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tending to cripple and embarrass the national power. The tax upon the national securities is a tax upon the exercise of the power of Congress “ to borrow money on the credit of the United States." The exercise of this power is interfered with to the extent of the tax imposed under State authority, and the liability of the certificates of stock or other securities to taxation by a State, in the hands of individuals, would necessarily affect their value in market, and therefore affect the free and unrestrained exercise of the power. “ If the right to impose a tax exists, it is a right which, in its nature, acknowledges no limits. It may be carried to any extent within the jurisdiction of the State or corporation which imposes it, which the will of such State or corporation may prescribe." 2
* If the States cannot tax the means by which the [* 483] national government performs its functions, neither, on the other hand, and for the same reasons, can the latter tax the agencies of the state governments. “ The same supreme power which established the departments of the general government determined that the local governments should also exist for their own purposes, and made it impossible to protect the people in their common interests without them. Each of these several agencies is confined to its own sphere, and all are strictly subordinate to the constitution which limits them, and independent of other agencies, except as thereby made dependent. There is nothing in the Constitution [of the United States] which can be
Weston v. Charleston, 2 Pet. 449; Bank of Commerce v. New York City, 2 Black, 620; Bank Tax Case, 2 Wall. 200; Van Allen v. Assessors, 3 Wall. 573; People v. Commissioners, 4 Wall. 244; Bradley v. People, ib. 459; The Banks v. The Mayor, 7 Wall. 16; Bank v. Supervisors, ib. 26. For a kindred doctrine, see State v. Jackson, 33 N. J. 450.
? Weston v. Charleston, 4 Pet. 449 ; Bank of Commerce v. New York City, 2 Black, 631. This principle is unquestionably sound, but a great deal of difficulty has been experienced in consequence of it, under the law of Congress establishing the National Banking System, which undertakes to subject the National Banks to State taxation, but at the same time to guard those institutions against unjust discriminations, by providing that their shares shall only be taxed at the place where the bank is located, and in the same manner as shares in the State banks are taxed. The difficulty is in harmonizing the State and national laws on the subject, and it will be illustrated in a measure by some of the cases above cited; though the full extent of the difficulty is only perceived in other cases where the taxation of State banks is fixed by constitutional provisions, which provide modes that cannot be harmonized at all with the law of Congress.
made to admit of any interference by Congress with the secure existence of any State authority within its lawful bounds. And any such interference by the indirect means of taxation is quite as much beyond the power of the national legislature as if the interference were direct and extreme.” 1 It has therefore been held that the law of Congress requiring judicial process to be stamped could not constitutionally be applied to the process of the State courts; since otherwise Congress might impose such restrictions upon the State courts as would put an end to their effective action, and be equivalent practically to abolishing them altogether. And a similar ruling has been made in other cases.
| Fifield v. Close, 15 Mich. 509. “In respect to the reserved powers, the State is as sovereign and independent as the general government. And if the means and instrumentalities employed by that government to carry into operation the powers granted to it are necessarily, and for the sake of self-preservation, exempt from taxation by the States, why are not those of the States depending upon their reserved powers, for like reasons, equally exempt from Federal tasation? Their unimpaired existence in the one case is as essential as in the other. 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 only exist at the mercy of that government. Of what avail are these means if another power may tax them at discretion ?" Per Nelson, J., in Collector v. Day, 11 Wall. 124.
? Warren v. Paul, 22 Ind. 279; Jones v. Estate of Keep, 19 Wis. 369; Fifield v. Close, 15 Mich. 505; Union Bank v. Hill, 3 Cold. (Tenn.) 325; Smith t. Short, 40 Ala, 796. State governments," it is said in the Indiana case, " are to exist with judicial tribunals of their own. This is manifest all the way through the Constitution. This being so, these tribunals must not be subject to be encroached upon or controlled by Congress. This would be incompatible with their free existence. It was held, when Congress created a United States Bank, and is now decided, when the United States has given bonds for borrowed money, that as Congress had rights to create such fiscal agents, and issue such bonds, it would be incompatible with the full and free enjoyment of those rights to allow that the States might tax the bank or bonds; because, if the right to so tax them was conceded, the States might exercise the right to the destruction of congressional power. The argument applies with full force to the exemption of State governments from Federal legislative interference.
