Ray KILLEN, as President, Logan County Board of Education, etc., et al. v. LOGAN COUNTY COMMISSION, etc., et al.
No. CC931.
Supreme Court of Appeals of West Virginia.
July 2, 1982.
295 S.E.2d 689
Dissenting Opinion July 15, 1982. Concurring Opinion Sept. 3, 1982.
Miller, C. J., filed a concurring opinion.
Neely, J., filed a dissenting opinion.
G. Thomas Battle and David B. Shapiro, Charleston, Edward I. Eiland, Logan, Er
Jacquline A. Kinnaman, Charleston, for amicus curiae W.Va. Educ. Ass‘n.
Alice Green, Charleston, for amicus curiae W.Va., for Fair and Equitable Assessment of Taxes.
Jane Moran, Williamson, for amicus curiae Tug Valley Recovery Center.
MCGRAW, Justice:
This case comes to us upon a certified question from the Circuit Court of Logan County. The Logan County Board of Education and its president filed an action there seeking review of a decision by the Logan County Board of Equalization and Review which approved assessment values set by the Logan County assessor. The question certified to this Court is whether
The issue in this case is clear.
I.
It is axiomatic under the American republican form of government that “the representatives of the people must impose the taxes the people are to pay.” 1 T. Cooley, The Law of Taxation § 21 at 84 (4th ed. 1924). This fundamental principle of government comes from England and precedes the American Revolution. It was recognized that imposition of taxes was a legislative power, and the sovereign could not levy taxes except as authorized by the representatives of the realm. Id. “No taxation without representation” subsequently became a rallying cry in the American colonies’ fight for independence from the British crown, as evidenced by the list of grievances set out in the Declaration of Independence. That historic document condemned the British monarchy “[f]or imposing Taxes on us without our Consent.”
The framers of the United States Constitution recognized the fundamental requirement of representative taxation in the organic law of this country when they gave sole authority “to lay and collect taxes” to Congress.
In 1932, the people amended article 10, section 1 by ratifying what was popularly called the “Tax Limitation Amendment.” That amendment established four classes of property and fixed maximum rates at which each class of property could be taxed. These rates ranged from $.50 to $2 per hundred dollars of valuation depending on the property‘s classification.2 The amendment also authorized the Legislature to prescribe rates which could exceed the specific maximums. The people tempered this grant of authority by imposing several conditions on enactment of such “excess” levies. First, additional rates could be imposed for no more than three years at a time. Second, 60 percent of the voters had to approve the levy. Third, the added levy rate could be no more than 50 percent of the maximum rate.3
Valuation of property, establishment of the levy rate, determination and payment of taxes and distribution of revenue is a complex process which depends upon private persons and a variety of elected public officials, the duties for all of whom are prescribed by the Legislature, for successful completion. These officials include county assessors, see, e.g.,
The taxation process consists of two important elements: valuation and levying.
Valuation is the act of placing a value on each piece of property. This phase of the process is sometimes referred to as assessment.
Levying is the establishment and application of a rate of taxation upon the valuation of property, the result being the determination of the amount of the tax owed. For example, with the sales tax, the valuation is the amount of purchase. The levy rate is 5 cents per dollar. Thus, the tax on a five-dollar purchase (valuation) is 25 cents (5 cents X $5). In property taxa
The valuation-levying process begins with the assessment of property. The state constitution provides that each county may elect not more than two assessors.
The first step in the valuation process is a democratic exercise in which each taxpayer swears what he deems to be the “true and actual value” of his property.
To ensure citizen participation, it is the duty of each county commission to provide the necessary personnel to see that every taxpayer is called upon by the county assessor or deputies.9 If the county commission fails to provide the assessor with sufficient staff to complete this initial valuation, see generally
The state constitution and the state code clearly contemplate that the assessor and his deputies shall possess the necessary qualifications to appraise and assess property. The use of the term “assessor” implies that such officials possess special knowledge and capacity to appraise property and to assign a market value to it. Without such expertise, accurate valuation of property cannot occur.
The Legislature has given county assessors from July 1 to January 30 of the next ensuing year to complete the assessment of each item of property. Valuations given by the property owner for the guidance of the assessor may be considered by the assessor as evidence “to settle and determine” the actual value of each item of property.” Id. The assessor must complete his assessment and deliver the county property books containing assessment values to the county commission, sitting as the Board of Equalization and Review, by February 1.
The next step is for the assessor to total the assessed property valuations per class of property and certify them to all levying bodies in the county.
Actual collection of taxes begins when the levying bodies transmit the levy rates to the assessor. The rates are then applied to the property valuations by the assessor and the amount of tax owed then is determined.
Much of the revenue produced from property taxes is used to finance public schools. Therefore, statutory provisions relating to public school financing have overlapped into property taxation and have led directly to this case. In 1958, the Legislature adopted article 9A of chapter 18 of the West Virginia Code relating to public school financing. Section 11 of article 9A provides for computation of a county‘s local share of school funding and contains provisions relating to the appraisal and assessment of property. The statute requires the state tax commissioner to appraise all nonutility real and personal property in each county based on its “true and actual value.”
After an appraisal has been completed for a class of property in a county, the state tax commissioner must furnish the appraisal to the county assessor and county commissioners for use in the determination of assessed values. Id.; see also Tug Valley Recovery Center, Inc. v. Mingo County Commission, supra. Once the assessor has determined the assessed values, he must forward them to the tax commissioner for comparison with the commissioner‘s appraisal figures. The specific issue in this case is triggered under this statutory arrangement because
II.
With this constitutional and statutory background established, we now consider the events which led to this case. In Feb
The Board of Equalization and Review approved the assessor‘s valuations over Killen‘s objections and the school board president sought judicial review in circuit court pursuant to
At trial, the parties agreed to certain facts surrounding property assessments in Logan County. First, they agreed that assessed valuations per class fell within the 50-100 percent range allowed by
On cross-motions for summary judgment, the lower court ruled that
Does Chapter 18, Article 9(A), Section 11 of the Code of West Virginia, insofar as it provides that the total assessed valuation in each of the four (4) classes of property shall not be less than fifty percent (50%) nor more than one hundred percent (100%) of the Tax Commissioner‘s appraised valuations of each of said classes of property, violate Article X, Section 1 of the Constitution of the State of West Virginia, and therefore, is unenforceable and invalid?
