power if an apportionment be made according to the Constitution. The Constitution does not say that no direct tax shall be laid by apportionment on any other property than land; on the contrary, it forbids all unapportioned direct taxes; and we know of no warrant for excepting personal property from the exercise of the power, or any reason why any apportioned direct tax cannot be laid and assessed, as Mr. Gallatin said in his report when Secretary of the Treasury in 1812, 'Upon the same objects of taxation on which the direct taxes levied under the authority of the State are laid and assessed.'

"The power to tax real and personal property and the income from both, there being an apportionment, is conceded; that such a tax is a direct tax in the meaning of the Constitution cannot be successfully denied; and yet, we are thus invited to hesitate in the enforcement of the mandate of the Constitution which prohibits Congress from laying a direct tax on the revenue from property of the citizen without regard to State lines, and in such manner that the States cannot intervene by payment in regulation of their own resources, lest a government of delegated powers should be found to be, not less powerful, but less absolute, than the imagination of the advocate had supposed.

"First. Our conclusions may, therefore, be summed up as follows:

"We adhere to the opinion already announced, that, taxes on real estate being indisputably direct taxes, taxes on the rents or incomes of real estate are equally direct taxes.

"Second. We are of opinion that taxes on personal property, or the income of personal property, are likewise direct taxes.

"Third. The tax imposed, by sections twenty-seven to thirtyseven, inclusive, of the Act of 1894, so far as it falls on the income of real estate and of personal property, being a direct tax within the meaning of the Constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid."

The constitutionality of the war revenue tax on legacies and inheritances was sustained by the Supreme Court of the United

States in Knowlton v. Moore.31 The Court holds that the uniformity required by the United States Constitution is merely a geographical uniformity, requiring the same plan and method. throughout the United States, and not an intrinsic uniformity relating to the inherent character of the tax as respects its operation on individuals. The contention that the tax was a direct tax which must be apportioned was not sustained because it was held that the tax was in its nature a duty or excise as distinguished from a tax on property. The progressive rate feature of the statute, by which the rates were graded in accordance with the amounts of the legacies or distributive shares, or progressively increased as those amounts increase, was also sustained.

This last decision of the Court on the legality of the tax on legacies and inheritances completes a series of decisions which apparently cover practically the whole field of litigation which is likely to arise on the construction of this clause. As a summary of all the decisions the law, as it now stands, is that a tax on consumable commodities is not a direct tax (Hylton v. the United States); a tax on legacies an inheritance is not a direct tax (Knowlton v. Moors); a succession tax is not a direct tax (Schley v. Rew); a tax on the income of an insurance company is not a direct tax (Soule v. Pacific Insurance Company); a tax on the note circulation of a State bank is not a direct tax (Veazie Bank v. Fenno); while a general income tax is a direct tax and is therefore, if not apportioned, unconstitutional as opposed to this fourth clause of the ninth section of the first article (Pollock v. Farmers' Loan & Trust Co., and Hyde v. Continental Trust Company). It is probable that all of these cases may be taken as finally settling the law on the point which they undertake to decide with the exception of the last one. In view of the fact that Pollock v. Farmers' Loan & Trust Co. was only decided by the Supreme Court by a vote of five to four on the second hearing (the judges being equally divided in opinion on the first hearing) and that it is directly opposed to the decision of the Supreme Court in Springer v. the United States, and to the reasoning of the Court in the famous case of Hylton v. the

United States, the constitutionality of a uniform income tax may still be held to be an open question. An important point in this recent decision of Knowlton v. Moore is that the reasoning of the Court and their apparent general conception of the meaning of this clause of the Constitution agrees much more nearly with that of the Court in the earlier cases, than with that in Pollock v. Farmers' Loan & Trust Company.

