112 Pa. 337 | Pa. | 1886
delivered the opinion of the court May 10th, 1886.
This bill was filed by the complainants in the court below against Edward Lerch, Reuben Fehnel, and Tilghman Wolfe, Commissioners of Northampton county, and Hiram Edelman,
The bill avers that the complainants are residents of Easton, and that Hiram Edelman is the assessor of the sixth ward, in which the plaintiffs reside. That he served a notice upon them requiring them to make a return of their personal property, viz., mortgages, notes, &e., for taxation, in accordance with the Act of June 30th, 1885. That upon the refusal of the plaintiffs to make such a return, the assessor would estimate the amount of their property, and return the same to the county commissioners, who would add fifty per centum thereto, and make the aggregate amount the basis of taxation of the personal property of the plaintiffs. That the Act of June 30th, 1885, is in conflict with sections 1 and 2 of Article IX. of the Constitution, and also with section 3 of Article III. The bill then prays for an injunction to restrain the assessor from requiring the plaintiffs to make a return, and from estimating their said property and returning such estimate to the commissioners, and restraining the commissioners from adding fifty per centum to any estimate made by the assessor.
The answer of the defendants admits the statement of facts contained in the bill, but denies that the Act of June 30th, 1885, is unconstitutional.
The case appears to have been set down for argument in the court below upon bill and answer. The court denied the injunction, and dismissed the bill. It was, therefore, a final decree.
The Act in question is entitled “ A further supplement to an Act entitled ‘ An Act to provide revenue by taxation,’ approved the seventh day of June one thousand eight hundred and seventy-nine.”
The first section of said Act provides “ That all mortgages, money owing by solvent debtors, whether by promissory note or penal or single bill, bond or judgment; also all articles of agreement and accounts.bearing interest, owned or possessed by any person or persons whatsoever (except notes or bills for work or labor done, and all obligations given to banks for money loaned and bank notes), and all public loan or stocks whatsoever (except those issued by this Commonwealth or the United States), and all moneys loaned or invested in any other state, and all other moneyed capital in the hands of individual citizens of the state, shall be and are hereby taxable for state purposes, at the rate of three mills on the dollar of the value thereof annually: Provided, That' the same shall, after the passage of this Act, be exempt from all taxation ex
The seventh section enacts that “ It shall ’ be the duty of every .taxable person to make the return prescribed in the preceding section (sixth) of this Act, within ten da]^ after being required to do so, with his or her affidavit thereto attached, made and subscribed before the proper assessor, that the return is true and correct to the best of his or her knowledge and belief. Any person who shall wilfully and corruptly make a false and fraudulent return shall be guilty of wilful and corrupt perjury.”
And by section ninth it is provided that “ Upon the refusal or failure of any taxable person to make a return, as required bj'- this Act, it shall be the duty of the assessor to make a return for such taxable person, estimating the amount from the best information at his command, to which estimated return the proper county commissioners or boards of revision shall add fifty per centum, and the aggregate amount so obtained shall be the basis for taxation: Provided, That if such taxable person, on or before the day fixed for appeals from assessments, shall present reasons under oath, satisfactory to the proper county commissioners or boards of revision, excusing the failure to make a! return, and shall then make such return as should have been made to the assessor, the proper county commissioners or boards of revision, shall substitute the taxable person’s return for that returned by the assessor, to have the like effect as if no failure had occurred.”
The twentieth section repeals or abolishes all taxes laid upon manufacturing corporations by the revenue laws of the Commonwealth, with a proviso that said repeal shall not apply to corporations engaged in the manufacture of malt, spiritous, or vinous liquors, or in the manufacture of. gas.
These are all the sections of the Act which I think it necessary to give at length or to epitomise. The remaining sections, if discussed at all, will only be referred to incidentally.
It was contended that the Act is in conflict with sections 1 and 2 of Article IX. of the constitution. Said sections are as follows:
Sec. 1. All taxes shall be uniform upon the same class of subjects, within the -territorial limits of the authority levying the tax, and shall be levied and collected under general laws; but the General Assembly may, by general laws, exempt from taxation publi<£ property used for public purposes, actual places of religious worship, places of burial not used or held for private or corporate profit, and institutions of purely public charity.
It was urge'd upon the argument that the Act of 1885 conflicts with these provisions because,
1. It exempts building and loan associations from taxation under its provisions.
2. It exempts all manufacturing corporations from taxation under the revenue laws of the Commonwealth, except companies engaged in the manufacture of gas and liquors.
