Pollock v. Farmers' Loan & Trust Co. 157 U.S. 429 and 158 U.S. 601 (1895)

Author:Leonard W. Levy

Page 1959

CHARLES EVANS HUGHES called these decisions a "selfinflicted wound" comparable to the decision in DRED SCOTT V. SANDFORD (1857). Here the Supreme Court held unconstitutional an 1894 act of Congress that fixed a flat tax of two percent on all annual incomes over $4,000. Pollock filed a STOCKHOLDER ' SSUIT against the trust company to prevent it from complying with the statute which, he claimed, imposed a DIRECT TAX without apportioning it among the states on the basis of population. The trust company, the party of record on the side of the tax, avoided the appearance of collusion by hiring the president of the American Bar Association, James Coolidge Carter; Richard Olney, attorney general of the United States, was on the same side as AMICUS CURIAE. Theirs was the easy task because history and all the precedents proved that the clause of Article 1, section 9, referring to direct taxes, meant only taxes on people or on land. The Court had so declared in HYLTON V. UNITED STATES (1796) and in several other cases, especially SPRINGER V. UNITED STATES (1881), a direct precedent; the Court there had unanimously sustained an earlier income tax as imposing an indirect tax and therefore not subject to the requirement of apportionment.

Counsel for Pollock, led by JOSEPH H. CHOATE, buttressed a weak case with an impassioned argument intended to provoke judicial fear and reflecting the panic felt by many conservatives. Choate warned that the Court had to choose between "the beginning of socialism and communism" and the preservation of private property, civilization, and the Constitution. He appealed to the Court to substitute its discretion for that of Congress.

Justice HOWELL E. JACKSON not having participated, an eight-member Court decided the case. All agreed that the federal tax on municipal bonds was unconstitutional, because government instrumentalities were exempt from taxation (see INTERGOVERNMENTAL IMMUNITIES). On the question of the validity of the tax on income from personal property, the Court divided evenly. But on the question of the validity of the tax on income from real estate, the Court voted 6?2 that it was a direct tax unconstitutionally assessed. Nothing favorable can be said about Chief Justice MELVILLE W. FULLER'S opinion for the majority. He took for granted the very proposition he should have proved, asserting that a tax on the income from land was indistinguishable from a tax on the land itself...

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