920 HARVARD LAW REVIEW cision has any sound economic justification, the Supreme Court ought to apply it to the objection against double taxation now under consideration. The reply is that Bank of California v. Rich- ardson ^^ is not supportable on economic grounds. It must stand or fall on the assumption on which it proceeds, i. e., that Congress has expressly dealt with the problem and permitted but a single tax on the economic interest represented by shares in national banks.^ The further objection to the inclusion of United States bonds in assessments of corporate franchises and shares of stock is that such inclusion may in fact operate to deter corporations from investing in those bonds. The argument runs as follows. With the normal difference between the interest rate of public and of private obliga- tions due to the superior security of the former, a tax on capital value would bear more heavily on the bonds with the lower interest rate. Those who might prefer three-per-cent government bonds to six-per-cent railroad bonds, when both were exempt from taxa- tion, would be Hkely to alter their preference if a two-per-cent tax reduced the income to one and four per cent respectively. The dis- crepancy would be reduced by the resulting alterations of capital value, but the effect on the borrowing power of the United States would not thereby be lessened. Giving full account to the fact that the capacity of the United States to borrow at lower interest rates than individuals or corporations is due in considerable part to a bounty conferred by the exemption of federal securities from burdens that competitors must bear, it may still be true that the removal of the exemption would in many instances be something more than the denial of a bounty. It may operate practically to deny to the government a part of the advantage conferred by the excellence of its credit. There may be a minimum to the total net income with which an investor will be content without looking for all possible ways of increase. He may look less favorably on three- or four-per- cent bonds subject to a two-per-cent tax, even though six-per-cent ^ Note 42, supra. " The Chief Justice hints that he could support the case on economic grounds if he had to, but he refrains from elaborating the hint. On page 485 he says: "We do not stop to point out the double burden resulting from the taxation of the same value twice which the assessment manifested, as to do so could add no cogency to the violation of the one power to tax by the one prescribed method conferred by the statute and which was the sole measure of the state authority."