III.
To resolve the issue presented in this case, it is necessary to define “value” as that term is used in
We have consulted numerous dictionaries with regard to the meaning of “value.” The result is unanimous. From the time of Dr. Samuel Johnson and his first English language dictionary, value has meant the property‘s “worth” in terms of what sale of the property would bring on an open market. S. Johnson, Dictionary of the English Language (1st ed. 1755); S. Johnson, Dictionary of the English Language 992 (9th ed. 1805); J. Barclay, Complete and Universal English Dictionary 946 (1815); N. Webster, American Dictionary of the English Language 989 (15th ed. 1838); 12 The Oxford English Dictionary 29-30 (1933); W. Neilson, T. Knott, P. Carhart, Webster‘s New International Dictionary of the English Language 2814-15 (2d ed. 1941); D. Guralnik, Webster‘s New World Dictionary 1568 (2d college ed. 1980); E. Ehrlich, S. Flexner, G. Carruth, J. Hawkins, Oxford American Dictionary 767 (1980).
This definition of “value” is reflected in early statutes adopted in Virginia and later in West Virginia. In 1819, the Virginia Legislature enacted a statute directing assessors to value land at its “market price.”
Case law, both in West Virginia and in other jurisdictions, reflects the common perception that value means worth. In Chesapeake and Ohio Railway Co. v. Miller, 19 W.Va. 408 (1882), the state auditor had assessed the railroad‘s property statewide and levied taxes on it.17 The railroad company claimed that a state statute exempted its property from taxation until the company earned a 10 percent annual rate of return on capital. The Court ruled that
Thus, as early as 1882, 100 years ago, this Court determined that the state constitution requires all property to be taxed at its worth. When property is assessed at less than its market value, only a portion of that value is being taxed. In effect, the remaining portion is exempted from taxation. Thus, exemption of partial value (fractional assessment) is in reality partial exemption of property from taxation. As the Court declared 100 years ago,
it was the intent of the framers of the Constitution to declare in most explicit terms that all property in the state should bear its equal share of the burden of Government, and there should be no property excepted from taxation, unless it was specifically excepted in the Constitution itself.
Id. at 435 (emphasis in original).
In another early West Virginia case, this Court defined taxable value as “fair cash valuation.” State v. Low, 46 W.Va. 451, 458, 33 S.E. 271, 274 (1899). Our decisions involving requests for reduction of assessments to a percentage of market value all imply that value equals the property‘s worth. See, e.g., In re United States Steel Corp., 165 W.Va. 373, 268 S.E.2d 128 (1980) (reduction of assessment from 100 percent of value to prevailing percentage granted).
Outside West Virginia, several jurisdictions have defined “value,” as used in constitutional taxation provisions, to mean market value. For example, in Arkansas Public Service Commission v. Pulaski County Board of Equalization, 266 Ark. 64, 582 S.W.2d 942 (1979), the Arkansas public service commission had ruled that the Arkansas constitution permitted different treatment of varying types of property. The county board of equalization sought statewide assessment based on the property‘s market value. The Arkansas Supreme Court interpreted the use of the word “value” in a constitutional provision strikingly similar in content to West Virginia‘s as meaning market value.18 Id. at 73, 582 S.W.2d at 945. See also State ex rel. Park Investment Co. v. Board of Tax Appeals, 175 Ohio St. 410, 412, 195 N.E.2d 908, 910, cert. denied, 379 U.S. 818, 85 S.Ct. 35, 13 L.Ed.2d 29 (1964) (“In essence, the value of property is the amount of money for which it may be exchanged, i.e., the sales price.“); Parker City v. Spindletop Oil and Gas Co., 612 S.W.2d 944 (Tex.Civ.App.1981).
The success of the general property tax depends upon the quality of the assessments. If assessments are very unequal the foundation of the entire tax structure is unsound. Inequality of assessments means that those underassessed pay less than their fair share of public expenses and those overassessed pay their full share and, in addition, they have to make up for what the underassessed fail to pay. The greater the inequalities of assessment the greater the inequalities of the taxes and the more grevious the burdens upon those who find it most difficult to meet their obligations. R. Blakey, Report on Taxation in West Virginia 107 (1930).
In 1921, the Tennessee Supreme Court emphasized this very point when it enforced the state constitution‘s requirement of equal and uniform taxation, “However difficult it may be to arrive at [full value assessment], it is imperatively commanded by the constitution and law. [Equal and uniform taxation] unavoidably and from necessity flows from [full value assessment], and to adopt a cash valuation is the only basis upon which it is practicable to make taxes equal and uniform.” Carroll v. Alsup, 107 Tenn. 257, 283, 64 S.W. 193, 199 (1921).
Moreover, comments made at the time of the adoption of article 10, section 1 at the constitutional convention support a “market value” definition of value. In explaining the taxation process, the chairman of the taxation and finance committee stated, “For it must be remembered sir, that it is the value of any particular thing or object that is taxed, not the thing or object itself.” 3 Debates, West Virginia Constitutional Convention, 1861-63 at 55 (remarks of Mr. Paxton). Thus, in explaining “value,” another delegate stated, “I understand all property shall be taxed in proportion to its value. That is, if one horse is worth $5, tax it on $5, and if another is worth $125, tax it on $125.” Id. at 71 (remarks of Mr. Sinsell).
Thus, dictionary definitions, the use of the word “value” in prior Virginia and West Virginia statutes, case law, and comments made at the West Virginia Constitutional Convention of 1861-63 lead to the conclusion that the term “value,” as used in
IV.
Having defined “value,” we now reach the fundamental issue in this proceeding. Is the language of
The taxpayers, intervenors below, have devoted a substantial part of their brief to the proposition that legislative enactments are to be presumed valid. We agree. See, e.g., State ex rel. Haden v. Calco Awning and Window Corp., 153 W.Va. 524, 528, 170 S.E.2d 362, 365 (1969). However, this Court has another duty which we firmly expressed 100 years ago in Chesapeake and Ohio Railway v. Miller, 19 W.Va. 408, 437 (1882).
