97 Minn. 11 | Minn. | 1905
Application was made to the court below, under the provisions of chapter 288, p. 427, Raws 1905, for a writ of mandamus commanding and requiring respondent, as judge of probate of Ramsey county, to appoint appraisers to ascertain the value of certain legacies and devises made by the last will and testament of Paul D. Ferguson, deceased, whose estate was being probated in his court, for the purpose of determining the amount of the inheritance tax imposed by that statute. The application was denied on the ground, in the opinion of the court below, that the statute referred to is unconstitutional and void. Relator appealed.
The sole question presented, aside from certain contentions respecting the interpretation of the statute, is its constitutionality. This statute represents the fourth attempt of our legislature to enact an inheritance tax law. It is, in essential respects, different from prior statutes on the subject, though the main purpose, an inheritance tax, is the same.
The first statute enacted was declared unconstitutional in Drew v. Tifft, 79 Minn. 175, 81 N. W. 839, 47 L. R. A. 525, 79 Am. St. Rep. 446, for the reason, among others, that real property was excluded from its operation, that it exempted certain corporations, prescribed a higher
The second (Taws 1901, p. 403, c. 355) was held unconstitutional in State v. Bazille, 87 Minn. 500, 92 N. W. 415, 94 Am. St. Rep. 718, on the ground that it operated unequally as respects the exemption, in that the tax upon collateral heirs was laid on the whole inheritance when it exceeded $5,000, while as to lineals the tax was upon the excess over $5,000. The result was an unwarranted discrimination in the matter of exemption; none being allowed collateral heirs receiving over $5,000.
The third (Taws 1902, p. 43, c. 3) was declared void in State v. Harvey, 90 Minn. 180, 95 N. W. 764, for the reason that it imposed a tax of ten per cent., double that allowed by the constitution.
The Drew case involved a construction of the provisions of our state constitution authorizing this sort of a tax, and also the validity of the statute enacted under it; but the other two cases involved only the statutes there before the court, which were materially different from that now before us, and throw no particular light upon the questions in the case at bar, and are not in point. Upon the construction of the constitution the Drew case is in point, and, as will be presently seen, is decisive of the present case.
We first turn our attention to the contention of respondent respecting the interpretation of the statute. The rules governing courts on this subject are too familiar to require extended discussion or citation of authorities. It may be stated as a cardinal rule, supported by an unbroken line of authorities, that in cases of imperfectly drawn statutes the court, rather than pronounce them unconstitutional and void, will draw inferences from the evident intent of the legislature, as gathered from the whole statute, correcting by intendment technical inaccuracies in expression, and supplying obviously unintentional omissions, that they may be rendered operative and effectuate the legislative will. The rule was applied recently by this court in State v. Bates, 96 Minn. 110, 104 N. W. 709, a case involving the construction of a statute of far greater indefiniteness and uncertainty than the one in the case at bar, and where, to save the statute from total destruction, words which ap
The sole purpose of the rules of construction is to ascertain the intention of the legislature, and inartificially constructed statutes, containing ungrammatical expressions or inconsistent provisions, will, if not so vague and indefinite as to render them void for uncertainty, be reduced or extended by intendment to effectuate the legislative intent. State v. Board of Commrs, of Polk County, 87 Minn. 325, 92 N. W. 216; State v. Chicago, M. & St. P. Ry. Co., 38 Minn. 281, 37 N. W. 782; Moody v. Stephenson, 1 Minn. 289 (401); Woodruff v. Town of Glendale, 26 Minn. 78, 1 N. W. 581; McGee v. Board of Co. Commrs. of Hennepin County, 84 Minn. 472, 481, 88 N. W. 6.
Though the statute under consideration is one imposing a tax upon-a class of citizens, its interpretation is governed by the general rule just referred to. The rule of strict construction ordinarily applied to-the operation and effect of such statutes, and to proceedings thereunder, does not apply. The statute must be given a fair and reasonable-construction. State v. Western Union Tel. Co., 96 Minn. 13, 104 N. W. 567; Treat v. White, 181 U. S. 264, 21 Sup. Ct. 611, 45 L. Ed. 853; In re Stewart, 131 N. Y. 274, 30 N. E. 184, 14 L. R. A. 836. With this rule in mind we will examine the various provisions of this statute in connection with the contentions of counsel for the respective parties. The statute is as follows:
Section 1. A tax shall be and is hereby imposed upon all inheritances, devises, bequests, legacies and gifts of every kind and description, of any and all persons and corporations, the value of which exceeds $10,000, and upon such excess only.
