Source: https://supreme.justia.com/cases/federal/us/229/322/
Timestamp: 2019-04-21 20:10:55+00:00

Document:
Power of exemption from taxation seems to imply the power of discrimination, and in taxation, as in other matters of legislation, classification is within the legislative power, and it may be even to a greater extent.
The numerous decisions of this Court reviewed in this opinion illustrate the power of the legislature of the state over the subjects of taxation and the range of discrimination that may be exercised in classification.
The legislature, having the power of classification, has also the power to select the differences on which to base the classification.
The state is not bound to rigid equality by the equal protection provision of the Fourteenth Amendment; classification simply must not be exercised in clear and hostile discrimination between particular persons and classes.
exempts corporation having gross receipts of less than five hundred dollars.
Where there has been a constant legislative and executive construction of a provision of the constitution of the state in regard to the title of a statute clearly expressing the object thereof, this Court will not, in view of the consequences of striking down legislation, declare a statute invalid on account of defective title where, as in this case, there has been substantial compliance with the requirement of the constitution of the state in that regard.
The facts, which involve the constitutionality under the Fourteenth Amendment of a statute of Michigan taxing telephone companies and excepting therefrom certain classes thereof, are stated in the opinion.
the Fourteenth Amendment of the Constitution of the United States and (2) violates the constitution of the state because the purpose of the act is not expressed in its title.
A demurrer was filed to the bill, which was overruled. An answer was then filed, and, after hearing, a decree was entered dismissing the bill. 185 F. 634. This appeal was then taken directly to this Court, the case presenting questions under the Constitution of the United States.
Prior to 1909, telephone companies were taxed under Act No. 179 of the Public Acts of Michigan for the year 1899 at the rate of 3% on their gross receipts for the year in which the tax was laid. This act also embraced express and telegraph companies. The companies were required to make a report of their gross receipts for the year ending December first next preceding such report. The taxes paid were to be in lieu of all other taxes.
"Provided, That the property of telegraph and telephone companies whose gross receipts within this state, for the year ending June 30, did not exceed five hundred dollars shall be exempt from taxation."
equal protection clause of the Constitution is based on that proviso. It is urged that the proviso makes an unjust discrimination between companies doing the same business by the same means, and imposes a tax on their property because the business of one is large and the other small. "The business is not taxed," it is contended, "under Act 49. It is the property used in the business, and it is all of like kind and used for like purposes, and each dollar's worth should be treated alike." And it is urged that "it must be remembered that the tax in question is a tax on property according to its value, and not a tax on doing the business." This being the insistence of appellant -- that is, that the tax is on property simply -- appellant makes the property, dollar for dollar, the only basis of comparison between the taxed companies and the exempt companies, and asserts illegal discrimination. In other words, treating the tax as one on property, and this being the purpose of the statute, "each dollar's worth should be treated alike," and, it is contended, if each dollar's worth is not treated alike, there is an arbitrary classification, and hence an illegal classification, because it has no proper relation to the legislative purpose.
tax, which would have been $228,000.) Four hundred and thirty-five of the reports showed receipts of less than $500 each. Property belonging to the persons and companies so reporting was not assessed. The cost of this nonassessed property at the average reported cost per telephone of all reporting companies would be about $145,000; complainants' proof tends to show such cost to be about $250,000; $200,000 may fairly be assumed as such cost, and, upon the comparative basis used with the larger corporations, this exempted property would have been assessed at $120,000. If we add an ample allowance for nonreporting, nontaxable property, it still appears that the property which escaped taxation, and which forms the basis of the complaint, is not more than one percent of the total."
The lines may be divided into two classes: (1) lines owned by appellant and conducted for profit, and (2) lines connected with those of the first class, and called sub-licensed companies, rural and roadway. There are 17 to 20 of the sub-licensed companies which operate for a profit. Their lines are connected with the main lines, and may extend over a whole county or more. It is testified that the sub-licensed companies run their own business, no control being in the main line. Their lines, it is further testified, were constructed by themselves, and the instruments either leased from the main company or owned by themselves. The contracts with the sub-companies are not all alike. The main line may or may not have investment in the sub-licensed line.
by the farmers in the same way as other roadways. The larger portion of "rurals" are contracts with individuals. The percentage of corporations in the roadway and sub-licensed lines is very small.
