Taxing Power, Veazie Bank v. Fenno

[A18]

Veazie Bank v. Fenno, 75 U.S. 533 (1869)

The Congress levied a 10% tax on state-charted bank notes. The Supreme Court upheld the tax, and such bank notes began their slip into extinction.

[A18]

The bank was not an agency of the state government, but a chartered private corporation just like any other business. Congress was not taxing the issuance of the charter by the state (an operation of the state government), but the issuance of banknotes by the bank (an operation of a private organization).

There is no doubt that Congress may tax for revenue purposes. But the federal government is acknowledged by all to be one of enumerated powers, and the problem here is that the Congress was using its taxing power to regulate private banking.

If Congress's power to tax is unlimited, so is its power to legislate. For the power to tax does, indeed, involve the power to destroy.

[A18]

Its primary effect (and, ultimately, only effect) was not to raise revenue, but to suppress private currency.

Even if we use the intent test, you can't tell me the Congress didn't realize putting private currency at this disadvantage would eliminate it altogether.

[A18]

Other excise taxes do not destroy the product they tax. Clearly, a tax that completely destroys the article it taxes is of no revenue benefit to the government.