taxable by the States and by the Provinces, although created by federal law, were clearly not agencies and instrumentalities employed in the execution and maintenance of federal authority.

cases of

EXAMPLES OF FEDERAL TAXING POWER.-In addition to the numerous commercial and trading taxes cited in our review of sub-sec. i. (trade and commerce), the following may be added as illustrations of the general taxing power : —

"If we measure the power of taxation residing in a State, by the extent of sovereignty which the people of a single State possess and can confer on its government, we have an intelligible standard, applicable to every case to which the power may be applied. . . We are relieved, as we ought to be, from clashing sovereignty; from interfering powers; from a repugnancy between a right in one government to pull down what there is an acknowledged right in another to build up; from the incompatibility of a right in one government to destroy what there is a right in another to preserve. We are not driven to the perplexing inquiry, so unfit for the judicial department, what degree of taxation is the legitimate use, and what degree may amount to the abuse of the power. The attempt to use it on the means employed by the government of the Union, in pursuance of the Constitution, is itself an abuse, because it is the usurpation of a power which the people of a single State cannot give (Marshall, C.J., in McCulloch v. Maryland, 4 Wheat. pp. 429-30.)

The doctrine which exempts the instruments of the Federal government from State taxation, is founded on the implied necessity for the use of such instruments by the government. Legislation which does not impair the usefulness of such instruments to serve the government is not within the rule of exemption. (National Bank v. Kentucky, 9 Wall. 353. See Pomeroy, Const. Law, p. 253.)

A tax

The exemption of agencies of the Federal Government from taxation by the States is dependent, not upon the nature of the agents nor upon the mode of their constitution, nor upon the fact that they are agents, but upon the effect of the tax; that is, upon the question whether the tax does in truth deprive them of power to serve the government as they were intended to serve it, or hinder the efficient exercise of their power. upon their property merely, having no such necessary effect, and leaving them free to discharge the duties they have undertaken to perform, may be rightfully laid by the States; but a tax upon their operations, being a direct obstruction to the exercise of Federal powers, may not be. This doctrine was applied to the case of a tax by a State upon the real and personal property, as distinguished from its franchises, of the Union Pacific railway company-a corporation chartered by Congress for private gain, and all whose stock was owned by individuals, but which Congress assisted by donations and loans, and over which it reserved and exercised many special rights, and which amongst other things was bound at all times to transmit despatches and transport mails, troops, munitions of war, &c., for the government whenever so desired. (Railroad Co. v. Peniston, 18 Wall. 5. See Pomeroy, Const. Law, 253; Baker, Annot. Const. p. 172.) "The principles to be deduced from the [American] cases appear to be, that the National government and the State governments are, as it were, distinct sovereignties; that the means and instrumentalities necessary for the carrying on of either government are not to be impaired by the other; that as the power to tax involves the power to impair, the exercise of such a power by the one government on the income of the officers of the other is inconsistent with independent sovereignty of the other; and that in such cases exemption from taxation, although not expressed in the national Constitution, exists by necessary implication." (Harrison, C.J., in Leprohon v. City of Ottawa, 40 Upper Canada Rep. 478.)

The Supreme Court, however, has declared that the general principles of the Constitution forbid Congress to tax the necessary governmental instrumentalities of the States, such as the salaries of officers and the revenue of municipal corporations, on the ground that such a power would enable the Congress to destroy the States, which nothing short of the amending power, the sovereignty, should be able to do in a Federal system of government. The United States courts determine, of course, in what these necessary instrumentalities, in any particular case, consist." (Collector r. Day, 11 Wall. 113; cited Burgess, Political Sc. II. p. 151.)

A Federal law imposing a tax on the sale of lottery tickets is valid, although their sale is prohibited by State law. (License Tax Cases, 5 Wall 462; cited Baker, Annot Const. p. 16.)

A Federal excise tax, imposed on a license to manufacture and sell intoxicating liquors, is no bar to a prosecution under State laws prohibiting such manufacture and sale within the State. (License Tax Cases, 5 Wall. 462; Pervear v. Commonwealth, 5 Wall. 475. Id.)

A Federal law imposing a tax on State banks or banking associations held valid. (National Bank v. United States, 101 U.S 1. Id)

A Federal tax on distilled spirits is not unconstitutional. It is in the nature of an excise, and the only limitation on the power of Congress in the imposition of taxes of this character is that they shall be uniform throughout the United States." (United States v. Singer, 15 Wall. 111; Same v. Van Buskirk, 15 Wall. 123. Id. p. 17.)