3. It provides only for the taxation of mortgages and other personal property of individual citizens,- thereby exempting corporations of all kinds.
To which may be added the further objection, not made upon the argument, that the Act expressly excepts from its operation “ notes or bills for work or labor done.”
It is clear, from the language of the Act, that it does "exempt building and loan associations from taxation under its provisions; that it does repeal all taxes upon manufacturing corporations with the exceptions therein named; and that it does exempt from taxation “notes or bills for work and labor done.” We are also of opinion that mortgages and other moneyed securities held and owned by corporations are not, and were not intended to be taxed by the Act in question. It was contended upon the argument, however, that the phrase “ any person or persons whatsoever,” was broad enough to include artificial persons or corporations, ' and that the subsequent phrase, “all other moneyed capital in the hands of individual citizens,” strengthened this view, as showing an intention to narrow the generality of the expression when it came to taxing “ moneyed capital.” If we concede the force of this it does not affect the main question, viz., the constitutionality of the Act for the obvious reason that if it is a violation of the constitution not to extend the tax on mortgages to corporations, it is equally a violation of it to relieve them from the tax on moneyed capital.
We are not without authority as to the meaning of the word “ person ” when used in statutes. The tax law of March 25th, 1831, P. L., 206, provided “ that all personal estate and property within this Commonwealth, hereinafter" described, owned or possessed by any person whatever, that is to say, all ground rents, money at interest, bonds, judgments, mortgages, &c., shall be subject to a yearly tax,” &c. In the case of School Directors v. Carlisle Bank, 8 Watts, 289, this court held that the Act did not apply to corporations. It was said by Mr. Justice Kennedy, in delivering the opinion of the court: “Although it cannot be denied but that the bank, being a corporation, and therefore a per
This case was commented on in Saving Fund v. Yard, 9 Pa. St. Rep., 359, where it was said : “ Although there are some of the dicta in that case which, I apprehend, do not meet the entire approval of the court, yet the exact point ruled — that is, that the word person does not usually include incorporations when used in statutes or common parlance, although in its legal import it embraces them, is wise and of good authority.”
In Saving Fund v. Yard, the question was whether the personal property of corporations could be taxed under the Act of 1846. It was held, that it could for the reason that the language of the Act clearly showed such an intention. The said Act required that “ every person, every firm and partnership, and the president, secretary, cashier or treasurer of every company or corporate body ” to deliver a statement of “ all money due by solvent debtors to such person, partnership firm, company or corporate body, whether on mortgage, judgment,” &c.
The Act, of 1885 resembles the Act of 1846 in many respects, and it is at least probable that the draftsman of the later Act had the prior Act before him when he drew the bill, and it is not without significance that it omits all reference to corporations in the first section. The Act of 1885 does not in any part thereof provide by express terms, or by necessary implication, for the taxing of mortgages in the hands of corporations; nor is there any provision requiring any officer of any corpora
We have not time to extend this branch of the discussion, nor do I deem it necessary. It has been recently thoroughly examined by two of the learned and able judges of the Common Pleas of Philadelphia, Judges Mitchell and Thayer. See Legal Intelligencer of July 18, 1884, and of April 9, 1885. It is true Judge Mitchell’s opinion refers to the Act of 1881, but the language of the two Acts is substantially identical, and his reasoning applies equally well to the Act of 1885. They both hold, and conclusively show, that the language referred to in the two Acts does not extend the tax on mortgages, etc., to corporations.
I have devoted more space to this branch of the subject than was perhaps necessary, for the reason that the main argument of the defendants in error was that the first section of the Act of 1885 is broad enough in its terms to extend to corporations. Having at least endeavored to show that this point was not well taken, I will now proceed to the further discussion of the case.
Conceding then that the Act of 1885 does not extend the tax on moneys at interest, mortgages, etc., to corporations, does it follow that said Act conflicts with the section of the constitution which declares that “ all taxes shall be uniform upon the same class of subjects within the limits of the authority levying the same?” If it does, the Act must fall, no matter what inconvenience may result to the state. This portion of the constitution is too important and valuable to be overridden by the Legislature, or frittered away by judicial construction. It was intended to, and does, sweep away forever the power of the Legislature to impose unequal burdens upon the people under the form of taxation. The evils which led up to its incorporation into the organic law are well known. The burden of maintaining the state has been, in repeated instances, lifted from the shoulders of favored classes and thrown upon the remainder of the community. This was done by means of favoritism and class legislation. Article IX of the constitution was intended to cut up this system by the roots, and we shall have.no more of it if the legislative and judicial departments of the government perforin their full duty in giving effect to that instrument.
