act that
the privilege of being red-headed is not a franchise granted by a
sovereign state. From the viewpoint of constitutional law it may well be
that Congress can tax a privilege conferred by the gods where it would
be powerless to tax a franchise granted by the Legislature of New
Jersey.

XI

THE CORPORATION TAX DECISION

The immediate consequences of the decision of the United States Supreme
Court[1] affirming the constitutionality of the federal corporation tax
are so slight that its profound significance is likely to be overlooked.
Until it was merged with the general income tax the exaction was not
burdensome and proved easy of collection. The thing upon which it
fell--the privilege of doing business in a corporate capacity--is an
abstraction which makes little appeal to the sympathies or the moral
sense. The public, more concerned with present conditions than with the
passing of a theory, is indifferent.

[Footnote 1: _Flint v. Stone Tracy Co._, 220 U.S., 107]

Thus it has sometimes been with the turning points in the affairs of
nations. They came quietly and without observation, and it remained for
the historians to mark the actual parting of the ways.

The Supreme Court holds, and in its opinion reiterates many times, that
the tax is upon the _privilege of doing business in a corporate
capacity_.

Right here is the crux of the matter. Corporate capacity is not a right
granted by the National Government. It is something which Congress can
neither give nor take away. In the division of powers which marked the
creation of our dual government the power to confer corporate capacity
was reserved to the states. The decision, therefore, comes to this:
Congress can by taxation burden the exercise of a privilege which only a
state can grant. And the power to tax, it must be remembered, involves
the power to destroy. This seems a long step from the theory of the men
who founded the Republic.

Nearly fifty years ago the Supreme Court stated the theory as follows:

The states are, and they must ever be, co-existent with the
National Government. Neither may destroy the other. Hence the
Federal Constitution must receive a practical construction.
Its limitations and its implied prohibitions must not be
extended so far as to destroy the necessary powers of the
States, or prevent their efficient exercise.[1]

[Footnote 1: _Railroad Co. v. Peniston_, 18 Wall., 5.]

The court