Federal taxation

“ Every tax levied by a state withdraws from the reach of federal taxation a portion of the property from which it is taken, and to that extent diminishes the subjects upon which federal taxes may be laid. The states are, and they must ever be, co-existent with the national government. Neither may destroy the other. Hence the federal constitution must receive a practical construction. ”

“ The burden of federal taxation necessarily sets an economic limit to the practical operation of the taxing power of the states, and vice versa. Taxation by either the state or the federal government affects in some measure the cost of operation of the other. ”

“ Whatever the gentleman may conjecture, I think it hardly possible that, when a state has laid a large duty upon a particular article, the Congress will be so unwise as to impose another upon the same, unless in extraordinary emergencies. There are certain capital subjects of taxation, which both the general and state governments must improve. But it is remarked that two taxes cannot operate together without confusion. ”

“ But what does this Constitution say? The clause under consideration gives an unlimited and unbounded power of taxation. Suppose every delegate from Virginia opposes a law laying a tax; what will it avail? They are opposed by a majority; eleven members can destroy their efforts; those feeble ten cannot prevent the passing the most oppressive tax law; so that, in direct opposition to the spirit and express language of your declaration of rights, you are taxed, not by your own consent, but by people who have no connection with you. ”

“ Having premised this much, to obviate misconstruction, I shall proceed to the clause before us with this observation—that I prefer a complete consolidation to a partial one, but a federal government to either. In my opinion, the states which give up the power of taxation have nothing more to give. The people of that state which suffers any power but her own immediate government to interfere with the sovereign right of taxation are gone forever. Giving the right of taxation is giving a right to increase the miseries of the people. ”

“ When we reflect that the exigencies of the government require that a general government upon other principles than the present should be established,—when we contemplate the difference between a federal union and a government operating upon the people, and not upon the states,—we must at once see the necessity of giving to it the power of direct taxation. ”

“ In other free governments, it had been seen that taxation had been carried farther, and more patiently borne, than in states where the people were excluded from the governments; the people considering themselves the sovereign as well as the subject, and as receiving with one hand what they paid with the other. The peculiar repugnance of the people of the United States to taxes, he supposed, proceeded, first, from the odious light in which they had been, under the old government, in the habit of regarding them ”

“ We should demand that Congress amend the Internal Revenue Code in such a way that no agency of the executive branch of government will have the power to grant federal tax-exemption. The Constitution gives the power of taxation only to the Congress. Hence, only Congress should have the power to grant exemption from taxation. ”

“ In final analysis the question we must decide is whether, by electing to support a governmental activity through the conduct of a business comparable in all essentials to those usually conducted by private owners, a state may withdraw the business from the field of federal taxation.
When a state embarks in a business which would normally be taxable, the fact that in so doing it is exercising a governmental power does not render the activity immune from federal taxation. ”

“ When power is in the hands of my representatives, I care not whether they meet here or a hundred miles off.
A gentleman (Mr. Monroe) has said that the power of direct taxation was unnecessary, because the imposts and back lands would be abundantly sufficient to answer all federal purposes. If so, what are we disputing about? I ask the gentleman who made the observation, and this committee, if they believe that Congress will ever lay direct taxes if the other funds are sufficient. It will then remain a harm less power upon paper, and do no injury. ”

“ But the power to tax incomes should not be granted in such terms as to subject to Federal taxation the incomes derived from bonds issued by the State itself, or those issued by municipal governments organized under the State’s authority. To place the borrowing capacity of the State and of its governmental agencies at the mercy of the Federal taxing power would be an impairment of the essential rights of the State, which, as its officers, we are bound to defend. ”

“ The federal revenue interest thus consists entirely of the expectation that the absence or presence of the rights will be determined accurately in accordance with the prevailing state rules. The question here is, however, not how state law must in the context of federal taxation ordinarily be determined; it is instead the more narrow one of whether and under what conditions a lower state court adjudication of a taxpayer's property rights is conclusive when subsequenty the federal tax consequences of those rights are at issue in a federal court. ”

“ If it should have a general power of taxation, they could select the most proper objects, and distribute the taxes in such a manner as that they should fall in a due degree on every member of the community They will be limited to fix the proportion of each state, and they must raise it in the most convenient and satisfactory manner to the public. ”

“ And the amount of the taxation may be determined by the value of the property, or its use, or its capacity, or its productiveness. It may touch business in the almost infinite forms in which it is conducted, in professions, in commerce, in manufactures, and in transportation. Unless restrained by provisions of the Federal Constitution, the power of the State as to the mode, form, and extent of taxation is unlimited, where the subjects to which it applies are within her jurisdiction. ”

