Beals v. State

139 Wis. 544 | Wis. | 1909

Lead Opinion

Winslow, C. J.

The plaintiff, having paid a large inheritance tax under protest, presented her claim to the legislature for a refund of the tax on the ground that the inheritance tax law was unconstitutional. The claim was rejected, and she now brings action in this court under the terms of sec. 3200, Stats. (1898), to recover the tax so paid, and the state demurs to her complaint. At the threshold of the case the state claims that the order of the county court of Milwaukee county fixing the amount of the tax and assessing the same against the estate is res adjudicata on the question and that the plaintiff should have appealed directly therefrom, and hence cannot jirosecute this independent action. We do not regard this point as well taken. The inheritance tax law is a law providing’ for the levying of a state tax. For very palpable reasons of convenience some of the matters concerning the administration of the law are committed to the county court in which the estate is being administered. Among these matters are the determining of the value of the estate and the assessment of the tax thereon. While these matters are closely connected with the settlement of the estate and the court acts upon them in a judicial manner, and thus it may properly be said, as held in Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, that the acts are so far judicial in their nature that their performance may properly be committed to the county court, still it seems plain that both of these acts are really but steps in the enforcement of a tax law of the state rather than judgments in judicial controversies. . Hence we conclude that the preliminary objection must be overruled.

Upon the merits of the case the only question is as to the constitutionality of the inheritance tax law (ch. 44, Laws of 1903, as amended by ch. 249, Laws of 1903). This question was presented to the court in very full and able arguments in the case of Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627. The case was given long and careful consideration in this court, and the present case might perhaps be now decided by simply referring to the Nunnemacher Case and applying the doctrine of stare decisis. However, owing to the fact that several new and interesting arguments are now presented, and in deference to the ability and earnestness of the counsel who have presented the present case for the plaintiff, we have deemed that it was our duty to thoroughly re-examine the question and review the former holding carefully in order to correct the ruling then made, if convinced that it was erroneous.

Inheritance taxation was held to be constitutional in the Nrmnemacher Case on. the ground that it is excise taxation levied on the transfer of property and not on the property itself, ’and hence not subject to the rule of uniformity as applied to taxation of property, but subject alone to the general rule of uniformity in legislation, namely, the rule that there must not be unjust discrimination or purely arbitrary classification, or, in other words, that the law must operate alike on all persons similarly situated.

The first argument made in the present case is one not made in the former case, and is in effect that, while the law (ch. 44, Laws of 1903) in sec. 2 provides for the taxation of the transfer of estates not exceeding in value $25,000, it provides in sec. 3 in effect that the transfer of the first $25,000 in an estate exceeding that sum shall not be taxed, and that only the transfer of the amount exceeding $25,000 shall be subject to taxation. If this be true, the law is manifestly bad under the ruling in the case of Black v. State, 113 Wis. 205, 89 N. W. 522, because it discriminates unjustly between persons in the same situation. The law provides in sec. 2 that when the property or interest transferred exceeds in value the exemption allowed by the law, but does not exceed in value $25,000, the tax imposed shall be according to a table of rates following, which are called the primary rates, and range from one to five per cent, according to the nearness of relationship of the beneficiary to the decedent. In sec. 3 it is provided that, “when the amount of the clear value of such property or interest exceeds $25,000, the rates upon such excess shall be” according to a certain table of rates progressive in their nature as the amount of the property increases. Then follows a table of exemptions applicable to all estates. It is very plain that, if secs. 2 and 3 be considered alone, there is a hiatus!. By the words used, transfers of property not exceeding $25,000 in value are taxed, while no specific provision appears for taxation of the transfer of the first $25,000 of an estate exceeding that sum. Exact construction of the language of the two sections can lead to no other result. There are, however, other provisions of the law which deserve and must receive consideration before a construction so manifestly unintended should be adopted. If, by the express language of other provisions, it conclusively appears that the intent of the legislature was to tax the first $25,000 (except exemptions) in all estates, great or small, and that the apparent hiatus in secs. 2 and 3 is the result merely of an inaccurate and careless use of language, then the court will be justified in construing the law as the legislature intended it, notwithstanding the lapse in secs. 2 and 3.

