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tive, the measure may not be invalidated because of consequences that may arise from its enforcement. "Undoubtedly," the opinion declares, "in determining whether a particular act is within the granted power, its scope and effect is to be considered. Applying this rule to the acts assailed, it is self-evident that on their face they levy an excise tax. This being their necessary scope and operation, it follows that the acts are within the grant of power."

In Knowlton v. Moore12 it was argued that inheritance taxes levied by Congress were unconstitutional in that the effect of their extreme enforcement would or might be to destroy the right to succession to property on the occasion of death, a subject beyond the control of Congress. As to this the court say: "This principle is pertinent only when there is no power to tax a particular subject, and has no relation to a case where such right exists. In other words, the power to destroy, which may be the consequence of taxation, is a reason only that the right to tax should be confined to subjects which may be lawfully embraced therein, even athough it happens that in some particular instance no great harm may be caused by the exercise of the taxing authority as to a subject which is beyond its scope. But this reasoning has no application to a lawful tax, for if it had there would be an end of all taxation; that is to say, if a lawful tax can be defeated because the power which is manifested by its imposition may, when further exercised, be destructive it would follow that every lawful tax would become unlawful, and therefore no taxation whatever could be levied." 13

The McCray case is, it will be seen, in one respect the opposite of Veazie v. Fenno and the Head Money Cases, in that it holds the law in question to be a tax law and constitutional because it is such; whereas, in the earlier cases, the laws were justified as being, in real character, not revenue measures at all, and, therefore, not subject to the limitations constitutionally imposed upon Congress when enacting revenue laws.

12 178 U. S. 41; 20 Sup. Ct. Rep. 747; 44 L. ed. 969.

13 For a criticism of McCray v. United States, see Michigan Law Review, VI, 277, article entitled May Congress Levy Money Exactions, Designated 'Taxes,' Solely for the Purpose of Destruction?"

§ 264. Federal Powers of Taxation.

By section VIII of Article I of the Constitution, Congress is given the general power "to lay and collect taxes, duties, imposts and excises." 14

§ 265. "Tax," "Duty," "Impost," and
Impost," and "Excise" Defined.

Duty and impost have a broad signification which makes them practically synonymous with the general term tax; more generally, however, they are given a narrower meaning according to which they become equivalent to customs or customs dues, that is, to taxes levied upon goods imported from foreign countries.

An excise is an inland tax upon manufacture or retail sale of commodities. It is thus often termed a consumption tax. In the United States the excise taxes are more generally known as internal revenue duties. 15

The general power to levy taxes being given, the Constitution enumerates duties, imposts and excises as the classes of taxes which are to be levied uniformly throughout the United States.16

§ 266. Limitations Upon the Federal Taxing Power.

The power of taxation given to the Federal Government is comprehensive and complete, embracing all possible subjects and modes of taxation except in so far as the Constitution, in other clauses, expressly limits the power, or except in so far as limitations may be implied from the general character of the American constitutional system. The express limitations are: (1) That "all duties, imposts, and excises shall be uniform throughout the United States;"17 (2) that "no capitation or other direct tax

14 The clause continues: "to pay the debts and provide for the common defense and general welfare of the United States." That this is not a general grant of power to the United States to pay the debts and provide for the common defense and general welfare, but is merely a statement of the purpose for which the power to lay and collect taxes, etc., is granted. See ante, Section 22. Cf. Story, Commentaries, §§ 902–926; Tucker, Constitution, § 222; The License Tax Cases, 5 Wall. 462; 18 L. ed. 497; Knowlton v. Moore, 178 U. S. 41; 20 Sup. Ct. Rep. 747; 44 L. ed. 969.

15 For a discussion of the various definitions of excise, duty and impost, see Pacific Insurance Co. v. Soule, 7 Wall. 433; 19 L. ed. 95. 16 Hylton v. United States, 3 Dall. 171; 1 L. ed. 556.

17 Art. I, Sec. VIII, Cl. 1.

shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken; 18 and (3) that "no tax or duty shall be laid on articles exported from any State.19

The implied limitations upon the federal taxing power are those that relate to the general, if not absolute, exemption of state governmental agencies from federal interference, whether by way of taxation or otherwise,20 and those arising out of all the express limitations upon the Federal Government, which, of course, are as operative when the Federal Government is exercising its taxing powers, as it is when employing any of the other rights possessed by it. Thus, for example, the United States may not, under the guise of a tax, take property without due process of law.

