Then the court goes on:

If business is not done in the manner described in the statute, no tax is payable.

If interstate commerce is not done by these artificial persons, if they want to go back to some form of individual business, why, the license regulation provided by the bill is not required. This bill and this regulation of corporations, we can say like the court with equal logic, if people want to do business as natural persons they may do it, but if, when created corporations by States they undertake to exercise the franchise, which is distinct as appears in this decision, which are valuable rights, and they undertake as artificial persons to exercise those franchises under the national sovereignty, they must bow to the power of Congress and be regulated as instrumentalities of that

commerce.

Quoting further:

In Osborn v. The Bank, supra, a leading case upon the subject, whilst it was held that the Bank of the United States-

Another Bank of the United States case

was not a private corporation, but a public one, created for national purposes, and therefore beyond the taxing power of the States, Chief Justice Marshall. in delivering the opinion of the court, conceded that if the corporation had been originated for the management of an individual concern, with private trade and profit for its great end and principal object, it might be taxed by the State.

That is exactly the decision I read from the Indiana Supreme Court in licensing and regulating, subject to restrictions, the National Life Insurance Co., created by Congress here in the District of Columbia, when it undertook to go to Indiana and operate. Indiana treated it exactly as it would treat a foreign insurance corporation from New York or any other State. Indiana treated it as created

by a sovereignty that was as distinct from the State of Indiana as the sovereignty of New York is distinct from it when it creates a corporation.

Now, let us proceed with this case:

While the tax in this case, as we have construed the statute, is imposed upon the exercise of the privilege of doing business in a corporate capacity, as such business is done under authority of State franchises, it becomes necessary to consider in this connection the right of the Federal Government to tax the activities of private corporations which arise from the exercise of franchises granted by the State in creating and conferring powers upon such corporations. We think it is the result of the cases heretofore decided in this court, that such business activities, so exercised because of State created franchises, are not beyond the taxing power of the United States. Taxes upon rights exercised under grants of State franchises, were sustained by this court in Railroad Company . Collector (100 U. S. 595), and other cases.

In that case the Congress laid its taxing and therefore its destroying hand under the taxing section of the Constitution, upon corporations formed by States that did not engage in interstate commerce. Some of them were banks, some of them were trust companies, some of them were municipal concerns. But the court said regardless of that definition that they are all artificial persons that have the privilege of doing business as corporations and that they are subject to an excise tax in relation to doing business in that particular way. And the Government, unable then under the decision in the Pollock case to levy an income tax, levied a tax that was measured by the income of the corporation, a tax of 1 per cent

upon its income if it exceeds $5,000, and imposed that tax upon all corporations, creatures of the State, artificial persons doing business under privilege, on the ground that it was a privilege.

And now you may smile, and there is humor in it no doubt, but I want to say this: In the Pollock case, the income tax law of 1894 was stricken down. This act I am now dealing with was passed by Congress on the recommendation of President Taft, and it stood as or was sponsored by Francis T. Newlands, of Nevada, and the tax was bitterly assailed, but it was upheld and was upheld as an excise tax, and yet every man that sat around a directors' table knew that it amounted to an income tax, upon the income of corporations exceeding $5,000.

And what was the result? The result was that the income tax amendment to the Constitution was adopted, almost unanimously. Why? Because those gentlemen that gathered around the mahogany tables said: Why, we are now being taxed upon our incomes. So let us make it general. If the income tax amendment is defeated we may have to pay more than 1 per cent on our income, so we will make it general.

Reference, Mr. Chairman, has been made to the child labor law. Take the child-labor situation and you will see that it is not limited to corporations. You will see that it is limited to no special type of persons. Both of the laws, the child labor tax law and the other law, were imposed without regard to artificial persons exercising particular franchises, as stated in this case, particular rights of doing business, but upon all shipments in the child labor case, and the laws were held bad. But I have no doubt from the examination I have made of these authorities that if the Congress had passed a law regulating the shipment of goods by corporations in interstate commerce made by children under 14 years of age, that it would have been sustained, under all these authorities, and if it had been sustained as a law regulating corporations, there would now be no opposition to the child-labor amendment such as are found in the legislatures of many of the States.