The Act imposing the succession tax is valid. It is neither a tax on land nor a capitation tax, although it is made a lien on the land to enforce its collection. Scholey v. Rew. 23 Wall. 331. Id.)

In the exercise of this power Congress may raise money in any way not forbidden by the Constitution, and as a means thereto it may tax employments. (United States v. Angell, 11 Fed. Rep. 34. Id.)

NO APPORTIONMENT OF TAXES.-The taxing power of Congress is seriously hampered by Art. I. sec. 3, of the Constitution, which provides that 'direct taxes" shall be apportioned among the several States according to their respective numbers. In 1894, Congress passed an unapportioned income tax. The tax was imposed on the annual income of individuals exceeding 4000 dollars and the income of corporations of all amounts excepting mutual insurance companies and ecclesiastical bodies. At least fourfifths of the tax was payable by four States--New York, New Jersey, Pennsylvania, and Massachusetts. “In a number of the States whose representatives voted for the tax its incidence did not affect more than a very few individuals. The constitutionality of this proceeding, by the consent of the Attorney-General, who waived all questions of jurisdiction, was brought before the Supreme Court before the tax was payable. In their first decision the Court held unanimously that so much of the tax as applied to the income from municipal bonds was void, since those securities could not be taxed by the United States; and by a majority of four to two, that so much as applied to rents was also void, as a tax upon real estate, and consequently a direct tax which must be apportioned. They divided equally on the questions whether the invalidity of this part destroyed the rest; and whether the tax on the general income from personal property was also void as a direct tax. A re-argument was ordered, which Mr. Justice Jackson, whose illness had prevented his previous presence, left his death-bed to attend. He voted to sustain so much as did not apply to municipal bonds; but Mr. Justice Shires, who on the first decision had voted to sustain so much as did not apply to rents, changed his mind; and by a majority of five to four the whole income-tax was held to be void, as a direct tax which had not been apportioned." (Pollock v. Farmers' Loan and Trust Co., 157 U.S. 429 and 158 U.S. 601. Foster's Comm. I. p. 421.)

Such a question as that raised in Pollock v. Farmers' Loan and Trust Co. could not be raised under the Constitution of the Commonwealth, in which there is no rule for the apportionment of direct taxes or of any taxes among the States. See, however, the rules against "Discriminations" and "Preferences," supra.

51. (iii.) Bounties165 on the production or export of goods, but so that such bounties shall be uniform throughout the Commonwealth :

HISTORICAL NOTE.-In the Commonwealth Bill of 1891, this provision was embodied in sub-clause 2, "customs, excise and bounties," and in that form it was adopted at the Adelaide and Sydney sessions in 1897. (Conv. Deb., Syd., 1897, pp. 1065-8.) At the Melbourne session, before the first report, it was placed in a sub-clause by itself.

The trade and commerce sub-section would probably have been sufficient to confer on the Federal Parliament power to grant bonuses, bounties, and subsidies on the production or the export of goods; that is to say, on the growth or manufacture of goods to be consumed within the Commonwealth, as well as on the growth or manufacture of goods to be exported from the Commonwealth. This sub-section has been inserted for

the purpose of placing the bounty-granting power of the Parliament beyond doubt, and also for the purpose of associating with and grouping around the power several restrictions and directions. It may facilitate the study of this power to present a survey of the constitutional provisions relating to it.

First comes the requirement (sub-sec. 3) that such bounties shall be uniform throughout the Commonwealth. If they are not uniform the law on which they are founded is null and void. The rule as to uniformity means not merely that the bounty must be general throughout the Commonwealth, but also that there must be a uniform or equal bounty on each class of goods which is the object of the bounty. (Sturges v. Crowninshield, 4 Wheat. 122.) The Supreme Court of the United States has interpreted the word "uniform," in similar association, to mean the same amount upon the same article wherever found. (Head Money Cases, 112 U.S. 580; Burgess, Political Sc. ii. 151.)

The next question to consider is, at what stage in the history of the Commonwealth does this bounty-regulating power come into operation? Sec. 86 provides that on the establishment of the Commonwealth the control of the payment of bounties shall pass to the Executive Government of the Commonwealth. Does this mean the control of the payment of bounties authorized by the Federal Parliament, or does it mean the control of the payment of bounties authorized under grants or agreements lawfully made by the governments of the States before 30th June, 1898 ?

