US SUPREME COURT DECISIONS

1. A state tax upon income is not to be deemed an interference with interstate commerce merely because the income is derived from a source in another State. P. 296 U. S. 419.

2. A state tax is not invalid as an interference with interstate commerce when its effect upon such commerce is merely collateral and incidental. Id.

3. A Vermont law laying a general income tax of 4% upon the dividends received by residents from corporations, exempts dividends from corporation business done in the State, measuring the exemption by the ratio of the net income of the corporation earned within the State to its entire net income. Corporations, on the other hand, are subjected to an annual franchise or privilege tax of 2% of the net income attributable to their local business, in addition to taxes upon their local tangible property.

Held: chanrobles.com-red

Page 296 U. S. 405

(1) That the exemption does not produce unconstitutional discrimination against recipients of dividends earned outside of the State. P. 296 U. S. 419.

(2) The evident intent and general operation of the legislation are to adjust with a reasonable degree of equality the tax burdens it imposes on shareholders, the exemption of locally earned dividends being the practical equivalent of the burden which the shareholders receiving them must bear indirectly because of the local taxes laid on their corporations. P. 296 U. S. 420.

4. Conceding the power of a State to impose double or multiple taxation, the avoidance of that result cannot be condemned as an arbitrary basis for apportioning tax burdens. P. 296 U. S. 420.

5. In testing whether the taxes imposed by a State on its residents discriminate unduly, in violation of the equality clause of the Fourteenth Amendment, the tax burdens imposed upon them by other States are irrelevant. P. 296 U. S. 420.

6. Absolute equality in taxation is not required by the Fourteenth Amendment; the boundary between permissible and forbidden inequalities depends upon the material circumstances in each case. P. 296 U. S. 422.

7. A Vermont law taxing income from interest-bearing securities exempts interest received on account of money loaned within the State at a rate of interest not exceeding 5% per annum, evidenced by promissory notes, mortgages on real estate, or bonds for deeds. Residents whose income is from like loans made outside of the State are not allowed the exemption.

Held:

(1) That, on the face of the statute, the discrimination is purely arbitrary, being based entirely upon a fortuitous circumstance- the place where the loan is made, which has no substantial or fair relation to the object of the Act, namely, the raising of revenue. Pp. 296 U. S. 422, 296 U. S. 424.

(2) Assuming that the classification would be valid under the equality clause of the Fourteenth Amendment if the exemption were made to depend not only upon the making of the loan within the State, but also upon the investment of the money loaned in property having its situs within the State, the Court is not at liberty to read such additional condition into the statute. P. 296 U. S. 424.

(3) The proposition that money loaned within the State will generally be invested there is a pure speculation, without warrant in the record or in the judicial knowledge of the Court. P. 296 U. S. 425. chanrobles.com-red

Page 296 U. S. 406

8. A statutory discrimination which on its face is arbitrary cannot be upheld by simply surmising that it subserves some unnamed public interest. P. 296 U. S. 425.

9. Classification for the purposes of taxation, to comply with the equal protection clause, must be founded upon pertinent and real differences, as distinguished from the irrelevant and artificial. The test is whether the taxing statute, arbitrarily and without genuine reason, imposes a burden upon one group of taxpayers from which it exempts another, both of them occupying substantially the same relation toward the subject matter of the legislation. P. 296 U. S. 423.

10. Even if beneficial to the State, a discrimination whereby its citizens who lend money outside of the State are taxed on the income, while those who make like loans in the State are not taxed, violates the privileges and immunities clause of the Fourteenth Amendment. Pp. 296 U. S. 426, 296 U. S. 433.

11. As citizens of the United States, our people are members of a single great community consisting of all the States united, and not of distinct communities consisting of the States severally. No citizen of the United States is an alien of any the Union, and the very status of national citizenship connotes equality of rights and privileges, so far as they flow from such citizenship, everywhere within the limits of the United States. P. 296 U. S. 426.

12. A citizen of the United States is ipso facto and at the same time a citizen of the State in which he resides. While the Fourteenth Amendment does not create a national citizenship, it has the effect of making that citizenship "paramount and dominant" instead of "derivative and dependent" upon state citizenship. P. 296 U. S. 427.

13. Whatever latitude of state power might exist under Art. IV, § 2 of the Constitution, providing that "The citizens of each State shall be entitled to all privileges and immunities of citizens in the several States," a State cannot, in view of the privileges and immunities clause of the Fourteenth Amendment, abridge the privileges of a citizen of the United States, albeit he is at the same time a resident of the State which undertakes to do so. P. 296 U. S. 428.

14. The same Act of a state legislature may contravene more than one provision of the Constitution -- e.g., it may infringe the right of a citizen under the commerce clause and also his privileges and immunities as a citizen of the United States. @Cf. 73 U. S. 430.

15. The right of a citizen of the United States to engage in business, to transact any lawful business, or to make a lawful loan of money chanrobles.com-red

Page 296 U. S. 407

in any State other than that in which the citizen resides is a privilege attributable to his national citizenship. A state law prohibiting the exercise of any of these rights in another State would therefore be invalid under the Fourteenth Amendment; a discriminating tax upon such activities is necessarily void even if the taxing State will thereby help its domestic business. P. 296 U. S. 430.

16. As the Fourth Article of the Constitution requires each State to accord equality of treatment to the citizens of other States in respect of the privileges and immunities of state citizenship, so the privileges and immunities clause of the Fourteenth Amendment safeguards citizens of the United States against any legislation of their own States having the effect of denying equality of treatment in respect of the exercise of their privileges of national citizenship in other States. P. 296 U. S. 431.

17. The right of a citizen of the United States resident in one State to contract in another may be a liberty safeguarded by the due process clause and at the same time, nonetheless a privilege protected by the privileges and immunities clause of the Fourteenth Amendment. In such case, he may invoke either or both. P. 296 U. S. 433.

18. A state law which allows a personal exemption from the taxable income derived from interest-bearing securities but withholds it if the taxpayer receive also income of another kind, and, in that event, gives to him a larger personal exemption in the computation of his tax upon the latter kind of income is consistent with equal protection of the laws, notwithstanding the fact that, in a particular tax year, the taxpayer, because of allowable deductions from gross income, paid no tax upon the latter kind of income and had no occasion to resort to the larger exemption applicable to it. P. 296 U. S. 434.

19. The question of equal protection must be decided in respect of the general classification, rather than by the chance incidence of the tax in particular instances or with respect to particular taxpayers. P. 296 U. S. 436.

107 Vt. 28, 175 A. 352, reversed.

Appeal from a judgment which affirmed a judgment rendered by a county court in favor of Harvey, Tax Commissioner, in a proceeding under the Income and Franchise Tax Law of Vermont for the revision of an income tax assessment. chanrobles.com-red

Page 296 U. S. 416