(3) A tax on exports.

(4) A tax for a purpose other than to pay the debts of the United States or provide for the general welfare.

The following discussion will develop first, that the equalization fee is, in addition to being a regulation of interstate and foreign commerce, a tax, and, second, that as a tax it does not violate any of the constitutional restrictions upon the exercise of the taxing power.

A. THE EQUALIZATION FEE AS A TAX.

(1) A monetary exaction may be found to be other than a tax if the face of the tax shows that there is a penal and regulatory end in view, and that the revenue to be obtained is not the moving cause for the imposition of the tax. Perhaps the most important case upon this subject is the Child Labor Tax case (1922, 259 U. S. 20), which declared invalid as an exercise of the taxing power Title XII of the Revenue Act of 1918.

Title XII imposed upon persons employing in factories, mines, etc., children under certain ages "an excise tax equivalent to 10 per centum of the entire net profits received or accrued for such year" from the sale or distribution of all products of the establishment.

The court considered the following as the fundamental questions involved:

Does this law impose a tax with only that incidental restraint and regulation which a tax must inevitably involve? Or does it regulate by the use of the so-called tax as a penalty? If a tax, it is clearly an excise. If it were an excise on a commodity or other thing of value we might not be permitted under previous decisions of this court to infer solely from its heavy burden that the act intends a prohibition instead of a tax (p. 36).

The court found that the so-called tax was more than a tax, that on its face it was a palpable regulation of and prohibition against employment of child labor and "in the act before us the presumption of validity can not prevail, because the proof of the contrary is found on the very face of its provisions" (pp. 37, 38).

The court in the Child Labor Tax case distinguished several of its former decisions with respect to palpably regulatory measures, the chief of which was the Narcotic Drug Act, considered in U. S. v. Doremus (1919, 249 U. S. 86).

This Act imposed a special tax on the manufacture, importation, and sale of opium or coca leaves, required persons subject to the tax to register with the collector of internal revenue, forbade the sale except on written order of the person to whom sale was made, except on a prescribed form, required the vendor to keep the order for two years, the purchaser to keep a duplicate for a similar period, and made both subject to certain inspection regulations. The court in discussing the decision of that case said (p. 43):

The validity of a special tax in the nature of an excise tax on the manufacture, importation, and sale of such drugs was, of course, unquestioned. The provisions for subjecting the sale and distribution of the drugs to official supervision and inspection were held to have a reasonable relation to the enforcement of the tax and were therefore held valid.

The court said that the act could not be declared invalid just because another motive than taxation, not shown on the face of the act, might have contributed to its passage. This case does not militate against the conclusion we have reached in respect of the law now before us. The court there made manifest its view that the provisions of the so-called taxing act must be naturally and reasonably adapted to the collection of the tax and not solely to the achievement of some other purpose plainly within State power.

On the same day that the Supreme Court decided the Child Labor Tax case, in Hill v. Wallace (1922, 259 U. S. 44) it held the Future Trading Act unconstitutional. The act imposed a tax of 20 cents a bushel on all contracts for the sale of grain for future delivery. Following the reasoning it had used in the Child Labor Tax case, the court pointed out that—

It is impossible to escape the conviction, from a full reading of this law, that it was enacted for the purpose of regulating the conduct of business of boards of trade through supervision of the Secretary of Agriculture and the use of an administrative tribunal consisting of that Secretary, the Secretary of Commerce, and the Attorney General. Indeed the title of the act recites that one of its purposes is the regulation of boards of trade. The manifest purpose of the tax is to compel boards of trade to comply with regulations, many of which can have no relevancy to the collection of the tax at all. (P. 66.)

* * *

Finally the court declared, as decisive upon the question of the validity of the act, that

When this purpose is declared in the title to the bill, and is so clear from the effect of the provisions of the bill itself, it leaves no ground upon which the provisions we have been considering can be sustained as a valid exercise of the taxing power. (P. 66, 67.)

From the above cases it appears that the court will be forced to declare an Act containing a purported tax unconstitutional if, on account of the provisions of the Act, "it leaves no ground upon which * * * the tax can be sustained as a valid exercise of the taxing power." One of the tests appears to be that the tax on its face can not be solely a regulatory measure; but if the provisions of the Act have a "reasonable relation to the enforcement," if they are "naturally and reasonably adapted to the collection of the tax," and if the Act does not contain so-called taxing provisions "which can have no relevancy to the collection of the tax at all" it is entirely probable that the court will sustain the Act as a valid exercise of the taxing power. The State bank note, oleomargarine, and narcotic drug taxes. were so sustained.

