as one entire thing, not as made up of several portions or items. And hence, although the statute might be called retrospective in its operation upon a part of the first year's income, it is not retrospective in such a sense as to render it unconstitutional." To similar effect is Endlich on Interpretation of Statutes, § 280, p. 377, thus: "But a statute is not retrospective in the sense under consideration because a part of the requisites for its action is drawn from a time antecedent to its passing." But to my mind the real answer to all contentions is that the income of the year does not and cannot come into, or have an existence, until the end of the year, and the law, being in force prior to that time, is in no sense retrospective in action. For these reasons, hurriedly expressed, I dissent. Petition for rehearing denied June 19, 1920. ANNOTATION. Retroactive effect of income tax. There seems to be no question that, at least, in the absence of an express constitutional provision inhibiting the enactment of retrospective laws, income taxes having a retroactive effect may be lawfully enacted. In the following cases from jurisdictions in which, so far as the cases under consideration show, retrospective laws were not expressly prohibited, income tax laws were upheld notwithstanding the fact that they operated retroactively: Stockdale v. Atlantic Ins. Co. (1874) 20 Wall (U. S.) 323, 22 L. ed. 348; Brushaber v. Union P. R. Co. (1916) 240 U. S. 1, 60 L. ed. 493, L.R.A. 1917D, 414, 36 Sup. Ct. Rep. 236, Ann. Cas. 1917B, 713; Tyee Realty Co. v. Anderson (1916) 240 U. S. 115, 60 L. ed. 554, 36 Sup. Ct. Rep. 281; Southern P. Co. v. Lowe (1918) 247 U. S. 330, 62 L. ed. 1142, 38 Sup. Ct. Rep. 540; Lynch v. Hornby (1918) 247 U. S. 339, 62 L. ed. 1149, 38 Sup. Ct. Rep. 543; Edwards v. Keith (1915) 224 Fed. 585, affirmed in (1916) L.R.A.1918A, 498, 145 C. C. A. 298, 231 Fed. 110; Woods v. Lewellyn (1918) 164 C. C. A. 218, 252 Fed. 106; Schuylkill Nav. Co. v. Elliott (1875) 1 N. Y. Week. Dig. 282, Fed. Cas. No. 12,497; Moore v. Miller (1895) 5 App. D. C. 413; Drexel v. Com. (1863) 46 Pa. 31; State ex rel. Bolens v. Frear (1912) 148 Wis. 456, L.R.A.1915B, 569, 134 N. W. 673, 135 N. W. 164, Ann. Cas. 1913A, 1147, error dismissed for want of jurisdiction in And it has been expressly held that an income tax may be predicated upon the income of a past year, or upon the income of a current year part of which had elapsed when the statute was passed. Stockdale v. Atlantic Ins. Co. (U. S.) supra; Brushaber v. Union P. R. Co. (1916) 240 U. S. 1, 60 L. ed. 493, L.R.A.1917D, 414, 36 Sup. Ct. Rep. 236, Ann. Cas. 1917B, 713; Tyee Realty Co. v. Anderson (1916) 240 U. S. 115, 60 L. ed. 554, 36 Sup. Ct. Rep. 281; Lynch v. Hornby (1918) 247 U. S. 339, 62 L. ed. 1149, 38 Sup. Ct. Rep. 543; Edwards v. Keith (1915) 224 Fed. 585, affirmed in (1916) L.R.A.1918A, 498, 145 C. C. A. 298, 231 Fed. 110; Woods v. Lewellyn (1918) 164 C. C. A. 218, 252 Fed. 106; Schuylkill Nav. Co. v. Elliott (1875) 1 N. Y. Week. Dig. 282, Fed. Cas. No. 12,497; Moore v. Miller (1895) 5 App. D. C. 413; State ex rel. Bolens v. Frear (Wis.) supra. But under the Federal Constitution and the 16th Amendment, it seems that the date of the retroactivity should not extend beyond the time when the Amendment became effective. Brushaber v. Union P. R. Co. (U. S.) supra (holding that the retroactive effect of the Federal Income Tax Act of 1913 was not unconstitutional, since the date of retroactivity did not extend beyond the time when the 16th Amendment to the Federal Constitution became effective); Tyee Realty Co. v. Anderson (1916) 240 U. S. 115, 60 L. ed. 554, 36 Sup. Ct. Rep. 281 (holding same as preceding case); Lynch v. Hornby (1918) 247 U. S. 339, 62 L. ed. 1149, 38 Sup. Ct. Rep. 543 (citing the Brushaber Case with approval); Woods v. Lewellyn (1918) 164 C. C. A. 218, 252 Fed. 106 (following the Brushaber Case). Whatever the law may be where there is no express constitutional prohibition against the passage of retrospective laws, it seems that, under a constitutional provision that no law retrospective in its operation shall be passed, an income tax law cannot include in its operation income received prior to its passage. This rule was laid down in the reported case (SMITH v. DIRCKX, ante, 510), which distinguished the cases which arrive at a contrary conclusion on the