also realize that in times of stress there is a danger that earlier sound decisions may be overthrown. Taxation of municipal bonds can only result in handicapping the vitally important expansion of water lines and sewers in Texas cities and the development of other facilities essential to our growing populations. Furthermore, we believe that the proposal is one for the further invasion of the right of our citizens to determine and control the operation of their local affairs, a right which is held particularly dear by Texans. We in Dallas sincerely hope that we shall have your cooperation in preventing the acceptance by the House Ways and Means Committee or by the Congress of a measure which would have such serious results to our people. Sincerely yours, Mr. EBERHARTER. Mr. Chairman? W. H. SAVAGE, Mayor. Mr. EBERHARTER. Mr. Lawrence, in my opinion, you have made a powerful presentation against the Treasury Department's proposal. I might add that the United States Conference of Mayors has been very well represented by you today as well as has the city of Pittsburgh, my home town. Now, aside from the legal questions involved, and aside from the revenue that the proposal might bring, it seems to me that one of the most important statements you have made is contained on page 10 of your presentation. As you read it, you gave a good deal of emphasis to that particular point, and I would like to quote it again: Thus, we have this result. Interest rates will increase. Holders of the bonds will get the higher returns, which would take care of their Federal income-tax obligations. City treasurers would have to secure the added revenues to pay the increased interest rates. Local revenues come mainly from property owners. So, our real-estate taxpayers in our cities would be the ones who would ultimately foot the bill. Because I think that is so important in our consideration, I have called it to the special attention of the committee. Thank you, Mr. Lawrence. Mr. LAWRENCE. Thank you, Mr. Eberharter. The CHAIRMAN. Mr. Simpson. Mr. SIMPSON. Mr. Lawrence, you have made a most vital contribution to the committee's study of this problem. I want directly to indicate my extreme satisfaction with your presentation, sir. Mr. LAWRENCE. Thank you, Mr. Simpson. The CHAIRMAN. Thank you, Mr. Lawrence, for the help you have given the committee. Mr. LAWRENCE. Thank you, Mr. Chairman. Mr. COOPER. Mr. Chairman, I would like to ask unanimous consent to have included in the record a letter from Governor Browning of Tennessee on the subject. The CHAIRMAN. Without objection, that will be done. (The letter referred to is as follows:) Hon. ROBERT L. DOUGHTON, TENNESSEE EXECUTIVE CHAMBER, Chairman, House Ways and Means Committee, DEAR SIR: We are advised that your honorable committee will, on February 26, 1951, consider the proposal of the Secretary of the Treasury to tax income received from future issues of State and municipal bonds. On behalf of the State of Tennessee and its political subdivisions, we desire to register a vigorous protest against the proposal. States and municipal governments will, in the event of such a tax, be faced with the necessity of conducting their public financing in unfavorable markets and at such increased cost as to become an unbearable burden on all small communities and to greatly restrict the larger ones, all at a time when they can least afford so great a handicap. We, therefore, respectfully request that nothing be done to disturb a relationship between the Federal and local governments which has properly existed since the founding of the Republic. We further request that this protest be presented at the meeting of your committee and be filed as part of the record of your proceedings. Respectfully, GORDON BROWNING, Governor; W. N. ELSEE, State Treasurer; Roy Mr. COOPER. Mr. Chairman, I would also like to ask unanimous consent to have included in the record at this point quite a number of statements, telegrams, and letters from governors and other officials which have been received by the clerk. The CHAIRMAN. Without objection, that will be done. (The statements, telegrams, and letters referred to are as follows:) THE NATIONAL ASSOCIATION OF ATTORNEYS GENERAL, Chicago Ill., February 14, 1951. CONFIRMATION COPY OF TELEGRAM SENT TO ALL ATTORNEYS GENERAL The National Association of Attorneys General in 1938 adopted a resolution strongly opposing attempts of Federal Government to tax income from State and local securities and approved efforts of the Conference on State Defense opposing imposition of this tax. Fight has been renewed by Federal Government by Secretary Snyder's statement on February 5 before House Ways and Means Committee. Hearings to be held by committee Monday, February 19, beginning at 9 a. m. on Treasury proposal. Thursday, February 15, last day to apply for place on committee calendar or to file notice of intention to file statement objecting to tax. If your State concurs in opposing the imposition of the Federal tax, suggest you notify Chairman Robert L. Doughton immediately concerning your intention to file statement and that you send in statement prior to Monday hearings with copy to members of your delegation in Congress. ATTORNEY GENERAL HARRY MCMULLAN, President, National