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repute and had become offensive to the people of the country, and was a kind of traffic that no one was entitled to pursue as of right, and that under the circumstances of the particular case prohibition was an appropriate method of regulation. The decision was therefore limited to the single point that lottery tickets were subjects of traffic and that congress could lawfully prohibit such traffic.'

The power to prohibit is necessarily involved in any effective federal control of the corporate agencies engaged in the conduct of commerce, whether through federal incorporation or any form of federal franchise, that is, to make the federal system effective its adoption must be made compulsory. The lottery decision related to the subjects of commerce and did not involve the power of congress in controlling the corporate relations of parties engaged in commerce. The prevailing opinion rests, in the final analysis, upon the broad ground that it is for congress to determine when the public good requires the use of prohibition as a form of regulation of inter

state commerce.

$58. Regulation of commerce through the taxing power. Interstate commerce may also be regulated through the exercise of the taxing power by congress. While congress has not an unlimited power as to the purpose of taxation, and can levy taxes only in order to pay the debts and provide for the common defense and general welfare of the United States, it is also true that under the permanent revenue system of the government, taxes are levied, not for specific purposes, but by continuing laws establishing the rate of customs duties and internal revenue taxes, and questions relating to the lawful purposes of taxation do not arise in levying revenue taxes but in the appropriation of public funds for public needs.

It is well recognized that the power of taxation is sometimes invoked with no purpose of revenue in view, but solely to destroy the interest or business upon which the tax is levied by

1 The court had sustained a stat ute excluding lottery tickets from the mails. See In re Jackson, 96 U. S. 727. 24 L. Ed. 877, and In re Rapier, 143 U. S. 110, 36 L. Ed. 93. This was on the ground that as congress fur nished postal facilities it had the

right to say what should be carried therein. But it was said that congress could not prevent the carriage of such tickets by other means, though they were excluded from the mails.

2 Story on the Constitution, sec. 907.

taxing it out of existence. Thus the notes of the state banks were taxed out of existence in order to open the means for circulating the notes of the national banks. This act was sustained by the supreme court. The court said that it was immaterial that the tax destroyed the business or franchise exercised under state authority While the only lawful purpose of taxation is revenue, the amount of the tax on any subject within the scope of the taxing power is for the legislative discretion to determine. In the words of chief justice Marshall in McCulloch v. Maryland, "it is a perplexing inquiry unfit for the judicial department, what degree of taxation is a legitimate use and what degree may amount to an abuse of the power?" A tax on oleomargarine, as is well known, was imposed for the avowed purpose of destroying the business. It therefore follows that congress, subject to the constitutional requirement of geographical uniformity and to the limitations of direct taxation, could impose indirect taxes and excises on subjects and facilities of commerce or upon the privilege of carrying on such commerce, whether by individuals or corporations, and that the amount of such taxes would be determined by the discretion of congress.

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$59. The federal power of granting corporate charters.The unexercised or undeveloped power of congress in interstate commerce is now discussed more particularly with reference to the power of congress in federal incorporation of business or trading companies. Interstate and foreign commerce under modern business conditions are almost wholly carried on by corporations chartered by the several states. The states therefore have the sole visitorial control of the organization of the business associations, through and by which the interstate and foreign business, subject to the exclusive jurisdiction of congress, is carried on. The difficulty of effectual governmental regulation of such commerce is apparent.

The power to charter a corporation is not among the enumerated powers of congress, but in the great case of McCul

1 Veazie Bank v. Fenno, 8 Wall. 533 (1869), 19 L. Ed. 482.

2 Supra. § 4.

3 Head Money Cases, 112 U. S. 580, 28 L. Ed. 798; Knowlton v. Moore, 178 U. S. 41, 44 L. Ed. 969.

4 Income Tax Cases, 158 U. S. 601, 39 L. Ed. 108: Nicol v. Ames, 173 U. S. 509, 43 L. Ed. 786; Knowlton v. Moore, supra.

loch v. Maryland' the court based the power to charter a national bank upon the right of congress to adopt incorporation

asonable means of carrying into effect its enumerated

"Incorporation," said the court, "is never made the

.

r which their powers are exercised, but a means by their objects are accomplished." "The power of creating a corporation is never used for its own sake, but for the purpose of affecting something else." The bank, therefore, was lawfully incorporated as a means of managing the great fiscal concerns of the government. The constitutionality of the national banking act of 1864 was based on the same principle. The national banks organized under the act, said the court, were the instruments designed to be used to aid the government in the administration of an important branch of the public service. They are means appropriate to that end.2 Congress also has the power to incorporate railroad companies to carry on interstate commerce, and to charter a corporation for constructing a bridge over a navigable stream forming the boundary of two states and condemn the property for approaches thereto. The power to incorporate was sustained as a reasonable and proper means of regulating commerce between the states, since corporations were direct instrumentalities for carrying on interstate commerce.

