Court Opinion

ID: 6260206
Source: CourtListenerOpinion
Date Created: 2022-02-17 22:00:53.595274+00
Date Added: 2024-06-11T08:59:41.372941
License: Public Domain

Dissenting Opinion by
Me. Justice Robeets:
In a single stroke, the majority has largely obliterated the Uniformity Clause from the Pennsylvania Constitution insofar as that clause has been applied to the taxation of real property in an uninterrupted line of cases since 1909. See Madway v. Board for the Assessment and Revision of Taxes, 427 Pa. 138, 233 A. 2d 273 (1987) ; Deitch Co. v. Board of Property Assessment, 417 Pa. 213, 209 A. 2d 397 (1965) ; McKnight Shopping Center, Inc. v. Board of Property Assessment, 417 Pa. 234, 209 A. 2d 389 (1965) ; Buhl Foundation v. Board of Property Assessment, 407 Pa. 567, 180 A. 2d 900 (1962); Delaware, Lackawanna & Western Railroad Co.’s Tax Assessment (No. 1), 224 Pa. 240, 73 Atl. 429 (1909).
For half a century it has been the clear, firm, and unquestioned view of this Court “. . . that the uniformity clause forbids the taxing of one man’s land at a lower rate than another’s simply because of the type of building erected, or the type of business conducted thereon”. Madway v. Board for the Assessment and Revision of Taxes, supra, at 146-47, 233 A. 2d at 278. (Emphasis added.) “The central thought running through all the opinions is that the principle of uniformity is a constitutional mandate to the courts, to *581the legislature, and to the taxing authorities, in the levy and assessment of taxes which cannot he disregarded. The purpose of requiring all tax laws to be uniform is to produce equality of taxation. . . . Each taxpayer, no matter how great or small, has a right to demand that his property shall be assessed upon the basis of a uniform valuation of other properties belonging to the same class and within the territorial limits of the authority levying the tax .... It will not do to assess farm lands at one-fifth their actual value, dwelling houses at one-third, manufacturing establishments at one-half, and coal lands at full value. The Constitution says the valuation must be uniform on the same class of taxable subjects and real estate is a taxable subject of a particular class . . . hence the rule of uniformity must be applied to all kinds of real estate as a class.” Delaware, Lackawanna & Western Railroad Co.’s Tax Assessment (No. 1), supra, at 243-48, 73 Atl. at 430-32.1 (Emphasis added.)
Yet today the majority gives constitutional sanction to a semantic sleight of hand that will permit any local taxing authority to subdivide real estate taxes into separate classifications merely by terming its action a tax on the “use” of the property. Thus, multiple family dwellings can be taxed at a different rate from single family dwellings; tenant-occupied houses can be taxed differently from owner-occupied houses; a man who conducts his profession or business from his home will be subject to a different property tax than his next door neighbor, because his “use” of his property is different from that of his neighbor.
The majority concedes that “. . . economically the incidence of the tax [here in question] is on the prop*582erty itself . . .”, but it insists that “its legal incidence is on the privilege of using . . . .” However, to attach such constitutional significance to the mere interjection of the term “use” into a taxing ordinance, a term that has traditionally concerned only the tax classification of tangible personal property, is to permit the wholesale avoidance of the long established mandate of the uniformity clause as that clause has been interpreted in the line of cases from Delaware (1909) to Madway (1967).
In sum, the majority exalts mere form over clear substance contrary to the dictates of sound and controlling principles of statutory interpretation. As Mr. Justice Brandéis aptly stated: “The name by which the tax is described in the statute is, of course, immaterial. Its character must be determined by its incidents. ... To levy a tax by reason of ownership of property is to tax the property ... It cannot be made an occupation or license tax by calling it so. . . .” Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288, 292-94, 41 S. Ct. 272, 274-75 (1921) (citations omitted) (holding state tax to be a property tax and hence violative of the state constitution’s uniformity clause).2 The majority would likewise do well to heed the long prevailing maxim, reiterated by Mr. Justice Sutherland, that “. . . 'what cannot be done directly because of constitutional restriction cannot be accomplished indirectly by legislation which accomplishes the same result’ . . .”. Macallen v. Massachusetts, 279 U.S. 620, 629, 49 S. Ct. 432, 435 (1929) (citations omitted) (holding state tax on federal securities invalid).
Indeed, this Court itself in the past and until today has consistently looked to the substance of a taxing measure rather than to the designation given it by the legislature. See, e.g., Gaugler v. Allentown, 410 Pa. *583315, 317, 189 A. 2d 264, 265 (1963); National Biscuit Co. v. Philadelphia, 374 Pa. 604, 615, 98 A. 2d 182, 187 (1953); Flynn v. Horst, 356 Pa. 20, 27, 51 A. 2d 54, 58 (1947). The majority fails to suggest any reason for forsaking .that approach in this case, nor can any be discerned.
In concluding that a tax upon the use and occupancy of central city real estate for commercial purposes is not a tax upon the real estate itself, but only upon one attribute of its ownership, the majority relies almost entirely upon the United States Supreme Court decision in Billings v. United States, 232 U.S. 261, 34 S. Ct. 421 (1913). That decision, however, is wholly in-apposite.
The issue in Billings concerned the constitutionality of Section 37 of the Payne-Aldrich Tariff Act of August 5, 1909, imposing a tonnage duty on foreign built yachts, pleasure boats, or vessels “. . . not used or intended to be used for trade, now or hereafter owned or chartered for more than six months by any citizen or citizens of the United States, a sum equivalent to a tonnage tax of seven dollars per gross ton.” 232 U.S. at 277, 34 S. Ct. at 422.3 The tax was held to be an excise tax on the use of foreign built yachts, and the Court did enter into a discussion of the difference between “ownership” and “use”, as quoted by the majority. However, that language has absolutely no relevance to the problem now before us for several reasons.