But let us get back to this case, because it is fine:

But it is insisted this taxation is so unequal and arbitrary in the fact that it taxes a business when carried on by a corporation and exempts a similar business when carried on by a partnership or private individual as to place it beyond the authority conferred upon Congress. As we have seen, the only limitation upon the authority conferred is uniformity in laying the tax, and uniformity does not require the equal application of the tax to all persons or corporations who may come within its operation, but is limited to geographical uniformity throughout the United States.

And further along:

In the case at bar we have already discussed the limitations which the Constitution imposes upon the right to levy excise taxes, and it could not be said, even if the principles of the fourteenth amendment were applicable to the present case, that there is no substantial difference between the carrying on of business by the corporations taxed, and the same business when conducted by a private firm or individual. The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed, and which are not enjoyed by private firms or individuals.

Let me paraphrase this language: The thing regulated and the license is not the mere dealing in merchandise as in the child labor, but the regulation of the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those regulated and which are not enjoyed by private firms or individuals.

Now, after paraphrasing that let me go ahead with the opinion. showing what they regard these privileges to be:

These advantages are obvious, and have led to the formation of such companies in nearly all branches of trade. The continuity of the business, without interruption by death or dissolution, the transfer of property interests by the disposition of shares of stock, the advantages of business controlled and managed by corporate directors, the general absence of individual liability; these and other things inhere in the advantages of business thus conducted, which do not exist when the same business is conducted by private individuals or partnerships. It is this distinctive privilege which is the subject of taxation * * *

It is the artificial person, forsooth, created by West Virginia, which is being licensed and regulated when it undertakes to exercise this franchise under the national sovereignty throughout other States.

There are other sections in addition to these I have read, but I want to get through if I can. However, it is a very interesting case. Senator COUZENS (presiding). Do you mind if I ask you a question?

Mr. WARRUM. No.

Senator COUZENS. Assuming that as an individual I bought the output of a coal mine in Pennsylvania that was conducted by a corporation, and had all of that output of coal shipped to me in Philadelphia, and I distributed it from there; how would this bill work in such a case?

Mr. WARRUM. By you? Senator COUZENS. Yes.

Mr. WARRUM. It would not affect you at all.

It

Senator COUZENS. You would not have any control of the mine in such a case, for they would not be engaged in interstate commerce. Mr. WARRUM. Of course not. This does not touch a corporation that is only engaged in mining coal. This bill affects corporations engaged in shipping coal in interstate and foreign commerce. does not impinge upon the rights of the individual engaged in shipping coal, and it does not impinge upon the rights of a corporation in carrying on the business of mining coal. A corporation can mine coal and sell it to another concern, but the bill catches the other conern if it is engaged in shipping coal in interstate commerce. And the authority that we believe the Congress would thus achieve over the shipping of coal in interstate commerce by corporations is the authority that will result in some relief to this distempered and disorganized industry.

Senator COUZENS. You speak of the hazards of mining and shipping coal as an obstacle in the way of being done by a private individual, and therefore if it is incorporated it would limit the liability. Would not that be overcome if the corporation sold their coal within the State to an individual to distribute it, either by a corporation or himself? I mean, that would be a means by which they could get around the provisions of this bill.

Mr. WARRUM. I have no doubt of it, and I have no doubt that there will be numerous efforts made to find a northwest passage around the control that I think the Congress has the right to assume over corporations shipping coal in interstate commerce. There will be litigation over it I would judge by the attitude of these gentlemen on the other side of the table. And no doubt there will be found some northwest passage, although the true northwest passage is supposed to be a kind of mythical passage. They may do it, but has the committee discovered any other method of control? If they have we have not heard of it. This bill was prepared by the mine workers because of the fact that although we had a hundred coal operators here before the committee, and every one of them was asked by some member of the committee, usually by the late Senator Gooding, to leave some suggestions for legislative relief, yet no constructive suggestion was ever made.

Toward the close of your hearings we suggested that this was one power that the Congress could exercise in the matter, and drafted a bill along that line. Nobody says that it is a perfect bill, and nobody says it will accomplish the ultimate that ought to be accomplished in the bituminous coal industry. But we say it is a step in the right direction, a legal step in the right direction.

I want to call attention, Mr. Chairman, to the fact that the Interstate Commerce Commission was created in 1885, but 15 years elapsed before that commission did more than draw their salaries.

