1. The provision in sec. 5219 of the Revised Statutes of the
United States, that state taxation on the shares of any national
banking association shall not be at a greater rate than is assessed
on other moneyed capital in the hands of individual citizens of the
state, has reference to the entire process of assessment, and
includes the valuation of the shares as well as the rate of
percentage charged thereon.
2. The statute of a state, therefore, which establishes a mode
of assessment by which such shares are valued higher in proportion
to their real value than other moneyed capital, is in conflict with
that section, although no greater percentage is levied on such
valuation than on that of other moneyed capital.
3. The statutes of New York which permit a party to deduct his
just debts from the valuation of all his personal property, except
so much thereof as consists of such shares, tax them at a greater
rate than other moneyed capital, and are therefore void as to
them.
The facts are stated in the opinion of the Court.
Mr. George F. Edmunds and Mr. Matthew Male for the plaintiff in
error.
MR. JUSTICE MILLER delivered the opinion of the Court.
The law of the State of New York for taxation in the County of
Albany, enacted in the year 1850, contained the following
section:
"SEC. 9. If any person shall, at any time before the assessors
shall have completed their assessments, make affidavit that the
value of his real estate does not exceed a certain sum, to be
specified in such affidavit, or that the value of the personal
estate owned by him, after deducting his just debts, and his
property invested in the stock of any corporation or association
liable to be taxed therefor, does not exceed a certain sum, to be
specified in the affidavit, it shall be the duty of the board of
assessors to value such real or personal estate, or both, as the
case may be, at the sum specified in such affidavit, and no more.
"
Page 100 U. S. 540
In the year 1866, the legislature of that state enacted on this
subject another law, the first section of which reads as
follows:
"SEC. 1. No tax shall hereafter be assessed upon the capital of
any bank or banking association organized under the authority of
this state or of the United States; but the stockholders in such
banks and banking associations shall be assessed and taxed on the
value of their shares of stock therein; said shares shall be
included in the valuation of the personal property of such
stockholder in the assessment of taxes at the place, town, or ward
where such bank or banking association is located, and not
elsewhere, whether the said stockholder reside in said place, town,
or ward or not, but not at a greater rate than is assessed upon
other moneyed capital in the hands of individuals in this state.
And, in making such assessment, there shall also be deducted from
the value of such shares such sum as is in the same proportion to
such value as is the assessed value of the real estate of the bank
or banking association, and in which any portion of their capital
is invested, in which said shares are held, to the whole amount of
the capital stock of said bank or banking association.
And
provided further that nothing herein contained shall be held
or construed to exempt from taxation the real estate held or owned
by any such bank or banking association; but the same shall be
subject to state, county, municipal, and other taxation to the same
extent and rate and in the same manner as other real estate is
taxed."
William J. Weaver, Edward Brennan, and Robert H. Weir, the
defendants in error, constituting the Board of Assessors of the
City of Albany for the year 1875, assessed against Chauncey P.
Williams, the relator, the sum of $38,250, for taxation on account
of shares owned by him in the National Albany Exchange Bank,
organized under the general banking act of Congress. He appeared
before this board in due time, and demanded the reduction of this
sum to the amount of one dollar, and accompanied the demand with
this affidavit:
"CITY AND COUNTY OF ALBANY,
ss.:"
"I, Chauncey P. Williams, being duly sworn, do depose and say
that the value of personal estate owned by me, including my bank
stock, after deducting my just debts and my property invested in
the
Page 100 U. S. 541
stock of corporations or associations liable to be taxed
therefor, and my investments in the obligations of the United
States, does not exceed the sum of one dollar."
"C. P. WILLIAMS"
"Subscribed and sworn before me, this twenty-eighth day of
September, 1875."
"JAMES MAHER,
Notary Public"
The defendants refused to make this deduction, and, under the
procedure in the courts of New York, which allows of an amicable
suit on an agreed statement of facts, the case finally came to the
Court of Appeals of that state. The judgment there being in favor
of defendants, the People of the State of New York, on the relation
of Williams, bring the record to this Court by writ of error. Three
questions were raised and decided in the supreme court, and its
judgment was affirmed in the Court of Appeals. They are thus stated
in the record:
"The case coming on for argument on the submission thereof,
after hearing Mr. Hale, of counsel for relator, and Mr. Peckham, of
counsel for defendants, the court decides:"
"1st, that it was not the duty of the defendants, as assessors
of the City of Albany, to comply with the demand made by said
relator, and reduce his assessments to the sum of one dollar, and
answer the first question submitted in the negative."
"2d, that, under the law of the State of New York, referred to
in the second question, and passed April 23, 1866, the defendants,
as such assessors, were justified in refusing to reduce the
relator's assessment on his shares of bank stock mentioned in said
submission to the sum of one dollar, and answers the second
question in the affirmative."