Association of Attorneys General. PHOENIX, ARIZ., February 16, 1951. HARRY MCMULLAN, President National Association of Attorney Generals, Care Secretary, Council of Senate Governments, 1313 East Sixieth Street: Enter objection of State of Arizona to imposition of Federal Tax upon income from State and local securities. Statement in support of Arizona's objection will follow. Hon. HARRY MCMULLAN, FRED O. WILSON, Attorney General, State of Arizona. WILMINGTON, DEL., February 19, 1951. National Association of Attorney Generals, 1313 East Sixtieth Street, Chicago: Delaware's Representative in Congress and Senators have been advised by this office of State's opposition to Secretary Snyder's statement concerning Federal taxation of State and local security income. VINCENT A. THEISEN, Chief Deputy Attorney General. OFFICE OF THE ATTORNEY GENERAL, Hon. AUSTIN J. TOBIN, Secretary, Conference on State Defense, DEAR MR. TORIN: Thank you for your night letter of February 13, and your night letter of February 14, with reference to the proposal of the United States Treasury Department to tax income from State and local securities. I am attaching copy of a telegram which I sent to Florida's congressional delegation, urging that they oppose such a tax. In addition, I contacted Hon. Ralph A. Marsicano, First National Bank Building, Tampa, Fla., who is attorney for the Florida League of Municipalities. Mr. Marsicano advised me that the Florida league would contact Florida's delegation, urging opposition to the measure, and would also ask their national association to appear at the hearing. He further assured me that, through the major of Tampa, he would contact the appropriate association of municipal officers and ask its active opposition to the proposed tax. Also, we have contacted Hon. Walter E. Keyes, chairman, Florida State Improvement Commission, Caldwell Building, Tallahassee, which agency issues revenue certificates, financing various public works of the several counties and the States. Mr. Keyes is tremendously interested and is compiling data to send to Florida's congressional delegation, showing the probable increased cost to the counties and the State if the proposed tax is passed. Mr. Keyes plans to actively oppose the measure and, after completing his studies, will probably ask permission to appear before the committee. Because of pressing matters which require my attention in the State, it will not be possible for me to appear before the committee in Washington on February 26, but I believe that I have done everything this office can do toward insuring strong opposition from Florida on this matter. With best wishes, I am, Sincerely yours, RICHARD W. ERVIN, Attorney General. OFFICE OF THE ATTORNEY GENERAL, Tallahassee, Fla., February 15, 1951. Hon. HARRY MCMULLAN, President, National Association of Attorneys General, 1313 East Sixtieth Street, Chicago 37, Ill. DEAR HARRY: Thank you for your telegram of February 14, with reference to the proposal of the United States Treasury Department to tax income from State and local securities. I am enclosing herewith copy of my telegram to Florida's congressional delega tion, urging that they oppose such a tax. I am also enclosing copy of a letter I have today written to Hon. Austin J. Tobin, secretary, Conference on State Defense, which enumerates the other things I have done to set in motion a strong opposition from Florida to this proposed tax. As stated in my letter to Mr. Tobin, it is not possible for me to appear before the committee in Washington, but I believe that you will find Florida in there pitching, in an effort to defeat the Federal proposal. With kind personal regards, I am, Sincerely yours, RICHARD W. ERVIN, Attorney General. [Western Union night letter] TALLAHASSEE, FLA., February 14, 1951. Re House Ways and Means Committee hearings Monday, February 19, on proposal to tax State and municipal bonds. Recommend your opposition to such tax as would seriously increase cost of State and local financing, would not yield appreciable Federal revenue for many years, would handicap financing of needed local improvements, and further subject State and local governments to Federal controls. Regards. RICHARD W. ERVIN, Attorney General, State of Florida. House of Representatives, Washington, D. C. BOISE, IDAHO, February 15, 1951. Hon. HARRY MCMULLAN, President, National Association of Attorneys, 1313 East Sixtieth Street: Reference your wire concerning Secretary Snyder's proposal tax interest on State and municipal bonds under Federal income-tax laws. Have requested conference Governor Jordan and will advise Idaho attitude when consideration is mature. Please advise Mr. Tobin. Appearance on behalf of this State at hearing unlikely. May authorize statement on behalf of Idaho by congressional delegation. ROBERT E. SMYLIE, Attorney General. BATON ROUGE, LA., February 15, 1951. Hon. HARRY MCMULLAN, President, National Association of Attorneys General, 1313 East Sixtieth Street, Chicago: Retel of February 14 concerning hearing on bill to impose tax on State income and local securities, I oppose this bill but do not believe that it is possible to be present to give statement. My views are in full accord with those announced in resolution of the National Association of Attorneys General in 1938. BOLIVAR E. KEMP, Jr., Attorney General. Attorney General HARRY MCMULLAN, BOSTON, MASS., February 20, 1951. 