MR. JUSTICE SUTHERLAND delivered the opinion of the Court.

The Vermont Income and Franchise Tax Act of 1931, Public Laws of Vermont, 1933, § 872 et seq. (the pertinent provisions of which are copied in the margin), imposes 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 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 §§ 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. (§ 880) — namely, $1,000 in the case of a single individual, and $2,000 in the case of a head of a 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 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.

The court below denied the contentions of appellant and sustained the validity of the act in every particular. 107 Vt. 28; 175 A. 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 §§ 887 and 888 a tax of 2%, measured by net income, is imposed upon every corporation for the privilege of exercising 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 done 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; Traveller's Insurance Co. v. Connecticut, 185 U.S. 364; Watson v. State Comptroller, 254 U.S. 122, 124-125; Lawrence v. State Tax Comm'n, 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 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 the 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.

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 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 circumstances 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 A. 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 a like discrimination against the products of a 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 neither 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 making the taxation of income from loans dependent merely upon the adventitious circumstance 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 them out and limit the exemption accordingly. To import 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 those made on Mondays — the arbitrary and capricious nature of the classification would scarcely be doubted, although a minute inspection of the field of 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 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, § 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. "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 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."

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 national 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. Among those privileges, however, undoubtedly is the right to pass freely from one State to another. Crandall v. Nevada, supra; Williams v. Fears, 179 U.S. 270, 274. 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, 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 in 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 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 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 whatever 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 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 all 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 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.

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.