We think the language of other sections of the act actually forbids such a construction of secs. 2 and 3 as the plaintiff contends for. It is very significant that sec. 4, which provides for exemptions, is a general section fixing the exemptions to be allowed in all estates, both great and small, and is intended to cover the whole subject of exemptions. It is manifestly unreasonable to suppose that the legislature imagined, when they provided this careful and complete code of exemptions, that they had already made an enormous exemption of $25,000 in favor of all beneficiaries who were fortunate enough to receive more than that sum. But the first section of the act is quite conclusive. This section is the section which imposes the tax and enumerates the transfers which come within the law. Leaving out matters immaterial here, it provides that “a tax shall be and is hereby imposed upon any transfer of any property, real, personal or mixed, or any interest therein, ... in the following cases: [here follow five clauses defining the transfers which are to be subject to the tax.] The tax so imposed shall be upon the clear market value of such property at the rates hereinafter prescribed, and only upon the excess of the exemptions hereinafter granted.” No. warrant can here be found for leaving out any transfer from the operation of the tax, whether large or small, except only transfers of property thereinafter specifically exempted. The tax is imposed upon any transfer of' any property except the exemptions, and this must be held to be controlling. After so sweeping a declaration of the purpose of the law, it would take something more than a technical hiatus in the details of the act to take property out of' the provisions of that section which is evidently intended to-be the effectual and potent section. This construction makes-the law reasonable and constitutional and relieves the legislature of any charge of inconsistency or favoritism, and we have-no hesitation in adopting it.

Another new argument is made in the present case to this-effect: It is said that, because this court held in the Nunnemacher Case that the right to inherit or devise property was-a natural right which could not be entirely abrogated by the legislature, therefore it was a property right, and hence an-inheritance tax must logically be held to be a tax upon a property right and subject to the provision that it must be absolutely uniform. It is admitted that the universal current of authority holds that inheritance taxes are not taxes levied upon property, though their amount may be measured by the value of the property involved, hut are excise taxes levied upon the transfer of property, or, as it is sometimes said, upon the transaction. But it is said (as the fact is)that the decisions so holding have all been rendered by courts which hold that the right to receive property by inheritance or will is the creation of the legislature and may be totally abrogated at will, and as this court holds that these rights are-natural rights, not subject to abrogation by the legislature, the principle cannot logically apply.

The conclusion does not follow from the premises. Taxes-frequently are levied upon transactions or occupations which are matters' of inherent and natural right, as well as upon transactions and occupations which are made lawful or possible only by virtue of statutory law. In other words, the-legislature is not limited to the levying of excise taxes upon privileges, transactions, or occupations which, it alone authorizes and which it can entirely abolish. Mr. Cooley says (2 ■Cooley, Taxation, 3d ed. 1091) : “What is true of property is true of privileges and occupations also. The state may tax ■all, or it may select for taxation certain classes and leave others untaxed.” In the absence of special constitutional restrictions, the only limitations are that there should be no ■unjust discrimination or arbitrary classification, and, in case ■of the exercise of inherent rights, that taxation shall be reasonable, and shall not be so great as to result in a practical taking away of the right.

The two arguments which we have treated are practically the only arguments advanced in the present case which were not advanced and fully considered in the Nunnemacher Case. 'Our conclusion being that they cannot prevail, we have left •only a reconsideration of the points made in the Nunnemacher •Case and now reiterated in the present case. It seems that it would avail little to again traverse the ground gone over in that case. The justices who concurred in the decision of that case, after reconsiderihg the whole subject, are of the opinion that the decision was right upon all points involved. So far as the writer is concerned, he feels that it would be impossible for him to state the positions taken by the court any more •clearly than they are there stated. If that opinion be not a satisfactory and fairly logical meeting of the contentions made against the law, the writer feels that he would not be .able to write one now.

