45 Md. 361 | Md. | 1876
Lead Opinion
delivered the opinion of the Court.
The main questions presented by this appeal are, first, whether the tax of one-half of one per centum upon the gross receipts of railroad companies, imposed by the Act of 1872, ch. 234, in lieu of all other taxes, is a valid exercise of Constitutional power ? and secondly, if so, whether the defendant corporation is,' by its charter, exempt from the payment of said tax?
The power of the Legislature to impose a tax of this character cannot be questioned, unless there is some provision in the Constitution prohibiting the exercise of such power.
A tax upon the gross receipts of railroad companies, it is contended, is an arbitrary tax upon property levied without regard to value, and not being imposed upon all property in the State, is in conflict with the Bill of Rights, which declares:
“ That the levying of taxes by the poll is grievous and oppressive, and ought to be prohibited; that paupers ought not to be assessed for the support of the government; but every person in the State, or person holding property therein, ought to contribute his proportion of public taxes, for the support of the government, according to his actual worth in real or personal property; yet, fines, duties or taxes may properly and justly be imposed or laid, with a political view for the good government and benefit of the community.” Art. 15, Bill of Bights, Constitution of 1867.
This Article in the Bill of Rights was not adopted for the first time by the Constitution of 1867; on the contrary, it is to be found word for word, in the Constitution of 1776, and in fact, in every Constitution adopted in this State from that time to the present, constituting thus a
It can hardly he necessary to say, the Bill of Rights announced no new principle in regard to the exercise of the power of taxation, on the contrary, with a phraseology somewhat varied hut unimportant, it is to he found in every standard work on the subject.
That every one should contribute his proportion of the public burdens, according to the measure of his ability, and that all taxes levied upon property for the support of the government, should so far as it is practicable, he equal and uniform, may he considered as a principle underlying the American system of taxation. It was to give an authoritative recognition of a principle so just and impartial, and which challenges universal assent, that the framers of the Constitution of 1776, made it a part of the organic law of the State. Having denounced the levying of taxes by the poll as grievous and oppressive, and recognizing property, as contra-distinguished from the person, to he the proper subject of taxation, they declared that every one ought to contribute his proportion of taxes according to the value of his property, and in order that every one should hear his just proportion and no more, it follows as a necessary corrollary that all taxes levied upon property, should be equal and uniform according to its actual value. In other words, that the Legislature should not impose a tax upon the property of one person at one rate, and upon the property of another at a different rate.
“The power of taxing the people and their property,” say the Supreme Court, “ is essential to the very existence of government and may be legitimately exercised on tbe objects to which it is applicable, to the utmost extent to which the government may choose to carry it. The only security against abuse of this power, is found in the structure of the government. In imposing a tax the Legislature acts upon its constituents. This is in general a sufficient security against erroneous and oppressive taxation.” Brown vs. McCullough, 4 Wheaton, 429.
We must not forget too, that the Article in the Bill of Rights was first adopted in 1776, just after the beginning of the War for Independence. No human wisdom could foresee the result of that great contest, nor to what extent the necessities of the State might require the exercise of the power now under consideration, and we can hardly presume that the wise men who framed' that instrument, intended to limit the power of the Legislature in regard to it beyond what they have plainly expressed. And in order to prevent any misconstruction, they declared that in addition to taxes upon property, other taxes might he levied “for the good government and benefit of the community.”
Without extending this opinion by a review of the several cases, in which this Article of the Bill of Rights has been considered, it is sufficient to say, they go to the extent of holding, and no. further, that when taxes are laid directly upon property, they must be equal and uniform upon all property in the State.
In the late case of The State vs. The Cumberland and Pennsylvania Railroad Company, 40 Md., 22, a tax upon all coal mined in the State for transportation, was held by
The question then on this branch of the case resolves itself into this, is a tax upon the gross receipts of railroad companies in lieu of all other taxes to he paid hy them, a direct tax upon the property of such companies, within the meaning of the Bill of Rights? We say it is not. It is neither levied upon the capital stock nor upon their property, in the sense in which the term property is used in the Constitution. Gross receipts, it is true, when received may be considered as the property of such companies, just as a person’s income may be considered his property when paid to him. But it will hardly he contended, that an income tax is a direct tax upon property within the meaning of the Bill of Rights. Properly speaking, the tax is not imposed upon the gross receipts; they are referred to not as descriptive of the subject to he taxed, but merely as furnishing the basis of ascertaining the amount of tax to he paid. If then it is not a tax upon property, what is it? We say, it is a tax upon the franchise of railroad companies, measured hy the extent of their business.
