Salt Lake City National Bank v. Robert J. Golding.

levied upon National Banks, except by the express provisions of the act permitting it to be done. That the exceptions contained in section 95, allowing shares in any such banking association to be assessed for taxes as the personal property of the owner or holder, is, in its terms, confined to States, and therefore does not confer upon Territories any authority to assess or tax such shares. This being the only form in which individual property in such banking associations is allowed to be taxed, under the act of their incorporation, it is insisted that a Territorial Legislature has no power to authorize the assessment and collection of a tax upon either the capital stock or shares of stock in a National Bank. The capital stock of a National Bank and shares in the bank are different things, as to which we shall have occasion to say more in a subsequent part of this opinion, but now we propose to discuss the correctness of this proposition in reference to shares in a National Bank. The National Banking Act was framed for two purposes: One was to furnish suitable fiscal agencies and safe depositories for public moneys for the Federal Government, and the other, to provide a National currency for the people of the United States, based upon National securities and guaranteed by the United States. To accomplish this end by inducing the organization of such associations, the privilege of banking was conferred upon them, which, under the restrictions imposed by said act upon other banking institutions, amounts almost to a monopoly of the business of banking in the whole country. The result is that the vast property which is represented by banking capital, and the profits of a business which permeates every community and vocation, and whose profits are proverbially good and often large, is centered in these National Banking Associations. In the absence of express legislation by Congress, providing for and permitting it, neither a National Bank which is a public depositary or financial agent of the Federal Government, nor United States bonds, constituting in whole or in part its capital stock, can be taxed by authority of a State. In McCulloch v.

Salt Lake City National Bank v. Robert J. Golding.

State of Maryland, 4 Wheaton, it was determined by the Supreme Court of the United States that a law of Maryland, imposing a tax on the operations of the bank (a branch bank of the United States), was unconstitutional. See Curtis' Decisions of Sup. Court of the U. S., vol. 4, p. 415; 4 Wheaton, 318, and in Weston and others v. The City Council of Charleston, it was decided by the same court that a tax on stock of the United States, held by an individual citizen of a State, is a tax on the power to borrow money on the credit of the United States, and cannot be levied by or under the authority of a State, consistently with the Constitution. Ib., vol. 8, p. 171; 2 Peters, 463.

These cases settled principles which, both in the reasoning upon which they are based and in the conclusions announced, have been repeatedly re-affirmed by the Supreme Court of the United States, and have been long accepted in the courts of this country as established law.

The act of Congress of February 25, 1862, section 2, provides: That all stocks, bonds and other securities of the United States held by individuals, corporations or associations within the United States shall be exempt from taxation by or under State authority. In view of this rule, established by authority and embodied into statute law of the United States, it was doubtless thought by Congress in enacting the National Banking Act, unless they intended to withdraw all the banking capital of the country from State taxation, to be proper, if not necessary, to express by the terms of the act itself the subject matter as well as the measure of taxation by the State of the banking associations to be incorporated under that act. The franchise of banking has always been recognized as the legitimate object of taxation, and as the purpose and tendency of the National Banking Act was to draw to National Banks all capital invested in banking, and as they were institutions incorporated under an act of Congress with a view to certainty and protection to the banks themselves and justice to the communities in which they might be located, it was expedient, and

Salt Lake City National Bank v. Robert J. Golding.

in the case of the States, necessary to express the mode and the limit of taxation by the States of these institutions, by the express terms of the act of Congress authorizing their creation.

