93 Mass. 268 | Mass. | 1865
No question has been made in these cases as to the form of the actions or as to the right of the plaintiff to recover the sums of money demanded of the several defendants, if it shall be held that the tax or excise established by St. 1863, c, 236) is legal and valid. By that statute it was provided that every corporation organized under a charter or under general statutes should reserve from each dividend one fifteenth part of that portion thereof which was due and payable to its stockholders residing out of the Commonwealth, and should pay the same as a tax or excise on such estate or commodity to the treasurer of the Commonwealth. The right of the legislature to impose this tax or excise is the real and only subject of controversy in these actions.
It is by no means certain, on the phraseology of the statute, whether the legislature intended by its provisions to impose a tax or to lay an excise. In the title of the act it is called “ a tax on the stock ” ; in the body of the statute it is denominated “ a tax or excise on such estate or commodity.” Probably the real purpose was to frame an act to raise a revenue out of certain specified property, by putting it in such shape that it might be held valid either as a tax or an excise, whichever it might be properly called, on a due consideration of the nature of the imposition, the kind or species of property on which it was laid, and the mode in which its payment was to be made and enforced. We shall therefore be more certain of arriving at a result which will cover the whole ground of controversy, and ai
Before proceeding, however, to determine the question whether the imposition of the tax or excise is valid and within the limit of legislative authority, it is necessary to understand whether it was intended to be laid on the corporations designated in the statute, or upon certain of their stockholders. On this point we cannot entertain any doubt. The purpose of the act in this respect is made manifest from the title. It is declared to be designed “ to levy a tax on the stock of corporations held by persons whose residence is out of the Commonwealth.” This is equivalent to a declaration that the tax or excise is to be imposed on the property of non-resident stockholders, because the shares in a corporation belong to its stockholders, and not to the corporation. The same intent is clearly shown in the body of the act. The subject of the tax or excise is not the real or personal property of the corporation, nor yet its franchise or corporate power and capacity. The “ estate or commodity ” which is to be liable to the assessment provided for by the act is that portion of the dividends which may become due and payable to stockholders residing out of the Commonwealth. Such dividends cannot in any just sense be regarded as belonging to the corporation, or as fit subjects of an assessment which is to constitute a corporate charge or burden. It is not until a dividend has been ascertained and declared and made payable to a certain class of stockholders that the subject of taxation or excise contemplated by the statute has any existence. Such dividend is not corporate property. On the contrary, the very act which calls it into being separates it from the property of the corporation, and it thenceforward belongs to the several stockholders, in the proportion in which they own shares in the capital stock. It is from the fund thus created that the tax or excise is to be reserved and paid. It is clearly, therefore, a tax or excise on the income or dividends of stockholders only, and is not intended to be a corporate charge. In order that its payment may be made certain
Regarding, then, the tax or excise as imposed on non-resident stockholders, and not on corporations, the main question recurs, whether the statute can be maintained as a valid exercise of legislative power. As has already been intimated, the words “ tax ” and “ excise,” although often used as synonymous, are to be considered as having entirely distinct and separate significations, under the provisions of the cbnstitution of Massachusetts, c. 1, § 1, art. 4. The former is a charge apportioned either among the whole people of the state, or those residing within certain districts, municipalities or sections. It is required to be imposed, as we shall more fully explain hereafter, so that, if levied for the public charges of government, it shall be shared according to the estate, real and personal, which each person may possess , or, if raised to defray the cost of some local improvement of a public nature, it shall be borne by those who will receive some special and peculiar benefit or advantage which an expenditure of money for a public object may cause to those on whom the tax is assessed. An excise, on the other hand, is of a different character. It is based on no rule of apportionment or equality whatever. It is a fixed, absolute and direct charge laid on mer chandise, products or commodities, without any regard to the
Bearing in mind this distinction between a tax and an excise under our constitution, it would seem to be very clear that the statute in question cannot be supported as a valid exercise by the legislature of the power of taxation. The requirement of the constitution is that all taxes shall be “ proportional.” If any force or effect is to be given to this word, it must be regarded as a restriction on the power of the legislative department of the government, and to have been intended to prevent the exercise of an unlimited right to impose taxes. Construed with reference to the context, the meaning of the word is clear and definite. In relation to those expenses which are called in the constitution “the public charges of government,” as distinguished from local expenditures or charges incurred for the benefit of a particular section or locality, the design of the framers of the constitution was that these, or