A franchise is a special privilege conferred by the State on certain persons, and which does not belong to them of common right, and although the franchises of a company may he considered in one sense property, and valuable property, yet they are not property in the meaning of that term, as used in the Bill of Rights.
That there is a wide distinction between a tax upon the franchises of a corporation, and a tax upon its property,
The judgment in this case was affirmed by the Supreme Court of the United States. Mr. Justice Clifford says:
“Nothing can be more certain in legal decision, than that the privileges and franchises of a private corporation, and all trades and avocations by which citizens acquire a livelihood, may be taxed by a State for the support of the State government.” 6 Wallace, 625.
In the case of The Commonwealth vs. Provident Institutions for Savings, 12 Allen, 312, it was contended that a tax upon the deposits of Savings Banks, was unconstitutional because it was an arbitrary tax upon the property of a certain class of corporations only, and not laid uniformly upon all property in the State, hut it was held by the Court to be a tax upon the franchise of such corporations and not upon their property. Upon appeal to the Supreme Court of the United States, the judgment in this case was also sustained. 6 Wallace, 630.
“The tax is neither imposed upon the shares of the individual stockholders, nor upon the property of the corporation, hut is a tax upon the corporation itself, measured hy a per centage upon the cash value of a certain proportional part of the shares of its capital stock.
Nor is there anything in the case of “ The State Tax on Railroad Gross Receipts, 15 Wall., 284, in conflict with these views. There it was contended, that a tax imposed hy the Legislature of Pennsylvania upon the gross receipts of railroad companies, was a tax upon transportation, and therefore in conflict with the Constitution of the United States, which confers upon Congress the exclusive power to regulate inter-State commerce. And although the Court speaks of gross receipts when received hy the company and mingled with its property, as property belonging to the company, yet we understand the Court as deciding the tax to he in fact levied “ upon the railroad company, measured in amount hy the extent of its business or the degree to which its franchise is exercised.”
Being of opinion then, that the tax upon gross receipts of railroad companies, imposed by the Act of 1812, is a tax upon the franchise of such companies, and not upon their property, as that term is used in the .Bill of Rights, we come to the question whether the defendant corporation is exempt from the payment of said tax?
This corporation was formed by a union of the Baltimore and Port Deposit Company, extending from the City of Baltimore to the Susquehanna river, the Wilmington and Susquehanna Company, extending from said river to
The Wilmington and Susquehanna Company was also formed, by the union of a company chartered'by that name, by the State of Delaware, and the Delaware and Maryland Railroad Company, incorporated by this State, and running from the Susquehanna river to the Maryland and Delaware line. Sec. 19, of the Act of 1831, ch. 296, incorporating this latter company provided:
“That the said road or roads, with all their works, improvements and profits, and all the machinery of transportation used on said road, are hereby vested in said company, * * and the shares of the capital stock of said company shall be deemed and considered personal estate, and shall be exempt from the imposition of any tax or burden by the State’s assenting to this law, except upon that portion of the permanent and fixed works of said company, which may lie within the State of Maryland.”
The purpose of the several Acts of the Legislature, under which these companies were united and the present defendant corporation formed, “was to vest in the new company the rights and privileges which the original companies possessed under their separate charters,” that is to say, “the rights and privileges in Maryland, which the Maryland company had there enjoyed ; and not to transfer to either State and enforce therein the legislation of the other.” Delaware Railroad Tax Case, 18 Wall., 221; Philadelphia, Wilmington and Baltimore R. R. Comp. vs. Maryland, 10 How., 377.
It is clear then, that by the consolidation of these companies, the qualified exemption granted by the Act of 1831 to the Delaware and Maryland Company, became vested in the new company, the present defendant corporation, and the question then is, whether under such exemp
In a former part of this opinion, we have said that a tax upon the franchises of a company is not a property tax within the meaning of the Bill of Rights, which declares “that every person ought to contribute his proportion of taxes for the support of the government, according to his actual worth in real or personal property.” Although this may be so, yet the franchise of a railroad company, namely, its right to maintain and operate its road and to receive fare for freight and passengers, may, in one sense, be considered property, and in the construction of an Act exempting the company from taxation, the immunity thereby granted may be held to include not only its capital stock and tangible property strictly speaking, but also its franchises, provided the language is such as to satisfy the Court the Legislature so intended.
In Wilmington Railroad vs. Reid, 13 Wall., 264, where an Act provided, that all the property purchased and works constructed, and profits accruing on said works should be vested in the shareholders, and that the property of said company and the shares therein, shall be held exempt from any public tax or charge, it was held that the franchises of the company were also exempted.
