The Commoner.
MARCH 11, 1910
:
EDUCATIONAL SERIES
Senator Root Answers Governor Hughes on the Income Tax
Blihu Root's reasons for advocating the pro
posed income tax amendment and his views on-
the subject, as contrasted with those of Gov
ernor Hughes, who has publicly opposed the
amendment, were presented to the New York
legislature February 28 in the form of a letter
addressed to State Senator Davenpprt. Senator
Davenport presented -the -letter to the senate,
and it also was read in the assembly. The let
ter is as follower
1 "My Dear Senator: '-Since our conversation
last month-1 have given-much consideration 'to
the scppe and effect of the proposed, income tax
amendment to the constitution- of the United.
States-. .; -.-. .,
' "Much as I respect the opinion of tho gov
ernor of the state, I can riot agree with the view
expressed in his special message of January 5,
and, as I advocated in the senate the resolution
to submit the proposed amendment, it seems ap
propriate that I should state my view of its
effect. The proposed amendment is in these
words:
" 'Article 16. The congress shall have power
to lay and collect taxes on incomes, from what
ever source derived, without apportionment
among the several states and without regard to
any census of enumeration.'
"The objection made to the amendment is
that this will confer upon the national govern
ment the power to tax .incomes derived from
bonds issued by the states or under the authority
of the states, and will place the borrowing ca
pacity of the state and its governmental agen
cies at the mercy of the federal taxing power.
"I do not find in the amendment any such
meaning or effect. I do not consider that the
amendment in any degree whatever will enlarge
the taxing power of the national government
or will have any effect except to relieve the ex
ercises of that taxing power from the require
ment that the tax shall be apportioned among
the several states.
"The effect of the amendment will be, In my
view, tho same as if it said: 'The United States
may lay a' tax on incomes without apportioning
the tax, and this shall be applicable, whatever
the source of the income subjected to the tax,'
leaving the question, 'What incomes are sub
ject to national taxation?' to be determined by
the same principles and rules which are now ap
plicable to the determination of that question.
"If we were to construe the proposed amend
ment only by a critical examination of its words,
the view upon which the objection is based
would be reached by practically cutting the pro
vision in two and reading it as if it read: 'The
congress shall have power to lay and collect
taxes on Incomes from whatever source de
rived,' without the concluding words. But we
are not at liberty to do this.
"The amendment consists of a single sen
tence and the whole of it must be read together.
It expresses but a single idea, and that is that
the tax to which it relates must be laid and
collected 'without apportionment among the sev
eral states and without regard to any census or
enumeration,' while the words 'from whatever
source derived' are obviously introduced to make
the exemption from the rule of apportionment
comprehensive and applicable to all taxes on
Incomes.
"We are not left, however, to a mere critical
examination of words. This provision, as Jus
tice Bradley said of the constitution in the legal
tender cases, is 'to be interpreted in the light
of history and of the circumstances of the period
in which it was framed.' Justice Story said of
another clause of the constitution, in Briscoe
against the Bank of Kentucky (11 Peters
3329):
" 'And I mean to insist that the history of
the colonies before and during the revolution
and down to the very time of the adoption of tho
constitution, constitutes the highest and most
authentic evidence to which we can resort, to
Interpret this clause of the instrument; and to
disregard it would be to blind ourselves to the
practical mischiefs which it was meant to sup
press, and to forget all the great purposes to
which it was to be applied.'
"This view necessarily must be applied to
the proposed amendment if it be adopted. It
will be construed in the light of the judicial and
political history which led to the proposal and
which appears upon tho public records of our
government.
"What is that history? Tho constitution of
1787 conferred upon the national government
the power of taxation without any limit what
ever except that taxes on exports were prohibit
ed. The method of .exercising tho, power, how
ever, was subjected to two limitations one
that imports, duties and excises should be uni
form, and the other that direct taxes should bo
apportioned among-the states.. .The apportion
ment provisions wero as follows:
.."'Article,!. Section, 2. Representatives and
direct taxes sha,llt be apportioned . among tho
several stafes. wntch may.be included, within this
union, according .to their respective numbers,
etc. (Amended, but not in this respect, by tho
Fourteenth amendment.)
. " 'Article 1. Section 9. No capitation or other
direct tax shall be laid unless in proportion to
the census or enumeration before directed to
bo taken.'
"For more than a hundred years after tho
adoption of the constitution various tax laws
of congress were from time to time brought be
fore the courts upon objections that they im
posed direct taxes in violation of tho rule of
apportionment. The decisions of the courts
uniformly sustained these laws, from the Hylton
case in 17 9 G, which sustained an unapportion
ated tax on carriages (3 Dallas 171), to tho
Springer case in 1880, which sustained an un
apportioned tax on incomes (102 U. S. 586).
"In the meantime numerous laws wero passed
and enforced imposing taxes on incomes without
apportionment, and a great part of tho means
for carrying on the civil war was derived from
such taxes.
"In the year 1895, however, an income tax
law included in the Wilson tariff act of 1894
was brought before the supreme court in the
case of Pollok against the Farmers' Loan and
Trust company, and in that case the court decid
ed against tho law. The case was heard twice.
On the first hearing a majority of the court held
that a tax on income derived from real estate
must be apportioned as a direct tax, because a
tax on real estate itself would be direct, and the
judges divided equally as to whether a tax on
income derived from personal property must be
apportioned. (157 U. S. 429.)
