                COLGATE V. HARVEY, STATE TAX COMMISSIONER.
                               296 U.S. 404.

                 APPEAL FROM THE SUPREME COURT OF VERMONT.
    No. 8.  Argued October 14, 15, 1935. -- Decided December 16, 1935.

1.  A state tax upon income is not to be deemed an interference with
interstate commerce merely because the income is derived from a source in
another State.  P. 419.
2.  A state tax is not invalid as an interference with interstate commerce
when its effect upon such commerce is merely collateral and incidental. Id.
3.  A Vermont law laying a general income tax of 4% upon the dividends
received by residents from corporations, exempts dividends from corporation
business done in the State, measuring the exemption by the ratio of the net
income of the corporation earned within the State to its entire net income. 
Corporations, on the other hand, are subjected to an annual franchise or
privilege tax of 2% of the net income attributable to their local business,
in addition to taxes upon their local tangible property. HELD:
          [405] (1)  That the exemption does not produce unconstitutional
     discrimination against recipients of dividends earned outside of the
     State.  P. 419.
          (2)  The evident intent and general operation of the legislation
     are to adjust with a reasonable degree of equality the tax burdens it
     imposes on shareholders, the exemption of locally earned dividends being
     the practical equivalent of the burden which the shareholders receiving
     them must bear indirectly because of the local taxes laid on their
     corporations.  P. 420.
4.  Conceding the power of a State to impose double or multiple taxation, the
avoidance of that result cannot be condemned as an arbitrary basis for
apportioning tax burdens.  P. 420.
5.  In testing whether the taxes imposed by a State on its residents
discriminate unduly, in violation of the equality clause of the Fourteenth
Amendment, the tax burdens imposed upon them by other States are irrelevant. 
P. 420.
6.  Absolute equality in taxation is not required by the Fourteenth Amendment;
the boundary between permissible and forbidden inequalities depends upon the
material circumstances in each case.  P. 422.
7.  A Vermont law taxing income from interest-bearing securities exempts
interest received on account of money loaned within the State at a rate of
interest not exceeding 5% per annum, evidenced by promissory notes, mortgages
on real estate, or bonds for deeds. Residents whose income is from like loans
made outside of the State are not allowed the exemption.  HELD:
          (1)  That on the face of the statute the discrimination is purely
     arbitrary, being based entirely upon a fortuitous circumstance -- the
     place where the loan is made -- which has no substantial or fair relation
     to the object of the Act, namely, the raising of revenue.  Pp. 422, 424.
          (2)  Assuming that the classification would be valid under the
     equality clause of the Fourteenth Amendment if the exemption were made
     to depend not only upon the making of the loan within the State but also
     upon the investment of the money loaned in property having its situs
     within the State, the Court is not at liberty to read such additional
     condition into the statute.  P. 424.
          (3)  The proposition that money loaned within the State will
     generally be invested there, is a pure speculation, without warrant in
     the record or in the judicial knowledge of the Court.  P. 425.
[406] 8.  A statutory discrimination, which on its face is arbitrary, cannot
be upheld by simply surmising that it subserves some unnamed public interest. 
P. 425.
9.  Classification for the purposes of taxation, to comply with the equal
protection clause, must be founded upon pertinent and real differences, as
distinguished from the irrelevant and artificial.  The test is whether the
taxing statute arbitrarily and without genuine reason imposes a burden upon
one group of taxpayers from which it exempts another, both of them occupying
substantially the same relation toward the subject-matter of the legislation. 
P. 423.
10.  Even if beneficial to the State, a discrimination whereby its citizens
who lend money outside of the State are taxed on the income, while those who
make like loans in the State are not taxed, violates the privileges and
immunities clause of the Fourteenth Amendment.  Pp. 426, 433.
11.  As citizens of the United States our people are members of a single great
community consisting of all the States united, and not of distinct communities
consisting of the States severally.  No citizen of the United States is an
alien of any State of the Union; and the very status of national citizenship
connotes equality of rights and privileges, so far as they flow from such
citizenship, everywhere within the limits of the United States.  P. 426.
12.  A citizen of the United States is ipso facto and at the same time a
citizen of the State in which he resides.  While the Fourteenth Amendment
does not create a national citizenship, it has the effect of making that
citizenship "paramount and dominant" instead of "derivative and dependent"
upon state citizenship.  P. 427.
13.  Whatever latitude of state power might exist under Art. IV, sec. 2 of the
Constitution, providing that "The citizens of each State shall be entitled
to all privileges and immunities of citizens in the several States," a State
cannot, in view of the privileges and immunities clause of the Fourteenth
Amendment, abridge the privileges of a citizen of the United States, albeit
he is at the same time a resident of the State which undertakes to do so.  P.
428.
14.  The same Act of a state legislature may contravene more than one
provision of the Constitution, e. g., it may infringe the right of a citizen
under the commerce clause and also his privileges and immunities as a citizen
of the United States.  Cf. Crandall v. Nevada, 6 Wall. 35.  P. 430.
15.  The right of a citizen of the United States to engage in business, to
transact any lawful business, or to make a lawful loan of money [407] in any
State other than that in which the citizen resides is a privilege attributable
to his national citizenship.  A state law prohibiting the exercise of any of
these rights in another State would, therefore, be invalid under the
Fourteenth Amendment; a discriminating tax upon such activities is necessarily
void even if the taxing State will thereby help its domestic business.  P.
430.
16.  As the Fourth Article of the Constitution requires each State to accord
equality of treatment to the citizens of others States in respect of the
privileges and immunities of state citizenship, so the privileges and
immunities clause of the Fourteenth Amendment safeguards citizens having the
effect of denying equality of treatment citizenship in other States.  P. 431.
17.  The right of a citizen of the United States resident in one State to
contract in another may be a liberty safeguarded by the due process clause
and at the same time, none the less, a privilege protected by the privileges
and immunities clause of the Fourteenth Amendment.  In such case he may invoke
either or both.  P. 433.
18.  A state law which allows a personal exemption from the taxable income
derived from interest-bearing securities but withholds it if the taxpayer
receive also income  of another kind, and, in that event, gives to him a
larger personal exemption in the computation of his tax upon the latter kind
of income, is consistent with equal protection of the laws, notwithstanding
the fact that, in a particular tax year, the taxpayer because of allowable
deductions from gross income, paid no tax upon the latter kind of income and
had no occasion to resort to the larger exemption applicable to it.  P. 434.
19.  The question of equal protection must be decided in respect of the
general classification rather than by the chance incidence of the tax in
particular instances or with respect to particular taxpayers.  P. 436.
107 Vt. 28; 175 Atl. 352, reversed.

     Appeal from a judgment which affirmed a judgment rendered by a county
court in favor of Harvey, Tax Commissioner, in a proceeding under the Income
and Franchise Tax Law of Vermont for the revision of an income tax assessment.
     [408] Mr. Edward J. Dimock, with whom Mr. George L. Hunt was on the
brief, for appellant.
     The Act in effect taxes interest and dividends earned outside of Vermont
and exempts interest and dividends earned within Vermont, and is therefore
unconstitutional under the Fourteenth Amendment.
     The Act deprives citizens of the United States of the constitutional
right to invest in non-Vermont loans and stocks on at least as favorable terms
as they are permitted to invest in Vermont loans and stocks.
     Capricious classifications for purposes of taxation deny the equal
protection of the laws.  Louisville Gas & Electric Co. v. Coleman, 277 U.S.
32.  Even a conclusion that a classification is not capricious is not
necessarily enough to save it under the equal protection clause.  Hanover
Insurance Co. v. Harding, 272 U.S. 492.
     Though a classification be not so oppressive as to be unconstitutional
under the equal protection clause, it may yet be unconstitutional if it
discriminates against a privilege of a citizen of the United States.
     The concept of privileges of citizens of the United States is one which
has developed since the foundation of the Republic.  It is even said that
prior to the adoption of the Fourteenth Amendment there were no citizens of
the United States.  Sharon v. Hill, 26 Fed. 337, 343.  Before the Civil War
had more closely welded the Union into a single nation, statesmen were much
more deeply concerned with preventing States from abridging the due privileges
of citizens of other States than with preventing them from abridging the due
privileges of citizens of their own who later came to constitute members of
the class of citizens of the United States.
     Under Art. IV, sec. 2 of the Constitution, citizens of other States were
able to come into Vermont and invest their funds upon equal terms with the
citizens of Vermont without [409] interference by its legislature.  Chalker
v. Birmingham & N. W. Ry. Co., 249 U.S. 522.
     Upon the adoption of the Fourteenth Amendment, citizens of Vermont became
ipso facto citizens of the United States as well, and they thereby became
entitled to go into other States and invest their funds without being
subjected by the legislature of Vermont to any greater burdens than it placed
upon their investment of money within its borders.
     There can be no doubt that the right to employ funds in any State of the
Union on equal terms with citizens of that State and unhampered by
restrictions imposed by the State of which the investor is a citizen of the
essential rights of citizenship in the United States.  If we have no such
right, the citizenship in the United States created by the Fourteenth
Amendment was a citizenship subject to the sovereignty of the States over
their citizens.  That cannot be.  If there is a paramount sovereign of the
citizen, it is the United States.
     State lines are used by the Act as the basis of a classification hostile
to investment in enterprises in sister States.  What the State has done in
effect is to announce that income over which Vermont has territorial
jurisdiction shall be tax free and income over which Vermont has no
territorial jurisdiction, but only a jurisdiction through the residence of the
owner, shall be taxed.  This is not the usual case of a classification invalid
because capricious and without logical basis.  Its basis is extremely logical
but wholly vicious and repugnant to the Fourteenth Amendment and to the whole
theory of our Union of States.  Of all the classifications that might have
been chosen for the purpose of taxation, the most clearly unconstitutional is
that which exempts intrastate income and taxes extra-state income.
     The Act, by discriminating against investment by Vermont residents in
non-Vermont stocks and loans, in effect [410] creates an embargo upon the
export of capital.  It is therefore unconstitutional under the commerce clause
of the Constitution.
