Lead Opinion
OPINION OP THE COURT, BY
(Frear, J., dissenting.)
These cases came before a Circuit Judge of the First Circuit Court and pro forma decrees were entered sustaining the demurrer interposed. By agreement the cases were heard by us in vacation, on the 5th and 6th instant.
The' Legislature of 1896, passed on the 12th of June of that year Act 65 entitled “An Act to Provide Revenue for the Gov-
Tbe actions are bills in equity, claiming that tbe Act in question is unconstitutional and void and pray that tbe Act may be-so declared and that tbe defendant as Tax Assessor for tbe First Taxation District may be enjoined from assessing and collecting-the tax by tbe said Act imposed. Tbe demurrers aver tbe constitutionality of tbe Act.
In Campbell’s case, tbe ten points made were that tbe Act is unconstitutional and void because—
(a) Tbe said income tax law requires tbe plaintiff to pay taxes on income, either in tbe form of money or in investments representing tbe same, upon which tbe plaintiff is taxed under tbe provisions of Act 51.
(b) Tbe said income tax law exempts from income tax all persons having an income of less than $2,000 and also corporations, companies or associations organized and conducted solely for charitable, religious, educational or scientific purposes, including fraternal beneficiary societies, orders or associations operating upon tbe lodge system and providing for tbe payment of life, sick, accident or other benefits to tbe members of such societies, orders or associations, and dependents of such members: the stocks, shares, funds, real and personal property, or securities held by any fiduciary or trustee for charitable, religious, educational or scientific purposes.
(c) Tbe said income tax law allows an exemption of two thousand dollars upon incomes under four thousand dollars, whereas no such exemption is allowed upon incomes over four thousand dollars.
(d) Tbe said income tax law exempts from an income tax all profits realized from sales of real estate purchased more than two years previous to tbe close of tbe year for which income is estimated.
(e) Tbe said income tax law makes no deduction for any
(f) Tbe said income tax law taxes the salaries of the President and of the Justices of the Supreme Court as officers of -the Republic.
\{g) The said income tax law necessarily requires double 'and duplicate taxation of property.
(h) The said income tax law unreasonably and unlawfully exempts ]Dersons and property from taxation.
(i) The said income tax law does not require each member of society to contribute his proportion or share of taxes.
(j) The said income tax law requires no returns or taxes of mercantile firms and imposes no taxes on partnership property, income or gains other than by requiring returns from and taxing individual members of such firms in' respect of their several interests in the firm property and income derived therefrom, whereby much partnership property and income are necessarily untaxed, resulting in an unlawful discrimination against the property and income of incorporated mercantile associations, as well as of other corporations and of individuals.
(k) The said income tax law is otherwise unconstitutional and void.
In the Honolulu Iron Works Company’s case fourteen reasons that the Act is unconstitutional and void are alleged, as follows:
(l) That the. exemption of incomes under two thousand dollars from taxation is unconstitutional, being in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(2) The provision allowing an exemption of two thousand dollars upon incomes under four thousand dollars, whereas no such exemption is allowed to incomes over four thousand dollars is unconstitutional and void, being.in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(B) The provision allowing an exemption of two- thousand
(4) The provision making it lawful for any assessor who shall be of the opinion that a i*eturn is false or fraudulent or coxxtains any under-statemexxt to summoxx axxy persoxx, vice-president, nxanagex’, residexxt maxxager or ag’exxt of, or any persoxx having the possession, cxxstodv or care of books of account containing entries relating to the business of such person or corporatioix, wherever residing or found, to appear before him and produce such books at a time and place named in the sxxmmoixs, and to give testimony or answer interrogations under oath respecting any objects liable to tax or the returns thereof, and in case of any return of a false or fraudulent list, the imposition of two hundred per cent, penalty in addition to the tax imposed, is unconstitutional and void, being in conflict with Article S axxd (ox’) Article 6 of the Constitution of the Republic of Hawaii.
(5) The provision that when any person or corporation having a taxable income refuses or neglects to render any return! or list of ixxcome requix’ed by law, or renders an understated, false or fraudulent return or list, that the assessor shall make according to the best infox’ixxatioxx which he caxx obtain, axxd oxx his own view axxd information, such return accox’ding to the fonn prescribed of the income liable to tax possessed by such person or corporation, and that the said assessor shall assess the incoxxxe; and in case of any x-etum of a false or fraudulent list or valuation that he shall add 200 per cent, to such tax, axxd in case of a refusal or neglect to make a list or return, or to verify the same, he shall add 100 per cent, to such tax, is unconstitutioxxal axxd void, being in conflict with Article 6 and (or) Axiicle 8 of the Constitution of the Republic of Hawaii.
