Graves v. New York ex rel. O'Keefe
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| Graves v. New York ex rel. O'Keefe | |
| Reference: 306 U.S. 466 | |
| Term: 1939 | |
| Important Dates | |
| Argued: March 6, 1939 Decided: March 27, 1939 | |
| Outcome | |
| New York Court of Appeals overturned | |
| Majority | |
| Harlan F. Stone • Owen Roberts • Hugo Black • Stanley Reed | |
| Concurring | |
| Chief Justice Charles Hughes • Felix Frankfurter | |
| Dissenting | |
| James McReynolds • Pierce Butler | |
Graves v. New York ex rel. O'Keefe is a case decided on March 27, 1939, by the United States Supreme Court, which overturned the ruling of the New York Court of Appeals and held that incomes of federal officials and employees could be subject to taxes from their states of residence. The court also held that state officials and employees were not immune from federal income taxes. The case overturned previous rulings like Collector v. Day where the court held that Congress did not have the power to tax the incomes of state employees.[1]
Why it matters: The Supreme Court's decision overturned previous decisions that exempted the incomes of state officials from federal taxation and federal officials from state taxation. Writing for the court, Justice Harlan F. Stone argued that private taxpayers should not be exempt from nondiscriminatory taxes based on their employment status within a government. Stone said New York's state tax on earnings did not specifically target federal employees and was not a burden on the Home Owners' Loan Corporation that would justify the claim of immunity of its employees from state taxation.
Background
Congress passed the Home Owners' Loan Act of 1933 establishing the Home Owners' Loan Corporation to provide emergency assistance to home owners who could not afford their mortgages.[1]
Precedent leading up to the Graves case supported the idea that federal salaries were immune from state income taxes and state salaries were immune from federal income taxes. In New York ex rel. Rogers v. Graves (1937), the Supreme Court held "that New York could not constitutionally tax the salary of an employee of the Panama Rail Road Company, a wholly owned corporate instrumentality of the United States." In Collector v. Day, the court held Congress did not have the power to tax the incomes of state employees.[1]
An examining attorney (who was a New York resident) for the Home Owners' Loan Corporation requested a refund of his state income tax amount from New York, claiming his income was constitutionally exempt from the state tax "because the Home Owners' Loan Corporation is an instrumentality of the United States Government." A New York tax commissioner denied the refund request, claiming the tax on the examining attorney did not constitute an unconstitutional burden on the Home Owners' Loan Corporation.[1]
The New York Court of Appeals cited New York ex rel. Rogers v. Graves (1937) and ruled the attorney's income was exempt from the state tax. The tax commissioner appealed the case to the Supreme Court.
Oral argument
Oral argument was held on March 6, 1939. The case was decided on March 27, 1939.[1]
Decision
The Supreme Court decided 6-2 that incomes of federal employees and officials were not exempt from state taxes and incomes of state officials and employees were not exempt from federal taxes.[1]
Opinions
Opinion of the court
Justice Harlan Stone, writing for the court, argued that private taxpayers should not be exempt from certain taxes based on their employment status within a government. Stone said the nondiscriminatory state tax on the earnings of the federal employees was not a burden on the Home Owners' Loan Corporation that would justify the claim of immunity of its employees from state taxation.
| “ | As already indicated, such differences as there may be between the implied tax immunity of a state and the corresponding immunity of the national government and its instrumentalities may be traced to the fact that the national government is one of delegated powers, in the exercise of which it is supreme. Whatever scope this may give to the national government to claim immunity from state taxation of all instrumentalities which it may constitutionally create, and whatever authority Congress may possess as incidental to the exercise of its delegated powers to grant or withhold immunity from state taxation, Congress has not sought in this case to exercise such power. Hence, these distinctions between the two types of immunity cannot affect the question with which we are now concerned. The burden on government of a nondiscriminatory income tax applied to the salary of the employee of a government or its instrumentality is the same whether a state or national government is concerned. The determination in the Gerhardt case that the federal income tax imposed on the employees of the Port Authority was not a burden on the Port Authority made it unnecessary to consider whether the Authority itself was immune from federal taxation; the claimed immunity failed because, even if the Port Authority were itself immune from federal income tax, the tax upon the income of its employees case upon it no unconstitutional burden.
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Concurrence
Justice Felix Frankfurter concurred with the court's decision and spoke further on the lack of Constitutional backing for the precedent of immunity for state officials from federal taxes and federal officials from state taxes.
| “ | The judicial history of this doctrine of immunity is a striking illustration of an occasional tendency to encrust unwarranted interpretations upon the Constitution, and thereafter to consider merely what has been judicially said about the Constitution, rather than to be primarily controlled by a fair conception of the Constitution. Judicial exegesis is unavoidable with reference to an organic act like our Constitution, drawn in many particulars with purposed vagueness so as to leave room for the unfolding future. But the ultimate touchstone of constitutionality is the Constitution itself, and not what we have said about it.[1][2] | ” |
Dissent
Justice Pierce Butler, joined by James McReynolds, argued that previous precedent established in cases like Collector v. Day should have stood and that the court did not establish a sufficiently clear rule to prevent destructive taxation between the federal and state governments.
| “ | From the decision just announced, it is clear that the Court has overruled Dobbins v. Commissioners of Erie County, 16 Pet. 435; Collector v. Day, 11 Wall. 113; New York ex rel. Rogers v. Graves, supra, and Brush v. Commissioner, 300 U. S. 352. Thus, now it appears that the United States has always had power to tax salaries of state officers and employees, and that similarly free have been the States to tax salaries of officers and employees of the United States. The compensation for past, as well as for future, service to be taxed and the rates prescribed in the exertion of the newly disclosed power depend on legislative discretion not subject to judicial revision. Futile indeed are the vague intimations that this Court may protect against excessive or destructive taxation. Where the power to tax exists, legislatures may exert it to destroy, to discourage, to protect, or exclusively for the purpose of raising revenue[1][2] | ” |
Aftermath
| Federalism |
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| •Key terms • Court cases •Major arguments • State responses to federal mandates • Federalism by the numbers • Index of articles about federalism |
Collector v. Day was superseded in 1939 when the Supreme Court ruled in Graves v. New York that the state of New York had the authority to levy a nondiscriminatory income tax on a federal employee who resided in the state. The court decided such taxation of individual employees was not a tax on the federal government itself or its operations and that, likewise, a federal tax on individual incomes of state employees was not an unconstitutional tax on state governments. To read more about the decision, click here.
See also
- Nondelegation doctrine
- Separation of powers
- Supreme Court of the United States
- History of the Supreme Court
External links
- Full text of case syllabus and opinions (Justia)
- Supreme Court of the United States
- Search Google News for this topic
Footnotes
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