It may be said that the correctness of the decision has now become a question of merely academic interest, the judgment of the High Court being final. The High Court has, with dignity and emphasis, refused to certify in favor of an appeal from itself to the Privy Council. The High Court has been given, by the Constitution, a peculiar status as guardian of the Constitution; and no "special reason was put before the court which would justify it in shunting its great responsibility. The assertion of the position of the court in relation to the Constitution is far more important than the question of the propriety of the particular decision. So far as one can foresee, the decision will probably be treated as binding and conclusive, for many years to come. Then what is to be done? I agree with those who think that federal servants should pay the same taxes as their neighbors to the state in which they live. The argument that by compelling them to do so you destroy the uniformity of conditions for similar work in different states, which is the aim of the public service system, may be greatly exaggerated. A postmaster in Queensland, in the same class as a postmaster in South Australia, may get the same salary; and yet the climate may be different, the building may be better in one place than another. One may have his friends near him, the other may not. In Western Australia there is no income-tax; in Victoria there is; and yet the comparative cheapness of food and clothing and the other advantages in Victoria may be some compensation for the tax. What is to be done? In the United States a law was passed which purported to enable the states to tax the stock of national banks on the same scale as other personal property; and I have not found

Constitution continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State.

107. Every power of the Parliament of a Colony which has become or becomes a State shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State, continue as at the establishment of the Commonwealth or as at the admission or establishment of the State as the case may be.

108. Every law in force in a Colony which has become or becomes a State and relating to any matter within the powers of the Parliament of the Commonwealth shall subject to this Constitution continue in force in the State, and until provision is made in that behalf by the Parliament of the Commonwealth, the Parliament of the State shall have such powers of alteration and of repeal in respect of any such law as the Parliament of the Colony had until the Colony became a State.

109. When a law of a State is inconsistent with a law of the Commonwealth the latter shall prevail and the former shall to the extent of the inconsistency be invalid.

that the validity of the law has ever been contested. Yet it is hard to answer the argument of Senator Howard, in the debates which led up to that act, that as, according to McCulloch v. Maryland, the Constitution forbade the taxation of such stock, Congress could not take away the prohibition. "It is certainly a very singular notion about states rights that the Congress of the United States can give to states rights of legislation which they did not previously possess."1 Perhaps the best course if we try to escape the effects of the decision is for the federal Parliament to authorize a deduction from the salary of each federal officer of the amount which he would have had to pay as income-tax to his state and to pay the amount of the deductions to the state in which the officer lives. But even this suggestion is not without grave difficulties, practical as well as constitutional.

MELBOURNE, VICTORIA.

H. B. Higgins.

1 See Congressional Globe, 1864, p. 1958.

THE POWER OF CONGRESS TO REGULATE RAILWAY RATES.

'HE power of Congress to regulate railway rates is based

THE

upon that section of the Constitution which provides that Congress shall have power "to regulate commerce with foreign nations, and among the several states and with the Indian tribes." 1 This grant of power, however, is limited by the provision that "No preference shall be given by any regulation of commerce or revenue to the ports of one state over those of another."2 It is also limited by the Fifth Amendment, which provides that no person shall be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use without just compensation." Furthermore, it is subject to certain well-settled constitutional principles underlying our form of government, namely: (1) Congress cannot delegate its legislative powers; (2) Congress cannot confer judicial powers, except upon courts established in the manner provided in the Constitution; and (3) Congress cannot confer non-judicial powers upon a duly established court.

In framing any congressional legislation vesting in a commission power to fix or control the charges of railway companies in respect of interstate commerce, it is essential to take into consideration the following propositions:

1. Unreasonably high rates are illegal. A public carrier is prohibited by the common law from making any unreasonably high charge, and this common law prohibition has been reinforced by the Interstate Commerce Act as to all interstate rates of railway companies. Congress has also strictly prohibited interstate carriers from making any unjust discrimination of any kind. These statutory prohibitions undoubtedly are constitutional and

valid.

