Lead Opinion
This action was instituted in the superior court of Lincoln county, and it is in the nature of an action in mandamus to require the assessor of that county to list for taxation purposes, for the year 1908, mortgages, notes, ac
It is urged in support of the demurrer that it was the duty of appellant to refuse to list the items mentioned, by reason of the act of the legislature as found in chapter 18, at page 69 of the session Laws of 1907. Section 1 of that act is as follows:
“That section 3 of ‘Chapter x-xxxm of the Laws of 1897, amended June 12, 1901, is hereby amended to read as follows: Sec. 3. Personal property, for the purpose of taxation, shall be construed to embrace and include, without especially defining and enumerating it, all goods, chattels, stocks or estates; all improvements upon lands, the fee of which is still vested in the United States, or in the State of Washington, or in any railroad company or corporation, and all and singular of whatsoever kind, name, nature and description, which the law may define or the courts interpret, declare and hold to be personal property, for the purpose of taxation, and as being subject to the laws and under the jurisdiction of the courts of this state, whether the same be any marine craft, as ships and vessels, or other property holden under the laws and jurisdiction of the courts of this state, be the same at home or abroad: Provided, That the ships or vessels registered in any custom house of the United States within this state, which ships or vessels are used, exclusively in trade between this state and any of the islands, districts, territories, states of the United States, or foreign countries, shall* not be listed for the purpose of or subject to taxation in this state, such vessels not being deemed property within this state: Provided, That mortgages, notes, accounts, moneys,*172 certificates of deposit, tax certificates, judgments, state, county, municipal and school district bonds and warrants shall not be considered as property for the purpose of this chapter, and no deduction shall hereafter he allowed on account of an indebtedness owed.”
It will be seen that the effect of the closing proviso of the. section is to exempt from taxation the items there enumerated. If, therefore, the statute is a valid one, the appellant did his duty; but if it violates constitutional limitations, the judgment of the court was right. The constitutionality of the statute is the only question involved in this appeal.
It is contended that the act is invalid because of insufficiency of the title. The title is as follows:
“An act amending an act entitled, ‘An act to amend section 3, of chapter Lxxxm of the Laws of 1897, relating to revenue and taxation,’ passed the senate and the house June 12, 1901, notwithstanding the veto of the governor, and declaring an emergency.”
If it is necessary to pay strict regard to everything contained in this title, then it is singularly involved. Reference to chapter 83 of the Laws of 1897, to which the title refers as the law amended by this act, discloses that it treats of monuments and notices upon mining claims. It is manifest that the reference to the former statute is a pure error, as the two ácts relate to subjects entirely separate and distinct. This title does however further state the subject as “relating to revenue and taxation,” and the body of the act clearly and succinctly treats of that subject alone. The subject of exemption from taxation treated in the body of the act is included in the general subject specified in the title. We think the erroneous reference to the former statute must be treated as mere surplusage, and inasmuch as without that part of the title there is a clearly stated and single subject which is followed by a clear treatment of that subject in the act itself, the statute becomes an independent one and has the effect of amending any existing statute upon the subject and of re
It is further urged that the act violates § §■ 1 and 2 of art. 7 of the state constitution. Section 1 contains, among other things, the following:
“All property in the state not exempt under the laws of the United States or under this constitution, shall he taxed in proportion to its value, to be ascertained as provided by law.”
Section % is in part as follows:
“The legislature shall provide by law a uniform and equal rate of assessment and taxation on all property in the state, according to its value in money, and shall prescribe such regulations by general law as shall secure a just valuation for taxation of all property, so that every person and corporation shall pay a tax in proportion to the value of his, her or its property: Provided, That a deduction of debts from credits may be authorized.”
It is argued that the exemption of the items mentioned in the statute violates the constitutional provision of § 1 quoted above, which requires that all property in the state shall be taxed except such as is exempt under the laws of the United States or under the constitution of the state. It is contended that credits such as mortgages, notes, and accounts, are property and cannot be excluded by the legislature from the subjects of taxation. The argument assumes that all property in the state cannot be taxed without the taxation of credits Is the assumption correct ? The constitution simply requires — that all property shall be taxed, but the method of doing it is left to the legislature. If the method devised by the legislature reaches all property in fact, then there is no violation of the constitution. It is possible to assess the same property in different ways any one of which would subject the entire property to the tax. For example, one person may own the fee title to real estate and another may own an easement or a
“But, as we have seen, the assessment of the capital stock of a domestic corporation which has all its property in which the capital stock is invested already assessed is duplicate taxation, and this latter result will not be inferred without specific legislation. It may be further observed that § 1676, Bal. Code, in providing the method for the assessment of domestic corporations such as this, does not contemplate duplicate taxation.”
See, also, Ridpath v. Spokane County, 23 Wash. 436, 63 Pac. 261.