This leads to the consideration of sec. 90. By the first paragraph of that section, the power of the Parliament to grant bounties on the production or export of goods becomes exclusive on the imposition of uniform duties of customs and excise. The preparation and adoption of such uniform duties will necessarily occupy a considerable time; by sec. 88 they must be imposed within two years of the establishment of the Commonwealth. By the second paragraph of sec. 90, it is enacted that, after the imposition of uniform duties, the bounty laws of the States shall cease to have effect. This is followed by a proviso—which requires careful examination—that certain grants or agreements made by States for bounties shall be preserved.

At the Adelaide sitting of the Convention, when the section relating to the cessation of State bounties, as drafted by the constitutional committee, was under discussion, attention was drawn to the fact that no provision was made for the protection of existing bounty arrangements. The State bounty laws, and contracts made thereunder, were to be absolutely swept away as soon as uniform duties were imposed. It was contended that where a colony had, prior to federation, entered into arrangements with the promoters of certain industries to grant bonuses and bounties for the assistance and development of those industries, such arrangements ought to be protected and preserved, even after the establishment of the Commonwealth; otherwise the sudden withdrawal of State aid from those who had invested capital, in the expectation of the continuance of that aid for a certain time, would be an unjust breach of faith on the part of the government, and would be ruinous to those who had entered upon productive enterprises on the strength of a public agreement. In illustration of the argument, it was mentioned that the government of South Australia had made contracts with stock-breeders in the Northern Territory, to pay them bonuses on the export of cattle. Those contracts had several years to run, and if federation were accomplished and uniform duties imposed before the expiration of the term, the government of South Australia would, under the clause as it then stood, be prevented from completing its contract. Victoria was under similar obligations, which her representatives were anxious should remain in full force and unimpaired by the Constitution.

An effort was made to show that the repeal of State laws offering bounties on the production or export of goods would not ipso facto invalidate any agreement made under such laws before their repeal. Legal authorities were cited, showing that where an enactment would prejudicially affect vested rights, or the legal character of past Acts,

the presumption against a retrospective operation is strongest. Every statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past, must be presumed, out of respect to the legislature, to be intended not to have a retrospective operation. Thus the provision of the Statute of Frauds, that no action should be brought to charge any person on any agreement made in consideration of marriage, unless the agreement were in writing, was held not to apply to an agreement which had been made before the Act was passed. The Mortmain Act, in the same way, was held not to apply to a devise made before it was enacted. So it was held that the Act 8 and 9 Vic. c. 109, which made all wagers void, and enacted that no action should be brought for a wager, applied only to wagers made after the Act was passed. (Maxwell, Interpretation of Statutes, 3rd ed. 299.)

This assurance, however, did not satisfy the representatives of the colonies interested. Eventually an addendum was made to the proposition, which, after various modifications at subsequent stages, at last assumed the phraseology in which it is presented in clause 90 of the Constitution, viz., any grant of or agreement for any bounty lawfully made by or under the authority of the Government of any State shall be taken to be good if made before the thirtieth day of June, one thousand eight hundred and ninety-eight, and not otherwise.

Another branch of the bounty question is dealt with by sec. 91, in which a limited measure of bounty-granting power is reserved to the States. In the course of the general debate at Adelaide, it was said that there were a number of local industries, peculiar and special to particular States, and with which the Commonwealth Parliament would have no concern. Thus the Victorian Parliament had been in the habit of granting prospecting votes for the encouragement of gold mining. New South Wales might see the advisability of granting a similar assistance for the production of iron. It was urged as extremely desirable that the greatest possible facility, consistent with equality and freedom of inter-state trade, should be reserved to the States, in order to enable them to promote any policy for the development of their natural resources. It was first suggested by Mr. Trenwith, that the right to vote grants in aid of gold and other metalmining should not be exclusively vested in the Federal Parliament, but that the States should have a concurrent power, and that as regards other local industries, not capable of full specification, and in which the Commonwealth as a whole was not concerned, bounties might be given by the States with the consent of the Federal Parliament. This would secure the object aimed at without detracting from the supreme control and supervision of the highest legislative authority. A section allowing the States to subsidize mining for gold, silver, or other metals, was readily agreed to. (Sec. 91.) It was only after a prolonged debate in Melbourne, and in response to the earnest appeal of the Premier of Victoria, supported by his colleagues, that an addition to the mining section, enabling a State, with the consent of both Houses of the Federal Parliament, to grant aids to or bounties on the production or export of goods was made. (Sec. 91.)

