[* 479] *CHAPTER XIV. THE POWER OF TAXATION. THE power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. It reaches to every trade or occupation; to every object of industry, use, or enjoyment; to every species of possession; and it imposes a burden which, in case of failure to discharge it, may be followed by seizure and sale or confiscation of property. No attribute of sovereignty is more pervading, and at no point does the power of the government affect more constantly and intimately all the relations of life than through the exactions made under it. Taxes are defined to be burdens or charges imposed by the legislative power upon persons or property, to raise money for public purposes.1 The power to tax rests upon necessity, and is inherent in every sovereignty. The legislature of every free State will possess it under the general grant of legislative power, whether particularly specified in the constitution among the powers to be exercised by it or not. No constitutional government can exist without it, and no arbitrary government without regular and steady taxation could be any thing but an oppressive and vexatious despotism, since the only alternative to taxation. would be a forced extortion for the needs of government from such persons or objects as the men in power might select as victims. Chief Justice Marshall has said of this power: "The power 1 Blackwell on Tax Titles, 1. A Law Dic. "The revenues of a State tax is a contribution imposed by gov- are a portion that each subject gives ernment on individuals for the service of his property in order to secure, or of the State. It is distinguished from to have, the agreeable enjoyment of a subsidy as being certain and orderly, the remainder." Montesquieu, Spirit which is shown in its derivation from of the Laws, B. 12, c. 30. See other Greek, ráĝis, ordo, order or arrange- definitions, Cooley on Taxation, 1. ment. Jacob, Law Dic.; Bouvier, of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the government may choose to carry it. The only security against the abuse of this power is found in the structure of the government itself. In imposing a * tax, the [* 480] legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. The people of a State, therefore, give to their government a right of taxing themselves and their property; and as the exigencies of the government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse." 1 And the same high authority has said in another case: "The power of legislation, and consequently of taxation, operates on all persons and property belonging to the body politic. This is an original principle, which has its foundation in society itself. It is granted by all for the benefit of all. It resides in the government as part of itself, and need not be reserved where property of any description, or the right to use it in any manner, is granted to individuals or corporate bodies. However absolute the right of any individual may be, it is still in the nature of that right that it must bear a portion of the public burdens, and that portion must be determined by the legislature. This vital power may be abused; but the interest, wisdom, and justice of the representative body, and its relations with its constituents, furnish the only security against unjust and excessive taxation, as well as against unwise taxation."2 And again, the same judge says it is "unfit for the judicial department to inquire what degree of taxation is the legitimate use, and what degree may amount to the abuse, of the power." And the same general views have been frequently expressed in other cases.4 1 McCulloch v. Maryland, 4 Wheat. 428. 478; Wingate v. Sluder, 6 Jones, Law, 552; Herrick v. Randolph, 13 2 Providence Bank v. Billings, 4 Vt. 529; Armington v. Barnet, 15 Vt. Pet. 561. 745; Thomas v. Leland, 24 Wend. 8 McCulloch v. Maryland, 4 Wheat. 65; People v. Mayor, &c. of Brook430. 4 Kirby v. Shaw, 19 Penn. St. 260; Sharpless v. Mayor, &c., 21 Penn. St. 168; Weister v. Hade, 52 Penn. St. lyn, 4 N. Y. 425; Portland Bank v. Notwithstanding the pervading nature of this power, there are some things under our system of government which, by necessary implication, are exempted from its exercise. Thus, the States cannot tax the agencies of the general government; for, if they could, it would be within their power to impose taxation [* 481] to an extent that might cripple, if not wholly defeat,* the operations of the national authorities within their proper sphere of action. "That the power to tax," says Chief Justice Marshall, "involves the power to destroy; that the power to destroy may defeat and render useless the power to create; that there is a plain repugnance in conferring on one government a power to control the constitutional measures of another, which other, with respect to those very measures, is declared to be supreme over that which exerts the control, are propositions not to be denied." And referring to the argument that confidence in the good faith of the State governments must forbid our indulging the anticipation of such consequences, he adds: “But all inconsistencies are to be reconciled by the magic word,— confidence. Taxation, it is said, does not necessarily and unavoidably destroy. To carry it to the excess of destruction would be an abuse, to presume which would banish that confidence which is essential to all government. But is this a case of confidence? Would the people of any one State trust those of another with a power to control the most insignificant operations of their State government? We know they would not. Why then should we suppose that the people of any one State would be willing to trust those of another with a power to control the operations of a government to which they have confided their most important and most valuable interests? In the legislature of the Union alone are all represented. The legislature of the Union alone, therefore, can be trusted by the people with the power of controlling measures which concern all, in the confidence that it will not be abused. This, then, is not a case of confidence." 1 i McCulloch v. Maryland, 4 Wheat. 431. The case involved the right of the State of Maryland to impose taxes upon the operations, within its limits, of the Bank of the United States, created by authority of Congress. 66 If," continues the Chief Justice, "we apply the principle for which the State of Maryland contends to the Constitution generally, we shall find it capable of changing totally the character of that instrument. We shall find it capable of arresting all the measures of the government, and of prostrating it at the foot of the States. The American people have declared their Constitution, and the laws made in pursuance thereof, to be * It follows as a logical result from this doctrine that [* 482] if the Congress of the Union may constitutionally create a Bank of the United States, as an agency of the national government in the accomplishment of its constitutional purposes, any power of the States to tax such bank, or its property, or the means of performing its functions, is precluded by necessary implication. For the like reasons a State is prohibited from taxing an officer of the general government for his office or its emoluments; since such a tax, having the effect to reduce the compensation for the services provided by the act of Congress, would to that extent conflict with such act, and tend to neutralize its purpose. So the States may not impose taxes upon the obligations or evidences of debt issued by the general government upon the loans made to it, unless such taxation is permitted by law of Congress, and then only in the manner such law shall prescribe,any such tax being an impediment to the operations of the government in negotiating loans, and, in greater or less degree in proportion to its magnitude, tending to cripple and embarrass the national power. The tax upon the national securities is a tax supreme; but this principle would This raising of revenue, though the levy of duties upon imports with a view to incidental protection to domestic manufactures is upon a similar principle. 1 McCulloch v. Maryland, 4 Wheat. 316; Osborn v. United States Bank, 9 Wheat. 738; Dobbins v. Commissioners of Erie Co., 16 Pet. 435. But the doctrine which exempts the instrumentalities of the general government from the influence of State taxation, being founded on the implied necessity for the use of such instruments by the government, such legislation as does not impair the usefulness or capability of such instruments to serve the government, is not within the rule of prohibition. National Bank v. Commonwealth, 9 Wall. 353; Thompson v. Pacific R. R. Co., 9 Wall. 579. 2 Dobbins v. Commissioners of Erie Co., 16 Pet. 435. 8 Weston v. Charleston, 2 Pet. 449; Bank of Commerce v. New 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."1 [483] * If the States cannot tax the means by which the 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 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."2 It has therefore been 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, 4 Wall. 459; The Banks v. The Mayor, 7 Wall. 16; Bank v. Supervisors, 7 Wall. 26. For a kindred doctrine, see State v. Jackson, 33 N. J. 450. 1 Weston v. Charleston, 4 Pet. 449; Bank of Commerce v. New York City, 2 Black, 631; Bank Tax Case, 2 Wall. 200; Society for Savings v. Coite, 6 Wall. 594. Revenue stamps are not taxable. Palfrey v. Boston, 101 Mass. 329. Nor United States treasury notes. Montgomery County v. Elston, 32 Ind. 27. 2 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 |