Why, no one who has heard the week of argument-I mean the week comprising the period of argument, the six days of argument, made against the bill-will fail to realize that the problem of stabilizing this bituminous coal business, the problem of commission control of it, and its more serious aspects the problem of transforming the pauperized mining communities into something resembling the other sections of the country, the problem of terminating the incessant deflation of wages, the problem of preventing the decimation of the capital structure of the industry which has been testified to by every operator that appeared here, admitting that he had lost money in the last three years, except as to the Island Creek Coal Co.; the problem of saving something of the resources of our country that is fact going to waste now, and which the Secretary of Labor says amounts to 40 per cent and which Mr. Belden representing the Ohio operators, here last week, said that estimate was too modest, that he knew himself in Ohio they were losing 50 per cent of what might be recovered, and he told the reason, because the market was so disorganized now that the problem was to get out the cheapest coal, that is, the coal that could be produced at the cheapest cost.

All these and other problems are confronting this committee, and no constructive suggestion has been made except by the mine workers. We realize that this bill may meet with different reactions from different members of the committee, and we realize that to some it may not appeal at all, although it is difficult to conceive of any Senator who heard the testimony given in the investigation last spring who would not feel that even the operators were entitled to some relief, and this bill, I think, is drafted primarily to give them relief. Now I want to discuss the bill because I only have a moment or so left. But before doing it I should like to talk to you about one question, a general question, and that is the proposition that this is

class legislation. It has been argued by Mr. Belcher at some length as well as by others more briefly, to this effect: That the bill does not affect any other fuel except bituminous coal and therefore is class legislation.

Now, of course, the limitation upon class legislation is the fifth amendment, which amounts to the same, as the courts have held, as the "equal protection of the law" clause in the fourteenth amendment. The courts have uniformly in passing upon such congressional legislation sustained any legislation dealing with a class provided the class formed a sufficient basis for regulation, tax, or whatever may be the subject matter of the legislation. Let me take a case they have cited and quote something that they did not quote from it. That is Heisler v. Thomas Colliery Co. (260 U. S. 245), which came from Pennsylvania. In that case the General Assembly of Pennsylvania levied a special tax of 212 per cent on anthracite coal as and when prepared for the market. That was bitterly assailed on the ground that it was not levied on bituminous coal; that bituminous coal entered into competition in the same market, to some extent at least. The court said:

The bill in the case, as far as we are concerned with it, assails the act of 1921 as offensive to the fourteenth amendment of the Constitution of the United States.

That case cited the matter of the fourteenth amendment, that it would govern it, but I say the fifth amendment would govern the Congress, too—

* * * in that it denies to the Thomas Colliery Co. and other owners and operators of anthracite mines the equal protection of the laws, because it taxes such owners and anthracite coal and does not tax the owners of bituminous mines and bituminous coal. The ultimate foundation of the contention is that anthracite coal and bituminous coal are fuels, and necessarily, therefore, must be associated in the same class for taxation, in disregard or in diminution of whatever other differences may exist. between them in composition, qualities, or uses, and that not to so associate them is arbitrary and unreasonable, having the consequences of inequality and illegality, and therefore within the ban of the Constitution of the United States.

The contention, therefore, concentrates attention upon the consideration of what resemblances or differences in objects justify their inclusion in, or their exclusion from, a particular class.

It would be commonplace and wearisome to enlarge much upon the principle that presides in and determines the classification of objects. It is too necessary and too familiar in the affairs of life. We can not go far in thought or practice without its exercise. It is the process of considering objects together or in separation, as determined by their properties or some of them, and the purpose we have in hand. If the properties and purpose have relation, the process is logically justified.

Illustrations readily occur. A farmer will classify plants differently from a botanist, but the classification of both may, notwithstanding the difference, be logically proper.

And so classification has uses in government-for government as well as persons has purposes, varied and, at times, exigent, and its legislation must be accommodated to them, either in convenience or necessity.

* ** **

*

In Watson v. State Comptroller (254 U. S. 122, 65 L. Ed. 170, 41 Sup. Ct. Rep. 43) it is said: "Any classification is permissible which has a reasonable relation to some permitted end of governmental action. It is enough, for instance, if the classification is reasonably founded in the purposes and policies of taxation.' In other cases it is said that facts which can be reasonably conceived of as having existed when the law was enacted will be assumed to justify it. (Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78, 55 L. Ed. 369, 377, 31 Sup. Ct. Rep. 337, Ann. Cas. 1912C, 160; Crescent Oil Co. v. Mississippi, 257

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