George Sutherland

“ The fact that a tax ostensibly laid upon a taxable subject is to be measured by the value of a nontaxable subject at once suggests the probability that it was the latter rather than the former that the law-maker sought to reach. If inquiry discloses persuasive grounds for the conclusion that such is the real purpose and effect of the legislation, the tax cannot be upheld without subverting the well-established rule that '* * * what cannot be done directly because of constitutional restriction cannot be accomplished indirectly by legislation which accomplishes the same result. ”

“ A state tax, however small, upon such securities or interest derived therefrom, interferes or tends to interfere with the constitutional power of the general government to borrow money on the credit of the United States, and constitutes a burden upon the operations of government, and carried far enough would prove destructive. ”

“ Words which, literally considered, import a tax upon something else-a tax, for example, as here, upon the privilege of doing business measured in part by the amount of nontaxable interest received-may, nevertheless, be adjudged to lay a tax upon the interest, if that purpose be fairly inferable from a consideration of the history, the surrounding circumstances, or the statute itself considered in all its parts. ”

“ Whether under recent federal statutes, states are authorized to impose a tax upon the income from United States bonds held by national banks, we need not stop to inquire. Certainly there is no statute of the United States which undertakes to authorize a state to impose a tax upon such bonds held by other kinds of corporations. ”

“ The national banks and trust companies in their returns to the federal government and to the state under the 12 1/2 per cent. income tax law are allowed certain deductions of income from specified types of securities in addition to the expense of conducting their business, bad debts, losses, etc. ”

“ The income of banking institutions from these sources is relatively much greater than that of other corporations. In endeavoring to reach a basis for a fair and equitable tax on national banks the commission, as previously stated in this report, was limited to the methods permitted under section 5219 of the United States Revised Statutes. A tax in the nature of an excise tax upon the income of the bank is an equitable and proper tax. ”

“ It was said that since the lessees were federal instrumentalities the state could not tax their interest in the leases either directly or as they were represented by the capital stock of the corporations owning them. 'A tax upon the leases is a tax upon the power to make them, and could be used to destroy the power to make them. ”

“ In a broad sense, the taxing power of neither state nor national government can be exercised without having some effect on the other, and there are many points at which the exercise of the undoubted power of one affects the other; but 'the limitation upon the taxing power of each, so far as it affects the other, must receive a practical construction which permits both to function with a minimum of interference each with the other ”

“ The business corporations, also, are allowed the same deductions. In the opinion of the commission there is no valid reason why, for purposes of this tax, such income exemption should be allowed. Corporations differ from the individual. Business corporations hold tax exempt securities generally, not because they fit into the purpose of their organization, but for the bearing they may have upon tax payments. ”

“ Many corporations invested in Liberty Bonds and other government securities during the war for patriotic reasons, which practice, so far as business corporations are concerned, is not generally prevalent at present, and the commission believes will not exist in the future to any appreciable extent. ”

“ Alpha Cement Co. v. Massachusetts, 268 U.S. 203, 218, 45 S.C.t. 477, 69 L. Ed. 916, 44 A. L. R. 1219; Frick v. Pennsylvania, 268 U.S. 473, 494, 495, 45 S.C.t. 603, 69 L. Ed. 1058, 42 A. L. R. 316; Nat. Life Ins. Co. ”

“ S. S. White Dental Mfg. Co. v. Commonwealth, 212 Mass. 35, 37, 98 N. E. 1056, Ann. Cas. 1913C, 805; President, etc., of Portland Bank v. Apthorp, 12 Mass. 252; Commonwealth v. Provident Institution, 12 Allen (94 Mass.) 312; Commonwealth v. Hamilton Mfg. Co., 12 Allen (94 Mass.) 298, 306; Eaton, Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 527, 130 N. E. 99; Alpha Portland Cement Co. v. Commonwealth, 244 Mass. 547, 139 N. E. 158. This interpretation of the nature of the exaction has been repeatedly approved by this court. Provident Institution v. ”