Much respect as we have for the Legislature, a co-ordinate branch of the government, we must pay greater respect to the sovereign will of the people expressed in the Constitution, which they have adopted for their own government. And where the court sees that the Legislature has plainly violated that instrument, it is the highest duty of the court, plainly required by the written Constitution, which it is its sworn duty to support, to pronounce such act of the Legislature unconstitutional.
The desire for equal and uniform taxation manifested in article 10, section 1 of the West Virginia Constitution can be traced to inequities in the Virginia taxation system prior to the Civil War. In 1850, eastern and western Virginians gathered to consider adoption of a new constitution. By this time, Virginia‘s population centers had shifted from the tidewater area to the western part of the state. Legislative representation, however, remained concentrated in the east, a fact which infuriated individuals who had migrated over the mountains and successfully established new lives. Eastern Virginia interests, recognizing the need to compromise, surrendered control of the House of Delegates, but retained control of the Senate. At the same time, however, the western delegates agreed to a taxation amendment which would provide favorable tax treatment to eastern agricultural interests. During the 1850s, the amendment resulted in inequitable taxation of some species of property because some types of property were valued at less than their market value. Farber, Property Taxation In West Virginia—An Historical Analysis (unpublished 1982) (on file at the West Virginia University College of Law).
During the 1861-63 constitutional convention, the West Virginia delegates quickly agreed upon the principle that taxation should be equal and uniform. After debate, they also agreed that the state constitution should set forth clearly the notion that different types of property with the same value should be taxed equally. The prevailing sentiment was that all citizens should pay their fair share of the cost of government. 3 Debates, West Virginia Constitutional Convention, 1861-63, at 55 (remarks of Mr. Paxton). Thus, the framers sought equal and uniform taxation on all property not exempted by the constitution. Chesapeake and Ohio Railway Co. v. Miller, 19 W.Va. 408 (1882).
The present system of equating assessments which are 50 percent of property‘s appraised value with true and actual value does not achieve the framers’ intent and cannot achieve the constitutional requirement of equal and uniform taxation. One has only to look at the disparities in valuations within Logan County to reach this conclusion. If we multiply these disparities by the 55 counties, the concept of equal and uniform taxation quickly becomes meaningless.
The parties stipulated below that the total assessed valuations per class in Logan County met the minimum 50 percent ratio required by
This is true within a class of property and among the four classes in Logan County. For example, there exists almost a 14 percent difference between the aggregate assessment ratios for Class IV property and Class III property. With such disparity, equal and uniform taxation is an impossibility. Such a difference also violates the prohibition against taxation of property of equal value at a higher rate contained in article 10, section 1 of the state constitution. Class III property is currently valued at 71.51 percent of market value while Class IV property is valued at 57.99 percent. Items of property of the same value, but in different classes are being taxed at different levels because of the differences in classification and prevailing ratios. While Class IV property owners in Logan County may be happy with this system, Class III property owners are being treated inequitably.
The parties differ in their characterization of the aggregate assessment-to-appraisal ratio. The taxpayers contend that these ratios do not represent fractional assessments, but merely reflect a difference of opinion between the assessor and the tax commissioner as to the value of property. The taxpayers acknowledge that state law prohibits application of a percentage to true and actual value to determine the assessment value.
The school board makes two arguments. First, it argues that these ratios are fractional assessments which directly violate article 10, section 1 of the state constitution. The school board claims that assessors consciously decide to value property at a fraction of its market value sufficient to meet the requirements of
The divergent arguments presented in this case represent the historic and continuing battle over property taxation in this state. This struggle has been fought in
It is important, however, to realize how this case differs from past property taxation decisions made by this Court. Historically, both here and in other states, property owners have sought to enforce their private right to uniform taxation, particularly when certain property has been assessed at a higher ratio of value than that of a neighbor. Such plaintiffs sought reduction of assessments, which in turn, reduced taxation as long as the levy rate remained the same. The United States Supreme Court sanctioned this approach in 1923. In Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 43 S.Ct. 190, 67 L.Ed. 340 (1923), the Court ruled that where uniformity of taxation and full value assessment could not be reconciled, uniformity took precedence. Thus, despite the presence of state law requiring assessment at 100 percent of value, the plaintiff was entitled to be assessed at the prevailing fraction of full value. Id. at 446, 43 S.Ct. at 192. This Court has followed that approach in a series of cases, the latest decided in 1980. See In re United States Steel Corp., 165 W.Va. 373, 268 S.E.2d 128 (1980); In re Tax Assessment Against Pocahontas Land Corp., 158 W.Va. 229, 210 S.E.2d 641 (1976); In re Assessment of Kanawha Valley Bank, 144 W.Va. 346, 109 S.E.2d 649 (1959).23
The leading reduction-in-assessment case is In re Assessment of Kanawha Valley Bank, 144 W.Va. 346, 109 S.E.2d 649 (1959). The bank argued that valuation of its shares at 100 percent of true value violated the constitutional guarantee of equal and uniform taxation because other types of property had been valued at less than full value. In finding that the bank was entitled to a reduced assessment, the Court correctly held that article 10, section 1 contains two prohibitions on unequal taxation. First, the requirement that “taxation shall be equal and uniform” is a general statement of the rule. This language is emphasized by language which declares that “[n]o one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value.” Thus, article 10, section 1 requires equality and uniformity both within species of property and among different species of property. Since the facts in this case show that wide disparities exist both within and among types of property, the
One West Virginia case, however, has departed from the reduction-in-assessment pattern. In Tug Valley Recovery Center, Inc. v. Mingo County Commission, 164 W.Va. 94, 261 S.E.2d 165 (1979), the appellant sought to enforce the public‘s right to equal and uniform taxation. We recognized in that case that state law provided third parties with standing to challenge the assessment values of property owned by others. We based this decision on the clear rationale that all taxpayers have an interest in the assessed values of other property since undervaluation of some property may lead to an unequal shouldering of the tax burden by others. While the appellant in Tug Valley sought only to raise the assessment of one property owner, it ultimately hoped to have the valuation set at the standard adopted here—market value.
