State of New York v. United States

• Decision Date: 14 January 1946
• Docket Number: No. 5,5
• Citation: 90 L.Ed. 326,66 S.Ct. 310,326 U.S. 572
• Parties: STATE OF NEW YORK et al. v. UNITED STATES. Re
• Court: U.S. Supreme Court

326 U.S. 572

66 S.Ct. 310

90 L.Ed. 326

STATE OF NEW YORK et al.

v UNITED STATES.

No. 5.

Reargued Dec. 4, 1945.

Decided Jan. 14, 1946.

Mr. Orrin G. Judd, of New York City, for petitioners.

Mr. Greek L. Rice, of Jackson, Miss., for State of Mississippi and other States as amici curiae, by special leave of Court.

Mr. Paul A. Freund, of Washington, D.C., for respondent.

Mr. Justice FRANKFURTER announced the judgment of the Court and delivered an opinion in which Mr. Justice RUTLEDGE joined.

Section 615(a)(5) of the 1932 Revenue Act, 47 Stat. 169, 264, 26 U.S.C.A. Int.Rev.Acts, page 614, imposed a tax on mineral waters.¹ The United States brought this suit to recover taxes assessed against the State of New York on the sale of mineral waters taken from Saratoga Springs, New York.² The State claims immunity from this tax on the ground that 'in the bottling and sale of the said waters the defendant State of New York was engaged in the exercise of a usual, traditional and essential governmental function.' The claim was rejected by the District Court and judgment went for the United States. 48 F.Supp. 15. The judgment was affirmed by the Circuit Court of Appeals for the Second Circuit. 140 F.2d 608. The strong urging of New York for further clarification of the amenability of States to the taxing power of the United States led us to grant certiorari. 322 U.S. 724, 64 S.Ct. 1286, 88 L.Ed. 1561. After the case was argued at the 1944 Term, reargument was ordered.

On the basis of authority the case is quickly disposed of. When States sought to control the liquor traffic by going into the liquor business, they were denied immunity from federal taxes upon the liquor business. State of South Caro- lina v. United States, 199 U.S. 437, 26 S.Ct. 110, 50 L.Ed. 261, 4 Ann.Cas. 737; State of Ohio v. Helvering, 292 U.S. 360, 54 S.Ct. 725, 78 L.Ed. 1307. And in rejecting a claim of immunity from federal taxation when Massachusetts took over the street railways of Boston, this Court a decade ago said: 'We see no reason f r putting the operation of a street railway (by a State) in a different category from the sale of liquors.' Helvering v. Powers, 293 U.S. 214, 227, 55 S.Ct. 171, 174, 79 L.Ed. 291. We certainly see no reason for putting soft drinks in a different constitutional category from hard drinks. See also Allen v. Regents, 304 U.S. 439, 58 S.Ct. 980, 82 L.Ed. 1448.

One of the greatest sources of strength of our law is that it adjudicates concrete cases and does not pronounce principles in the abstract. But there comes a time when even the process of empiric adjudication calls for a more rational disposition than that the immediate case is not different from preceding cases. The argument pressed by New York and the forty-five other States who, as amici curiae, have joined her deserves an answer.

Enactments levying taxes made in pursuance of the Constitution are, as other laws are, 'the supreme Law of the Land.' Art. VI, Constitution of the United States; Flint v. Stone Tracy Co., 220 U.S. 107, 108, 153, 31 S.Ct. 342, 350, 55 L.Ed. 389, Ann.Cas.1912B, 1312. The first of the powers conferred upon Congress is the power 'To lay and collect Taxes, Duties, Imposts and Excises * * *.' Art. I, § 8. By its terms the Constitution has placed only one limitation upon this power, other than limitations upon methods of laying taxes not here relevant: Congress can lay no tax 'on Articles exported from any State.' Art. I, § 9. Barring only exports, the power of Congress to tax 'reaches every subject.' License Tax Cases, 5 Wall. 462, 471, 18 L.Ed. 497. But the fact that ours is a federal constitutional system, as expressly recognized in the Tenth Amendment, carries with it implications regarding the taxing power as in other aspects of government. See, e.g., Hopkins Federal Savings Ass'n v. Cleary, 296 U.S. 315, 56 S.Ct. 235, 80 L.Ed. 251, 100 A.L.R. 1403. Thus, for Congress to tax State activities while leaving untaxed the same activities pursued by private persons would do violence to the presuppositions derived from the fact that we are a Nation composed of States.

