State Taxation of Income

S TATE income tax legislation, in effect or in contemplation in wide areas throughout the Union,' is rapidly becoming a problem of universal concern.What are the limits, self-imposed or enjoined by a higher authority, upon the power of the states to levy this species of taxation?With one minor exception it is to this jurisdictional problem rather than to questions of construction arising under particular state statutes that this paper is addressed.Conclusions respecting these matters must be revised from time to time in the light of new principles, or new applications of old principles, discernible in the constantly augmented flow of judicial opinion relating to this subject.This consideration constitutes the reason, and it is hoped, a justification for the present review of a topic to which earlier commentators have contributed much enlightenment. 2In the following discussion a classification which has been found convenient for purposes of analysis, but which may be in some respects arbitrary, has been followed. I. CONSTITUTIONAL LIMITATIONS ON POWER OF STATES TO TAX INCOMEThe power to levy income taxes is inherent, requiring no special constitutional grant, 3 and when restricted to residents of the taxing state 4 or income from sources arising within it, violates no provision of the Federal Constitution.5 The recent case of Colgate v. Harvey, 6 1 Income tax laws are now in effect in thirty-three states.VI Comm.CL.HOUSE Bus.LAW REF.SERV., pars.3501-5969.Of the territories, Hawaii has a similar tax.See Ewa Plantation v. Wilder (1922) 26 Haw.299, aff'd, (C.C. A. 9th., 1923) 289 Fed.664.No new laws designed to overcome objections found to exist under local constitutions in Illinois, Pennsylvania and Washington have at this date (May, 1936) been enacted.See Bachrach v. Nelson (1932) 349 Ill.579, 182 N. E. 909; Kelley v. Kalodner (Pa.1935) 181 Ati.598; Jensen v. Henneford (Wash.1936) 53 P. (2d) 607. 2 Rottschaefer, State Jurisdiction of Income for Tax Purposes (1931) 44 HARv.L. REv.1075; Brown, Multiple Taxation by the States (1935) 48 HAav.L. REv.407; Brown, Nature of the Income Tax (1933) 17 MINx.L. REv.127; Lowndes, State Jurisdiction to Tax Income (1932) 6 TFmn.L. Q. 486; Kessler, Some Legal Problems in State Personal Income Taxation (1925) 34 YALE L. J. 759. 3 Shaffer v. Carter (1920) 252 U. S. 37; Stanley v. Gates (1929) 179 Ark.