The right to prevent the corporation from returning and
paying the tax was based upon many averments as to the repugnancy of
the statute to the Constitution of the United States, of the peculiar
relation of the corporation to the stockholders, and their particular
interests resulting from many of the administrative provisions of the
assailed act, of the confusion, wrong, and multiplicity
Page 240 U.S. 1, 10
of suits and the absence of all means of redress which would
result if the corporation paid the tax and complied with the act in
other respects without protest, as it was alleged it was its intention
to do. To put out of the way a question of jurisdiction we at once say
that in view of these averments and the ruling in Pollock v. Farmers'
Loan & T. Co. 157
U.S. 429, 39 L. ed. 759, 15 Sup. Ct. Rep. 673, sustaining the right
of a stockholder to sue to restrain a corporation under proper
averments from voluntarily paying a tax charged to be unconstitutional
on the ground that to permit such a suit did not violate the
prohibitions of 3224, Revised Statutes (Comp. Stat. 1913, 5947),
against enjoining the enforcement of taxes, we are of opinion that the
contention here made that there was no jurisdiction of the cause, since
to entertain it would violate the provisions of the Revised Statutes
referred to, is without merit. Before coming to dispose of the case on
the merits, however, we observe that the defendant corporation having
called the attention of the government to the pendency of the cause and
the nature of the controversy and its unwillingness to voluntarily
refuse to comply with the act assailed, the United States, as amicus
curiae, has at bar been heard both orally and by brief for the purpose
of sustaining the decree.
Aside from averments as to citizenship and residence,
recitals as to the provisions of the statute, and statements as to the
business of the corporation, contained in the first ten paragraphs of
the bill, advanced to sustain jurisdiction, the bill alleged twenty-one
constitutional objections specified in that number of paragraphs or
subdivisions. As all the grounds assert a violation of the
Constitution, it follows that, in a wide sense, they all charge a
repugnancy of the statute to the 16th Amendment, under the more
immediate sanction of which the statute was adopted.
The various propositions are so intermingled as to cause it
to be difficult to classify them. We are of opinion, however,
Page 240 U.S. 1, 11
that the confusion is not inherent, but rather arises from
the conclusion that the 16th Amendment provides for a hitherto unknown
power of taxation; that is, a power to levy an income tax which,
although direct, should not be subject to the regulation of
apportionment applicable to all other direct taxes. And the
far-reaching effect of this erroneous assumption will be made clear by
generalizing the many contentions advanced in argument to support it,
as follows: (a) The Amendment authorizes only a particular character of
direct tax without apportionment, and therefore if a tax is levied
under its assumed authority which does not partake of the
characteristics exacted by the Amendment, it is outside of the
Amendment, and is void as a direct tax in the general constitutional
sense because not apportioned. (b) As the Amendment authorizes a tax
only upon incomes 'from whatever source derived,' the exclusion from
taxation of some income of designated persons and classes is not
authorized, and hence the constitutionality of the law must be tested
by the general provisions of the Constitution as to taxation, and thus
again the tax is void for want of apportionment. (c) As the right to
tax 'incomes from whatever source derived' for which the Amendment
provides must be considered as exacting intrinsic uniformity, therefore
no tax comes under the authority of the Amendment not conforming to
such standard, and hence all the provisions of the assailed statute
must once more be tested solely under the general and pre-existing
provisions of the Constitution, causing the statute again to be void in
the absence of apportionment. (d) As the power conferred by the
Amendment is new and prospective, the attempt in the statute to make
its provisions retroactively apply is void because, so far as the
retroactive period is concerned, it is governed by the pre-existing
constitutional requirement as to apportionment.
But it clearly results that the proposition and the
contentions
Page 240 U.S. 1, 12
under it, if acceded to, would cause one provision of the
Constitution to destroy another; that is, they would result in bringing
the provisions of the Amendment exempting a direct tax from
apportionment into irreconcilable conflict with the general requirement
that all direct taxes be apportioned. Moreover, the tax authorized by
the Amendment, being direct, would not come under the rule of
uniformity applicable under the Constitution to other than direct
taxes, and thus it would come to pass that the result of the Amendment
would be to authorize a particular direct tax not subject either to
apportionment or to the rule of geographical uniformity, thus giving
power to impose a different tax in one state or states than was levied
in another state or states. This result, instead of simplifying the
situation and making clear the limitations on the taxing power, which
obviously the Amendment must have been intended to accomplish, would
create radical and destructive changes in our constitutional system and
multiply confusion.