A corporate franchise involves the power to be, and also the power to do. Congress has the power to grant a corporate franchise for the construction of national highways. The supreme court in the Pacific Railroad Tax cases," said that in former times this power was exercised very little, as commerce was then conducted wholly by water, and many of our statesmen had entertained doubts as to the existence of the power to establish ways of communication over land. But since the expansion of the commerce of the country, the multiplication of its products and the invention of railroads and locomotion by steam, land transportation has so vastly increased, that a sounder con

14 Wheat. 316, supra.

2 Farmers, etc., National Bank v. Dearing, 91 U. S. 29 (1875), 23 L. Ed. 196.

3 Pacific R. Cases, 115 U. S. 2, 29 L. Ed. 319 (1885); California v. Pacific

Railroads, 127 U. S. 1, 32 L. Ed. 150;
Decker v. R. R. Co., 30 Fed. Rep. 723.
4 Luxton v. North River Bridge Co.,
153 U. S. 525, 38 L. Ed. 808.
5127 U. S. 1, supra, note 3.

sideration of the subject has prevailed and led to the conclusion that congress had plenary power over the whole subject.

Congress has granted charters of incorporation with franchises to be exercised in the District of Columbia, as insurance companies, and savings banks and trust companies. A federal charter was also granted to the Maritime Nicaraugua Canal Company for facilitating intercourse between the Atlantic and Pacific oceans.3 The National Trades Union incorporation act, infra, § 376, contains no reference to interstate commerce except that the members must be resident in two or more states. No incorporation had been formed under this act up to January 1, 1905.

§ 60. National incorporation as a means in the exercise of the commerce power. As congress can exercise this power of incorporation as a means and not as an end, its power of incorporation under the commerce clause would necessarily therefore be limited in its grant to the carrying on of interstate and foreign commerce, with such corporate powers as would be fairly incidental to such general grant. Congress has no power over the business of manufacturing, mining or other local productive industries conducted in the states, and therefore such powers could not be granted by congress, nor exercised under a congressional grant.

It has been suggested that a "franchise to produce,” as by manufacturing, would be an incidental and essential franchise to sell, and, therefore, congress would have the power to grant producing franchises as essential to the carrying on of interstate commerce. This position seems clearly untenable in view of the distinct declaration of the supreme court in the Knight case, that commerce is incidental to manufacture and succeeds to it, but is not a part of it, and that the jurisdiction of congress relates to commerce alone. As said in that case and in an earlier case, the result of a contrary ruling would be that congress would be invested to the exclusion of the states with the power to regulate every branch of human industry.

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1 Act of February 14, 1865, 13 Stats. 428.

2 Act of March 3, 1865, 13 Stats. 510.

3 Act of February 20, 1899, 25 Stats.

675.

4 United States v. Knight Co., supra.

5 Appendix A to Report of Commissioner of Corporations, Dec. 1904

6 Kidd v. Pearson, 128 U. S. 1. 32 L Ed. 346.

A corporation organized to engage in interstate and foreign commerce would necessarily buy in order to sell, and such purchases and sales, both domestic as well as interstate and foreign, could be held incidental, as essential to the exercise of the federal grant. The power " to produce," however, would involve manufacturing, mining and the whole range of local productive industries, and their regulation and control by federal authority, under the commerce power would essentially revolutionize the whole frame-work of our government, with its distinct divisions of the powers of sovereignty between the state and federal governments.

The difficulty does not lie merely in the conflict with the sovereignty of the state, which has exclusive jurisdiction over the business of manufacturing and producing within its borders, but in the limitation of the federal government to the powers expressly granted and to those which are fairly and reasonably incidental to those expressly granted.

§ 61. Relation of the states to federal corporations.-Assuming that corporations are chartered by congress for the carrying on of interstate and foreign commerce, their status in relation to the state government can be determined by analogy from the relation now held by national banks, which are organized under federal law, and by interstate railroad corporations organized under federal law, and corporations, as railroad companies, transacting interstate business, though chartered under state law.

National banks are not chartered under the commerce clause, but as banks of deposit and discount their ordinary business does not differ in any wise from that of the state banks in the same communities. The Pacific railroads were incorporated by Congress, and though chartered by the federal power, they transact local as well as through business, and as to the former are subject to the laws of the states where they operate. It would seem, however, from expressions in the opinions cited, that this subjection to state control in the regulation of local

The Secretary of the Treasury, December 1904, recommends that congress should make provision for the incorporation and regulation of trust companies.

2 Reagan v. Mercantile Trust Co., 154 U. S. 413 (1894), 38 L. Ed. 1028; Smyth v. Ames, 169 U. S. 466 (1898), 42 L. Ed. 819.

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