This case turns upon the Constitution of West Virginia. Therefore, our decision does not depend on results reached in other jurisdictions in analogous cases. However, the question of full value assessment has become an increasingly litigated topic. While there has not been unanimous agreement, the majority of courts have found that state statutes or constitutional provisions analogous to those in West Virginia require assessment at 100 percent of property‘s market value. E. Ingraham Co. v. Town of Bristol, 144 Conn. 374, 132 A.2d 563 (1957) (statute); McNayr v. State, 166 So.2d 142 (Fla.1964) (statute); Russman v. Luckett, 391 S.W.2d 694 (Ky.1965) (constitution); Bettigole v. Assessor of Springfield, 343 Mass. 223, 178 N.E.2d 10 (1961) (statute); Switz v. Middleton, 23 N.J. 580, 130 A.2d 15 (1957) (statute); Hellerstein v. Islip, 37 N.Y.2d 1, 371 N.Y.S.2d 388, 332 N.E.2d 279 (1975) (statute); Carroll v. Alsup, 107 Tenn. 257, 283, 64 S.W. 193, 199 (1921) (constitution and statute).
In general, cases involving statutory requirements of full value assessment have focused on language mandating valuation at “full” or “cash” value. However, at least one state supreme court has approved fractional assessment notwithstanding a legislative command to the contrary. State ex rel. Park Investment Co. v. Board of Tax Appeals, 175 Ohio St. 410, 195 N.E.2d 908, cert. denied, 379 U.S. 818, 85 S.Ct. 35, 13 L.Ed.2d 29 (1964).
A less-decided question has been whether state constitutional provisions require full value assessment. At least two jurisdictions, Kentucky and Tennessee, have held that their constitutions require assessment at market value.24 Conversely, California and Virginia have interpreted constitutional provisions requiring full value assessment as allowing fractional assessment.25 In these latter jurisdictions, the courts have accepted the argument that the historic practice of undervaluation has undermined the constitutional requirement of full value assessment and have declared their constitutional provisions to be in desuetude. We reject this proposition of law. The rule of desuetude is not the law of this jurisdiction. We find more persuasive and reputable the language of the Kentucky Supreme Court.
In any event, we are dealing with fundamental law. It is not outdated, or obsolete, or contrary to any public policy we know of. The public has acquiesced in its nonobservance simply because personal rights were not adversely affected and citizens heretofore have not been inclined to compel executive compliance. This law today is just as vital and enforceable as the day it was written into the Constitution.
Russman v. Luckett, 391 S.W.2d 694, 697 (Ky.1965).
Achievement of uniform assessment and thereby equal and uniform taxation is a step-by-step process. Because the law directs that competent appraisers or expert examiners will be appointed by the tax commissioner to value property, the appraisal values are to be considered presumptive evidence of the assessed value. Cf.
The statute itself supports this requirement.
The lower court declined to adopt mandatory use of the tax commissioner‘s appraisal and instead offered to conduct de novo hearings on the question of the taxpayers’ property values. The trial judge apparently believed that use of appraisal values would be a denial of due process to these taxpayers. Due process requires procedures by which taxpayers and other interested parties may challenge use of the appraisal values as assessment values if the former are either too high or too low. This can be accomplished by use of the procedures prescribed by
Use of the tax commissioner‘s appraisal is premised in part on the need for assessment uniformity in both methodology and result. Therefore, the tax commissioner‘s appraisal should be presumed to be correct and the assessed value should correspond to the appraisal value in the usual case. An objection to any assessment value may be sustained only upon the presentation of competent evidence, such as that equivalent to testimony of qualified appraisers, that the property has been under- or over-appraised by the tax commissioner and wrongly assessed by the assessor. The objecting party, whether it be the taxpayer, the tax commissioner or another third party, must show by a preponderance of competent evidence that the assessment is incorrect.27
To maintain the integrity of the appraisal system, it is incumbent upon the county assessor and county commissioners to inform the tax commissioner of all challenges made to assessment values based on claims of under- or over-appraisal by the tax commissioner. The tax commissioner has a supervisory duty over both the county assessor and the county commissioners to establish assessments. It is the tax commissioner‘s duty to ensure that assessment occurs at market value. The tax commissioner must see that county officials are complying with the constitutional and statutory requirements of full value assessment.
We wish to dispose of one final contention made by the taxpayers. They argue that the constitutional phrase “equal and uniform taxation throughout the State” does not mean what it says. They interpret this phrase to require only uniformity of methodology in determining value within a county. As already demonstrated, the existing “uniformity” of methodology has not, and cannot result in uniform taxation, either within a county or within this state.28 Since article 10, section 1 of the West Virginia Constitution requires equal and uniform taxation in all areas of the state, both the method and the result of taxation are essential to compliance with the constitution.
The parties contest the propriety of applying our decision to the assessments made July 1, 1980, which are at issue here. The taxpayers argue that this would be retroactive application. We disagree. The
We realize, however, that the valuation-levying cycle based on the 1980 assessments is well under way. In fact, taxpayers should have made their final installment payments on those assessments this past March. Additionally, the valuation-levying cycle for the 1981 assessment year is almost half complete. Taxes based on those assessments are due this September and next March. Therefore, the assessments already made in 1980 and in 1981 and the levy rates based on those assessments are to remain in force, provided they are otherwise lawful. This approach is in accord with the decisions of other jurisdictions which have held that full value assessments are required. See, e.g., Hellerstein v. Islip, 37 N.Y.2d 1, 371 N.Y.S.2d 388, 332 N.E.2d 279 (1975), Russman v. Luckett, 391 S.W.2d 694 (Ky.1965); Switz v. Middleton, 23 N.J. 580, 130 A.2d 15 (1957). Therefore, we hold that it is the duty of all county assessors to comply with the law. It is the duty of the tax commissioner to proceed with all deliberate speed to develop an up-to-date appraisal for each assessment year for all the 55 counties. The tax commissioner has a duty to appoint the necessary special assessors and appraisers to accomplish this end.
This Court is not unmindful that this decision may result in increased taxes to some, particularly those who have not paid their fair share in the past. However, if governmental expenditures remain the same, it should lower the taxes paid by other property owners.29 Individuals whose property has been undervalued to any great extent face the greatest likelihood of increased taxes. Those whose property has been valued at or near its market value will benefit because others will be taxed on the same ratio of full value—100 percent. The tax commissioner has calculated that almost 40 percent of the value of taxable property in West Virginia escaped taxation in 1980. H. Rose, Study of Property Valuations As They Relate To Levies Laid For The Support Of Schools In West Virginia For The Tax Year 1981 at VI (Dec. 1, 1981). This results in a disproportionate levy on the remaining 60 percent of value. Thus, with full valuation of property, the local levying bodies should be able to reduce the applicable levy rates.30
During the argument of this case, there was much discussion respecting who is ultimately responsible for establishment of property tax rates. Clearly, the Legislature has the duty and responsibility to levy taxes.