§ 140. Collateral powers implied from the power of taxation. In the exercise of its power of taxation the United States may authorize the building of custom houses, employment of revenue cutters, appointment of revenue collectors and other officials, and pass all other acts necessary for the full exercise of this power of taxation.32

§ 141. The power to borrow money.-Clause 2: (The Congress shall have power) "To borrow money on the credit of the United States." This power to borrow money was one which had been given to Congress to the fullest extent by the Articles of Confederation, and the same complete power to incur indebtedness was given to the new Congress by the Constitution. Congress was given the power not only to borrow money directly, but also to assume indebtedness already contracted by others, as was done by the first Congress when it assumed the debts of the different States contracted during the Revolutionary war.33 The Constitution contains two pledges in relation to the payment of the public debt.

Article VI. provided that "all debts, contracts and engagements entered into before the adoption of the Constitution shall be as valid against the United States under this Constitution as under the Confederation."

The Fourteenth Amendment declares that: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion shall not be

32 United States v. Rhodes, 1 Cobb. U. S. 49, Federal Cases, 16, 151.

"The assumption of these debts was the result of a so-called

"trade" put through Congress by Alexander Hamilton, one of the provisions of which was the location of the capitol of the United States at its present site.

questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave, but all such debts, obligations and claims shall be held illegal and void."

34

Obligations and debts due by the United States cannot be taxed by the States. The necessity for this is obvious; if the States could tax the bonds of the United States, hostile action on the part of any State could hinder, or even absolutely prevent, the sale of such bonds to its citizens. Under the most favorable circumstances a power residing in the States to tax United States securities would always hamper the United States in disposing of them and would affect the price at which they could be sold.

In the decision in Weston et al. v. the City Council of Charleston, Chief Justice Marshall said in part: "The Court in that case (i. e., in McCulloch v. the State of Maryland) held that the States have no power by taxation, or otherwise, to retard, impede, burden, or in any manner control the operation of the Constitutional laws enacted by Congress, to carry into execution the powers vested in the general government.

"We retain the opinion which was then expressed. A contract made by the Government in the exercise of its power, to borrow money on the credit of the United States, is undoubtedly independent of the will of any State in which the individual who lends may reside, and is undoubtedly an operation essential to the important objects for which the Government was created. It ought, therefore, on the principles settled in the case of McCulloch v. the State of Maryland, to be exempt from State taxation, and consequently from being taxed by corporations deriving their power from the States.

"It is admitted that the power of the Government to borrow money cannot be directly opposed and that any law directly obstructing its operation would be void; but a distinction is taken between this direct opposition and those measures which may consequently affect it; that is, that a law prohibiting loans.

"Weston v. City of Charleston, 2 Peters, 449.

to the United States would be void, but a tax on them to any amount is allowable.

“It is, we think, impossible not to perceive the intimate connection which exists between these two modes of acting on the subject.

"It is not the want of original power in an independent sovereign state, to prohibit loans to a foreign government, which restrains the legislative from direct opposition to those made by the United States. The restraint is imposed by our Constitution. The American people have conferred the power of borrowing money on their Government, and by making that Government supreme, have shielded its action, in the exercise of this power, from the action of the local government. The grant of the power is incompatible with a restraining or controlling power, and the declaration of supremacy is a declaration that no such restraining or controlling power shall be exercised.

"The right to tax the contract to any extent, when made, must operate upon the power to borrow money before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of the distinct government. To any extent, however inconsiderate, it is a burden on the operation of the Government. It may be carried to an extent which shall arrest them entirely. The tax on Government stock is thought by this Court to be a tax on the contract, a tax on the power to borrow money on the credit of the United States, and consequently to be repugnant to the Constitution."35

If the capital stock of a corporation is made up of United States bonds or other securities, it is exempt from taxation.86 United States notes are also exempt from taxation by either States or municipalities.37 Franchises of corporations, which have invested in Government securities, are not exempt from

See also Society for Savings v. Coite, 6 Wallace, 594; Hamilton Mfg. Co. v. Massachusetts, 6 Wallace, 632.

26 Provident Institution for Savings in Boston v. Massachusetts, 6 Wallace, 611; People of New York

v. Commissioners of Texas, 2 Wallace, 200; same v. same, 2 Black, 620; First National Bank of Louisville v. Kentucky, 9 Wallace, 353.

Bank v. Supervisors, 7 Wallace, 353.