All the provisions of the constitution on the subject of taxation cannot be fully and literally met. For purposes of present consideration these provisions may be stated as follows: “All property” shall be taxed. The assessment shall be “uniform and equal,” and a “just valuation” shall be placed upon all property, so that every person shall pay a tax in proportion to the value. No method of taxation in its
It will be seen that the items specified by the statute of 1907 which shall not be considered as property for the pur — • poses of assessment and taxation, may all be classified as “credits,” except the item of “moneys.” So far as credits are — concerned, if it is demonstrable that the total wealth of the state can be once taxed without the taxation of credits in any form, we think the constitution is satisfied without the taxation of credits. The multiplicity of credits does not add to the property wealth of the state. If A buys of B a piece of real estate and agrees, by promissory note or otherwise, to pay $5,000 therefor, there is as a result in the hands of B a credit in the amount of $5,000, but there is not thereby created $5,000 more property or wealth. By the transaction the land has passed from B into the possession and control of A and is taxable the same as if it had remained with B. The credit in the hands of B is a matter of no value or consequence, except for the prospect or faith that A will in the future deliver to B $5,000 in actual money or other prop
A similar illustration applies to a loan of money. At this „ point it is proper to remark that we think moneys cannot properly be classified with credits as is done in the statute of 1907. Money in practical commercial operations possesses such value by way of immediate purchasing or exchange — powers as in effect robs it of a mere representative character and clothes it with the dignity of property having intrinsic value. We therefore think that the proviso in question must —be held to be inoperative so far as money is concerned, since to exempt it from taxation would amount to a palpable effort to avoid the taxation of all property. Becurring now to the illustration as to a credit created by the loan of money,, we will suppose that A borrows from B $5,000 in cash. A, instead of B, becomes the possessor of the money, and either it or its equivalent in other property which it purchases for A becomtes taxable in the latter’s hands. To tax the money — in A’s hands and also the mere right which B has to call upon A for its repayment is clearly double taxation. These’ illustrations it is believed should apply to all credits. Credits are in effect the mere legal right with which one is clothed to demand the delivery of money or other property in the future, and until such transfer of possession is made, that property is-taxed wherever it may be. Thus the total actual property or —- wealth of the state may be once taxed without the taxation-of credits, and the constitutional requirement is thereby fully-met.
It is urged that the makers of our constitution must have intended to declare that credits are property which must be taxed, from the fact that § 2 of art. 7, supra, provides that “a deduction of debts from credits may be authorized.” It is insisted that the above words are a clear constitutional recognition of credits as property.’ If, however, we should recognize the argument as forcible and should undertake to adopt it, we should at once be met with the requirement in the same section that all taxation shall be uniform and equal. We have seen that the taxation of credits violates uniformity and
With the mere policy of the statute, the courts have nothing to do, except in so far as the same may throw light upon the legislative intention. It may be stated in this connection, as a matter of common knowledge, that one of the most fruitful sources of inequality in taxation is the attempt to tax credits. Laws for that purpose can never be effectively enforced. Efforts to conceal the existence of the credits are so successful that a few honest persons pay the taxes and the large majority of holders do not. Moreover, in practical experience,the tax is not really paid by the holders of the credit, but it is paid by his debtor. When mortgages are taxed, the mortgagee seldom pays the tax, but the burden thereof is imposed upon the mortgagor by way of increased rates of interest or otherwise, and the same may be said as to increased rates of interest imposed upon borrowers generally. Such results cannot well be avoided, and doubtless the legislature had such considerations in mind as supporting the policy of this law. It was no doubt believed that all the wealth of the state can be once taxed without the taxation of credits, and that with the constitutional requirement as to taxation of all property thus satisfied, uniformity and equality can be the better effected and the abuses above mentioned largely corrected.
We therefore think, for the foregoing reasons, that the statute is not unconstitutional, except in so far as it attempts to exempt moneys from taxation. That, however, does not invalidate the other provisions, as has been often held. The
Rudkin, Dunbar, Crow, and Mount, JJ., concur.
Dissenting Opinion
(dissenting) — I am compelled to dissent both from the conclusion and judgment in this case. The decision is rested, as I understand it, on three propositions: (1) that credits are not property; (2) that to tax credits violates the principle of equality and uniformity in taxation required by the constitution; and (3) that credits are taxed by the taxation of the tangible property of the state. As the questions decided are important, I feel justified in briefly stating the grounds of my dissent.
(1) The constitutional provisions on the subject of taxation appropriate to the questions before the court are set out in the majority opinion, and need not be reproduced here. A reading of them makes it at once manifest that it was the purpose and intent of the framers of the constitution, as well as that of the people who adopted it, to require for the purposes of revenue the taxation of all private property in the state, of whatsoever kind or nature, equally and uniformly, in proportion to its value in money. The language is explicit. It admits of no limitation or construction. “All property” is. named, and the only exception provided for is that a deduction of debts from credits may be authorized. The questions, therefore naturally arise what is meant by the word “property” and in what sense was the word used in the constitution ?
