170 N.W. 582 | S.D. | 1919
The sole question before us is: Are bonds of a municipal corporation of this state — suoh as of a school district or city-' — subject to taxation under t’he existing laws of this state? The trial court held that they were.
“The right to tax the contract to any extent, when made, must operate upon the power to borrow, before it is exercised, and have a sensible influence on the contract.”
In the great case of Pollock v. Farmers’ L. & T. Co., 157 U. S. 429-586, 15 Sup. Ct. 673, 39 L. Ed. 759, the court was a unit in holding a tax on the income or interest from municipal securities to be invalid, and, in addition to what was quoted from the Weston Case, said1:
“The tax in question is a tax on the power of the states and their instrumentalities to borrow money.”
In Penick v. Foster, 129 Ga. 217, 53 S. E. 773, 12 L. R. A. (N. S.) 1159, 12 Ann. Cas. 346, it is said:
/ “Nothing is better settled than that securities issued iby the government are as much the instrumentalities of the government as other means adopted by it to perform its functions. It is immaterial whether the security be issued by the state, or by a county, or by a municipality. It is, in all cases, an instrumentality of the government. It is issued for the purpose of effectuating those objects for which governments exist.”
In Re Assessment of First Nat. Bk. (Okl.) 160 Pac. 469, L. R. A. 1917B, 294, the court says:
“When a state issues its bonds in conformity to law in order to raise money to accomplish and carry out a governmental purpose, the instruments issued by it for that purpose are instrumentalities of government.”
In Farmers’ Bank v. Minn., 232 U. S. 516, 34 Sup. Ct. 354, 58 L. Ed. 706, the court says:
“We deem it entirely clear that a tax upon the exercise of the function of issuing municipal bonds is a tax upon the operations of the government. * * * And to tax the bonds * * * in the hands of the holders is, in the last analysis, to impose a tax upon the right of the municipality to issue them.”
In Penick v. Foster, supra, the court further says:.
“By the provision against exemption from taxation, it was not intended' to deny to the state an exercise of sovereignty so necessary and essential to the due and orderly administration of its affairs. It 'was not intended thereby to deny to the state the power to go upon the open money markets of th-e world1 and compete for money upon equal terms with other sovereign states; or to deny to the state the power to provide a security of equal
In Mercantile Bk. v. New York, 121 U. S. 138, 162, 7 Sup. Ct. 826, 839 (30 L. Ed. 895), the court says of such public securities- :
“It is not a part of the policy of the government which issues them to subject them to taxation for its own purposes.”
We therefore conclude that, while the word “property” is general enough in its meaning to include securities issue’di by this state, her counties, and her municipalities, it was not intended b-y its use in our Constitution to include such securities. All must concede that, even though we did not have section 5, art. 11, of our Constitution, expressly exempting the property of the United States, of this state, and of her county and municipal corporations, yet there would, in the absence of an express provision for their taxation, be a conclusive presumption that such exemption was intended' — it would! certainly border on the ridiculous for a state to go to the expense of assessing levying, and -collecting taxes of herself. -So we say, in support of our view as was said in the leading case of State ex rel. Da Ponte v. Board of Assessors, 35 La. Ann. 651:
“Nor can it be successfully opposed to this view that the words, 'all property shall -be taxed/ are too clear and unambiguous to leave room for construction. On the contrary, such general terms and expressions are constantly subjected to construction, and it may be said that they are never allowed their full literal import. To do so would be to extend their intent to subjects which the state has clearly no power to tax, such as bonds of the United ‘States, and other means and instruments for the exercise of the powers delegated to the 'Federal government; and to other subjects, such as the salaries of judges, public property (though this is expressly exempted), and the like, which, though it is within the power of the state to tax, are yet considered on fundamental principles to be nontaxable.”
To summarize in a few words our conclusion: If we were to consider the; bonds before us merely as property and disregard the purpose for which they were issued — disregard the fact that they are governmental instrumentalities — we should holdi them taxable; but, when we regard them, not merely as property, but as governmental instrumentalities of a sovereign state, a superior intervening public policy grounded upon one of the sovereign powers of the state compels us to the conclusion (there being no express language in the Constitution to the contrary) that the public securities of a state, and of its counties and municipalities were not intended to be included either in the term “property” or the term "bond” as such terms are used in that article of our Constitution relating to taxation.
The judgment of the trial court is reversed, and such court is directed to enter a judgment in favor of appellant. No costs to be taxed in this court.