But let us by a demonstration of the error of the fundamental
proposition as to the significance of the Amendment dispel the
confusion necessarily arising from the arguments deduced from it.
Before coming, however, to the text of the Amendment, to the end that
its significance may be determined in the light of the previous
legislative and judicial history of the subject with which the
Amendment is concerned, and with a knowledge of the conditions which
presumptively led up to its adoption, and hence of the purpose it was
intended to accomplish, we make a brief statement on those subjects.
That the authority conferred upon Congress by 8 of article 1
'to lay and collect taxes, duties, imposts and excises' is exhaustive
and embraces every conceivable power of taxation has never been
questioned, or, if it has, has been so often authoritatively declared
as to render it necessary only to state the doctrine. And it has also
never
Page 240 U.S. 1, 13
been questioned from the foundation, without stopping
presently to determine under which of the separate headings the power
was properly to be classed, that there was authority given, as the part
was included in the whole, to lay and collect income taxes. Again, it
has never moreover been questioned that the conceded complete and
all-embracing taxing power was subject, so far as they were
respectively applicable, to limitations resulting from the requirements
of art. 1, 8, cl. 1, that 'all duties, imposts and excises shall be
uniform throughout the United States,' and to the limitations of art
I., 2, cl. 3, that 'direct taxes shall be apportioned among the several
states,' and of art 1, 9, cl. 4, that 'no capitation, or other direct,
tax shall be laid, unless in proportion to the census or enumeration
hereinbefore directed to be taken.' In fact, the two great subdivisions
embracing the complete and perfect delegation of the power to tax and
the two correlated limitations as to such power were thus aptly stated
by Mr. Chief Justice Fuller in Pollock v. Farmers' Loan & T. Co.
157 U. S. supra, at page 557: 'In the matter of taxation, the
Constitution recognizes the two great classes of direct and indirect
taxes, and lays down two rules by which their imposition must be
governed, namely: The rule of apportionment as to direct taxes, and the
rule of uniformity as to duties, imposts, and excises.' It is to be
observed, however, as long ago pointed out in Veazie Bank v. Fenno, 8
Wall. 533, 541, 19 L. ed. 482, 485, that the requirements of
apportionment as to one of the great classes and of uniformity as to
the other class were not so much a limitation upon the complete and
all-embracing authority to tax, but in their essence were simply
regulations concerning the mode in which the plenary power was to be
exerted. In the whole history of the government down to the time of the
adoption of the 16th Amendment, leaving aside some conjectures
expressed of the possibility of a tax lying intermediate between the
two great classes and embraced
Page 240 U.S. 1, 14
by neither, no question has been anywhere made as to the
correctness of these propositions. At the very beginning, however,
there arose differences of opinion concerning the criteria to be
applied in determining in which of the two great subdivisions a tax
would fall. Without pausing to state at length the basis of these
differences and the consequences which arose from them, as the whole
subject was elaborately reviewed in Pollock v. Farmers' Loan & T.
Co. 157 U.S. 429,
39 L. ed. 759, 15 Sup. Ct. Rep. 673, 158 U.S. 601, 39
L. ed. 1108, 15 Sup. Ct. Rep. 912, we make a condensed statement which
is in substance taken from what was said in that case. Early the
differences were manifested in pressing on the one hand and opposing on
the other, the passage of an act levying a tax without apportionment on
carriages 'for the conveyance of persons,' and when such a tax was
enacted the question of its repugnancy to the Constitution soon came to
this court for determination. Hylton v. United States, 3 Dall. 171, 1
L. ed. 556. It was held that the tax came within the class of excises,
duties, and imposts, and therefore did not require apportionment, and
while this conclusion was agreed to by all the members of the court who
took part in the decision of the case, there was not an exact
coincidence in the reasoning by which the conclusion was sustained.
