Law Can Not Stand

Washington, D. C, May 21.- The supreme court of the l'r.ited Statte clared the income tax law lo be uneonBtitutlonal. The vote on the income tax resul ted: Five against the constitutionality of tho law to four for the law. Those againat the law were Chief Justice Fuller and Justiees Field, Gray, Brewer and Shiras; for the law, Justiees Harían, White, Brown and Jackson. Chief Justice Fuller read the opinión and the conclusions of the -court are as follows: "1. Wc adhere to the opinión already announced that taxes on real estáte ing indisputably direct taxes, taxes on the rents or income of real estáte are equally direct tax.'s. "2. We are of the opinión that taxes on personal property or on the income of personal property are likewise direc taxes. "3. The tax imposed by sections 27 to 37 inclusive, of the act of 1894, so far as it falls on the income of real estáte and on personal property, being a direct tax within the meaning of the constitution, is therefore unconstitutionil and void, because not apportlonefl accordine to representation, all those tions constituting' one entire scheme of taxatlon are necessarily invalid. "The decrees hereinbefore entered in this court will be vacated. The deci below will be reversed and the cases remanded with lnstructions to grant the relief prayed" Sections 27 to 37 of the tariff act of 1894 referred to in the conclusions of the court in the oplnlona are all the Bections of the act relating to the income tax, so that the entire income tax law is declared void specifically. There was the usual throng of people about the United States supreme court room in anticipation or a nnai decisión of the income tax cases, the chamber being crowded for quite a time before the court convened at noon. While there were other cases under consideration in the conférence, the income tax ca received the principal share of the attention of the members of the court. The presence of Justice Jackson caused a great deal of speculation and was the basis for much gossip as to the possibility of some sort of surprise for the public. The chief justice immedlately began the delivery of the main opinión in the case. f'hic-f Justice Fuller delivered the opinión, wliich is in part as follows: "Whenever this court is required to pass upon the valldity of an act of gress as tested by thp fundamental law enacted by the people the duty imposed demands in its discharge the utmost deliberation and care and invokes the deepest sense oí responsibility. And this is especlally so when the question involves the exercise of a great governmental power and brings into consideration, as vitally affected by the decisión, that complex system of government, so sagaciously framed to secure and perpetúate 'an Indestructible unión, composed of indestructible States.' "As heretofore stated, the constitution divided federal taxation into two great classes, the class of direct taxes and the class of duties, imposts and excises, and prescribed two rules which qualifled the grant of power as to each class. The power to lay direct taxes, apportioned to thelr representation In the popular branch of congress, a representation based on population as certained by the census, was plenary and absolute, birt to lay direct taxes Without apportionment was forbidden. The power to lay duties, lrnposts and excises was subject to the qualiflcation that the imposition must be uniform throughout the United Statrs. "Our previous decisión was oonlined to the consideration of the validity of the tax on the income from real estáte and on the Income fnini municipal bonds. The question thus limited was whether such taxation was direct or not, In the meaning of the constltutlon, and the court went no farther as to the tax on the incomes from real estáte than to hold that it feil witbln the same class as the source vvhenee the income was derived - that is, that a tax upon the realty and a tax upon the receipts therefrom were allke direct; whlle as to the income from municipal bonds, that could not be taxed, because of want of power to tax the source and no referenee was made to the natuiv r the tax as being direct or indirect. "We are now permitted to broaden the field of inquiry and determine to whieh of the two great classes, a tax upon a person's entire income, whether derived from rents or products or otherwise of real estáte, or from bonds, stocks or other forms of personal property. belongs, and we are unable to conclude that the enforced subtraction f rom the yleld of all the owners1 ival or personal property, in the manner prescribed, is so different f,rom a tax upon the property itseli, that it is not a direct hut an indirect tax in the meaning of the constitution. "We know of no reason for holding otherwiwc than that the words 'direct taxes' on the one hand, and 'duties, imposts and excises' on the other were used in the constitution in their natural and obvioua senses, nor in arriviim at what those terms embrace do we perceive any ground for enlarging them beyond or narrowing them within their natural and obvious import, and the time the constitution was framed and ratifled. Passing from the text, we regard the conclusión reached as Inevitable, when the circumstances whlch surrounded the convention and controlled its action and the views of I who framed and those who adoptefl the constitution are considered." The chief justice noxt dlBCUSSed the reasons for the constitutional provlsions regarding direct taxation. The States had plenary powers of taxation, he said. but erave up the great sources of revenuc derived from commerce and retained the power of levying taxes and duties covering anything other than excises, but in respect to them the range of taxation was narrowed by the power granted to the federal government over interstate commerce. While they granted the power of apportioning direct taxation they secured to the states the opportunity to pay the amount apportioned and to recoup from their own citizens in the most feasible way. Tht founders anticipated that the expenses of the federal government would chiefly be met by indirect taxation. They knew that the power to tax involved the power to destroy. The opinión continued. "It is said that a tax on the whole ineome of property is not a direct tax, but a duty. We do not think so. Direct taxation was not restricted in one breath and the restrlction blown to the winds in another." The Federalist was then quoted from to show that Harnilton considered all Internal taxes, except duties and excises on articles of consumptlon, to be direct taxes. The opinión next took up the argument that a tax on property is not a direct tax within the meaning of the constitulion, and on this point it says"The conslitution prohibits any direct tax unlops in proportion in numbers as ascertained by the census; and in the Hght of the circumstances to which we have ïeferred, is it not an evasiari of that prohibition to hold that a genera unapportioned tax imposed upon al property-owners as a body for or in re speet of their property is not direct ii the meaning of the constitution, becaus confincil to the incotne therefrom? No can we conceive any ground why th same reasontng does not apply to cap] tal in personality for the purpose of in come or ordinarily yieldlng income, anc to the ineome therefrom. All the rea estáte of the country and all its investec personal property are open to the di reet pperation of the taxing power if a apportionmer.t be made according to the constitution. The constitution does not say that no direct tax shall be laid by apportionment on any property than land. On the contrary, it forbids all unapportioned direct taxes; and wc know of no warrant for éxcepting personal property from the exercise of the power, or any reason why an apportioned direct tax cannot be laid and assessed, as Mr. Gallatin said in hls report when secretary of the treasury in 1S12. 'upon the same objeets of taxation on which the direct taxes levied under the authority of the state are laid and assessed.' The stress of argument is thrown, however, on the assertion that an income tax is not a property tax at all; that it is not a real estáte tax nor a erop tax nor a bond tax; that it is an assessment upon the taxpayer on account of hls money-spending power, as shown by his revenue for the year precedtng the assessment; that rents reeeived, crops harvested, interest colleeted, although once not taxable, han' e become transnmted in their near form into taxable matter; in other words, that income is taxable irrespective of the source from whence it is derived."