Double taxation

“ Taxes on franchises, corporations, and inheritances are among those more recently introduced in attempts to reform the tax system.
The various attempts to obtain sufficient revenue to support the government or to reform an unjust and unequal tax have led to double taxation, and hence have laid the burden upon persons holding a specific class of property. There are to-day no less than five methods in which double taxation occurs in the present system of taxation of corporations. The taxation of mortgages, because it may be shifted to the borrower, is virtually a double tax. ”

“ For centuries no principle of law has won more ready or universal acceptance. Even now that it is doubted, the doubt is rested on no more substantial foundation than want of 'jurisdiction' to tax, and the assertion that the Fourteenth Amendment is endowed with a newly discovered efficacy to forbid 'double taxation' when the sovereignty imposing the tax is that of two or more states. See Farmer's Loan & Trust Co. ”

“ Hitherto the fact that taxation is 'double' has not been deemed to affect its constitutionality, and there are, I think, too many situations in which a single economic interest may have such legal relationships with different taxing jurisdictions as to justify its taxation in both to admit of our laying down any constitutional principle broadly prohibiting taxation merely because it is double, at least until that characterization is more precisely defined. ”

“ As the present is not a tax on the debt, but only on the transfer of it, neither the analogies drawn from the law of property taxes nor the attempt to solve the present problem by ascribing to a legal relationship unconnected with any physical thing, a fictitious situs, can, I think, carry us very far toward a solution. Nor does it seem that the invocation of the Fourteenth Amendment to relieve from the burdens of double taxation, as such, promises more. ”

“ But when once a government has assumed its basis, to select and tax special articles from either of the other classes, is double taxation. For example, if the system be established on the basis of Income, and his just proportion on that scale has been already drawn from every one, to step into the field of Consumption, and tax special articles in that, as broadcloth or homespun, wine or whiskey, a coach or a wagon, is doubly taxing the same article. ”

“ Third, it sanctioned the right of a State to subject its citizens to double taxation in respect to one and the same property, and indorsed the justice and morality of the act. If the situs of the property—in the sense of an actuality—and the owner of a mortgage upon it, are within the territory of one and the same State, and the actuality is fully taxed by it, the separate and duplicate taxation of the mortgage would not be sanctioned except at the demand of the debtor, and which, as equivalent to his asking that the burden of his debt be augmented, he would be not likely to make. ”

“ In the case of intangible property, the law does not look for absolute equality, but to the much nore practical consideration of collecting the tax upon such property, either in the state of the domicil or the situs. Of course, we do not enter into a consideration political economists, of the double taxation political ecnomists, of the double taxation involved in taxing the property from which these securities arise, and also the burdens upon such property, such as mortgages, shares of stock, and the like,-the securities themselves. ”

“ Moreover, it encourages the evasion of tax burdens. Individuals and corporations sometimes migrate from localities or states in which they are subject to double taxation, to localities or states in which the danger of such taxation is less. This in turn has the evil effect of tempting states and municipalities to neglect taxes on corporations, incomes, and inheritances for the sake of attracting wealthy individuals and large industrial organizations from neighboring areas. ”

“ Badlam, 57 Cal. 594, 601. But, from the point of view of the taxpayer, it does not matter whether all of his double taxation is done in one state or half in one and half in another. He suffers the same injustice. ”

“ The hostility of the people toward taxation, possibly engendered in the Revolutionary days, and exaggerated by human nature, has been described in previous pages. One of the objections to the Constitution had been that the people could now be taxed by two agencies, State and nation, thereby involving double taxes. The resistance to the excise tax, which began to be manifest in a small way soon after its institution in 1791, bore a striking resemblance to the rebellion against the stamp-tax levied by Britain upon the colonists a generation before. ”

“ I cannot assent to the view that visible, tangible personal property is not subject to a national tax under the rule of uniformity, whether such uniformity means only territorial uniformity, or equality of right among all taxpayers of the same class. When direct taxes are restricted to capitation taxes and taxes on land, taxation, in either form, is limited to subjects always found whereever population is found, and which cannot be consumed or destroyed. ”

“ That tax is to be returned by, and collected from, the corporation as his agent and instrument.
A tax is understood to be a charge, a pecuniary burden, for the support of government. Of all burdens imposed upon mankind that of grinding taxation is the most cruel. It is not taxation that government should take from one the profits and gains of another. That is taxation which compels one to pay for the support of the government from his own gains and of his own property. ”

“ The resources appropriated to one may diminish or fail, while those of the other may increase beyond the wants of government. One may be destitute of revenues, while the other shall possess an unnecessary abundance; and the Constitution will be an eternal barrier to a mutual intercourse and relief. In this case, will the individual state stand on so good a ground as if the objects of taxation were left free and open to the embrace of both the governments? Possibly, in the advancement of commerce, the imposts may increase to such a degree as to render direct taxes unnecessary. ”

