Opinion of the court. ton, this court, speaking through Chief Justice Marshall, said: * "The American people have conferred the power of borrowing money upon their government, and by making that government supreme have shielded its action in the exercise of that power from the action of the local governments. The grant of the power is incompatible with a restraining or controlling power, and the declaration of supremacy is a declaration that no such restraining or controlling power shall be exercised." And applying these principles the court proceeded to say: "The right to tax the contract to any extent, when made, must operate on the power to borrow before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government. To any extent, however inconsiderable, it is a burden upon the operations of the government. It may be carried to an extent which shall arrest them entirely." And finally: "A tax on government stock is thought by this court to be a tax on the contract, a tax on the power to borrow money on the credit of the United States, and consequently repugnant to the Constitution." Nothing need be added to this, except that in no case decided since have these propositions been retracted or qualified. The last cases in which the power of the States to tax the obligations of the government came directly in question were those of the Bank of Commerce v. The City of New York, in 1862, and the Bank Tax Case,‡ in 1865, in both of which the power was denied. An attempt was made at the bar to establish a distinction between the bonds of the government expressed for loans of money and the certificates of indebtedness for which the exemption was claimed. The argument was ingenious, but failed to convince us that such a distinction can be main * 2 Peters, 467. † 2 Black, 628. 2 Wallace, 200. Opinion of the court. tained. It may be admitted that these certificates were issued in payment of supplies and in satisfaction of demands of public creditors. But we fail to perceive either that there is a solid distinction between certificates of indebtedness issued for money borrowed and given to creditors, and certificates of indebtedness issued directly to creditors in payment of their demands; or that such certificates, issued as a means of executing constitutional powers of the government other than of borrowing money, are not as much beyond control and limitation by the States through taxation, as bonds or other obligations issued for loans of money. The principle of exemption is, that the States cannot control the national government within the sphere of its constitutional powers-for there it is supreme-and cannot tax its obligations for payment of money issued for purposes within that range of powers, because such taxation necessarily implies the assertion of the right to exercise such control. The certificates of indebtedness, in the case before us, are completely within the protection of this principle. For the public history of the country and the acts of Congress show that they were issued to creditors for supplies necessary to the government in carrying on the recent war for the integrity of the Union and the preservation of our republican institutions. They were received instead of money at a time when full money payment for supplies was impossible, and according to the principles of the cases to which we have referred, are as much beyond the taxing power of the States as the operations themselves in furtherance of which they were issued. It results that the several judgments of the Court of Appeals must be REVERSED. Statement of the case. NOTE. At the same time with the cases just disposed of was decided another, from the same court, involving the same question of the right to tax as they did, but differing from them in certain respects. It is here reported: BANK v. SUPERVISORS. 1. United States notes issued under the Loan and Currency Acts of 1862 and 1863, intended to circulate as money, and actually constituting, with the National bank notes, the ordinary circulating medium of the country, are, moreover, obligations of the National government, and exempt from State taxation. 2. United States notes are engagements to pay dollars; and the dollars intended are coined dollars of the United States. THIS case-brought here by the Bank of New York-differed from the preceding in two particulars: (1) That the board of supervisors, which in the other cases allowed and audited the claims of the banking associations, refused to allow the claim made in this case; and (2) That the exemption from State taxation claimed in this case, was of United States notes, declared by act of Congress to be a legal tender for all debts, public and private, except duties on imports and interest on the public debt, while in the other cases it was of certificates of indebtedness. These United States notes, as is sufficiently known at the present, had become part of the currency of the country. Their form (with certain necessary variations for different denominations, place of payment, &c.) was thus: Argument in favor of the tax. The mandamus in the State court was directed, in the case now before the court, to the board of supervisors, instead of to the officers authorized to issue bonds, as in the cases just preceding. The judgment in the Court of Appeals sustained the action of the board refusing to allow the exemption set up, and the case was brought here by writ of error to that court. Messrs. O'Connor and O'Gorman, in support of the judgment below: 1. The exemption of the public debt of the United States from taxation by State authority, rests only upon that clause of the Constitution which authorizes Congress "to borrow money on the credit of the United States." 2. The purpose and effect of the acts authorizing the notes in question was to create a new kind of money in the United States-paper money-which was to be a substitute for a metallic currency. The issuing of these notes was neither more nor less than the creation, by right or without it, of a conventional money. The notes were intended to be money, and in practice have become the only lawful money in use. 3. The government did not, really and in fact, contract by these notes to pay the bearer on demand or at any time. The notes were made by the act a legal tender in payment of all debts, including (with a small exemption) the government's own, and of course when presented for payment, similar notes being a legal tender in discharge of them, the debt would be discharged by a delivery of new notes of the same kind. The notes were promises to make other promises, to be renewed ad infinitum. There is really no debtor nor creditor in respect of them. There is no loan or evidence of loan. As far as the credit of the United States was involved in the issue of these notes, no greater responsibility was assumed than is assumed by any government in coining or otherwise affixing a stamp to metal, and affixing to it a certain nominal value; although by mixing or debasing the metal, its real value, in use or exchange, may have been totally destroyed. The acts in question did but endeavor to confer a prescribed value on certain stamped paper, which they compelled the citizens of the United States to take in payment of all debts due, or to become Opinion of the court. due by the government to them, or by them to the government, or to one another. By this means, instead of borrowing money, Congress made money, and rendered borrowing unnecessary. The protection from State interference accorded by the Constitution to the exercise by the government of the power of borrowing cannot be invoked in such a case. 4. The acts of Congress relating to the financial operations of the government during the civil war, afford evidence that Congress did not intend that the notes in question should be exempt from State taxation.* Messrs. Peckham and Burrill, contra. The CHIEF JUSTICE delivered the opinion of the court. The general question requiring consideration is whether United States notes come under another rule in respect of taxation than that which applies to certificates of indebtedness. The issues of United States notes were authorized by three successive acts. The first was the act of February 25, 1862;† the second, the act of July 11, 1862; and the third, that of March 3, 1863.§ Before either of these acts received the sanction of Congress the Secretary of the Treasury had been authorized by the act of July 17, 1861,|| to issue treasury notes not bearing interest, but payable on demand by the assistant treasurers at New York, Philadelphia, or Boston; and about three weeks later these notes, by the act of August 5, 1861, had been made receivable generally for public dues. The amount of notes to be issued of this description was originally limited to fifty millions, but was afterwards, by the act of February 12, 1862,** increased to sixty millions. These notes, made payable on demand, and receivable for all public dues, including duties on imports always payable in coin, were, practically, equivalent to coin; and all public disbursements, until after the date of the act last mentioned, were made in coin or these notes. * See 12 Stat. at Large, 345, 28 1, 2; Ib. 709; 13 Id. 218-19-21-22. Stat. at Large, 259, ¿ 6. Ib. 532. ? Ib. 709. ** Ib. 338. |