     The taxes involved cannot stand if the discriminatory exemptions are
stricken from the statute as unconstitutional.
     The Act, by arbitrarily refusing to the appellant the $800 exemption
given to other persons whose situation differed from his only in that they had
no income from business, denies appellant the equal protection of the laws. 
It is therefore unconstitutional under the Fourteenth Amendment.
     Messrs. Guy M. Page and Seymour P. Edgerton, with whom Mr. Lawrence C.
Jones, Attorney General of Vermont, was on the brief, for appellee.
     The challenged exemptions are directed to the avoidance of double or
multiple taxation by Vermont of the same economic interest, viz:  (a) shares
of stock in corporations to the extent to which the issuing corporation is
taxed in Vermont, and (b) certain credits, the consideration for which became
a part of the general wealth of the State and thereby subject to its tax laws.
     The general power of States to classify for purposes of taxation is not
open to question.  It applies equally to classification of incomes for
taxation.  In such taxation, "possible differences in tax burdens not shown
to be substantial or which are based on discriminations not shown to be
arbitrary or capricious do not fall within constitutional prohibitions." 
Lawrence v. State Tax Comm'n, 286 U.S. 284.  "It is not necessary . . . that
the basis of the classification must be deducible from the nature of the
things classified. . . . It is enough, for instance, if the classification is
reasonably founded in the `purposes and policy of taxation.'"  Watson v. State
Comptroller, 254 U.S. 122, 125; Stebbins v. Riley, 268 U.S. 137, 143.
     [411] A basis of classification is reasonable and valid which operates
to avoid double taxation by a single State of the same economic interest. 
Lawrence v. State Tax Comm'n, supra; Klein v. Board of Supervisors, 282 U.S.
19, 23; Kidd v. Alabama, 188 U.S. 730, 732; Darnell v. Indiana, 266 U.S. 390;
Watson v. State Comptroller, supra; Clement National Bank v. Vermont, 231
U.S. 120; Concordia Fire Ins. Co. v. Illinois, 292 U.S. 535.
     The rule has a wide variety of application.  Concordia Fire Ins. Co. v.
Illinois, supra; Pacific Express Co. v. Siebert, 142 U.S. 339; Northwestern
Mutual Life Ins. Co. v. Wisconsin, 247 U.S. 132; Travelers' Insurance Co. v.
Connecticut, 185 U.S. 364; Clement National Bank v. Vermont, supra; General
American Tank Car Corp. v. Day, 270 U.S. 367; Watson v. State Comptroller,
supra.
     The right to exempt persons or property from one tax because the same
economic interest has been otherwise taxed has been repeatedly applied in
cases with respect to the taxation of corporations or the stockholders.  Kidd
v. Alabama, supra; Darnell v. Indiana, supra; Klein v. Board of Supervisors,
supra.
     It is the necessary conclusion from these cases that a State may so
classify the objects of taxation within its jurisdiction as to avoid taxing
the same value more than once and in so doing may disregard the taxation
imposed by other States.  Distinguishing: Louisville Gas & Electric Co. v.
Coleman, 277 U.S. 32; Hanover Fire Ins. Co. v. Harding, 272 U.S. 494.
     In the case at bar there is no classification of taxpayers under the
income tax law.  The sole classification is of income.  That classification
is admittedly "extremely logical," and operates equally with respect to all
taxpayers who are recipients of income in any of the specified classes.  The
Fourteenth Amendment guarantees equal protection to taxpayers similarly
situated, but it "does not compel the adoption of an iron rule of equal
taxation, [412] nor prevent variety or difference in taxation, or discretion
in the selection of subjects, or the classification for taxation of
properties. . . ."  State Tax Board of Tax Comm'rs v. Jackson, 283 U.S. 527,
537.
     The privileges and immunities protected under the Fourteenth Amendment
are those that arise from the Constitution and laws of the United States,
rather than those which spring from other sources.  Slaughter-House Cases, 16
Wall. 36; Twining v. New Jersey, 211 U.S. 78; Duncan v. Missouri, 152 U.S.
377; Prudential Insurance Co. v. Cheek, 259 U.S. 530.  Nothing in the
Constitution or laws of the United States requires the equal taxation of all
property, although the Constitution does require the equal protection of all
citizens similarly situated.  Chalker v. Birmingham & N. W. Ry. Co., 249 U.S.
522, distinguished.
     Nothing in the Federal Constitution requires that a State shall twice tax
the property which a citizen has left at home, subject to the taxing laws,
because property which he has invested in other States is to be once taxed at
home.  Darnell v. Indiana, 226 U.S. 390, and Royster Guano Co. v. Virginia,
253 U.S. 412, distinguished.
     An examination of the history and effect of the exemption of the income
from money loaned within the State at not over 5% per annum discloses that the
encouragement intended was the removal of the barrier of double taxation of
the same intrinsic wealth, a barrier adequate to effectively discourage
investment of Vermont funds within the State.
     The obvious effect of the change in taxation thus enacted was to tax the
property and exempt the credit, provided the creditor yielded 1% of the legal
rate of interest; and if the creditor exacted the legal rate of interest, to
tax the creditor and permit the debtor to deduct one-half of the taxable debt
(with limitations) which amounted to substantially 1%.  In other words, the
legislature recognized [413] that the sale on credit of property within the
State to become a part of the property of the debtor in fact created no new
wealth and so a single tax was exacted, within limitations.  The incidence of
the tax was substantially equally divided between the debtor and the creditor. 
The system thus achieved is analogous to systems for the taxation of credits
in force in many jurisdictions and uniformly sustained by the courts.
     The statute is within the "general usage" of the States, which, in the
frequently quoted statement in Bells' Gap R. Co. v. Pennsylvania, 134 U.S.
232, 237, was said not to be forbidden by the Fourteenth Amendment.
     It cannot be said that a legislative purpose to encourage the investment
of Vermont money for the assistance of the agricultural and industrial
interests of the State is an unlawful and prohibited purpose.  Without the
exemption, a debt-burdened class of residents would be subjected to tax laws
oppressive in proportion to the taxpayers' indebtedness.  Cf. Aero Mayflower
Transit Co. v. Public Service Comm'n, 295 U.S. 285; Stephenson v. Binford, 287
U.S. 251; Southwestern Oil Co. v. Texas, 217 U.S. 114; Barbier v. Connolly,
113 U.S. 27; Pacific Express Co. v. Siebert, 142 U.S. 339; Bell's Gap R. Co.
v. Pennsylvania, 134 U.S. 232; Citizens Telephone Co. v. Fuller, 229 U.S. 322.
     The legislative purpose to encourage, approved in the foregoing cases,
had no necessary relation to other States.  See New York v. Roberts, 171 U.S.
658; National Union Fire Ins. Co. v. Wanberg, 260 U.S. 71, 75; Board of
Education v. Illinois, 203 U.S. 553.
     The controlling test is to be found in the operation and effect of the
law as applied and enforced by the State.  St. Louis S. W. Ry. Co. v.
Arkansas, 235 U.S. 350, 362, 363; Texas v. Brown, 258 U.S. 466, 479; Gregg
Dyeing Co. v. Query, 286 U.S. 472, 482; Wagner v. Covington, 251 U.S. 95, 102;
Hope Natural Gas Co. v. Hall, 274 U.S. 284, 288.
     [414] The record is devoid of any evidence which indicates that any of
the capital of appellant, or any capital of any other resident of Vermont, has
been driven from other States into Vermont, or unreasonably retained within
Vermont, by reason of the provisions of the challenged tax law; nor is there
any evidence from which a tendency in that direction can be deduced.
     An exemption of shares of stock, complete or partial, under the Vermont
income tax law arises out of the imposition of a franchise tax upon the
corporation.  The imposition of a franchise tax is conditioned and
proportioned upon business within the State.  The locus of a corporate
business is by fair inference the locus of its principal property.  Bethlehem
Motors Corp. v. Flynt, 256 U.S. 421; Northwestern Mutual Life Ins. Co. v.
Wisconsin, 247 U.S. 132, 139; Kidd v. Alabama, 188 U.S. 730, 732.
     All the tangible property of corporations within the State is taxed at
the local rate.  Pub. Laws, Vt., Secs. 571, 588.  Both the report of the State
Tax Commissioner to the Legislature and the United States census show that
this rate is about 3%.  It follows that in general the exemption of stock in
corporations is conditioned upon the payment by the corporation of a property
tax substantially proportioned to the extent of the exemption.
     Entirely apart from any franchise tax, the payment of the property tax
would justify the exemption of the stock from a similar property tax.  Kidd
v. Alabama, supra; Darnell v. Indiana, supra; Klein v. Board of Supervisors,
supra; Lawrence v. State Tax Comm'n, supra.
     But by the Vermont tax laws the income tax is substituted for the
property tax upon shares of stock.  The income tax is therefore in effect a
tax upon the shares.  See Pollock v. Farmers Loan & Trust Co., 157 U.S. 429,
581; Weston v. Charleston, 2 Pet. 449; Railroad Co. v. [415] Jackson, 7 Wall.
262; Opinion of the Justices, 220 Mass. 613; Wright v. Georgia R. Co., 216
U.S. 420.
     It follows that wholly irrespective of the franchise tax, the income from
shares of corporations doing business in Vermont may fairly be exempted from
taxation, in proportion to business within the State, as the statute in effect
provides.
     But the statute imposes an additional condition that the corporation
shall pay in addition to its property tax a franchise tax at the rate of 2%
upon its entire net income attributable to business within the State.  It is
obvious that in the ordinary case the net income of the corporation will
exceed the distribution of dividends; that, therefore, the 2% tax will be
applied to a wider base than the 4% tax.  The excess of burden upon a
stockholder who pays a 4% dividend tax can never exceed 50% of his tax paid,
and will generally be less.  Entirely apart from the property tax, the
franchise tax presents a disproportion to the taxation of shares not
materially different from that sustained by this Court in Klein v. Board of
Supervisors, 282 U.S. 19.
