MUNICIPAL BANK SHARES TAX.
The House then resumed the consideration of Mr. Kercheval's Municipal Bank Shares Tax bill [H. R. 170].
Mr. KERCHEVAL. Mr. Speaker: I was pleased to hear the honorable gentlemen from Monroe, (Mr. Buskirk), in his very able argument upon this bill, say that the question involved in its passage, is not a party or political question, but purely a question of law. In this opinion I fully concur, and in my argument I shall confine myself to that view of it.
The taxation of the bonds and other securities of the United States, is a totally different question from that of proposing to tax the stock of the National Banks, in the hands of the individual shareholders thereof," for municipal purposes. The Supreme Court of the United States has repeatedly decided that the bonds of the United States can not be taxed by State authority, because this would be to tax a page: 132[View Page 132] governmental power of the United States, to-wit, the power to borrow money, and would place the General Government at the mercy of State legislation. This principle of the non-taxability of Government securities by State authority, has, by a recent decision of the Supreme Court, been extended to the greenback currency of the country, so that a man holding greenbacks can not be taxed thereon by State authority, for State, county or municipal purposes. But this exemption from taxation by State authority, does not include either the issues or the stock of the National Banks. On the contrary, Congress has expressely enacted, and the Supreme Court of the United States has authoritatively decided, that the stock of these National Banks may be taxed, by State authority, in the hands of the individual owner of the stock, provided it is placed on an equality in this respect with the stocks of the banking institutions of the State, by whose authority the tax was levied. In other words, the State may tax the stock of the National Banks in the hands of the shareholders, but not at a greater rate, or to a greater extent, than they tax the stock of their own banking institutions. Not only has Congres so enacted, and the Supreme Court so decided, but in pursuance thereof, we do now tax National Bank stock in the the State, for State, County and Township purposes, under the act of 1867. But, by that act, it was, and is, exempted for municipal purposes; and this brings us to the real question at issue between the friends and adversaries of this bill.
That question is, why is this stock taxed for State and county purposes, and exempted for city and towns, or municipal purposes? The exemption is not certainly based on reason, or sound policy. Banks are always located in towns or cities, and are as much protected by municipal government as other property, and no property can, in view of its productiveness, better afford to pay taxes than the stock of these banks.
The only question remaining is, can it be legally taxed for municipal purposes? The opponents of the bill say it can not; we say it can.
On what grounds is the opinion based that this stock may be taxed for State and county purposes, and may not be for municipal purposes? The answer is this, that the State can not tax stock in the National Banks at a greater rate, or to a greater extent, than she taxes the stock in her own banks. Now, the opponents of this bill say that we have the dead carcass of a once live bank in this State, to-wit: the Bank of the State of Indiana, and that the stock of this bank of the State of Indiana, and its branches, can not be taxed for municipal purposes because you have expressly exempted it from such taxation by its charter, and, it being exempted, the stock of the National Banks is also from taxation for municipal purposes; cause you cannot tax them for any purpose for which you do not tax your own banks.
This brings us to the question, is the stock of the Bank of the State exempt from taxation for municipal purposes?
And this question again, depends upon the other question; whether the clause of the 15th section of the Charter of the Bank of the State of Indiana, which declares that the capital stock of said bank or branches shall not be taxable for municipal purposes is constitutional or not. If the exemption is constitutional, it being part of the charter has become a contract, and can not be altered, or repealed, without the consent of the Bank.
This exemption was passed in the interest of capital, as against labor, by a Democratic Legislature; and its constitutionality was sustained by a Democratic Supreme Court, in the face of that provision of the Constitution which declares: "The General Assembly shall provide by law for a form and equal rate of assessment and taxation, and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal excepting such only for municipal, educational, literary, scientific, religious or charitable purposes, as may be specially exempt by law."