ground that they all arose in jurisdictions where laws having a retroactive effect were not prohibited by express constitutional provision. The case of State v. Galveston, H. & S. A. R. Co. (1906) 100 Tex. 153, 97 S. W. 71, which is set out and quoted with approval in the reported case (SMITH V. DIRCKX), was reversed on another point in (1908) 210 U. S. 217, 52 L. ed. 1031, 28 Sup. Ct. Rep. 638. In the reported case (SMITH V. DIRCKX) it was also held that the unconstitutionality of the provisions of a statute increasing the tax rate upon income earned prior to the Amendment did not prevent the collection of the tax provided for by the original law, on income earned during that part of the year which had passed at the time of the enactment of the unconstitutional amendment. In Murchison v. McNeill (1864) 60 N. C. (1 Winst. L.) 220, it was held that a statute effective February 11, 1863, which imposed a net profits tax, payable annually, upon certain corporations carrying on their business from and after January 1, 1863, did not apply to profits made between January 1 and February 11, and therefore that it was not unconstitutional. G. J. C. 1. A Federal district judge could not, consistently with the provision of U. S. Const. art. 3, that all Federal judges shall, at stated times, receive for their services a compensation "which shall not be diminished during their continuance in office," be subjected to an income tax imposed under the 16th Amendment in respect of his salary as such judge. [See note on this question beginning on page 532.] the Federal Constitution does not extend the taxing power to new or excepted subjects, but merely removes all occasion otherwise existing for an ap portionment among the states of taxes (Holmes and Brandeis, JJ., dissent.) ERROR to the District Court of the United States for the Western District of Kentucky to review a judgment in favor of defendant in a suit to recover back a portion of the income tax paid by the plaintiff Federal district judge. Reversed. The facts are stated in the opinion of the court. The taxation imposed on judicial salaries diminishes the compensation of the judges. Atty. Gen. Hoar's Opinion, 13 Ops. Atty. Gen. 161; Re Taxation of Salaries of Judges, 131 N. C. 693, 42 S. E. 970; Taney's Letter, 157 U. S. 701, 39 L. ed. 1155, 15 Sup. Ct. Rep. ix.; Pollock v. Farmers' Loan & T. Co. 157 U. S. 429, 39 L. ed. 759, 15 Sup. Ct. Rep. 673; New Orleans v. Lea, 14 La. Ann. 194; Com. ex rel. Hepburn v. Mann, 5 Watts & S. 403; Com. ex rel. Atty. Gen. v. Mathues, 210 Pa. 394, 59 Atl. 961; Federalist, No. 79; Story, Const. §§ 1629-1631; Kent, Com. pp. 293–295. The power to tax implies the power to destroy. M'Culloch v. Maryland, 4 Wheat. 316, 431, 4 L. ed. 579, 607; Collector v. Day (Buffington v. Day) 11 Wall. 113, 127, 20 L. ed. 122, 126. The 16th Amendment can in no way justify or support that provision of the Revenue Act the constitutionality. of which is now in question. Brushaber v. Union P. R. Co. 240 U. S. 1, 60 L. ed. 493, L.R.A.1917D, 414, 36 Sup. Ct. Rep. 236, Ann. Cas. 1917B, 713; William E. Peck & Co. v. Lowe, 247 U. S. 165, 62 L. ed. 1049, 38 Sup. Ct. Rep. 432; Pollock v. Farmers' Loan & T. Co. 157 U. S. 429, 39 L. ed. 759, 15 Sup. Ct. Rep. 673; Re Debs, 158 U. S. 594, 39 L. ed. 1106, 15 Sup. Ct. Rep. 900; Prout v. Starr, 188 U. S. 543, 47 L. ed. 587, 23 Sup. Ct. Rep. 398; Knowlton v. Moore, 178 U. S. 41, 44 L. ed. 969, 20 Sup. Ct. Rep. 747. Article 3, § 1, of the Constitution must control. Weston v. Charleston, 2 Pet. 466, 7 L. ed. 487; Pollock v. Farmers' Loan & T. Co. 157 U. S. 429, 39 L. ed. 759, 15 Sup. Ct. Rep. 673; Minnesota v. Bar ber, 136 U. S. 319, 320, 34 L. ed. 457, 458, 3 Inters. Com. Rep. 185, 10 Sup. Ct. Rep. 862; Dobbins v. Erie County, 16 Pet. 435, 10 L. ed. 1022; Collector v. Day (Buffington v. Day) 11 Wall. 113, 20 L. ed. 122. United States Const. art. 3, § 1, forbids diminution of a judge's salary during his term of office, and the law forbids a thing done indirectly which is forbidden to be done directly. Brown v. Maryland, 12 Wheat. 419, 6 L. ed. 678; Weston v. Charleston, 2 Pet. 449, 7 L. ed. 481; Cummings v. Missouri, 4 Wall. 288, 18 L. ed. 356; 2 Co. Inst. 48, 202; Broom, Legal Maxims, 367; Burrill, Law Dict. 202; Fairbank v. United States, 181 U. S. 283. 