Given these relative duties and responsibilities of the assessors and the levy bodies, all prescribed by the Legislature, it is appropriate here to comment generally on the state-county relationship. Although the office of assessor is created by the constitution, the assessor‘s duties are prescribed by the Legislature. State ex rel. Hallanan v. Rocke, 91 W.Va. 423, 113 S.E. 647 (1922). For example, the Legislature has prescribed how the assessor is to value property,
This example typifies the state-county relationship. It is not one of federalism, of co-sovereigns. Fifty-five sovereign entities do not exist within the sovereign state of West Virginia. Rather, 55 geographically-defined governmental organizations exist to carry out the purpose of state government. The counties are subdivisions of the state, and county officials and governments are generally subject to supervision by state officials acting for the state government. This fact is clearly reflected by the detailed statutory provisions which provide political subdivisions with their powers. See, e.g.,
We realize that today‘s decision will require some time for the various officials to obtain market value assessments on all property subject to the ad valorem tax. We also realize taxpayers may initiate litigation concerning equal and uniform or market value assessments. In actions which challenge an entire class of assessments, the State Tax Commissioner is an indispensable party because of his ultimate supervisory authority. Consequently, under
Once assessments are calculated at market value, with the tax commissioner‘s appraisal used as presumptive evidence of that value, the need for reduction-in-assessment actions should be eliminated. As discussed previously, case law in this state has been concerned primarily with efforts by taxpayers to reduce their assessments because they had been assessed at a higher fraction of market value than other taxpayers. In the future, taxpayers who claim that they are being overassessed in relation to other taxpayers may not have their assessments reduced as long as their property is valued at market value. Instead, they should seek to have the assessments of other taxpayers raised to market value. Tug Valley Recovery Center, Inc. v. Mingo County Commission, 164 W.Va. 94, 261 S.E.2d 165, 173 (1979). Since fractional assessment is not lawful, taxpayers should not seek to reduce their assessments. The only lawful percentage is 100 percent of market value.
For the foregoing reasons, we hold that
The state tax commissioner has a duty to do as the Legislature has instructed and his appraisals are to be considered presumptive evidence of property‘s “true and actual value.” However, “any person claiming to be aggrieved“—property owners, the tax commissioner, other taxpayers, or public officials—may challenge any assessment under the procedures set forth in
Affirmed.
NEELY, Justice, dissenting:
I respectfully dissent from the majority‘s opinion. I believe that the analysis of my brothers is technically flawed and, in large part, disingenuous, and that their decision is unnecessary and fundamentally wrong.
I
The words of
It should be obvious that the expression “in proportion to value” has a very different meaning from the word “value” alone, and in the past, this difference has not escaped us. In numerous cases we have required that taxation be equal and uniform in the sense that the tax paid by each
I have no quarrel with the majority‘s definition of the term “value” and the exhaustive authority they marshal to support it. The majority can define value until they are blue in the face and still not escape the fact that the Constitution requires only that property be taxed in proportion to even admittedly full and fair value.
Furthermore, there is nothing in the phrasing of the Constitution to indicate that the dependent clause, “to be ascertained as directed by law,” is intended to modify “value” alone. The clause could equally operate to mean that the proportion to value is to be ascertained by law. Indeed the West Virginia Code appears to give this provision such a reading: the law directs that the proportion to value be ascertained at “not less than fifty percent nor more than one hundred percent of the appraised valuation of each said class of property: Provided, however, that beginning July one, one thousand nine hundred eighty-one, the total assessed valuation in each of the four classes of property shall not be less than sixty percent of the appraised valuation of each said class of property.”
Finally, even if one finds the majority construction convincing, it still does not require today‘s result. California and Virginia have articulated what I believe to be the correct rule regarding the revitalization of language in a state constitution after decades of desuetude. The supreme courts of Virginia and California have both faced constitutionally-based objections to discounted assessments where the state constitution required assessments at full value.
The Virginia Court held that there is only a “constitutionally required relationship between fair market value and assessment value (where uniform ratios are applied)“, Fray v. County of Culpepper, 212 Va. 148, 150, 183 S.E.2d 175, 177 (1971) (emphasis added) and that they “have consistently honored the breach” of the literal rule “by taking notice of the fact that most local taxing authorities apply a fixed multiple or percentage... to fair market value in order to arrive at assessed value“. Id. at 149, 183 S.E.2d at 177. The Supreme Court of California looked to the history of the adoption into the state constitution of the “full cash value” amendment, and concluded that since a discounted assessment was the practice at the time of the amendment, it “must be deemed to have incorporated into the Constitution the settled interpretation of its predecessor statute.” County of Sacramento v. Hickman, 66 Cal.2d 841, 851, 428 P.2d 593, 599, 59 Cal.Rptr. 609, 615 (1967).
While there are moral injunctions in constitutional provisions like the Bill of Rights and its state counterparts which can, and should be, resurrected or rediscovered by courts, this is possible precisely because they are moral injunctions. Their resurrection can confound no legitimate reliance interest. The same cannot be said about provisions concerning taxation. Although the constitutional mandate of equal, uniform taxation arose from a bitter dispute with Eastern Virginia which had pronounced natural law overtones, the constitutional purpose of ensuring fundamentally equal taxation has long since been satisfied. It is inopportune of the majority to beat the “tyranny of taxation without representation” drum; a substantively neutral provision limiting the flexibility of local assessments to within a fixed percentage of the tax commissioner‘s appraisals cannot legitimately be equated to the discriminato
II
Courts are not infallible in their readings of statutory or constitutional language, but it is unfortunate when such an error is made by a court of final appeal. In this case the tragedy is that by insisting on applying their erroneous reading the majority has improperly intruded into the province of the legislature. The issue of taxation is, probably more than any other subject, first and last an issue for the legislature. It is the classic political question into which courts should not intrude themselves.
