1. Section 27, Article III: "The legislature shall not pass local or special laws in any of the following enumerated *Page 444 cases, that is to say, * * * for the assessment or collection of taxes * * * in all other cases where a general law can be made applicable no special law shall be enacted."
2. Section 34, Article I: "All laws of a general nature shall have a uniform operation."
3. Section 28, Article I: "* * * All taxation shall be equal and uniform."
4. Section 32, Article I: "Private property shall not be taken for private use * * * nor in any case without due compensation."
5. Section 33, Article I: "Private property shall not be taken or damaged for public or private use without just compensation."
6. Section 6, Article XVI: "Neither the State, nor any county, city, township, town, school district, or any other political subdivision, shall loan or give its credit, or make donations to, or in aid of any individual, association or corporation, except for necessary support of the poor * * *."
The statute in question is long and is similar to many unemployment compensation acts in other states. The details thereof need not be set out and a general outline will suffice. Its purpose is to provide compensation for employees during involuntary unemployment. The amount of payments range from $7.00 to $20.00 per week, depending on the amount which the workmen have previously earned. The benefit is confined to unemployed workmen who register for work, are able to work, are available for work, and have been employed for a certain length of time previous to the time of making claim for payment. Other limitations are mentioned in the statute. In order to raise a fund from which these payments may be made, the statute imposes a charge or tax upon the total payroll of the respective employers in this state, excepting from the *Page 445 statute, however, payments made by employers of agricultural, ranch or dude ranch labor, domestic service, public service, service for charitable purpose, and "service performed by an individual in the employ of his son, daughter, or spouse, and service performed by a child under the age of 21 in the employ of his father or mother." The Unemployment Compensation Commission, provided in the statute, is required to keep a separate account for each employer. Employers are divided into seven classes and the rate of contribution to the fund depends upon the status of their account and the amount which has been drawn against it by reason of payments made to former employees, the rate of payment varying from one-half of 1% to 3.6% of the total payroll of the respective employer, the standard rate being 2.7%. The fund created by the contributions is a separate fund held by the State Treasurer, separate and apart from the public funds of the state, and is to be used solely for the purpose of meeting the payments to be made to unemployed workmen.
I. The first question to be answered herein is as to whether or not the statute in question is a special or a general law, in controvention of Section 27 of Article III of the Constitution which provides that in all cases where a general law can be made applicable, no special law shall be enacted and the legislature shall not pass special laws for the assessment or collection of taxes. We think that the decisions of this Court dispose of this question. It was stated in Standard Cattle Company v. Baird,
In the case at bar the unemployment compensation act in question embraces a group of objects, or a class of subjects, throughout the state, and is not accordingly, a special law but is a general law unless the exemptions of certain employers mentioned in the statute make the classification unreasonable. In view of the fact that that question also arises in connection with the constitutional provision relating to taxation, certified to this Court, we shall defer the discussion of that point until we reach that subject, but may say in passing that Public Service Commission v. Grimshaw, supra, goes far in holding the classification not to be unreasonable.
II. What we have said is largely applicable to the question as to whether or not the statute in question is violative of Section 34 of Article I of the Constitution *Page 447 providing that all laws of a general nature shall have a uniform operation. This Court stated in State v. A.H. Read Co., supra, that that provision of the Constitution is held to be satisfied by a statute applying uniformly within a class of persons, based on a reasonable distinction, or objects of a reasonable class, and operating the same in all parts of the state under the same circumstances. See also 59 C.J. 722. Unless, accordingly, the exemptions of employers mentioned in the act render the classification unreasonable, the section under discussion cannot be said to be violated.
