The United States Corporation Tax Act of igog
613
If the tax is to be regarded as invalid invested personal property be stricken so far as it affects the income from out, certainly a large part of the anti real and personal property, the further cipated revenue would be eh'minated, question is presented whether, in conse and the tax would cease to be upon the quence, the whole of the section in entire net income as contemplated by reference to the taxation of corporate Congress. A tax upon net income re incomes is not void. A similar question ceived from all sources except from in was raised in the Income Tax cases vested capital, is wholly different in and answered in the affirmative, upon operation and effect from a tax upon the ground that the income from real entire net income from all sources. If and personal property formed a vital any part of the tax is invalid, it would part of the scheme of taxation embodied therefore seem that the whole must be in Sections 27 to 37 of the Act, and that regarded as void.41 that scheme must be considered as a 41It has been suggested that the Supreme Court whole.40 The same reasoning is appli might decline to follow the Income Tax cases if the cable to Section 38 of the Act of 1909. questions there decided were again presented for E. B. Whitney, 20 Harv. L. R. 280, 288. The scheme of taxation is as much a decision. The possibility of such a course may be admitted. The court has, however, heretofore always been whole as that contained in the earlier slow to overrule itself upon questions of such im Act.' It contemplates a tax measured portance where they have only been decided after the most careful consideration. "It is almost as by the entire net income of corporations important that the law should be settled perma as that it should be settled correctly. Its received during the year from all sources, nently rules should be fixed deliberately and adhered to firmly, unless clearly erroneous. Vacillation is a and the income from real estate and serious evil." Swayne, J., in Oilman v. Phila invested personal property is as vital a delphia, 3 Wall. (U. S.) 713, 724. The Income Tax cases were argued twice at great length and part of this scheme as in the case of were fully considered by the court. While the decision was widely criticized at the time it was the Act of 1894. Section 38 of the pres rendered as overruling the earlier cases, all those ent Act permits the deduction, in deter cases were examined and distinguished on grounds or less satisfactory. The later decisions rec mining the amount of the net income more ognize these distinctions as valid and uphold the authority of the Income Tax cases themselves. subject to taxation, of dividends re Nichol v. Ames, 173 U. S. 509, 519, 520; Knowlton ceived by the corporation from shares v. Moore, 178 0. S. 41, 52, 53, 79-83; Fairbank v. United States, 181 U. S. 283, 296; Potion v. Brady, of stock owned by it in other corpora 184 U. S. 608, 618; Thomas v. United States, 192 U. S. 363, 370; Spreckels Sugar Refining Co. v. tions subject to the tax. If, however, McClain, 192 U. S. 397, 413. Even if the decision was not in harmony with the previous cases, it had the income from all real estate owned the effect of overruling them, Asher v. Texas, 128 by corporations within the United States, U. S. 129, 131, 132. Four of the Justices who took in the decision of the Income Tax cases still and also the income from all other part remain on the bench—Chief Justice Fuller and Mr. Justice Brewer, who voted with the majority of the by that decision. See Seligman, Essays in Taxa Court, and Justices Harlan and White, who dis tion, p. 218: "An individual can indeed obtain sented. In the later cases of Spreckels Sugar Re a professional income without any capital; but fining Company v. McClain, and Knowlton v. in the case of a business with capital invested, Moore (supra), the opinions of the court were deliv it is impossible to say how much of the profits are ered respectively by Mr. Justice Harlan and Mr. due to the capital, how much to the personal man Justice White. Each of these Justices in these agement. Without the capital there would be no opinions recognizes the principles established in profits at all, because there would be no business. the Income Tax cases as settled, 192 U. S., p. 413; Therefore in taxing profits we are really taxing 178 U. S.,pp. 52, 53, and no dissent therefrom has property, or rather the proceeds of property." been expressed by any of the members of the court «158 U. S., pp. 636, 637. since the time the decision was rendered.