Sec. 2. Such tax shall be computed upon the full and true-value of such inheritance, devise, bequest, legacy or gift, above-such excess, at the following rates, viz.:
1. When such valuation is over $10,000 and less than $50,000,. the rate shall be one and one-half per cent, thereof.
2. When such valuation is $50,000 or over, and less than’ $100,000, the rate shall be three per cent, thereof.
3. When such valuation is $100,000 or over, the rate shall be • five per cent, thereof.
It is also urged that subdivision 1 of this section contains an arbitrary and unfair discrimination in favor of inheritances and devises amounting to less than $10,000, and such as to render the statute violative of the constitution. It will be observed that the statute divides the tax into three classes. The first class includes inheritances or devises between the sums of $10,000 and $50,000; the second, to sums between $50,000 and $100,000; and the third, those above $100,000. Respecting the first class the statute provides that the tax thereby imposed shall be computed upon the full value of the inheritance above the exemption “at the following rates: 1. When such valuation is over $10,000 and less than $50,000 the rate shall be one and one-half per cent, thereof.” It is contended that by the language here employed the statute creates an exemption of $20,000 to persons coming within the first class, receiving less than $10,000' — in other words, that, unless the inheritance exceeds the sum of $10,000 over and above the previously fixed exemption of $10,000, no tax is imposed at all, while those of this class who receive over $10,000 and less than $50,000 are taxed at the rate there prescribed upon the whole amount; and it is insisted that this is a discrimination between persons of the same class, rendering the statute invalid.
We do not concur in this view. The intention of the lawmakers is here indefinitely expressed. The language is somewhat ambiguous;
We come, then, to the main contention, namely, that the statute violates the constitutional mandate of equality in taxation, and is void. Section 1, article 9, of our constitution provides, so far as here material, that:
All taxes to be raised in this state shall be as nearly equal as may be: * * * Provided * * * that there may be by law levied and collected a tax upon all inheritances, devises, bequests, legacies and gifts of every kind and description, above a fixed and specified sum, of any and all natural persons and corporations. Such tax above such exempted sum may be uniform, or it may be * * * graded or progressive, but shall not exceed a maximum tax of five per cent.
It is insisted that the proviso authorizing the inheritance tax must be construed in connection with the equality mandate, and that, properly construed, the tax, although it may be graded or progressive, must, as respects graded or progressive features, be made as nearly equal as may be, and that the statute does not conform to this requirement. Counsel contend that this construction is sustained by the Drew case. In this we do not concur.
The history of taxation is, in harmony with all human affairs, one of evolution. Its progress from the earliest times to the present day is one of constant development, in keeping with the advancing intelligence of man, unrolling step by step, with changing economic and social conditions, tardily however, new methods and means of subjecting untaxed property to the tax rolls. Originally public revenue was raised by voluntary contributions from the citizens; later; in response
The equity and fairness of this theory, in its broadest sense, when we reflect upon the vast fortunes accumulated as the result of especially advantageous opportunities and facilities, not possessed by people in general, is apparent and obvious. It works no injustice or harm to those thus fortunately situated, does not injuriously affect productive or industrial agencies, and relieves in a measure those with lesser opportunities, and those to whom taxation is always an extreme burden. This theory does not, however, harmonize well with a strict application of the fundamental mandate of equality, as applied more particularly to the proportional system of taxation in force in this and other states. We mean by “proportional system” a tax at a fixed and uniform rate, in proportion to the amount of taxable property, based upon a cash valuation ; and legislatures and courts have been not a little embarrassed in attempts to. apply it.
But an examination of the books discloses that the equality mandate has been expanded and made to yield, from time to time, to new and
The statute before the court in the Gorman case prescribed, as a condition to the settlement of estates of deceased persons, the payment of what is known in England and other European countries as “probate duties”; that is, a tax graded in accordance with the valuation of the estate to be probated. The court there held that the statute violated the equality provisions of the constitution and was consequently void. Duties or taxes of the character of those imposed by that statute are sustained by nearly all the courts of this country, upon the principle that it is not a tax upon property and the equality rule does not apply. The question before us is whether the people, by the enactment of the amendment under consideration, intended to the extent expressed therein to make a farther departure from the equality rule. That such was the intention was distinctly held in the Drew case, and we have no misgivings respecting the correctness of the conclusion there reached. It was there said that the provision authorizing the tax to be graded or progressive was a distinct departure from the rule of equality, as near as may be, and authorized the legislature, in its discretion, to graduate the tax by increasing the percentage, within the maximum limit of five per cent., as the value of the property received increased.