The points there decided and now reaffirmed may be briefly recapitulated thus:

(1) The right to receive property by inheritance or will in an inherent right, subject to reasonable regulation and taxation, but not to abrogation by the legislature.

(2) Sec. 1, art. VIII, of our constitution does not limit taxation to property only, and hence the legislature may levy excise taxes upon, privileges, occupations, business transfers, or transactions.

(3) As to the taxation of property, there can be no classification which interferes with substantial uniformity of rate based upon value.

(4) As to excise taxation, there may be proper classification and different rates applied to the different classes, and the term “uniformity of taxation” means simply taxation which acts alike on all persons similarly situated.

(5) The inheritance tax levied by ch. 44, Laws of 1903, is-not a tax upon property or property rights in any sense, but. purely an excise tax levied upon the “transfer” or transaction, and merely measured in amount by the amount of property transferred.

(6) Neither the classification between relatives in various degrees and strangers nor the progressive features of the law violate the true principles of classification, and as excise taxation is only subject to'the general principle that all persons-similarly circumstanced shall be treated alike, and not to the-rule of uniformity as applied to property taxation, the law does not violate the constitutional mandate in this respect.

It follows that the general demurrer to the complaint on the ground that it does not state a cause of action must be-sustained, and, it being apparent that no amendment can be made which will remedy the defect, judgment for the defendant dismissing the action, with costs, will be entered.

. By the Court. — It is so ordered

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Dissenting Opinion

Timlin, J.

(dissenting). After the enactment of the statutes here considered (chs. 44 and 249, Laws of 1903) and at the general November election of 1908, the constitution of' Wisconsin was amended by adding the following:

“Taxes may also be imposed on incomes, privileges and occupations, which taxes may be graduated and progressive, and1 reasonable exemptions may be provided.”

In view of this amendment the decision of the instant case perhaps loses something in importance, and I shall not in this ■dissent discuss the matter at length. Prior to said amendment the constitutional mandate was:

“The rule of taxation shall he uniform, and taxes shall he levied upon such property as the legislature shall direct.” ■Const, art. VIII, sec. 1.

My view of duty forbids silent acquiescence in the unfortunate judicial history of this section of the constitution. But I shall merely state conclusions. In the interpretation of this provision of the constitution I exclude as irrelevant'or remote ■all discussion of the antiquity, equity, or comparative desirability of a progressive inheritance tax, grant that under this section reasonable classification of the objects of taxation based upon substantial differences is ex necessitate permissible, grant that the rule of taxation need be uniform only within the proper class, and grant that classification of transfers by gift, will, or the laws of descent according to the de■gree of relationship of the donee, devisee, or heir to' the decedent is permissible classification. I believe in the views ■expressed in the following quotation:

“Nor can I find any definition of property which does not include the power of disposition and sale as well as the right •of private use and enjoyment. Thus Blackstone says (1 ■Comm. 138) : ‘The third absolute right of every Englishman, is that of property, which consists in the free use, enjoyment •and disposal of all his acquisitions, without any control or ■diminution, save only by the laws of the land.’ Chancellor Kent says (2 Comm. 320) : ‘The exclusive right of using and .transferring property follows as a natural consequence from the perception and admission of the right itself.’ And again (p. 326) : ‘The power of alienation of properly is a necessary incident to the right, and was dictated by mutual convenience .and mutual wants.’ By another author property is defined as an ‘exclusive right to things, containing not only a right -to use those things, but a right to dispose of them, either by exchanging them for other things or giving them away to any other person without consideration, or even throwing them away.’ Bouv. Law Diet. tit. Property. These definitions are in accordance with the general sense of mankind. Indeed, if any one can define property eliminated of its attributes, incapable of sale, and placed without the protection of law, it were well that the attempt should be made.” Wynehamer v. People, 13 N. Y. 378, 396.