"3d, that the said law of the State of New York, passed April
23, 1866, is not in violation of any law of the United States
relating to the amount of taxes on shares of national banking
associations, and answers the third question submitted in the
negative."
"Judgment is therefore ordered for the defendants against the
relator, with costs."
Of the second of these propositions this Court has no
jurisdiction, but must accept the decision of the highest court of
the
Page 100 U. S. 542
state, that the act of 1866 took the money invested in bank
shares out of the general provision of the law of 1850, which
allowed a deduction of the debts owing by the shareholder from the
value of the personal property as a basis for laying the tax. In
that respect, we are bound by the decision of the Court of Appeals
as the true construction of the state statute. The first
proposition is but the necessary result of the case, if the other
two are decided in favor of defendants by that court. We have thus
left for our consideration the third proposition, which, being
decided against a right asserted by plaintiff under the act of
Congress establishing the national banking system, presents a
question reviewable by this Court. We proceed to consider it.
The Court of Appeals delivered no formal opinion in the present
case; but, in the entry of their judgment, which is part of the
record, they say, "This judgment is upon the authority of the
former decision of this Court, rendered in the case of
The
People v. Dolan and Others, 36 N.Y. 59."
The opinion in that case is before us. It decides directly the
question now presented, and, if sound, justifies the judgment of
the court in this case. We have given it the careful consideration
which the high character of the court demands at out hands. The
question arises on the provision of the national bank law
concerning taxation of the shares of the banks, which is thus
expressed in sec. 5219 of the Revised Statutes, in force at the
time of this assessment:
"Nothing herein shall prevent all the shares in any association
from being included in the valuation of personal property of the
owner or holder of such shares, in assessing taxes imposed by
authority of the state within which the association is located, . .
. subject only to the two restrictions, that the taxation shall not
be at a greater rate than is assessed upon other money capital in
the hands of individual citizens of such state, and that the shares
of any national banking association owned by non-residents of any
state shall be taxed in the city or town where the bank is located,
and not elsewhere."
It cannot be disputed -- it is not disputed here -- nor is it
denied in the opinion of the state court, that the effect of the
state law is to permit a citizen of New York, who has money
Page 100 U. S. 543
capital invested otherwise than in banks, to deduct from that
capital the sum of all his debts, leaving the remainder alone
subject to taxation, while he whose money is invested in shares of
bank stocks can make no such deduction. Nor, inasmuch as nearly all
the banks in that state and in all others are national banks, can
it be denied that the owner of such shares who owes debts is
subjected to a heavier tax on account of those shares than the
owner of moneyed capital otherwise invested, who also is in debt,
because the latter can diminish the amount of his tax by the amount
of his indebtedness, while the former cannot. That this works a
discrimination against the national bank shares as subjects of
taxation, unfavorable to the owners of such shares, is also free
from doubt. The question we are called to decide is, whether
Congress, in passing the act which subjected these shares to
taxation by the state, intended, by the very clause which was
designed to prevent discrimination between national bank shares and
other moneyed capital, to authorize such a result.
That the provision which we have cited was necessary to
authorize the states to impose any tax whatever on these bank
shares, is abundantly established by the cases of
McCulloch
v. The State of Maryland, 4 Wheat. 316;
Osborn v. Bank of the United
States, 9 Wheat. 738;
Weston v.
The City Council of Charleston, 2 Pet. 449.
As Congress was conferring a power on the states which they
would not otherwise have had, to tax these shares, it undertook to
impose a restriction on the exercise of that power, manifestly
designed to prevent taxation which should discriminate against this
class of property as compared with other moneyed capital. In
permitting the states to tax these shares, it was foreseen -- the
cases we have cited from our former decisions showed too clearly --
that the state authorities might be disposed to tax the capital
invested in these banks oppressively.
This might have been prevented by fixing a precise limit in
amount. But Congress, with due regard to the dignity of the states,
and with a desire to interfere only so far as was necessary to
protect the banks from anything beyond their equal share of the
public burdens, said, you may tax the real estate
Page 100 U. S. 544
of the banks as other real estate is taxed, and you may tax the
shares of the bank as the personal property of the owner to the
same extent you tax other moneyed capital invested in your state.
It was conceived that by this qualification of the power of
taxation equality would be secured and injustice prevented.
That such was the intent of Congress can admit of no doubt. Have
they given expression to that intent so that courts can see and
enforce it, or have they expressed themselves so unfortunately that
the states may, by a narrow interpretation of the act of Congress
and by skillfully framed statutes of their own, exercise the power
thus granted so as not only to reap its full benefit, but at the
same time cause the burden of supporting the state government to
fall with unequal weight on the subject of taxation thus
surrendered to it by the national government?
