Dissenting opinion of
Mr. Justice Stone.Petitioner is a corporation of the State of Massachusetts. Its very existence and the Conduct of its business in corporate form are privileges conferred by the state, which, under the Constitution, it may tax. Under the constitution of Massachusetts the present tax can be up*635held only if ah excise and it and its predecessors have been consistently sustained as excises. S. S. White Dental Mfg. Co. v. Commonwealth, 212 Mass. 35, 37; Portland Bank v. Apthorp, 12 Mass. 252; Commonwealth v. Provident Institution, 94 Mass. 312; Commonwealth v. Hamilton Mfg. Co., 94 Mass. 298, 306; Eaton Crane & Pike Co. v. Commonwealth, 237 Mass. 523, 527; Alpha Portland Cement Co. v. Commonwealth, 244 Mass. 547. This interpretation of the nature of the exaction has been repeatedly approved by this Court. Provident Institution v. Massachusetts, 6 Wall. 611; Hamilton Co. v. Massachusetts, 6 Wall. 632; cf. Baltic Mining Co. v. Massachusetts, 231 U. S. 68, 84; National Leather Co. v. Massachusetts, 277 U. S. 413; Alpha Portland Cement Co. v. Massachusetts, 268 U. S. 203, 216. It is imposed “with respect to the carrying on or doing business,” and is collectible only when the corporation has in fact been so engaged during the taxable year, see Fore River Shipbuilding Corp. v. Commonwealth, 248 Mass. 137, 140; Attorney General v. Boston & Albany R. R. Co., 233 Mass. 460. It is measured by the value of the corporate assets (with appropriate deductions for machinery and real estate otherwise taxed) and by net income earned within the state, which this Court has often said are fair measures of the exercise of the corporate franchise. The tax is not measured by gross income as in Northwestern Mutual Life Insurance Co. v. Wisconsin, 275 U. S. 136, where the validity of an excise measured by net income including that from tax exempt securities of the United States was recognized. The distinction between net income and gross as the measure of a tax is well established. Peck & Co. v. Lowe, 247 U. S. 165; compare Crew Levick Co. v. Pennsylvania, 245 U. S. 292; United States Glue Co. v. Oak Creek, 247 U. S. 321, 328. Being on net income, the tax does not vary in exact proportion to the gross income from the tax exempt securities included in the aggregate.
*636There is no constitutional principle and no decision of this Court, of which. I am aware, which would deny to the state the power so to tax the privileges which it has conferred upon petitioner, even though all its property were tax exempt securities of the United States and income derived from them. For seventy years this Court has consistently adhered to the principle that either the federal or state governments may' constitutionally impose an excise tax on corporations for the privilege of doing business in-corporate form, and measure the tax by the property or net income of the corporation, including the tax exempt securities of the other or income derived from them. Provident Institution v. Massachusetts, supra; Society for Savings v. Coite, 6 Wall. 594; Hamilton Co. v. Massachusetts, supra; Home Insurance Co. v. New York, 134 U. S. 594; Flint v. Stone Tracy Co., 220 U. S. 107, 162-5. In Flint v. Stone Tracy Co., a Federal tax on corporations “ with respect to. carrying on or doing business ” measured by net income, was held to be an excise, not a direct tax on property or income, and so was valid, although not apportioned under. Art. I, § 2, cl. 3, § 9, cl. 4 of the Constitution and notwithstanding the fact that net income from tax exempt municipal bonds was included in the measure of the tax. In no technical sense does this tax seem open to objection. Being an excise the tax is not one on property or income and may include either in its measurement although not directly taxable.
Upon like principle a state inheritance tax may be measured by including the value of United States bonds of the decedent. Plummer v. Coler, 178 U. S. 115; Blodgett v. Silberman, 277 U. S. 1, 12; compare Greiner v. Lewellyn, 258 U. S. 384. Similarly an excise on a corporation may be measured by its outstanding capital stock, International Shoe Co. v. Shartel, ante, p. 429; Hump Hair*637pin Co. v. Emmerson, 258 U. S. 290; or by its net income, Underwood Typewriter Co. v. Chamberlain, 254 U. S. 113, 120; United States Glue Co. v. Oak Creek, supra, even though a part of its capital is used in or some of its income is derived from interstate commerce.
It would seem that only considerations of public .policy of weight, which appear to be here wholly wanting, would justify overturning a principle so long established. It has survived a great war, financed by the sale of government obligations; and it has never even been suggested that in any practical way it. has impaired either the dignity or credit of the national government.
I suppose a certain advantage would be enjoyed by a corporation if the exercise of its-corporate franchise in the purchase and use of securities of one government could not be taxed by the other. Theoretically the advantage would inure to each government in the marketing of its securities, just as would be the case if such securities of the taxpayer could not be seized and sold for the payment of any taxes lawfully levied by the state or national government. But the advantage of the one would be gained only at the expense of the other, and it would seem that neither immunity could be claimed under any reasonably practical application of the rule that government instrumentalities may not be taxed. In a broad sense, the taxing power of neither state nor national government can be exercised without having some effect on the other and there are many points at which the exercise of the undoubted power of one affects the other, but “ the limitation upon the taxing power .of each, so far as it affects the other, must receive a practical 'construction which permits both to function with á minimum of interference each with the other;, and that limitation cannot be so varied or extended as serioffsly to impair either the taxiñg power of the gov-*638eminent imposing the tax . . . or the appropriate exercise of the functions of the government affected by it.” See Metcalf & Eddy v. Mitchell, 269 U. S. 514, 523.
Granted that a statute otherwise valid may be deemed improper when intended as a covert means of directly burdening ownership of securities of the other sovereignty, see Miller v. Milwaukee, 272 U. S. 713, I can discern no such sinster purpose in the present legislation. . It was, of course, the intention of the Massachusetts Legislature in the amendment of § 30, to deal specifically not alone with federal bonds but with the tax exempt securities of the Commonwealth and its municipalities by including them in the measure of the excise tax. The amendment did not aim at securities of the national government or discriminate against them. It was obviously designed to impose on corporations generally, a tax similar to the excise on national banks, measured by net income, recommended by the legislative committee as a means of avoiding a then existing- discrimination. The inclusion in the measure of the tax of income from all tax exempt securities tended only to effect this purpose, a similar computation of net income being contemplated for national banks.. But in neither case' is there anything to suggest that the legislature intendéd to impose a direct tax on income or do more than to impose an excise tax, measured by income, including that upon federal bonds, which this Court has declared it may do. Its purpose was to prevent the evasion by corporations of payment of the tax which the Commonwealth had fixed as the price of the privilege of doing business within it in corporate form, by any course of investment of their funds in tax exempt securities, state or national. As this seems to me to be a permissible purpose both on principle and by authority, I think the judgment below should be affirmed.
Mr. Justice Holmes and Mr. Justice Beandeis concur in this opinion.