The provisions in respect of the equalization fee can not be objectionable as regulatory upon their face. Section 201 declares the purpose for which the fee is to be collected, 202 prescribes the manner in which the fee is to be determined, 203 specifies the time and manner of imposition and the mode of collection, and section 204 provides for the equalization funds and dividends from such funds. There is only the "incidental restraint and regulation which a tax must inevitably involve," there are no "heavy burdens" or prohibitions, no compulsion to comply with regulatory features which "can have no relevancy to the collection of the tax at all." It is submitted that these straightforward provisions of the bill are "naturally and reasonably adapted to the collection" of the fee, and their regulatory effect follows, not from the imposition and collection of the fee, but from the use to which the moneys collected are put in equalizing losses of the corporation and meeting operating costs.

In the above respects the equalization fee is distinguishable from the monetary exactions in the Child Labor Tax provisions and the Future Trading Act. There is, however, a further distinction of primary importance. The tax on products manufactured by child labor and the tax on future sales on exchanges were each aimed to prohibit and penalize certain transactions by reason of the discriminatory amount and the indiscriminate manner of the exaction. The State bank note tax, the oleomargarine tax, and the narcotic drug tax also imposed prohibitory exactions, but this end was not apparent upon the face of the statutes for the reason that there were included administrative provisions unnecessary to the collection of revenue. The equalization fee, however, is uniform in its application. No particular class of transaction is prohibited by the fee. The fee is not penal. On the contrary, it is permissive. It encourages and increases the quantity and value of transactions in certain agricultural commodities. Without it as a necessary part of the machinery of the bill, foreign commerce in such commodities would remain at the present low level, and the total value involved in the combined domestic and foreign transactions in such commodities would not advance proportionately to the advance in the value of transactions of most other commodities since the pre-war period. Therefore, no implication of regulatory purpose can be derived from the equalization fee on the ground that its economic effect is penal. The reverse is true. Tariff duties stimulate domestic and penalize certain phases of foreign commerce. The equalization fee stimulates both domestic. and certain phases of foreign commerce. Neither shows on its face any regulatory end. Each is, therefore, a tax as well as a regulation of commerce.

(2) While normally, in the imposition, collection, and distribution of monetary exactions, certain characteristics enumerated below appear, it is not essential that these characteristics be a part of the exaction, and without them the exaction is entirely valid as a tax.

(a) It is commonly thought that one characteristic of an exaction that is a tax should be that it be denominated a tax. However, the courts will as readily impute tax characteristics to an exaction denominated a fee, a charge, or a license, as they will reject so-called taxes when it is apparent that they are penalties or regulatory exactions not valid exercises of the taxing power.

In Dayton-Goose Creek Railway v. United States (1923, 287 Fed. 728) the court had under consideration the validity of certain provisions of the Transportation Act, 1920, especially those requiring that there be paid into a "general railroad contingent fund," provided for in paragraph 10 of section 15a of the Interstate Commerce Act, one-half of its net earnings in excess of 6 per cent upon the value of its property. The court said (p. 732):

While the exaction in question is not denominated a tax, it is in effect an excise tax levied on all carriers. * * * We see no reason why the United States can not measure this tax by the excess of profit realized over a specified percentage. It is the nature of the demand, and not its name as given in the statute, which determines if it is in truth a tax.

(b) Another usual charateristic in a tax is that it be collected by the sovereign power imposing it. "The Constitution confers the power upon Congress to lay and collect taxes, but leaves it to the Congress to prescribe the mode, manner, and means of levying and collecting the same." (U. S. v. 288 Packages of Tobacco, 1900, 103 Fed. 453.)

While normally taxes are collected by officers of the sovereign taxing authority itself, there are examples of collection by other agencies designated or created by such authority for the purpose.

One example of this is the tax collected under section 11 of the Federal Reserve Act by the Federal reserve banks. The Federal reserve banks, corporations created by the United States, are required to collect a tax for a specific purpose, just as the corporation created by the United States under the McNary-Haugen bill collects the fee. The tax is imposed by the Federal Reserve Board upon Federal reserve banks which allow their gold reserve held against Federal reserve notes to fall below 40 per centum, but the reserve bank must collect the tax by adding an amount equal to the said tax to its rates of interest and discount.

