State Of New York et al v. Mnuchin et al

Filing 47

DECLARATION of Owen T. Conroy in Support re: 44 CROSS MOTION for Summary Judgment .. Document filed by State Of Connecticut, State Of New York, State of Maryland, State of New Jersey. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28, # 29 Exhibit 29, # 30 Exhibit 30, # 31 Exhibit 31, # 32 Exhibit 32, # 33 Exhibit 33, # 34 Exhibit 34, # 35 Exhibit 35, # 36 Exhibit 36, # 37 Exhibit 37, # 38 Exhibit 38, # 39 Exhibit 39, # 40 Exhibit 40, # 41 Exhibit 41, # 42 Exhibit 42, # 43 Exhibit 43, # 44 Exhibit 44, # 45 Exhibit 45, # 46 Exhibit 46, # 47 Exhibit 47, # 48 Exhibit 48, # 49 Exhibit 49, # 50 Exhibit 50, # 51 Exhibit 51, # 52 Exhibit 52, # 53 Exhibit 53, # 54 Exhibit 54, # 55 Exhibit 55, # 56 Exhibit 56, # 57 Exhibit 57, # 58 Exhibit 58, # 59 Exhibit 59, # 60 Exhibit 60, # 61 Exhibit 61, # 62 Exhibit 62, # 63 Exhibit 63, # 64 Exhibit 64, # 65 Exhibit 65, # 66 Exhibit 66, # 67 Exhibit 67, # 68 Exhibit 68, # 69 Exhibit 69, # 70 Exhibit 70, # 71 Exhibit 71, # 72 Exhibit 72, # 73 Exhibit 73, # 74 Exhibit 74, # 75 Exhibit 75, # 76 Exhibit 76, # 77 Exhibit 77, # 78 Exhibit 78, # 79 Exhibit 79, # 80 Exhibit 80, # 81 Exhibit 81, # 82 Exhibit 82, # 83 Exhibit 83, # 84 Exhibit 84, # 85 Exhibit 85, # 86 Exhibit 86, # 87 Exhibit 87, # 88 Exhibit 88, # 89 Exhibit 89, # 90 Exhibit 90, # 91 Exhibit 91, # 92 Exhibit 92, # 93 Exhibit 93, # 94 Exhibit 94, # 95 Exhibit 95, # 96 Exhibit 96, # 97 Exhibit 97, # 98 Exhibit 98, # 99 Exhibit 99, # 100 Exhibit 100, # 101 Exhibit 101, # 102 Exhibit 102, # 103 Exhibit 103, # 104 Exhibit 104, # 105 Exhibit 105, # 106 Exhibit 106)(Conroy, Owen)

Exhibit 20

ROOT FOR ADOPTION OF TAX AMENDMENT: No Danger to State Bonds in ...
Special to The New York Times.
New York Times (1857-1922); Mar 1, 1910; ProQuest Historical Newspapers: The New York Times
pg. 4

ROOT FOR ADOPTION
OF TAX AMENDMENT
No Danger to State Bonds in
Income Provision, He Argues,
Answering Hughes.

READ IN ALBANY

LETTER

'

~
-- .:
many. while the rew, oa.tef:Y entrenched
behind the rule of apport1on.ment runong the
States on· the basis of numbers, are per-·
milted to evade their share ot respon•lblllty
!or the support ot the Government ordained
tor the.protection of the rights of all.
It was so evidently Impossible to colleot
an Income tax by apportionment among
the States according to population that
the general judgment of the oountry confirmed the opinion that the decision in
the Polack case had practically taken
away from Oengress a power of vital Importance to the General Government-'a
power the exercls6 of which had, at least
In one time of peril, proved essential to
the Nation's life.
.
The . attention of the country was
sharply called to the need ot more Go,.•
ernment revenue tor the tlrst time atter
the Pollock case by the decrea.se ot customs and -internal revenue receipts and
the rapidly mounting deficit which followed the financial panic of 1007, and In
the extraordinary session of Congress