The inheritance tax has been in existence for years, and, although not generally in force in the states of this country until recent times, the general principle has been practiced in European countries for ages, and for a number of years in some of the states of the Union. It is variously termed an “inheritance tax,” “succession tax,” “legacy tax,” and “probate duties”; but, whatever it may be termed, it is not a tax upon property, but upon the right of succession thereto. Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 288, 18 Sup. Ct. 594, 42 L. Ed. 1037; Plummer v. Coler, 178 U. S. 115, 124, 20 Sup. Ct. 829, 44 L. Ed. 998; In re Sherman, 153 N. Y. 1, 46 N. E. 1032; School District v. Learn, 53 Pa. St. 181. An interesting history of the subject may be found in Dos Passos, Inher. Taxn., West, Inher. Taxn. and Knowlton v. Moore, 178 U. S. 41, 20 Sup. Ct. 747, 44 L. Ed. 969.
Our constitution provides that the tax may be “uniform, graded, or progressive.” This language can be construed in but one light. It has a fixed and definite meaning in the law. Seligman in his work on Progressive Taxation (page 11) says: “The term ‘progressive tax/ or ‘graduated tax,’ is also used in another way. If a different rate is levied on different kinds (not different amounts) of property or income, we speak not of a graduation but of a differentiation of the tax. But, if different rates are levied on inheritances or bequests, according to the degree of relationship of the heir or successor, the tax is sometimes called a graduated or progressive tax. In ordinary cases, ‘progressive’ denotes a changed'rate for altered amounts.”
Authority to classify persons and property for the purpose of taxation is well settled. When based upon some reasonable and practical rule, founded on such substantial difference of situation or circum
taxes upon different trades and professions, and may vary the rates of excise upon various products. It may tax real estate and personal property in a different manner. It may tax visible property only, and not tax securities for payment of money. It may allow deductions for indebtedness, or not allow them. All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the state legislature, or the people of the state in framing their constitution.”
Graduated or progressive taxation is intimately associated with that of classification, and perhaps amounts, substantially, to the same thing. The progressive rule is applied to the income tax, which in principle is identical with the inheritance tax; the only difference being that the income tax is one upon property, while the inheritance tax is upon the right of succession. It is applied in different forms, not materially dissimilar to that fixed by the statute under consideration, in all states and countries where the income or inheritance tax is in force; the amount of the income or inheritance being made the basis for a different rate of taxation. The rule applied in our sister states and by the federal court sustains the statute under discussion, whether it be termed a classified or a progressive tax. It is in a sense arbitrary, but not so unreasonable or unfair as to justify interference by the courts.
The Illinois statute was under consideration in the supreme court of the United States in Magoun v. Illinois Trust & Savings Bank, 170 U. S. 288, 18 Sup. Ct, 594, 42 L. Ed. 1037, where the subject was carefully gone over and the classification sustained. That case was cited and relied upon in the Drew case in this court, and is directly in point. The court said, in part: “If there is unsoundness, it must be in the classification. The members of each class are treated alike; that is to say, all who inherit $10,000 are treated alike — all who inherit any other sum, are treated alike. There is equality, therefore, within the classes. If there is inequality, it must be because the members of a class are arbitrarily made such and burdened as such on no distinction justifying it. This is claimed. It is said that the tax is not in proportion to the amount, but varies with the amounts arbitrarily fixed, and hence that an inheritance of $10,000 pays, * * * not three per cent, on $10,-000 and an increased percentage on the excess over $10,000, but an increased percentage on the $10,000 as well as on the excess; and it is said, as we have seen, that in consequence one who is given a legacy of $10,001 by the deduction of the tax receives $99.04 less than one who
A similar statute was enacted by the legislature of the state of Washington, which was sustained by the supreme court of that state in State v. Clark, 30 Wash. 439, 71 Pac. 20; and in Colorado in the case of In re Estate of Magnes, 32 Colo. 527, 77 Pac. 853. In most of the states where this form of taxation is in force, a distinction is made between collateral and lineal descendants, and in some lineals are not taxed at all, while in others a greater tax is imposed upon collaterals than upon lineals. A distinction might properly have been made by the legislature of this state, but the failure to do so is not fatal to the statute. Whether a differentiation should be made is a matter of legislative discretion, and in no sense a judicial question.
A careful consideration of the entire subject, in the light of these general principles, leaves in our minds no doubt that the framers of the constitutional amendment intended, as said in the Drew case, to depart from the rule of equality as respects an inheritance tax. It was another step in the evolution of taxation in this state. The statute in question is not obnoxious to the constitution as thus amended, and must be sustained. The authority to make the tax graded or progressive was incorporated in the law advisedly, and in view of the well-known and firmly established system of such taxation in force in this •country, based upon the wise and wholesom.e doctrine that ability to pay is the true basis for all taxation. Though it results in a measure in inequality, it conforms to a system sanctioned and supported by the authorities generally, and is not repugnant to constitutional principles. Three distinct classes are created by the statute, and there is absolute
It follows that the judgment appealed from must be, and is, reversed, and the cause remanded, with directions to the court below to proceed in harmony with the views here expressed.