“ BEFORE we proceed to examine any other objections to an indefinite power of taxation in the Union, I shall make one general remark; which is, that if the jurisdiction of the national government, in the article of revenue, should be restricted to particular objects, it would naturally occasion an undue proportion of the public burdens to fall upon those objects. Two evils would spring from this source: the oppression of particular branches of industry; and an unequal distribution of the taxes, as well among the several States as among the citizens of the same State. ”

“ In other words, the actual tax to be paid does not increase simply as the legacy increases, which would be the rule of equality, but the rate of taxation is also increased as the amount of the legacy passes from one sum to another. ”

“ No one ever doubted that before the adoption of the Constitution of the United States each of the States possessed unlimited power to tax, either directly or indirectly, all persons and property within their jurisdiction, alike by taxes on polls, or duties on internal production, manufacture, or use, except so far as such taxation was inconsistent with certain treaties which had been made. ”

“ And yet the power to tax involves the power to destroy and the levy of duty touches all our people in all places under the jurisdiction of the Government. The logical result is that Congress may prohibit commerce altogether between the States and Territories, and may prescribe one rule of taxation in one Territory, and a different rule in another. ”

“ And again, in the same case, 'it is admitted that the power of taxing the people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable, to the utmost extent to which the government may chose to carry it. The only security against the abuse of this power is found in the structure of the government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation.' 4 Wheat. ”

“ The expense of government to the individuals of a great nation is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim consists what is called the equality or inequality of taxation.'
But notwithstanding the rule of uniformity lying at the basis of every just system of taxation, there are doubtless many individual cases where the weight of a tax falls unequally upon the owners of the property taxed. ”

“ This inherent limitation upon the taxing power forbids the imposition of taxes which are unequal in their operation upon similar kinds of property, and necessarily strikes down the gross and arbitrary distinctions in the income law as passed by congress. The law, as we have seen, distinguishes in the taxation between corporations by exempting the property of some of them from taxation, and levying the tax on the property of others, when the corporations do not materially differ from one another in the character of their business or in the protection required by the government. ”

“ Because it is the practice of most states to seek revenue without regard to the taxing activities of other states, or of the Federal government, it may happen that corporations, incomes, or inheritances are taxed by more than one agency of government. If a scientific and co÷rdinated tax system were deliberately to provide for this, the supposition would be that such taxation were reasonable and just, because intended to bear with equal weight upon all forms of property in the taxable class. ”

“ I am surprised that such strong objections should have been made to, and such fears and alarms excited by, this power of direct taxation, since experience shows daily that it is neither inconvenient nor oppressive. A collector goes to a man's house; the man pays him with freedom, or makes an apology for his inability to do it then: at a future day, if payment be not made, distress is made, and acquiesced in by the party. What difference is there between this and a tax imposed by Congress? ”

“ The tax under consideration, however, goes further and fastens upon something new—something which in the case of individuals or partnerships has no existence at all—which comes into being only by the exercise of the sovereign power of a state. The opponents of the tax, far from attempting to narrow the existing field of federal taxation, were in fact resisting an encroachment by Congress on an entirely new field, created by, and theretofore reserved exclusively to, the separate states. ”

“ At that time very few corporations existed. If the mere fact of state incorporation, extending now to nearly all branches of trade and industry, could withdraw the legitimate objects of Federal taxation from the exercise of the power conferred, the result would be to exclude the national government from many objects upon which indirect taxes could be constitutionally imposed. Let it be supposed that a group of individuals, as partners, were carrying on a business upon which Congress concluded to lay an excise tax. ”

“ But when the taxpayer extends his activities with respect to his intangibles, so as to avail himself of the protection and benefit of the laws of another state, in such a way as to bring his person or property within the reach of the tax gatherer there, the reason for a single place of taxation no longer obtains, and the rule is not even a workable substitute for the reasons which may exist in any particular case to support the constitutional power of each state concerned to tax. ”

“ The tendency has been to tax every form of property that could be observed or described. And so our own nation, like many others, has gone on, step by step, adding one tax after another, without carefully considering the fundamental principles of taxation or the burdens laid upon particular classes. To-day we have a complex system, full of irregularities and imperfections. Our taxes are poorly and unjustly assessed, and the burdens fall heavily upon some, while others have an opportunity of escaping. ”

“ This court has repeatedly laid down the doctrine that diversity of taxation, both with respect to the amount imposed, and the various species of property selected either for bearing its burdens or for being exempt from them, is not inconsistent with a perfect uniformity and equality of taxation in the proper sense of those terms; and that a system which imposes the same tax upon every species of property, irrespective of its nature or condition or class, will be destructive of the principle of uniformity and equality in taxation, and of a just adaptation of property to its burdens. ”

“ Each branch of government should pretty well confine its use of the taxing power to definite types of taxable wealth. The Federal government, for example, might secure most of its revenue from import duties, excises, an income tax, and stamp taxes of various kinds. Many taxation experts believe that the states ought to confine themselves mainly to license, corporation, inheritance, and, possibly, income taxes. Local governments might well secure most of their revenue from taxes on franchises, licenses, and real estate. ”