“ There must be some limit to the power of Congress to lay stamp taxes. Suppose a State to form a new, or to amend her existing constitution; could Congress declare that it should be void, unless stamped with a Federal stamp? Can Congress require State legislatures to stamp their bills, journals, laws, &c., * Strong as is the language employed to characterize the [* 484] taxing power in some of the cases which have considered
in order that they shall be valid ? Can it require the executive to stamp all commissions ? If so, where is he to get the money? Can Congress compel the State legislatures to appropriate it? Can Congress thus subjugate a State by legislation? We think this will scarcely be pretended. Where, then, is the line of dividing power in this particular? Could Congress require voters in State and corporation elections to stamp their tickets to render them valid ? Under the old Confederation, Congress legislated upon States, not upon the citizens of the State. The most important change wrought in the government by the Constitution was that legislation operated upon the citizens directly, enforced by Federal tribunals and agencies, not upon the States. Another established constitutional principle is, that the government of the United States, while sovereign within its sphere, is still limited in jurisdiction and power to certain specified subjects. Taking these three propositions then as true, - 1. States are to exist with independent powers and institutions within their spheres ; 2. The Federal government is to exist with independent powers and institutions within its sphere; 3. The Federal government operates within its sphere upon the people in their individual capacities, as citizens and subjects of that government, within its sphere of power, and upon its own officers and institutions as a part of itself, – taking these propositions as true, we say, it seems to result as necessary to harmony of operation between the Federal and State governments, that the Federal government must be limited, in its right to lay and collect stamp taxes, to the citizens and their transactions as such, or as acting in the Federal government, officially or otherwise; and cannot be laid upon and collected from individuals or their proceedings when acting, not as citizens transacting business with each other as such, but officially or in the pursuit of rights and duties in and through State official agencies and institutions. When thus acting, they are not acting under the jurisdiction nor within the power of the United States; not acting as subjects of that government, not within its sphere of power over them; and neither they nor their proceedings are subject to interference from the United States. Can Congress regulate or prescribe the taxation of costs in a State court? The Federal government may tax the governor of a State, or the clerk of a State court, and his transactions as an individual, but not as a State officer. This must be so, or the State may be annihilated at the pleasure of the Federal government. The Federal government may perhaps take by taxation most of the property in a State, if exigencies require ; but it has not a right, by direct or indirect means, to annihilate the functions of the State government."
The case of Hoyt v. Benner, 22 La. Am. 353, is opposed to those above cited as to the power of the government to tax the process of State courts, but the soundness of those decisions was really conceded by Congress in repealing the provision of law that provided for the tax, and was recognized by Judge Clifford, in Day v. Buffington, Am. Law Rev., Oct., 1870, p. 176.