which h<>ga.n March 15, 1000, when the

:State and Municipal rssues, He Says, revised Ta.rift bill came Into the Senate1
an amendment to the bill wa.s lntroctuce11
Are Protected by the General Prlncl- reproducing in substance the old income
tax prnvlslons of 1894 which the Supr4)me
ples of the Federal Constitution.
Court had held to be Invalid both as to
SPccial lo TM N11JJ York Times.
ALBANY, Feb. 28.---Senator Elihu Root's
reasons for thlnltlng that the proposed
amendment to the Federal Constitution
to provide for an lncome tax should he
adopted was read to the Senate to-night
by Senator Frederick M. Davenport, to
whom Mr. Root had written at length explalnini; his attitude.
Senator Root. who advocated the amendment when It was before Congress last
; Ear, ari;u<>d against lne pos!tlon of Gov.
Hughes, who, in submlttlng the matter
to th'Ol Legislature. declared that by the
language of th'l proposed amendment the
States seemed to glve to tile National
Government the pawer to tax Incomes deri~ ed from State and municipal bonds.
The Governor, whlle he expressed api,,roval ot an Income tax, opposed this
pa!'ticular amendment because it pro\'iderl a. tax on Incomes .. from whatever
s<•urce derl\·ed."
Senator Root, ln Ills
cltter. took the ground that the proposed
am~ndment
did not give th.a National
Goverr.ment any new power. State and
inuiiic~pal

bonds.

he

argued.

were

ex-

cluded from the at>plleatlon of the tax
by general and establlshed constitutional
principles Inherent In the ven· nature or
the dual Government of the t.:n!ted
States.
!Oenator Root" s letter follows:
THE .J--'NITED STATES SENATE,
' ' ashington, D. c., Feb. 17. 1910.
l\Iy Dear Senator:
E'ince our conversation last month I
ha,·e given much consideration to the
scope and effect of the proposed Income
Tax amendment to the Constitution of the
t:nlte<t States.
!•Iueh as I respect the opinion of the
G ?Vernor of the StatE>. 1 cannot agree
rnth the view expres~ed in his special
message o! Jan. 5. and as I advocnted in
the S0na..te the resolution to submit the
proposed amendment. it seems appropriate
tlut I f'hould state my view of Its effect.
The proposed amendment Is In these

words:
Artlcle 16-Th<l Congress Eball ha'ite power

income derived from real estate and a.s
to Income derived from persona.I property.
The a vowed_ and necessary ·effect of Including such provisions In the new ta.rift
law would be to present again to the. Supreme. Court the same queattons which
had been decided in the Pollock case and
to challenge a reversal or U1elr decision.
Thereupon the resolution tor the submission of this amendment was Introduced
In the Senate and was passed by Congress.
The proposal followed the suggestions
of the Supreme Court In th,e Pollock case.
The ev1l to be remedied was avowedly
and manifestly the Incapacity of the National Government resulting from the de..
elslon that Income practically could not
he taxed when derived either from real
estate or from personal property, although it could be taxed when derived
from business or occupation.
The terms of. the amendment ue apt
to cure that evil and to take away from
the different classes or Income conaldered
by the court a. practical Immunity from
ta..'<atlon based upon the source from
which they we-re derived.
There w!LS no question Iii Congress or ln
the courts. or In the country about the
tsxatlon of State securities. No one
claimed that the Inability of the General
Go\·ernment to tax them was an evil.
The lnablllty to true them did not arise
from the terms of the Const!tutlo.p, but
from the fa.ct that, being the necessary
instrument~ ot ca.rl")l'lng on other and
soverel$11 uovernments they were not the
proper~ubject of National taxation, and
that, tlierefore, no provisions of the Constitution, however Wide the scope of their
language, could be held to apply to euch
securJtles or to the Income rrom them.
Judge Cooley, In his work on constitutional law, says:
·
The power to tax, Whether by the United
States or by the States, Is to be construed
In the Ught or. and limited by, tile tact
thnt tne States and the Union are insepatab!e, •rnd that tbe Constitution contemplates
tho pe-rpetuat mntntennnce ot each wtth all
Us constltut!onat po""~ern unembarrassed
and unimpaired by any adtlln of tbe otller.
The taxing power of the Federal Government doe-s not therefore extend to the means
or agencies through or by the employment
<>r ,,.lllch the States perform their essential

functions. &c.
This rule or construction has been
maintained for generations. It is undisputed; it was referred to Vw-1th approval