a portion thereof, should be defrayed by means of taxation; and that in assessing the needful amount it should be laid on property, real and personal, within the Commonwealth, so that, taking “ all the estates lying within the Commonwealth”,38 one of the elements of proportion, each tax-payer should be obliged to bear only such part of the general burden as the property owned by him bore to the whole sum to be raised. This rule of proportion was based on the obvious and just principle that the benefit which each person derives from the government has direct relation to the amount of property which he possesses and enjoys under its sanction and protection. It was to prevent this essential principle from being violated or disregarded, and to render it certain that taxation for general purposes of government should be made equal, that it was expressly provided in the constitution that a valuation of estates within the Commonwealth should be taken anew decennially at least, and oftener if the legislature should order. Having regard to these explicit provisions of the constitution,
No attempt has been made in the arguments, both oral and written, submitted by the attorney general to show that the tax in question, which is a tax imposed for no local object of a public nature but to defray general public charges, is in any just sense proportional. Nor can we see any ground on which it can be plausibly confided that it is so. It is imposed as an absolute fixed tax on certain property belonging to a designated class of persons, without any reference to the elements of proportion which usually and properly enter into and form the basis of assessments for public charges. The imposition of the tax is not affected nor the amount of the exaction varied, either by the fluctuations of the public charges or by the valuation of all the property which is liable to assessment. The rule of taxation is permanent and inflexible, and is to be uniformly applied without any reference to the amount of money to be raised for the general purposes of government, or the sum which is to be assesses on other kinds of property, or the value of all the property io
But it is urged that these words, which seem to limit and 'estrain the authority of the legislature in the matter of taxaion, were not intended to be obligatory in such sense as to render an observance of them essential to the validity of legislative enactments; bu*" that they were designed as- directory only, indicating a rule which was to be binding on the
It only remains for us to consider whether the assessments laid on the defendants can be supported as a valid exercise of the power to impose excises. Assuming that a dividend may be deemed to be a commodity or production, and so be considered as coming within the class of subjects on which an excise may be properly laid — a point by no means clear — still there are insuperable difficulties in the way of sustaining the assessment authorized by the statute. In the first place, it is grossly unequal, and does not operate alike on all persons whose property is made subject to it. It was declared by this court in Portland Bank v. Apthorp, ubi supra, that “ taxes of this sort must undoubtedly be equal;” that is, must operate alike on all persons who exercise a particular employment or enjoy the same
These inequalities, however, are not the only objections to the validity of the excise. We are unable to see how it can be supported consistently with that provision of the constitution of the United States which secures to the citizens of each state all the privileges and immunities of citizens of the several states. Art. 4, § 2. This clause of the constitution was doubtless taken and condensed from art. 4, § 1, of the articles of confederation and perpetual union, adopted by congress July 9th 1778, and which formed the basis of a national government for the United
But it is suggested that it is not made to. appear that the effect of this assessment on stockholders residing in other states is to impose a greater burden on them than on citizens of this state. But the suggestion, though specious and plausible, does not seem to us to answer the objection. The excise is in terms confined to stockholders residing out of the state. No such assessment is laid on the citizens of this state. It is a burden wholly different in kind from any which is borne by the resident stockholders. Primd facie, then, a discrimination is made in favor of our own citizens. This inference is not controlled or overcome by the suggestion that shareholders residing in this state are subject to taxation on the value of their shares under the general laws regulating the assessment of taxes, but that the shares of non-resident shareholders are not liable to be
In the supplemental brief submitted by the attorney general, it is urged that the statute may be supported as an exercise of the right to amend the charters of corporations which is reserved to.the legislature. But we see no reason to believe that such is the effect of the statute, or that it was so intended by the legislature. The statute in that respect interprets itself. It is an act to lay an excise or tax on certain stockholders. It is not a tax on the corporation or its franchise, as has been already stated, nor are corporations made liable to pay out of their corporate funds any tax, excise or duty on the shares of nonresident stockholders. If such had been the provision of the statute a very different question would have arisen. But it is a tax or excise laid on the property of each stockholder, after the dividend has been ascertained and declared and become due and payable from the corporation to him. The corporation is only made the agent to pay the tax in behalf of. the stockholders. We cannot regard these provisions, so far as they affect the rights of the stockholders only, to be amendatory of the charters.
Judgment for the defendants.