The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-05-30
FRANCHISE TAX LAW UPHELD,
SUPREME COURT DECLARES THAT
1T IS CONSTITUTIONAL.
Holds That All Property In . State 10
Subject to Its Taxing Power and That
There Was No RelinquishInent OF the
Right OF Taxation In tho Contracts.

u
when Governor Of the State, was to-day
held by the Supreme Court to be valid
and not, as urged by the corporations,
violative Of the Federal Constitution. This
decision was by unanimous bench. The
cases, seven In number, we're appeals from
the Judgment of the Supreme Court OF New
York, which also affirmed the validity OF
the taxes. They were brought BY the
Metropolitan, the Twenty-third Street, tho
Central Crosstown, the Brooklyn City and
the Coney Island and Brooklyn Railway
companies, and the New Amsterdam and
the Consolidated Gas companies William
d. Guthrie and James Russell Solely made
the principal arguments for the corpora
tons, and Attorney General Mayer repre-
eented the State Of New York. The opinion
Of the court was delivered by Justice Brewer.
In its decision the Court Gays the judy
ment OF the Court Of Appeals settled that
there was nothing In the special franchise
law In conflict with the Constitution OF
the State Of New York and the corporations
did not contend that there was any con-
stitutiona objection to the taxation OF
franchises, they concedhg that there was
a right to subject them to a share in the
burden of supporting the government.
The main Don tention was that the anchise
tax legislation impaired the obligation Of
contracts.
It must be borne In mind that presump-
lively all property within the territorial
limits Of State was subject to It's taxing
power, and whoever insisted that any
peculiar property was not so subject had
the burden Of proof and must make 1t en-
tirely clear that by contract or otherwise
the property was beyond its reach. Quot
ing from numerous decisions OF the court
on that point. Justice Brewer says the rule
laid down thereby was akin to. If not part
OF, the broad proposition, now universally
accepted, that In grants from the public
nothing passed by implication.
Applying those well established rules
to the several contracts under consideration
it would be perceived that there was no
express REIMBURSEMENT Of the right OF
taxation. The plaintiffs in error must rely
upon some implication and not upon any
direct stipulat ion. In each contract there
was grant Of privileges. but the grant
was specifically Of privileges in respect
to the construction, operation and main
tenanoe Of a street railroad. These were
all that in terms were granted. In con-
alteration Of this grant the grantees were
to pay something, and such payment was
nowhere said to be in lieu Of or as an equiva-
lent or substitute for taxes.
All that could be extracted from the
language used was a grant Of privilege and
payment therefor Other words must be
be found any REIMBURSEMENT Of the power
IA l>l kol hot
II grant was Of specific, tangible property,
like tract Of land, and the payment there
for was a gross sum. no implication OF
an exemption from taxation would arise.
Nor would this result be altered by the
fact that the payment for the thing granted
was to be made annually. instead Of by
single sum in gross. II it was the real
estate il would be equivalent to the con-
veyance Of the tract subject to ground
rent, and the grantee taking the title would
hold 1t liable to taxation upon its value. If
this be true in reference to grant Of tangi-
BILE property it was equally true in respect
to grant of q franchise. for franchise,
though tangible was none the less property,
and oftentimes property Of great value.
To the claim that when the public granted
a privilege on condition of the payment
Of an annual sum the contract implied that
the public should exact no larger amount
for that privilege, and that to impose tax
was simply increasing the price which the
grantee was called upon to pay for the
privileges, the opinion quotes extensively
from decisions by the Supreme Court TO the
contrary.
Taking up the contentious that the fran
chise tax was not imposed for many years
after the franchises we're granted: that
IN, h1i
messages had both referred to the taxes as
taxes, and that section 48 of the franchise
law provided for the deduction of other
taxes, the court says it would be giving
them undue significance to hold that they
are potent to discharge the power Of a State
to subject to the burdens OF taxation prop
erty within its limits.
The word tax says the opinion, Is not
infrequently used in general sense as
denoting a burden or charge, and not in
thestrict legal sense of the charge or burden
imposed by the State for the purposes of
revenue for its support. Undoubtedly
the payment for the franchise Of an annual
sum was burden, and in that sense 1t
might not unnaturally have been spoken
of as tax. Being recognized as burden
it may also we'll be that when the tax was Of
comparatively little value the Legislature
Of ordinary taxation. But the omission
of one Legislature or a dozen Legislatures
does not destroy the power Of the State.
Section 48 Of the franchise tax act in
dictated the desire Of the Legislature to
deal equitably with the corporations hold
ing those franchises. Surely the mani
festation Of this desire could not be con-
strued into population Of power. The
annual charges were not called taxes but
were spoken Of as in the nature OF a tax,
and the Legislature. recognizing the eoui-
table force OF the claim based thereon,
provided that the corporation be given
credit for sums thus payable.
"We are OF the opinion" says Justice
Brewer, shat no contract right Of the
relator was impaired by the legislation in
question.
In referring to the contentious Of the COR
porations that the franchise tax law operated
to deprive them Of the equal protection
Of the laws and the due process thereof,
in that it added to the obligations Of their
various contracts while preserving all
the burdens previously imposed, and that
it Disseminated against them and in favor
Of their competitors operating under the
surfaces of many OF the same streets they
occupied, the court says it having already
been decided that there was impairment
of contract the fact that the companies
had escaped the burden for these many
years was their good fortune, but it in no
manner discharged them from the ordinary
burdens Of taxation which the present
law imposed.
The lump sum under which the taxes
were paid was so obviously a payment
l. ~ 4.