It has been repeatedly decided that the act of Congress which provided that certain papers not stamped should not be received in evidence must be limited in
this subject, subsequent events have demonstrated that it was by
no means extravagant. An enormous national debt has [* 485] not only made * imposts necessary which in some cases
reach several hundred per cent of the original cost of the articles upon which they are imposed, but the systems of State banking which were in force when the necessity for contracting that debt first arose have been literally taxed out of existence by burdens avowedly imposed for that very purpose. . If taxation is thus unlimited in its operation upon the objects within its reach, it cannot be extravagant to say that the agencies of government are necessarily excepted from it, since otherwise its exercise might altogether destroy the government through the destruction of its agencies. That which was predicted as a possible event has been demonstrated by actual facts to be within the compass of the power; and if considerations of policy were important, it might
' be added that, if the States possessed the authority to tax the agencies of the national government, they would hold within their
its operation to the Federal courts. Carpenter v. Snelling, 97 Mass. 452 ; Green v. Holway, 101 Mass. 250 ; s. c. 3 Am. Rep. 339; Clemens v. Conrad, 19 Mich. 170; Haight v. Grist, 64 N. C. 739; Griffin v. Ranney, 35 Conn. 239; People v. Gates, 43 N. Y. 40; Bowen v. Byrne, 55° Ill. 467; Hale v. Wilkinson, 21 Grat. 75; Atkins v. Plympton, 44 Vt. 21; Bumpas v. Taggart, 26 Ark. 398 ; s. c. 7 Am. Rep. 623; Sammons v. Holloway, 21 Mich. 162; s. c. 4 Am. Rep. 465; Duffy v. Hobson, 40 Cal. 240; Sporrer v. Eifler, 1 Heisk. 633; McElvain o. Mudd, 44 Ala. 48; s. C. 4 Am. Rep. 106; Burnson v. Huntington, 21 Mich. 415; s. C. 4 Am. Rep. 497 ; Davis v. Richardson, 45 Miss. 499; s. c. 7 Am. Rep. 732 ; Hunter v. Cobb, 6 Bush, 239; Craig v. Dimmock, 47 III. 308; Moore o. Moore, 47 N. Y. 467; s. c. 7 Am. Rep. 466. . Several of these cases have gone still farther, and declared that Congress cannot preclude parties from entering into contracts permitted by the State laws, and that to declare them void was not a proper penalty for the enforcement of tax laws. Congress cannot make void a tax deed issued by a State. Sayles v. Davis, 22 Wis. 225. Nor require a stamp upon the official bonds of State officers. State v. Garton, 32 Ind. 1. Nor tax the salary of a State officer. Day v. Buffington, Am. Law Rev. Oct. 1870, 176; s. c. in error, 11 Wall. 113 ; Freedman v. Sigel, 10 Blatch. 327. Nor forbid the recording of an unstamped instrument under the State laws. Moore v. Quirk, 105 Mass. 49 ; s. c. 7 Am. Rep. 499. “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 defence and general welfare of the United States is an exclusive power in Congress." Clifford, J., Ward v. Maryland, 12 Wall. 427.
· The constitutionality of this taxation was sustained by a divided court in Veazie Bank v. Fenno, 8 Wall. 533.
hands a constitutional weapon which factious and disappointed parties would be able to wield with terrible effect when the policy of the national government did not accord with their views; while, on the other hand, if the national government possessed a corresponding power over the agencies of the State governments, there would not be wanting men who, in times of strong party excitement, would be willing and eager to resort to this power as a means of coercing the States in their legislation upon the subjects remaining under their control.
There are other subjects which are or may be removed from the sphere of State taxation by force of the Constitution of the United States, or of the legislation of Congress under it. That instrument declares that "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." This prohibition has led to some difficulty in its practical application. Imports, as such, are not to be taxed generally, but it was not the purpose of the Constitution to exclude permanently from the sphere of State taxation all property brought into the country from abroad; and the difficulty met with has been in indicating with sufficient accuracy for practical purposes the point of time at which articles imported cease to be regarded as imports within the meaning of the prohibition. In general terms it has been said that when the importer has so acted upon the thing imported that it has become incorporated and mixed up with the mass of property in the country, it has perhaps lost its distinctive character as an import, and has become subject to the taxing power of the State ; but that while remaining the property of the importer, in his warehouse, in the original form or package in which it was * imported, a tax upon it is too plainly a duty on im- [* 486] ports to escape the prohibition in the Constitution.1 And in the application of this rule it was declared that a State law which, for revenue purposes, required an importer to take a license and pay fifty dollars before he should be permitted to sell a package of imported goods, was equivalent to laying a duty upon imports. It has also been held in another case, that a stamp duty imposed by the legislature of California upon bills of lading for gold or silver, transported from that State to any port or place out
1 Brown v. Maryland, 12 Wheat. 441, per Marshall, Ch. J.