Source: https://caselaw.findlaw.com/us-supreme-court/147/190.html
Timestamp: 2019-04-25 05:02:06+00:00

Document:
[147 U.S. 190, 197] E. S. McDonald and Hugh Crea, for defendant in error.
Between taxes-or 'general taxes,' as they are sometimes called, by way of distinction, which are the exactions placed upon the citizen for the support of the government, paid to the state as a state, the consideration of which is protection by the state-and special taxes or special assessments, which are imposed upon property within a limited area for the payment for a local improvement, supposed to enhance the value of all property within that area, there is a broad and clear line of distinction, although both of them are properly called taxes, and the proceedings for their collection are by the same officers, and by substantially similar methods. Taxes proper, or general taxes, proceed upon the theory that the existence [147 U.S. 190, 198] of government is a necessity; that it cannot continue without means to pay its expenses; that for those means it has the right to compel all citizens and property within its limits to contribute; and that for such contribution it renders no return of special benefit to any property, but only secures to the citizen that general benefit which results from protection to his person and property, and the promotion of those various schemes which have for their object the welfare of all. 'The public revenues are a portion that each subject gives of his property in order to secure or enjoy the remainder.' 13 Montesq. Sp. Laws, c. 1; Association v. Topeka, 20 Wall. 655, 664; Opinions of Judges, 58 Me. 591; Hanson v. Vernon, 27 Iowa, 28, 47; Judd v. Driver, 1 Kan. 455, 462; Association v. Wood, 39 Pa. St. 73, 82; Bank v. Hines, 3 Ohio St. 1, 10.
Indeed, the rule has been so frequently enforced that, as a general proposition, it may be considered as thoroughly established in this country. It is unnecessary to refer to the cases generally. It may be well, however, to notice those from Illinois. In Trustees v. City of Chicago, 12 Ill. 403, (decided in the lower court at May term, 1849, and before the [147 U.S. 190, 201] passage of the act creating the contract relied upon, and by the supreme court at the June term, 1851,) the exemption was 'from taxation of every description by and under the laws of this state,' and it was held that that did not include an assessment made to defray the expense of opening a street. It was observed: 'In our opinion, the exemption must be held to apply only to taxes levied for state, local, and municipal purposes. A tax is imposed for some general or public object. ... The assessment in question has none of the distinctive features of a tax. It is imposed for a special purpose, and not for a general or public object.' See, also, Chicago v. Colby, 20 Ill. 614; Peoria v. Kidder, 26 Ill. 351; Pleasant v. Kost, 29 Ill. 490, 494; Illinois Cent. R. Co. v. Commissioners of Drainage Dist., 129 Ill. 417, 21 N. E. Rep. 925. Nor is this a mere arbitrary distinction created by the courts, but one resting on strong and obvious reasons. A grant of exemption is never to be considered as a mere gratuity,- a simple gift from the legislature. No such intent to throw away the revenues of the state, or to create arbitrary discriminations between the holders of property, can be imputed. A consideration is presumed to exist. The recipient of the exemption may be supposed to be doing part of the work which the state would otherwise be under obligations to do. A college or an academy furnishes education to the young, which it is a part of the state's duty to furnish. The state is bound to provide highways for its citizens, and a railroad company, in part, discharges that obligation. Or the recipient may be doing a work which adds to the material prosperity or elevates the moral character of the people. Manufactories have been exempted, but only in the belief that thereby large industries will be created, and the material prosperity increased; churches and charitable institutions, because they tend to a better order of society. Or it may be that a sum, in gross or annual installments, is received in lieu of taxes. But in every case there is the implied fact of some consideration passing for the grant of exemption. But those considerations, as a rule, pass to the public generally, and do not work the enhancement of the value of any particular area of property. So, when the [147 U.S. 190, 202] consideration is received by the public as a whole, the exemption should be, and is, of that which otherwise would pass to such public, to wit, general taxes.
And, again, as special assessments proceed upon the theory that the property charged therewith is enhanced in value by the improvement, the enhancement of value being the consideration for the charge, upon what principles of justice can one tract within the area of the property enhanced in value be released from sharing the expense of such improvement? Is there any way in which it returns to the balance of the property within that area any equivalent for a release from a share in the burden? Whatever may be the supposed consideration to the public for an exemption from general taxation, does it return to the property within the area any larger equivalent with the improvement than without it? If it confers a benefit upon the public, whether the general public or that near at hand,- a benefit which justifies an exemption from taxation,-does it confer any additional benefit upon the limited area by reason of sharing in the enhanced value springing [147 U.S. 190, 203] from the improvement? Obviously not. The local improvement has no relation to or effect upon that which the exempted property gives to the public as consideration for its exemption. Hence there is manifest inequity in relieving it from a share of the cost of the improvement. So, when the rule is laid down that the exemption from taxation only applies to taxes proper, it is not a mere arbitrary rule, but one founded upon principles of natural justice.
