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New York v. United States (1946)
 | |
| New York v. United States | |
| Reference: 326 U.S. 572 | |
| Term: 1946 | |
| Important Dates | |
| Argued: December 7-8, 1944 Reargued: December 4, 1945 Decided: January 14, 1946 | |
| Outcome | |
| United States Court of Appeals for the Second Circuit affirmed | |
| Majority | |
| Wiley Rutledge • Felix Frankfurter • Harlan F. Stone • Stanley Forman Reed • Frank Murphy • Harold Hitz Burton | |
| Concurring | |
| Wiley Rutledge • Felix Frankfurter • Harlan F. Stone • Stanley Forman Reed • Frank Murphy • Harold Hitz Burton | |
| Dissenting | |
| William O. Douglas • Hugo Black | |
New York v. United States is a case decided on January 14, 1946, by the United States Supreme Court affirming that the Revenue Act of 1932 gives the federal government the power to tax states for general enterprises, including the sale of mineral water. The Supreme Court affirmed the ruling of the United States Court of Appeals for the Second Circuit.[1][2]
Why it matters: The Supreme Court's decision in this case established that states are subject to federal revenue taxes per the 1932 Revenue Act, regardless of whether the state is engaging in a function that the state considers essential or for the sake of conservation.
Background
The state of New York engaged in competition with private water companies by selling its own mineral water. Congress had previously deemed it necessary to use water as a source of revenue for the national government. The state of New York claimed that federal taxes did not apply to its sale of mineral water because it was somewhat connected with the state's conservation policy.
The state of New York sold mineral water from Saratoga Springs, which under private operation, had been substantially diminished by excessive pumping. In 1911, New York began to acquire lands on which mineral springs were located, including Saratoga Springs. In order to conserve the springs for beneficial operation, the state government took various measures to protect them. In 1930, control over the springs was given to the newly formed Saratoga Springs Commission. In 1933, the Commission leased the springs' facilities and delegated their management to the Saratoga Springs Authority, a public benefit corporation of New York.
From 1932 to 1934, the Saratoga Springs Commission and the Saratoga Springs Authority operated the area as a health resort and spa. Some of the mineral waters of the springs that have medicinal value were bottled and sold to distributors, retailers, and directly to consumers. The sales were promoted by advertising, and customarily yield a profit which is applied to the expenses of operating the other facilities. The remainder of those expenses is met by annual legislative appropriations. The United States Court of Appeals for the Second Circuit found that, despite the mineral water being used in part for conservation efforts, it was still subject to federal taxation.[2]
Oral argument
Oral argument was held between December 7-8, 1944. The case was reargued on December 4, 1945. The case was decided on January 14, 1946.[2]
Decision
The Supreme Court decided 6-2 to affirm the decision of the United States Court of Appeals for the Second Circuit. Justice Felix Frankfurter delivered the opinion of the court. Justice William Douglas wrote a dissenting opinion, joined by Justice Hugo Black. Justice Robert Jackson did not participate in the decision of the case.[2]
Opinions
Opinion of the court
Justice Felix Frankfurter, writing for the court, argued that states' enterprises are not immune to federal taxation, especially if the state is acting as a trader instead of a government. Justice Frankfurter cited the Ohio v. Helvering opinion to support his argument:[2]
| “ | "If a state chooses to go into the business of buying and selling commodities, its right to do so may be conceded so far as the Federal Constitution is concerned, but the exercise of the right is not the performance of a governmental function. . . . When a state enters the marketplace seeking customers, it divests itself of its quasi-sovereignty pro tanto, and takes on the character of a trader, so far, at least, as the taxing power of the federal government is concerned."[3] | ” |
| —Felix Frankfurter, majority opinion in New York v. United States[2] | ||
Concurring opinions
After establishing that the federal government can tax states for their enterprises, Justice Wiley Rutledge concurred that states cannot declare immunity from taxation when they engage in commercial activity that has historically been conducted by private citizens:
| “ | I join in the opinion of MR. JUSTICE FRANKFURTER and in the result. I have no doubt upon the question of power. The shift from immunity to taxability has gone too far, and with too much reason to sustain it, as respects both state functionaries and state functions, for backtracking to doctrines founded in philosophies of sovereignty more current and perhaps more realistic in an earlier day. Too much is or may be at stake for the nation to permit relieving the states of their duty to support it, financially as otherwise, when they take over increasingly the things men have been accustomed to carry on as private, and therefore taxable, enterprise. Competitive considerations unite with the necessity for securing the federal revenue, in a time when the federal burden grows heavier proportionately than that of the states, to forbid that they be free to undermine, rather than obligated to sustain, the nation's financial requirements. [3] | ” |
| —Wiley Rutledge, concurring opinion in New York v. United States[2] | ||
Justice Harlan Stone concurs that New York is subject to federal taxation for the sale of its mineral waters when saying:
| “ | In view of our decisions in South Carolina v. United States, 199 U. S. 437, Ohio v. Helvering, 292 U. S. 360, Helvering v. Powers, 293 U. S. 214, and Allen v. Regents, 304 U. S. 439, we would find it difficult not to sustain the tax in this case, even though we regard as untenable the distinction between "governmental" and "proprietary" interests on which those cases rest to some extent. But we are not prepared to say that the national government may constitutionally lay a nondiscriminatory tax on every class of property and activities of States and individuals alike. [3] | ” |
| —Harlan Stone, concurring opinion in New York v. United States[2] | ||
Dissenting opinion
Justice William Douglas, in a dissenting opinion joined by Justice Hugo Black, argued that the court's view of the 1932 Revenue Act was inaccurate. Douglas posited that the federal government should not tax state enterprises because such enterprises are exercises of sovereign state power:[2]
| “ | I do not believe South Carolina v. United States states the correct rule. A State's project is as much a legitimate governmental activity whether it is traditional, or akin to private enterprise, or conducted for profit. Cf. Helvering v. Gerhardt, 304 U. S. 405, 304 U. S. 426-427. A State may deem it as essential to its economy that it own and operate a railroad, a mill, or an irrigation system as it does to own and operate bridges, street lights, or a sewage disposal plant. What might have been viewed in an earlier day as an improvident or even dangerous extension of state activities may today be deemed indispensable. But, as Mr. Justice White said in his dissent in South Carolina v. United States, any activity in which a State engages within the limits of its police power is a legitimate governmental activity. Here, a State is disposing of some of its natural resources. Tomorrow it may issue securities, sell power from its public power project, or manufacture fertilizer. Each is an exercise of its power of sovereignty. Must it pay the federal government for the privilege of exercising that inherent power? If the Constitution grants it immunity from a tax on the issuance of securities, on what grounds can it be forced to pay a tax when it sells power or disposes of other natural resources? [3] | ” |
| —William Douglas, dissenting opinion in New York v. United States.[2] | ||
Impact
| 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 |
New York v. United States established that the 1932 Revenue Act allows the federal government to tax state-run enterprises, regardless of the reasoning for the enterprise.[1][2]
See also
External links
- Full text of case syllabus and opinions (Justia)
- Supreme Court of the United States
- Search Google News for this topic
Footnotes
- ↑ 1.0 1.1 LexisNexis, "New York v. United States - 326 U.S. 572, 66 S. Ct. 310 (1946)", accessed July 5, 2022
- ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 Justia, "New York v. United States, 326 U.S. 572 (1946)", accessed July 5, 2022
- ↑ 3.0 3.1 3.2 3.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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