One of the cases relied upon by the Supreme Court in the Flint v. Stone Tracy decision was Nicol v. Ames, 172 U.S. 509 (1899), which affirmed the constitutionality of an excise on the gross sale prices of transactions carried out in an exchange or board of trade. In describing the objections to the tax, the Supreme Court stated that:LPC wrote:Actually, the argument was raised by the Supreme Court in 1911, and rejected.Famspear wrote:The argument, if I recall, is essentially that everybody from 1913 to the 1930s just sort of "knew" that "income" didn't include earnings realized in an "activity" not involving a "federal privilege."
So, my question to you is: How do you explain the points that no none ever raised such an argument in a federal tax case in the period from 1913 to the 1930s?
In Flint v. Stone Tracy Co., 220 U.S. 107, 155 (1911), the Supreme Court upheld the constitutionality of the Corporation Excise Tax Act of 1909, which imposed a tax on the incomes of incorporated businesses, stating:And that was *before* the ratification of the 16th Amendment.Supreme Court wrote:While the tax in this case, as we have construed the statute, is imposed upon the exercise of the privilege of doing business in a corporate capacity, as such business is done under authority of state franchises, it becomes necessary to consider in this connection the right of the Federal government to tax the activities of private corporations which arise from the exercise of franchises granted by the state in creating and conferring powers upon such corporations. We think it is the result of the cases heretofore decided in this court, that such business activities, though exercised because of state-created franchises, are not beyond the taxing power of the United States.
After discussing the nature of "exchanges" and "boards of trade," and the benefits of trading on them, the court stated that "it would seem that such facilities or privileges, even though not granted by the government or by a state, ought nevertheless to be recognized as existing facts, and to be subject to the judgment of congress as fit matters for taxation." 173 U.S. 518.Supreme Court wrote:It is not a 'privilege tax,' within the meaning of that term, because there is no privilege other than that which every man has to transact his own business in his own house or in his own office under such regulations as he may choose to adopt; and such a choice cannot be, in any fair use of the term, a privilege which is subject to taxation.
Later in the opinion, the Supreme Court affirmed the same point of view, stating: "Although not created by government, this privilege or facility in effecting a sale at an exchange is so distinct and definite in its character, and constitutes so clear and plain a difference from a sale elsewhere, as to create a reasonable and substantial ground for classification and for taxation when similar sales at other places are untaxed." 173 U.S. 509, 521-522.
So an excise can apply to a "privilege" not created by the federal government, or any government at all? Who'd have thunk it. (Certainly not "lorne", who has been largely incapable of thinking anything.)