66 Op. Att'y Gen. 331 | Wis. Att'y Gen. | 1977
EVERETT E. BOLLE, Assembly Chief Clerk, Wisconsin Legislature
Upon the direction of the Wisconsin State Assembly you have requested my opinion regarding the constitutionality of federalizing the Wisconsin income tax. Assembly Resolution 11 states in full:
"Resolved by the assembly, That the attorney general is requested to provide an opinion as to the constitutionality of *332 federalizing the Wisconsin income tax by establishing the tax as a percentage of the federal income tax owed by the taxpayer, without any modifications, adjustments or deductions."
There is no specific proposed legislation before me to examine.
Wisconsin "federalized" its individual income tax some time ago by adopting ch.
Accordingly, it would not be constitutional to establish the state income tax as a percentage of the federal income tax, as the resolution provides, without any modifications to satisfy such constitutional requirements.
Another constitutional question raised is whether such a scheme of taxation constitutes an unconstitutional delegation of state legislative powers to the federal government. Wisconsin Constitution art.
The following quotations from 50 Op. Att'y Gen. 107 (1961) place the delegation issue into its proper perspective:
"The general rule is that a `state legislature has no power to delegate any of its legislative powers to any outside agency such as the Congress of the United States. * * * A state legislature does not invalidly delegate its legislative authority by adopting the law or rule of Congress, if such law is already in existence or *333 operative.' 11 Am. Jur. 930, 931, 16 C.J.S. 563. `It is generally held that the adoption by or under authority of a state statute of prospective Federal legislation, or Federal administrative rules thereafter to be passed, constitutes an unconstitutional delegation of legislative power. In some cases, however, it has been held that there was no unconstitutional delegation of authority by a state statute which provided that prospective Federal legislation should control.' 11 Am. Jur. Sec. 219, 1961 supplement p. 141, 16 C.J.S. 564.
"* * *
"In George Williams College v. Williams Bay (1943)
242 Wis. 311 ,316 ,7 N.W.2d 891 , it is stated:"`* * * By this doctrine [legislation by reference] when a statute adopts the general law on a given subject, the reference is construed to mean that the law is as it reads thereafter at any given time including amendments subsequent to the time of adoption. This is to be contrasted with adoption by reference of limited and particular provisions of another statute, in which case the reference does not include subsequent amendments. * * *'"
Alaska's territorial income tax law which was based on a percentage of the federal tax paid had its constitutionality upheld in Alaska Steamship Co. v. Mullaney,
The problem of incorporating provisions into enactments by reference to future acts of other legislative bodies is avoided by the periodic updating of Wisconsin's reference to the federal law. Chapter
Any attempt to federalize corporate income taxes must keep in mind that corporations must have their incomes apportioned between the states in which they are doing business. Apportionment of corporate income between states, of course, is not necessary for federal income tax purposes. An unapportioned tax, by its very nature, makes interstate commerce bear more than its fair share of taxation. See 71 Am. Jur. 2d State and LocalTaxation sec. 456.
The essential difference between the present proposal suggested by Assembly Resolution 11 and the current law is that the basis for the individual income tax would be the federal tax due instead of federal taxable income. This difference is not dramatic, nor does it lead to any more "simplification" or "federalization" than is possible under the present scheme of taxation. Some state and federal differences, such as those related to capital gains treatment and reporting of combined incomes by spouses, could be eliminated under our present simplified federalized income tax law as policy considerations may dictate. Other differences, such as those related to interest on government obligations and residency, are constitutionally mandated, and would be just as necessary under a state law based on federal tax due as a state law based on federal taxable income.
BCL:APH