Now let it be remembered that this requires a just valuation of all property, both real and personal, not simply for State taxation, or for township taxation, but for taxation in general, without any qualification except such property only as may be used for municipal, educational, literary, scientific, religious or charitable purposes. Now bank stock is not within this exemption, and the old Democratic Supreme Court, to sustain the exemption of the stock of the bank of the State from municipal taxation, had to resort to the theory that this provision of the Constitution, refers only to State taxes, and not to taxes levied for county, township or municipal purposes. That Court assumed that the equality assessment and taxation required by the Constitution is an equality of per cent-or rate, in the levy, and from this false assumption, they, go on to say, "Taxes for corporation purposes can not be equal for Township and County purposes can be equal." Of course the necessities of one County, Township, or City, will differ from those of another, and hence, one rate per centum will be necessary here, and another there. But the Constitution, when it requires a uniform and equal rate of page: 133[View Page 133]assessment and taxations, and a just valuation of all property, does not mean a uniformity in the per cent. levied, so that the percent. in one County for County purposes shall be the same as in another. But it does mean, as the present Supreme Court has decided (in 27th Ind. 230) that "the assessment and taxation must be uniform and equal throughout the locality in which the tax is levied." If the levy is for State purposes, the rate must be uniform and equal in all parts of the State, and if the levy is made, and so in the townships, towns and cities.
It was simply intended, says the Supreme Court, that the uniformity and equality of rate should be co-extensive with the territory to which the tax applies.
The absurdity of the opinion, that this uniformity and equality of assessment and taxation, required by the Constitution, only includes State taxes proper, is manifest, when we consider that the State taxes assessed do not amount to one-sixth part of the aggregate amount of the county, township, city and town taxes assessed every year. It is possible that the convention which framed the Constitution, should prohibit the Legislature from discriminating against one kind of property, or in favor of another, as to the two millions of State taxes assessed, and yet allow the General Assembly to levy twelve millions of taxes for local purposes, or on real estate alone, to the entire exemption of capital. Such is the result of the construction contended for by the opponents of this bill.
Mr. ZOLLARS saw in the bill an issue, not a political issue, but an issue between capital and labor. The gentleman from Monroe (Mr. Buskirk) was correct as far as he went, but he did not reach the issue. We doubtless could not tax these shares as the law now stands, but we propose to change the law. He concurred with the gentleman from Spencer, that the provision to exempt the State bank shares from taxation for municipal purposes is unconstitutional. It was so decided by the Supreme Court in 1866. He read from a late decision of the Supreme Court, to show that the rate of taxation shall be uniform and equal upon all property throughout the territory to which the tax applies; and also by way of reasoning against the constitutionality of the exemption in the 15th section of the charter of the Bank of the State of Indiana. He was also sustained by the recommendation of Governor Baker. So he rested this case, without controverting the special argument of the gentleman from Monroe, and proceeded to sustain the provisions of the bill proposing to tax the State Bank shares as well as those of the National Banks upon the principle of justice and equality, showing also how the Government is cheated in the assessment of the income tax of the banks; that where it should have received thirteen millions, throughout the country, it really collected but ten millions. He also gave a statement of figures showing the enormous profits realized under the National Banking laws - reading freely from statements and conclusions by the Hon. B. F. Butler, of Massachusetts, in a speech in the House of Representatives of the Fortieth Congress. And from these facts, he urged both the legality and the equity of the provisions of the bill. It was the old issue between labor and capital - he was on the side of labor.
Mr. NEFF spoke of the origin of the bill, the consideration to which it is entitled, and the opposition it has received. He was glad that it involves no political question. And he read the recommendation of Governor Baker in his biennial message for such legislation as will enable the State to tax the shares of stock in the banks for municipal purposes, like other property. He alleged with earnesttness the sheer justice and equity of the bill.
Mr. BUSKIRK asked whether this opinion of the Governor in this case is worth any more than that of the legal opinion of any other respectable lawyer?
Mr. NEFF. In ordinary cases it is not. But when it becomes the opinion of the Executive of the State, addressed to the Legislature, he was obliged to regard it as worth more. He pursued the reading from the message, and concluded with an expression of the readiness and earnestness with which he would support the bill with his vote.
Mr. WILLSON followed the line of argument submitted by Mr. Kercheval - reading the constitutional provision for taxation, and the direct conflict therewith in the 15th section of the Charter of the Bank of the State. He would sustain and redeem every pledge which the national government has made, but he would go no further in the interest of capital. He would not tax the United States bonds, because the government was pledged against that; but there was no pledge forfeited in taxing shares in bank stock.
