Argument in support of the tax. charging most necessary, valuable, and efficient service. The stage-coach upon the frontier, taking up and carryi g into remote parts these orders, so that from this centre the volitions and pulsations are obeyed and felt to the extremities of the land, shares in the vast service of the republic. And, for all this service, these agents, and thousands of others like them, are paid by the government. Not a small proportion of their earnings, and the dividends which they distribute among their stockholders, is derived from the government. They even pay to the State taxes upon these earnings. They have conveniences for doing this service, used for this service exclusively; the steamship, apartments; the railroad, postal cars; the stage-coach, wagons; and they pay taxes thereon; and yet they never claim exemption from State taxes. Or if one of them, the Kansas Pacific Railroad, is any exception, if it has claimed exemption on that ground, it stands solitary and alone in asserting such claim, and it has signally failed in establishing it.* But, as all know, there are agencies to which such exemption is conceded. The line of separation is clearly drawn by Chief Justice Marshall in Osborn v. The Bank of The United States. He says: "The foundation of the argument in favor of the right of a State to tax the bank, is laid in the supposed character of that institution. The argument supposes the corporation to have been originated for the management of an individual concern, to be founded upon contract between individuals, having private trade and private profit for its great and principal object. "If these premises were true, the conclusion drawn from them would be inevitable. This mere private corporation, engaged in its own business, with its own views, would certainly be subject to the taxing power of the State, as any individual would be; and the casual circumstance of its being employed by the government in the transaction of its fiscal affairs, would no more exempt its private business from the operation of that power, than it would exempt the private business of any individual employed in the same manner. But the premises are not * Thompson v. Railroad Company, 9 Wallace, 579. † 9 Wheaton, 859. Argument in support of the tax. true. The bank is not considered as a private corporation, whose principal object is individual trade and individual profit, but as a public corporation, created for a public and national purpose. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies, having no political connection with the government, is admitted; but the bank is not such individual or company. It was not created for its own sake, or for private purpose. ... Why is it that Congress can incorporate or create a bank? This question was answered in the case of McCulloch v. The State of Maryland. It is an instrument which is necessary and proper' for carrying on the fiscal operations of government." From the exposition of the relations and immunities of the agencies of the government, traced in the case cited, these principles are deducible: 1. A private corporation, whose principal object is individual trade and individual profit, is not exempted from State taxation by the casual circumstance of being employed by the government in the transaction of its fiscal affairs. 2. While it is true that the agent entitled to exemption may transact private business, its capacity so to do must be an incident to its agency, and be in aid thereof. 3. Its operations in transacting private business must be necessary to its character and efficiency, as a machine employed by the government. But it is not all of the property of any agents of the Federal government that may be withdrawn from the taxing power of the States. The Bank of the United States was a fiscal agent of the government; it bore a most intimate relation to that government; and yet in McCulloch v. Maryland,* Marshall, C. J., said: "This opinion does not deprive the States of any resources which they originally possessed. It does not extend to a tax paid by the real property of the bank, in common with other real property within the State." * 4 Wheaton, 436. Argument in support of the tax. And again, in Osborn v. The Bank of the United States,* he said, that the local property of the bank may be taxed by the State, the same as the property of other citizens. But there is a position in which the Federal officer is entitled to the protection of the Federal power. While the property of the officer in general is subject to State taxation, his salary is entirely exempt therefrom.