_v._ O'Keefe,[70] handed down two years later. Repudiating the
theory "that a tax on income is legally or economically a tax on its
source," the Court held that a State could levy a nondiscriminatory
income tax upon the salary of an employee of a government corporation.
In the opinion of the Court, Justice Stone intimated that Congress could
not validly confer such an immunity upon federal employees. He wrote:
"The burden, so far as it can be said to exist or to affect the
government in any indirect or incidental way, is one which the
Constitution presupposes; and hence it cannot rightly be deemed to be
within an implied restriction upon the taxing power of the national and
state governments which the Constitution has expressly granted to one
and has confirmed to the other. The immunity is not one to be implied
from the Constitution, because if allowed it would impose to an
inadmissible extent a restriction on the taxing power which the
Constitution has reserved to the state governments."[71] Chief Justice
Hughes concurred in the result without opinion. Justices Butler and
McReynolds dissented and Justice Frankfurter wrote a concurring opinion
in which he reserved judgment as to "whether Congress may, by express
legislation, relieve its functionaries from their civic obligations to
pay for the benefits of the State governments under which they
live...."[72]

_AD VALOREM_ TAXES UNDER THE DOCTRINE

Property owned by a federally chartered corporation engaged in private
business is subject to State and local _ad valorem_ taxes. This was
conceded in McCulloch _v._ Maryland,[73] and confirmed a half century
later with respect to railroads incorporated by Congress.[74] Similarly,
a property tax may be levied against the lands under water which are
owned by a person holding a license under the Federal Water Power
Act.[75] Land conveyed by the United States to a corporation for dry
dock purposes was subject to a general property tax, despite a
reservation in the conveyance of a right to free use of the dry dock and
a provision for forfeiture in case of the continued unfitness of the dry
dock for use, or the use of the land for other purposes.[76] Where
equitable title has passed to the purchaser of land from the Government,
a State may tax the equitable owner on the full value thereof, despite
the retention of legal title by the Government,[77] but the equitable
title passes otherwise.[78] Recently a divided Court held that