The subject of federal income taxes remains to be considered. There is no doubt that any state may levy income taxes. Nor is there any doubt that, under the federal Constitution as it now stands, Congress may levy an income tax provided it be apportioned according to population as required in regard to all direct federal taxes. There is also no doubt that Congress, by means of an excise tax, may reach income derived from any business or profession, and that any such tax, being essentially an excise tax on business, need not be apportioned but need merely be uniform throughout the United States. For example, a tax on the earnings of railroads and manufacturing businesses could be levied without apportionment, and it would produce a large revenue. It would also have the advantage of tapping income at the source. A tax by Congress on lands and personal property as such would, no one disputes, be a direct tax and subject to the rule of apportionment, and a tax on the income of property is in substance and practical and legal effect the equivalent of a tax on the property itself.
As Chief Justice Fuller said in the Income Tax cases: "The acceptance of the rule of apportionment was one of the compromises which made the adoption of the Constitution possible, and secured the creation of that dual form of government, so elastic and so strong, which has thus far survived in unabated vigor. If, by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property."[61]
Nor is the rule of apportionment in itself unfair, even under the conditions existing to-day. If a direct income tax were now levied and duly apportioned among the states according to population as required by the Constitution, the smaller states would pay comparatively little and the more populous and richer states would have to bear what would seem to be their full share of national taxation. New York would then have to pay approximately ten per cent. of such a tax, Pennsylvania eight per cent., Illinois six per cent., Ohio five per cent., whilst Nevada would pay only one-twentieth of one per cent. and Delaware one-quarter of one per cent., although these two states have a representation in the Senate equal to that of New York and Pennsylvania. Indeed, ten states would have to pay more than one-half of any direct tax, leaving the balance to be divided among the remaining thirty-six states according to their population. On the other hand, if a graduated income tax such as is now proposed were levied without regard to apportionment, and all incomes of $4,000 and under were exempted, the effect would be to cast more than ninety per cent. of the entire tax upon the inhabitants of less than one-third of the states.
Nearly twelve years have passed since the decision of the Income Tax cases, and there has been ample time to amend the Constitution if the people had so desired. But, instead of submitting an amendment such as was introduced in the House of Representatives last week, it is suggested by some that an attempt should be made to disregard or circumvent the Constitution as interpreted by the Supreme Court and to speculate on the change of its personnel and the chance of different views on the part of new incumbents. Surely, the simpler and wiser course would be to ascertain the wishes of the people in the manner provided by the Constitution. Assuming, as is so frequently asserted, that the people generally want a federal income tax, ratification of an amendment can be readily secured. The Congress, by a vote of two-thirds of both houses, can at once propose the necessary amendment, which will become effective when ratified by three-fourths of the states. The ratification can probably be secured in less than six months if there really exists any general sentiment in favor of such an amendment, for more than three-fourths of the state legislatures meet this winter. If deemed necessary, conventions could be called to meet within a few months. In any event, the delay ought not to exceed fourteen months.
No student of our institutions can doubt that amendments to the Constitution will soon be thought necessary, and that such amendments will be submitted to the people. Our political system has not ceased to grow. Conditions are constantly changing, and powers which were adequate for the government of a federation of agricultural states may become insufficient for the necessities of the national government of a highly commercial and manufacturing people, with world-wide interests. Mr. Root's eloquent speech last night before the Pennsylvania Society has shown us how inevitably and irresistibly we are tending toward centralization. But it is mischievous and dangerous for the people to be taught that there is great or insurmountable difficulty in securing amendments to the Constitution in order to supply its defects or to meet changed conditions and that they must therefore accomplish their wishes by indirect means or by perverting delegated powers. The future contentment of the American people requires that they shall feel that they may readily, and are at liberty to, amend their organic law according to their mature judgment whenever they deem it necessary to do so. All that can be asked is that they shall act deliberately in the manner provided by the Constitution and under circumstances calculated to afford time and opportunity for error to be exposed, for theorizing and clamor and prejudice to exhaust themselves and "for the sober second thought of every part of the country to be asserted." If, then, it be determined to give to the national government the power to levy income taxes without apportionment, or to control successions to the estates of decedents, or any other power, the will of the sovereign people will have to be obeyed. But let us hope that when amendments are adopted they will be conservative and wise, that the reserved powers of the states will not be heedlessly curtailed to the embarrassment of the states, and that it will be appreciated that local self-government is still essential to the perpetuation of our republican and federal institutions.
FOOTNOTES:
[59] Address delivered before the National Civic Federation at its annual meeting held in New York, December 13, 1906.
[60] Constitutional Limitations, 7th ed., p. 705.
[61] 157 United States Reports, p. 583.