Court Opinion

ID: 9686630
Source: CourtListenerOpinion
Date Created: 2023-08-24 15:59:29.758298+00
Date Added: 2024-06-11T18:18:21.003234
License: Public Domain

Per Curiam.
The Department of Treasury appeals as of right from the trial court’s October 7, 1983, order and judgment granting plaintiffs’ motion for summary judgment._
*1181982 PA 269 amended § 520 of the Income Tax Act of 1967, MCL 206.520; MSA 7.557C1520).1 Section 520 provides for a property tax credit against state income tax owed by taxpayers. The amendment created a credit reduction formula which decreased the property tax credit by 10% for persons with an adjusted household income of over $65,000 per year and by an additional 10% for each increment of $1,000 in additional household income until the allowable property tax credit is reduced to zero for those taxpayers with household incomes in excess of $74,000.2
Plaintiffs filed this suit alleging that they earned a taxable income in excess of $65,000 in 1982 and were affected by the credit reduction formula mandated by 1982 PA 269. Plaintiffs alleged that 1982 PA 269 was unconstitutional because the property tax credit reduction formula violated Const 1963, art 9, §§ 3 and 7 on the basis of due process, and the title-object clause of Const 1963, art 4, § 24.
The parties brought opposing motions for summary judgment. The trial court granted plaintiffs’ motion finding that 1982 PA 269 was unconstitutional because it violated Const 1963, art 9, § 7. The trial court also certified plaintiffs’ action as a class action and ordered defendant to insert a notice of this class action with 1983 individual *119income tax forms, instructional brochures, booklets and notices.
On October 25, 1983, this Court granted defendant’s motions for a stay of proceedings and immediate consideration. The only issue defendant raises in this appeal is whether 1982 PA 269 violates Const 1963, art 9, § 7. We decide that it does not, and reverse.
Const 1963, art 9, § 7 provides:
"No income tax graduated as to rate or base shall be imposed by the state or any of its subdivisions.”
The plaintiffs argue that the incremental property tax credit reduction formula mandated by 1982 PA 269 indirectly imposes a graduated income tax rate on taxpayers with annual adjusted household incomes between $65,000 and $74,000. We disagree.
The Court will not declare a statute unconstituional, or affirm a trial court’s finding of such unconstitutionality, "unless it is plain that it violates some provisions of the Constitution and the constitutionality of the act will be supported by all possible presumptions not clearly inconsistent with the language and the subject matter”. Oakland County Taxpayers’ League v Oakland County Supervisors, 355 Mich 305, 323; 94 NW2d 875 (1959). In addition to the presumption of constitutionality given to statutes, courts construe constitutional language within its "common understanding”. To do so, courts must consider the circumstances surrounding the adoption of the constitutional provision at issue as well as the purpose of the provision. Traverse City School Dist v Attorney General, 384 Mich 390, 405-406; 185 NW2d 9 (1971).
In Kuhn v Dep’t of Treasury, 15 Mich App 364; *120166 NW2d 697 (1968), aff'd as modified 384 Mich 378; 183 NW2d 796 (1971), plaintiffs attacked the constitutionality of the Income Tax Act of 1967, alleging that its classification of taxpayers into three categories and its sliding scale of credit for city income and property taxes violdated Const 1963, art 9, § 7. The Court disagreed, and stated:
"Undoubtedly what the drafters and adopters of that provision in the 1963 Michigan Constitution had in mind was the graduated scheme of the federal income tax in which rates increase as taxable income does, and that power they wished to deny to the state. Neither the designation of three types of taxpayers with different applicable rates to each, nor the difference in exemptions or exclusions causes this act to run amiss of that wish and does not violate art 9, § 7. The rates of tax imposed by the act are uniformly applicable to all taxable income of every taxpayer in each class.” Kuhn, supra, 384 Mich 389.
This Court said the common understanding of art 9, § 7 was a constitutional prohibition "of a so-called 'piggyback’ income tax, i.e., one based on a taxpayer’s federal tax liability”. Kuhn v Dep’t of Treasury, 15 Mich App 370.
In Rosenbaum v Dep’t of Treasury, 77 Mich App 332; 258 NW2d 216 (1977), lv den 402 Mich 826 (1977), the plaintiffs similarly challenged the constitutionality of the property tax credit computation formula. That formula allows a credit against state income tax liability equal to 60% of the amount by which property taxes on a homestead in a taxable year exceed 3.5% of the claimant’s total annual household income. MCL 206.522; MSA 7.557(1522). Plaintiffs in Rosenbaum argued that the formual indirectly caused a graduated income tax rate because otherwise qualified taxpayers were denied the credit solely because their *121incomes were higher, or they were "out of formula”. This Court rejected the argument and stated:
