Marshall Overruled

When Franklin Roosevelt began to talk of collecting Federal income taxes on salaries of State & municipal officials (at the same time suggesting reciprocal tax powers for the States), he was primarily seeking new sources of Federal revenue. The way to such a source was apparently opened last year by the Supreme Court's ruling that the U. S. might tax the pay of employes of the Port of New York Authority and similar quasi-public bodies (TIME, June 13).

New York's Attorney General retaliated for the Port Authority levy by trying to collect State income tax upon the Federal salary of an attorney for HOLC (TIME, Nov. 28). Utah's Attorney General tried to collect on the salary of an RFC attorney. In each case, the State's high court ruled against its Attorney General. No one was surprised, for 120 years ago, in a somewhat similar case, McCulloch v. Maryland, U. S. Chief Justice Marshall ruled against Maryland saying: "The power to tax involves the power to destroy." This week the U. S. Supreme Court overruled both State courts, upheld both States' Attorneys General.

Justices Black and Stone, in separate opinions, found nothing in the U. S. Constitution to render Federal salaries immune. In a concurring opinion, Justice Frankfurter observed: "Whether Congress may, by express legislation, relieve its functionaries from their civic obligations to pay the benefits of the State governments under which they live, is matter for another day."

A bill to make all State & municipal employes pay income tax to the Federal Government was passed last month by the House. In the Senate, whose members did not relish inflicting pain on their political machines back home, it faced a fight. Government lawyers this week declared that the Supreme Court's new ruling cut both ways, rendered such legislation unnecessary except to relieve State & municipal employes from levies retroactive to 1926. To take advantage of the new ruling, however, most States will have to amend their income tax laws, which specifically exempt Federal salaries. Especially prompt to act should be Maryland and Virginia, where hordes of Federal folk live near their jobs in the District of Columbia.

To taxpayers not on any public payroll, the rise of reciprocal taxation presented food for a happy thought: that making taxes more real to public officials might make them more chary with public funds.

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