Without stating the minor differences, it may be said with substantial
accuracy that the divergent reasoning was this: On the one hand, that
the tax was not in the class of direct taxes requiring apportionment,
because it was not levied directly on property because of its
ownership, but rather on its use, and was therefore an excise, duty, or
impost; and on the other, that in any event the class of direct taxes
included only taxes directly levied on real estate because of its
ownership. Putting out of view the difference of reasoning which led to
the concurrent conclusion in the Hylton Case, it is undoubted that it
came to pass in legislative practice that the line of demarcation
between the two great classes of direct taxes on the one hand and
excises, duties, and
Page 240 U.S. 1, 15
imposts on the other, which was exemplified by the ruling in
that case, was accepted and acted upon. In the first place this is
shown by the fact that wherever (and there were a number of cases of
that kind) a tax was levied directly on real estate or slaves because
of ownership, it was treated as coming within the direct class and
apportionment was provided for, while no instance of apportionment as
to any other kind of tax is afforded. Again the situation is aptly
illustrated by the various acts taxing incomes derived from property of
every kind and nature which were enacted beginning in 1861, and lasting
during what may be termed the Civil War period. It is not disputable
that these latter taxing laws were classed under the head of excises,
duties, and imposts because it was assumed that they were of that
character inasmuch as, although putting a tax burden on income of every
kind, including that derived from property real or personal, they were
not taxes directly on property because of its ownership. And this
practical construction came in theory to be the accepted one, since it
was adopted without dissent by the most eminent of the text writers. 1
Kent, Com. 254, 256; 1 Story, Const. 955; Cooley, Const. Lim. 5th ed.
*480; Miller, Constitution, 237; Pom. Const. Law, 281; 1 Hare, Const.
Law, 249, 250; Burroughs, Taxn. 502; Ordronaux, Constitutional
Legislation, 225.
Upon the lapsing of a considerable period after the repeal of
the income tax laws referred to, in 1894 [28 Stat. at L. 509, chap.
349], an act was passed laying a tax on incomes from all classes of
property and other sources of revenue which was not apportioned, and
which therefore was of course assumed to come within the classification
of excises, duties, and imposts which were subject to the rule of
uniformity, but not to the rule of apportionment. The constitutional
validity of this law was challenged on the ground that it did not fall
within the class of excises, duties, and imposts,
Page 240 U.S. 1, 16
but was direct in the constitutional sense, and was therefore
void for want of apportionment, and that question came to this court
and was passed upon in Pollock v. Farmers' Loan & T. Co. 157 U.S. 429, 39
L. ed. 759, 15 Sup. Ct. Rep. 673, 158 U.S. 601, 39
L. ed. 1108, 15 Sup. Ct. Rep. 912. The court, fully recognizing in the
passage which we have previously quoted the allembracing character of
the two great classifications, including, on the one hand, direct taxes
subject to apportionment, and on the other, excises, duties, and
imposts subject to uniformity, held the law to be unconstitutional in
substance for these reasons: Concluding that the classification of
direct was adopted for the purpose of rendering it impossible to burden
by taxation accumulations of property, real or personal, except subject
to the regulation of apportionment, it was held that the duty existed
to fix what was a direct tax in the constitutional sense so as to
accomplish this purpose contemplated by the Constitution. ( 157 U.S.
581.) Coming to consider the validity of the tax from this point of
view, while not questioning at all that in common understanding it was
direct merely on income and only indirect on property, it was held
that, considering the substance of things, it was direct on property in
a constitutional sense, since to burden an income by a tax was, from
the point of substance, to burden the property from which the income
was derived, and thus accomplish the very thing which the provision as
to apportionment of direct taxes was adopted to prevent. As this
conclusion but enforced a regulation as to the mode of exercising power
under particular circumstances, it did not in any way dispute the
all-embracing taxing authority possessed by Congress, including
necessarily therein the power to impose income taxes if only they
conformed to the constitutional regulations which were applicable to
them. Moreover, in addition, the conclusion reached in the Pollock Case
did not in any degree involve holding that income taxes generically and
necessarily came within the class
Page 240 U.S. 1, 17
of direct taxes on property, but, on the contrary, recognized
the fact that taxation on income was in its nature an excise entitled
to be enforced as such unless and until it was concluded that to
enforce it would amount to accomplishing the result which the
requirement as to apportionment of direct taxation was adopted to
prevent, in which case the duty would arise to disregard form and
consider substance alone, and hence subject the tax to the regulation
as to apportionment which otherwise as an excise would not apply to it.
