William O. Douglas

“ Thus, through the corporate charter fiction the chartering state may thrust its own tax with extraterritorial effect between the taxing power of the state of domicile and tax resources to which that State has had, and I think should have, first and under ordinary circumstances exclusive resort.
2. To subject intangible property to many more sources of taxation than other wealth prejudices its relation to other investments and other wealth by a discrimination which has no basis in the function that intangibles perform for our present society. ”

“ Because Utah issued a charter to a corporation, which issued stock to a nonresident, which changed hands at his death, which required a transfer on the corporation's books, which transfer was permitted by Utah law, Utah got jurisdiction to tax succession to the stock. It is really as remote as that.
No one questions that a state which charters a corporation, even though it amounts to no more than giving 'to airy nothing a local habitation and a name,' has the right to exact a charter fee, an incorporation tax, or a franchise tax from the artificial entity it has created. ”

“ If the values derived from privileges extended by the National Government and from rendering national transportation were to be allocated to any single state for tax purposes, a realistic basis would entitle the five States of Idaho, Kansas, Nebraska, Oregon, and Washington to some consideration, for each embraces, authorizes, and protects by its laws more miles of trackage than does Utah. ”

“ And while today the Court sustains only a death transfer tax, its theories are equally serviceable to sustain an income or excise tax on dividends from such stock or interest on bonds or a sales tax, or a gift tax. Whether each chartering or issuing state will be permitted to calculate its tax on some formula that will consider the total property owned by the decedent, I do not know, but in the present trend of decision there is little restraint on such formulas. ”

“ The amount of plant and material and goods in process, working capital, good will, and organization at any time devoted to enterprise substantially will depend upon the willingness of the public to stand in the position of stockholder or bondholder. When this Court determines that the effect of owning this type of circulating medium is to subject the estate of the owner to an inheritance tax from every state that chartered one of the companies in which he has invested, it imposes a handicap on such ownership that is substantial and influential upon our economy. ”

“ To read into the Constitution the Court's present concept of jurisdiction through charter granting, and to hold that it follows that the Constitution does not prohibit this tax, is to make new law quite as certainly as to adhere to the concept of jurisdiction according to the decedent's domicile and to hold that the Constitution therefore does prohibit it. ”

“ But that such chartering enables the taxing arm of the state to reach the estate of every stockholder, wherever he lives, and to tax the entire value of the stock because of 'opportunities which it has given,' 'protection which it has afforded,' or 'benefits which it has conferred' is quite another matter. Utah is permitted to tax the full value of each share of Union Pacific stock passing by death. Any conceivable 'opportunity,' 'protection,' or 'benefit' derived by the Union Pacific stockholders from Utah is negligible in proportion to the values Utah is authorized to tax. ”

“ Modern enterprise often brings different parts of an organic commercial transaction within the taxing power of more than one State, as well as of the nation. It does so because the transaction in its entirety may receive the benefits of more than one government. And the exercise by the States of their Constitutional power to tax may undoubtedly produce difficult political and fiscal problems. ”

“ What gives the Union Pacific stock its value, all of which is appropriated by this decision to Utah's taxing power, is its operation in interstate commerce, a privilege which comes from the United States and one which Utah does not give or protect and could not deny. The Union Pacific system itself is in interstate operation, embracing thirteen states and drawing its business from the whole country. ”

“ In 1939, the Union Pacific had 50,131 stockholders. [22] The many small stockholders cannot afford professional counsel or evasion devices. The burden of reports and appraisals and foreign tax proceedings bears heavily upon them because of the relatively small amount involved in their transfers. The new tax we have authorized undermines the principle of graduation of tax burdens in proportion to ability to pay. No tax laid on anything less than the total net worth of the estate can be graduated even roughly according to the principle which progressive modern taxation strives to heed. ”

“ The seriousness of these burdens is increased if the decedent owns stock in consolidated corporations incorporated in several states, and under this decision stocks of some consolidated railroads would be subject to tax on their full values by five or six states. One need not be unduly soft-hearted towards taxpayers to doubt whether the exhaustion of estates through multiplication of reports, returns, appraisals, litigation, counsel fees, and expenses ultimately makes for a sound fiscal policy or an enlightened social policy. ”

“ Harkness's $87,000,000 net estate with its $1,000,000 investment in Union Pacific stock. As we have pointed out, it is not he, but the State of New York, that will pay this tax to the State of Utah. And if New York had no provision in its statutes for credit and Mr. Harkness could have foreseen the shift of position of this Court, it is not likely that he would have been caught with the tax. Those who have large estates and watchful lawyers will find ways of minimizing these burdens. But Mr. Harkness is not a typical Union Pacific stockholder. ”

“ We stated that rights to intangibles 'are but relationships between persons, natural or corporate, which the law recognizes by attaching to them certain sanctions enforceable in courts. The power of government over them and the protection which it gives them cannot be exerted through control of a physical thing. They can be made effective only through control over and protection afforded to those persons whose relationships are the origin of the rights. ”

“ Some states have seen to it that our food is properly produced and inspected; others have fostered and protected the industry upon which we are utterly dependent for the ordinary conveniences of life and for life itself. ”

“ Maryland, 4 Wheat. 316, 429, 4 L.Ed. 579, the power to tax 'is an incident of sovereignty, and is co-extensive with that to which it is an incident. All subjects over which the sovereign power of a state extends, are objects of taxation * * *.'
It was that view which we followed in the Curry case. We held there that the Fourteenth Amendment did not prevent both Alabama and Tennessee from imposing death taxes upon the transfer of an interest in intangibles held in trust by an Alabama trustee but passing under the will of a beneficiary decedent domiciled in Tennessee. ”

“ And we added: 'Shares of corporate stock may be taxed at the domicile of the shareholder and also at that of the corporation which the taxing state has created and controls; and income may be taxed both by the state where it is earned and by the state of the recipient's domicile. Protection, benefit, and power over the subject matter are not confined to either state.' 307 U.S. page 368, 59 S.Ct. ”

“ It is these intangible symbols or tokens which give liquidity and modibility to otherwise fixed underlying plant assets, which give ready negotiability to fractional interests therein that would otherwise transfer with difficulty, and which divide among many both benefits and risks from aggregation of properties whose successful functioning for society requires unified management of the bulk. ”

“ These facts leave nothing of Utah's claim to tax the full value of Union Pacific shares when transferred by death of a nonresident stockholder, and no basis for the Court's decision that it may do so, except the metaphysics of the corporate charter. ”

“ Many estimates are extravagant and include an enormous amount of duplications-for example, the aggregate of stockholders' lists of all corporations. I think the estimate of Berle and Means as of 1927 that between four and six million persons owned stocks, including an estimated two million employee or customer stockholders, is a reasonable one. ”