State Taxation of Property Engaged in, and of the Proceeds From, Interstate Commerce
In this area of Constitutional Law the principle asserted in the State Freight Tax Case,[651] that a State may not tax interstate commerce, is confronted with the principle that a State may tax all purely domestic business within its borders and all property "within its jurisdiction." Inasmuch as most large concerns prosecute both an interstate and a domestic business, while the instrumentalities of interstate commerce and the pecuniary returns from such commerce are ordinarily property within the jurisdiction of some State or other, the task before the Court in drawing the line between the immunity claimed by interstate business on the one hand and the prerogatives claimed by local power on the other has at times involved it in self-contradiction, as successive developments have brought into prominence novel aspects of its complex problem or have altered the perspective in which the interests competing for its protection have appeared. In this field words of the late Justice Rutledge, spoken in 1946, are especially applicable: "For cleanly as the commerce clause has worked affirmatively on the whole, its implied negative operation on State power has been uneven, at times highly variable. * * * Into what is thus left open for inference to fill, divergent ideas of meaning may be read much more readily than into what has been made explicit by affirmation. That possibility is broadened immeasurably when not logic alone, but large choices of policy, affected in this instance by evolving experience of federalism, control in giving content to the implied negation."[652]
At the outset the Court appears to have thought that it could solve all difficulties by the simple device of falling back on Marshall's opinion in Brown _v._ Maryland;[653] and on the same day that it set aside Pennsylvania's freight tax by appeal to that transcendent precedent, it sustained, by reference to the same authority, a Pennsylvania tax on the gross receipts of all railroads chartered by it, the theory being that such receipts had, by tax time, become "part of the mass of property of the State."[654] This precedent stood fourteen years, being at last superseded by a ruling in which substantially the same tax was held void as to a Pennsylvania chartered steamship company.[655] A year later the Court sustained Massachusetts in levying a tax on Western Union, a New York corporation, on account of property owned and used by it in the State, taking as the basis of the assessment such proportion of the value of its capital stock as the length of its lines within the State bore to their entire length throughout the country.[656] The tax was characterized by the Court as an attempt by Massachusetts "to ascertain the just amount which any corporation engaged in business within its limits shall pay as a contribution to the support of its government upon the amount and value of the capital so employed by it therein."[657] And drawing on certain decisions in which it had sought to limit the principle of tax exemption as applied in the case of railroads chartered by the United States, it expressed concern that "the necessary powers of the States" should not be destroyed or "their efficient exercise" be prevented.[658] Three years later Pennsylvania, still in quest of revenue, was sustained in applying the Massachusetts idea to Pullman's Palace Car Company, a "foreign" corporation.[659] Pointing to the fact that the company had at all times substantially the same number of cars within the State and continuously and constantly used there a portion of its property, the Court commended the State for taking "as a basis of assessment such proportion of the capital stock of the company as the number of miles over which it ran cars within the State bore to the whole number of miles, in that and other States, * * *" This, said the Court, was "a just and equitable method of assessment;" one which, "if it were adopted by all the States through which these cars ran, the company would be assessed upon the whole value of its capital stock, and no more."[660]