Court Opinion

ID: 9558584
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:13:02.78244+00
Date Added: 2024-06-11T09:09:26.183603
License: Public Domain

Mallery, Grady, and Finley, JJ.
(dissenting) — The question is whether the corporate franchise excise tax is an excise tax or a property tax. If it is an excise tax, it is valid. If it is a property tax, it is not, because the state constitution requires property taxes to be uniform. This tax is not uniform in that it taxes the privilege of exercising a corporate franchise or, in other words, the privilege of doing business as a corporation, but does not tax the privilege of doing business by partnerships and individuals. The existing business and occupation tax is applied to the same privilege and is discriminatory in that it exempts farmers.
This tax merely adds a new levy and a further discrimination to the business and occupation tax. All excise taxes *215are discriminatory. No one questions the constitutional power of the legislature to impose discriminatory excise taxes.
The respondents’ contention that it a property tax is based on the cases involving net income taxes, which this court invalidated on the ground that they were property taxes. They are not in point. This is not a net income tax.
The act in question provides, inter alia:
“Sec. 7. . . . (a) . . . Every bank and corporation . . . for the privilege of exercising its corporate franchise . . . shall annually pay ... an excise tax according to, or measured by, its net income equal to four per cent of such net income . . .
“Sec. 38. ... (h) The amount of tax payable . . . shall be reduced by a credit equal to fifty per cent of the amount of the business and occupation tax paid ...” (Italics ours.)
The business and occupation tax, which this court upheld on a challenge to its constitutionality, is based upon gross income. The instant tax is computed by a formula based on both net and gross income, and hence, is neither a net income tax nor a gross income tax. It is merely a tax computed by reference to them.
The overwhelming weight of authority in the United States holds that a tax on corporate franchises is an excise. As such, this act is valid.
The act in question makes appropriations and imposes taxes to meet them, as has been frequently done. Witness the recent soldiers’ bonus act, for instance.
The constitution of the state of Washington, Art. VIII, § 4, requires all moneys to be paid out by the treasurer pursuant to appropriation by law. Art. VII, § 5, provides:
“No tax shall be levied except in pursuance of law; and every law imposing a tax shall state distinctly the object of the same, to which only it shall be applied.” (Italics ours.)
The phrase “object of the same” is synonymous with the purpose for which it is appropriated.
This act complies with these requirements and cannot be said to be unconstitutional because it does so.