There are uses and abuses of the “political question” doctrine. When a court avoids a truly justiciable question arising from a constitutional provision, and that constitutional provision illuminates a moral imperative, the “political question” doctrine becomes nothing more than the means for a flight from responsibility. On the other hand, when there is an entire matrix of legislative acts, court decisions, and executive policies predicated upon an existing political structure that reflects the rational and completely moral accommodation of conflicting interests, it is improvident for a court to intrude itself gratuitously. There is no issue known to the law or to politics that cannot be phrased by skilled lawyers in constitutional terms; if timidly avoiding truly justiciable controversies is a vice, then straining, contorting, and twisting constitutional language in order to achieve a value-mandated result that reflects nothing but the personal preferences of judges is as great a vice.
The “political question” justification for declining to decide an issue must be predicated upon a careful analysis of the matrix of political accommodations that a particu
III
There is little more to law than its application, and its application is determined by institutions. The value of stare decisis is not only that it protects reliance interests, but also that the doctrine helps provide a stable environment in which the institutions which apply laws can grow and change gradually. A successful analogy can be made to the situation in which an oyster finds himself when a piece of sand enters his shell. He cannot dislodge it, so he accommodates himself to it by encasing it in pearl. Similarly, law, even bad law, is made livable and useful by institutional coatings. Shattering the pearl in order to remove the speck of sand would be a foolish tactic, yet that is exactly what this Court has done.
The ramifications of this decision are many. First and foremost, we have today raised taxes. The majority opinion observes that “the framers of the United States Constitution recognized the fundamental requirement of representative taxation in the organic law of the country when they gave sole authority to lay and collect taxes to Congress.
While the majority points out that levying bodies may now reduce their levy rate to maintain taxes as they are, I doubt that this will occur. The pressures on the county commissions are probably such that they will quickly use all money available to them. The counties may, in fact, be prohibited from lowering their levy rate in response to the rise in assessments this Court now demands.
IV
Property taxes are among the most regressive taxes available to a sovereign. They look to the value of one‘s property, not to one‘s ability to pay. Thus a working-class West Virginian might save and struggle all his life so that from the age of fifty on he and his family can enjoy a house worth $150,000, while a dentist fresh from the West Virginia University Dental School might purchase such a house at the age of 27. While both the ordinary worker and the dentist have property of equal value, they assuredly have differing capacities to pay a property tax. Where the lion‘s share of a political subdivision‘s revenue comes from taxation of property, the worker making $25,000 a year bears the same tax burden as the dentist making $95,000 a year.
Considerations going to the regressive nature of property taxes in general have led West Virginia to select other taxes of a less regressive nature whenever needs for more revenue have appeared in recent years. The Constitution has been amended in order to fix maximum rates for ad valorem property taxes, thereby all but eliminating the property tax as a source of revenue for state government.4
The State of West Virginia funds with these taxes a uniquely high proportion of county school costs.5 The policies inherent in the property tax limitation amendment have led the State practically to take over the financial support of county schools. The majority writing in Pauley v. Kelly, 162 W.Va. 672, 255 S.E.2d 859 (1979) made the observation:
The Legislature almost forty years ago recognized that: “Because of the adoption of the ‘Tax Limitation Amendment‘, it has become necessary for the State to participate to an increasing degree in the financing of the free public schools.”
W.Va.Code, 18-9B-1 . It passed what is nowW.Va.Code, 18-9B-1, et seq. , creating the State Board of School Finance and giving it a variety of administrative and budgetary powers over county boards of education.
Id., at 882.
This is a good example of the oyster and pearl phenomenon. In order to mitigate the effects of regressive taxation the property tax limitation amendment was added to the State Constitution. This forced the State to fund the lion‘s share of county education through its more progressive taxes. The elaborate provisions of Articles 9, 9A and 9B of Section 18 of the West Virginia Code created an entire bureaucracy to permit and oversee the transfer of State funds received from other sources than the property tax to county schools in order to finance the bulk of county school expenses with revenues not derived from the regressive property tax.
Now it appears that this long and arduous legislative effort is for naught. The Court has permitted the Logan County Board of Education a judicial end run around this legislative bulwark, and handed over to it the fruits of a regressive tax which the bulwark was deliberately erected to protect.
This legislative protection of West Virginia‘s citizens from the regressive property tax is not limited to school finance. In 1972 the Federal Grants and County and Municipal Aid Amendment to the West Virginia Constitution was proposed and ratified.
V
The majority opinion speaks darkly of “out-of-state interests” who own the land. However, most land in West Virginia is held by West Virginia residents or businesses. Evidence has been presented before the Court in this case that the small, individual landowner bears a disproportionate weight of the tax burden in West Virginia because of inequitable appraisals by the State Tax Commissioner himself resulting from delays in the state-wide reappraisal demanded by the legislature.6 Enforcement of the one hundred percent assessment by the same official will therefore only serve to increase the disproportionality of the tax burden.
The majority should have considered that for every coal company that underpaid its taxes, there will be countless retired couples (the favorable exemptions going to the very poor notwithstanding) who will either lose their homes because they cannot pay the court‘s new tax, or will otherwise be required to live in penury during their declining years because this Court has imposed upon them an unconscionable, regressive tax that would never have been countenanced by their elected officials. Finally, since the commissioner of commerce is constantly soliciting bigger and better “out-of-state interests” to come to West Virginia to open factories and mines, it appears that out-of-state interests are not entirely pernicious.
VI
In this year 1982, the United States is suffering the worst economic conditions since the Great Depression. More to the point, states of the Northeast and North Central regions, like West Virginia, are
At the same time, states like Texas and Louisiana are extremely aggressive in their competition for industry. Taxation is inextricably intertwined with both a state‘s ability to attract new industries and the continued vitality of a state‘s existing industries. The political authorities in this State are entrusted with designing our strategy for competing successfully in the national market for industries, and taxation is an essential element of any such strategy. What this Court has done is to increase taxes significantly at a time when the executive and legislative branches must be able to tinker with the economy. We have thus severely reduced the freedom of action of the elected7 branches in exactly the area where a high degree of responsiveness is most required.
The argument that I make concerning the effect of taxation on West Virginia‘s attractiveness to industry might appear to the untrained observer to be unjustified. After all, the level of local taxation is not the only criterion upon which industry bases its location decisions. The quality of labor is one important consideration, as is the degree of labor strife or cooperation. The transportation costs of moving raw materials to plants and of moving finished products to customers are also important factors, along with countless other considerations of a similar nature.