(6) The provision maldng it lawful for the assessor of the division in which any corporation is assessable, whenever he
(7) The entire law imposing a tax on incomes is unconstitutional and void for the reason that in connection with Section 17 of Act 51 of the Session Laws of 1896, passed prior to the income tax law, which section provides that: “In estimating the aggregate value of each such enterprise for profits there shall be taken into consideration the net profits made by the same, and also the gross receipts and actual running expenses,” etc., the said income tax law results in duplicate taxation, and is in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(8) The entire income tax law is unconstitutional and void for the reason that, taken in connection with Sections 14 and 16 of Act 51, Session Laws of 1896, passed prior to said income tax law, said income tax law results in duplicate taxation of all income received between the 1st day of July and the 1st day of January of each year, and remaining as money on hand on the 1st day of January, thus conflicting with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(9) The entire income tax law is unconstitutional and void for the reason that, taken in connection with Sections 14, 15
(10) The said income tax law is unconstitutional and void in that it exempts from its operation corporations, companies and associations organized and conducted solely for charitable, religious, educational and scientific purposes, including fraternal beneficiary societies, orders or associations operating upon the lodge system, and providing for the payment of life, sick, accident or other benefits to the members of such societies, orders and associations, and dependents of such members; and insurance companies taxed on a percentage of the premiums under the authority of any other act; and the stock, shares, funds, real and personal property or securities held by any fiduciary or trustee for charitable, religious, educational and scientific purposes, and is therefore in conflict with Article 11, Section 2, and (or) Article 1, Section 2, of the Constitution of the Republic of Hawaii.
(11) The said income tax law is unconstitutional and void in that it exempts from its operation all copartnerships consisting of two or more persons carrying on business together, and is therefore in conflict with Article 1, Section 2, and (or) Article 11, Section 2, of the Constitution of the Republic of Hawaii.
(12) The provisions of the income tax law imposing a tax of one per cent, on the incomes of every servant or officer of the Republic is unconstitutional and void so far as it relates to the salaries of the President and Justices of the Supreme Court, being in conflict with Article 25 of the Constitution of the Republic of Hawaii, and of Article 83 of the Constitution of the Republic of Hawaii.
(13) The entire income tax law is unconstitutional and void for the reason that such portions of it as are unconstitutional and void for any or all of the reasons above stated render
(14) The entire income tax law is unconstitutional and void for the reason that the exclusion and non-enforcement of such portions of it as are unconstitutional and void results in the entire tax being borne by only a portion of the community, and is therefore in conflict with Article 11, Section 2, and (or) Article 1, Section 2, of the Constitution of the Republic of Hawaii.
We will consider first the questions raised upon the first section of the Act. The section reads as follows:
“From and after the first day of July, A. D. 1897, there shall be levied, assessed, collected and paid annually upon the gains, profits and income derived by every person residing in the Republic, and by every person residing without the Republic, from all property owned, and every business, trade, profession, employment or vocation carried on in the Republic, and by every servant or officer of the Republic, wherever residing, a tax of one per cent, on the amount so derived; provided, that where the gains, profits or income of any such person who resides within the Republic, or of any servant or officer of the Republic wherever residing, shall not have exceeded the sum of four thousand dollars for the preceding twelve months, only so much of such gains, profits or income as exceeds the sum of two thousand dollars, shall be liable to such tax, and the tax herein provided for shall be assessed by the assessors and collectors for the time being for the several tax divisions of the Republic, and collected and paid upon the gains, profits and income for the year ending the 30th day of June next preceding the time for levying, assessing, collecting and paying the said tax.”
The plaintiffs claim that this section is violative of Article Eleven of the Constitution which reads:
Section 1. No subsidy, duty or tax of any description shall be established or levied without the consent of the Legislature; nor shall any money be drawn from the Public Treasury with
Section 2. Each member of society has the right to be protected in the enjoyment of his life, liberty and property, according to law; and therefore, he shall be obliged to contribute his proportion or share to the expense of this protection; and to give his personal services, or an equivalent when necessary, as may be provided by law.
The Act in question is claimed to be repugnant to other articles of the Constitution, especially Article 1, Section 2, which reads:
The Government is conducted for the common good, and not for the profit, honor or private interest of any one man, family or class of men.