Row the Act of 1831, declares that the road or roads with all their ivories,• improvements and profits, and machinery, dfcc. are “ hereby vested in said company, and the shares of the capital stock of said company shall be deemed and considered personal estate, and shall be exempt from the imposition of any tax or burthen, except the fixed and permanent works within the State.”
Under this Act our predecessors, in the Philadelphia, Wilmington and Baltimore Railroad Company vs. Bayless, 2 Gill, 355, held, that the capital stock of the company, its
This decision was rendered in a case in which the present defendant corporation was a party, and upon the precise question now before us, and whatever may be our opinion in regard to the meaning of the Act of 1831, we are bound by the construction thus placed upon it. It can hardly he necessary to say, such an exemption of the capital stock and property and profits of a company, exempts also its franchises, because its profits are derived solely from the fare and tolls received from freight and passengers. Under the decision thus rendered by this Court, we are of opinion, that the .Legislature has no power to tax the gross receipts of this part of the defendant’s road. ■
There is no exemption from taxation in the charter of the Baltimore and Port Deposit Company, the only other portion of the road lying in this State, and the right of the Legislature to tax the gross receipts of this part of the road cannot be questioned.
The only remaining point then to be considered, is the apportionment of the gross receipts liable to taxation, under the Acts of 1872 and 1874, and in regard to this, we are of opinion, that upon the pleadings and admitted facts in this case, the State is entitled to recover a sum equivalent to that part of the gross receipts, which may be in the same proportion to the whole amount of gross receipts of the defendant, on its entire road from Baltimore to Philadelphia, that the number of miles of the Baltimore and Port Deposit Company bears to the whole number of miles of the Philadelphia,, Wilmington and Baltimore Company, of which it forms a part. It is true, the gross receipts on one part of the road may be greater than on another, but perfect equality in the assessment and apportionment of taxes is unattainable, and the rule we have
It follows from what we have said, that the Court erred in granting the defendant’s prayer and in refusing the fourth, twelfth and thirteenth prayers of the plaintiff.
Judgment reversed, and neio trial awarded.
Dissenting Opinion
delivered the following dissenting opinion:
I dissent in toto from the opinion of the majority of the Court filed in this case ; and while I shall refrain from a general discussion of the questions presented by the record, there is one fundamental question in regard to which I shall state briefly the grounds of my dissent.
That gross receipts of a railroad company, upon which the tax in this case was levied, under the Act of 1812, ch. 234, are not property, within the meaning and contemplation of the 15th Article of the Bill of-Rights of this State, and may, therefore, be taxed without restriction, is a proposition to which I can never yield assent. What are such receipts if not personal property? And if personal property, upon what principle are they to be distinguished from other personal property within the meaning of the Bill of Rights ? The rule of taxation as prescribed by the 15th Article of the Bill of Rights has reference to real and personal property, as those two well defined classes of property are known and understood, and makes no manner of distinction between the one species of real or the one species of personal property and another. Whatever falls within the one class or the other is within the letter, and also within the spirit and reason, of the provision of the Bill of Rights. To make distinction by construction, such as is made in this case, and thus withdraw property from the protection of the restriction imposed by the Article
I certainly know of no case that decides that the gross receipts or earnings of a corporation are not property, in the strictest sense of the term. On the contrary, according to my reading of the cases, they all concede that such receipts are property of the corporation, as much so as anything else owned by it. Such was certainly conceded and declared in the case of the State Tax on Railway Gross Receipts, 15 Wall., 284. In that case, the Supreme Court, in speaking of the tax and upon what it was imposed, said: “ The tax is laid upon the gross receipts
Nor can I assent to the proposition that this tax is to he regarded as a tax on the franchise or business of the corporation, measured by the amount of its gross receipts, and therefore not within the restriction imposed by the 15th Article of the Bill of Rights. The tax, by the very terms of the law, is “levied annually upon the gross receipts of all railroad companies worked by steam.” It is, therefore, a specific levy upon the particular fund, requiring a certain proportion of it to be paid over to the State. But if the terms of the law were different, I utterly deny that the State has power, under the Bill of Rights, to impose an arbitrary tax, without reference to value, and uniformity of assessment with other property of the State, on the franchise of the corporation. The franchise of the corporation is not only property, but is property of the most valuable kind, essential to the very
As it is apparent that the State tax attempted to he collected from the appellee, under the Act of 1872, ch. 234, imposing a tax of one-half of one per cent, on the gross receipts of the company, far exceeds the rate of taxation imposed on the other real and personal property of the State, I think such tax invalid, and that the judgment of the Court below ought to be affirmed.