§ 267. Due Process of Law and Taxation.

We have already seen that the taking of private property by the State in exercise of the taxing power is not brought within the constitutional requirement, applicable in the case of property taken under the power of eminent domain, that direct pecuniary compensation therefor shall be made. In like manner the taking of private property in the form of taxes, is not, in itself, a taking of property without due process of law.

In Davidson v. New Orleans2 the Supreme Court after considering the meaning of the phrase "due process of law" as employed in the Fourteenth Amendment, and after adverting to the difficulty of stating affirmatively and completely the protection afforded by it, go on to say that they can at least state some of the cases which do not fall within its application, and among these, they say, we lay down the following propositions as applicable to the case before us: that whenever by the laws of a State, or by state authority, a tax, assessment, servitude, or other burden is imposed upon property for the public use, whether it be of the whole State or of some more limited portion of the

18 Art. I, Sec. VII, Cl. 4.

19 Art. I, Sec. VIII, Cl. 5.

20 See Sections 57-60.

21 96 U. S. 97; 24 L. ed. 616

community, and those laws provide for a mode of confirming or contesting the charge thus imposed, in the ordinary courts of justice, with such notice to the person or such proceeding in regard to the property as is appropriate to the nature of the case, the judgment in such proceedings cannot be said to deprive the owner of his property without due process of law, however obnoxious it may be to other objections. It may violate some provision of the state Constitution against unequal taxation, but the Federal Government imposes no restraints on the States in that regard. . . . It is said that plaintiff's property had previously been assessed for the same purpose, and the assessment paid. If this be meant to deny the right of the State to tax or assess property twice for the same purpose, we know of no provision in the federal Constitution which forbids this, or which forbids unequal taxation by the States. If the act under which the former assessment was made is relied on as a contract against further assessments for the same purpose, we concur with the Supreme Court of Louisiana in being unable to discover such a contract."

From the foregoing it is apparent that the taking of private property in the form of taxes is not, in itself, a taking of private property without due process of law because no direct compensation is made for the property thus taken. Though the taking of the property in the form of a tax is thus not in itself a taking without due process, it may become such by reason of the purpose for which, or the manner in which, the tax is levied, assessed and collected.

Due process of law obliges the United States as well as the individual States, in the exercise of their taxing powers, to conform to the following rules:

1. That the tax shall be for a public purpose.

2. That it shall operate uniformly upon those subject to it. 3. That either the person or the property taxed shall be within the jurisdiction of the government levying the tax.

4. That in the assessment and collection of the tax certain guarantees against injustice to individuals, especially by way of notice and opportunity for a hearing, shall be provided.

§ 268. Taxation Must Be for a Public Purpose.

A tax being in the eyes of the law an enforced contribution upon persons or property to raise money for a public purpose, it follows that where this public purpose is absent, the contribution sought to be enforced cannot be justified as a tax but amounts to an attempt to take property without due process of law. The validity of this proposition is beyond dispute, but judicial records furnish comparatively few instances of tax levies being held void for this reason. This is due, in the first place, to the fact that not often do the laws expressly state the purpose for which a tax is levied; and, in the second place, where this purpose is stated, the courts will, in deference to the legislative judgment, construe the purpose to be a public one if it is possible to do so. In Broadhead v. City of Milwaukee the Supreme Court of Wisconsin say: "To justify the court in arresting the proceedings and declaring the tax void the absence of all possible public interest in the purpose for which the funds are raised must be clear and palpable to every mind at the first blush."

A leading federal case with reference to this subject is that of Loan Association v. Topeka.23 This case did not involve a law levying a tax, but one authorizing towns to issue bonds payable to private manufacturing companies to encourage and aid them in establishing their plants within their respective limits. It was held by the court that inasmuch as taxes would have to be levied for the payment of these bonds, the law in effect attempted to authorize the towns to levy taxes in aid and encouragement of a private enterprise and was, therefore, void. In its opinion the court say: "The subject of the aid voted to railroads by counties and towns has been brought to the attention of the courts of almost every State in the Union. It has been thoroughly discussed and is still the subject of discussion in those courts. It is quite true that a decided preponderance of authority is to be found in favor of the proposition that the legislatures of the States, unless restricted by some special provisions of their Con

22 19 Wis. 624.

23 20 Wall. 655; 22 L. ed. 455.

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