The "roadway" is a line owned and constructed by farmers, connected with a receiving service from an existing exchange of a main line or profitmaking company, or of rural exchange manager.
It is manifest, therefore, that there are marked differences between the taxed and nontaxed companies, and the differences might be pronounced arbitrary if the rule urged by appellant should be applied -- that is, that, in the taxation of property, no circumstance should be considered but its value; or, to use appellant's words, "each dollar's worth should be treated alike." But such rigid equality has not been enforced. In Michigan, the legislature has the power of prescribing the subjects of taxation and exemption, notwithstanding the Constitution of the state requires the legislature to provide a uniform rule of taxation, except on property paying specific taxes. The People v. The Auditor General, 7 Mich. 84; Board of Supervisors v. Auditor General, 65 Mich. 408; National Loan &c.
Co. v. City of Detroit, 136 Mich. 451. The power of exemption would seem to imply the power of discrimination, and in taxation, as in other matters of legislation, classification is within the competency of the legislature. We said in American Sugar Refining Co. v. Louisiana, 179 U. S. 89, 179 U. S. 92, that, from time out of mind, it has been the policy of this government to classify for the purpose of taxation, and a discrimination was supported between taxation of producers and manufacturers of products, and yet, in Billings v. Illinois, 188 U. S. 97, 188 U. S. 102, we compared the rule with that in Connolly v. Union Sewer Pipe Co., 184 U. S. 540, where a distinction between buyers of products and the producers of them was held an illegal discrimination.
It may therefore be said that, in taxation, there is a broader power of classification than in some other exercises of legislation. There is certainly as great a power, and the rule appellant urges cannot be adopted. It is inconsistent with the principle of classification and the cases which have explained the principle and the range of its legal exercise.
vice, and which every state, in one form or another, deems it expedient to adopt."
"There is no general supervision on the part of the nation over state taxation, and, in respect to the latter, the state has, speaking generally, the freedom of a sovereign both as to objects and methods."
"It is enough that there is no discrimination in favor of one against another of the same class and the method for the assessment and collection of the tax is not inconsistent with natural justice."
In Travelers' Insurance Co. v. Connecticut, 185 U. S. 364, a law of the state was sustained which imposed a tax on the stock of nonresidents in corporations and exempted the stock of residents.
In King v. Mullins, 171 U. S. 404, 171 U. S. 435, a distinction was made in the taxing system of the state between tracts of 1,000 acres or less and tracts of more than 1,000 acres. It was sustained.
In Consolidated Coal Co. v. Illinois, 185 U. S. 203, a law providing for the inspection of mines was held not unconstitutional by reason of its limitation to mines where more than five men were employed at any one time. See also McLean v. Arkansas, 211 U. S. 539.
U.S. 628, a law requiring railroads to heat their passenger coaches, but exempting roads of less than fifty miles in length, was declared not unconstitutional and discriminatory. To like effect is Dow v. Beidelman, 125 U. S. 680, where a classification of railroads by their length in fixing the rate of passengers' fare was sustained.
In Postal Telegraph Cable Co. v. Adams, 155 U. S. 688, a tax was graduated according to the amount and value of the property, measured by miles, and was in lieu of taxes levied directly on the property. Held valid. In Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, legacies less than a certain amount were held legally exempt from taxation.
To these cases may be added others. They illustrate the power of the legislature of the state over the subjects of taxation, and the range of discrimination which may be exercised in classifying those subjects when not obviously exercised in a spirit of prejudice and favoritism. Cook v. Marshall County, 196 U. S. 274; Missouri v. Dockery, 191 U. S. 165. The cases decided subsequent to the decision in Bell's Gap Railroad Co. v. Pennsylvania have applied its principle to many varying instances. Granting the power of classification, we must grant government the right to select the differences upon which the classification shall be based, and they need not be great or conspicuous. Keeney v. New York, 222 U. S. 536. The state is not bound by any rigid equality. This is the rule; its limitation is that it must not be exercised in "clear and hostile discriminations between particular persons and classes." See Quong v. Kirkendall, 223 U. S. 59, 223 U. S. 62-63. Thus defined and thus limited, it is a vital principle, giving to government freedom to meet its exigencies, not binding its action by rigid formulas, but apportioning its burdens and permitting it to make those "discriminations which the best interests of society require."