Nothing could serve to make this clearer than to recall that in the
Pollock Case, in so far as the law taxed incomes from other classes of
property than real estate and invested personal property, that is,
income from 'professions, trades, employments, or vocations' (158 U.S.
637), its validity was recognized; indeed, it was expressly declared
that no dispute was made upon that subject, and attention was called to
the fact that taxes on such income had been sustained as excise taxes
in the past. Id. p. 635. The whole law was, however, declared
unconstitutional on the ground that to permit it to thus operate would
relieve real estate and invested personal property from taxation and
'would leave the burden of the tax to be borne by professions, trades,
employments, or vacations; and in that way what was intended as a tax
on capital would remain, in substance, a tax on occupations and labor'
( id. p. 637),-a result which, it was held, could not have been
contemplated by Congress.
This is the text of the Amendment:
'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.'
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,
Page 240 U.S. 1, 18
-or to limit and distinguish between one kind of income 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 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 whatever source the income may be derived, shall not be
subject to the regulation of apportionment. From this in substance it
indisputably arises, first, that all the contentions which we have
previously noticed concerning the assumed limitations to be implied
from the language of the Amendment as to the nature and character of
the income taxes which it authorizes find no support in the text and
are in irreconcilable conflict with the very purpose which the
Amendment was adopted to accomplish. Second, that the contention that
the Amendment treats a tax on income as a direct tax although it is
relieved from apportionment and is necessarily therefore not subject to
the rule of uniformity as such rule only applies to taxes which are not
direct, thus destroying the two great classifications which have been
recognized and enforced from the beginning, is also wholly without
foundation since the command of the Amendment that all income taxes
shall not be subject to apportionment by a consideration of the sources
from which the taxed income may be derived
Page 240 U.S. 1, 19
forbids the application to such taxes of the rule applied in
the Pollock Case by which alone such taxes were removed from the great
class of excises, duties, and imposts subject to the rule of
uniformity, and were placed under the other or direct class. This must
be unless it can be said that although the Constitution, as a result of
the Amendment, in express terms excludes the criterion of source of
income, that criterion yet remains for the purpose of destroying the
classifications of the Constitution by taking an excise out of the
class to which it belongs and transferring it to a class in which it
cannot be placed consistently with the requirements of the
Constitution. Indeed, from another point of view, the Amendment
demonstrates that no such purpose was intended, and on the contrary
shows that it was drawn with the object of maintaining the limitations
of the Constitution and harmonizing their operation. We say this
because it is to be observed that although from the date of the Hylton
Case, because of statements made in the opinions in that case, it had
come to be accepted that direct taxes in the constitutional sense were
confined to taxes levied directly on real estate because of its
ownership, the Amendment contains nothing repudiation or challenging
the ruling in the Pollock Case that the word 'direct' had a broader
significance, since it embraced also taxes levied directly on personal
property because of its ownership, and therefore the Amendment at least
impliedly makes such wider significance a part of the Constitution,-a
condition which clearly demonstrates that the purpose was not to change
the existing interpretation except to the extent necessary to
accomplish the result intended; that is, the prevention of the resort
to the sources from which a taxed income was derived in order to cause
a direct tax on the income to be a direct tax on the source itself, and
thereby to take an income tax out of the class of excises, duties, and
imposts, and place it in the class of direct taxes.
Page 240 U.S. 1, 20
We come, then, to ascertain the merits of the many
contentions made in the light of the Constitution as it now stands;
that is to say, including within its terms the provisions of the 16th
Amendment as correctly interpreted. We first dispose of two
propositions assailing the validity of the statute on the one hand
because of its repugnancy to the Constitution in other respects, and
especially because its enactment was not authorized by the 16th
Amendment.
