the suspension was absolutely required, when the President ascertained the existence of a particular fact, it cannot be said that in ascertaining that fact and in issuing his proclamation, in obedience to the legislative will, he exercised the function of making laws. Legislative power was exercised when Congress declared that the suspension should take effect upon a named contingency. What the President was required to do was simply in execution of the Act of Congress. It was not the making of law. He was the mere agent of the law-making department to ascertain and declare the event upon which its expressed will was to take effect. It was a part of the law itself as it left the hands of Congress that the provisions, full and complete in themselves, permitting the free introduction of sugars, molasses, coffee, tea and hides, from particular countries, should be suspended, in a given contingency, and that in case of such suspensions certain duties should be imposed."

§ 500. Taxing power of Congress with reference to treaty power.

It is no objection to the validity of any tax imposed by Act of Congress, that it violates provisions contained in the treaties of the government with other nations. This was determined by the court in the Head Money Cases,1 and the same principle has been since declared. While a treaty is a law of the land, it has no superiority over an Act of Congress, and may therefore be repealed or modified

1 112 U. S. 580.

by an act of a later date. It was said by the court, in the case cited, that there is nothing in its essential character or in the branches of the government by which a treaty is made, to give it any superior sanctity. The general principle was laid down, that so far as a treaty made by the United States with a foreign nation can become the subject of judicial cognizance in the courts of this country, it is subject to such enactments as Congress may pass for its enforcement, modification or repeal. This principle is, of course, applicable in the case of customs duties. The validity of the duty, as enacted by Congress, cannot be affected by the provisions of any prior treaty, so far as the courts are concerned.

§ 501. State instrumentalities and agencies exempt from Federal taxation.

In the language of the Supreme Court in the Income Tax case: 2. As the States cannot tax the powers, the operations, or the property of the United States, nor the means which they employ to carry their powers into execution, so it has been held that the United States have no power under the Constitution to tax either the instrumentalities or the property of a State." It was the unanimous opinion of the justices in this case, and this was the only point on which there was a unanimous concurrence, that so much of the income tax law of 1894 as imposed a tax upon the income derived from the interest of bonds issued by a municipal corporation was a tax upon the power of the State in its instrumentalities to borrow money, and was consequently repugnant to the Constitution of the United States. "The Constitution," the court said,

1 As to the general principle involved, see Chinese Exclusion Case, 13C U. S. 581; Fong Yue Ting v. United States, 149 U. S. 721; Whitney v. Robinson, 124 U. S. 190.

2 157 U. S. 584.

"contemplates the independent exercise by the nation and the States severally of their constitutional powers.

It had been before decided1 with reference to the Income Tax Law of 1864, that it was not competent for Congress to impose a tax upon the salary of a State judicial officer. The court ruled there that the case was controlled by the same principle as that of Dobbins v. Erie County, deciding that a State cannot tax the salaries of officers of the United States; for, in respect to its reserved powers, the State is a sovereign as independent as the general government. It said, at page 127:

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It is admitted that there is no express provision in the Constitution that prohibits the general government from taxing the means and instrumentalities of the States, nor is there any prohibiting the States from taxing the means and instrumentalities of that government. In both cases the exemption rests upon necessary implication, and is upheld by the great law of self-preservation; as any government, whose means employed in conducting its operations, if subject to the control of another and distinct government, can exist only at the mercy of that government. Of what avail are these means if another power may tax them at discretion?

The Internal Revenue Act of 1864 provided that railroads and certain other companies should pay a five per cent tax on the amount of all interest paid on their bonds. The city of Baltimore held five million dollars of the bonds of the Baltimore & Ohio Railroad issued for a loan by the city to the railroad of its own bonds to that amount.

It

1 Collector v. Day, 11 Wall. 113. See also United States v. Railroad Co., 17 Wall. 822, and Van Brocklin v. Tennessee, 117 U. S. 151, 178. 2 Supra, § 14.

3 Justice Bradley dissented in this case, saying that the decision established a limitation of the power of taxation which he thought would be found very difficult to control.