But the fear that one government may cripple or obstruct the operations of the other early led to the assumption that there was a reciprocal immunity of the instrumentalities of each from taxation by the other. It was assumed that there was an equivalence in the implications of taxation by a State of the governmental activities of the National Government and the taxation by the National Government of State instrumentalities. This assumed equivalence was nourished by the phrase of Chief Justice Marshall that 'the power to tax involves the power to destroy.' McCulloch v. Maryland, 4 Wheat. 316, 431, 4 L.Ed. 579. To be sure, it was uttered in connection with a tax of Maryland which plainly discriminated against the use by the United States of the Bank of the United States as one of its instruments. What he said may not have been irrelevant in its setting. But Chief Justice Marshall spoke at a time when social complexities did not so clearly reveal as now the practical limitations of a rhetorical absolute. See Holmes, J., in Long v. Rockwood, 277 U.S. 142, 148, 48 S.Ct. 463, 464, 72 L.Ed. 824, and in Panhandle Oil Co. v. State of Mississippi, 277 U.S. 218, 223, 48 S.Ct. 451, 453, 72 L.Ed. 857, 56 A.L.R. 583. The phrase was seized upon as the basis of a broad doctrine of intergovernmental immunity, while at the same time an expansive scope was given to what were deemed to be 'instrumentalities of the government' for purposes of tax immunity. As a result, immunity was until recently accorded to all officers of one government from taxation by the other, and it was further assumed that the economic burden of a tax on any interest derived from a government imposes a burden on that government so as to involve an interference by the taxing government with the functioning of the other government. See Metcalf & Eddy v. Mitchell, 269 U.S. 514, 46 S.Ct. 172, 70 L.Ed. 384; Helvering v. Mountain Producers Corporation, 303 U.S. 376, 58 S.Ct. 623, 82 L.Ed. 907; Graves v. People of State of New York ex rel. O'Keefe, 306 U.S. 466, 480, 481, 59 S.Ct. 595, 598, 599, 83 L.Ed. 927, 120 A.L.R. 1466.

To press a juristic principle designed for the practical affairs of government to abstract extremes is neither sound logic nor good sense. And this Court is under no duty to make law less than sound logic and good sense. When this Court for the first time relieved States officers from a non-discriminatory Congressional tax, not because of anything said in the Constitution but because of the supposed implications of our federal system, Mr. Justice Bradley pointed out the invalidity of the notion of reciprocal intergovernmental immunity. The considerations bearing upon taxation by the States of activities or agencies of the federal government are not correlative with the considerations bearing upon federal taxation of State agencies or activities. The federal government is the government of all the States, and all the States share in the legislative process by which a tax of general applicability is laid. 'The taxation by the State governments of the instruments employed by the general government in the exercise of its powers,' said Mr. Justice Bradley, 'is a very different thing. Such taxation involves an interference with the powers of a government in which other States and their citizens are equally interested with the State which imposes the taxation.'³ Since then we have moved away from the theoretical assumption that the National Government is burdened if its functionaries, like other citizens, pay for the upkeep of their State governments, and we have denied the implied constitutional immunity of federal officials from State taxes. Graves v. People of State of New York ex rel. O'Keefe, supra. See Gillespie v. State of Oklahoma, 257 U.S. 501, 42 S.Ct. 171, 66 L.Ed. 338, criticized in Burnet v. Coronado Oil & Gas Co., 285 U.S. 393, 401, 52 S.Ct. 443, 445, 76 L.Ed. 815, and explicitly overruled in Helvering v. Mountain Producers Corporation, 303 U.S. 376, 58 S.Ct. 623, 82 L.Ed. 907; Long v. Lockwood, 277 U.S. 142, 48 S.Ct. 463, 72 L.Ed. 824, overruled in Fox Film Corporation v. Doyal, 286 U.S. 123, 52 S.Ct. 546, 76 L.Ed. 1010; Collector v. Day, 11 Wall. 113, 20 L.Ed. 122, and People of State of New York ex rel. Rogers v. Graves, 299 U.S. 401, 57 S.Ct. 269, 81 L.Ed. 306, overruled in Graves v. People of State of New York ex rel. O'Keefe, supra.

In the meantime, cases came here, as we have already noted, in which States claimed immunity from a federal tax imposed generally on enterprises in which the State itself was also engaged. This problem did not arise before the present century, partly because State trading did not actively emerge until relatively recently, and partly because of the narrow scope of federal taxation. In State of South Carolina v. United States, 199 U.S. 437, 26 S.Ct. 110, 50 L.Ed. 261, 4 Ann.Cas. 737, immunity from a federal tax on a dispensary system, whereby South Carolina monopolized the sale of intoxicating liquors, was denied by drawing a line between taxation of the historically recognized governmental functions of a State, and business engaged in by a State of a kind which theretofore had been pursued by private enterprise. The power of the federal government thus to tax a liquor business conducted by the State was derived from an appeal to the Constitution 'in the light of conditions surrounding at the time of its adoption.' State of South Carolina v. United States, supra, 199 U.S. at page 457, 26 S.Ct. at page 115, 50 L.Ed. 261, 4 Ann.Cas. 737. That there is a Constitutional line between the State as government and the State as trader, was still more recently made the basis of a decision sustaining a liquor tax against Ohio. 'If a state chooses to go into the business of buying and selling commodities, its right to do so may be conceded so far as the Federal...