The statute was enacted October 3, 1913, and provided for a
general yearly income tax from December to December of each year.
Exceptionally, however, it fixed a first period embracing only the time
from March 1, to December 31, 1913, and this limited retroactivity is
assailed as repugnant to the due process clause of the 5th Amendment,
and as inconsistent with the 16th Amendment itself. But the date of the
retroactivity did not extend beyond the time when the Amendment was
operative, and there can be no dispute that there was power by virtue
of the Amendment during that period to levy the tax, without
apportionment, and so far as the limitations of the Constitution in
other respects are concerned, the contention is not open, since in
Stockdale v. Atlantic Ins. Co. 20 Wall. 323, 331, 22 L. ed. 348, 351,
in sustaining a provision in a prior income tax law which was assailed
because of its retroactive character, it was said:
'The right of Congress to have imposed this tax by a new
statute, although the measure of it was governed by the income of the
past year, cannot be doubted; much less can it be doubted that it could
impose such a tax on the income of the current year, though part of
that year had elapsed when the statute was passed. The joint resolution
of July 4th, 1864 [13 Stat. at L. 417], imposed a tax of 5 per cent
upon all income of the previous year, although one tax on it had
already been paid, and no one doubted the validity of the tax or
attempted to resist it.'
Page 240 U.S. 1, 21
The statute provides that the tax should not apply to
enumerated organizations or corporations, such as labor, agricultural
or horticultural organizations, mutual savings banks, etc., and the
argument is that as the Amendment authorized a tax on incomes 'from
whatever source derived,' by implication it excluded the power to make
these exemptions. But this is only a form of expressing the erroneous
contention as to the meaning of the Amendment, which we have already
disposed of. And so far as this alleged illegality is based on other
provisions of the Constitution, the contention is also not open, since
it was expressly considered and disposed of in Flint v. Stone Tracy Co.
220 U.S. 108, 173, 55 S. L. ed. 389, 422, 31 Sup. Ct. Rep. 342, Ann.
Cas. 1912B, 1312
Without expressly stating all the other contentions, we
summarize them to a degree adequate to enable us to typify and dispose
of all of them.
1. The statute levies one tax called a normal tax on
all incomes of individuals up to $20,000, and from that amount up, by
gradations, a progressively increasing tax, called an additional tax,
is imposed. No tax, however, is levied upon incomes of unmarried
individuals amounting to $3, 000 or less, nor upon incomes of married
persons amounting to $4,000 or less. The progressive tax and the
exempted amounts, it is said, are based on wealth alone, and the tax is
therefore repugnant to the due process clause of the 5th Amendment.
2. The act provides for collecting the tax at the
source; that is, makes it the duty of corporations, etc., to retain and
pay the sum of the tax on interest due on bonds and mortgages, unless
the owner to whom the interest is payable gives a notice that he claims
an exemption. This duty cast upon corporations, because of the cost to
which they are subjected, is asserted to be repugnant to due process of
law as a taking of their property without compensation, and we
recapitulate various contentions as to discrimination against
corporations and against individuals,
Page 240 U.S. 1, 22
predicated on provisions of the act dealing with the subject.
(a) Corporations indebted upon coupon and registered
bonds are discriminated against, since corporations not so indebted are
relieved of any labor or expense involved in deducting and paying the
taxes of individuals on the income derived from bonds.
(b) Of the class of corporations indebted as above
stated, the law further discriminates against those which have assumed
the payment of taxes on their bonds, since although some or all of
their bondholders may be exempt from taxation, the corporations have no
means of ascertaining such fact, and it would therefore result that
taxes would often be paid by such corporations when no taxes were owing
by the individuals to the government.
(c) The law discriminates against owners of corporate
bonds in favor of individuals none of whose income is derived from such
property, since bondholders are, during the interval between the
deducting and the paying of the tax on their bonds, deprived of the use
of the money so withheld.
(d) Again, corporate bondholders are discriminated
against because the law does not release them from payment of taxes on
their bonds even after the taxes have been deducted by the corporation,
and therefore if, after deduction, the corporation should fail, the
bondholders would be compelled to pay the tax a second time.