We think the statute under review is within the rule.
"predominately private, while the use of the taxed property is correspondingly public; the exempt property is used for the personal convenience of the owners, while the taxed property represents commercial investment for profitmaking purposes."
"(1) that the property exempted is only a trifling portion of the whole; (2) that the cost of assessing and collecting in this class would be disproportionate to the amount which would be realized; (3) that this property is in the incipient or development stage, while the taxed property is in the fully developed form."
All were differences which could appeal to the legislature and determine a difference of treatment. To accomplish it, they had to be united in a class, and, as happily said by Judge Denison in the circuit court, the companies were described "in terms of earnings instead of in terms of method and use." It seems, however, that, by the selection of earnings as a basis of classification, all of the differences we have enumerated are not exactly accommodated. Some small portion of the cooperative companies will be taxed and some small portion of the profitmaking companies will be exempt. This result is not, we think, an impeachment of the basis of classification, as the cases we have cited illustrate. Besides, the appellant is not affected by the inexactitude.
assessed, is sufficiently expressed in its title. Prior to the passage of that act, certain specified classes of corporations, such as railroad, express companies, etc., were taxed under the provisions of Act No. 282 of the Acts of 1905, supra.
"The title and §§ 1, 4, 5, 6, 8, 9, 10, 13, 14, 18, and 21 of Act No. 282 of the Public Acts of 1905, entitled, 'An Act to Provide for the Assessment of the Property of Railroad Companies, Union Station and Depot Companies, Sleeping Car Companies, Express Companies, Car Loaning Companies, Stock Car Companies, Refrigerator Car Companies, and Fast Freight Line Companies, and for the Levy of Taxes Thereon by a state Board of Assessors, and for the Collection of Such Taxes, and to Repeal All Acts or Parts of Acts Contravening Any of the Provisions of This Act,' are hereby amended to read as follows:"
" TITLE. An Act to Provide for the Assessment of the Property, by Whomsoever Owned, Operated, or Conducted, of Railroad Companies, Union Station and Depot Companies, Telegraph Companies, Telephone Companies, Sleeping Car Companies, Express Companies, Car Loaning Companies, Stock Car Companies, Refrigerator Car Companies, and Fast Freight Companies, and All Other Companies Owning, Leasing, Running, or Operating Any Freight, Stock, Refrigerator, or Any Other Cars, Not Being Exclusively the Property of Any Railroad Company Paying Taxes upon Its Rolling Stock under the Provisions of This Act, over or upon the Line or Lines of Any Railroad or Railroads in This State, and for the Levy of Taxes Thereon by a State Board of Assessors, and for the Collection of Such Taxes, and to Repeal All Acts or Parts of Acts Contravening Any of the Provisions of This Act. "
The contention is that there is nothing in the title to indicate the intention of adding to the Act of 1905 "new classes of business to those already taxed by the ad valorem method, so as to include telephone companies." It is hence further contended that the act is invalid, the constitution of the state providing that "no law shall embrace more than one object, which shall be expressed in its title."
There can be no doubt that the purpose of the act was to extend to telegraph and telephone companies the provisions of the Act of 1905, which provided for the assessment of the property of certain companies, and the levying of taxes thereon by the state board of assessors, and the method of collecting such taxes. Its title explicitly states that its purpose is to amend the title and the act relating to the taxation of railroads and express companies, and the particular sections which consummate the purpose are referred to and in § 1 declared to be amended. The title therefore is a substantial compliance with the Constitution of the state, and the brief of appellee shows thirty-eight examples of like kind in the laws of the state. This legislative and executive construction is entitled to weight, and when considered in connection with the consequence of making those laws invalid, as well as declaring the law under review invalid, would determine against the construction urged by appellant, even if we had doubt of the sufficiency of the title to give notice of the purpose of the legislation. See Attorney General v. Amos, 60 Mich. 372; Grimm v. Secretary of State, 137 Mich. 134; Detroit v. Schmid, 128 Mich. 379; People v. Howard, 73 Mich. 10; Detroit v. Chapin, 108 Mich. 136.

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