A rehearing of the case having been allowed the court broadened still further the scope of the term "direct taxes," making it include taxes on personal property and upon the income therefrom. To this doctrine four justices dissented.

79

In Nicol v. Ames the scope of the doctrine laid down in the Income Tax Case was clearly stated. In this case it was argued that a duty levied by the War Revenue Act of 1898 upon sales or agreements of sale of products or merchandise at exchanges or boards of trade was a direct tax and as such unconstitutional because not properly apportioned. The court, however, held that the tax was in the nature of a duty or excise tax for the privilege of doing business at such places and not a tax on the products or merchandise sold, and, therefore, not a direct tax. The court say: "It is asserted to be a direct tax, because it is a tax upon the sale of property measured by the value of the thing sold, and such a tax is a direct tax upon the property itself, and, therefore, subject to the rule of apportionment. Various cases are cited, from Brown v. Maryland (12 Wheat. 419; 6 L. ed. 678) down to those involving the validity of the income tax (Pollock v. Trust Co., 157 U. S. 429; 15 Sup. Ct. Rep. 673; 39 L. ed. 759) for the purpose of proving the correctness of this proposition. All the cases involved the question whether the taxes to which objection was taken amounted practically to a tax on the property. If this tax is not on the property, or on the sale thereof, then these cases do not apply."

In Patton v. Bradys a tax upon tobacco, however prepared, manufactured, and sold, for consumption or sale, was held not a direct tax but an excise tax,-"not a tax upon property as such, submit, is a misconception of the issue. The point involved is whether a tax on net income, when such income is made up by aggregating all sources of revenue and deducting repairs, insurance, losses in business, exemptions, etc., becomes, to the extent to which real estate revenues may have entered into the gross income, a direct tax on the land itself. In other words, does that which reaches an income, and thereby reaches rentals indirectly, and reaches the land by a double indirection, amount to a direct levy on the land itself? It seems to me the question when thus accurately stated furnishes its own negative response."

79 173 U. S. 509; 19 Sup. Ct. Rep. 522; 43 L. ed. 786. 80 184 U. S. 608; 22 Sup. Ct. Rep. 493; 46 L. ed. 713.

but upon certain kinds of property, having reference to their origin and intended use."

In Spreckles Sugar Refining Co. v. McClains the special excise tax imposed on sugar refining by the act of 1898, and measured by the gross annual receipts in excess of a named sum, was held to be not a direct tax. "Clearly," the court say, "the tax is not imposed upon gross annual receipts as property, but only in respect of the carrying on or doing the business of refining sugar. It cannot be otherwise regarded because of the fact that the amount of the tax is measured by the amount of the gross annual receipts."

§ 280. The Federal Corporation Tax of 1909.

Section 38 of the Tariff Law of 1909 contains the provision that every corporation "organized for profit and having a capital stock represented by shares. shall be subject to pay annu

ally a special excise tax with respect to the carrying on or doing business by such corporation equivalent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources."

The constitutionality of this tax, as being indirect, would seem to be supported by the decisions cited in the preceding paragraphs, and by that in Knowlton v. Moore,82 considered in the next paragraph. It is true that in the Income Tax Case83 the court held that a tax upon income from property is not to be distinguished from a tax on the property itself, but it is probable that the tax levied by Section 38 of the Tariff Law of 1909 will be held to be a tax not on the income of the corporations, but one in the nature of a franchise or excise tax. The constitutionality of such a federal tax upon corporations chartered by the States would seem to be disposed of by the argument in Veazie Bank v. Fenno.8

81 192 U. S. 397; 24 Sup. Ct. Rep. 376; 48 L. ed. 496.

82 178 U. S. 41; 20 Sup. Ct. Rep. 747; 44 L. ed. 969.

84

83 Pollock v. Farmers L. & T. Co., 158 U. S. 601; 15 Sup. Ct. Rep. 912; 39 L. ed. 1108.

84 8 Wall. 533; 19 L. ed. 482. See also South Carolina v. United States, 199 U. S. 437; 26 Sup. Ct. Rep. 110; 50 L. ed. 261.

§ 281. Federal Inheritance Taxes not Direct.

The constitutional definition of a direct tax was again raised in Knowlton v. Moore with reference to the constitutionality of the inheritance taxes levied by the War Revenue Act of 1898. The court applied the well established doctrine that the taxes in question were not upon the property inherited but upon the right to inherit, and, therefore, not being taxes upon property but upon a right, were in the nature of an excise tax, and as such indirect.

85 178 U. S. 41; 20 Sup. Ct. Rep. 747; 44 L. ed. 969.