Certainly no one will observe a wholesale removal of plants from West Virginia as a direct result of today‘s majority ruling. The process is far more subtle and obscure; furthermore, it is not wholesale removal but rather removal at the margin that requires careful consideration. Only a one percent change in employment can have a substantial effect on West Virginia‘s economy. Consequently, perhaps a real life example will illuminate the problem.
The Union Carbide Corporation employs approximately 10,000 men and women in four plants in West Virginia. Three of these plants, namely the South Charleston, Institute, and Sistersville plants, produce a diverse range of plastics and chemicals. While these three plants occupy individual parcels of land, each is not just one plant, but really many plants. Within, for example, the South Charleston plant numerous unrelated chemical processes are undertaken, and many different end products manufactured.8 Each separate process is constantly being modernized; every year certain equipment and even total systems for the manufacture of individual products become obsolete, and must be replaced. Thus a chemical plant, like the human body which entirely regenerates itself every seven years, is constantly undergoing minor transformations. In effect, a chemical plant is itself a process.
Union Carbide also has plants outside of West Virginia, among them the Taft, Louisiana plant and the Brownsville, Seadrift, and Texas City plants in Texas. All of these plants are capable of carrying on the
Unfortunately for the State, the relationship between taxation and the health of West Virginia industry is no less real for its subtlety; over time we are likely to suffer a deterioration in our competitive position because of this Court‘s decision today.
VII
Such an interference with the political balance is inexplicable on the basis of true and uniform valuation requirements. If we are to have to live with the majority‘s construction of the Constitutional valuation requirement, it would still have been possible, from a mechanical point of view, to have enjoined the local assessors to assess property at its “true and actual value,” leaving to the Tax Commissioner only the overall supervisory powers currently attendant on that office.9 It is unnecessary to mandate that the commissioner‘s appraisal be the standard. In a matter as changing and complex as the calculation of property tax, the simplistic conclusion that the appraisal equals the fair market value will be accurate only coincidentally.
The practice of allowing local assessors to establish the property tax value, subject to the legislative requirement that their assessments total no less than fifty percent (now sixty percent) of the commissioner‘s appraisal, has long been accepted in West Virginia. The majority questions whether the elected assessors should set the proportion of taxes by the assessment percentage or the levying body should do so through levy rates, and concludes that the “proportion to value” should be determined by the levying body. There is no cogent authority for that proposition to outweigh the force of a long-established custom based on political practicality, particularly in light of the rigidity of those levy rates, discussed supra.
The custom of permitting elected assessors to establish the relationship between value and assessment has become an integral part of the taxation process, allowing for local relief from the State Tax Commissioner‘s appraisals on a large scale and without the expense and nuisance of having to resort to court on a case by case basis.10 Courts can now expect a deluge of litigation; given the small staff of the tax commissioner and that staff‘s unfamiliarity
VIII
There is a final irony to the majority‘s ill-advised and destructive foray into the realm of tax assessments. This catastrophic endeavor was undertaken to ensure that “taxation shall be equal and uniform throughout the State”
MILLER, Chief Justice, concurring:
While I concur with the majority opinion, it seems to me that some clarification might be added to it, particularly in light of the dissenting opinion.
First, it cannot be doubted, and the parties to this litigation do not assert otherwise, that we are confronted with two statutes that contain irreconcilable language. The first is
“All property shall be assessed annually as of the first day of July at its true and actual value; that is to say, at the price for which such property would sell if voluntarily offered for sale by the owner thereof, ...”
The second statute is
“The tax commissioner shall make or cause to be made an appraisal in the several counties of the State of all nonutility real property and of all nonutility personal property which shall be based upon true and actual value as set forth in article three [§ 11-3-1 et seq.], chapter eleven of this Code.
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“[A]fter such appraisal is so delivered and received, the county assessor and the county court, sitting as a board of equalization and review, shall use such appraised valuations as a basis for determining the true and actual value for assessment purposes of the several classes of property. The total assessed valuation in each of the four classes of property shall not be less than fifty percent nor more than one hundred percent of the appraised valuation of each said class of property.”
The clear import of
The majority resolves this conflict between these two statutes by looking to the provisions of
The dissent proceeds on a misconception that our constitutional phrase which reads “and all property ... shall be taxed in proportion to its value” should be read to mean that “all property ... shall be assessed in proportion to its value.” (Emphasis added) Obviously, there is a total dif
As the majority opinion demonstrates, our constitutional phrase “taxed in proportion to its value” is found in other state constitutions. Courts that have had occasion to construe this phrase have rather uniformly determined that the term “value,” standing alone, is deemed to mean fair market value or actual value or some other equivalency.
A case cited by the majority and one that is closely analogous to our present situation is Arkansas Public Service Commission v. Pulaski County Board of Equalization, 266 Ark. 64, 582 S.W.2d 942 (1979).
“But the larger question relates to the meaning of the word ‘value,’
Article 16, § 5 , requiring that ‘[a]ll property subject to taxation shall be taxed according to its value.’ An illustration which is perhaps overly simple serves to drive home the meaning of the word ‘value.’ If an individual displays an article, be it an article of jewelry, an automobile, or even if a house is being sold, and is asked the question, ‘What is its value?‘, the answer, of course, is the value of that property today—not what it was worth in 1956 or 1961—or any other year. The constitutional requirement, it would appear, undoubtedly means ‘present value,’ because its value in some other year would almost certainly not be the same as the current value, and accordingly, if some other basis is used, would not be its true value at all.”
266 Ark. at 72-73, 582 S.W.2d at 945.
In reaching this conclusion, the court noted that the Legislature had since its earliest days after the formation of the State utilized in its assessment statutes language that gave recognition to the fact that the constitutional term “value” meant fair market value. A similar pattern can be found in our own assessment statutes. In Section 67 of Chapter 157 of the 1863 West Virginia Code, the affidavit of value submitted by the owner of property contained the following affirmation: “[T]hat in my opinion the valuations of the property listed are not below the fair cash value thereof: So help me God.”