to lay and C"ollecr ta.:s1.7s on Incomes. trom
whatt:ver source derived, wlthout apportionby the Justices who wrote and delivered
meat n.mong thA several States und without
the opinions in the Pollock case. both
regard to any census or enumeration.
for and aga.Jnst the judgment. rt has
TN!" objection made to 'the amendment been declared again and again by the

ls 1hat thls wltJ confer upon the .National Supreme Court to be not open to quesGo\'ernment the power to tax incomes tlon. It Is a rule o:- construction just as
Ei.:rivt"d fro.n bonrls is~ued by the States controlllng In defining the scope of the

or und.-:r the authority of thelllta..tes. nnd proposed amendment .n.s it Is in defining
Will pla,'e the borrowing capat'ity of the the scope of the existing pro••fslons. UnS.ra~e and its Go'\·crnmental agencies at der it. from the earliest Umes of our

tne merry of the Federal taxing power.
I do not find ln the amen<iment any
svch meanlng Oil effect. I do not consider that the amendment In any degree
wtatC'\·er will enlarge the taxing power of
the .:Satlonal Government or will have any
I (lffe!"'t e>xcC"pt to rC"litH~e the exercise of th-ti.t
taxing pov.·er from the re'luirement that
tb(' tax shall bt> apport!onE'd among the
~.,,-u:i.1 States.
The effect of th<' amendment will bf', In m;.· vi,.w, the same as lf
1t "aid . . . The United States may Jay a
t:-.x on lneomes without apportioning the
tnx, and thb :-;hall be applkable whate,·er
the source 0f the Income subjected to the
tax." leaving the question, ··'What Ineomes arc subject to National taxatlon 1 "
to be determined by the samo principles
'Ind rulPs which are now applicable to the
determination of that question_
H we wer<' to constru<" the proposed
auH"ndment only by a critical examlnation of lts v.·ords. the \•lew upon which
the obJE>rUon is ba:;ed would be reached
by pra.etlca.l!y cutting the provision In
two and reading it ns If It read, •· the
Congress shall have power to lay and colkc t taxes on In Mmes !rom what<'ver
sour~o deri,·cct," without tl1e concluding
words. But we are not at Hbertr to do
tllis. The amendment consists of a single
sentence. and thfl whole of It must ue
rr-a<l together. 1t expresses but a single
!dea. aud that Is that the tax to which it
reJ:;_tes must be laid and collected without !ipportionmcnt among the several
Stat<'~ '1.nd without regard to nny census
vr enun1eration vrhHe the n·ords " from
-·h"t·'"'er so11r":.,, derh-ed .. are obviously
..
~
c
latro1luc-erl to make- the exemption from

Go\·ernment, the apparently unlimited
taxing power conferred by the tertTIB o:I'
the Constitution has been held not to
aj>ply to the Jnstrumentallt!es of the State.
t:nder It acts o( Congress. which, by
their express terms. appeared to Include
infitrumentu.Hties of State Go"·ernment ..
have uniformly been held not to Include
thf'm.
This unl!orm, Jong-eetabllshed,
and Indisputable rule applied to the construct!on of our Constitution-a rule which
has b<>en declared to be essential to a.
continuance of our dull.I system of gov·
ernment-forblds that the words of that
lnstrun1ent conferring the power of taxatlon sh'ould be deemed to a.pp!{ to anything but the proper subjects o National
taxation. L'nder lt we are forbidden to
apply the words .. froni whatever source
derived .. In tho proposed amendment to
auy of tho lnstrumentalltles o.f State Government.
This amendm.-nt,. wlll be no new grant
of power. The 9ongress already·- hns
power to impose taxes on tncOJ;nes 1'rom
whatCl\'er source derived,. eubje¢t to the
rule of construction, which excludes State
securities !rom the operation of the power; but the taxes so Imposed must be apportioned among the States. Under the
proposed 1<mendment there will be the
same and no greater power to tax Jnt~omes from v.~hatever source d~rlved. subJect to the same rule of construction. but
rellel'ed from the requirement that the
tax !<hall be apportioned.
It appears ther<>fore that ·no danger to
th
o
I st
t lltl
f th
e
e
Statepowers apprehended fromes o adopls to be r n rumen a
the
tlon or the amendment.

