Harlan F. Stone

“ And, although it may be conceded that a tax measured by income derived from copyrights does not impose a burden upon the exercise of a vital power of the federal government, as it would in the case of federal bonds, it is, nevertheless, a tax falling upon income which is exempt in virtue of an implied prohibition of the Federal Constitution. ”

“ By section 209 the net income embraces 'income from any source,' and 'is presumably the same as the entire net income' reported for income taxation to the United States, 'plus * * * dividends on stocks or any interest received on bonds of any character.' Subdivision 3 of section 208 provides: 'The term 'entire net income' means the total net income, including all dividends received on stocks and all interest received from federal, state, municipal or other bonds. ”

“ There surely was no intention that all mercantile and manufacturing corporations, foreign and domestic, should in very truth be exempt from taxes upon property so fundamental in importance as capital and the fruits of capital. ”

“ At the outset appellant contends that the tax, although stated in the Taxing Act to be on corporate franchises, is in reality a tax on income, and as such falls within the class of taxes which concededly may not be directly imposed on federal instrumentalities. ”

“ The necessity for marking those boundaries grows out of our constitutional system, under which both thefed eral and the state governments exercise their authority over one people within the territorial limits of the same state. ”

“ However, in determining the entire net income, for purposes of equitable taxation under this article of the tax law, the tax commission may include income from any source, provided only that the assets from which the income arose shall be included in any segregation for the purpose of computing the tax.↑ The equity jurisdiction to enjoin collection of the tax is not challenged. ”

“ The reason for the apparent exemption was that, under the form of a tax upon the franchise, the property of such corporations had already been subjected to its share of public burdens.
'I think, therefore, that in substance, though not in form, in tendency, though not in name, this tax is equivalent to a tax upon relator's income.'
There is nothing in the later case of People ex rel. Bass, Ratcliff, etc., v. Tax Comm., 232 N. Y. 42, 133 N. E. 122, which, in our opinion, challenges Judge Cardozo's cogent view. ”

“ There is nothing to suggest that the Legislature could at any time have had in mind the addition of income from copyrights to the measure of the tax, or that the statute or the amendments were adopted 'for the very purpose of subjecting' it 'pro tanto to the burden of the tax,' which was declared to be the vice of the statute in Macallen Co. ”

“ Milwaukee, 272 U.S. 713, 47 S.C.t. 280, 71 L. Ed. 487, in which this court had stated, with respect to a state tax on income, no franchise or privilege tax being involved: 'If the avowed purpose or self-evident operation of a statute is to follow the bonds of the United States and to make up for its inability to reach them directly by indirectly achieving the same result, the statute must fail even if but for its purpose or special operation it would be perfectly good.' But, as the court in that case was careful to point out, in language later quoted with approval in Macallen Co. v. ”