The taxing power of the state is great and searching. Within the limits of the constitution it is bounded only by the necessities of the state and the will of the people. This must be so or the state might be without the means to sustain itself ; to repel aggression from without or to suppress disorder
The power of the state is conceded to select its subjects of taxation. It may tax mortgages or it may omit to tax them. It may tax horses or it may omit to tax them. But' this tax, upon whatever laid, must be uniform. Thus it must be laid upon all taxpayers alike. It cannot tax A on his mortgages or his horses, and exempt B from a like tax. Nor do I see any distinction here between natural persons and artificial persons, commonly called corporations. Each must bear its due share of the public burdens. This is because the constitution declares that “ all taxes shall be uniform.” It is perhaps vain to expect that any system of taxation shall produce exact uniformity; it is however both reasonable and possible to levy the taxes in such a manner that substantial justice and uniformity shall be the result.
While the first section of the Act of 1885 does not extend the tax on money at interest, mortgages, etc., to corporations, we are not prepared to say that for such reason it violates the constitution. The Act is a supplement to the Act of 7th June, 1879, P. L., 112, by the fourth section of which a tax is imposed upon the capital stock of “ every company or association whatever, now or hereafter incorporated by or under any law of this Commonwealth, or now or hereafter incorporated' by any other state or territory of the United States, or foreign government, and doing business in this Commonwealth, or having capital employed in this Commonwealth in the name of any other person or corporation, association or associations, person or persons, or in any other manner, except foreign insurance companies, banks and savings institutions, shall be subject to and pay into the treasury of the Commonwealth, annually a tax to be computed as follows,” etc.:
The tax, briefly stated^ is three mills on the dollar of the appraised value of the capital stock of such corporations.as declare either no dividends or dividends of less than, six per cent.; and on. corporations which pay a dividend of six per cent, or over one half mill on the capital stock for each one per centum of such dividend ; and where profits are made'and not divided, but added to the sinking fund of such, corporation, the like tax is imposed.
The Act contains other provisions for taxing banks, insurance companies, limited partnerships, etc., which we need not specifically refer to.
We have, therefore, by virtue of the provisions of the Act of 1879, a tax on the capital stock of corporations, the minimum of which is three mills on the dollar, the exact amount
While a different mode of assessing taxation is adopted in dealing with the tax on corporations from that of taxing money in the hands of individuals, the result is substantially the same. Were the tax of 1885 on mortgages extended to corporations, the result would be double taxation, which, while not beyond the powers of the legislature, is not to be presumed in the absence uf a clear intent to impose it. The case may be illustrated thus: We will suppose the capital stock of a trust company or other corporation to consist of $1,000,000, and that this amount has been invested in mortgages or other interest bearing securities. The $1,000,000 of capital stock is taxed by the Act of 1879 at three mills, and more if dividends in excess of six per .cent, are earned. If now, the Act of 1885 imposes a tax of three mills upon the $1,000,000 of securities, it is obvious w.e have a ease of double taxation. The capital stock is nothing; a myth; a mere name, excepting in so far as it is represented by investments made with the money paid into the treasury of the corporation on account of such capital stock. Hence it is .that the courts have long since declared
We do not think the Act of 1885 is unconstitutional, because it does not impose the tax on mortgages upon corporations. The proviso in the first section exempting building associations from the operation of the act is harmless, because said section does not, and was not intended to apply to corporations of any description. If there really was an exemption of such corporations, it would be void under the constitution, for the legislature can only exempt from taxation such property as that instrument authorizes it to exempt.
The exception of “notes or bills for work or labor done” is clearly a violation of the IXth Article of the Constitution. This belongs to a species of class legislation that has become very common, more common than commendable, the object of which is to favor a particular class at the expense of the rest of the community. So far as such legislation affects the question of taxation the constitution has put an end to it. There can be no more of it. Nor should there be. The constitution protects all classes alike; the poor and the rich equally enjoy its benefits, and all must share the burden which it imposes. However popular such legislation may be, it cannot- be sustained under our present constitution.
