The aegis & intelligencer. [volume] (Bel Air, Md.) 1864-1923, 1875-02-19

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passed. unanimously in both branches OF inc
Legislature, and the question of its validity
is now before the court of Appeals.
! The following is the article referred to;
MEssRs. EDIToRs: The State having passed
laws to tax the gross receipts Of railroads work
cd by steam, several questions of great impor-
| lance to the public have arisen with regard to
the nature of the tax and the rights of the State
| lnasmuch as disposition has been exhibited by
some persons to find fault with the Legislature,
both for supposed defects in the form and SUBJ
stance Of its legislation, | propose briefly to
consider how far such structures may be well
founded.
The first act was passed In 1872, and provided
| THAT State tax of one half of one per centum
| be- and the same is hereby, levied annually upon
the gross receipts of all railroad companies
| worked by steam incorporated by or under III
thority of the State and doing business therein"
| Section provides "that if any such railroad
| company from whom taxes shall be and payable
| on their gross receipts as AZORES i'd" &c, &c
Section s provides THAT the property, real and
personal, of all railroad companies which shall
duly pay into the Treasury the said annual tax
on gross receipts as aforesaid, shall be exempt
from taxation for State purposes during the
continuance Of this act" Suits were institute
ed againts several companies under this law, and
it was understood the tax was resisted on the
ground, first, that 1.-THE shares of the capital
stock" of the companies were exempted from
taxation by their charters, and consequently
no tax could be imposed on the company or its
property; secondly, that the act did not coufne
the tax to that part of the gross receipts earned
in the State, and was consequently "a regula.
ton OF inter State commerce." and in violation
of the Federal Constitution. Under this latter
defense the Legislature of 1874 amended the act
of 1872, In SO far only as to confne the tax to
gross receipts earned within the State. Upon
this amended law suit was instituted, and both
were tried at the same time against the North
ern Central Railway Company, resulting in an
elaborate opinion of the Superior Court ad.
verse to the States right to enforce the tax, be.
cause the exemption of the shares of the capital
stock OF the corporation is an exemption of all
the property and franchise of the CORPORATION
and further, because the taxes in question are
imposed on the properly of the corporation, and
are special taxes in violation of the Fifteenth
Article ofthc Bill of Rights of MARYLAND which
requires equality of taxation.
The case having been appealed, ii remains of
course, to be seen what view the Court of Ap.
peals may take Of these questions. The opin.
Ion OF that Court would have been sought, no
matter what the conclusion arrived at In The SUI
pcrior Court may have been.
There can be no doubt the Legislature had
very high authority for supposing the exemp-
ton OF "the shares of the capital stocli' of the
companies did not extend TO the property or
franchise of the company ITSELF 1t had never
been denied that laws eXempting persons from
taxation were to be strictly construed and not
extended beyond necessary inference Unless,
therefore, the language used in the charters ne.
eessarily COW red the property and franchise of
the corporation, the exemption did not extend
TO them. Taxes in this State under the Decla-
ration of Rights, article 10, are imposed on
persons, not property. The property owned by
the person Is the measure OF his tax. The tax
is debt due by the property holder TO The
State, and is collected like other debts, by dis
tress or execution. The tax then being laid on
the person who owns property, it is essential to
ascertain who owns the property by reason of
which the tax is imposed. When lie is found
neltheraax Oh him or exemption ofhm is a tax
or exemption of any one else.
The Supreme Court of the United States had
decided in Wallace, Van Allen VS.. the Asses
sors, that tax on the shares of the National
banks was not tax on the property of the
banks, and though the banks had pari of their
capital, upon which this very stock was issued,
invested in United States bonds which it was
admitted was not taxable, yet the shares ofstock
was taxable. This decision was made in 1865,
and was based on the general principles of Cor.
poration law; that the shares of stock belong
to the shareholder as his absolute property,
whilst the capital OF the corporation of what
ever it may consist, belongs TO the corporation
in its corporate entity. In the above case, the
Supreme Court of the United States says this is
familiar law, to be found in all the law books on
corporations. 1t was hut the iteration Of the
principle held in Mccullough VS.. the State MS TO
taxation of the old United States Bank. Since
then the same court has held the same doctrine
repeatedly, applying it to q tax on the shares of
stock held in q State bank whose capital was
invested in United States bonds, and holding
that tax on the capital stock (not the shares
of the capital stock 60 nOanine, was q tax on the
corporation, and not on the shareholders. Ifthe
tax then had been one imposed on the property
of the corporation and 1t is conceded on all
hands that the gross receipts are the property
of the corporation-so decided BY the Supreme
Court and by Judge Dobbin-that the Legsla
ture was justified under the authority above
cited TO conclude it was not Il tax on the share.
holders, and that an exemption of the shares of
the capital stock "did not exempt it." They
seem TO have SO decided, and in so doing clearly
did not mean 'to impair the obligation of any
contract the State has made.
Had the tax been direct tax on property II
would probably have fallen within The proyi
sons of the Fifteenth Article of the Declaration
of Rights, as being special tax not equally i'm.
posed upon all property. But the Legislature
it would seem, did not mean it as Il special tax
on property or tax directly on pror erty at all
1t had before it as n model an Act of the Pom.
sylvana Legislature, passed in 1866, in this Ian
guage: ain addition to the taxes now proyii
ed by law every railroad, canal and transporta
tion company Incorporated under the laws of
this Commonwealth, and not liable to the tax
upon income under existing laws, shall pay to
the Commonwealth tax of three fourths of one
per centum upon the gross receipts ofsaid com
pany." The remaining provisions of the law
are substantially the same as those of our laws
of 1872 and 1874. This tax being resisted, on
the ground that it was q regulation of com
merce, and SO Il violation of the Federal Consti-
tuition, the Supreme Court of the United States
in 10 Wallace, used this language: "Very mani
testify it is tax upon the railroad company,
measured in amount by the extent of its bust.
of the degree to which its franchise is eyer.
cised. A tax upon landlords as such, affects
rents, and generally increases them, but it would
be misnomer to call it tax on tenants. A
tax upon the occupation of physician or an at
tornoy, measured by the income of his profess
sion, or upon banker, graduated according to
the amount of his discounts or deposits, will
hardly be claimed to be tax on his patients.
clients or customers, though the burden ul,i-
matcly falls on them. 1t not their money that
is taken by the Government. The law exacts
nothing from them" The Court holds the tax
to be tax on the corporation, measured by its
gross receipts. This case would also seem TO
prove that tax on corporation is not tax on
the shareholder. A tax on the corporation is no
more a tax on the shareholder than tax on n
landlord Is q tax on his tenant, or u license de.
manded from merchant is tax on his prop
erty.
The Court then holds that there is no differ.
ence between tax on gross receipts and one
on net receipts, The latter being part Of the
former.
That there is no mistake as TO what they mean
is apparent from the case of the Delware Rail
road tax, decided the next year, 1873. That case
arose on two taxes laid by the State Of Delaware
on railroad companics-one "of three per cent
upon their net earnings or income received from
all sources during the preceding year;' the 9TH
er, "one-fourth OF one per cent. upon the actu
al cash value of every share oft capital stock"
The Supreme Court says that if, as was assumed
by the railroad these taxes were either upon the
property of the corporation, or the shares of the
individual stockholders, they would be difficult
to maintain, and proceeds: ave do not think,
however, the assumption is correct. As we con