45 L. ed. 862, 21 Sup. Ct. Rep. 648, 15 Am. Crim. Rep. 135. The test of the constitutionality of a statute is not what has been done, but what, by its authority, may be done under it. Ames v. People, 26 Colo. 109, 56 Pac. 656; Eubank v. Richmond, 226 U. S. 137, 144, 57 L. ed. 156, 159, 42 L.R.A. (N.S.) 1123, 33 Sup. Ct. Rep. 76, Ann. Cas. 1914B, 192. The power to tax is the power to destroy. Brown v. Maryland, 12 Wheat. 419, 445, 6 L. ed. 678, 687; Austin v. Boston, 7 Wall. 694, 19 L. ed. 224; Veazie Bank v. Fenno, 8 Wall. 533, 19 L. ed. 482; McCray v. United States, 195 U. S. 27, 49 L. ed. 78, 24 Sup. Ct. Rep. 769, 1 Ann. Cas. 561. It is the duty of the courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. Fairbank v. United States, 181 U. S. 283, 291, 45 L. ed. 862, 866, 21 Sup. Ct. Rep. 648, 15 Am. Crim. Rep. 135; Boyd v. United States, 116 U. S. 616, 29 L. ed. 746, 6 Sup. Ct. Rep. 524; Re Debs, 158 U. S. 594, 39 L. ed. 1106, 15 Sup. Ct. Rep. 900. (253 U. S. 245, 64 L. ed. 887, 40 Sup. Ct. Rep. 550.) Messrs. A. Mitchell Palmer, Attorney General, and William L. Frierson, Assistant Attorney General, for defendant in error: The principle controlling this case has been clearly settled by decisions of this court in cases involving similar questions. Postal Teleg. Cable Co. v. Adams, 155 U. S. 688, 695, 696, 39 L. ed. 311, 315, 316, 5 Inters. Com. Rep. 1, 15 Sup. Ct. Rep. 268, 360; Atlantic & P. Teleg. Co. v. Philadelphia, 190 U. S. 160, 163, 47 L. ed. 995, 999, 23 Sup. Ct. Rep. 817; William E. Peck & Co. v. Lowe, 247 U. S. 165, 62 L. ed. 1049, 38 Sup. Ct. Rep. 432. The mere fact that a part of a judge's salary must be used to pay a tax does not render the tax unconstitutional. Com. ex rel. Hepburn v. Mann, 5 Watts & S. 403; William E. Peck & Co. v. Lowe, supra; United States Glue Co. v. Oak Creek, 247 U. S. 321, 62 L. ed. 1135, 38 Sup. Ct. Rep. 499, Ann. Cas. 1918E, 748. Mr. Justice Van Devanter delivered the opinion of the court: This is an action to recover money paid under protest as a tax alleged to be forbidden by the Constitution. The plaintiff is the United States district judge for the western district of Kentucky, and holds that office under an appointment by the President made in 1899, with the advice and consent of the Senate. The tax which he calls in question was levied under the Act of February 24, 1919, chap. 18, 40 Stat. at L. 1062, on his net income for the year 1918, as computed under that act. His compensation or salary as district judge was included in the computation. Had it been excluded, he would not have been called on to pay any income tax for that year. The inclusion was in obedience to a provision in § 213, requiring the computation to embrace all gains, profits, income, and the like, "including in the case of the President of the United States, the judges of the Supreme and inferior courts of the United States, [and others] the compensation received as such." Whether he could be subjected to such a tax in respect of his salary, consistently with the Constitution, is the matter in issue. If it be resolved against the tax, he will be entitled to recover what he paid; otherwise his action must fail. It did fail in the district court. 262 Fed. 550. The Constitution establishes three great co-ordinate departments of the national government, -the legislative, the executive, and the judicial,-and distributes among them the powers confided to that government by the people. Each department is dealt with in a separate article, the legislative in the first, the executive in the second, and the judicial in the third. Our present concern is chiefly with the third article. It defines the judicial power, vests it in one supreme court and such inferior courts as Congress may from time to time ordain and establish, and declares: "The Judges both of the supreme and inferior Courts, shall hold their Offices during good Behavior, and shall at stated Times, receive for their Services, a Compensation, which shall not be diminished during during their Continuance in Office." The plaintiff insists that the provision in § 213 which subjects him to a tax in respect of his compensation as a judge by its necessary operation and effect effect diminishes that compensation, and therefore is repugnant to the constitutional limitation just quoted. Stated in its broadest aspect, the contention involves the power to tax the compensation of Federal judges in general, and also the