926 HARVARD LAW REVIEW its formal distinctions and permit income from federal securities to be taxed by the states through excises on corporate franchises and through taxes on corporate dividends. If considerations of substance do not require exclusion of United States bonds from as- sessments of corporate franchises and shares of stock, a fortiori such assessments should be permitted to include income from United States bonds. Such taxes measured by income do not deprive bor- rowers with superior credit of any advantage which that credit gives. Double taxation of stockholder and corporation does not influence the choice of corporate investments. And any margin of error in such calculations is more than offset by the boimty conferred on the federal borrowing power by exemption of interest on United States bonds from an income tax which feeds on interest from com- peting obligations. Thus there appears to be no substantial reason for adding new limitations to the power of the states to levy taxes which fall in- directly on federal instrumentalities. The distinction between taxes on corporate capital and taxes on corporate franchises or on shares of stock may be artificial, but it serves a useful purpose; and this on the whole is the most reliable test of the merit of a distinction. Since taxes directly on United States bonds do not have the serious effect on the federal borrowing power which judges of the Supreme Court have often assumed, there is good sense in not extending to indirect taxation the prohibitions against direct taxation. Animated by such good sense, the Supreme Court has allowed the states to tax income from interstate commerce and the United States to tax income from an exporting business. It has appreciated that a general tax on all net income does not cast any unwarranted burden on any particular enterprise from which such income issues. If the Supreme Court were making the law of the Constitution de novo, it might therefore be expected to allow the states to tax interest on federal securities and income from federal salaries, granting to the United States a similar power over the fruits of state func- tions. The economic implications of Peck &* Co. v. Lowe^^ and United States Glue Co. v. Oak Creek ®^ are opposed to the economics underlying Pollock v. Farmers^ Loan &• Trust Co.,""^ Dobbins v. Com- ^ Note 14, supra. «9 247 U. S. 321, 38 Sup. Ct. Rep. 499 (1918), 32 Harv. L. Rev. 634/. «> Note 58, supra.