III. We are asked whether the statute in question is contrary to the constitution which provides that "all taxation shall be equal and uniform." That question assumes that the charge imposed upon employers is a "tax". Section 1 of Chapter 113, being the unemployment compensation act, states that the legislative act is passed in pursuance of the police power. We seem, accordingly, to be confronted, to some extent at least, by the question as to what bearing the police and the taxing powers, respectively, have on this case. While courts consider the legislative declaration of the purpose of the act they are not bound thereby. 26 R.C.L. 19; Cooley on Taxation, 4th Ed. Sec. 37. It has been held that if the charges imposed under a statute are primarily in the exercise of the police power, they do not constitute a tax and are not subject to the constitutional limitations upon the power of taxation. 26 R.C.L. 17; 16 C.J.S. 538; Cooley on Taxation, supra, Sec. 29 and 1784. That means — and all that it means is — that in the police power is inherent the power to impose a charge upon the persons and property affected in order to carry the police power, sought to be exerted, into force and effect, and for that purpose is not dependent upon the taxing power. It has its limitations. It has been held that the police power cannot be used for the purpose of exacting revenue. Viquesny v. Kansas *Page 448
City,
If we inquire into the relation of the rule of these cases to the rule previously stated, namely, that of the limitation of the police power, it seems to be this, that a regulation — using that term in the broad sense — under *Page 450 the police power is not necessarily the regulation of the business or occupation upon which the charge is imposed but may be the regulation of that condition which properly falls within the police power and is so closely connected with the business upon which the charge is imposed as to justify the imposition of the charge upon the latter. In other words, the expense incident to regulation, is the expense to carry into effect the ultimate purpose of the act — in this case, the relief or amelioration of unemployment. If that relationship is true, the rule of these cases is not totally inconsistent with the rule previously mentioned, but is merely a specific application or modification of the latter, thus avoiding an incongruity in our law which is already sufficiently incongruous. In that view of the case, if correct, we could not say that the charges imposed under the statute in question are unreasonable. Employers are divided into seven classes, the amount of contribution depending upon the amount drawn against their account for payments for their unemployed, and the rates are fixed, depending upon whether the amount of the unemployment fund is less than 1 1/2 per cent of the total payroll, or greater than 1 1/2 per cent but less than 2 1/2 per cent, or greater than 2 1/2 per cent. So that it would seem that the statute contemplates that the amount in the fund shall always be approximately sufficient at all times to fulfill the ultimate purpose of the act, but no greater than that. In any event, no evidence in the case shows that the amounts which are to be contributed by employers are greater than the amount which would approximately be commensurate with the expense of enforcing the ultimate purpose of the statute so as to make it unreasonable.
Most of the cases which have held the unemployment compensation act valid as to the employers have so held upon the ground that the charges imposed on *Page 451
them is valid as a tax. What impresses one as perhaps the most logical is the holding of the Supreme Court of Alabama in Beeland Wholesale Co. v. Kaufman,
It is proper, accordingly, that we proceed to discuss the question propounded to us as to the uniformity and equality of taxation, considering for the purpose of this discussion that the contributions of the employers are in fact a tax.
It was held in State v. Snyder,
"In a number of the States it has been held that the constitutional requirement of equality and uniformity does not apply at all to the taxation of occupations, owing to the fact that the taxation of all occupations *Page 453 equally would work the greatest possible injustice and is impossible, in practice. But, if applicable at all, it does not deprive the Legislature of the power of dividing the objects of taxation into classes. It merely obliges the Legislature to impose an equal burden upon all those who find themselves in the same class. * * * To be uniform, taxation need not be universal. Certain objects may be made its subject, and others may be exempted from its operation, certain occupations may be taxed and others not; so some occupations may be taxed for a greater amount and others for a less, but as between the subjects of taxation in the same class, there must be an equality."
(a) The specific claim made herein by counsel for the appellants, in connection with the foregoing constitutional provision, as well as those previously considered, is that the statute in question violates these provisions because of the failure to include all employers on the taxable list, and particular complaint is made because farmers were exempted under the act. In Public Service Commission v. Grimshaw, supra, the Court considered the motor vehicle law which exempted farmers and ranchers and their employees, as well as some other persons. But the act was upheld notwithstanding these exceptions. Several cases which have considered unemployment compensation acts, similar to ours, have upheld the act notwithstanding the exceptions similar to the exceptions contained in our act: Carmichael v. Southern Coal Coke Co., supra; Charles C. Steward Machine Co. v. Davis, supra; Howes Bros. v. Massachusetts Unemployment Compensation Commission, supra; W.H.H. Chamberlin v. Industrial Commission,
(b) It is also contended that the legislative act violates the constitutional provisions heretofore considered because it places the burden of providing economic security upon employers only. It can hardly be denied, however, that a distinction exists between employers and employees generally. Ordinarily speaking, the cost of business, including charges and taxes, are added to the product of the employer, to be shifted on to the consumer. It is doubtful that employees are ever able to shift the burden. And while employers may not always be able to do so, still, it is clear that a sufficient distinction exists between them and their employees so as to classify them differently and leave the latter outside of the scope of the charge or tax. It was said in State v. Willingham, supra:
"The sovereignty may, in the discretion of its Legislature, levy a tax on every species of property within its jurisdiction, or on the other hand, it may select any particular species of property, and tax that only, if in the opinion of the Legislature that course will be wiser. And what is true of property is true of privileges and occupations also; the State may tax all, or it may select for taxation certain classes and leave the others untaxed. Considerations of general policy determine what the selection shall be in such cases, and there is no restriction on the power of choice unless one is imposed by the constitution."