Article 8. No person shall be compelled in any criminal case to be a witness against himself; nor be deprived of life, liberty or property, without due process of law.
Article 10. Every person has the right to be secure from all unreasonable searches and seizures of his person, his house, his papers and effects; and no warrant shall issue, except on probable cause, supported by oath or affirmation and describing the place to be searched and the persons or things to be seized.
It is urged by plaintiffs’ counsel that Article 11 of the Constitution which declares that each member of society “shall be obliged to contribute his proportion or share to the expense of this protection,” etc., means that each person may be obliged to pay only his proportion or share of such tax, that is, that the tax to be paid by each shall be in proportion to the income from property owned by him. To express it in another way, each person can only be taxed on his income rateably with the incomes of others. The tax of one must bear the same ratio to his income as the tax of others bears to their incomes.
The attorney for the defendant urges that there is no limitation to the power of taxation since we have no provision in the Constitution that taxes shall be “equal and uniform” as in
In the light of this reasoning to tax A one per cent, of his entire annual income, if it exceeds the sum of four thousand dollars, and to tax B on only two thousand dollars of his income if the whole does not exceed four thousand dollars, and to impose no tax at all upon 0 if his income be less than two thousand dollars would be obliging A to pay more than his “proportion or share” of the tax, and such taxation would not be “equal and uniform.” To this it is replied that the legislature has the power to exempt from taxation such subjects as it deems proper. But by all the authorities the exemptions must be supported by public considerations and tend to promote the general welfare. Of this character is the exemption from taxation long existing in this country to every taxpayer property to the value of three hundred dollars, the obvious purpose being not to tax at all those who are so poor as to possess property of only that value or less. But the statute in question does not exempt from taxation all incomes to the amount of two thousand dollars, but im
It may be argued that if that part of the statute which provides for these exemptions is inoperative and void because of its repugnancy to Article 11 of the Constitution, the rest of the section imposing the tax upon every one, might stand. But we do not know that the legislature would have passed that part of the section imposing the tax upon all persons were it not for the exemptions made. To mutilate the section by holding that the first part which imposes a tax upon all incomes of persons is constitutional, all exemptions being cut off, would be in effect the making of a new statute which we have no authority to do. The entire section expresses the intention of the legislature and its solidarity must either be preserved or the whole fails. The same reasoning will apply to Section 2 which imposes a tax of one per cent, upon the net income of corporations. It was the evident intention of the legislature to establish a general scheme of taxation and place a tax upon incomes of every description
The demurrers are overruled.
OPINION OF
I agree with the opinion of the Chief Justice in so far as it declares the law unconstitutional as being in violation of Article 11 of the Constitution, for the reason that there is an unjust discrimination in the imposition of the tax on incomes over $4,000 without the allowance of the exemption given to those having a less income. The exemption of $2,000 of income from taxation ought to be allowed to all, in order that each member of society may bear his proportion or share of the burdens of taxation. The legislature may classify the objects of taxation, but when classified, there must be no discrimination. I am of opinion that the division of the income under Sec. 1 of the Income Tax Act of 1896 into $2,000, $2,000--$4,000, and $4,000 and over, is not classification of-objects of taxation. I also agree that the whole Act falls, and the demurrer should be overruled.
Dissenting Opinion
DISSENTING OPINION OF
I respectfully dissent and in stating my reasons I shall refer only to the three main points involved in the case, all of which
In Pacific Express Co. v. Seibert, 142 U. S. 339, a special tax was laid upon express companies which did not own their own means of transportation and not upon other express companies, and the contention was that the rule of uniformity and equality was destroyed by arbitrary discrimination, but the court held that there was an essential difference between companies that owned their own means of transportation and those that did not, inasmuch as the former possessed property which was subject to other taxes and the latter would escape taxation unless taxed specially, and hence the classification was justified.
Referring to a State constitutional provision requiring uniformity and equality of taxation and the 14th Amendment to the Federal Constitution, the court said:
“This court has repeatedly laid down the doctrine that diversity of taxation, both with respect to the amount imposed and the various species of property selected either for bearing its burdens or for being exempt from them, is not inconsistent with a perfect uniformity and equality of taxation in the proper sense of those terms; and that a system which imposes the same tax upon every species of property, irrespective of its nature or condition or class, will be destructive of the principle of uniformity and equality in taxation and of a just adaptation of property to its burdens.” See also West. Un. Tel. Co. v. Indiana, 165 U. S. 304, 309.