(e) Owners of bonds the taxes on which have been
assumed by the corporation are discriminated against because the
payment of the taxes by the corporation does not relieve the
bondholders of their duty to include the income from such bonds in
making a return of all income, the result being a double payment of the
taxes, labor and expense in applying for a refund, and a deprivation of
the use of the sum of the taxes during the interval which elapses
before they are refunded.
Page 240 U.S. 1, 23
3. The provision limiting the amount of interest paid which
may be deducted from gross income of corporations for the purpose of
fixing the taxable income to interest on indebtedness not exceeding one
half the sum of bonded indebtedness and paidup capital stock is also
charged to be wanting in due process because discriminating between
different classes of corporations and individuals.
4. It is urged that want of due process results from
the provision allowing individuals to deduct from their gross income
dividends paid them by corporations whose incomes are taxed, and not
giving such right of deduction to corporations.
5. Want of due process is also asserted to result
from the fact that the act allows a deduction of $3,000 or $4,000 to
those who pay the normal tax, that is, whose incomes are $20,000 or
less, and does not allow the deduction to those whose incomes are
greater than $20,000; that is, such persons are not allowed, for the
purpose of the additional or progressive tax, a second right to deduct
the $3,000 or $4,000 which they have already enjoyed. And a further
violation of due process is based on the fact that for the purpose of
the additional tax no second right to deduct dividends received from
corporations is permitted.
6. In various forms of statement, want of due
process, it is moreover insisted, arises from the provisions of the act
allowing a deduction for the purpose of ascertaining the taxable income
of stated amounts, on the ground that the provisions discriminate
between married and single people, and discriminate between husbands
and wives who are living together and those who are not.
7. Discrimination and want of due process result, it
is said, from the fact that the owners of houses in which they live are
not compelled to estimate the rental value in making up their incomes,
while those who are living in rented houses and pay rent are not
allowed, in making up their taxable income, to deduct rent which they
have
Page 240 U.S. 1, 24
paid, and that want of due process also results from the fact
that although family expenses are not, as a rule, permitted to be
deducted from gross, to arrive at taxable, income, farmers are
permitted to omit from their income return certain products of the farm
which are susceptible of use by them for sustaining their families
during the year.
So far as these numerous and minute, not to say in many
respects hypercritical, contentions are based upon an assumed violation
of the uniformity clause, their want of legal merit is at once
apparent, since it is settled that that clause exacts only a
geographical uniformity, and there is not a semblance of ground in any
of the propositions for assuming that a violation of such uniformity is
complained of. Knowlton v. Moore, 178 U.S. 41, 44 L.
ed. 969, 20 Sup. Ct. Rep. 747; Patton v. Brady, 184 U.S. 608, 622,
46 S. L. ed. 713, 720, 22 Sup. Ct. Rep. 493; Flint v. Stone Tracy Co. 220 U.S. 107, 158,
55 S. L. ed. 389, 416, 31 Sup. Ct. Rep. 342, Ann. Cas. 1912B, 1312;
Billings v. United States, 232 U.S. 261, 282,
58 S. L. ed. 596, 605, 34 Sup. Ct. Rep. 421.
So far as the due process clause of the 5th Amendment is
relied upon, it suffices to say that there is no basis for such
reliance, since it is equally well settled that such clause is not a
limitation upon the taxing power conferred upon Congress by the
Constitution; in other words, that the Constitution does not conflict
with itself by conferring, upon the one hand, a taxing power, and
taking the same power away, on the other, by the limitations of the due
process clause. Treat v. White, 181 U.S. 264, 45
L. ed. 853, 21 Sup. Ct. Rep. 611; Patton v. Brady, 184 U.S. 608, 46
L. ed. 713, 22 Sup. Ct. Rep. 493; McCray v. United States, 195 U.S. 27, 61,
49 S. L. ed. 78, 97, 24 Sup. Ct. Rep. 769, 1 Ann. Cas. 561; Flint v.
Stone Tracy Co. 220
U.S. 107, 158, 55 S. L. ed. 389, 416, 31 Sup. Ct. Rep. 342, Ann.
