Geery v. Minnesota Tax Commission ( 1938 )

The purpose of our income tax is to make the payers contribute to the support of government in proportion to their ability to pay. Strictly speaking, the tax is on the person rather than his income. The latter is but the measure of his obligation. Because of that, and inasmuch as property and income as such have no rights, the question of immunity from an income tax must be solved by consideration of the rights of the taxpayer. That some of the latter are his because attachedin rem to his property or income may affect the result. But it does not make less determinative his own legal status in respect to any tax sought to be imposed on him.

Solution of the problem of immunity in a given case is likely to be wrong if it is forgotten that we are dealing with a personal tax rather than one on property. For that and other reasons, what may be called the economic argument should be put aside. Our property taxes are high. Pro tanto, they burden all officers and employes of the United States and its instrumentalities, whom we are fortunate enough to have as residents of our state, in the same manner, and just as directly, as does the income tax.

Officers of the federal reserve bank are not officers of the United States. At most they serve only a governmental instrumentality, which is not even partially owned by the government. Their compensation is not paid by government or out of government funds. (That circumstance is well-nigh determinative. See Helvering v. Therrell, 303 U.S. 218,58 S. Ct. 539, 82 L. ed. ___.) There is then no impingement upon federal jurisdiction by subjecting them personally to the payment of a nondiscriminatory state income tax measured by their income inclusive of their compensation as bankers. The state tax sustained in Union Pacific R. Co. v. Peniston, 18 Wall. 5, 36, 21 L. ed. 787, seems to me to have been nearer an invasion of the federal field than the one presently involved. That decision declared the test to be "the effect of the tax"; that is, "whether the tax does in truth deprive them [instrumentalities of the federal government] of power to serve the government as they were intended to serve it, or hinder the efficient exercise of their power."

The Supreme Court of the United States has "always recognized that no constitutional implications prohibit a nondiscriminatory tax upon the property of an agent of government merely because it is the property of such an agent and used in the conduct of the agent's operations and necessary for the agency." Helvering v. Mountain Producers Corp.303 U.S. 376, 58 S. Ct. 623, 627, 82 L. ed. ___.

That proposition should have the same application to taxesin personam as it has to those in rem.

I fail to perceive how the tests thus established are violated by Minnesota's income tax in application to the officers and employes of the federal reserve bank of Minneapolis. Just how is the mechanism of that institution to be jammed or its operation slowed because those in charge are required to contribute to the support of the state government in precisely the same fashion and by the same standard as other residents (e. g., bankers) similarly circumstanced?