salary of the President, as to which the Constitution (art. 2, § 1, cl. 6) contains a similar limitation. Because of the individual relation of the members of this court to the question, thus broadly stated, we cannot but regret that its solution falls to us; and this although each member has been paying the tax in respect of his salary voluntarily and in regular course. But jurisdiction of the present case cannot be declined or renounced. The plaintiff was entitled by law to invoke our decision on the question as respects his own compensation, in which no other judge can have any direct personal interest; and there was no other appellate tribunal to which, under the law, he could go. He brought the case here in due course, the government joined him in asking an early determination of the question involved, and both have been heard at the bar and through printed briefs. In this situation, the only course open to us is to consider and decide the cause,-a conclusion supported by precedents reaching back many years. MoreMoreover, it appears that, when this taxing provision was adopted, Congress regarded it as of uncertain constitutionality, and both contemplated and intended that the question should be settled by us in a case like this.1 With what purpose does the Constitution provide that the compensation of the judges "shall not be diminished during their continuane in office?" Is it primarily to benefit the judges, or rather to promote the public weal by giving them that independence which makes for an impartial and courageous discharge of the judicial function? Does the provision merely forbid direct diminution, such as expressly reducing the compensation from a greater to a less sum per year, and thereby leave the way open for indirect, yet effective, diminution, such as withholding or calling back a part as a tax on the whole? Or does it mean that the judge shall have a sure and 1 See House Report, No. 767, p. 29, 65th Cong. 2d Sess.; Senate Report, No. 617, p. 6, 65th Cong. 3d Sess. And see Cong. Record, vol. 56, p. 10,370, where the chairman of the House Committee, in asking the adoption of the provision, said: "I wish to say, Mr. Chairman, that while there is considerable doubt as to the constitutionality of taxing. Federal judges' or the President's salaries, we cannot settle it; we have not the power to settle it. No power in the world can settle it except the Supreme Court of the United States. Let us raise it, as we have continuing right to the compensation, whereon he confidently may rely for his support during his continuance in office, so that he need have no apprehension lest his situation in this regard may be changed to his disadvantage? The Constitution was framed on the fundamental theory that a larger measure of liberty and justice would be assured by vesting the three great powers-the legislative, the executive, and the judicial-in separate departments, each relatively independent of the others; and it was recognized that without this independence-if it was not made both real and enduring the separation would fail of its purpose. All agreed that restraints and checks. must be imposed to secure the requisite measure of independence; for otherwise the legislative department, inherently the strongest, might encroach on or even come to dominate the others, and the judicial, naturally the weakest, might be dwarfed or swayed by the other two, especially by the legislative. The particular need for making the judiciary independent was elaborately pointed out by Alexander Hamilton in the Federalist, No. 78, from which we excerpt the following: "The executive not only dipenses the honors, but holds the sword of the community; the legislature not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated; the judiciary, on the contrary, has no influence over either the sword or the purse; no direction done, and let it be tested, and it can only be done by someone protesting his tax and taking an appeal to the Supreme Court." And again: "I think really that every man who has a doubt about this can very well vote for it and take the advice of the gentleman from Pennsylvania [Mr. Graham], which was sound then and is sound now, that this question ought to be raised by Congress, the only power that can raise it, in order that it may be tested in the Supreme Court, the only power that can decide it." |