«nd applicable to all taxes on Incomes.

amendment w<>re rejected by the LegJs-

-

c

•

•

the rttl(::' of apportionment compr<"hensive

It "~ould be

cause for regret

If

tbe

lature or :NC'\'\"' York.
crl!kal <>xamination of words. This proIt Is said that n ver~· lar,ge part or any
'ision as ~tr. Ju!!:tice Bradley said of t~e- income tax under thC" an endment would
\\·e

a.r~

hOWf'V~r.

not left.

to a

Dlt'>re

C'onst1tutinn In the Legal Tender cas<.'s. IS
" to be inlerpr<>ted In the light of histon· and of the circumstances of the
pc•1.-,0d rn. which It was framed_" Ju~!lce
Story said of another clause of the ' on~tl:u-tion, !n Briscoe against the Bank of
Keutu oky. n 1 .Peters :-;:1:;,)
~·\n<i I m<:>an to 1nslst that the hlstnrl· ot
0

1'e paid by c-ltlzens of New York. That ls
undoubtedly true, but there Is all the more
reason why our Legislature should take
special care to <':<elude every narrow and
s<>lf1~h motlve from influence upon Its
p.ctlon and should consider the proposal In
a sr-irlt of broad Xatlonal patriotism and

ghould net upon it for the best interests
of the v;,rJioJe country.
The n~1n reason why the cJtlzens ot

1c.. nltoi:. be-fore and during the Rcvolution an.1 down tn the ·very time ot' thead<Jpt.ion of the cons[ftutfoni constitutes

!\"'e"· Yr " ,v!li pay so large a part of the

or the 1nstrumr-nt; und to <ltarega-rd it
would ue tfJ bHnd ourseh·es to the practical

fir.nnc."ial and comrnercia.J ce!itro ot a great
countrv vdth vast resources and industrial

the

t •0

tht> highest n.nd most auUh~nuc evidence to
which '\.Vt' (•an re&ot"'t to tnterpr(>t thli:; clause

tfi•_·· 1~.
-"

hnt .1..,,..,,_
~"ow York Cltv

[a

..,

the ....
~htef

rnischi·?fs 't'-'htch lt was me.ant lo suppress.
and :o forget all the groat purposes to

which !t was to be applied.

acth·H)·. For many yo-ars AmPTicans engaged !n developing •he wealth of all parts
of the country have been going to New

This view must necess:;ariJy be appUed

York tn secure capttal and market their

to th» proposed amendm<>nt If lt be adopt- sl'curitles and to buy their supplles. Thou-

rt

t>d.

wlil be construed in the Jlght of snnds of nzen ~-ho hav-e 11mass-ed fortunes

the judicial and political hll'tory which
Jed to the proposal and which appears
upon !he publlc records of our Governm<'nt.
'What lg that history? The Const!tutlon
Of 1787 conferred upon the );atlonal Government thn power of taxation without
anv limit whate,·er except that taxes on
exports were prolllbitea.
The method of exer!"lsing the power,
h<>wet·er v.·as suhjected to two limltations. one, that lmports, duties. and exclses should be uniform, and the other.
that direct taxes should be apportioned

ln all sorts of enterprlsE's in other States
h:n·e p:one to New York to llve be<"ause
they ]Ike the l!fe of the city or because
thP.lr distant enterprises require representatlon at the financial centre. The Incomes of New York are In a great measure derived from the countr:,- at large.
A continual stream of wealth sets toward
the great cltv from the mines and manufa.-to1ies and railroads outside of New
York. The l"nlted States is no longer a
mere group of separate communities embrac<>d In a polltlcal union; It has be·
come a product of organic growth, a vast

provi!<!ons were as follows:

cludlng the whole country;
tfon or Kew York City to
ganization of which It 1s
great source of her wealth

among

the

States.

~rhe

apportionment

ArUcl'" I.-.SF!ction 2-Reprc.senta.ti\·es and

;!~~~tS~~e~n~~ 1 ~~ rirr~t"i~~~~ 1 ~:~~"'~. 1 i~~

in thJs Lnton. according to th(>Jr respectJve
numbers. &t·.
(Amended, but not In thJs
res:pect. by the Fourteenth Amendment.>
~eetion

O-Xo cap1t.atJon or othi;.>r- direct
lax shall be laid unless tn proportion t.a the
r~n~us or cnumeratlon LeCore dJrccted to
be taken.
For more than a hundred years after

industrial orgnnizatton covenng ano. ln-

reason -vihy her
a

and the relathe whole ora part is the
and the chlet

citizens wUl pay so great

part of ·an income tax.

