the even broader issue of the division of powers between state and the Federal Government.

In 1816 Congress established the Second National Bank to help control the amount of unregulated currency issued by state banks. Many states questioned the constitutionality of the national bank, and Maryland set a precedent by requiring taxes on all banks not chartered by the state. In 1818 the State of Maryland approved legislation to impose taxes on the Second National Bank chartered by Congress.

James W. McCulloch, a Federal cashier at the Baltimore branch of the U.S. bank, refused to pay the taxes imposed by the state. Maryland filed a suit against McCulloch in an effort to collect the taxes. The Supreme Court, however, decided that the chartering of a bank was an implied power of the Constitution, under the elastic clause, which granted Congress the authority to make all laws which shall be necessary and proper for carrying into execution the work of the Federal Government.

This case presented a major issue that challenged the Constitution: Does the Federal Government hold sovereign power over states? The proceedings posed two questions: Does the Constitution give Congress power to create a bank? And could individual states ban or tax the bank? The court decided that the Federal Government had the right and power to set up a Federal bank and that states did not have the power to tax the Federal Government. Marshall ruled in favor of the Federal Government and concluded, the power to tax involves the power to destroy."

ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO, Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of Finance, respondents.

FACTS: The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the validity of Section I of Batas PambansaBlg. 135 depends upon a showing of its constitutional infirmity. The assailed provision further amends Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income. Petitioner as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes the above section as arbitrary amounting to class legislation, oppressive and capricious in character. For petitioner, therefore, there is a transgression of both the equal protection and due process clauses of the Constitution as well as of the rule requiring uniformity in taxation.

ISSUE: WON Batas Pambansa Big. 135 is a valid exercise of the State's power to tax.

RULING: YES.A bare allegation that Batas 135, which sets different income tax schedules for fixed income earners and business or professional income earners, is arbitrary does not suffice to invalidate said tax statute.The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void on its face, he has not made out a case. This is merely to adhere to the authoritative doctrine that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail.

Due process clause may be invoked where a tax statute is so arbitrary as to find no support in Constitution.It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property. That would be a clear abuse of power. It then becomes the duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. That properly calls for the application of the Holmes dictum. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds.

Taxation; Constitutional Law; The Constitution sets forth