Blit for this vice we are not required to declare the Act of 1885 void. The second section of Article IX. of the Constitution provides: “All laws exempting property from taxation, other than the property’ above enumerated, shall be void.” The exception of “ notes or bills for work or labor done ” is void, under this provision, and drops out of the Act of 1885. The exception falls, but the Act stands. It will be the duty of the assessors to assess and return such bills or notes the same as other moneyed securities in the hands of individuals.
Nor do we. think the case is affected by the 20th section of this Act, which repeals taxes heretofore laid on manufacturing corporations by the revenue laws. Even if this section amounted to an unlawful exemption from taxation, under the principle already referred to, the exemption would fall, and leave the balance of the Act in full force. The Act is complete without this section. As the constitutionality of the Act does not depend upon the validity of section 20, we do not propose to discuss the effect of the repeal of the tax on this class of corporations. It will be time enough to discuss it when a case arises, where the question is distinctly made.
We have some trouble with the ninth section of the Act. It provides, as before stated, that when no return is made under the sixth and seventh sections, the assessor shall make return for such taxable person, “ estimating the amount from
We have no doubt of the power of the legislature to impose penalties for the non-payment of taxes. Such penalties are usually in the form of an increased per centage for the delay, or interest at a fixed rate. When so imposed, it is a penalty for withholding from the state a sum of money, the amount of which has been precisely ascertained, and the day of payment fixed by law. It may also be conceded that the legislature may impose a penalty upon the taxpayer who improperly withholds information which the state is entitled to have as to the condition or extent of his estate.
This provision in the Act of 1885 is an exercise of the taxing power. The tax on mortgages imposed by the Act of 1879 had never produced the amount of revenue which it might and ought to have done, for the reason that it was constantly and persistently evaded. Occasionally an honest man would make an honest return and pay an honest tax. But it is well known that full and fair returns were the exception rather than the rule, while many persons possessed of considerable estates liable to this tax escaped it altogether. The machinery provided for its assessment and collection, as before observed, was inadequate. The Act of 1885 provided such inachinery; that it was effective we may fairly infer from the extent and character of the opposition to it. Taxation is never popular, and the Act of 1885 has received its full share of criticism; but. the plain object of this particular provision of the Act was to make people honest and keep them so. It was intended to compel each taxpayer to disclose to the assessor the full extent of his personal estate, and to avoid the unequal burdens which had been laid upon the shoulders of some person by the neglect of others to return the full amount of their property. No legal objection can be made to this. If the state has the right to tax moneys at interest in the hands of her citizens, and this cannot be denied, she has the right to know to what extent each citizen holds such property. In the exercise of this right she has the power, and it is a part of the taxing power, to require each taxpayer to make known to the assessor the extent of his or her property of this description. She has the further right to punish the failure to. make such return by the imposition of a penalty, or otherwise, as may best secure the object to be attained. These powers must be conceded. I have never heard them questioned, and without them the taxing power of the state would be no power at all. It would be a mere privilege. .
It is to be observed, in the first place, that the provisions of the ninth section apply only to taxpayers who neglect or refuse to make a proper return. They are by their own act in default, and are primé facie attempting to avoid their share of the public burdens. Now, what hardship does the Act im-, pose upon them for their default, or what penalty does it inflict' that is unjust? In the first place, the assessor is obliged to make a return for them, from the best information at his command. This means that the assessor shall inquire from such persons as he may reasonably suppose to have information, as to the extent of the defaulting taxpayer’s estate. Surely this is no hardship upon any one but the assessor. Estimating the amount of the property in this manner, the assessor returns such amount to the proper commissioners or returning boards, who are required to add fifty per’ centum thereto, and the amount so increased stands as the assessment. The state imposes this fifty per centum upon the taxpayer as a punishment for his default in not making the return required by law. If no appeal were allowed to the action of the commissioners in adding this penalty, it would be a serious question whether this Act could be sustained. It is one of the fundamental principles of English and American law that no man can be condemned in his person or property without a hearing. But the Act expressly provides that the taxpayer may, on or before the day fixed for appeals, go before the commissioners or board of revision and present his reasons,’under oath, for his failure to make return, which, if satisfactory to the commissioners or board of revision, they shall substitute the taxpayer’s return for that of the assessor, to have the like effect as if no failure had occurred.
It will thus be seen that the taxpayer holds the key of the position in his own hands, and can relieve himself from the consequences of his own contumacy by coming forward and being honest.
