130 A. 357 | N.H. | 1925
In 1903 a fundamental change was made in the people's grant of the taxing power. In the generation just preceding that time, the idea that the constitutional provision for contribution of "his share" by each taxable party meant a share determined by a common and unvarying method had been unheld and amplified in great detail and with a wealth of argument. Edes v. Boardman,
In this situation, the convention of 1902 proposed and the people adopted a constitutional amendment providing that "The public charges of government or any part thereof may be raised by taxation upon polls, estates and other classes of property, including franchises and property when passing by will or inheritance." Const., Part II, Art. 6. *128
The significance of the grant of power to lay an inheritance tax has since been the subject of litigation and judicial decision. The cases upon that subject establish that there is a disproportion inherent in the nature of such a tax, as compared with an annual tax upon estates; and that since power to lay an inheritance tax was granted, it must be assumed that the constitutional rule of proportionality (theretofore applied with more strictness than in other jurisdictions) was relaxed, so far as necessary for the imposition of the new tax in an efficient way. Thompson v. Kidder,
Whether the provision for the taxation of "other classes of property" enlarges the legislative power has not been considered. The question is presented by this petition for the abatement of an income tax, laid under the provisions of the act of 1923. This statute provides for the taxation of dividends and interest; and resident individuals, partnerships and fiduciaries are taxable parties. Laws 1923, c. 65, s. 2. The fundamental question is whether authority has been given to lay a tax of this nature.
What was intended by the grant of power to tax "other classes of property"? Other provisions of the amendment show, by elimination, what it does not mean. It does not refer to any form of tax upon estates, that is to taxes upon ownership, possession or enjoyment of property. It had theretofore been decided that the term estates covers all these matters. Morrison v. Manchester,
As all property could be taxed as estate under the earlier constitutional provisions, it is clear that the term "other classes of property" refers to some element other than ownership, possession or enjoyment as the determining factor for taxability under the new grant of authority. Read in another way, the provision means that property may be taxed for reasons other than ownership. The test of taxability may be put upon other grounds. "Other classes of property" is here used as the equivalent for property otherwise classified. The incidence of the tax is to be determined by some fact *129 other than mere ownership. This is illustrated by the named class of inheritances. These are property, and taxable each year as estate. They are taxed annually because of ownership. They are made subject to another tax for another reason. The inheritance tax is imposed because of the fact that the estate has passed from ancestor to heir.
In the search for classifications of property to which the general provision in the amendment of 1903 could apply, the one that naturally and inevitably comes to mind is the receipt of income. The levy upon income was then a generally recognized method of taxation. Beyond any other that has been suggested, it is one to which the general description fitly applies. Unless the provision under consideration is to be wholly disregarded, the conclusion that it authorizes laying an income tax must be adopted.
It may be urged that as the amendment by implication limits the application of earlier and continuing constitutional provisions against discrimination, therefore nothing should be added to the amendment by implication; that these other provisions forbid the extension of the application of the amendment beyond its plain terms. It may be conceded that the argument is sound; but it does not control the present situation. The phrase "other classes of property" is not to be effaced from the amendment upon this ground. It is not a question of adding something by implication, but of giving some meaning to express terms. And since this provision cannot be given any effect, save by the limitation of other provisions, the intent to create that limitation must have existed and must be allowed to operate. It was understood, in 1903, that additional powers of taxation were being granted, and that existing constitutional limitations, necessarily in conflict with the new grant, were to be disregarded. Williams v. State,
The power to tax other classes of property, or property classified in some way other than as estate, was granted. No form of tax coming within this description, which would not impinge upon the rules theretofore laid down as to constitutional limitations upon the power to tax property, has been suggested. It is believed that none can be found. The implied exception from earlier provisions is necessary if this phrase in the amendment is to be given any effect.
In the advisory opinions given to the house of representatives, in 1915, the majority suggested that there might be a grant of power to lay an income tax in this provision. But the point was not pressed, and the theory that a certain limited taxation of incomes was *130
permissible under the provision for the taxation of estates was made the basis of the advice given.
