ed that Congress could
tax a business when done by individuals and could tax the same business
when done by a corporation. The inquiry was: Does the act of a state in
clothing the individuals with corporate capacity create a new subject
matter for taxation by the General Government? That was the real
question before the Court, and the decision answers it in the
affirmative.

[Footnote 1: 192 U.S., 397.]

Other illustrations of the same apparent confusion of thought are to be
found in the opinion. For example, it is said (citing various cases
involving a tax on business where the party taxed was a corporation):

We think it is the result of the cases heretofore decided in
this Court, that such _business activities_, though exercised
because of state-created franchises, are not beyond the taxing
power of the United States.

Here again the Court seems to lose sight of the distinction between a
tax on "business activities" and a tax on the privilege of conducting
such activities in a corporate capacity.

It is futile, however, to quarrel with the logic of the opinion. The
question is closed and the Court, by affirming the judgments appealed
from, has committed itself to the theory that the Federal Government
may, by taxation, burden the exercise of a privilege which only a state
can confer. With the expediency of that theory as applied to present-day
political conditions we are not now concerned. The object of this
chapter is to point out that the decision marks a distinct departure
from the earlier doctrine that the two sovereignties, federal and state,
are upon an equality within their respective spheres.

In view of the centralizing forces which are tending to transform these
sovereign states into mere political subdivisions of a nation, the
decision is of great significance. Moreover, in a very practical way it
touches the right of each state under the compact evidenced by the
Federal Constitution to manage its internal affairs free from compulsion
or interference by the other states. To illustrate: In some parts of the
country the anti-corporation feeling runs high. Many men if given their
way would tax the larger corporations out of existence. Under this
decision the way is open whenever a majority can be secured in Congress.
An increase in the tax rate is all that would be necessary. Make the
rate ten per cent. or twenty per cent. instead of one per cent. and the
thing is accomplished.

N