U.S. Supreme Court MACALLEN CO. v. COMMONWEALTH OF MASSACHUSETTS, 279 U.S. 620 (1929)

[Page 279 U.S. 620, 638]

ernment imposing the tax ... or the appropriate exercise of the functions of the government affected by it.' See Metcalf & Eddy v. Mitchell, 269 U.S. 514, 523, 46 S. Ct. 172 (70 L. Ed. 384).

Granted that a statute otherwise valid may be deemed improper, when intended as a covert means of directly burdening ownership of securities of the other sovereignty (see Miller v. Milwaukee, , 47 S. Ct. 280), I can discern no such sinister purpose in the present legislation. It was, of course, the intention of the Massachusetts Legislature, in the amendment of section 30, to deal specifically, not alone with federal bonds, but with the tax-exempt securities of the commonwealth and its municipalities, by including them in the measure of the excise tax. The amendment did not aim at securities of the national government, or discriminate against them. It was obviously designed to impose on corporations generally a tax similar to the excise on national banks, measured by net income, recommended by the legislative committee as a means of avoiding a then existing discrimination. The inclusion in the measure of the tax of income from all tax-exempt securities tended only to effect this purpose, a similar computation of net income being contemplated for national banks. But in neither case is there anything to suggest that the Legislature intended to impose a direct tax on income or do more than to impose an excise tax, measured by income, including that upon federal bonds, which this court has declared it may do. Its purpose was to prevent the evasion by corporations of payment of the tax which the commonwealth had fixed as the price of the privilege of doing business within it in corporate form, by any course of investment of their funds in tax exempt securities, state or national. As this seems to me to be a permissible purpose, both on principle and by authority, I think the judgment below should be affirmed.

Mr. Justice HOLMES and Mr. Justice BRANDEIS concur in this opinion.