     As to the personal exemption, a taxpayer with a subsistence exemption
from one class of income is not subjected to unjust discrimination because he
is not permitted to take an exemption from another class, any more than a
taxpayer would be entitled to an exemption of two homesteads because he
occupied alternately two places of residence.  If the taxpayer had other than
Class B income, his need was less than that of the taxpayer who had no income
in addition to Class B income, and generally, he would have availed himself
of an exemption from his Class A income.  In any aspect there is a substantial
difference between income from intangibles and income from business and rents. 
All taxpayers are classified by the same criteria, having a real relation to
the purpose and object of the exemption.
     [416] Mr. Justice Sutherland delivered the opinion of the Court.

     The Vermont Income and Franchise Tax Act of 1931, Public Laws of Vermont,
1933 sec. 872 et seq. (the pertinent provisions of which are copied in the
margin1), imposes [417] individual income taxes as follows:  First, with
respect to net income derived from salaries, wages, etc., denominated by the
court below class A income, at the rate of 2%; second, with respect to income
received on account of the ownership or use of or interest in any interest
bearing security, denominated class B income, at the rate of 4%, excluding,
however, from such income (a) interest received [418] on account of money
loaned within the state at a rate of interest not exceeding 5% per annum,
evidenced by a promissory note, mortgage, or bond for a deed bearing a like
rate of interest; (b) dividends on stocks of corporations subject to taxation
under secs. 887, 888 of the statute.  If the income taxed is derived wholly
from interest-bearing securities, there is allowed in the case of a single
individual, a personal exemption of $400, and, in the case of a head of a
family or of a married individual living with husband or wife, a personal
exemption of $800.  If, however, either husband or wife shall receive any
income other than that derived from such securities, then the personal
exemption is not allowed.  A distinct and larger personal exemption is allowed
in the case of net income derived from salaries, wages, etc. (sec. 880) --
namely, $1,000 in the case of a single individual, and $2,000 in the case of
a head of family or a married individual living with husband or wife.
     Appellant is a resident of Vermont, married and living with his wife. 
During the taxable year in question, he received both class A and class B
income; but his class A income, although large, was absorbed by allowable
deductions, so that there was no net income from that source, and consequently
nothing subject to taxation.  His class B income amounted to a larger sum,
part of which consisted of interest on notes, mortgages, etc., representing
money loaned outside the State of Vermont at not exceeding 5% per annum, and
another part from taxable dividends received from corporations other than
Vermont corporations.  Upon these two sums a tax was assessed against him at
the rate of 4%.  Under the statute he was allowed no personal exemption
whatever.
     The validity of the statute under the federal Constitution was properly
challenged.  The grounds of attack, so far as necessary to be stated, are as
follows:  (1) The act imposes a tax upon dividends earned outside the State
of [419] Vermont, while exempting from the tax dividends earned within the
state, thereby denying petitioner the equal protection of the laws in
violation of the Fourteenth Amendment; (2)the act, in violation of the same
clause, discriminates in favor of money loaned within the state as against
money loaned outside the state; (3) the act arbitrarily denies appellant the
$800 exemption while giving it to other persons whose situation differed from
his only in that they had no income from business, and thereby denies
appellant the equal protection of the laws guaranteed by the Fourteenth
Amendment; and in each of these three particulars the act abridges the
privileges and immunities of appellant as a citizen of the United States in
contravention of the same amendment.2
     The court below denied the contentions of appellant and sustained the
validity of the act in every particular.  107 Vt. 28; 175 Atl. 352.
     First.  Does the imposition of a tax upon dividends earned outside the
state, from which tax dividends earned within the state are exempt,
constitute, under the Fourteenth Amendment, an allowable classification?  The
basis of the classification rests in the consideration that by secs. 887 and
888 a tax of 2%, measured by net income, is imposed upon every corporation for
the privilege of exercising [420] its franchise in the state and of doing
business therein.  If the entire business of the corporation be transacted
within the state, the amount of the tax is fixed with regard to the entire net
income.  If the entire business be not so transacted, the net income is
calculated with respect to that part of the business does within the state,
to be allocated so as fairly and justly to reflect such net income.  Dividends
upon shares of corporations which are subjected to this tax are exempted from
the income tax.  In addition to the 2% franchise tax, all tangible corporate
property lying within the state is subjected to a property tax.  The evident
aim of the classification, therefore, is to produce equality and not
inequality; and, obviously, that aim will become effective in fact, to a
greater or less extent, in the administration of the legislation.
     The theory upon which the tax is laid upon dividends realized from
out-of-state business while leaving dividends realized from domestic business
untaxed, is that the 2% franchise tax, especially with the property tax added,
has the effect of indirectly imposing a tax burden upon the latter measurably
equivalent to that imposed directly upon the former.  Thus, the tendency of
the plan is to avoid taxing twice what is, in effect, the same thing.  And
conceding the power of the state to impose double or even multiple taxation,
legislation which is calculated to avoid that undesirable result certainly
cannot be condemned as arbitrary.  Thus far, the question is settled in favor
of the validity of the tax by prior decisions of this court.  Kidd v. Alabama,
188 U.S. 730; Darnell v. Indiana, 226 U.S. 390, 398; Travellers' Insurance Co.
v. Connecticut, 185 U.S. 364; Watson v. State Comptroller, 254 U.S. 122,
124-125; Lawrence v. State Tax Comm's, 286 U.S. 276, 284.  True, it well may
be assumed that similar franchise and property taxes are imposed upon the
outside corporations by other states; but the assumption is immaterial [421]
to the issue here involved.  It is enough that such taxes are not imposed by
the State of Vermont.  It was so decided in Kidd v. Alabama, supra, where Mr.
Justice Holmes, speaking for the court, said (p. 732):
     "The State of Alabama is not bound to make its laws harmonize in
principle with those of other States.  If property is untaxed by its laws,
then for the purpose of its laws the property is not taxed at all."  And see
Bacon v. Board of Tax Comm'rs, 126 Mich. 22, 25-26; 85 N.W. 307.
     Appellant urges that the franchise tax measured by the corporation's
income is at a rate of 2%, while the tax on dividends is at the rate of 4%;
and concludes that this results in putting a burden on dividends directly
taxed twice as great as that imposed indirectly by the franchise tax.  But it
is obvious that, since the 4% tax is imposed only upon such part of the
corporate net income as passes to the shareholders in the form of dividends,
and the 2% tax is measured by the entire net income of the corporation, this
conclusion is erroneous.  Corporations do not, at least as a general rule, pay
out their entire net income in dividends.  Something is reserved for future
contingencies; and it may well result that a tax of 2% measured by the entire
net income of the corporation will roughly approximate the amount imposed by
a 4% tax on that part of the net income paid out as dividends.  There is
nothing in the equality clause of the Constitution which requires that the two
sums shall be mathematically equivalent.  Concordia Fire Ins. Co. v. Illinois,
292 U.S. 535, 547.  In Klein v. Board of Supervisors, 282 U.S. 19, this court
sustained an act exempting corporate shares from taxation where 75% of the
total property of the corporation was taxable in the state and the taxes
thereon were paid.  It was said that this was plainly a reasonable effort to
do justice to all in view of the way other assessments were made.
     [422] It is impossible to say from the record before us that there is a
greater disproportion here than was presented in the KLEIN case, or to
conclude that the disproportion is so great as to stamp the classification as
wholly arbitrary or capricious.  Moreover, as a general thing, a corporation
subject to the 2% franchise tax will pay also a tax upon property located
within the state, with the effect of still further narrowing, if not
altogether extinguishing, the difference.
     This court has frequently said that absolute equality in taxation cannot
be obtained and is not required under the Fourteenth Amendment.  This, of
course, is not to say that, because some degree of inequality from the nature
of things must be permitted, gross inequality must also be allowed.  The
boundary between what is permissible and what is forbidden by the
constitutional requirement has never been precisely fixed and is incapable of
exact delimitation.  In the great variety of cases which have arisen,
decisions may seem to be difficult of reconcilement; but investigation will
generally cause apparent conflicts to disappear when due weight is given to
material circumstances which distinguish the cases.  If the evident intent and
general operation of the tax legislation are to adjust the burden with a fair
and reasonable degree of equality, the constitutional requirement is
satisfied.  We think the provision now under consideration meets this test. 
Cf. State Railroad Tax Cases, 92 U.S. 575, 612; Tappan v. Merchants' National
Bank, 19 Wall. 490, 504; Merchants' Bank v. Pennsylvania, 167 U.S. 461, 464.
     Second.  It is settled beyond the admissibility of further inquiry that
the equal protection clause of the Fourteenth Amendment does not preclude the
states from resorting to classification for the purposes of legislation. 
Royster Guano Co. v. Virginia, 253 U.S. 412, 415.  And "the power of the state
to classify for purposes of taxation is [423] of wide range and flexibility
. . ."  Louisville Gas Co. v. Coleman, 277 U.S. 32, 37.  But the
classification "must be reasonable, not arbitrary, and must rest upon some
ground of difference having a fair and substantial relation to the object of
the legislation, so that all persons similarly circumstanced shall be treated
alike."  Royster Guano Co. v. Virginia, supra; Air-Way Corp. v. Day, 266 U.S.
71, 85; Schlesinger v. Wisconsin, 270 U.S. 230,240.  The classification, in
order to avoid the constitutional prohibition, must be founded upon pertinent
and real differences, as distinguished from irrelevant and artificial ones. 
The test to be applied in such cases as the present one is--does the statute
arbitrarily and without genuine reason impose a burden upon one group of
taxpayers from which it exempts another group, both of them occupying
substantially the same relation toward the subject matter of the legislation? 
"Mere difference is not enough . . ."  Louisville Gas Co. v. Coleman, supra;
Frost v. Corporation Commission, 278 U.S. 515, 522.