"Upon the second hearing of the case the
court, by a majority of five to four, held that a
tax upon income derived from personal property
must be considered a direct tax and must be
apportioned. (158 U. S. 601.) All tho judges
agreed, however, that taxes on incomes derived
from business or occupations need not be ap
portioned. "The effect of these decisions was thus de
scribed in one of the minority opinions:
" 'But the serious aspect of the present deci
sion is" that by a new interpretation of the con
stitution it so ties the hands of the legislative
branch of the government that without an
amendment of that instrument, or unless this
court at some future time should return to the
old theory of the constitution, congress can not
subject to taxation however great the needs or
pressing the necessities of the government
either the invested personal property of the
country, bonds, stocks, and investments of all
kinds, or the income arising from the renting
of real estate, or from the yield of personal
property, except by the grossly unequal and un
just rule of apportionment among the states.
Thus undue and disproportioned burdens are
placed upon the many, while the few are safely
intrenched behind the rule of apportionment
among the states on the basis of responsibility
for the support of the government ordained for
the protection of the rights of all.
"It was so evidently impossible to collect an
income tax by apportionment among the states
according to population that the general judg
ment of the country confirmed the opinion that
the decision in the Pollok case had practically
taken away from congress a power of vital im
portance to the general government a power
the exercise of which had, at least in qne time
of peril, proved essential to the nation's life.
"The attention of the country was sharply
called to the need of more government revenue
for the first time after the Pollok case by the
decrease of customs and internal revenue receipts
and the rapidly mounting deficit which followed
tho financial panic of 1907, and in the extra
ordinary session of congress which began March
15, 1909, when tho revised tariff canio into tho
senate, an amendment to tho bill was Introduced
reproducing in substance the old income tax
provisions of 1894 which tho supremo court
had held to be invalid both as to income derived
from real estate and as to Income derived from
personal property.
"The avowed and necessary effect of Including
such provisions In tho new tariff law would bo to
present again to tho supremo court tho same
questions which had been decided in tho Pollok
case, and to challenge a reversal of their deci
sion. Thereupon tho resolution for the submis
sion of this amendment was introduced In tho
senate and was passed by congress.
"Tho proposal followed the suggestions of tho
supremo court in the Pollok case. The evil to
be remedied wns avowedly and manifestly tho
incapacity of the national government, resulting
from tho decision that incomo practically could
not do taxed when derived either from real
estate or from personal property, although it
could bo taxed when derived from business or
occupation. The terms of tho amendment are
apt to cure that evil and to take away from tho
different classes of Incomo considered by tho
court a practical immunity from taxation based
upon tho source from which they were derived.
"There was no question in congress or In tho
courts, or in the country about tho taxation of
state securities. No one claimed that the in
ability of the general government to tax them
was an evil. The Inability to tax them did not
arise from tho terms of tho constitution, but
from the fact that being necessary instruments
of carrying on other and sovereign governments
they were not the proper subject of national
taxation, and that, therefore, no provisions of
tho constitution, however wide the scope of their
language, could bo held to apply to such securi
ties or to the Incomo from them. Judge Cooley,
In his work on constitutional law, says:
" 'The power to tax, whether by the' United
States or by the states, is to be construed in tho
light of and limited by tho fact that the states
and the union are inseparable and that tho con
stitution contemplates the perpetual maintenance
of each with all Its constitutional powers, unem
barrassed and unimpaired by any action of tho
other. The taxing power of tho federal govern
ment does not, therefore, extend to the means
or agencies through or by the employment of
which the states perform their essential func
tions, etc'
"This rule or construction has been main
tained for generations. It is undisputed; it was
referred to with approval by the justices who
wrote and delivered the opinions In the Pollok
case both for and against the judgment. It has
been declared again and again by the supremo
court to be not open to question. It is a rulo
of construction just as controlling in defining
the scope of tho proposed amendment as It is
in defining the scope of the existing provisions.
"Under it, from the earliest times of our gov
ernment, the apparently unlimited taxing power
conferred by tho terms of the constitution has
been held not to apply to the instrumentalities
of the state. Under it acts of congress which,
by their expressed terms appeared to Include in
strumentalities of state government, have uni
formly been held not to include them. This
uniform, long established and Indisputable rulo
applied to the construction of our constitution
a rule which has been declared to be essential
to a continuance of our dual system of govern
ment forbids that the words of that instru
ment conferring tho power of taxation shall bo
deemed to apply to anything but the proper
subjects of national taxation. Under It wo aro
forbidden to apply the words 'from whatever
source derived' in the proposed amendment to
any of the instrumentalities of state government.
"This amendment will be no new grant of
power. The congress already has power to im
pose taxes on incomes from whatever source
derived, subject to the rule of construction which
excluded state securities from the operation of
tho power; but the taxes so imposed must be
apportioned among the states. Under the pro
posed amendment there will be the same and no
greater power to tax incomes from whatever
source derived, subject to the same rule of con
struction, but relieved from the requirement
that the tax shall be apportioned.
"It appears, therefore, that no danger to the
powers or Instrumentalities of the state is to be
apprehended from the adoption of the amend
ments. "It would be cause for regret If the amend
ment were rejected by the legislature of New
York. It is said that a very large part of any
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