In Com. v. Del. Div. Canal Co., 123 Pa. 594, corporate obligations were taken out of the general designation of sub
“Absolute equality is of course unattainable; a mere approximative equality is all that can reasonably be expected. A mere diversity in the methods of assessment and collection, however, if these methods are provided by general laws, violates no rule of right, if when these methods are applied the results are practically uniform. If there is a substantial uniformity, however different the procedure, there is a compliance with the constitutional provisions; even when there may be some disparity of results, if uniformity is the purpose of the legislature, there is a substantial compliance. Nor is classification necessarily based upon any essential differences in the nature or, indeed, the condition of the various subjects; it may be based as well upon the want of adaptability to the same methods of taxation, or upon the impracticability of applying to the various sub jects the same methods, so as to produce just and reasonably uniform results, or it may be based upon well-grounded considerations of public policy.
“Hence it is that some classes of corporations are taxed upon net earnings, or income; others upon capital stock, the value thereof to be ascertained by their annual dividends, or in a certain event upon the actual value of the shares; others upon their gross receipts; insurance companies upon the gross amount of their premiums; coal and mining companies at a specific sum for every ton of coal mined, etc.
“Real estate, for taxation, has been classified as seated and unseated, and for municipal purposes may, perhaps, admit of further classification. Collateral inheritances are distinguished*127 from those that are direct, the former being subject to taxation, the latter not. Foreign insurance companies have been distinguished from domestic companies, and taxed independently and differently. So, trades, professions, callings, and even single men have been taxed by classification, and it has been said that professional men may be classified as physicians, lawyers, clergymen, etc.; tradesmen as merchants, mechanics, etc.; and other persons as bankers, manufacturers, etc., and a uniform tax assessed upon each class. Not only have taxes been laid in all these various forms, rated on values, on dividends or profits, on premiums, on net earnings, and on gross receipts, but also by specific sums on specific articles. The x*oad bed, station houses, rolling stock and equipxnexxts of a railroad company; the canal bed, and berm banks, the locks, lock houses, etc., of a canal company; the banking house or place of business of a baxxking company, etc., are withdrawn from the ordinary processes of general taxation axxd ax*e reached in a tax upon capital stock, which has always beexx regax’ded as a tax upoxx the propex*ty and assets. These several classifications and depax’tures from uniformity in xnethods, were intended simply to bx’ing about a just uniformity in results.”
See also Durach’s Appeal, 62 Pa. 491, 494, ixx which the court said: “In the legitimate exercise of the power of taxation, persons and things always have been axxd may constitutionally be classified. No one has ever denied this proposition. To hold otherwise, would logically require that all the subjects of taxation, as well persons as things, should be assessed, and an equal rate laid ad valorem. Practically no more unequal system could be contrived. * * * If the taxation is upon all of a class, either of persons or things, it matters not whether those included in it be one or many, or whether they reside in anv particular locality or are scattex’ed all over the state.”
In Kittaning Coal Co. v. Com., 79 Pa. 100, 105, the court said: “Without the power to classify men as well as things, this undesirable inequality cannot be avoided, for if visible or tangible things only can be classified for taxation, then those
In Singer Mfg. Co. v. Wright, 33 Fed. R. 121, 127, the court upheld a special tax on sewing machine companies, saying: “A mere arbitrary arrangement of the same business precisely into separate classes, and discriminating taxes as to the classes, might not be upheld. But where there is reasonable difference and distinction, the legislature is unrestricted in the matter of classification.”
In Leicht v. City of Burlington, 73 Ia. 29, lots within the city limits containing more than 10 acres, and used for agricultural and horticultural purposes were exempted from municipal taxes. The court found a reasonable ground for the classification and said:
“This act was not made to apply to specific property, nor to specific persons. It was made to apply to a certain class of property, and to the owners of such property, whoever they might be. It is true that privileges and immunities cannot be granted to a class of citizens. But those who happen to be owners of a certain class of property do not themselves become a class in any proper sense. They do not sustain a relation to each other, but a mere property relation. They are affected by the statute in consequence merely of the circumstances in which they happen to be. * * * If the law operates upon every jjerson within the relations and circumstances provided for, it is sufficient. * -* «
“It is urged by the plaintiffs, to be sure, that the distinction which the legislature has attempted to make between lots containing more than 10 acres or less, is purely arbitrary, and that for this reason the act cannot be said to have a uniform operation, as it might if the larger lots as provided could be said to constitute a class, as distinguished from the smaller lots. As to*129 this we think it may be said that the design of the legislature evidently was to exempt property which is used essentially for agricultural purposes. Where the limits of a city are extended so as to take in what is used essentially as a farm, there is much reason for exempting it from city taxes. But where the property is substantially residence property, as distinguished from agricultural, and valuable only as such whether improved or not, there is less reason, when it becomes city property, that it should be exempt from city taxes. The legislature seems to have thought that large lots brought within the city, and used for agricultural purposes do constitute a class, as distinguished from small lots, though agricultural products be grown upon them to some extent; and we think that it cannot be denied that the thought is correct. Proceeding manifestly upon this thought, it fixed the limit between what might be considered as belonging to one class and what to the other. This was necessary as a practical guide to the assessor.”