For further discussion of State and Federal powers with regard to bounties, see notes to secs. 86, 90, and 91.

51. (iv.) Borrowing money166 on the public credit of the Commonwealth :

HISTORICAL NOTE. -The Constitution of the United States empowers Congress 66 to borrow money on the credit of the United States." (Art. I. sec. vii. sub-s. 2.) The British North America Act, sec. 91, sub-s. (4), gives the Dominion Parliament power as to "The borrowing of money on the public credit," whilst sec. 92, sub-s. (3), gives each Provincial Legislature power as to "The borrowing of money on the sole credit of the Province." In the Commonwealth Bill of 1891 the sub-clause appeared in its present form.

In Committee, the only debate was on the suggestion that there should be power

to borrow in order to pay off the debts of the States. (Conv. Deb. Syd., 1891, pp. 679-83.) In the Convention of 1897-8 the sub-clause was adopted and agreed to without debate.

Under the power to borrow money on the credit of the United States, and to issue circulating notes for the money borrowed, the authority of Congress to define the quality and force of these notes as currency is as broad as the like power over metallic currency under the power to coin money and regulate the value thereof. Under the two powers, taken together, Congress is authorized to establish a national currency, either in coin or in paper, and to make that currency lawful money for all purposes as regards the national government or individuals, and this whether in time of war or peace. (Juilliard v. Greenman, 110 U.S. 421. Baker, Annot. Const 19.)

A tax imposed by a State or under its authority on stock issued for loans made to the United States is unconstitutional. (Weston v. City of Charleston, 2 Pet. 449. Id. p. 17.)

The stock of the United States, constituting the whole or part of the capital stock of a State Bank, is not subject to State taxation. A tax on Federal stock is regarded as a tax upon the exercise of the borrowing powers conferred upon Congress. It is immaterial that the tax is on the aggregate property of the taxpayer, and the stock is not taxed by name. (Bank Tax Case, 2 Wall. 200.)

Securities of the United States are exempt from State taxation; and this exemption extends to the capital stock of a corporation if made up of such securities. (Provident Institution v. Massachusetts, 6 Wall. 611. Id. p. 17.)

United States notes are exempt from taxation by State or municipal authority. (Mitchell v. County Commissioners, 91 U.S. 206. Id. p. 18.)

A tax by a State upon the bonds of the United States is a tax upon the borrowing power of Congress, and is invalid. But the fact that a corporation has invested part of its capital in United States bonds does not prevent the State from taxing the corporate franchises or business of the corporation. (Home Insurance Co. v. New York, 134 U.S. 594. Id. p. 19.)

51. (v.) Postal 167, telegraphic, telephonic, and other like

services:

HISTORICAL NOTE -The corresponding power in the Constitution of the United States is "to establish post-offices and post-roads;" in the British North America Act, "Postal service." Earl Grey's Committee of the Privy Council in 1849 suggested "The conveyance of letters" as a federal subject (p. 85, supra). Wentworth's Constitutional Committee in 1853 specified "Postage between the said colonies;" and the draft Bill annexed to Wentworth's Memorial in 1857 specified “Intercolonial telegraphs and postage" (pp. 91-94, supra). In the Federal Council of Australasia Act, 1885, posts and telegraphs, curiously enough, were not mentioned.

In the Commonwealth Bill of 1891, "Postal and telegraphic services" were specified (sub-cl. 8). At the Adelaide session, 1897, the same words were adopted in the first draft. In Committee, Mr. Holder moved to add the words "without the boundaries of the Commonwealth," on the ground that inland posts and telegraphs were matters of purely local concern. This was defeated by 30 votes to 5. On Mr. Wise's motion, the words "telephonic and other like services" were added. (Conv. Deb., Adel., pp. 767-75.)

At the Sydney session, a suggestion by the Legislative Assembly of South Australia (similar to a suggestion by the Legislative Assembly of Western Australia) to add the words "outside the limits of the Commonwealth" was negatived. (Conv. Deb., Syd., 1897, pp. 1068-9.)