1. Sec. 3413 of the Revised Statutes, which enacts that:
"Every national banking association, state bank, or banker, or
association, shall pay a tax of ten percentum on the amount of
notes of any town, city, or municipal corporation, paid out by
them,"
is not unconstitutional.
2. The tax thus laid is not on the notes, but on their use as a
circulating medium.
3.
Veazie Bank v.
Fenno, 8 Wall. 533, cited and approved.
This is a suit by the United States to recover from the
Merchants' National Bank of Little Rock, Ark., $160,000, being ten
percent on $1,600,000 of certain notes of the City of Little Rock,
which it was alleged the bank had paid out during the years 1870,
1871, 1872, and 1873. The notes were issued and put in circulation
by the city, and used in business and commercial transactions as
money. They were printed on banknote paper in amounts ranking from
$1 to $100, and were payable to a person named or to bearer. By an
ordinance of the city, and also by an act of the legislature of the
state, they were receivable in payment of city taxes and of all
dues to the city.
Sec. 3413 of the Revised Statutes is as follows:
"Every national banking association, state bank, or banker, or
association
Page 101 U. S. 2
shall pay a tax of ten percentum on the amount of notes of any
town, city, or municipal corporation, paid out by them. "
There was a verdict in favor of the United States for $2,000;
and judgment thereon having been rendered, the bank thereupon sued
out this writ of error.
Page 101 U. S. 5
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
The only question presented is as to the constitutionality of
sec. 3413 of the Revised Statutes, the objection being that the tax
is virtually laid upon an instrumentality of the State of
Arkansas.
We think this case comes directly within the principles settled
in
Veazie Bank v.
Fenno, 8 Wall. 533, where it was
Page 101 U. S. 6
distinctly held that the tax imposed by that section on national
and state banks for paying out the notes of individuals or state
banks used for circulation was not unconstitutional. The reason is
thus stated by Mr. Chief Justice Chase:
"Having thus, in the exercise of undisputed constitutional
powers, undertaken to provide a currency for the whole country, it
cannot be questioned that Congress may constitutionally secure the
benefit of it to the people by appropriate legislation. To this
end, Congress has denied the quality of legal tender to foreign
coins, and has provided by law against the imposition of
counterfeit and base coin on the community. To the same end,
Congress may restrain, by suitable enactments, the circulation as
money of any notes not issued under its authority. Without this
power, indeed, its attempts to secure a sound and uniform currency
for the country must be futile."
P.
75 U. S.
549.
The tax thus laid is not on the obligation, but on its use in a
particular way. As against the United States, a state municipality
has no right to put its notes in circulation as money. It may
execute its obligations, but cannot, against the will of Congress,
make them money. The tax is on the notes paid out -- that is, made
use of as a circulating medium. Such a use is against the policy of
the United States. Therefore the banker who helps to keep up the
use by paying them out -- that is, employing them as the equivalent
of money in discharging his obligations -- is taxed for what he
does. The taxation was no doubt intended to destroy the use; but
that, as has just been seen, Congress had the power to do.
Judgment affirmed.