In Nicchia v. People of New York (1920, 254 U. S. 228) the validity of a license fee imposed upon all dogs was questioned, because it was collected by the American Society for Prevention of Cruelty to Animals, a private corporation, and funds were used by it to enforce certain penal laws. The court held there was no infringement of any right guaranteed to an individual by the Federal Constitution "when a State * * * chooses to entrust * * * the collection of fees to a corporation created by it * and in good faith appropriates the funds so collected for payment of expenses fairly incurred * * * ""

Here the corporation is a Government agency not unlike the United States Spruce Production Corporation, the United States Grain Corporation, the War Finance Corporation, Federal reserve banks, Federal lands banks, and the Emergency Fleet Corporation. It is created for the special purpose of carrying out the provisions of the McNaryHaugen bill, and the collection of the equalization fee by it is but one of the governmental functions which it as agent of the Government is to perform. Further, the bill provides that in collecting the fee the corporation may avail itself of any other governmental agency in the executive branch of the Government, as for instance the Post Office Department or Federal reserve system. Section 303 (a) reads that "Any governmental establishment in the executive branch of the Government is authorized to act as agent of the corporation in the administration of functions vested in it by this Act.'

(c) Another characteristic which is considered as normally attaching to a tax is that it should be covered into the general fund in the Treasury as a part of the public moneys, there to be available for appropriation as the Congress may direct. Following are mentioned a few of the many legislative precedents which allow public money, and particularly fees, to be retained and not covered into the Treasury. These indicate that whether the fee should be covered into the Treasury does not depend on whether it is a tax but upon the legislative policy of Congress. There is no constitutional requirement that the revenues of the United States, taxes and others, should be covered into the Treasury. The sole requirement is that "no money shall be drawn from the Treasury but in consequence of appropriations made by law;" Article I, section 9.

Certain sections of the Revised Statutes disclose precedents for the withholding of fees by governmental officers to pay the expenses of their office, to pay their salaries, and to cover only amounts in excess of a specified sum into the Treasury. Revised Statutes, sections 4592 and 4594, are examples of this. The validity of these

sections was never questioned, although most of them have been repealed because of the change in legislative policy to one which now makes appropriations for these offices and requires the payment of the fees into the Treasury.

Sections 4185 and 4186 of the Revised Statutes, under the title Regulation of commerce and navigation," contained provisions enacted as early as 1792 authorizing officers of the Government to collect and retain as their compensation fees to cover the cost of the regulation of commerce and navigation by the Government. While subsequent acts (see Act of June 19, 1886, c. 421, 24 Stat. 79; Act of June 10, 1890, c. 407, 26 Stat. 140) have changed the policy of paying the officers of the Government directly from the fees received, there are many provisions in the navigation laws requiring fees to be paid to the United States for regulatory services.

Section 13 of the Act of June 29, 1906 (c. 3592, 34 Stat. 596), which established a Bureau of Immigration and Naturalization, imposes certain fees and provides for their collection by the clerk of the court, who is authorized to withhold one-half of the fees collected by him up to $3,000. All amounts in excess of that are to be covered into the Treasury of the United States. This is the existing law.

During the Civil War period assessors, inspectors, and collectors of the Internal Revenue Service were paid salaries, commissions, and fees from funds collected by them. Section 30 of the act of July 13, 1866 (c. 184, 14 Stat. 98, 156), provides for the appointment by the Secretary of the Treasury of "one or more general inspectors of spirits, who shall be entitled to receive such fees as may be prescribed by the Commissioner of Internal Revenue, * * * to be paid by the owner of the spirits."

Similar examples of fees and payments may be found in sections 22, 24, and 25 of the Act of June 30, 1864 (c. 173, 13 Stat. 223, 230, 231). Money-order funds, not a part of the postal revenues, are "deemed to be moneys in the Treasury of the United States" under Revised Statute 4045, but only the net proceeds need be covered into the Treasury.

(d) What is frequently regarded as another characteristic of a tax is that the tax moneys should, after collection, be available for appropriation from the general fund for such use as the legislative authorities may select. This is subject to numerous exceptions. There are many instances of the creation of special funds and the moneys in these funds are specifically set aside for a special use. In 14 Dec. Comp. Treas. 361, these funds are clearly distinguished. The Comptroller states: "Moneys in the general fund can only be withdrawn from the Treasury in pursuance of an appropriation made by law; but moneys in special funds, having been dedicated by Congress for expenditure for specified objects before they were covered into the Treasury, are subject to withdrawal from the Treasury for those objects without appropriation.' The first section of the Reclamation Act, approved June 17, 1902 (c. 1093, 32 Stat. 388), created a reclamation fund of all moneys received from the sale of public lands in certain States. A more recent example of such a fund appears in paragraph 10 of section 15a of the Interstate Commerce Act, in which a general railroad contingent fund is created. It is a revolving fund, to be administered by the Interstate Commerce Commission. The Attorney General, in 33 Op. Atty. Gen. 316, ruled that moneys paid into such fund need not be covered into the Treasury of the United States, but the Comptroller