Although professing to be non-political in the beginning, the leaders of these alliances called a national convention at Omaha in 1892 and put forth the most radical platform that had yet appeared in American politics. It declared that the newspapers were subsidized, corruption dominated the ballot box, homes were covered with mortgages, labor was impoverished and tyrannized over by a hireling standing army, and the nation stood on the verge of ruin. "The fruits of the toils of millions," runs the platform, "are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind; and the possessors of these in turn despise the republic and endanger liberty. From the same prolific womb of governmental injustice we breed two classes of tramps and millionaires." Their demands included the free coinage of silver, a graduated income tax, postal-savings banks, government ownership of railways, telegraph and telephones; they declared their sympathy with organized labor in its warfare for better conditions and its struggle against "Pinkerton hirelings"; and they commended the initiative, referendum, and popular election of United States Senators. On this program, the Populists polled over a million votes and captured twenty-two presidential electors. Evidently the indifference of the old parties to such issues could not remain undisturbed much longer.
Fuel was added to the discontent in the spring of 1895, when the Supreme Court declared null and void the income tax law of the previous year.[38] The opponents of the tax, having lost in the Congress, made their last stand in the highest Federal tribunal, and marshaled on their side an array of legal talent seldom seen in an action at law, including Senator Edmunds, Mr. Joseph H. Choate, and other attorneys prominently identified with railway and corporation litigation. No effort was spared in bringing pressure to bear on the Court, and no arguments, legal, political, and social, were neglected in the attempt to impress upon the Court the importance of stopping Populism by a judicial pronunciamento. Conservative New York papers, like the Herald, boldly prophesied in the summer of 1894 that "the income tax will be blotted from the statute books before the people are cursed with its inquisitorial enforcement."
No easy victory lay before the opponents of the income tax, for the law seemed to be against them. In 1870, the Supreme Court had upheld the Civil War income tax without a dissenting voice, and had distinctly said: "Our conclusions are that direct taxes, within the meaning of the Constitution, are only capitation taxes as expressed in that instrument and taxes on real estate, and that the tax of which the plaintiff in error complains [the income tax] is within the category of an excise or duty." Of course, the terms of the new law were not identical with those of the Civil War measure, and the Supreme Court had been known to reverse itself.
The attorneys against the tax left no stone unturned. As Professor Seligman remarks, "Some of the important financial interests now engaged a notable array of eminent counsel to essay the arduous task of persuading the Supreme Court that it might declare the income tax a direct tax without reversing its previous decisions. The effort was made with the most astonishing degree of ability and ingenuity, and the briefs and arguments of the opposing counsel fill several large volumes.... The counsel's arguments abound in historical errors and economic inaccuracies.... Errors and misstatements which might be multiplied pale into insignificance compared with the misinterpretation put upon the origin and purpose of the direct-tax clause—a misinterpretation which like most of the preceding mistakes was bodily adopted by the majority of the Court, who evidently found no time for an independent investigation of the subject." Having exhausted their ingenuity in the matter of technicalities and imposing historical and economic and legal arguments, the counsel appealed to every class fear and prejudice that might be entertained by the Court.
The introduction of the passions of a social conflict into what purported to be a legal contest was intrusted to Mr. Choate. He threatened the Court with the declaration that if it approved the law, and "the communistic march" went on, a still higher exemption of $20,000 might be made and a rate of 20 per cent imposed—a highly important statement, but one that had no connection with the question whether an income tax was a direct tax. "There is protection now or never," he exclaimed. The very keystone of civilization, he continued, was the preservation of the rights of private property, and this fundamental principle was scattered to the winds by the champions of the tax. Mr. Choate concluded by warning the Court not to pay any attention to the popular passions enlisted on the side of the law, and urged it not to hesitate in declaring the law unconstitutional, "no matter what the threatened consequences of popular or populistic wrath may be."
The Court was evidently moved by the declamation of Mr. Choate, for Justice Field, in his opinion, replied in kind. "The present assault upon capital," he said, "is but the beginning. It will be but the stepping stone to others larger and more sweeping till our political conditions will become a war of the poor against the rich; a war growing in intensity and bitterness." If such a law were upheld, he gravely announced, boards of walking delegates would be fixing tax rates in the near future. Mr. Justice Harlan, in his dissenting opinion, however, replied in behalf of the populace by saying: "The practical effect of the decision to-day is to give certain kinds of property a position of favoritism and advantage inconsistent with the fundamental principles of our social organization, and to invest them with power and influence that may be perilous to that portion of the American people upon whom rests the larger part of the burdens of government and who ought not to be subjected to the dominion of aggregated wealth any more than the property of the country should be at the mercy of the lawless."
At the best, the nullification of the income tax law was not an easy task. There were eight justices on the bench when the decision of the Court was handed down on April 8, 1895. All of them agreed that the law was unconstitutional in so far as it laid a tax on revenues derived from state and municipal bonds; five of them agreed that a tax on rent or income from land was a direct tax and hence unconstitutional unless apportioned among the states on the basis of population—which was obviously impolitic; and the Court stood four to four on the important point as to the constitutionality of taxes on incomes derived from mortgages, interest, and personal property generally. The decision of the Court was thus inconclusive on the only point that interested capitalists particularly, and it was so regarded by the Eastern press.
On April 9, the day following the decision of the Court, the New York Sun declared: "Twice in great national crises the Supreme Court of the United States has failed to meet the expectations of the people or to justify its existence as the ultimate tribunal of right and law. In both instances the potent consideration has been neither right nor law, but the supposed demands of political expediency.... Yesterday the failure of the Supreme Court to decide the main question of constitutionality submitted to it was brought about by political considerations. It was not Democracy against Republicanism as before, but Populism and Clevelandism against Democracy, and the vote was four to four." The Tribune, on April 10, declared that "the Court reached a finding which is as near an abdication of its power to interpret the Constitution and a confession of its unfitness for that duty as anything well can be."
In view of the unsatisfactory condition created by its decision, the Court consented to a rehearing, and, on May 20, 1895, added its opinion that the tax on incomes from personal property was also a direct tax, thus bringing the whole law to the ground by a vote of five to four. Justice Jackson, who was ill when the first decision was made, had in the meantime returned to the bench, and he was strongly in favor of declaring the law constitutional. Had the Court stood as before, the personal property income tax would have been upheld, but one Justice, who had sustained this particular provision in the first case, was induced to change his views and vote against it on the final count. Thus by a narrow vote of five to four, brought about by a Justice who changed his mind within the period of a few days, all of the essential parts of the income tax law were declared null and void.