It is urged by the petitioner that the tax results in double taxation. It is said that as under our decisions an estate tax cannot be laid against a corporation, and another against its stockholders (Smith v. Burley,
In the discussion of the questions of proportionality and equality in the decisions before 1903, it was not said that a departure from those principles could not be accomplished by constitutional amendment. The principles involved are binding upon the legislature because they are declared in the constitution. Constitutional government implies the assent of the people to a compact. It is "the execution of a written agreement, creating a limited agency for the purchase of common benefit." State v. Express Company,
"The questions whether an annual distribution of public expense in proportion to the property of each taxpayer is the most equitable method, — whether in that or some other way the public charges can be met so as to be least of a burden to the people, — are questions of economics not open in a judicial forum, but properly considered and determined in a convention of the people engaged in arranging the terms of the social compact and settling the fundamentals of government." Ib., 92, 93.
It is manifest that no income tax could be laid upon the increment of some property, while other property was taxed as estate, without creating a practical disproportion, as that term has heretofore been applied to the taxation of estates. If one party is taxed upon his income and also upon the corpus of his estate, he pays more than his neighbor who is taxed upon his estate only. If he is taxed upon his income only, his tax, in proportion to his estate, is less than his neighbor's. Whether this can or can not be explained, as matter of law, upon a theory that dividends are entities separate from the stock, the practical proposition that the taxes are out of proportion is unanswerable.
But the extent of double or other disproportional taxation created by the imposition of an income tax need not be passed upon. The question raised is settled by the decisions under the inheritance tax law. Whatever disproportion is necessarily created by the tax is permitted. Thompson v. Kidder,
An income tax being permissible under the amendment of 1903, and such disproportion as here appears being a necessary incident to any effective income tax, the general rules of proportionality do not apply, as between the income tax and a tax upon estates, so far as that question is here presented. In view of this conclusion, the discussion of the subject of double taxation, in the dissent from the advice given to the house of representatives, in 1923, becomes immaterial. The interpretation of "other classes of property" had not been urged and was not then considered. That discussion was in denial of the proposition that an income tax could be upheld under *132
the grant of power to tax estates. It in no way questions the soundness of the decisions as to the inheritance tax, or their applicability to a grant of power to lay an income tax.
It is also urged that the act of 1923 is unconstitutional because corporations are not included in the list of those taxed. In the imposition of a tax laid because of the happening of an event, there are always difficult questions involved in so describing the event that the law will fairly reach all of the selected class and yet will not subject some to being taxed oftener (and therefore more) than others. Practically all corporations not created for eleemosynary purposes are dividend paying. The income they receive is passed on to their stockholders in the form of dividends, and is then subject to the tax. If the income were also taxed to the corporation when received by it, there would be a manifestly unequal burden placed upon the owners of the corporation. It is true that there may be corporations so organized that the benefit to members or owners therein comes in other ways than by the receipt of dividends. As to these there is a failure to tax. But the number of such aggregations, and the amounts involved, must be small. They may be said to be almost negligible, contrasted to the class wherein the income received by the corporation is paid to the stockholders as dividends.
But, in any event, the legislature had to choose between the alternatives of double taxation on the one hand and escape from taxation on the other. In selecting the course which avoided double taxation, the legislature did not exceed its right to make a reasonable classification of those who should be taxed. The situation is a necessary incident to the imposition of an income tax; and authority to deal with it in a reasonable way goes with the power to lay such a tax.
Objection is also made because the statute provides for a tax upon residents and not upon nonresidents. The tax is laid upon the principle that a state can tax a person over whom it has jurisdiction, as to all his intangible personal property. Mann v. Carter,
As stated at the beginning of this opinion, the constitutional amendment of 1903 made a radical change in the grant of the taxing power. Other questions as to the present limits of this power may hereafter arise. The foregoing discussion is not designed to anticipate matters not presented by this appeal. The present decision goes no further than to determine that the objections urged against the statute under consideration are not well grounded; and that no constitutional inhibition exists which would prevent the levy of the tax against this plaintiff.
Petition dismissed.
All concurred.