Source: https://supreme.justia.com/cases/federal/us/332/168/
Timestamp: 2019-04-22 20:38:50+00:00

Document:
"The stock of the said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of the said rail roads or any one of them, and after that, shall be subject to a tax not exceeding one half percent. per annum on the net proceeds of their investments."
In 1937 the State imposed a tax of 5 1/2 percent on the net income of all domestic and foreign corporations, and in 1941 assessed deficiencies for such taxes against a lessee of the railroad.
Held, following a decision of the highest court of the State, that the 1833 exemption did not apply to taxes on "income" imposed by a statute in 1937, and therefore the tax did not impair the obligation of the railroad's charter contrary to Art. I, § 10, of the Federal Constitution. Pp. 332 U. S. 169-174.
2. Earlier decisions of this Court construing the same tax exemption provision, in cases involving property taxes and not a conventional income tax, are not controlling here. Pp. 332 U. S. 173-174.
200 Ga. 856, 38 S.E.2d 774, affirmed.
The railroad company appealed to the state courts from a tax assessment under a state statute challenged as violative of the contract clause of the Federal Constitution. The trial court gave judgment for the railroad. The State Supreme Court reversed. 200 Ga. 856, 38 S.E.2d 774. On appeal to this Court, affirmed, p. 332 U. S. 174.
To encourage railroad development, the State of Georgia, in 1833, chartered the Georgia Railroad Company (which later became the Georgia Railroad and Banking Company), and gave the railroad certain immunity from taxation. Georgia's increasing need of tapping new sources of revenue has not unnaturally brought to the courts the scope of this immunity. Its construction in relation to the claim of Georgia that, despite the charter of 1833, the appellant is subject to its corporate income tax is the sole issue before us.
tax to be measured so as not to exceed one-half percent. of the net earning power of the properties. 200 Ga. 856, 38 S.E.2d 774. The exemption, so the State Supreme Court found, was not concerned with what we now know as a corporate net income tax, and therefore did not bargain away the power of the legislature to impose such a tax.
"yet, when we are dealing with a matter of local policy, like a system of taxation, we should be slow to depart from their judgment if there was no real oppression or manifest wrong in the result."
Clyde v. Gilchrist, 262 U. S. 94, 262 U. S. 97.
"The stock of said company and its branches shall be exempt from taxation for and during the term of seven years from and after the completion of said railroads or any one of them, and after that, shall be subject to a tax not exceeding one half percent. per annum on the net proceeds of their investments."
§ 15, Act of December 21, 1833, Acts 1833, p. 256, 263-64.
in words may carry meaning to insiders which is not within the sure discernment of those viewing the law from a distance. And so we are not prepared to say that the Supreme Court of Georgia was "manifestly wrong," Hale v. State Board, 302 U. S. 95, 302 U. S. 101, in construing the exemption as limiting merely the right to impose property taxes. Our search is for something other than the meaning which the tax specialists may today find in the words.
"It is for the meaning that at a particular time and place and in the setting of a particular statute might reasonably have acceptance by men of common understanding."
Hale v. State Board, supra. We should reject the construction which the Georgia Supreme Court has placed upon what the Georgia Legislature of 1833 wrote only if we can be confident that the Georgia Legislature of 1833, by the words it used, could not have expressed the meaning thus attributed to it. A fair regard for the place of income taxes, as now commonly conceived, in the thought and practice concerning fiscal matters prevalent in 1833 precludes the rejection of the interpretation by the Georgia Court of the exemption of 1833.
resort to what was indisputably an income tax. On the other hand, to read, as the Georgia Supreme Court read, the exemption provision of the Charter of 1833 as dealing with a tax on property fairly reflects a practice, not unknown in the earlier days, of assessing property for tax purposes not by its exchange value, but by its earning power. See, e.g., Seligman, The Income Tax (2d Ed.) pp. 382, 383; Report of Special Commission on Taxation, Connecticut 1887, p. 9, with comments thereon in Kennan, Income Taxation p. 207.
Oil Co. v. Mississippi, 280 U. S. 390, 280 U. S. 395-396. This is so because "nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions." Learned Hand, C.J., dissenting in Commissioner v. Newman, 159 F.2d 848, 851. Conversely, the State, insofar as it may limit its basic power to tax to enable government to go on, can sail as closely as astuteness permits to the line of an immunity from such exaction. This is an old canon of judicial construction. The policy on which it rests antedates the charter before us, and it forms the setting in which the exemption is to be read. See, e.g., Charles River Bridge v. Warren Bridge, 7 Pick. (Mass. 1829) 344, aff'd, 36 U. S. 11 Pet. 420. This requirement in the construction of legislative grants, especially tax exemptions, is merely an aspect of respecting legislative purpose. A legislature is not to be presumed to have relinquished its power of taxation beyond the narrowest rational reading of an exemption. The potential need of all governmental powers, and fairness in the distribution of burdens or in the enjoyment of privileges, preclude such an assumption.
from the context of discussion of property taxes. In any event, these phrases leave untouched our duty to respect the judgment of a State court as to the fair intendment of an exemption.

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