     The question depends here upon whether the income taxed and the income
exempted from taxation reasonably can be assigned to different classes.  As
the Supreme Court of Vermont itself has pointed out, in all such cases it must
appear not only that a classification has been made, but that it is one based
on some reasonable ground.  State v. Hoyt, 71 Vt. 59, 64-66; 42 Atl. 973.  The
decision in that case held invalid a state statute the effect of which was to
impose a tax upon sales of goods manufactured in the state, while leaving
sales of goods manufactured in other states free from taxation.  It was held
that the classification could not be based on any difference in the goods,
because there was none; nor on the fact that they were made in different
states, for that bore no just and proper relation to the classification, but
was purely arbitrary; nor on the difference of residence of the manufacturers,
for the same reason.  And clearly the view of the court was that [424] a like
discrimination against the products of another state would have been open to
the same objections.
     Let us apply these principles to the statute creating the exemption now
in question.  Upon the face of the statute the classification is based upon
a difference having no substantial or fair relation to the object of the
act--which, so far as this question is concerned, simply is to secure revenue. 
The statute itself suggests no other public purpose which will be served by
the exemption.  The language creating the exemption is "(a) Interest received
on account of money loaned within this state, at a rate of interest not
exceeding five per cent per annum . . ."  The naked and complete test afforded
by the statute is that the money shall be loaned within the state.  What is
to be done with the money, whether it is to be invested in the state or
elsewhere--indeed, whether it is to be devoted to any useful purpose--are
matters having nothing to do with the imposition of the tax or the exemption
therefrom.  If the statute had provided that interest on account of money so
loaned when invested in property having a situs within the state shall be free
from the tax, a different question as to classification might be presented. 
In that event the actual wealth of the state would be increased, and in
addition, and as a consequence, opportunity to obtain additional revenue
through taxation would result.  But this exempting provision, we repeat,
contains either this qualification nor any other.  Its terms are positive and
all-inclusive and will be fully satisfied whenever it appears that money has
been loaned within the state.  The Supreme Court of Vermont has not read into
the statute a qualification that loans shall be deemed to be made within the
state only if their proceeds be invested in the state.  Obviously this court
cannot so read the provision, for that would be to amend and not to construe
it.  We are unable to find in the provision any public purpose which can be
subserved by [425] making the taxation of income from loans dependent merely
upon the adventitious circumstances as to the place of making the loan.
     It is suggested, however, that, aside from anything in the statute, money
loaned within the state generally will be invested therein.  But there is
nothing in the record to indicate that this will result; and for aught this
court can know judicially there is no warrant for saying either that it will
or will not result.  All we can say is that money so loaned MAY BE invested
in Vermont, or MAY BE invested in some other state -- for example, in property
having a situs in New York -- or may not be invested at all.  If there be
circumstances which will justify the exemption of any income derived from
money loaned within the state while taxing the income from that loaned
outside, it is for the state legislature to point then out and limit the
exemption accordingly.  To impose any such circumstances into the present
situation is to indulge in pure speculation.  Compare Travis v. Yale & Towne
Mfg. Co., 252 U.S. 60, 81.
     To assume that some unnamed public interest exists, which will sustain
the discrimination, does not help the matter here; because the assumption can
rest only upon surmise, with nothing concrete or explicit appearing to support
it or to indicate a legislative intent to relate the exemption to any public
purpose or to anything else beyond the mere fact that the favored loans are
effected within the state.  In principle, the classification is quite as
arbitrary as that dealt with by this court in Louisville Gas Co. v. Coleman,
supra, pp. 38-39.  If the exemption had been made to depend upon the time when
the loan was made, instead of upon the locality where it was made--as, for
example, a tax upon all income from loans except that made on Mondays--the
arbitrary and capricious nature of the classification would scarcely be
doubted, although a minute inspection of the field of [426] possibilities
might persuade an anxious mind, bent on sustaining the tax at all events, to
the view that in some far-fetched way a loan made on Monday would further some
public purpose, other than that of revenue, which a loan made on another day
of the week would not.
     It is said that an exemption which may have for its aim the advancement
of local interests can hardly be condemned under a Constitution which for a
century has known a protective tariff.  Considering the suggestion
categorically, a pertinent answer to it is that while the general government
may, for the benefit of national interests, exact impost duties which
discriminate against foreign interests, one state, even for the advancement
of its own interests, is not permitted to exact taxes discriminating against
goods brought from a sister state.  See, for example, Welton v. Missouri, 91
U.S. 275; cf. Burnet v. Brooks, 288 U.S. 378, 401, et seq.
     But, assuming that the State of Vermont is benefited by the exemption,
the complete answer is that appellant is a citizen of the United States; and,
quite apart from the equal protection of the laws clause, the suggestion is
effectively met and overcome, and the fallacy of other attempts to sustain the
validity of the exemption here under review clearly demonstrated, by reference
to the privileges and immunities clause of the Fourteenth Amendment.  "For all
the great purposes for which the Federal government was formed," this Court
has said, "we are one people, with one common country."  Crandall v. Nevada,
6 Wall. 35, 48-49.  As citizens of the United States we are members of a
single great community consisting of all the states united and not of distinct
communities consisting of the states severally.  No citizen of the United
States is an alien in any state of the Union; and the very status of national
citizenship connotes equality of rights and privileges, so far as they flow
from such citizenship, everywhere within the limits of the [427] United
States.  This fact is obvious and vital and no elaboration is required to
establish it.
     Section 2 of Article IV of the Constitution contains the provision, "The
Citizens of each State shall be entitled to all Privileges and Immunities of
Citizens in the several States."  The Fourteenth Amendment, sec. 1, provides:
     "All persons born or naturalized in the United States, and subject to the
jurisdiction thereof, are citizens of the United States and of the State
wherein they reside.  No State shall make or enforce any law which shall
abridge the privileges or immunities of citizens of the United States; . . ."
     Thus, the dual character of our citizenship is made plainly apparent. 
That is to say, a citizen of the United States is ipso facto and at the same
time a citizen of the state in which he resides.  And while the Fourteenth
Amendment does not create a national citizenship, it has the effect of making
that citizenship "paramount and dominant" instead of "derivative and
dependent" upon state citizenship.3  "In reviewing the subject," Chief Justice
White said in the Selective Draft Law Cases, 245 U.S. 366, 377, 388-389, "we
have hitherto considered it as it has been argued, from the point of view of
the Constitution as it stood prior to the adoption of the Fourteenth
Amendment.  But to avoid all misapprehension we briefly direct attention to
that [the Fourteenth] Amendment for the purpose of pointing out, as has been
frequently done in the past, how completely it broadened the national scope
of the Government under the Constitution by causing citizenship of the United
States to be paramount and dominant instead of being subordinate [428] and
derivative, and therefore, operating as it does upon all the powers conferred
by the Constitution, leaves no possible support for the contentions made, if
their want of merit were otherwise not so clearly made manifest."
     The result is that whatever latitude may be thought to exist in respect
of state power under the Fourth Article, a state cannot, under the Fourteenth
Amendment, abridge the privileges of a citizen of the United States, albeit
he is at the same time a resident of the state which undertakes to do so. 
This is pointed out by Mr. Justice Bradley in the Slaughter House Case, 1
Woods 21, 28:
     "The `privileges and immunities' secured by the original constitution
were only such as each state gave to its own citizens.  Each was prohibited
from discriminating in favor of its own citizens and against the citizens of
other states.
     "But the fourteenth amendment prohibits any state from abridging the
privileges or immunities of citizens of the United States, whether its own
citizens or any others.  It not merely requires equality of privileges but it
demands that the privileges and immunities of all citizens shall be absolutely
unabridged, unimpaired."
     The same distinction is made by this court in Bradwell v. State, 16 Wall.
130, 138, where, speaking of the privileges and immunities provision of the
Fourth Article, it was said:
     "The protection designed by that clause, as has been repeatedly held, has
no application to a citizen of the State whose laws are complained of.  If the
plaintiff was a citizen of the State of Illinois, that provision of the
Constitution gave her no protection against its courts or its legislation."4
     [429] But the court added that with respect to the Fourteenth Amendment
"there are certain privileges and immunities which belong to a citizen of the
United States as such; otherwise it would be nonsense for the Fourteenth
Amendment to prohibit a State from abridging them, . . . We agree . . . that
there are privileges and immunities belonging to citizens of the United
States, in that relation and character, and that it is these and these alone
which a State is forbidden to abridge."  The governments of the United States
and of each of the several states are distinct from one another.  The rights
of a citizen under one may be quite different from those which he has under
the other.  To each he owes an allegiance; and, in turn, he is entitled to the
protection of each in respect of such rights as fall within its jurisdiction. 
United States v. Cruikshank, 92 U.S. 542, 549.
     Under the Fourteenth Amendment, therefore, the simple inquiry is whether
the privilege claimed is one which arises in virtue of natural citizenship. 
If the privilege be of that character, no state can abridge it.  No attempt
has been made by the courts comprehensively to define or enumerate the
privileges and immunities which the Fourteenth Amendment thus protects.5 
Among those privileges, however, undoubtedly is the right to pass freely from
one State to another.  Crandall v. Nevada, supra; Williams v. Fears, 170 U.S.
270, 74.  And that privilege, obviously, is as immune from abridgement by the
state from which the citizen departs as it is from abridgement by the state
which he seeks to enter.  This results from the essential character of
national citizenship.  Cf. In re Kemmler, 136 U.S. 436, 448; Duncan v.
Missouri, 152 U.S. 377, 382; In re Quarles and Butler, [430] 158 U.S. 532,
536; United States v. Cruikshank, supra, at p. 552.