That mortgages, notes, accounts, moneys, certificates of deposit, tax certificates, judgments, state, county, municipal
That the word “property” was used in the constitution in its general sense seems to me also to be free from doubt. It is a cardinal rule of construction that the language of a state constitution, more than that of any other written instrument, is to be taken in’ its general and popular sense. The reason for the rule lies in the fact that its makers are the people who: adopt it. Its language is their language, and its words have meaning as they commonly understand them. When, therefore, words are used which have both a general and a technical sense the former must prevail over the latter, unless the very nature of the subject-matter indicates, or the context suggests, that the technical sense was intended. In the sentence on which the word “property” is used in the constitutional provision quoted there is no attempt at definition. It is used without connection with any sentence or phrase which limits its meaning. Nor is there elsewhere any limitation upon its meaning. Indeed, there is no reason for concluding that the word was used other than in its general sense.
That the makers of the constitution had the right to provide for the taxation of credits, if they so desired, I think will be conceded. It will be conceded also that this could be done
But there is another reason more potent to my mind than even the foregoing, which shows that the framers of the constitution intended to provide for the taxation of credits by the use of the general term “property.” They authorized the legislature, when providing the method of taxation, to allow a deduction of debts from credits. Clearly, if it had not been understood that credits were property and taxable as such, this deduction would not have been authorized.
(2) Does the taxation of credits violate the principle of equality and uniformity in taxation required by the constitution? The affirmative argument is, that to tax these 'obligations is double taxation. Thus it is said that if A loans B $5,000, and takes B’s obligation to repay that sum, it is double taxation to tax the obligation in A’s hand and the money in B’s. But if this be true, and the obligation be property, I cannot understand how the rule of uniformity and equality is advanced by exempting the obligation. It seems to me that this but further confuses the matter. It cannot be said that the obligation is doubly assessed. If any property is doubly assessed it is the money, and to exempt the obligation exempts the wrong thing. But it is not sound for another reason. When A, the money loaner, loans to B, the borrower, $5,000, and takes his obligation to repay the loan, A’s wealth is not thereby decreased $5,000, nor is B’s wealth increased $5,000. The parties have only made an exchange of wealth, and each has exactly the same amount of wealth he had before. If, therefore, each paid taxes on $5,000 before the exchange, in justice and equity each ought to pay taxes on a like amount thereafter. The law as it heretofore existed, however, seems to have made A pay, after the ex
(3) Finally, it is said that credits are taxed in other forms of property, and for that reason their exemption from taxation as credits is justified. The argument in support of this proposition is that credits are but representations of interests in the tangible property of the state, and that when the tangible property of the state is taxed all the wealth within the state is taxed. But I must dissent from this proposition also. It assumes, what is obviously not the fact, that there is no wealth in credits independent of tangible property. Suppose that tomorrow a person should come into this state from some other state bringing with him .stocks and bonds to the value of a million dollars of some solvent railroad corporation whose lines do not touch this state, would any one say that he had brought no wealth into the state, or that the wealth of the state had not been increased? Or, would any one say that these stocks and bonds were taxed by the taxation of the tangible property of the state? Obviously not. How then can it be said that the wealth of the state is taxed by the taxation of its tangible property? It is no answer to say that these bonds are taxed by the taxation of the railroad in another state. This does not satisfy our own laws which require that all property within the state bé taxed. Nor does it satisfy the justice of the matter. So long as this
Again, it is suggested in this connection, and it is a common argument used in support of laws of this character, that credits escape taxation in the major part through the dishonesty of their holders, and that, when they are found, the tax is paid by the debtors in the way of increased interest. But this does not appear to me to argue in favor of the exemption of credits. If the laws are so lax as to permit credits to escape taxation, the remedy is to reform the law, not to exempt credits. It will not do to say that no tax law can be framed that will reach credits. This is no place to point out remedies, but when the law places the premium upon honesty instead of upon dishonesty in these matters, the evil will disappear. But, supposing it be true that a goodly part of the credits of the state will escape the assessor under the best framed law, is it not better that the part that can be reached be taxed than that all be allowed to escape? No one pretends that the assessor reaches all of the tangible personal property in the state, yet I have never heal’d this given as a reason for the exemption from taxation of all tangible personal property.
The claim that the borrower pays the taxes on credits in the way of interest is only true in a general sense. It is true in the sense that the renter pays the taxes on rented land in the way of rents, that the builder pays the taxes on the manufacturing plants when he pays the cost of the building material, that the consumer pays the tax on the products he consumes when he pays the price of the consumed products,
But these latter considerations are beside the question. If the constitution declares that notes, accounts, moneys, certificates of deposit, and the like, are property and taxable as such, the legislature is without power to exempt them from taxation, and any statute attempting so to do is void. I believe it has so declared, and for that reason I think the judg- ■ ment of the lower court should be affirmed.