Court Opinion

ID: 4728702
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:53:56.927759+00
Date Added: 2024-06-11T08:07:57.115540
License: Public Domain

Fullerton, J.
(dissenting) — I am compelled to dissent both from the conclusion and judgment in this case. The decision is rested, as I understand it, on three propositions: (1) that credits are not property; (2) that to tax credits violates the principle of equality and uniformity in taxation required by the constitution; and (3) that credits are taxed by the taxation of the tangible property of the state. As the questions decided are important, I feel justified in briefly stating the grounds of my dissent.
(1) The constitutional provisions on the subject of taxation appropriate to the questions before the court are set out in the majority opinion, and need not be reproduced here. A reading of them makes it at once manifest that it was the purpose and intent of the framers of the constitution, as well as that of the people who adopted it, to require for the purposes of revenue the taxation of all private property in the state, of whatsoever kind or nature, equally and uniformly, in proportion to its value in money. The language is explicit. It admits of no limitation or construction. “All property” is. named, and the only exception provided for is that a deduction of debts from credits may be authorized. The questions, therefore naturally arise what is meant by the word “property” and in what sense was the word used in the constitution ?
That mortgages, notes, accounts, moneys, certificates of deposit, tax certificates, judgments, state, county, municipal *180and school district bonds and warrants, are property in the general and popular sense of that term hardly admits of doubt. They are so termed and considered by all English-speaking people, by all law writers, and by the entire commercial world. They are held by the courts to be protected against spoliation and theft by the statutes which make it a crime to despoil or steal personal property. The question of ownership and title to them is daily the subject of controversy in the civil courts. They are daily the subject of barter and sale in all the marts of commerce. They have value in money, and constitute and make up the most satisfactory character of wealth that mankind possesses. In fine, they have all the attributes of property. These propositions are matters of common knowledge, and citations of authorities are not necessary to establish them.
That the word “property” was used in the constitution in its general sense seems to me also to be free from doubt. It is a cardinal rule of construction that the language of a state constitution, more than that of any other written instrument, is to be taken in’ its general and popular sense. The reason for the rule lies in the fact that its makers are the people who: adopt it. Its language is their language, and its words have meaning as they commonly understand them. When, therefore, words are used which have both a general and a technical sense the former must prevail over the latter, unless the very nature of the subject-matter indicates, or the context suggests, that the technical sense was intended. In the sentence on which the word “property” is used in the constitutional provision quoted there is no attempt at definition. It is used without connection with any sentence or phrase which limits its meaning. Nor is there elsewhere any limitation upon its meaning. Indeed, there is no reason for concluding that the word was used other than in its general sense.
That the makers of the constitution had the right to provide for the taxation of credits, if they so desired, I think will be conceded. It will be conceded also that this could be done *181by the use of general terms. Therefore, it being true that the obligations here enumerated are “property” in the general sense of that term, and it being true that the constitution makers used the term “property” in its general sense, it must follow that the constitution requires the taxation of these obligations.
But there is another reason more potent to my mind than even the foregoing, which shows that the framers of the constitution intended to provide for the taxation of credits by the use of the general term “property.” They authorized the legislature, when providing the method of taxation, to allow a deduction of debts from credits. Clearly, if it had not been understood that credits were property and taxable as such, this deduction would not have been authorized.
(2) Does the taxation of credits violate the principle of equality and uniformity in taxation required by the constitution? The affirmative argument is, that to tax these 'obligations is double taxation. Thus it is said that if A loans B $5,000, and takes B’s obligation to repay that sum, it is double taxation to tax the obligation in A’s hand and the money in B’s. But if this be true, and the obligation be property, I cannot understand how the rule of uniformity and equality is advanced by exempting the obligation. It seems to me that this but further confuses the matter. It cannot be said that the obligation is doubly assessed. If any property is doubly assessed it is the money, and to exempt the obligation exempts the wrong thing. But it is not sound for another reason. When A, the money loaner, loans to B, the borrower, $5,000, and takes his obligation to repay the loan, A’s wealth is not thereby decreased $5,000, nor is B’s wealth increased $5,000. The parties have only made an exchange of wealth, and each has exactly the same amount of wealth he had before. If, therefore, each paid taxes on $5,000 before the exchange, in justice and equity each ought to pay taxes on a like amount thereafter. The law as it heretofore existed, however, seems to have made A pay, after the ex*182change, on $5,000 and B on $10,000. To correct the evil the legislature relieves A entirely, still leaving B to pay on double the amount he possesses. This to my mind is not equality and uniformity in taxation. Nor do I think any law can equalize taxes which exempts from taxation the creditor class. The burden of double taxation never falls upon them. It falls in every instance upon the property-holding debtor class, since it is the debtor who does not have the absolute interest in the property he possesses. Laws which allow the debtor to deduct from the assessed value of his property debts in good faith owing by him have, for that reason, a sense of equity, but there is no sense of equity or justice in exempting from taxation money and credits.