     In the Crandall case, while the court at least gravely doubted whether
a capitation tax imposed by the State of Nevada upon persons leaving the state
by railroad or stagecoach violated the commerce clause (p. 43), it was
distinctly held that the tax did affect the rights of citizens under the
federal government so as to invalidate the act imposing the tax.  The doubt
as to the first point has been resolved in later cases against the power of
the state (Helson and Randolph v. Kentucky, 279 U.S. 245, 251); but the ruling
on the second point has never been doubted and was definitely approved in the
Slaughter-House Cases, 16 Wall. 36, 79, and the right described in the
Crandall case placed among the partially enumerated privileges and immunities
"which owe their existence to the Federal government, its National character,
its Constitution, or its laws."  The opinions in both cases were delivered by
the same eminent justice; and it is not without significance that while the
first opinion was delivered before the adoption of the Fourteenth Amendment,
the second one was delivered afterwards and with direct reference to the
privileges and immunities clause of that amendment.  The fact that we have
since decided, and should now hold, that the Nevada act was in violation of
the commerce clause, in no way detracts from the view that it also violated
the privileges and immunities clause; but simply demonstrates that the same
act of state legislation may contravene more than one provision of the federal
Constitution.
     The right of a citizen of the United States to engage in business, to
transact any lawful business, or to make a lawful loan of money in any state
other than that in which the citizen resides is a privilege equally
attributable to his national citizenship.  A state law prohibiting the
exercise of any of these rights in another state would, therefore, be invalid
under the Fourteenth Amendment.  The imposition by one state of a
discriminating tax upon a citizen resident in another state for trading in the
territory of the former has been held invalid.  Ward v. Maryland, 12 Wall.
418, 430.  And, of course, conversely, a tax of that description is likewise
void if imposed by one state upon a resident citizen of the United States for
trading or doing business in the territory of another state.  And such a tax
is not justified because the taxing state will thereby help its domestic
business.
     The purpose of the pertinent clause of the Fourth Article was to require
each state to accord equality of treatment to the citizens of other states in
respect of the privileges and immunities of state citizenship.  It has always
been so interpreted.  One purpose and effect of the privileges and immunities
clause of the Fourteenth Amendment, read in the light of this interpretation,
was to bridge the gap left by that article so as also to safeguard citizens
of the United States against any legislation of their own states having the
effect of denying equality of treatment in respect of the exercise of their
privileges of national citizenship in other states.  A provision which thus
extended and completed the shield of national protection between the citizen
and hostile and discriminating state legislation cannot be lightly dismissed
as a mere duplication, or of subordinate or no value, or as an
almost-forgotten clause of the Constitution.
     Reference has been made to numerous cases in which this court has
rejected or ignored specific claims under the privileges and immunities
clause; but since none of them relates to state legislation even remotely
resembling the Vermont law here challenged, their collection and citation is
without useful result, unless, as it seems to be thought, these numerous
unsuccessful efforts to give the clause applications which fall outside its
meaning show or tend to show that the clause itself has become a dead [432]
letter.  Such a conclusion is, of course, inadmissible; for as we have already
said, referring to the Bradwell case, there are privileges and immunities
which belong to a citizen of the United States as such; otherwise it would be
nonsense to prohibit a state from abridging them.  Some of these privileges
and immunities we have already pointed out; others are enumerated in the cases
cited under note 5.
     To these illustrations we may add another, which here is peculiarly
pertinent.  The business of insurance has grown to vast proportions. 
Insurance companies issuing policies are found in every state; and the
activities of the larger companies overflow state lines and extend into every
part of the country.  But insurance is not commerce; and the right of a
citizen to take out a policy in one state, insuring property in another where
he resides, cannot be protected under the commerce clause.  National
protection, when appropriate, must be found in the Fourteenth Amendment.  It
well cannot be doubted that a citizen of the United States, residing and
having property in Vermont, exercises a privilege of national citizenship when
he negotiates and takes out in another state a policy insuring that property,
or takes out in another state a policy insuring his life.  There may be very
cogent reasons, resting in the strength of the company, terms of the policy,
and otherwise, making it desirable that he should do so.  And it well cannot
be doubted that legislation of one state denying the privilege or taxing the
transaction when it occurs in another state, while leaving the transaction
wholly free from taxation when it takes place in the former state, would
abridge that privilege of citizenship.  It would be no answer to say that
thereby the former state was building up her local insurance companies and
adding to the wealth of the state.  Nor is it any answer to say that the
citizen may resort to other clauses of the Fourteenth Amendment which will
afford [433] protection.  The right of a citizen of the United States resident
in one state to contract in another may be a liberty safeguarded by the due
process of law clause, and at the same time, none the less, a privilege
protected by the privileges and immunities clause of the Fourteenth Amendment. 
In such case he may invoke either or both.  This seems to be recognized in
Allgeyer v. Louisiana, 165 U.S. 578, 589-592, where the court evidently
thought that under circumstances not unlike those just suggested the words
"liberty" and "privilege" were interchangeable terms.
     It follows from what has been said that when a citizen of the United
States residing in Vermont goes into New Hampshire, he does not enter foreign
territory, but passes from one field into another field of the same national
domain.  When he trades, buys or sells, contracts or negotiates across the
state line, when he loans money, or takes out insurance in New Hampshire --
whether in doing so he remains in Vermont or not -- he exercises rights of
national citizenship which the law of neither state can abridge without coming
into conflict with the supreme authority of the federal Constitution.
     The statute, as here applied, says that if a citizen resident in Vermont
loan his money at 5% or less in another state, he must pay a tax upon the
income; but if he loan money in Vermont at the same rate, no tax whatsoever
shall be imposed.  The power to tax income here asserted by Vermont, is in the
final analysis, the power to tax so heavily as to preclude loans outside the
state altogether.  It reasonably is not open to doubt that the discriminatory
tax here imposed abridges the privilege of a citizen of the United States to
loan his money and make contracts with respect thereto in any part of the
United States.
     The tax on dividends, already discussed and upheld, rests in a different
situation.  Although dividends from outside investments are taxed, and those
from state investments [434] in terms are exempt, they are, as already
appears, in substance and effect treated alike--the one by a tax falling
directly upon the income of the individual stockholders, and the other falling
indirectly but no less definitely upon that income, in the form of a tax which
is first imposed upon the corporation as a franchise tax measured by income,
but the burden of which ultimately is borne by the stockholders.  The effect
is the same as though the tax were imposed generally upon corporate dividends
without exception or discrimination.  Travellers' Insurance Co. v.
Connecticut, 185 U.S. 364, 369 et seq.  The same would be true of the tax on
income from loans, if it had been imposed in respect of all loans wherever
made or if there had been some form of equalizing tax which would have
compensated for the burden cast upon loans made in other states.  But such is
not the case.  Income from loans made outside the state is taxed directly,
while income from loans made within the state is not taxed directly or in any
indirect way so as to equalize the burden.  Woodruff v. Parham, 8 Wall. 123,
140, dealt with a sales tax imposed upon sales, whether made by a citizen of
the state where the tax was imposed or a citizen of another state; and whether
the goods sold were the product of the state enacting the law or of some other
state.  This court upheld the tax upon the ground that it did not discriminate
against the products of other states or affect the privileges or immunities
of their citizens; but the court clearly stated that if it had done so it
would be an infringement of the provisions of the Constitution relating to
those subjects.  The principle of that case is applicable here and has the
effect of sustaining the tax in respect of dividends and condemning the tax
in respect of loans.  Compare Travis v. Yale & Towne Mfg. Co., supra.
     Third.  The statute, so far as it applies to appellant, provides that if
the income taxed be derived wholly from ownership of or interest in
interest-bearing securities, there shall be allowed an exemption of $800.  If
the income [435] be derived from other enumerated sources, an exemption is
allowed of $2,000 against the "aggregate net income."
     It is manifest that if the legislation had provided that where the
taxpayer shall have income from both of these general sources he shall not be
entitled to both exemptions, the provision would have been open to no
constitutional objection.  Such legislation might properly permit him, in that
contingency, to select which of the exemptions he will take; or, on the other
hand, might properly specify which of the two exemptions shall be accorded
him.  In effect, though not in terms, it is the latter alternative which the
statute adopts.  In terms, the statute provides that if the taxpayer receive
any income other than that derived from interest-bearing securities, the
personal exemption applicable to the latter class of income shall not be
allowed.  But the right to the $2,000 exemption allowed in respect of class
A income remains unaffected.  The taxpayer who receives both classes of
income, while thus compelled to forego the smaller exemption, is accorded the
larger one; and it is impossible reasonably to find in this situation anything
arbitrary or capricious.  It is true that during the taxable year in question
appellant had no net income because his gross income derived from salaries,
etc., amounting to about $70,000, was entirely absorbed by allowable
deductions; but this was an incident of the particular year in question and
might never happen again.  He failed to obtain the advantage of the exemption
not because of any hostile statutory intent or hostile enforcement of the tax,
but because of the collateral circumstance, peculiar, perhaps, to him alone
and to the taxable year in question, that his entire gross income was absorbed
by deductions, allowed by the statute as a matter of grace as is the exemption
itself, so that nothing remained from which the amount of the exemption or any
part of it could be subtracted.
     [436] The question of equal protection must be decided in respect of the
general classification rather than by the chance incidence of the tax in
particular instances or with respect to particular taxpayers.  "And
inequalities that result not from hostile discrimination, but occasionally and
incidentally in the application of a system that is not arbitrary in its
classification, are not sufficient to defeat the law."  Maxwell v. Bugbee, 250
U.S. 525, 543.  "The operation of a general rule will seldom be the same for
every one.  If the accidents of trade lead to inequality or hardship, the
consequences must be accepted as inherent in government by law instead of
government by edict."  Fox v. Standard Oil Co., 294 U.S. 87, 102.  Cf. Packard
v. Banton, 264 U.S. 140, 145; Gant v. Oklahoma City, 289 U.S. 98, 102;
Storaasli v. Minnesota, 283 U.S. 57, 62.
     The general classification--namely, that the right to a partial exemption
from a tax upon one class of income will depend upon whether the taxpayer is
in receipt of income of another class with respect to which a different
exemption applies--does not seem to us to be open to the objection that it is
arbitrary or capricious, simply because, like any other general rule of
taxation, its administration may involve incidental instances of inequality.
     We conclude that the taxing act is valid in respect of the first and
third points which we have discussed, but invalid in respect of the second.

Reversed and remanded for further proceedings not inconsistent with the
foregoing opinion.

1                                "Chapter 39.