These principles have béen repeatedly applied under our various constitutions. To notice only some of our more general statutes, — one imposes different import duties upon different commodities, another different occupation or license taxes upon different businesses, another different stamp duties upon different documents, and even our general internal tax law is full of classifications. It imposes different specific taxes on dogs, drays and carriages, and not on most other kinds of personal property, and without regard to their different values, and although these classes of property are owned by some persons and not by others; it imposes poll, school and road taxes upon males between certain ages and not upon females or other males, or certain clergymen, firemen and soldiers; in its definition of personal property for purposes of taxation ad valorem it enumerates certain classes and omits other classes of personal property; it imposes a special income tax upon insurance companies; it wholly exempts certain classes of property devoted to educational, religious and charitable purposes, and property to the extent of $300 by whomsoever owned whether it be the whole or a part of the property of
First, as to the exemption of $2,000. The objection to this is that it is too large. It is conceded that some exemption may be allowed on the same principle that exemptions of $300 are allowed under our genera] property tax act. Exemptions of incomes up to a certain amount have been allowed everywhere else so far as I know. The legislature alone can fix the amount. The court can interfere only when it is obvious that the amount is so large as to result in arbitrary discrimination. Certainly no one can say that the amount was fixed at $2,000 by the representatives of the many for the purpose of taking unfair advantage of the few. There is no indication of such an intention either on the face of the act or in extraneous facts. The presumption is that the legislature did its duty. There would naturally be a difference of opinion as to the proper amount. In cases of this kind where a limit must be placed somewhere great weight must be given to the opinion of the legislative body and the discretion of that body cannot be controlled by the courts except in a clear case of abuse. See Leicht v. Burlington, supra, and The King v. Tong Lee, 4 Haw. 335, 343. In Massachusetts the exemption of incomes is, or was recently, $2,000, the same as in our statute. Pub. Sts. p. 96. In the Federal statute recently before the United States Supreme Court, (Pollock v. Farmer's Loan & Trust Co., 157 U. S. 429; 158 U. S. 601) and from which our statute was largely copied, the exemption was $4,000. It is noteworthy that though counsel in that case urged that the exemption was too large the court did not allude to the point. Several Justices referred to the point in individual opinions. Mr. Justice Field thought the exemption of $4,000 unconstitutional; 157 U. S. 596. Mr. Justice Harlan said (158 U. S. 675):
*131 “In this connection, and as a ground for annulling the provisions taxing incomes, counsel for the appellant refers to the exemption of incomes that do not exceed $4,000. It is said that such an exemption is too large in amount. That may be conceded. But the court cannot for that reason alone declare the exemption to be invalid. Every one, I take it, will concede that Congress, in taxing incomes, may rightfully allow an exemption in some amount. That was done in the income tax laws of 1861 and in subsequent laws, and was never questioned. Such exemptions rest upon grounds of public policy, of which Congress must judge; and that determination cannot be interfered with by the- judicial branch of the government, unless the exemption is of such a character and is so unreasonably large as to authorize the court to say that Congress, under the pretence merely of legislating for the general good, has put upon a few persons burdens that, by every principle of justice and under every sound view of taxation, ought to have been placed upon all or upon the great mass of the people. If the exemption had been placed at $1,500 or even $2,000, few, I think, would have contended that Congress, in so doing, had exceeded its powers. In view of the increased cost of living at this day, as compared with other times, the difference between either of those amounts and $4,000 is not so great as to justify the courts in striking down all of the income tax provisions. The basis upon which such exemptions rest is that the general welfare requires that in taxing incomes, such exemption should be made as will fairly cover the annual expenses of the average family, and thus prevent the members of such families becoming a charge upon the public. The statute allows corporations, when making returns of their net profits or income, to deduct actual operating and business expenses. Hpon like grounds, as I suppose, Congress exempted incomes under $4,000.”