(3) Finally, it is said that credits are taxed in other forms of property, and for that reason their exemption from taxation as credits is justified. The argument in support of this proposition is that credits are but representations of interests in the tangible property of the state, and that when the tangible property of the state is taxed all the wealth within the state is taxed. But I must dissent from this proposition also. It assumes, what is obviously not the fact, that there is no wealth in credits independent of tangible property. Suppose that tomorrow a person should come into this state from some other state bringing with him .stocks and bonds to the value of a million dollars of some solvent railroad corporation whose lines do not touch this state, would any one say that he had brought no wealth into the state, or that the wealth of the state had not been increased? Or, would any one say that these stocks and bonds were taxed by the taxation of the tangible property of the state? Obviously not. How then can it be said that the wealth of the state is taxed by the taxation of its tangible property? It is no answer to say that these bonds are taxed by the taxation of the railroad in another state. This does not satisfy our own laws which require that all property within the state bé taxed. Nor does it satisfy the justice of the matter. So long as this *183property is within the state it requires the care and protection of the laws of the state, and it is only right that it should contribute its proportionate share to the maintenance of the state. Furthermore, if credits be property in any form, they must be taxed as property. The constitution does not recognize vicarious taxation. The requirement that all property must be taxed means that it must be taxed directly, in the form it presents itself when the assessment lists are made up, not in the form, of substitutes.
Again, it is suggested in this connection, and it is a common argument used in support of laws of this character, that credits escape taxation in the major part through the dishonesty of their holders, and that, when they are found, the tax is paid by the debtors in the way of increased interest. But this does not appear to me to argue in favor of the exemption of credits. If the laws are so lax as to permit credits to escape taxation, the remedy is to reform the law, not to exempt credits. It will not do to say that no tax law can be framed that will reach credits. This is no place to point out remedies, but when the law places the premium upon honesty instead of upon dishonesty in these matters, the evil will disappear. But, supposing it be true that a goodly part of the credits of the state will escape the assessor under the best framed law, is it not better that the part that can be reached be taxed than that all be allowed to escape? No one pretends that the assessor reaches all of the tangible personal property in the state, yet I have never heal’d this given as a reason for the exemption from taxation of all tangible personal property.
The claim that the borrower pays the taxes on credits in the way of interest is only true in a general sense. It is true in the sense that the renter pays the taxes on rented land in the way of rents, that the builder pays the taxes on the manufacturing plants when he pays the cost of the building material, that the consumer pays the tax on the products he consumes when he pays the price of the consumed products, *184but it is true in no other sense. The rate of interest is regulated-by law in this state, and it is this law that governs interest rates. Experience has shown that it is only by law “'that the exaction of excessive and exorbitant interest can be prevented. It is never done by freeing money and credits from taxation. Nor is interest lessened to any material extent thereby. This is so because freedom from taxation is —only one, and a minor one, of the many conditions that regulate rates of interest. The maximum rate allowed by law is always exacted if the demand for money at the time justifies it, regardless of other conditions, and the fact that credits are or are not taxed is hardly considered as an element when determining whether the maximum rate shall be exacted.
But these latter considerations are beside the question. If the constitution declares that notes, accounts, moneys, certificates of deposit, and the like, are property and taxable as such, the legislature is without power to exempt them from taxation, and any statute attempting so to do is void. I believe it has so declared, and for that reason I think the judg- ■ ment of the lower court should be affirmed.