2. The states have power to regulate domestic rates. It is settled by the decisions of the Supreme Court of the United 2 Art. I. § 9.

1 Art. I. § 8.

8 Maximum Rate Case, 167 U. S. 479, 501.

States that the legislature of a state can regulate the charges of railway companies for the transportation of passengers and freight wholly within the state.1 However, inasmuch as the power to regulate interstate commerce is vested by the United States Constitution in Congress, a state cannot regulate the charges in respect of interstate commerce.2

The power of a state to regulate the charges of railway companies in respect of transportation wholly within the state is subject to the Fourteenth Amendment of the United States Constitution. Accordingly, a state statute, or a regulation made under authority of a state statute, limiting or fixing the rates of a railway company within the state in such manner as to deprive the company of reasonable compensation, would be in violation of the Constitution.3

3. Congress has power to regulate interstate rates. The power of Congress to regulate the charges of railway companies in respect of interstate transportation is not necessarily coextensive with the power of the states to regulate charges in respect of domestic transportation. The power of Congress is based wholly upon the affirmative grant by the Constitution of power to regulate interstate commerce. The several states not only have the power to regulate domestic commerce, but they possess all other legislative powers that are not taken away by the Constitution of the United States. Congress cannot base its power to regulate charges of railway companies in respect of interstate transportation solely upon the principle established by the decision in Munn v. Illinois. An act of Congress regulating rates of a railway company cannot be sustained unless it is a regulation of interstate commerce within the meaning of the Constitution; nor can it be sustained if it gives a preference to the ports of one state over those of another, or if it deprives the railway company of liberty, or property, without due process of law.

While, no doubt, Congress can prohibit railway companies from charging more than reasonable compensation for the services rendered by them in interstate transportation, it has not unlimited power to interfere with them in their interstate transportation, or

1 Munn v. Illinois, 94 U. S. 113; Chicago, etc., Ry. Co. v. Iowa, 94 U. S. 155, and subsequent cases.

2 Hanley v. Kansas City S. Ry. Co., 187 U. S. 617. Smyth v. Ames, 169 U. S. 466.

to exercise unlimited control over interstate railway companies in the use of their property, or in the transaction of their business. It is well settled that the Fifth Amendment and the Fourteenth Amendment not only prevent Congress and the several states from actually confiscating property or destroying its value, but also protect the liberty of contract and the liberty of the owner of property in its use and enjoyment.1

4. Neither Congress, nor a commission created by Congress, can fix the rates of a railway company solely on the basis of the value or of the cost of its property rates can be fixed only on the basis of allowing the carrier to charge in each case reasonable compensation for the services rendered.

The property of a railway company is, practically, of no value except for railway purposes, and its value depends wholly upon its earning capacity when used for such purposes. This earning capacity, in turn, depends wholly upon the rates which the company can charge, the volume of its business, and the expenses of doing that business. It would, therefore, be illogical to attempt to fix the rates of a railway company on the basis of the value of its property. The value of the property is fixed by the rates and not the reverse. In Smyth v. Ames 2 the Supreme Court said that "the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public"; but it is obvious from the context that the word "value" was not here used in its usual

sense.

At common law the reasonableness or unreasonableness of a rate charged by a railway company does not depend upon the original cost of the property used by it, nor upon the cost of reproducing a similar property. There is no rule of law limiting the income of a carrier according to the cost of its property. The question in each instance is whether the rate charged by the carrier requires the payment of more than reasonable compensation for the service rendered. A carrier cannot charge more than reasonable compensation for the service rendered, merely

1 Lake Shore, etc., Ry. Co. v. Smith, 173 U. S. 684, 691, 697; Allgeyer v. Louisiana, 165 U. S. 578; Lochner v. New York, U. S. Supreme Court, October Term, 1904. 2169 U. S. p. 546.

8 Cotting v. Stock Yards Co., 183 U. S. 79, 95, 97; Canada Southern Ry. Co. v. International Bridge Co., 8 App. Cas. 723, 731.