1313 East Sixtieth Street: You may record me as attorney general of this commonwealth in opposition to the taxing of State bonds. FRANCIS E. KELLY, Attorney General. CARSON CITY, NEV., February 14, 1951. Hon. HARRY MCMULLAN, President, National Association of Attorneys General, 1313 East Sixtieth Street, Chicago: Reurtel February 14 re Federal taxation income State, local securities, have wired Chairman Doughton Nevada's strong opposition to such taxation. W. T. MATHEWS, Attorney General of Nevada. Hon. ROBERT L. DOUGHTON, STATE OF NEW HAMPSHIRE, February 15, 1951. Chairman, House Ways and Means Committee, DEAR SIR: Pursuant to our telegram dated February 15, enclosed herewith are 40 copies of a brief in opposition to proposal to tax the obligations of States and their governmental subdivisions. Time has not permitted full and complete treatment of the questions raised by this proposal in the brief which I now submit. However, I am convinced that further research and presentation would only result in lengthy corroboration of the principles therein established. Very truly yours, GORDON M. TIFFANY, Attorney General. BRIEF OF THE ATTORNEY GENERAL OF NEW HAMPSHIRE IN OPPOSITION TO PROPOSAL TO TAX OBLIGATIONS OF STATES AND THEIR GOVERNMENTAL SUBDIVISIONS I. It is basic to our dual form of government that the States will respect the Federal Government and the Federal Government the State, as each carries out it assigned or inherent functions under the Constitution. It was early held that a State is without the power to tax the Federal Government in respect to governmental functions undertaken by the latter. The principle leading to this conclusion is cogently stated by Marshall, J., in M'Culloch v. Maryland (4 Wheat. 316, 4 L. Ed. 579): "That the power to tax involves the power to destroy * * * [is a] proposition not to be denied" (4 L. Ed. at 607). The reciprocal of the foregoing principle was stated in Pollock v. Farmers Loan & Trust Co. (157 U. S. 428, 39 L. Ed. 759): "The Constitution contemplates the independent exercise by the Nation and the State, severally, of their constitutional powers. "As the States cannot tax the powers, the operations, or the property of the United States, nor the means which they employ to carry their powers into execution, so it has been held that the United States have no power under the Constitution to tax either the instrumentalities or the property of a State. "A municipal corporation is the representative of the State and one of the instrumentalities of the State government. It was long ago determined that the property and revenues of municipal corporations are not subjects of Federal taxation" (39 L. Ed. at 820). The doctrines thus asserted have been assiduously followed. See, e. g., Indian Motorcycle Co. v. United States (283 U. S. 570, 75 L. Ed. 1277), where the Court declares: "It is an established principle of our constitutional system of dual government that the instrumentalities, means, and operations whereby the United States exercises its governmental powers are exempt from taxation by the States, and that the instrumentalities, means, and operations whereby the States exert the governmental powers belonging to them are equally exempt from taxation by the United States. This principle is implied from the independence of the National and State Governments within their respective spheres and from the provisions of the Constitution which look to the maintenance of the dual system.' See, also, Ashton v. Cameron County Water Improvement District No. One (298 U. S. 513, 528, 80 L. Ed. 1309, 1313). The recent language of Justice Douglas is directly in point and cannot be questioned as applied to State activity in its governmental sphere: "The States on entering the Union surrendered some of their sovereignty. It was further curtailed as various amendments were adopted. But the tenth amendment provides that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.' The Constitution is a compact between sovereigns. The power of one sovereign to tax another is an innovation so startling as to require explicit authority if it is to be allowed. If the power of the Federal Government to tax the States is conceded, the reserved power of the States guaranteed by the tenth amendment does not give them the independence which they have always been assumed to have. They are relegated to a more servile status. They become subject to interference and control both in the functions which they exercise and the methods which they employ. They must pay the Federal Government for the privilege of exercising the powers of sovereignty guaranteed them by the Constitution, whether, as here, they are disposing of their natural resources, or tomorrow they issue securities or perform any other acts within the scope of their police power" New York v. United States (326 U. S. 572, 90 L. Ed. 326, 341). The State of New Hampshire feels, consistently with the principles clearly enumerated in the cases noted above, that the proposed measure strikes at the very core of our constitutional system and should not, therefore, be countenanced. |