But it is said that it is within the competency of the legislature, having full control over the matter of general taxation and special assessments, to exempt any particular property from the burden of both, and that it is not the province of the courts, when such entire exemption has been made, to attempt to limit or qualify it upon their own ideas of natural justice. Thus, in the case of College v. Boston, 104 Mass. 470, an assessment for altering a street was held within the language of the college charter exempting the property 'from all civil impositions, taxes, and rates.' See, also, the following authorities: Brightman v. Kirner, 22 Wis. 54; Southern R. Co. v. Mayor, etc., 38 Miss. 334; State v. City of Newark, 27 N. J. Law, 185; City of Erie v. First Universalist Church, 105 Pa. St. 278; Olive Cemetery Co. v. City of Philadelphia, 93 Pa. St. 129; City of Richmond v. Richmond & D. R. Co., 21 Grat. 604. This is undoubtedly true. So we turn to the language employed in granting this exemption to see what the legislature intended; and we notice that by the charter certain sums are to be paid into the state treasury, in money, and applied to the payment of interest-paying state indebtedness until the extinction thereof, and it is in consideration of this payment that the corporation is exempted from all taxation of every kind. Inasmuch as the payment by the corporation is to be always made into the state treasury, and for a time to be applied only to a single state purpose, a very plausible argument might be made to the effect that all that was intended to be granted was an exemption from state taxes, leaving the property, like other property, still subject to municipal taxation. That question, however, is not before us; and it has been held by the supreme court of Illinois, in [147 U.S. 190, 204] Neustadt v. Railroad Co., 31 Ill. 484,-and properly so, in view of the provision in section 27 that the act 'shall be favorably construed for all purposes therein expressed and declared,'-that the charter exemption extends to all general municipal taxation.
In other words, the general rule which we have been considering was recognized, but its applicability was denied by the court, and properly so. In order to create a fund to reclaim these lands from overflow, the state sold them exempted [147 U.S. 190, 206] from taxation. To turn around, after such sale, and charge the cost of reclamation upon the same lands, would fullify the purpose for which they were sold. It is precisely as though the state had sold a body of lands for the specific purpose of raising funds to build a state house, and then, after the sale and receipt of the money, had turned around, and charged the cost of building such state house upon the very lands sold. By the sale the land was once appropriated to a given purpose, and could not be burdened a second time for the same purpose. It would be practically a second appropriation, which nullified that created by the sale. There is nothing in this case, therefore, which announces a doctrine in conflict with that we have been considering, and which has been recognized in all the states.
But the difference between the two constitutions is simply in the mode of ascertaining the benefits, and does not change the essential fact that a charge like the one here in controversy is for the cost of a local improvement, and is charged upon the contiguous property, upon the theory that it is benefited thereby. This is the interpretation put upon the matter by [147 U.S. 190, 208] the supreme court of Illinois. In White v. People, 94 Ill. 604, 613, it was said: 'Whether or not the special tax exceeds the actual benefit to the lot is not material. It may be supposed to be based on a presumed equivalent. The city council have determined the frontage to be the proper measure of probable benefits. That is generally considered as a very reasonable measure of benefits in the case of such an improvement.' So, also, in Craw v. Tolono, 96 Ill. 255, it is said: 'Special taxation, as spoken of in our constitution, is based upon the supposed benefit to the contiguous property, and differs from special assessments only in the mode of ascertaining the benefits. In the case of special taxation, the imposition of the tax by the corporate authorities is of itself a determination that the benefits to the contiguous property will be as great as the burden of the expense of the improvement, and that such benefits will be so nearly limited, or confined in their effect, to contiguous property, that no serious injustice will be done by imposing the whole expense upon such property.' And in City of Sterling v. Galt, 117 Ill. 11, 7 N. E. Rep. 471, in which the difference between special assessment and special taxation was noticed, it was held that the whole of the burden in case of special taxation was imposed upon the contiguous property, upon the hypothesis that the benefits will be equal to the burden.
We do not suppose that the company had by its charter any contract with the state that the matter of special benefit resulting from a local improvement should be ascertained and determined only in the then existing way. There was nothing in the terms of that contract to prevent the state from committing the final determination of the question of benefits to the city council, rather than leaving the matter of ascertainment to a jury; and whether the charges are called 'special taxes' of 'special assessments,' and by whatever tribunal or by whatever mode the question of benefits may be determined, the fact remains that the charges are for a local improvement, and cast upon the contiguous property, upon the assumption that it has received a benefit from such improvement, which benefit justifies the charge. The charges here are not taxes [147 U.S. 190, 209] proper, are not contributions to the state or to the city for the purpose of enabling either to carry on its general administration of affairs, but are charges only, and specially, for the cost for a local improvement supposed to have resulted in an enhancement of the value of the railroad company's property. It is not in lieu of such charges that the company pays annually the stipulated per cent. of its gross revenues into the state treasury.

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