U.S. Supreme Court National Bank v. United States, 101 U.S. 1 (1879)
National Bank v. United States
101 U.S. 1
ERROR TO THE CIRCUIT COURT OF THE UNITED
STATES FOR THE EASTERN DISTRICT OF ARKANSAS
1. Sec. 3413 of the Revised Statutes, which enacts that:
"Every national banking association, state bank, or banker, or association, shall pay a tax of ten percentum on the amount of notes of any town, city, or municipal corporation, paid out by them,"
is not unconstitutional.
2. The tax thus laid is not on the notes, but on their use as a circulating medium.
3. Veazie Bank v. Fenno, 8 Wall. 533, cited and approved.
This is a suit by the United States to recover from the Merchants' National Bank of Little Rock, Ark., $160,000, being ten percent on $1,600,000 of certain notes of the City of Little Rock, which it was alleged the bank had paid out during the years 1870, 1871, 1872, and 1873. The notes were issued and put in circulation by the city, and used in business and commercial transactions as money. They were printed on banknote paper in amounts ranking from $1 to $100, and were payable to a person named or to bearer. By an ordinance of the city, and also by an act of the legislature of the state, they were receivable in payment of city taxes and of all dues to the city.
Sec. 3413 of the Revised Statutes is as follows:
"Every national banking association, state bank, or banker, or association
shall pay a tax of ten percentum on the amount of notes of any town, city, or municipal corporation, paid out by them. "
There was a verdict in favor of the United States for $2,000; and judgment thereon having been rendered, the bank thereupon sued out this writ of error.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
The only question presented is as to the constitutionality of sec. 3413 of the Revised Statutes, the objection being that the tax is virtually laid upon an instrumentality of the State of Arkansas.
We think this case comes directly within the principles settled in Veazie Bank v. Fenno, 8 Wall. 533, where it was
distinctly held that the tax imposed by that section on national and state banks for paying out the notes of individuals or state banks used for circulation was not unconstitutional. The reason is thus stated by Mr. Chief Justice Chase:
"Having thus, in the exercise of undisputed constitutional powers, undertaken to provide a currency for the whole country, it cannot be questioned that Congress may constitutionally secure the benefit of it to the people by appropriate legislation. To this end, Congress has denied the quality of legal tender to foreign coins, and has provided by law against the imposition of counterfeit and base coin on the community. To the same end, Congress may restrain, by suitable enactments, the circulation as money of any notes not issued under its authority. Without this power, indeed, its attempts to secure a sound and uniform currency for the country must be futile."
P. 75 U. S. 549 .
The tax thus laid is not on the obligation, but on its use in a particular way. As against the United States, a state municipality has no right to put its notes in circulation as money. It may execute its obligations, but cannot, against the will of Congress, make them money. The tax is on the notes paid out -- that is, made use of as a circulating medium. Such a use is against the policy of the United States. Therefore the banker who helps to keep up the use by paying them out -- that is, employing them as the equivalent of money in discharging his obligations -- is taxed for what he does. The taxation was no doubt intended to destroy the use; but that, as has just been seen, Congress had the power to do.