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INTERSTATE COMMERCE

ports of one state over those of another; nor shall vessels bound to or from one state be obliged to enter, clear, or pay duties in another” (Art. 1, sec. 9, clauses 5 and 6). Directly and by implication, Congress was granted a number of other powers over commerce, in that it may coin money, establish uniform laws of bankruptcy, establish post-offices and post roads, regulate weights and measures, exercise admiralty jurisdiction (now interpreted to extend to all public waterways accessible to the traffic of more than one state), grant patents and copyrights, and use the power of taxation to protect, repress or even destroy the agencies of commerce (e.g. state bank notes). But these powers can be exercised only in ways which favour and make free the intercourse among all parts of the nation.

Even if the commerce clause had been omitted from the Constitution, a large part of its object would have been attained by certain prohibitions upon the states as follows: “The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states” (Art. 4, sec. 2). “No state shall, without the consent of the Congress, lay any impost or duties on imports or exports, except what may be absolutely necessary for executing its inspection laws; and the net produce of all duties and impost, laid by any state on imports or exports, shall be for the use of the treasury of the United States, and all such laws shall be subject to the revision and control of the Congress” (Art. 1, sec. 10, clause 2). “No state shall, without the consent of Congress, lay any duty of tonnage” (Art. 1, sec. 10, clause 3). Thus by threefold measures of precaution was ensured domestic freedom of trade from every point in the land to its farthest frontiers.

Negative Working of the Commerce Provisions.—For nearly a hundred years these provisions were important only in their negative effects of preventing the states from granting special privileges to their citizens or taxing unequally the citizens of other states. The decision in 1824 of Gibbons v. Ogden stopped the attempt of the state of New York to grant the monopoly of steamboat traffic on the waters of that state. Had the clear and unequivocal opinion in that case been different, local ingenuity doubtless would have devised a multitude of discriminations. “The power to tax involves the power to destroy,” and ever since the decision of McCulloch v. Maryland in 1819 it has been held that no agencies created by the federal government, such as banks or legal tender notes, are subject to state taxation, and the rule has also been laid down repeatedly by the Supreme Court (for the first time in 1886) that no burden can be laid upon the act of taking goods into or out of the state, of soliciting sales, or of delivering goods even though the tax is without discrimination as between the state's own citizens and others; that is, interstate commerce “cannot be taxed at all” (Robbins v. Shelby County Taxing District, 120 U.S. 489).[1]

Federal control of interstate commerce has been interpreted by the courts to be exclusive of any control by the states. This is not self-evident in the clause, “Congress shall have power to regulate commerce among the several states.” Over some other subjects the power of the federal and state governments is concurrent, the state being able to act until Congress enacts some conflicting legislation. Although the early decisions suggested that the power of Congress was exclusive, yet for nearly a century no positive decision was rendered and no positive action was taken by Congress. Between 1870 and 1886 the states made great progress in the regulation of railways on the assumption that until Congress had acted the states were free to act. The question was put beyond doubt in a series of decisions establishing the principle that the non-action of Congress indicates its will that commerce shall be free and untrammelled and that the states cannot interfere either through their police power or their taxing power.[2]

Positive Federal Regulation.—Though the regulation of interstate commerce up to the Civil War was mainly negative, some positive actions of the federal government had indirect effects on commerce, as, for example, the coinage of money, the establishment of post-offices, the charter of the first and second United States banks, and the charter of the Pacific Railroad. The power to do these things was conferred by the Constitution in some cases directly, in other cases by implication in that any means appropriate to lawful ends might be employed (as in case of charter of the United States Bank, McCulloch v. Maryland). From 1850 to 1862 the federal government had made numerous land grants in aid of railways, but always to the states, not directly to the corporations, and it had never until 1862 granted a charter to a railway, canal, turnpike or transportation company. In 1866 Congress passed an act authorizing railway companies whose roads were operated by steam to carry passengers, freight, &c., “on their way from any state to another state and to receive compensation therefor and to connect with roads of other states so as to form continuous lines for the transportation of the same to the place of destination.”[3] This act, so vague and general in its terms, had very little effect, though it has been the occasion of considerable litigation to determine its influence upon existing police laws of the states. In 1884 Congress established the Bureau of Animal Industry for preventing the exportation of diseased cattle and for the extirpation of disease among domestic animals. This had little significance at the time for interstate commerce, its purpose being to meet the objections of foreign countries to the importation of American meat. In 1887 was passed the Interstate Commerce Act, providing a national commission to supervise interstate railways. In 1888 was passed an Arbitration Act, replaced in 1898 by an act which provides that in case of disputes between common carriers subject to the Interstate Commerce Act and their employees, conciliation shall be tried, and, in case this should fail, indicates the methods that may be used for the voluntary submission of the dispute to a board of arbitration.

  1. However, a very important distinction is drawn between taxing the commerce and taxing property employed in commerce. With the increase of interstate commerce, the states have been hard pushed to find sources of revenue adequate to their increasing needs. The courts, therefore, have sought to draw a line between taxes on the privilege of carrying on interstate commerce and taxes on the property employed in carrying on such commerce as a part of the general body of property in the state. Thus it has been held in the case of State Freight Tax (1872, 15 Wall. 232) that a state could not lay a tax on freight transported from one state to another, and yet the same year the court held in State Tax on Gross Receipts (15 Wall. 284) that a tax was valid when laid upon the receipts of railways organized under the laws of the state, as upon a fund which had become incorporated with the general mass of property. This latter decision was by a divided court (three of the nine judges dissenting), but it has since been frequently confirmed. The tax on gross receipts of all railway companies doing business in the state has been supported when levied in proportion to the mileage within as compared with the total within and without the state (Erie Ry. v. Pa., 21 Wall. 492). This so-called “unit rule,” as applied either to gross receipts or to the entire value of an interstate railway, has been upheld in a number of decisions. The method of taxation by gross receipts, however, has not tended to increase of late, but the unit rule, as applied to ad valorem taxes on property, is more and more being applied. Every case involving the distinction between a tax on commerce and a tax on property employed in commerce presents its own difficulties, yet a practical way is thus found to prevent discriminating action by the several states, while leaving to them adequate sources of revenue.
  2. 1873, State Freight Tax, 15 Wall. 232; 1887, Robbins v. Shelby County Taxing District, 120 U.S. 489; Wabash R. R. Company v. Illinois, 118 U.S. 557. The last-named case arose out of the attempts of the state of Illinois to prevent discrimination between two shippers, both being its own citizens and within its own borders, one of whom was being charged more than the other for a shorter shipment on the same line and in the same direction, from a point outside the state. The court, applying the established definition of interstate commerce with verbal formality of logic, decided that the state could do nothing, for even in such a case all regulation of interstate commerce, from the beginning to the end of a shipment, was confided to Congress exclusively. Thus a clause whose clear purpose was to prevent one state from burdening unequally the citizens of other states was successfully invoked by a private corporation to forbid the state securing equality of treatment for its own citizens as regards such parts of shipments as lay within its own borders. Most railway traffic was by this decision declared to be subject to legislation by Congress but Congress had not acted. The impossibility of this situation was so evident that the Interstate Commerce Act, long under discussion, became a law a few months later.
  3. This was probably aimed at the discriminating between New York and Philadelphia (see speech of Charles Sumner on the railroad usurpation of New Jersey in U.S. Senate, February 14, 1865).