          "Sec. 873.  Rate; Exemptions; Amount. -- A tax is hereby imposed
     upon every resident of the state, which tax shall be levied, collected
     and paid annually, with respect to:
          "I.  His net income as herein defined, after deducting the
     exemptions provided in this chapter, at the rate of two per cent; and
          "II.  To the income received by him on account of the ownership or
     use of or interest in any stock, bond, note, agreement or other interest
     bearing security at the rate of four per cent; but the words `income
     received by him on account of the ownership or use of or interest in any
     stock, bond, agreement or other interest bearing security' shall not
     include the following items which shall be exempt from taxation under
     this chapter:
          "(a)  Interest received on account of money loaned within this
     state, at a rate of interest not exceeding five per cent per annum
     evidenced by a promissory note, mortgage on real estate or a bond for a
     deed, including credits representing the purchase price, or any part
     thereof, of real estate within this state, sold or transferred, evidenced
     by a promissory note, mortgage or bond for a deed bearing a rate of
     interest not exceeding five per cent per annum;

                                 *   *   *

          "(e)  Dividends on stocks of those corporations which are subject
     to taxation under chapter, but if a corporate franchise tax is not
     measured by the entire net income of such corporation, then a portion of
     the dividends paid by such corporation shall be taxable under this
     chapter, and such taxable portion shall be that proportion of the
     dividend as the income earned by the corporation from business done
     without the state of Vermont bears to the entire income of the
     corporation;
          "(f)  In case the income taxed in this section is derived wholly
     from ownership of or interest in any stock, bond, note or other interest
     bearing security, there shall be deducted from such income the following
     exemptions:
          "1.  In case of a single individual a personal exemption of four
     hundred dollars;
          "2.  In the case of the head of a family, or a married individual
     living with husband or wife, a personal exemption of eight hundred
     dollars; but if either a husband or wife shall receive any income other
     than that derived from the ownership of or interest in any stock, bond,
     note or other interest bearing security, then such personal exemption
     shall not be allowed.  A husband and wife, living together, shall receive
     but one personal exemption of eight hundred dollars against their
     aggregate net income; and in case they make separate returns, the
     personal exemption of eight hundred dollars may be taken by either or
     divided between them. . . .

                               "Chapter 40.
          "Sec. 887.  Rate. -- For the privilege of exercising its franchise
     in this state in a corporate or organized capacity, every domestic
     corporation, and for the privilege of doing business in this state every
     foreign corporation, liable to tax under this chapter shall annually pay
     to this state a franchise tax to be measured by its net income to be
     computed in the manner hereinafter provided at the rate of two per cent
     upon the basis of its net income as herein computed, for the next
     preceding fiscal or calendar year.
          "Sec. 888.  Basis on business within the state. -- If the entire
     business of the corporation be transacted within the state, the tax
     imposed shall be based upon the entire net income of such corporation for
     such fiscal or calendar year.  If the entire business of the corporation
     be not transacted within the state and its gross income derived from
     business done both within and without the state, the determination of its
     net income shall be based upon the business done within the state and for
     the purpose of computing such net income the commissioner shall adopt
     such recommendations and regulations for the allocation of net income as
     will fairly and justly reflect the net income of that portion of the
     business done within the state."
2    The further point is made that the discrimination in respect of dividends
     and interest upon loans is a regulation of interstate commerce and
     therefore void under the commerce clause of the federal Constitution. 
     But we mention this latter claim only to reject it as without merit,
     since clearly a tax upon income is not an interference with interstate
     commerce simply because the income is derived from a source within
     another state; and, moreover, if there be any tendency to interfere with
     such commerce it is purely collateral and incidental.  Nathan v.
     Louisiana, 8 How. 73, 82; Williams v. Fears, 179 U.S. 270, 276; Diamond
     Glue Co. v. United States Glue Co., 187 U.S. 611, 616; Anderson v. United
     States, 171 U.S. 604, 616; Engel v. O'Malley, 219 U.S. 128, 138; Moore
     v. N.Y. Cotton Exchange, 270 U.S. 593, 604.
3    In United States v. Hall, Case No. 15,282, 26 Fed Cas. 79, 81, Judge
     Woods said:  "By the original constitution citizenship in the United
     States was a consequence of citizenship in a state.  By this clause this
     order of things is reversed. . . . and citizenship in a state is a result
     of citizenship in the United States."
4    This does not mean that a state has unlimited power by law to abridge the
     privileges of its own citizens.  It only means that in such case we must
     look elsewhere than to the language of the privileges and immunities
     clause of the Fourth Article of the Constitution for the constitutional
     infirmity of the statute, if it have any.
5    For examples, however, see Corfield v. Coryell, 4 Wash. C. C. 371, 380,
     381; Slaughter-House Cases, 16 Wall. 36, 79-80; Twining v. New Jersey,
     211 U.S. 78, 97; Ward v. Maryland, 12 Wall. 418, 430; Blake v. McClung,
     172 U.S. 239, 248,252; United States v. Wheeler, 254, U.S. 281; Paul v.
     Virginia, 8 Wall. 168, 180.

Mr. Justice Stone, dissenting.

     I think that the exemption, from the tax, of net income from money loaned
within the state at not more than 5%, like the exemption of income from
dividends of [437] corporations earned within the state, does not deny equal
protection or infringe any privilege or immunity of citizens of the United
States, and that the judgment should be affirmed in its entirety.  Unless the
constitutional validity of the exemptions is to avoid taxing the same economic
interest twice, but disapprove those to encourage residents to invest their
funds at home, it would seem that the considerations which have led to
upholding the one exemption would not admit of condemning the other.  See
Southwestern Oil Co. v. Texas, 217 U.S. 114, 127.
     1.  It is not denied that the effect of both exemptions is to place a
burden on income derived from sources or investments made without the state
which they do not place on income derived from like sources or investments
made within it.  But that affords no ground for saying that either is invalid. 
The equal protection clause does not forbid inequalities in state taxation. 
A state may select the objects to be taxed and selection, which is but the
converse of exemption, involves the imposition of a tax burden on some which
is not placed on others.  As this court has repeatedly held, inequalities
resulting from the singling out of one particular class for taxation or
exemption, regardless of the reason for the choice, or even if there is no
discernable reason, are not to be pronounced invalid where there is no clear
indication that the purpose or effect is a hostile or oppressive
discrimination against particular persons or classes.  American Sugar Refining
Co. v. Louisiana, 179 U.S. 89; Board of Education v. Illinois, 203 U.S. 553;
Beers v. Glynn, 211 U.S. 477; Southwestern Oil Co. v. Texas, supra; Quong Wing
v. Kirkendall, 223 U.S. 59; Citizens Telephone Co. v. Fuller, 229 U.S. 322;
Heisler v. Thomas Colliery Co., 260 U.S. 245; Lawrence v. State Tax Comm'n,
286 U.S. 276; Concordia Fire Insurance Co. v. Illinois, 292 U.S. 535.
     [438] The end sought by the classification is of significance in passing
upon the constitutionality of the tax only insofar as it serves to  show that
the discrimination is not invidious.  If it appears or may fairly be assumed
that it is for the purpose of promoting a permissible public aim, it cannot
be condemned because one class must pay a tax which another does not.  Where
the public interest is served one business may be left untaxed and another
taxed, in order to promote the one, American Sugar Refining Co. v. Louisiana,
supra; Heisler v. Thomas Colliery Co., supra; Aero Mayflower Transit Co. v.
Georgia Commission, 295 U.S. 285, or to restrict or suppress the other,
Magnano Co. v. Hamilton, 292 U.S. 40; Fox v. Standard Oil Co., 294 U.S. 87;
Quong Wing v. Kirkendall, supra; Singer Sewing Machine Co., v. Brickell, 233
U.S. 304; Alaska Fish Co. v. Smith, 255 U.S. 44, 48.  But it is not necessary
to go so far to support the present exemption.  There is no serious contention
that its purpose or effect is to suppress the lending of money without the
state or to injure appellant or his fellow residents of Vermont who may prefer
to invest their funds elsewhere.  Nor can it be said that the exemption was
not granted in furtherance of a permissible state policy, which was the
legislative objective rather than an invidious discrimination against
appellant and other similarly situated.
     It seems to be conceded that if the statute had placed upon the tax
gatherers the burden of ascertaining whether money loaned within the state is
invested in property there, and had limited the exemption to money so loaned
and invested, the tax would be sustained because of the benefit which would
result from the increase of wealth in the state and the enlarged opportunity
to obtain additional revenue.  The attack is thus narrowed to the single
objection that there are exempted loans, some of which, although made within
the state, are or may be withdrawn and used elsewhere.  It is assumed that
money thus loaned [439] and withdrawn can be of no possible benefit to the
state, and it is declared that since such transactions may occur the Court
cannot determine whether the exemption will have any beneficent effect and it
is therefore invalid.
     But there are benefits other than the increase of its taxable wealth
which a state is at liberty to stimulate by its taxing policy, and exemptions
have been sustained on the broader ground that they foster some form of
domestic industry.  New York v. Roberts, 171 U.S. 658; Magnano Co. v.
Hamilton, supra; Fox v. Standard Oil Co., supra; Aero Mayflower Transit Co.
v. Georgia Commission, supra.  If Vermont chooses to encourage, by tax
exemption, loans at favorable rates of interest within the state, because it
believes that local interests will be benefited, it can hardly be said for
that reason to be contravening a constitution that has known a protective
tariff for more than one hundred years.  See Alaska Fish Co. v. Smith, supra,
48; Rast v. Van Deman & Lewis Co., 240 U.S. 342, 347.  It is true that a state
may not lay taxes on imports or burden interstate commerce, Welton v.
Missouri, 91 U.S. 275, but it is too late for this Court to declare that a
state may not favor domestic interests by granting exemptions in the exercise
of its taxing power.