A similar statement is contained in Cooley on Taxation, 4th Ed., Vol. 4, Sec. 1685; see also 26 R.C.L. 257, 61 C.J. 102, 107; Charles C. Steward Machine Co. v. Davis, supra. In Stulz Eagle Drug Co. v. Luke,
"The Legislature of the State, acting after investigation and study upon the report of experts, has proposed what seems to it a better plan. Instead of solely taxing all the people directly, it has passed a law whereby employers are taxed for the help of the unemployed, the sums thus paid being cast upon the public generally through the natural increase in the price of commodities. Whether relief be under this new law of the legislature or under the dole system, the public at large pays the bill. * * * I can see, therefore, nothing unreasonable or unconstitutional in the legislative act which seeks to meet the evils and dangers of unemployment in the future by raising a fund through taxation of employers only."
We cannot, accordingly, say that the constitutional provisions heretofore considered have been violated.
IV. The various decisions passing upon the constitutionality of the unemployment compensation acts have uniformly held that the purpose of the act is a public purpose, and this is true in the states which regard it as an exercise under the police power and in those which regard the levy of the charge as coming under the taxing power. In Friedman v. American Surety Company, supra, for instance, the Supreme Court of Texas, sustaining a similar statute under the taxing power, stated that:
"Unemployment, with its attendant consequences and evils, is of very vital concern to the State and to every inhabitant thereof. Unemployment always has had and always will have, a very profound influence upon the public welfare. The evils which attend it permeate every part of our social, economic and political structure. Unemployment bears in its wake, *Page 456 vagrancy, crime, reduction in marriage, deterioration in health, and the destruction of family life. It not only impairs the health of the unemployed, but it impairs the health of their dependents. It lessens and often destroys patriotic impulses. It fosters and produces other evils too numerous to mention. This act was intended to lessen these evils. To our minds, no court ought to say that such a purpose is outside of the administration of government."
In Howes Bros. v. Massachusetts Unemployment Compensation Commission, supra, the Court, in upholding a similar statute under the police power, stated in part that:
"The harm to the common weal arising from unemployment of large numbers of people is beyond question. Unemployment inflicts want upon many workmen. It offers a fertile field for general discontent. This law affords some defence against that hazard. There has been widespread belief that a public exigency due to unemployment existed. The good and welfare of the Commonwealth seemed to demand relief by legislation. The attention of the General Court was given to the subject. The solution put forward after deliberation is the law here assailed. The connection between employers and unemployment is not remote and is affected by general business conditions."
It is insisted, however, by counsel for the appellants that the act in taking the money of the employer and giving it to persons who have never been in his employ for service violates the constitutional provisions of Sections 32 and 33 of Article I of our Constitution which provide that private property shall not be taken for private use, except with the consent of the owner, nor in any case without due compensation, and shall not be taken for public or private use without due compensation. And it is argued that the employer receives no compensation for what he pays; in other words, that his money is taken for the benefit of someone else without any equivalent return to himself. *Page 457 However, the situation under the workman's compensation act is very similar. Under that act an employer contributes to a fund which may be paid out to persons who were never in his service. The fact that he may not receive any direct benefit from the payment which he makes is no defense. The purpose, as stated, is public. It is of general benefit to and for the welfare of all. Cooley on Taxation, supra, Section 89, says:
"The contention has often been presented that property receiving no direct benefit from a tax for a particular purpose should not be taxed for that purpose. However, it is almost unanimously held that it is no defense to the collection of a tax for a special purpose that a person liable for the tax is not benefited by the expenditure of the proceeds of the tax or not as much benefited as others."