“ It was conceived by the Committee to be highly unreasonable and unjust that a small State, which would contribute but one sixty-fifth part of any tax, should, nevertheless, have an equal right with a large State which would contribute eight or ten sixty-fifths of the same tax, to take money from the pockets of the latter, more especially as it was intended that the powers of the new legislature should extend to internal taxation. ”

“ Comprehensive, however, as the power of Federal taxation is, being without limitation as to amount, still there are some restrictions as to the manner of its exercise, and some exceptions as to the objects to which it may be applied. Bills for raising revenue must originate in the house of representatives; duties, imposts, and excises must be uniform throughout the United States; direct taxes must be apportioned according to numbers; regulations of commerce and revenue shall not give any preference to the ports of one state over those of another ”

“ 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. ”

“ The whole wisdom of the science of government, with respect to taxation, consists in selecting that mode of collection which will best accommodate the convenience of the people. When you come to tax a great country, you will find that ten men are too few to settle the manner of collection. One capital advantage, which will result from the proposed alternative, is this—that there will be necessary communications between your ten members in Congress and your hundred and seventy representatives here. ”

“ The finances of the United States are characterized by rapid increase in magnitude of fiscal operations, and by the great facility with which revenues are secured, resulting in a general tendency for revenue to outstrip expenditures. While the Federal Government possesses the constitutional right to levy both direct and indirect taxes, the requirement that the former shall be apportioned among the States in proportion to population, and the popular hostility to direct taxation, have in effect practically confined the Federal Government to the field of indirect taxation. ”

“ I am apprehensive that the power of taxation is unlimited. It expressly says that Congress shall have the power to lay taxes, &c. It is obvious to me that the power is unbounded, and I am apprehensive that they may lay taxes too heavily on our lands, in order to render them more productive. The amount of the taxes may be more than our lands will sell for. It is obvious that the lands in the Northern States, which gentlemen suppose to be more populous than this country, are more valuable and better cultivated than ours ”

“ The failure in one state will authorize a failure in another. The calculation in some states that others will fail, will produce general failures. This will also be attended with all the expenses which we are anxious to avoid. What are the advantages to induce us to embrace this system? If they mean that requisitions should be complied with, it will be the same as if Congress had the power of direct taxation. The same amount will be paid by the people.
It is objected, that Congress will not know how to lay taxes so as to be easy and convenient for the people at large. ”

“ The state's power to lay the tax, being independent of its jurisdiction over the ceded territory, subsists unless waived or prohibited by competent authority.
Whatever constitutional power the federal government may have to prohibit the state taxation of income derived from property located on the reservation, regarded as a federal instrumentality, it is plain that it has not assumed to exercise the power. ”

“ With regard to the appointment of officers, the President must nominate before they can vote; so that, if the powers of either branch are perverted, it must be with the approbation of some one of the other branches of government. Thus checked on each side, they can do no one act of themselves.
"The powers of Congress extend to taxation—to direct taxation—to internal taxation—to poll taxes—to excises—to other state and internal purposes." Those who possess the power to tax, possess all other sovereign power. That their powers are thus extensive is admitted ”

“ The immediate power of the purse is in the immediate representatives of the people, chosen every two years, who can lay no tax on their constituents but what they are subject to at the same time themselves. The power of taxation must be vested somewhere. Do the committee wish it to be as it has been? Then they must suffer the evils which they have done. Requisitions will be of no avail. No money will be collected but by means of military force. Under the new government, taxes will probably be much lighter than they can be under our present one. ”

“ Under our plan of government those new instructions are the direct product of public opinion.
That is one side of taxation. The other side is even more amazing. There is practically no basic American principle applying to taxes, which of necessity affects every citizen and every corporation. We find, for instance, that there is no line of demarcation between Federal taxes and state taxes. In many cases there is a definite duplication of taxes by the Federal Government and by the state, as, for example, in the case of the income tax. ”

“ Since the federal revenue laws are designed for a national scheme of taxation, their provisions are not to be deemed subject to state law 'unless the language or necessary implication of the section involved' so requires. ”

“ It will be no less so to attempt to raise a powerful fleet. With respect to requisitions, I beseech gentlemen to consider the importance of the subject. We, who are for amendments, propose (as has been frequently mentioned) that a requisition shall be made for two hundred thousand pounds, for instance, instead of direct taxation, and that, if it be not complied with, then it shall be raised by direct taxes. We do not wish to have strength, to refuse to pay them, but to possess the power of raising the taxes in the most easy mode for the people. ”

“ 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. ”

“ 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. ”