"The city income tax credit provision, MCL 206.257; MSA 7.557(1257), permits a taxpayer to claim a credit for city income tax liability on a sliding scale with a maximum limit. Since the city income tax paid varies with the taxpayer’s income one could argue that the sliding scale credit has an impermissible effect of imposing a graduated tax rate. Both the Court of Appeals and the Supreme Court in their Kuhn opinions found the city income tax credit unobjectionable. Therefore, Kuhn cannot mean that tax credits may bear no relation to income. The city income tax credit will often bear a graduated relation to income, but once the credit is computed it is allowed as a credit without regard to a taxpayer’s income. The same is true for the property tax credit. The amount of the property tax credit is not based solely upon the taxpayer’s income, but rather upon the two independent variables of household income and property tax. Once the credit is computed it is allowed without regard to the taxpayer’s income. Therefore, it does not create either directly or indirectly a graduated tax rate or base. The logic of the Kuhn opinion requires the finding that the property tax credit provision does not violate Const 1963, art 9, § 7.” Rosenbaum, pp 335-336.
In this case, plaintiffs argue that 1982 PA 269 does violate Const 1963, art 9, § 7 because once the property credit is computed, it is allowed as a credit for taxpayers with adjusted household incomes over $65,000 on a declining sliding scale with regard to income.
While it is true that the property tax credit is allowed against income tax liability with regard to a taxpayer’s taxable income, we still find no constitutional violation. The dispositive question is whether the credit at issue indirectly creates a progressive or graduated income tax rate.
*122The § 520(8) property tax credit incremental reduction formula does not affect the fixed flat rate income tax liability imposed upon taxpayers with adjusted household incomes over $65,000. Their income tax liability remains the same. The only tax liability the § 520(8) formula affects, either directly or indirectly, is the property tax liability on their homestead. We reach this conclusion after carefully considering the nature of the property tax credit.
The property tax credit provisions of the income tax act create a property tax rebate program. That program is primarily designed to relate local property taxes to income or to the ability to pay those taxes rather than to the actual value of the property so taxed. The major recipients of this property tax rebate program are senior citizens, veterans, the blind and disabled, and the low-incomed. See, MCL 206.522; MSA 2.557(1522).
Those eligible for this property tax rebate under the formula, MCL 206.522; MSA 7.557(1522), Rosenbaum, supra, may receive the rebate in the form of an income tax credit. Indeed, a property taxpayer may file for this property tax rebate and receive such a rebate even if the computed rebate exceeds the amount of income taxes the property taxpayer might owe or even if the property taxpayer has no state income tax liability whatsoever. MCL 206.520(3); MSA 7.557(1520X3). The essence, then, the property tax credit is a convenient and practical means for the state to administer this property tax rebate program.
Furthermore, as was discussed in Rosenbaum, whether an income taxpayer in the $65,001 to $74,000 range receives a property tax credit at all depends upon (1) whether that taxpayer had indeed paid any property taxes, and (2) whether that income taxpayer is eligible for a credit by having *123paid more than $2,275 in property taxes on his or her primary residence in the tax year. Thus, income taxpayers with household incomes between $65,001 and $74,000 may not be eligible for any property tax rebate whatsoever regardless of the application of § 520(8). However, all income taxpayers in that bracket still owe income taxes on their adjusted incomes based upon the same flat rate; the same rate that applies to all personal income taxpayers in this state regardless of the amount of their adjusted incomes.
Therefore, 1982 PA 269 does not violate Const 1963, art 9, § 7.
Reversed.

 "(8) For tax years commencing after December 31, 1981, a credit under this section shall' be reduced by 10% for each claimant whose household income exceeds $65,000.00, as adjusted pursuant to this section, and by an additional 10% for each increment of $1,000.00 of household income in excess of $65,000.00 or the adjusted base level.”

 The $65,001 to $74,000 figures are not fixed. Also in § 520(8) of the Income Tax Act is a formula which adjusts those base levels to reflect the effects of inflation. Thus, in 1983, the incremental reduction of the property tax credit mandated by §520(8) affects householders with adjusted gross incomes exceeding $68,500. Households with incomes over $77,500 in 1983 could not receive any property tax credit. See the 1983 State of Michigan instructions for filing individual income taxes and general homestead property tax credits.