We have the

\vealth because behind the city stands the
country. \\."e ought to be wlllln~ to shnro
the butdens of the NaUonal Government
Jn the sa.n1e proportion in whlch we share
its henefits.

'l'he circumstances that originally justlthe adoption of the Constltlltion nJ.riom; fied the establi"hm"nt of the rule <If aptax Jaws of Congress were, from time to portlonment in tho Constitution have long
time. brought before the coura:; up.on ob- since passed away. It ls universally con ...
jections that they lmposed direct taxes t•f'dcd :hat Its appllciulon to existing conln \'lolatlon of the rule of apportionment. ditlons would be so unjust and Inequitable
The dec:isions of the courts uniformly sus- as :o i.>e impossible. The power of taxatai~"d these Jaws, from the Hylton case, tivn whlsh the rule makes It lmposs1ble
in llJfl, which sustained an upapportloned for. the Nation to exercise may be again,
tax on carriages, (:~ Dallas HJ,) to the 1 r..s lt has once been, vital to the preservaSprlnger case. in 1880, which sustained tion of National exlatence. It would be
an unapportloned tax on Incomes. , (102 most unfortunate If the se,·era.l States of
'L. s. r.86.J
·
the L'mon were to Insist upon the conIn the meantlme numerous Jaws were ttnur.nc<l of this unjust and useless l!mltapa:::sed and enforced imposing taxes on t1on upon the necessn.ry pow~rs orlginally
incomes v:itllout apportionment; and a and wisely granted to the National Govgreat part .if the means for carrying on ernment.
the civil ''mr was derived from such
'\Vlth kind regards. I am always,
taxes_
Very sincerely yours,
In the yfar 1805 howe,·er an income
ELIHU ROOT.
tax la ...-· lndC1ded ·,;; the Wilson Tariff a.ct Hon. Frederlck M. Davenport,
of 1804 was brought before the Supreme
Senate Chamber.
Court ln the ca.•e of Pollock against the.
Albany, New York.
Farmers· Loan and --rru~t Company, and
In the Assembly after Senator Root's
in that case the court decided against the letter had been read by the clerk, Ed\Vln
Jaw. The case was heard twiee_ On the A. Merritt. Jr., moved that It be referred
first hearing a majurity uf the court to the Judiciary Committee and printed
held that a tax on Income derived from as an Assembly document.
I
real estate must be apportioned as a di-·
Daniel F. Frisbie, minority leader, secrect tax because a. tax on real estate It- onded the motion and said that It gave
sefr w;,uld be direct; and tile Judges di- h!m pleasure to listen to "such a sound
vlded equally as to whether a tax on argument from the lunlor United States
Income derived from· personal property Senator of Democra le doctrine." •
•
must ::.e apportioned. (157 U. S. 420.)
A resolution disapproving the Income
Upon the second hearini; or the case, tax amenl:Jme.nt Is now before the Senate
the court, by a majority of five to !our, Judiciary Committee.
held that a tax upon Income derived.from
personal property nrust be considered a
olrect tax and must be apportioned. (158
'L- s. 001.) AU tile Judges agreed how-

1

e'•er, that taxes on Incomes derived from

busln.,,•s or occupations need not bo apporuoiied. The effect of these decisions
'Vas thus described in one of tile minority
opinlors:
But t.he serious aspect

or- the.

pre.sent de-

cision ls that by a new interpretation of the

Constitution St so ties the ll!tnds at the

legislative branch o! the Government tbA.t
without an amendment of tba.t lm::strument,
or unless this court~ at some future time1
should return to the old theory of the Constitution. Congress cannot subject to taxa ..

t!on-however great the needs or pressing

nc~ess1tles ot the Government-either
tho luves•ed personal property. of tile country. bonds. stocks~ and Investments or1 an
kinds. or the Income arising trom -the renting ot real estate. or from the yJeid o!

the

pernonal

pfopcrty.

except

by the

grossly

unequal and unjust rule of ,apportionment
amor.~ the States.
Thus. imdP,e 1l'n.d _disproportioned burdelllJ aro placed upon :t110
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