Mr.-Justice Brown said (16. 693):
“Irrespective, however, of the Constitution, a tax which is wanting in uniformity among members of the same class is, or may be, invalid. But this does not deprive the legislature of*132 the power to make exemptions, provided such exemptions rest upon some principle, and are not purely arbitrary, or created solely for the purpose of favoring some person or body of persons. Thus in every civilized country there is an exemption of small incomes, which it would be manifest cruelty to tax, and the power to make such exemptions once granted, the amount is within the discretion of the legislature, and so long as that power is not wantonly abused, the courts are bound to respect it. In this law there is an exemption of $4,000, which indicates a purpose on the part of Congress that the burden of this tax should fall on the wealthy, or at least upon the well-to-do. If men who have an income or property beyond their pressing needs are not the ones to pay taxes, it is difficult to say who are; in other words, enlightened taxation is imposed upon property and not upon persons. Poll taxes, formerly a considerable source of revenue, are now practically obsolete. The exemption of $4,000 is designed, undoubtedly, to cover the actual living expenses of the large majority of families, and the fact that it is not applied to corporations is explained by the fact that corporations have no corresponding expenses. The expenses of earning their profits are, of course, deducted in the same manner as the corresponding expenses of a private individual are deductible from the earnings of his business. The moment the profits of a corporation are paid over to the stockholders, the exemption of $4,000 attaches to them in the hands of each stockholder.”
In Minot v. Winthrop, 162 Mass. 113, a question arose as to the constitutionality of an act imposing a tax on collateral legacies and successions, with an exemption of estates up to $10,000. The Constitution required the tax to be “reasonable.” The court said: “The exemption in the statute under consideration is certainly large as an exemption of estates, but it is peculiarly within the discretion of the legislature to determine what exemptions should be made in apportioning the burdens of taxation among those who can best bear them, and we are not satisfied that this exemption is so clearly unreasonable as 'to require us to declare the statute void.” No doubt exemptions of inheritances
Secondly, the discrimination between personal incomes over $4,000 and those not exceeding $4,000. The argument against this assumes that the exemption up to $2,000 would be valid if it were applicable to all incomes. The effect of the provision imposing a tax upon all personal incomes with a proviso that those not exceeding $4,000 shall be exempt to the amount of $2,000, is to divide all personal incomes into three classes, — (1) incomes not exceeding $2,000, which are wholly exempt, (2) incomes from $2,000 to $4,000, which are partially exempt, namely, to the extent of $2,000, and (3) incomes over $4,000 which have no exemption at all. The question of the validity of these discriminations or classifications depends upon whether they are arbitrary or founded on real distinctions, — not indeed whether the limits are arbitrary but whether any classification at all of this nature may be justified on principle. For, if it may, it is obvious from the above reasoning upon the first point that the limits of these classes as fixed in this instance cannot be pronounced unreasonable by the court.
There can be little question, I think, that a graduated or progressive income tax in the usual form would be constitutional, as, for instance, if all incomes were exempt to the extent of $2,000, and all were taxed a certain rate upon their amount over $2,000 and up to $4,000, and all were taxed a higher rate upon their amount over $4,000. But what difference in principle is there between a progressive tax in the usual form and one in the form now under consideration? For this is merely one form of progressive tax. Both forms rest upon the power of classification, and if there is a basis for one method of classification there is a basis for the other. The argument made against a total or partial exemption of incomes up to a certain amount with no exemption at all for incomes above that amount is that it would enable the many in poor or moderate circumstances to cast all the burdens on the few wealthy. But this argument so far as it
Two reasons are sometimes given as grounds for a classification of incomes in this way. One is this: There should be equality in taxation, but by this is meant not equality in amount but equality of sacrifice. Now, one’s income is spent for neces
Thirdly, the discrimination between persons and corporations. Here also there are grounds upon which the discrimination can be justified so as to amount to real classification. Two grounds are referred to by counsel. One is that corporations, unlike individuals, have no personal or family expenses; the other is somewhat similar, namely, that in estimating their incomes for the purposes of the tax a corporation is allowed to deduct the cost of all labor employed in earning its income, while an individual
So far as the three points discussed are concerned, I cannot find that the legislature has proceeded arbitrarily or without real grounds for classification or with any other purpose than to equalize the burdens of taxation. The tax is uniform upon all those within each class. With the various provisions of the statute so far as questions of policy are concerned, the court has nothing to^do. The strong presumption is that the legislature acted within its constitutional power and that presumption has not been overcome. I have treated the subject at such length because of its importance.