Mr. VATER answered the argument, that we have no right to tax bank shares, because a large percent. of them may be owned by those who do not live in the city. Just as reasonably might it be said that we should not tax town lots which are owned by non-residents. All he asked was that the authorities shall not discriminate against the laboring man in the matter of taxation. He quoted the consti page: 134[View Page 134]tuitional provision against the granting of exclusive privileges. How would it look for him to come in here with a bill to exempt all bricklayers from taxation for municipal purposes? He referred to the issue here between labor and capital, suggested by Mr. Zollars. It was that which (sometimes unwisely) suggested those combinations of workingmen all over the country, because it was observable that capitalists and moneyed men manipulated the legislation of the country too much in their own interest, and he would have gentlemen to beware how, in forgetfulness of this issue, they allow themselves to vote against this bill.
Mr. JOHNSON, of Parke, spoke in reply to Mr. Neff. The Governor's recommendation was not an argument, and some gentlemen here, now gladly availing themselves of his opinions, but one year ago would not have quoted him as authority. He referred to the law of Congress, and the charter of the State Bank, to show ther incompatibility with this bill-and plead the chartered exemption from municipal taxation as a solemn contract which cannot be revoked but by the consent of the contracting parties. By way of offset to the decision quoted from 27th Indiana Reports, he referred to a decision of the same Court, establishing the doctrine, that the legislative power to create a bank implies also the power to exempt from municipal taxation. He then proceeded to show at length the fact of the direct Government bank tax of four and a half per cent, for the privilege of banking; and, if the argument of the friends of the bill be good, just so far as we may oppress them with taxation, just so far will those have to pay for it who borrow money over their counters. He paid a tribute to the excellence of our national banking system, giving uniformity of exchange arid security to the note holders. When he hrd concluded-
Mr. WILDMAN demanded the previous question, and there was a second, and the main question, viz: Shall the bill pass? was ordered-the vote thereon resulting-yeas 55, nays 29-as follows:
YEAS-Messrs. Admire, Barritt, Bates, Beeler, Bobo, Britton, Calvert, Carnahan, Chapman, Cory, Cox, Davis of Elkhart, Davis of Floyd, Dittemore, Dunn, Field of Lake, Fuller, Furnas, Greene, Hatchings, Hyatt, Johnson of Montgomery, Johnson of Marshall, Kercheval, Lawler, Long, Mason, McBride, McDonald, McFadin, McGregor, Miller, Miles, Mitchell, Montgomery, Neff, Odell, Osborn, Overmyer, Palmer, Ratliff, Ruddell, Shoaff, Skidmore, Sleeth, Stewart of Ohio, Tebbs, Vater, Welborn, Wile, Williams of Hamilton, Williams of Knox, Wilson, Zenor and Zollars-55.
NAYS-Messrs. Baker, Barnett, Beatty, Bowen, Breckinridge, Davidson, Fairchild, Field of Lagrange, Gilham, Hall, Hamilton, Higbee, Higgins, Hutson, Johnson of Parke, Jump, Lamborn, Millekan, Pierce of Vigo, Sabin, Smith, Stanton, Stewart of Rush, Sunman, Taber, Vardeman, Wildman, Williams of St. Joseph and Mr. Speaker-29
Mr. BRECKINRIDGE, explaining. My sympathies are all in favor of the bill feel that we ought to tax these bondholders all we can. But still, it seems to me that this would be a violation of contract the law of Congress in the case.
Mr. DAVIS, of Floyd's, explanation was not well heard. He voted aye, under the decision of the Supreme Court cited in the debate from the XVIIth Indiana Reports.
Mr. PIERCE, of Vigo, explained. Looking into the charter of the Bank of the State, he found a section which provides how these State banks may be taxed and for what purpose. And further along subsequently in this charter there is a provision that it shall not be changed without the consent of the President and Directors of these banks And he found that, in the Eleventh Indian! Reports, it is decided that cities can not tax these banks, because the charter creating these banks has limited the power of the State in that direction. And he was therefore, obliged to think that the State has no power to authorize their taxation by the cities without the consent of the Directors of the banks.
Mr. STANTON had felt that the object of the bill is correct and right, but he yielded to the same considerations that controlled the vote of the gentleman from Vigo.
Mr. STEWART, of Rush. My sympathies and views of right and justice are decidedly and fully in favor of the bill. I think it would be just and right. But seeing that the authorities are in direct opposition to the bill, I therefore vote "no."
So the bill passed the House of Representatives.
Mr. McDONALD filed his motion to reconsider the vote rejecting the female Prison bill (H. R. 176).
The House then adjourned.
