45. This was the constitutional law of the United States as settled in 1870,[116] the case arising in Massachusetts; the plaintiff a judicial officer of that Commonwealth having brought suit to recover from the United States Revenue Collector the amount of income tax exacted from him, it being part of his salary as a judge in that Commonwealth. The Supreme Court of the United States sustained the plaintiff for reasons given in the opinion, part of which has been quoted. By parity of reasoning, as followed in that decision, any act of Congress imposing a tax on the salary of any State officer, if his office is a means and instrumentality employed by the State to carry its powers into operation must be declared unconstitutional. In 1913 the Constitution was amended so that “The Congress shall have power to lay and collect taxes on incomes from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”[117]
Does this amendment increase the taxing power of Congress beyond that power as possessed prior to 1913 and as limited by the Supreme Court in its decision in the case of The Collector v. Day? If any officer of a State, executive, legislative, judicial, or administrative, receives a salary, large or small, (and it forms part of his income) is it beyond the jurisdiction of the United States as a taxable estate, despite the explicit power of Congress, in this Sixteenth Amendment “to lay and collect taxes on incomes, from whatever source derived?” Does the amendment overrule the decision in The Collector v. Day?[118] Evidently the amendment empowers Congress to levy an income tax wholly in disregard of the effect of the tax in impairing the “necessary means and instrumentalities of a State.” Here too the issue is one of jurisdiction. The person taxed being within the jurisdiction of the United States has no redress against that jurisdiction more than has a person, taxed and being within the jurisdiction of a State, redress against the State. But can the Commonwealth of Massachusetts, or any other State, imposing an income tax, lay and collect it from whatever source derived, and that source be the treasury of the United States,—that income be salary received by a citizen of the State who also is a federal official, say a federal Judge, or a Collector of the Revenue, or a United States Marshal, or a Senator of the United States, or a Congressman, or the President of the United States?[119]
46. In the operations of government, the delegation of authority by the executive, the legislative, or the judiciary is rare. The constitutional test, in either case, is purpose and authority. Thus a municipal corporation is a representative not only of the State, but is a portion of its governmental power. It is one of its creatures, made for a specific purpose, to exercise within a limited sphere the powers of the State. “The action is no less a portion of the sovereign authority when it is done through the agency of a town or city corporation.”[120] Thus a tax authorized by the State Legislature, to be imposed by a municipal corporation is a good tax in law, provided it is for a public purpose. This is not a delegation of the taxing power, but is the exercise of it by the Legislature. The municipality itself has no power to tax, or even to be a municipality, save by authority of the State, usually by the constitution, vested in its Legislature. The amount of the tax, the subjects of taxation, the method of assessment and of collection are wholly within the discretion of the Legislature. The exemption of churches, schools, colleges, and charitable institutions may or may not be required by a State constitution. If this is silent on the subject, the question is wholly one of legislative discretion. A charitable institution has no fundamental right to exemption from taxation, as a person has a fundamental right to “due process of law.”[121] The principle of exemption from taxation is that taxation of the person or the property tends to destroy the powers or to impair the efficiency of the State.[122]
47. A tax must not only be laid by authority but it must be for a public purpose. Thus any assessment imposed upon persons or property by the government, State or federal, for the gain, emolument, or advantage of a private person, or an official, is unconstitutional. The purpose must be public, as for example, for schools, highways, canals, public buildings, markets, asylums, jails, or to keep the same in repair and to use them for public purposes. The Legislature cannot authorize a town or a county, or any subdivision of the State, to raise money for other than public purposes and uses. It cannot confer benefits on individuals, however meritorious, by taxation.[123]
48. Taxes, imposed under the Constitution, have been classed as direct or indirect,—the direct being apportionable among the States according to population; the indirect being uniform throughout the United States.[124]
The Sixteenth Amendment of 1913 abolishes the limitation of apportionment or enumeration in the imposition and collection of an income tax. The Income Tax law of October 3, 1913—the first of the kind enacted by Congress under the amendment—exempted incomes of $3000, or less, or $4000, or less, as the person taxed may be single or married. The amount of the exemption is fixed at the discretion of Congress. So too is the rate of taxation by duties, imposts, and excises, as well as the inclusion or exclusion of articles subject to them, but Congress must make such taxes uniform throughout the United States.[125]
The taxing power may be used to encourage or to discourage an activity, or to destroy it. As thus used, the exercise of the taxing power, whether by the State or by the United States, may characterize the policy, or administration of its government. So too if a State engages in manufacturing, or in any activity or occupation taxable under federal revenue laws, it is amenable in taxes like a private person.[126]
CHAPTER V
THE LAW OF COMMERCE
49. The power to regulate commerce belongs to sovereignty. By the Constitution Congress is empowered “to regulate commerce with foreign nations, and among the several States, and with the Indian tribes.”[127] The principle of this regulation, or of the exercise of the power, is essentially that of taxation: it is a matter of jurisdiction. “The power of Congress to regulate commerce,” observes Chief Justice Marshall, in the first American judicial decision on the subject, “comprehends and warrants every act of national sovereignty which any other sovereign nation may exercise.”[128]