See also Globe Grain Milling Co. v. Industrial Commission (Utah),
"Nothing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the conditions to be remedied.
"A tax is not an assessment of benefits. It is, as we have said, a means of distributing the burden of the cost of government. The only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the privileges of living in an organized society, established and safeguarded by the devotion of taxes to public purposes. See Cincinnati Soap Co. vs. United States, supra. Any other view would preclude the levying of taxes except as they are used to compensate for the burden on those who pay them, and would involve the abandonment of the most fundamental principle of government — that it exists primarily to provide for the common good. A corporation cannot object to the use of the taxes which it pays for the maintenance of schools because it has no children. Thomas v. Gay,
And what is true of a tax must be equally true of a charge under the police power, whether properly called a "tax" or not.
V. It is also contended that the act in question is in violation of Section 6 of Article XVI of our Constitution in that the payments to be made to the unemployed are gratuities or donations which, under that constitutional provision, may be made to the poor, but which, under the statute in question, are not limited to those who are indigent, but are made to all unemployed alike, even though they may happen to be affluent. We think, however, that the legislature has the right to take into consideration the difficulties which may be encountered in the administration of the act. Carmichael v. Southern Coal Coke Co., supra. There can scarcely be any doubt that the ordinary industrial worker would be affected adversely by reason of unemployment. It would ordinarily be only a question as to the degree or extent of his need. To put upon the unemployment compensation commission the burden to investigate in each case whether the unemployed worker had saved some for a rainy day, and the amount of it, whether or not he is in actual need, and the degree of the need, would be almost intolerable, if not impossible of accomplishment, and would often have a tendency to delay payments when most needed, and thus to that extent nullify the benefits intended to be accomplished under the statute and thwart the economic welfare therein intended. To condemn the whole legislative act because *Page 459
in isolated instances the payment made to an unemployed workman might seem to be in the nature of a gratuity, does not appeal to us to be reasonable. We think we should consider the rule of probability, and that is, that in the ordinary case the unemployed workman is in need of the payment under the act. In State v. Snyder,
"We have no hesitation in declaring that the statute may be properly assumed by the court as having been intended to promote the public welfare, and that it must be regarded as having that effect and as a statute for the accomplishment of a public purpose. That being its purpose and effect it cannot be held, we think, to amount to violation of the provisions of Section 6 of Article XVI."
In State v. Carter,
"The present scheme of unemployment relief is not subject to any constitutional infirmity, as respondents argue, because it is not limited to the indigent or because it is extended to some less deserving than others, such as those discharged for misconduct. While we may assume that the state could have limited its award of unemployment benefits to the indigent and to those who had not been rightfully discharged from their employment, it was not bound to do so. Poverty is one, but not the only evil consequence of unemployment. Among the benefits sought by relief is the avoidance of destitution, and of the gathering cloud of evils which beset the worker, his family and the community after wages cease and before destitution begins. We are not unaware that industrial workers are not an affluent *Page 461
class, and we cannot say that a scheme for the award of unemployment benefits, to be made only after a substantial `waiting period' of unemployment, and then only to the extent of half wages and not more than $15 a week for at most 16 weeks a year, does not effect a public purpose, because it does not also set up an elaborate machinery for excluding those from its benefits who are not indigent. Moreover, the state could rightfully decide not to discourage thrift. Mountain Timber Co. v. Washington, supra,
We think, accordingly, that the instant contention should be overruled.
In conclusion, the only other section of our constitution not already considered which appears to have a bearing herein is Section 35 of Article III which provides that "except for public interest on public debt, money shall be paid out of the treasury only on appropriations made by the legislature, and in no case otherwise than upon a warrant drawn by the proper officer in pursuance of law." A similar constitutional provision was considered by the Supreme Court of California, in Gillum v. Johnson, 7 Calif.2d 744,
We, accordingly, answer all the constitutional questions submitted to us in the negative.
KIMBALL, Ch. J., and RINER, J., concur.