86 To the argument that the doctrine declared in Scholey v. Rew (23 Wall. 331; 23 L. ed. 99), had been practically overruled by the Income Tax Case, the court say:

"It is asserted that it was decided in the Income Tax Cases that in order to determine whether a tax be direct within the meaning of the Constitution, it must be ascertained whether the one upon whom by law the burden of paying it is first cast can thereafter shift it to another person. If he cannot, the tax would then be direct in the constitutional sense, and hence, however obvious in other respects it might be a duty, impost, or excise, it cannot be levied by the rule of uniformity, and must be apportioned. From this assumed premise it is argued that death duties cannot be shifted from the one on whom they are first cast by law, and therefore they are direct taxes requiring apportionment. The fallacy is in the premise It is true that in the income tax cases the theory of certain economists by which direct and indirect taxes are classified with reference to the ability to shift the same was adverted to. But this disputable theory was not the basis of the conclusion of the court. The constitutional meaning of the word direct was the matter decided. Considering that the constitutional rule of apportionment had its origin in the purpose to prevent taxes on persons solely because of their general ownership of property from being levied by any other rule than that of apportionment, two things were decided by the court: First, that no sound distinction existed between a tax levied on a person solely because of his general ownership of real property, and the same tax imposed solely because of his general ownership of personal property. Secondly, that the tax on the income derived from such property, real or personal, was the legal equivalent of a direct tax on the property from which said income was derived, and hence must be apportioned. These conclusions, however, lend no support to the contention that it was decided that duties, imposts and excises which are not the essential equivalent of a tax on property generally, real, or personal, solely because of its ownership, must be converted into direct taxes, because it is conceived that it would be demonstrated by a close analysis that they could not be shifted from the person upon whom they first fall. The proposition now relied upon was considered and refuted in Nicol v. Ames, 173 U. S. 509; 19 Sup. Ct. Rep. 522; 43 L. ed. 786."

§ 282. Federal Taxation and Due Process of Law: Hearing Required.

Due process of law requires that in the case of an ad valorem tax an opportunity shall be given the taxpayer to appear and give evidence as to the proper valuation of the property which is assessed.87 In other cases, however, no notice or opportunity for hearing need be given the taxpayer. In Hagar v. Reclamation Districts the court say: "Of the different kinds of taxes which the State may impose, there is a vast number of which, from their nature, no notice can be given to the taxpayer, nor would notice be of any possible advantage to him, such as poll taxes, license taxes (not dependent upon the extent of his business) and generally, specific taxes on things or persons or occupations. In such cases the legislature, in authorizing the tax, fixes its amount, and that is the end of the matter. If the tax be not paid, the property of the delinquent may be sold and he be thus deprived of his property. Yet there can be no question, that the proceeding is due process of law, as there is no inquiry into the weight of evidence, or other element of a judicial nature, and nothing could be changed by hearing the taxpayer. No right of his is, therefore, invaded. Thus, if the tax on animals be a fixed sum per head, or on articles a fixed sum per yard or bushel or gallon, there is nothing the owner can do which can affect the amount to be collected from him. So, if a person wishes a license to do business of a particular kind or at a particular place, such as keeping a hotel or restaurant, or selling liquors or cigars or clothes, he has only to pay the amount required by the law and go into business. There is no need in such cases for notice or hearing. So, also,

if taxes are imposed in the shape of licenses for privileges, such as those on foreign corporations for doing business in the State, or on domestic corporations for franchises, if the parties desire the privilege, they have only to pay the amount required. In such cases there is no necessity for notice or hearing. The amount

87 Or, if it be a special assessment for the purpose of some public improve ment, as to the extent to which the property in question will be benefited thereby.

88 111 U. S. 701; 4 Sup. Ct. Rep. 663; 28 L. ed. 569.

of the tax would not be changed by it. But where a tax is levied on property, not specifically but according to its value, to be ascertained by assessors appointed for that purpose upon such evidence as they may obtain, a different principle comes in. The officers, in estimating the value, act judicially, and in most of the States provision is made for the correction of errors committed by them, through boards of revision or equalization, sitting at designated periods provided by law, to hear complaints respecting the justice of the assessments. The law in prescribing the time when such complaints will be heard, gives all the notice required, and the proceeding by which the valuation is determined, though it may be followed, if the tax be not paid, by a sale of the delinquent's property, is due process of law."

§ 283. Hearing Before Administrative Tribunal Sufficient.

It is not necessary that the hearing thus required in the case of ad valorem taxes should be before a court of justice. The hearing may be had and, in fact, is usually had, before an administrative board whose action in this respect is judicial in character and whose determinations may be final and conclusive in the matter. Thus, for example, by Section 2930 of the Revised Statutes, it is provided that in the matter of appraisement of imports an appeal shall be allowed the importer from the collector of customs to "one discreet and experienced merchant to be associated with one of the general appraisers wherever practicable, or two discreet and experienced merchants," but that "if they shall disagree, the collector shall decide between them; and the appraisement thus determined shall be final and be deemed to be the true value, and the duties shall be levied thereon accordingly." Provision is, however, made for relief in cases where the collectors have acted fraudulently or upon a principle not sanctioned by law, or where they have in any way transcended the powers given them by Congress.