     It is not for us to say that the Vermont legislature was unmindful of
these broader advantages, or to declare that the presence within the state of
investment funds offered at 5% or less to borrowers there, including those who
are carrying on the business and industry of the state, is not beneficial; or
that if any loans made within the state are used elsewhere they are or ever
would be more than negligible in amount; or if they were that they could not
have a favorable effect on interest rates within the state, which is a matter
of state concern.  When the Vermont legislature adopted the present exemption,
it had before it the reports of two committees appointed to investigate [440]
the tax system of the state, which clearly indicate their judgment, based on
a study of conditions in the state, that the existing system was driving
investment capital from the state or into secured and non-commercial loans,
and that a tax exemption embracing both secured and commercial loans would
tend to increase the supply of investment capital for both and to reduce
interest rates in the state.1  This Court has no basis for saying that those
committees were wrong and no authority to say it.  The state supreme court has
stated in the present case that the legislature did have in mind these broader
advantages, for it rested its decision on the ground that the exemption was
made "in the interest of thrift and state development" and "for the assistance
of the agricultural and industrial interests of the state."
     If in the face of so much which is persuasive of the legitimate purpose
and effect of this legislation, we are to declare that we cannot say whether
the benefits intended either will or will not result, it does not follow that
the Vermont legislature is similarly uninformed.  We must assume that it is
not, unless we are to discard the salutary principle of decision, that, out
of a decent respect to an independent branch of the government, legislative
acts must be overtaken to be based on facts which support their constitutional
validity unless the contrary reasonably appears. [441]  This Court, it is
true, has held discriminations invalid where, upon the facts disclosed by the
record or within the range of judicial notice, it has felt able to say that
there could be not state of facts which could rationally support them. 
Royster Guano Co. v. Virginia, 253 U.S. 412; Heiner v. Donnan, 285 U.S. 312;
Louisville Gas & Electric Co. v. Coleman, 277 U.S. 32; Liggett Co. v. Lee, 288
U.S. 517.  But in no case has it rendered such a judgment where it has
declared that it is unable to say that consequences which would justify the
discrimination will not result.  Erb v. Morasch, 177 U.S. 584, 586; Middleton
v. Texas Power & Light Co., 249 U.S. 152, 158; Stebbins v. Riley, 268 U.S.
137, 143; Swiss Oil Corp. v. Shanks, 273 U.S. 407 413, 414; Fort Smith Light
& Traction Co. v. Paving District No. 16, 274 U.S. 387, 391, 392; Clarke v.
Deckebach, 274 U.S. 392; Silver v. Silver, 280 U.S. 117, 123; O'Gorman &
Young, Inc. v. Hartford Fire Ins. Co., 282 U.S. 251, 257, 258; Board of Tax
Commissioners v. Jackson, 283 U.S. 527, 537-541; Hardware Dealers Mut. Fire
Ins. Co. v. Glidden Co., 284 U.S. 151, 158; Boston & Maine R. R. v. Armburg,
285 U.S. 234, 240; Lawrence v. State Tax Comm'n, supra, 547, 548; Metropolitan
Casualty Insurance Co. v. Brownell, 292 U.S. 620; Fox v. Standard Oil Co.,
supra.  Unless, as we  profess not to do, Standard Oil Co. v. City of
Marysville, 279 U.S. 582, we are to sit as a super-legislature, or as triers
of the facts on which a legislature is to say what shall and what shall not
be taxed, we are not free to say that the exemption will not induce residents
to offer to lend their funds within the state and at lower interest rates than
they otherwise would, or that opportunities thus afforded will not be availed
of by borrowers requiring funds for carrying on the commerce and industry of
the state.
     Even if we are to assume, in the absence of any actual knowledge, that
money loaned in the state at favorable [442] rates would not benefit it if
used elsewhere, and further that in fact some money is so loaned and used,
there is no discernable reason why those circumstances should be deemed to
invalidate the tax and none is stated by the Court.  It is irrelevant that the
state, which has selected domestic loans for exemption in furtherance of a
state policy, has not excluded from the exemption every transaction which
conceivably might not advance its purpose.  Whether the legislative object is
completely achieved is of no concern to this Court, once it appears that the
exemption is made for a permissible end and bears some reasonable relation to
that end.  Purpose or motive of the selection of the objects of taxation and
exemption is material only so far as it is needful to ascertain whether the
discrimination is invidious.  If the choice is not condemned for that reason,
it has never been held that an exemption must fail because it may benefit some
who do not advance the legislative purpose.  A classification for a
permissible end is not to be condemned because it operates to prohibit
transactions in themselves harmless, or fails to reach others which are
harmful.  Powell v. Pennsylvania, 127 U.S. 678; Purity Extract Co. v. Lynch,
226 U.S. 192; Hebe Co. v. Shaw, 248 U.S. 297; Jacob Ruppert, Inc. v. Caffey,
251 U.S. 264; Miller v. Wilson, 236 U.S. 373; Hawley v. Walker, 232 U.S. 718.
     All taxes must of necessity be levied by general rules capable of
practical administration.  In drawing the line between the taxed and the
untaxed the equal protection clause does not command the impossible or the
impractical.  Unless the line which the state draws is so wide of the mark as
palpably to have no reasonable relation to the legitimate end, it is not for
the judicial power to reject it and say that another must be substituted. 
Citizens' Telephone Co. v. Fuller, supra, 329; Miller v. Wilson, 236 U.S. 373,
384; Clark v. Titusville, 184 U.S. 329, 331; Metropolis Theatre Co. v.
Chicago, 228 U.S. [443] 61, 69, 70; see also Salomon v. Tax Commission, 278
U.S. 484; McCray v. United States, 195 U.S. 27; Quong Wing v. Kirkendall,
supra; Bell's Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237.
     As the purpose of the exemption appears to be to encourage the lending
of money within Vermont by its residents, at low rates of interest, and as it
appears reasonably calculated to have that effect, and as we cannot say that
such loans will not be of benefit to the state by tending to establish the
interest rate at 5% or less, and by stimulating loans to borrowers for the
purpose of carrying on business and industry within the state, the conclusion
seems inescapable that the equal protection clause does not forbid it.
     2.  Feeble indeed is an attack on a statute as denying equal protection
which can gain any support from the almost forgotten privileges and immunities
clause of the Fourteenth Amendment.  The notion that that clause could have
application to any but the privileges and immunities peculiar to citizenship
of the United States, as distinguished from those of citizens of states, has
long since been rejected.  Slaughter-House Cases, 16 Wall. 36.  It created no
new privileges and immunities of United States citizenship, Bartemeyer v.
Iowa, 18 Wall. 129, 133, and, as they are derived exclusively from the
Constitution and laws enacted under it, the states were powerless to abridge
them before the adoption of the Fourteenth Amendment as well as after.  See
Crandall v. Nevada, 6 Wall. 35.
     Before the Amendment the privilege of passing from state to state for the
purpose of approaching the seat of the national government, of transacting
business with it, and of gaining access to its courts, its public offices and
its ports, was declared in Crandall v. Nevada, supra, 44, to be a right of
national citizenship which could be exercised independently of the will of the
state.  Upon this [444] ground was placed the decision in that case that a
state capitation tax on passengers transported out of the state by railroad
or stage coach infringed the Constitution.  No one could doubt that if the
decision had been made at any time after Railroad Co. v. Maryland, 21 Wall.
456, 472 (1874), and until the present moment, it would have been rested on
the commerce clause.  This Court has many times pointed out that movements of
persons across state boundaries are a part of interstate commerce, subject to
the regulation and entitled to the protection of the national government under
the commerce clause.  Caminetti v. United States, 242 U.S. 470; Hoke v. United
States, 227 U.S. 308; Mayor of Vidalia v. McNeely, 274 U.S. 676; Gloucester
Ferry Co. v. Pennsylvania, 114 U.S. 196; cf. Passenger Cases, 7 How. 283.  And
it has specifically pointed out that Crandall v. Nevada, supra, is overruled
so far as it referred the protection of such commerce to the privileges and
immunities clause rather than to the commerce clause.  Helson and Randolph v.
Kentucky, 279 U.S. 245 251.
     The privileges and immunities clause has consistently been construed as
protecting only interests, growing out of the relationship between the citizen
and the national government created by the Constitution and federal laws.  In
re Kemmler, 136 U.S. 436, 448; McPherson v. Blacker, 146 U.S. 1, 38; Giozza
v. Tiernan, 148 U.S. 657, 661; Duncan v. Missouri, 152 U.S. 377, 382.  Appeals
to this Court to extend the clause beyond these limitations have uniformly
been rejected, and even those basic privileges and immunities secured against
federal infringement by the first eight amendments have been held not to be
protected from state action by the privileges and immunities clause.  Walker
v. Sauvinet, 92 U.S. 90; Presser v. Illinois, 116 U.S. 252; O'Neil v. Vermont,
144 U.S. 323; Maxwell v. Dow, 176 U.S. 581; Twining v. New Jersey, 211 U.S.
78; cf. Hurtado v. California, 110 U.S. 516; West v. Louisiana, [445] 194 U.S.
258.  The protection and control of intercourse between the states, not
carried on in pursuance of the relationship between the citizen and the
national government, has been left to the interstate commerce clause, to the
due process and equal protection clauses of the Fourteenth Amendment, and to
Art. IV, sec. 2, guaranteeing to the citizens of each state the privileges and
immunities of citizens in the several states.  See Williams v. Fears, 179
U.S. 270.  In no case since the adoption of the Fourteenth Amendment has the
privileges and immunities clause been held to afford any protection to
movements of persons across state lines or other form of interstate
transaction.
     The reason for this reluctance to enlarge the scope of the clause has
been well understood since the decision of the Slaughter-House Cases, supra. 
If its restraint upon state action were extended more than is needful to
protect relationships between the citizen and the national government, and it
did more than duplicate the protection of liberty and property secured to
persons and citizens by the other provisions of the Constitution, it would
enlarge judicial control of state action and multiply restrictions upon it to
an extent difficult to define, but sufficient to cause serious apprehension
for the rightful independence of local government.  That was the issue fought
out in the Slaughter-House Cases, supra, with the decision against the
enlargement.  Since the adoption of the Fourteenth Amendment at least
forty-four cases2 have been [446] brought to this Court in which state
statutes have been assailed as infringements of the privileges and immunities
clause.  Until today none has held that state legislation infringed that
clause.