It cannot be truly said that this provision is not “ uniform,” whether we regard it as a penalty or an assessment. There is no lack of uniformity in the law; if any exists, it grows out of its application to particular cases. The assessments are increased at the uniform rate of fifty per centum. That it will produce exact uniformity in its results is not contended; but this flows not from any fault of the law, but from the neglect or refusal of the taxpayer to make the return. The
The right of the legislature to provide for such an increase of the assessment in the case of the refusal of a taxpayer to comply with the law in the matter of the return of his property to the assessor, has been recognized in several of our sister states. The latest case to which my attention has been called is that of Newell v. Town of Whittingham, Eastern Reporter, vol. 3, p. 649. This case was decided last January by the Supreme Court of Vermont. The statute of that state directs the “listers,” whose duties correspond with those of our assessors, in all cases where a taxpayer wilfully omits to return, under oath, a complete inventory of his property, to ascertain the amount of the taxpayer’s taxable property, appraise the same, and double the sum so obtained as a basis for the delinquent list. In this case the taxpayer made a .return underneath, “ to the best of his knowledge and belief.” The form of oath was held not to be a compliance with the law, and the assessment Vas sustained. This was an admittedly hard case, as it was conceded the taxpayer had made an honest return, aad refused to take a more positive form of oath by reason of a tender conscience, yet we do not find throughout the case, not even in the opinion of the dissenting judge, so much as a hint that any one doubted the validity of the Act.
By the statutes of the State of California, the penalty for wilfully concealing, removing, transferring or misrepresenting property by the owner or agent thereof, to evade taxation, is an assessment of it at ten times its value, or less. The validity of this Act was recognized in Biddle v. Oaks, 59 Cal., 94, where it was held, under another section of the Code, that property which had escaped assessment one year might be doubly assessed the next year.
In Butler v. Bailey, 2 Bay’s (S. C.) Rep., 244, it was held that when a man does not make a return of his taxable property agreeably to the general Tax Act, he is liable to be doubly taxed, and his estate is liable for the whole of the double tax.
In New Jersey, by the Act of 1862, it was provided that any person who shall refuse to be sworn or affirmed by the assessor touching his taxable property, shall be subject to a penalty of five hundred dollars, and shall be deprived of any right to appeal from any tax for which he may be assessed by such assessor. This Act was sustained in The State v. Apgar, 2 Vroom, 358.
In Massachusetts, by General Statutes, c. 11, § 46, it is enacted: “ When the assessors of a city or town have given
In Lincoln v. The City of Worcester, 8 Cushing, 63, it was said by Chief Justice Shaw that “perhaps it is true that it is not made the duty of the taxpayer to bring in a list, but it is made a condition precedent (Rev. St., c. 7, § 40), without which he cannot have the remedies provided for him by law. Section 23 provides, that if any person shall not have brought in such list, the assessors shall ascertain, as nearly as possible, the particulars of his personal and real estate, and make an estimate thereof at its just value, according to their best information and belief, and their estimate, by § 24, shall be conclusive. The effect of the statute, therefore, is, that a person may, at his option, decline giving in his list, and leave the assessors to ascertain the particulars; but-if he does so, he tacitly submits himself to their valuation and assessment, and of necessity waives, all those exceptions which he could take only on condition of having given in a list. He submits himself to what is called, in some of the earlier statutes (Anc. Chart., 70-73), the doom of the assessors.” See also Otis Company v. Inhabitants of Ware, 8 Gray, 509.
I am not aware of any decision of this court which is in conflict with those cited, and, in the face of so much respectable authority, we are not disposed to strike down the power of our state to impose this penalty, and thus cripple it in the assessment and collection of its revenue. Indeed, we have no right to do so, unless it is made to appear that the exercise of such power is a clear violation of the constitution. This has not been done.
Criticism has been made upon other portions of the Act relating more especially to the mode of its execution. While some of them seem harsh and of a character to be offensive to
Our entire revenue system needs to be re-moulded in accordance with the new constitution. It has been for many years a disjointed system, subjected to frequent and arbitrary changes, in many instances loosely and obscurely w-orded, making its construction and enforcements matters of no slight difficulty. To re-east it now in entire harmony with the or' ganic law is a serious matter. It will require the ripest ex perience and the highest wisdom. Now that the attention oí the legislature has been called to it,’we have n.o doubt the wisdom of that body will prove equal to the emergency.
The decree is affirmed, and the appeal dismissed at the cost of the appellants.