Veazie Bank v. Fenno
"Veazie Bank v. Fenno" is a significant Supreme Court case from 1866 that addressed the constitutionality of a federal tax on state bank notes. In response to the financial needs of the Civil War, Congress increased the tax on these notes from 1 percent to 10 percent. The Veazie Bank of Maine resisted this tax, asserting that it was unconstitutional due to its nature as a direct tax imposed on a state entity. The Supreme Court ultimately ruled in a 7-2 decision that the tax was not a direct tax under the Constitution and concluded that the Veazie Bank, despite being chartered by Maine, did not qualify as a state "instrumentality." This ruling affirmed Congress's authority to impose such taxes, requiring the bank to comply with federal tax obligations. Chief Justice Salmon P. Chase authored the majority opinion, with Justices Samuel Nelson and David Davis dissenting. This case highlights the balance between state and federal powers, particularly in financial regulation during a tumultuous period in American history.
Veazie Bank v. Fenno
Date: December 13, 1869
Citation: 75 U.S. 533
Issue: Taxation
Significance: The Supreme Court upheld Congress’s right to tax bank notes issued by a state-chartered bank.
In an effort to build revenue to finance the Civil War, in 1866 Congress passed an act that raised the tax on state bank notes from 1 percent to 10 percent. The Veazie Bank of Maine declined to pay the higher tax, arguing that it was an unconstitutional use of Congress’s power to tax because it was a direct tax and levied on a state agency. The Supreme Court, by a 7-2 vote, followed Hylton v. United States (1796) and found that a tax on bank notes was not a direct tax in contravention of the Constitution and that the bank though chartered by Maine was not a state “instrumentality.” It upheld Congress’s power to levy such a tax, and Veazie Bank was required to pay. Chief Justice Salmon P. Chase wrote the opinion for the Court, and Justices Samuel Nelson and David Davis dissented.