However it may be elsewhere, under any scheme of government like that of the United States, whose organic law' de■clares that private property shall not be taken for public use without just compensation, or like that of the state of Wisconsin, whose organic law declares that the property of no person shall be taken for public use without just compensation, I would reject as extravagant and fantastical the notion put forth in Eyre v. Jacob, 14 Grat. 422, and Pullen v. Comm’rs, 66 N. C. 361, and some other cases, that the state has power to create an universal escheat by taking away from the owner of property the right of disposal thereof by gift, will, or other testamentary transfer, and repealing all statutes •of descent in force at the time of the adoption of the constitution. To take away, either by absolute interdict or indirectly, the power of disposal of a thing is to take property. Stratton Claimants v. Morris Claimants, 89 Tenn. 497, 15 S. W. 87, 12 L. R. A. 70; Block v. Schwartz, 27 Utah, 387, 76 Pac. 22, 65 L. R. A. 308. To take away the right to acquire property by barter, purchase, gift, or inheritance is to •deprive one of liberty within the meaning of that word as used in Magna Charta and in the constitution of Wisconsin. The right of the heir to have the property of his ancestor was one of the “liberties” secured by the great charter. Par. 2-6, 18, 26, 27, 37, 52, 56, 63. An heir was not then understood to mean one entitled to take by statute of descent, but the term meant a child or relative by blood. The term is used by Littleton and his predecessors in this sense: "Solus Deus ■hceredem facere potest, non homo." Coke upon Littleton, lib. 1, c. 1, of Fee Simple (sec. 1, 7. b). The “law of the land” as it' exists in Wisconsin secures this right of disposal on the part of the owner and this “liberty” to acquire by inheritance,, or by gift or purchase, against any power of the legislature except reasonable police regulation, or a taking with full compensation, and except the power of taxation for legitimate-public purposes. Amendm. V, XIV, Const, of UPS.; Const, of Wis. art. I, secs. 1, 13.

I therefore agree with Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, that the power of the legislature to impose a succession or inheritance tax cannot be rested upon any right or power to forbid the making of wills or gifts causa mortis or to repeal the law of descent of property. But I think every state has the power to impose taxes for proper-public purposes upon all taxable property or rights created, protected, and upheld by its laws in every case not forbidden by the state or tire federal constitution. This includes a succession or inheritance tax.

In the' interpretation of a constitution the state must be-considered perpetual, and, because all men must die, a succession or inheritance tax is when the same rate is applied to-all within the same lawful class upon an uniform rule. The-“tax” imposed by the statute in question is not an indirect tax which one may incur or not incur at his option and which can be shifted, but is inevitable and without incidence, and is a percentage upon the value of the property. It is therefore not analogous to a stamp duty or an excise tax, but is a. direct tax. Its essential nature cannot be altered by the legislature or the courts arbitrarily giving it a name. I am convinced that, while the legislature of Wisconsin had power to-impose a succession or inheritance tax, such tax came within the command of the constitution that “the rule of taxation shall be uniform.” A progressive tax is the very antithesis-of a tax by uniform rule. Classification of' property according to amount or value for the purpose of taxation is contrary to this command of the constitution. This provision expressly forbids a progressive rate of taxation within a legitimate class, and does not permit evasion of its command by the simple expedient of unconstitutional classification according to amount or value. The cases of Magoun v. Ill. T. & S. Bank, 170 U. S. 283, 18 Sup. Ct. 594; Knowlton v. Moore, 178 U. S. 41, 20 Sup. Ct. 747; and Kochersperger v. Drake, 167 Ill. 122, 47 N. E. 321, cited in Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, in support of the progressive features of this taxation, relate to essentially different constitutional provisions, and with reference to the constitutional provision heretofore quoted they do not, in my judgment, meet the question presented. I think the act in question in its progressive features which are based solely upon the amount or value of the property transferred, is unconstitutional.