Court Opinion

ID: 8199137
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:22:48.608039+00
Date Added: 2024-06-11T16:40:51.651032
License: Public Domain

Fairchild, J.
{dissenting). I cannot agree with the majority. It seems to me that the limits of the powers conferred upon the legislature by the people have been exceeded in this particular. It has never been considered fair play to impose burdens or penalties by later legislation upon a fellow citizen for an act or transaction which was lawful at the time of its occurrence, and the power to do that was withheld from governmental agencies by the people. The idea is not a new one and was not at the time of the formation of this government. Due process and the law of the land as legal concepts *337calculated to protect individuals in their lives and property have been parts of charters of freedom at least since the time of Conrad II (the Salic), who reigned from 1024 to 1039. In Mott’s work on Due Process of Law, page 1, he says with reference to an edict of that reign providing that no man be deprived of his fief, but by the laws of the empire and the judgment of his peers :
“Sixteen states of the United States have incorporated a literal translation of a portion of this canon in their fundamental law, and fully as many more use phrases of similar import.”
The thirty-ninth section of the Magna Carta reads, Mott, page 3:
“No freeman shall be taken and imprisoned or disseized or exiled or in any way destroyed, nor will we go upon him nor send upon him, except by the lawful judgment of his peers and by the law of the land.”
Sec. 6, ch. 15, Laws of 1935, is retroactive. I think it must be conceded that the taxpayer in this case had fully discharged all claims against him and his income under the law of 1933. Since this is so, his income for that year had been earned, taxed, and discharged of all obligations as income, and, under the “pattern of the income tax law,” had passed from its status as income into the taxpayer’s estate. Its character as income had vanished, and whatever was left of it was no longer income, but was property and a part of the taxpayer’s holdings or his estate. It has been decided that the legislature may constitutionally authorize the tax commission to go back several years for the purpose of reassessing incomes and correcting errors and eliminating frauds-in previous returns. State ex rel. Globe Steel Tubes Co. v. Lyons, 183 Wis. 107, 197 N. W. 578. A legislature would not, of course, be acting under such constitutional power in levying a tax upon income not previously taxed at *338all. The power is merely that of collecting sums due since the tax was originally levied. It was held in State ex rel. Globe Steel Tubes Co. v. Lyons, supra, that this power included power retroactively to require payment of interest on back taxes from the date when they became due.
The legislature has also been upheld in levying new taxes on income already, but recently, earned. If this power to go back in levying new taxes is unlimited as to time, the tax in question would be valid. Can the legislature on March 14, 1935, levy a new tax upon incomes received during the calendar year 1933, or corresponding fiscal year? On July 13, 1911, the legislature imposed a tax on incomes received during the calendar year 1911. This act was upheld in Income Tax Cases, 148 Wis. 456, at p. 514, 134 N. W. 673, 135 N. W. 164. On August 17, 1927, a tax was imposed upon incomes received in the calendar year 1926, and it was held valid in West v. Tax Comm. 207 Wis. 557, 242 N. W. 165. In this case the tax on incomes received during 1926 as imposed by the law passed in 1925 was in the midst of the process of assessment when the 1927 law was passed.
Cooper v. United States, 280 U. S. 409, 50 Sup. Ct. 164, lays down the test that gains from “prior but recent transactions” may be taxed as income. No case holds, and, with one exception, no case suggests, that the legislature may constitutionally impose a tax upon income received during a year, the taxes for which have been assessed and paid. Stockdale v. Insurance Companies, 20 Wall. (87 U. S.) 323, holds good a tax imposed by congress on July 14, 1870, on incomes received during the period from January 1, 1870, to August 1, 1870, but at page 331, the court says :
“The right of congress to have imposed this tax by a new statute, although the measure of it was governed by the income of the past year, cannot be doubted; much less can it be doubted that it could impose such a tax on the income of the current year, though part of that year had elapsed when the *339statute was passed. The joint resolution of July 4, 1864, imposed a tax of five per cent upon all income of the previous year, although one tax on it had already been paid, and no one doubted the validity of the tax or attempted to resist it.”
Apart from the quoted remark in the Stockdale Case, there is no authority for holding that after an income tax on income received during a given year has been assessed and collected, the legislature may constitutionally tax the income received that year to a further extent. Fairness suggests that when a taxpayer’s tax on one year’s income has been assessed and paid according to the law then in force, the taxpayer is justified in concluding that the matter is closed except for fraud or erroneous assessment. The power of the legislature to provide for the collection of taxes which validly should have been assessed under the existing law, but which were omitted because of fraud or mistake, cannot be doubted, but that power does not support the law here in question. There is no claim of fraud as a reason for reexamining and reassessing this income of 1933, but the legislature in 1935 seeks to reach into a citizen’s present estate and lay a tax, called an income tax, on that portion of his present property which was income during 1933, but not thereafter, and by such so-called income tax, compel him to disgorge a sum of money into the common treasury. That he may be able to afford it is no more a sufficient excuse for the usurpation of power than is the great need by the treasury of money. Even though the need be great, constitutional rights should not be invaded. A desire for material to patch a leak does not warrant tearing away structure that prevents inundation.
“When the government through its established agencies interferes with the title to one’s property, or with his independent enjoyment of it, and its action is called in question as not in accordance with the law of the land, we are to test its validity by those principles of civil liberty and constitu*340tional protection which have become established in our system of laws, and not generally by rules that pertain to forms of procedure merely.” Cooley, Const. Lim. (7th ed.) p'. 505.
Civilized countries, enlightened nations have protected and preserved the rights of its citizens, encouraged thrift and the honest accumulation of resources. Laws relating to acts and events to occur in the future are acceptable and may be justified in taxation under the fundamental policy of protecting the rights of all and preserving the integrity of the government, but impositions on closed transactions cannot long be tolerated in a free government. Mr. Justice Story in the case of Society for the Propagation of the Gospel v. Wheeler, Fed. Cas. No. 13,156, 2 Gall. *105, 139, defined a retroactive or, as he called it, a retrospective law:
“Upon principle, every statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already passed, must be deemed retrospective.”
I have adverted to the fact that the taxpayer’s 1933 income discharged itself of impositions then existing. The majority opinion suggests many subtle differentiations, but these do not appear to me to build a substantial difference between the closed act which is beyond the reach of the legislature and that particular situation of which the taxpayer complains.
I do not feel any practical purpose can be served by further discussion of the point. The feeling that persons who have income from dividends from Wisconsin corporations have escaped taxation long enough may exist, but such escape was purposely permitted by the legislature in the belief that a sufficient tax on that earning had been paid by the corporation. Income from such dividends might be taxed from 1935 on, but for the years that had closed, the legislature was precluded by its own determination that such income was *341sufficiently taxed at its source. Citizens acted in reliance upon the assurance of the government that if each did all the existing law recjuired him to do, he need not worry about completed acts.
The objections to the act here outlined, together with those advanced by Mr. Justice Fowler in the dissent by him and Mr. Justice Nelson, sufficiently disclose the reasons for my not concurring in the majority opinion.