     If its sweep were now to be broadened to include protection of every
transaction across state lines, regardless of its connection with any
relationship between the citizen and the national government, a step would be
taken, the gravity of which might well give us concern.  But it is necessary
to go much further before the present tax can be condemned.  If protection of
the freedom of the citizen to pass from state to state were the object of our
solicitude, that privilege is adequately protected by the commerce clause,
even though the purpose of his going be to effect insurance or transact any
other kind of business which is in itself not commerce.  But protection of the
citizen's freedom of movement, whether by the privileges and immunities clause
or by the commerce clause, will afford appellant no relief from the present
tax.  The record does not show that he was ever outside the State of Vermont
and for aught that appears he acquired his extra-state investments, which are
in the form of negotiable [447] corporate securities, by gift or purchase in
Vermont.  Nor does it appear that the physical securities or payments of
income of which appellant has had the benefit have crossed state lines.  He
can be saved from the tax only by the extension of the immunity to his income
merely because the property from which it has been derived, or the corporation
paying it, is located in another state.
     Such is the contention now made:  that the privilege of acquiring, owning
and receiving income from investments without the state is a privilege of
federal citizenship.  And the suggestion is that the privilege is infringed
by taxing this income just as the commerce clause is infringed by state
taxation burdening the privilege of carrying on commerce across state lines. 
In any case the privileges and immunities clause is said to be infringed by
taxing this income at a different rate than income from investments made
within the state.
     The novel application thus given to the clause, and the arguments used
to support it, leave one in doubt whether it is though to preclude all
differences of taxation of the two classes of income, or only to forbid such
inequality as is in some sense arbitrary and unreasonable.  If the former, the
clause becomes an inexhaustible source of immunities, incalculable in their
benefit to taxpayers and in their harm to local government, by imposing on the
states the heavy burden of an exact equality of taxation wherever transactions
across state lines may be involved.  If the latter, it would seem to add
nothing to the guarantee of the equal protection clause, which extends to all
"persons," including citizens of the United States.  In that case discourse
upon the privileges and immunities clause would appear to be a gratuitous
labor of supererogation.
     If the privilege of making investments without the state is one protected
by the privileges and immunities clause [448] and a tax upon the income
derived from them is analogous to a tax upon the privilege of carrying on
interstate commerce, we must not only accept the view that the privilege is
infringed by the present tax, but it would follow that any taxation of the
income is forbidden.  The answer is, of course, that a state tax on net income
derived from interstate commerce has never been regarded as a burden on
commerce or as an infringement of the commerce clause.  See United States Glue
Co. v. Oak Creek, 247 U.S. 321; Shaffer v. Carter, 252 U.S. 37; cf. Peck & Co.
v. Lowe, 247 U.S. 165; Wagner v. Covington, 251 U.S. 95.  Far less could it
be thought that a tax on property, or income from it, is an interference with
commerce because the property had at some time been or might some time become
the subject of such commerce.  Cf. Heisler v. Thomas Colliery Co., supra.  In
applying the privileges and immunities clause, as now interpreted, no ground
is suggested, or well could be, for regarding a tax on income from investments
without the state as infringing the privilege of carrying on interstate
transactions, any more than a tax on net income derived from interstate
commerce or from property which had at some time moved in interstate commerce
infringes the commerce clause.
     The contention that a state tax indirectly affecting transactions carried
on across state lines, not forbidden by the commerce clause or by Art. IV,
sec. 2, can be condemned under the privileges and immunities clause, was
definitely rejected by this Court in Williams v. Fears, supra.  There a state
occupation tax upon those engaged in hiring laborers for employment outside
the state was held not to infringe the privileges and immunities clause or the
equal protection clause.
     So far as the objection is addressed to bare inequality of taxation
affecting interstate transactions, if valid, it must be accepted as compelling
equality of taxation by [449] the state of the citizen's residence and as well
by the state into which the transaction extends.  More than this, since the
exercise of the privilege involves both states, it would seem to be infringed
not only by an unequal tax imposed by either, but by any tax imposed at the
normal rate by both.
     Starting with the dubious assumption that the protection of every
movement of the citizen interstate, an acknowledged subject of the commerce
clause, is independently a subject of the privileges and immunities clause,
the protection afforded by the latter is expanded until it affords a refuge
to the citizen from taxation which has no necessary relation to his movements
interstate and is in fact not shown to impose any restraint upon them.  A tax
immunity created avowedly for the protection of the citizen's privilege of
movement from state to state is thus pressed far beyond the requirements of
the interest put forward to justify it, and to a point which has never been
thought needful or even desirable for the protection of the commerce of the
nation.  It is a transaction effected only by ignoring the decision of this
Court in Williams v. Fears, supra.
     If mere difference in taxation is made the test of infringement, the iron
rule of equality of taxation which the equal protection and due process
clauses have failed to impose, see Bell's Gap R. Co. v. Pennsylvania, supra,
237 is the first fruit of this expansion of the protection of the privileges
and immunities clause.  To gain the benefits of its shelter the citizen has
only to acquire, by a transaction wholly intrastate, an investment outside his
state.  I can find in the language and history of the privileges and
immunities clause no warrant for such a restriction upon local government and
policy.  Citizens of the United States are given no privilege not to pay
taxes.  It would seem that a subordination of state taxing power to the [450]
interests of the individual, of such debatable wisdom, could be justified only
by a pointed command of the Constitution of plain import.
     If we turn from the reasoning by which this application of the privileges
and immunities clause to state taxation is supported to the decision now
actually made, it seems that the clause is thought to prohibit only those
inequalities in taxation which are considered to be arbitrary and
unreasonable.  The exemption of dividends derived from corporate business
carried on within the state, and the taxation of similar dividends from
without the state, is held not to be an infringement of the clause.  Exemption
of income from investments in property within the state and taxation of like
income from without the state is thought to be valid.  But the privileges and
immunities clause, it is declared, forbids any difference in the taxation of
income from investment made within the state and income from investment made
without, a conclusion which can only be attributed to the belief that this
discrimination, as distinguished from the others, is arbitrary and
unreasonable.
     We are thus returned to the point of beginning, to a discussion of the
question whether the exemption in the present tax is so unreasonable, so
without support of a permissible state policy, as to infringe constitutional
limitations.  If the exemption does not merit condemnation as a denial of the
equal protection which the Fourteenth Amendment extends to every person,
nothing can be added to the vehemence or effectiveness of the denunciation by
invoking the command of the privileges and immunities clause.
     The judgment should be affirmed.

     Mr. Justice Brandeis and Mr. Justice Cardozo concur in this opinion.

1    The committee appointed in 1900 by the Governor of Vermont to investigate
     double taxation and to recommend measures for its relief found that the
     existing taxing system was driving capital from the state or into tax
     exempt savings banks, and suggested an exemption of loans secured by
     property returned for taxation in the state.  Double Taxation in Vermont;
     Report of Special Committee Appointed to Report a Measure for its Relief
     to the Legislature of 1900, pp. 4, 15.  In 1908 a similar committee
     recognized the same evils but did not favor the exemption of secured
     loans alone, because it would increase interest rates on unsecured loans
     and cause a dearth of commercial credits.  Vermont -- Commission on
     Taxation -- Report 1908, pp. 43 ff.

2    Slaughter-House Cases, 16 Wall. 36; Bradwell v. State, 16 Wall. 130;
     Bartemeyer v. Iowa, 18 Wall. 129; Minor v. Happersett, 21 Wall. 162;
     Walker v. Sauvinet, 92 U.S. 90; Kirtland v. Hotchkiss, 100 U.S. 491;
     Presser v. Illinois, 116 U.S. 252; Mahon v. Justice, 127 U.S. 700; In re
     Kemmler, 136 U.S. 436; Crowley v. Christensen, 137 U.S. 86; McElvaine v.
     Brush, 142 U.S. 155; McPherson v. Blacker, 146 U.S. 1; Giozza v. Tiernan,
     148 U.S. 657; Duncan v. Missouri, 152 U.S. 377; Miller v. Texas, 153 U.S.
     535; In re Lockwood, 154 U.S. 116; Iowa Central Ry. v. Iowa, 160 U.S.
     389; Plessy v. Ferguson, 163 U.S. 537; Orient Insurance Co. v. Daggs, 172
     U.S. 557; Cumming v. Board of Education, 175 U.S. 528; Maxwell v. Dow,
     176 U.S. 581; Williams v. Fears, 179 U.S. 270; Orr v. Gilman, 183 U.S.
     278; Cox v. Texas, 202 U.S. 446; Board of Education v. Illinois, 203 U.S.
     553; Ballard v. Hunter, 204 U.S. 241; Western Turf Assn. v. Greenberg,
     204 U.S. 359; Halter v. Nebraska, 205 U.S. 34; Wilmington Star Mining Co.
     v. Fulton, 205 U.S. 60, 73; Twining v. New Jersey, 211 U.S. 78; Western
     Union v. Commercial Milling Co., 218 U.S. 406; Missouri Pacific Ry. Co.
     v. Castle, 224 U.S. 541; Graham v. West Virginia, 224 U.S. 616; Selover,
     Bates & Co. V. Walsh, 226 U.S. 112; Rosenthal v. New York, 226 U.S. 260;
     Waugh v. Board of Trustees, 237 U.S. 589; Porter v. Wilson, 239 U.S.
     170; Crane v. Campbell, 245 U.S. 304; Armour & Co. v. Virginia, 246 U.S.
     1; Omaechevarria v. Idaho, 246 U.S. 343; Maxwell v. Bugbee, 250 U.S. 525;
     Ownbey v. Morgan, 256 U.S. 94; Prudential Ins. Co. v. Cheek, 259 U.S.
     530; Hamilton v. Regents, 293 U.S. 245.
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