The argument by which this view is supported is founded on the
assumption that while Congress limited the state authorities in
reference to the ratio or percentage levied on the value of these
shares, which could not be greater than on other moneyed capital
invested in the state, it left the matter of the relative valuation
of the shares and of other moneyed capital wholly to the control of
state regulation. The state can therefore adopt any arbitrary or
conventional system of valuation as a basis of taxation, however
unequally or unjustly it may operate and however it may
discriminate against bank shares, provided the percentage of the
tax levied in this valuation is the same in all cases. If, for
instance, the tax is two percent on all personal property, the
argument is, that the act of Congress is not violated if the
valuation on the money of the citizen invested in state bonds is,
by statute, one-half its real value, and that on bank shares is its
full value, or, as in the statute of the state now under
consideration, the taxpayer is allowed an exemption from taxation
in whole or in part, as regards his state bonds, while none is
allowed in reference to bank shares.
"Taxation shall not be at a greater rate than is assessed upon
other moneyed capital in the hands of individuals." Seizing upon
the word "rate" in this sentence as if disconnected
Page 100 U. S. 545
from the word "assessment," and construing it to mean percentage
on any valuation that might be made, the Court of Appeals
arrive at the conclusion that, since that percentage is the same in
all cases, that act of Congress is not infringed. If this
philological criticism were perfectly just, we still think the
manifest purpose of Congress in passing this law should prevail. We
have already shown what that was. But the criticism is not sound.
The section to be construed begins by declaring that these shares
may be "included in the valuation of the personal property of the
owner, in assessing taxes imposed by authority of the state within
which the association is located." This
valuation, then,
is part of the
assessment of taxes. It is a necessary part
of every assessment of taxes which is governed by a ratio or
percentage. There can be no rate or percentage without a valuation.
This taxation, says the act, shall not be at a greater rate than is
assessed on other moneyed capital. What is it that shall not be
greater? The answer is, taxation. In what respect shall it be not
greater than
the rate assessed upon other capital? We see
that Congress had in its mind an
assessment, a
rate of assessment, and a
valuation; and, taking
all these together, the taxation on these shares was not to be
greater than on other moneyed capital.
"When taxes have been properly decided upon, an assessment may
become an indispensable proceeding in the establishment of any
individual charge, against either person or property. This is
always requisite when the taxes are to be levied in proportion to
an estimate either of values, of benefits, or the results of
business. . . . An assessment, strictly speaking, is an official
estimate of the sums which are to constitute the basis of an
apportionment of a tax between the individual subjects of taxation
within the district. As the word is more commonly employed, an
assessment consists in the two processes listing the persons,
property, &c., to be taxed, and of estimating the sums which
are to be the guide in an apportionment of the tax between them. .
. . Taxation by valuation cannot be apportioned without it."
Cooley, Taxation, 258, 259; Burroughs, Taxation, p. 198, sec.
94. So also, Judge Bouvier defines assessment to be determining the
value of a man's property or occupation for the purpose of levying
a tax.
Page 100 U. S. 546
Determining the share of a tax to be paid by each
individual. Levying a tax. 1 Bouvier 154. These definitions
show that in the best use of the language employed by Congress we
are justified in looking to the rule of valuation adopted by the
state in assessing taxes on these shares, as well as to the
uniformity of percentage to ascertain whether the congressional
restriction has been violated.
It is said, however, that the judgment of the state court is
supported by the decision of this Court in
People v.
The Commissioners, 4 Wall. 244. The specific
question now before us was not involved in that case. The only
matter before the Court was whether the holder of the bank shares
was entitled to deduct from their value a due proportion of the sum
which the bank had invested in government bonds. This was decided
in the negative, and it is all that was decided, or could be
decided. The sentence in Mr. Justice Nelson's opinion, on which the
argument is founded, reads thus:
"The answer is, that, upon a true construction of this clause of
the act, the meaning and intent of the law makers were that the
rate of taxation of the shares should be the same, or not greater,
than upon the moneyed capital of the individual citizen which is
subject or liable to taxation. That is, no greater proportion or
percentage of tax in the valuation of the shares should be levied
than upon other moneyed taxable capital in the hands of the
citizens."
If we give to the phrase "rate of taxation" in this sentence no
more than its proper force, and if we observe that the learned
judge speaks of the proportion or percentage in the valuation, not
on it, as it is misquoted, we have the idea which we have
already supposed to be the true one in the minds of the lawmakers.
However this may be, we feel quite sure that the question of
limiting the effect of the act of Congress to a discrimination in
the percentage levied as a tax, without regard to equality in the
valuation on which that tax was levied, was not before the Court,
and was not intended to be decided. And in our view, such a
proposition is untenable.
We are, therefore, of opinion that the statute of New York, as
construed by the Court of Appeals, in refusing to plaintiff the
same deduction for debts due by him, from the valuation of his
shares of national bank stock, that it allows to those
Page 100 U. S. 547
who have moneyed capital otherwise invested, is in conflict with
the act of Congress, and the judgment of that court will be
reversed and the case remanded for further proceedings in
conformity to this opinion.
So ordered.