† And the same is true of the corporate agent. If "the tax be upon its operations, and consequently upon the operation of an instrument empowered by the government of the Union, to carry its powers into execution," then the tax is unconstitutional. The reason of the rule marks its limitations. The National government must be free to use such means as it selects, to carry out its functions, else it cannot exist. When a State tax impairs the efficiency of any instrumentality which Congress selects to carry out the legitimate purposes of the Federal government, it is unconstitutional. When it does not have that effect, it is within the competency of the State to impose it. Miller, J., delivering the unanimous opinion of the court, in National Bank v. Commonwealth, one of the cases of the bank taxes, distinguishies the cases in the way we do, where the State may and where it may not tax. He He says: "It is argued that the banks, being instrumentalities of the Federal government, by which some of its important operations are conducted, cannot be subjected to such State legislation. It is certainly true that the Bank of the United States, and its capital, were held to be exempt from State taxation on the ground here stated; and this principle, laid down in the case of Mc Culloch v. The State of Maryland, has been repeatedly affirmed by the court. But the doctrine has its foundation in the proposition, that the right of taxation may be so used in such cases, as to destroy the instrumentalities by which the government proposes to effect its lawful purposes in the States; and it certainly cannot be maintained that banks, or other corporations 9 Wheaton, 867. † Dobbins v. The Commissioners of Erie County, 16 Peters, 435. Argument in support of the tax. or instrumentalities of the government, are to be wholly with drawn from the operation of State legislation. The most important agents of the Federal government are its officers; but no one will contend that when a man becomes an officer of the government he ceases to be subject to the laws of the State. The principle we are discussing has its limitation; a limitation growing out of the necessity on which the principle itself is founded. That limitation is, that the agencies of the Federal government are only exempted from State legislation so far as that legislation may interfere with or impair their efficiency, in performing the functions by which they were designed to serve that government. Any other rule would convert a principle founded alone in the necessity of securing to the government of the United States the means of exercising its legitimate powers, into an unauthorized and unjustifiable invasion of the rights of the States. The salary of a Federal officer may not be taxed; he may be exempted from any personal service which interferes with the discharge of his official duties, because those exemptions are essential to enable him to perform those duties. But he is subject to all the laws of the State which affect his family or social relations, or his property; and he is liable to punishment for crime, though that punishment be imprisonment or death. So of the banks. They are subject to the laws of the State, and are governed in their daily course of business, far more by the laws of the State than of the nation. contracts are governed and construed by State laws. quisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on State laws. It is only when the State law incapacitates the banks from discharging their duties to the government. that it becomes unconstitutional." All their Indeed, it is believed that no case adjudged by this court can be found, of a tax on the property of a third party— meaning by this term some agency, other than an integral part of the machinery of government-made use of by the National government, which has been held invalid. The tax in question, in McCulloch v. Maryland, and Osborn v. The United States Bank, was upon the operations of the bank, and not upon its property. Argument in support of the tax. And in one of the cases of the bank tax,* the taxation of the present national banks has been supported upon the same theory: the theory, to wit, that it was upon the new use, in the business of banking, to which the Federal bonds were put, and not upon the bonds nor upon the banks that the taxes were imposed. It may be that the language of some of the judges, and even the reasoning which they have pursued, seem to favor the doctrine of total exemption of the property of an agent of, the National government from State taxes. But, as Chase, C. J., said in Thompson v. The Pacific Railroad, these decisions are limited to the cases before the court. It is obvious, upon the principle of the cases above cited, that there are agencies of the government, like the old Bank of the United States, the nature of which places them beyond the reach of the States. But there are other agencies, as the new banks, whose principal business is private, and the public business is an incident thereto, which cannot be placed in the same category. As to this latter class, it is not too much to insist that exemption from State regulation should be secured by express direction of Congress; that if Congress does not in terms grant the exemption the State sovereignty is not displaced. It is not needful to this case, to go through the judgments of this court in order to ascertain whether the State power is displaced without a direct enactment of Congress to that effect. There was a long disagreement between the judges on this subject. But in Gilman v. Philadelphia,‡ Swayne, J., delivering the opinion of the court, assigned as one of the reasons for sustaining the State law authorizing the bridge, against objections that it conflicted with the commercial power of the nation, the fact that "Congress may interpose whenever it shall be deemed necessary, by general or special laws," the inference being, that until such interposition the power of the State must be respected; and in Woodruff v. Parham,§ Miller, J., also * Van Allen v. The Assessors, 3 Wallace, 573. 3 Wallace, 718. |