agencies of or
franchises granted by a state, the distinction must be borne in mind
between a tax upon _property_ acquired by means of the franchise from
the state and a tax upon the exercise of the franchise itself. The
former tax may be perfectly valid where the latter would be
unconstitutional. Thus, the Supreme Court has upheld a tax by a state
upon the real and personal property (as distinct from the franchises) of
a railway company chartered by Congress for private gain, while
conceding that the state could not tax the franchises, because to do so
would be a direct obstruction to federal powers.[1]

[Footnote 1: _Union Pacific Railroad Company vs. Peniston_, 18 Wall.,
5.]

It remains to notice briefly one or two Supreme Court decisions which
are relied upon by the sponsors of the new tax law. Reference has
already been made to the decision in the Spreckels case[1] which upheld
the validity of the tax imposed by the War Revenue Act of 1898 upon the
gross receipts of corporations engaged in the businesses of refining
petroleum and refining sugar. The Court held the tax to be an excise tax
"in respect of the carrying on or doing the business of refining sugar,"
and such it obviously was. It was not a tax upon the privilege or
franchise of doing business in a corporate capacity, like the tax now
under debate. On the contrary, the act expressly applied to "every
person, firm, corporation, or company carrying on or doing the business
of refining sugar...." The case, therefore, has no bearing on the point
we are discussing. Had the act applied only to corporations, a different
question would have been involved.

[Footnote 1: _Spreckels Sugar Refining Co. vs. McClain_. 192 U.S., 397.]

The case of _Veazie Bank vs. Fenno_,[1] upholding the statute which
taxed out of existence the circulation of the state banks, has
frequently been cited as an authority sustaining the right of Congress
to levy a tax upon a franchise or privilege granted by a state. It is
true that in that case the eminent counsel for the bank (Messrs. Reverdy
Johnson and Caleb Cushing) argued unsuccessfully "that the act imposing
the tax impaired a franchise granted by the state, and that Congress had
no power to pass any law which could do that;"[2] and that two justices
dissented on that ground. The conclusive answer to this argument, was,
however, that the power of the states to grant the particular right or
privilege in question was subordinate to