Cas. 1912B, 1312; Billings v. United States, 232 U.S. 261, 282,
58 S. L. ed. 596, 605, 34 Sup. Ct. Rep. 421. And no change in the
situation here would arise even if it be conceded, as we think it must
be, that this doctrine would have no application in a case where,
although there was a seeming exercise of the taxing power, the act
complained of was so arbitrary as to constrain to the conclusion that
it was not the exertion of taxation, but a confiscation of property;
that is, a taking
Page 240 U.S. 1, 25
of the same in violation of the 5th Amendment; or, what is
equivalent thereto, was so wanting in basis for classification as to
produce such a gross and patent inequality as to inevitably lead to the
same conclusion. We say this because none of the propositions relied
upon in the remotest degree present such questions. It is true that it
is elaborately insisted that although there be no express
constitutional provision prohibiting it, the progressive feature of the
tax causes it to transcend the conception of all taxation and to be a
mere arbitrary abuse of power which must be treated as wanting in due
process. But the proposition disregards the fact that in the very early
history of the government a progressive tax was imposed by Congress,
and that such authority was exerted in some, if not all, of the various
income taxes enacted prior to 1894 to which we have previously
adverted. And over and above all this the contention but disregards the
further fact that its absolute want of foundation in reason was plainly
pointed out in Knowlton v. Moore, 178 U.S. 41, 44 L.
ed. 969, 20 Sup. Ct. Rep. 747, and the right to urge it was necessarily
foreclosed by the ruling in that case made. In this situation it is, of
course, superfluous to say that arguments as to the expediency of
levying such taxes, or of the economic mistake or wrong involved in
their imposition, are beyond judicial cognizance. Besides this
demonstration of the want of merit in the contention based upon the
progressive feature of the tax, the error in the others is equally well
established either by prior decisions or by the adequate bases for
classification which are apparent on the face of the assailed
provisions; that is, the distinction between individuals and
corporations, the difference between various kinds of corporations,
etc., etc. Ibid.; Flint v. Stone Tracy Co. 220 U.S. 107, 158,
55 S. L. ed. 389, 416, 31 Sup. Ct. Rep. 342, Ann. Cas. 1912B, 1312;
Billings v. United States, 232 U.S. 261, 282,
58 S. L. ed. 596, 605, 34 Sup. Ct. Rep. 421; First Nat. Bank v.
Kentucky, 9 Wall. 353, 19 L. ed. 701; National Safe Deposit Co. v.
Stead, 232 U.S.
58, 70, 58 S. L. ed. 504, 510, 34 Sup. Ct. Rep. 209. In fact,
comprehensively surveying all the contentions
Page 240 U.S. 1, 26
relied upon, aside from the erroneous construction of the
Amendment which we have previously disposed of, we cannot escape the
conclusion that they all rest upon the mistaken theory that although
there be differences between the subjects taxed, to differently tax
them transcends the limit of taxation and amounts to a want of due
process, and that where a tax levied is believed by one who resists its
enforcement to be wanting in wisdom and to operate injustice, from that
fact in the nature of things there arises a want of due process of law
and a resulting authority in the judiciary to exceed its powers and
correct what is assumed to be mistaken or unwise exertions by the
legislative authority of its lawful powers, even although there be no
semblance of warrant in the Constitution for so doing.
We have not referred to a contention that because certain
administrative powers to enforce the act were conferred by the statute
upon the Secretary of the Treasury, therefore it was void as
unwarrantedly delegating legislative authority, because we think to
state the proposition is to answer it. Marshall Field & Co. v.
Clark, 143 U.S. 649,
36 L. ed. 294, 12 Sup. Ct. Rep. 495; Buttfield v. Stranahan, 192 U.S. 470, 496,
48 S. L. ed. 525, 535, 24 Sup. Ct. Rep. 349; Oceanic Steam Nav. Co. v.
Stranahan, 214
U.S. 320, 53 L. ed. 1013, 29 Sup. Ct. Rep. 671.
AFFIRMED.
__________________
Ladies and gentlemen, the law is void on the basis of
vagueness alone.
Mark Yannone