By the terms of the act of Congress, 95th section, Territories are not included, and it is insisted that this is the provision in the act which enables the States to tax shares in National Banks, and that without it they wouid have no power to tax them, and that it follows a fortiori that Territories upon whom no such power is conferred by the act cannot tax these corporations in any form. This proposition, the most important in the case under consideration, we propose as briefly as is consistent with perspicuity to discuss. A State cannot tax a National Bank which is the financial agent or public depository of the Federal Government, because, as such, it is one of the agencies created and used by the Federal Government for carrying out or exercising powers conferred upon it by the Constitution of the United States, and because a State is a sovereign power in this regard, independent of and beyond the control of the Federal Government, and as the power to tax all things within the scope of its authority is in a State, limited only by its discretion, the power to tax the means which the Federal Government adopts for the exercise of its constitutional powers is inconsistent with the free and unrestrained use of those means by the Federal Government, and consequently is repugnant to the Constitution of the United States, and as the Constitution of the United States, and the laws passed in pursuance thereof, are supreme, a power claimed for a State incompatible therewith must be unconstitutional and void. The foundation of the rule and substance of the reason which supports it is that a State as a sovereignty is without and beyond the control of the Federal Government in the exercise of its taxing powers, and that to admit the right in a State to exercise this power upon constitutional agencies of the Federal Government might impede, obstruct or destroy them, and thus, by indirection, clothe the

Salt Lake City National Bank v. Robert J. Golding.

States with the power to defeat the ends and objects of the Federal Government. A reference to authority will illustrate and enforce this proposition with a clearness and force which precludes doubt upon the subject. Referring to McCulloch v. State of Maryland, 4 Wheaton, Weston v. City Council of Charleston, 2 Peters, and a number of other kindred decisions, Mr. Justice WILSON, in Bank of Commerce v. New York City, 2 Black. 633, says: "The conclusive answer to the attempted exercise of State authority in all these cases is that the exercise is in derogation of the powers granted to the General Government within which it is admitted it is supreme."

That government whose powers, executive, legislative or judicial, whether it is a government of enumerative powers like this one, or not, are subject to the control of another distinct government, cannot be sovereign or supreme, but subordinate to and inferior to the other. 2 Black. 633, 634.

In National Bank v. Commonwealth, 9 Wallace, the court says: But it is argued that the banks being instrumentalities of the Federal Government by which some of its most important operations are conducted cannot be subject 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 McCulloch v. State of Maryland has been repeatedly affirmed by this court. But this 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 State. 9 Wallace, 361.

There is no express constitutional prohibition against taxation by the States of these instrumentalities of the Federal Government, nor is there anything in the objects proposed to be taxed exempting them from taxation, nor is there any limitation in a general point of view of the power of a State as sovereign to levy taxes at discretion. The only foundation

Salt Lake City National Bank v. Robert J. Golding.

or support which the rule has is that the exercise of such a power by a State is incompatible with the free exercise of the constitutional powers of the Federal Government and repugnant to the constitution of the United States, because the power of taxation in a State is independent of the control of the General Government. Does this rule extend to Territorial Legislatures? We think not; because neither the rule nor the reason of the rule applies to them. The States derive their powers from the people of the States, and are sovereign and supreme within their territorial limits, except so far as they have ceded constituents of that sovereignty and supremacy to the Federal Government. They are only subject and subordinate to the power of the United States in the particulars expressly declared or necessarily implied in the Constitution of the United States.

The Territorial Governments are the creations of Congress, derive all their powers from them, exercise them subject to their disapproval, and hold them at their will. Such governments can levy no taxes of any kind contrary to the will of Congress, and consequently, by the rule to which we have above referred, in reason or in principle, can have no application to them. If, then, the inhibition imposed upon the States does not rest upon the Territories, then, as all the powers of the Territorial Governments are delegated by Congress, we must look to the grant in its organic act to determine whether it has the power to levy a tax upon National Banks. The power to levy taxes is one of the leading if not the highest attributes of legislative power. It is said to be an evidence of sovereignty, without which no government could exercise the powers delegated to it. Blackwell on Tax Titles, 2; McCulloch v. State of Maryland, 4 Wheaton, 316, 428; Providence Bank v. Billings, 4 Peters, 514, 561, 563.

The power of Congress to create Territorial Governments, and delegate to them the powers of government necessary and proper for the condition of the people of the Territory, is too well settled to require authorities to support it.