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Weston v. City Council of Charleston, 27 U.S. 449, 2 Pet. 449, 1829 WL 3180, 7 L.Ed. 481

Facts

On February 20, 1823, the city council of Charleston passed an ordinance to raise funds through taxation, which included a tax on six and seven percent stock of the United States. The plaintiffs, owners of this stock, filed for a prohibition against the city council, claiming the tax was unconstitutional. The constitutional court of South Carolina ruled in favor of the city council, stating the ordinance did not violate the Constitution, prompting the plaintiffs to appeal to the Supreme Court.

In the court of common pleas for the Charleston district, the plaintiffs in error, in May 1823, filed a suggestion for a prohibition, as owners of United States stock, against the city council of Charleston, to restrain them from levying under the ordinances, on six and seven per cent. stock of the United States and the tax imposed under the ordinance; on the ground that the ordinance, so far as it imposes a tax on the stock of the United States is contrary to the constitution of the United States.

Issue

The main legal issue was whether a state or local government has the authority to impose a tax on the stock of the United States, and if such a tax is constitutional under the U.S. Constitution.

The subject in controversy is one of proper cognizance for this Court. It involves a most important constitutional question; the right of the states, or of state authorities, to tax the funded debt of the United States.

Rule

The court applied the principle that states cannot tax the credit of the United States, as such taxation would interfere with the federal government's ability to borrow and manage its finances.

A tax imposed by a law of any state of the United States, or under the authority of such a law, on stock issued for loans made to the United States, is unconstitutional.

Analysis

The Supreme Court analyzed the ordinance in light of the Constitution, emphasizing that the credit of the United States is a creation of the federal government and cannot be subjected to state taxation. The court reasoned that allowing states to tax federal stock would undermine the federal government's fiscal operations and violate the obligation of contracts established by the Constitution.

The power to create this credit is expressly given by the 8th section, 1st article, of the constitution of the United States: ‘congress shall have power to borrow money on the credit of the United States.’

Conclusion

The Supreme Court concluded that the ordinance imposing a tax on the six and seven percent stock of the United States was unconstitutional, affirming the prohibition against such taxation.

Held, that the question decided by the constitutional court, was the very question on which the revising power of this Court is to be exercised.

Who won?

The plaintiffs (owners of the United States stock) prevailed in the case because the Supreme Court ruled that the city ordinance was unconstitutional, thus protecting the federal credit from state taxation.

The prohibition having been granted, the city council applied to the constitutional court, the highest court of law in the state, to reverse the order, on the ground that the ordinance was not repugnant to the constitution of the United States.

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