In 1904, the assessment language was changed to that which is presently found in
Finally, I must take exception to the dissent‘s characterization of this case as a “political question” and that somehow we should have avoided deciding this case. The dissent overlooks the fact that the case had already been decided by the Circuit Court of Logan County. We occupy the position of being the final arbiter of our State‘s law. We would do no credit to our office and our oath if we avoid complex or controversial cases by refusing to decide them under the guise of calling them “political issues.” To make such an assertion is to ignore all of the tax cases that have been decided by this Court in the past.
Surely, the test of whether a given opinion is correct cannot be based on whether it will gain popular acceptance by all who will feel its impact. If this were the yardstick, no court would hold any tax measure proper. Reference need only be made to Bee v. Huntington, 114 W.Va. 40, 171 S.E. 539 (1933), to find the true measure for a court. There, this Court was confronted with the then recent amendment to Section 1 of Article X of our Constitution, which had set the maximum tax or levy rates that could be charged against the various classes of real and personal property. The practical effect of this amendment was to seriously curtail the amount of property tax revenues that had been formerly available to local governmental bodies.
The Legislature, in response to the outcry for more funds by the local governmental units, had enacted a statute to permit the local levying bodies to exceed the constitutional maximum levy rates by utilizing “additional levies ‘to meet current requirements of now-existing indebtedness.‘” 114 W.Va. at 43, 171 S.E. at 451. This Court held the statute to be unconstitutional. Justice Kenna in his concurring opinion acknowledged the difficult choice that faced the Court in these words:
“I concur in the majority opinion. In doing so, I have a full appreciation of the very serious nature of the difficulty involved and of the far-reaching consequences with which the question is fraught. On the one hand, it is urged that we are faced by the probability of a breakdown of local government in a large number of the taxing units throughout the state through lack of money realized from taxation to provide for their essential functions, and, on the other, that the sovereign will of the people, expressed by them in the very instrument to which these taxing units owe their existence, will be thwarted in a matter of vital importance.”
114 W.Va. at 50, 171 S.E. at 544.
I am sure Justice Kenna and the other members of that Court would have been comforted to learn from today‘s dissent that they could have avoided the entire issue as a “political question.”
Notes
The tax commissioner shall make or cause to be made an appraisal in the several counties of the State of all nonutility real property and of all nonutility personal property which shall be based upon true and actual value as set forth in article three [§ 11-3-1 et seq.], chapter eleven of this Code ....
The statute further directs that the tax commissioner shall deliver the appraisal to county officials after its completion and they:
shall use such appraised valuations as a basis for determining the true and actual value for assessment purposes of the several classes of property. The total assessed valuations in each of the four classes of property shall not be less than fifty percent nor more than one hundred percent of the appraised valuation of each said class of property.
The Legislature amended the statute in 1980 to require that the total assessed valuation per class be at least 60 percent of the total appraised valuation per class.
[T]axation shall be equal and uniform throughout the State, and all property both real and personal, shall be taxed in proportion to its value to be ascertained as directed by law. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value ....
What is now
Taxation shall be equal and uniform throughout the State, and all property, both real and personal, shall be taxed in proportion to value, to be ascertained as directed by law. No one species of property for which a tax may be collected, shall be taxed higher than any other species of property of equal value; but property used for educational, literary, scientific, religious, or charitable purposes, and public property, by law, shall be exempted from taxation.
In 1872, the people adopted a new constitution in which the taxation provision became article 10. Language was added at that time which allowed the Legislature to tax “franchises and privileges of persons and corporations.” The Tax Limitation Amendment of 1932 transformed article 10 into its present form.
For what it is worth I have elsewhere tried to construct a practical theory to explain where and when courts should intrude themselves into the political process based on the nature of political institutions. The reason I wrote an entire book on the subject was so as not to have to explain the theory piecemeal in concurring and dissenting opinions. Consequently, for the reader who is not entirely satisfied with my brief reference to the continued viability of the “political question” doctrine, a more elaborate analysis of my position is to be found in R. Neely, How Courts Govern America, Yale University Press (New Haven and London, 1981). The entire purpose of“The aggregate of taxes assessed in any one year by all levying bodies, except as provided by section twenty-three [§ 11-8-23] of this article, shall not exceed fifty cents on each one hundred dollars’ assessed valuation on Class I property; one dollar on Class II property; one dollar fifty cents on Class III property; and two dollars on Class IV property.”
“All property, both real and personal, in any county, except as herein otherwise expressly provided, shall be assessed as of the first day of April [currently July] of each year at its true and actual value; that is to say: at the price for which such property would sell if voluntarily offered for sale by the owner thereof, upon such terms as such property, the value of which is sought to be ascertained, is usually sold, and not the price which might be realized if such property were sold at a forced sale.”
Assessment, however, is a more specific term used in a statutory sense to mean the listing and valuation of property for taxation purposes.
The tax commissioner argues that county assessors should retain discretion to set assessed values at less than appraised values and that assessors should retain primary authority over the assessment process. The remaining parties ask the Court to delay its decision until the lower court has completed its consideration of Pauley v. Kelly, 162 W.Va. 672, 255 S.E.2d 859 (1979), on remand, Pauley v. Bailey, Civil Action No. 75-1278 (Kanawha County Circuit Court, May 11, 1982), and until the state tax commissioner has completed an up-to-date statewide tax appraisal. We note that the lower court has completed its consideration of Pauley; therefore, we do not agree that this Court should delay its decision of this case.
We do agree, however, that an up-to-date appraisal is needed and required by law.
All property subject to taxation shall be taxed according to value, that value to be ascertained in such manner as the General Assembly shall direct, making the same equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than any other species of property of equal value ....
Subsequent studies have commented on this historic practice. R. Blakey, Report on Taxation in West Virginia 107-11 (1930); H. Shamberger and J. Thompson, The Operation of the Tax-limitation Amendment in West Virginia 9-11 (1950) (real estate assessed at 30 percent of market value in 1949); E. Hanczaryk and J. Thompson, The Economic Impact of State and Local Taxes in West Virginia 32-35 (1958).
The Virginia Supreme Court acknowledged the requirement of full value assessment when it said, “We have consistently honored the breach of this rule by taking notice of the fact that most local taxing authorities apply a fixed multiple or percentage ... to fair market value in order to arrive at assessed value.” 212 Va. at 149, 183 S.E.2d at 177.