The core of the Billings opinion was the reasonableness of the classification of yachts as “domestic” and “foreign built” for purposes of the equal protection clause. Had the tax been on the use of yachts built in a particular state to the exclusion of yachts built in another state, there is no question but that the tax would *584be invalid as a violation of federal uniformity. Id. at 282, 34 S. Ct. at 424. “[T]he difference between things domestic and things foreign and their use are apparent on the face of things and are expressly manifested by the text of the Constitution.” Id. at 283, 34 S. Ct. at 425. Thus, the sine qua, non of the validity of the tax was that the yachts be foreign built. Nothing resembling that issue is now before this Court.
The United States Supreme Court in Billings did discuss the nature of the yacht tax as it related to the use of the property, for the Court had to determine whether the tax was a direct tax. However, the discussion pertained to the use of tangible personal property—the traditional subject of a “use” tax. E.g., The Tax Act of 1963 for Education, Act of March 6, 1956, P. L. (1955) 1228, Art. 1, §1, as amended, Act of May 29, 1963, P. L. 49, §2, 72 P.S. §3403-1 et seq. See Commonwealth v. Central Pennsylvania Quarry Stripping & Const. Co., 422 Pa. 573, 222 A. 2d 728 (1966) ; see generally Hartman, State Taxation of Interstate Commerce, 131-47, 161-79 (1953) ; “What is a Property Tax”, Annot., 103 A.L.R. 18, 95 (1936). The distinctions between tax classifications of real property and tax classifications of personal property heretofore consistently have been recognized by this Court.as necessitating different treatment with respect to the Uniformity Clause. Compare Deitch Co. v. Board of Property Assessment, 417 Pa. 213, 209 A. 2d 397 (1965) and McKnight Shopping Center, Inc. v. Board of Property Assessment, 417 Pa. 234, 209 A. 2d 389 (1965) with Jones & Laughlin Tax Assess. Case, 405 Pa. 421, 175 A. 2d 856 (1961). No. justification exists for removing that distinction.
The Court, in Billings, was aware of the unique nature of the tax before it. “But it is to be observed that it may well have been .that the character of the property with which the statute deals and the mere ele*585ment of caprice as to its use and the uncertainties of the subject led to the fact of mailing the use alone the criterion as the wiser and juster method of operating equally upon all.” 232 U.S. at 281-82, 34 S. Ct. at 424.
Furthermore, the United States Supreme Court in Billings ivas interpreting and determining the constitutionality of an Act of Congress. No federal issue is involved in the case the majority decides today. We are not bound by the language of the United States Supreme Court when we are interpreting the constitutionality of a local taxing ordinance under the Pennsylvania Constitution. “The question of validity of a state or municipal tax is one which the state courts are peculiarly fitted to answer and which, therefore, a federal court should not consider.” United States v. City of New York, 175 F. 2d 75, 77 ( 2d Cir.), cert. den., 338 U.S. 885, 70 S. Ct. 189 (1949).
Nor does Billings even offer a valuable analogy. The constitutional challenge in Billings centered on the equal protection clause of the Fourteenth Amendment of the federal constitution, and the demands of equal protection as applied to taxing measures are far more lenient than those of our own Uniformity Clause. In Davidson v. New Orleans, 96 U.S. (6 Otto) 97 (1878). the United States Supreme Court, in referring to a tax law, declared: “[i]t may violate some provision of the State Constitution against unequal taxation; but the Federal Constitution imposes no restraints on the States in that regard,” and “. . . Ave know of no proAdsion in the Federal Constitution which forbids . . . unequal taxation by the States.” Id. at 105, 106.
A short time later the Court recognized that the federal constitutional doctrine of equal protection did have some relevance in the area of taxation but continued to suggest that great deference would be ac*586corded to the legislative judgment as to the unequal allocation of tax burdens.
“We think that we are safe in saying that the fourteenth amendment was not intended to compel the states to adopt an iron rule of equal taxation. If that were its proper construction, it would . . . [inter alia] supersede all those constitutional provisions and laws of some of the states, whose object is to secure equality of taxation. . . .” Bell’s Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237, 10 S. Ct. 533, 535 (1890) ; see Tussman & tenBroek, The Equal Protection of the Laws, 37 Cal. L. Rev. 341, 369-70 (1949). But this Commonwealth has chosen to adopt such a constitutional rule of equal taxation, to wit: the uniformity clause. That the federal standard of equal protection and our constitutional rule of uniformity are quite different can be further demonstrated by comparing Shaffer v. Carter, 252 U.S. 37, 40 S. Ct. 221 (1920), sustaining the constitutionality of a state graduated income tax, with Kelley v. Kalodner, 320 Pa. 180, 181 Atl. 598 (1935), where this Court found a similar graduated income tax to be violative of our Uniformity Clause. See generally, New-house, Constitutional Uniformity and Equality in State Taxation, 601-09 (1959).
In light of the foregoing, I fail to understand how the majority can deem the Billings case to be relevant authority for its present conclusion, much less deem it controlling.
Even assuming arguendo that a personal property tax case can be relevant to the real property taxation issue presently before us, the more apposite case would be Dawson v. Kentucky Distilleries & Warehouse Co., supra, which was decided after the Billings case and which involved not a federal issue of equal protection but rather an issue of the application of the uniformity clause of the Kentucky state constitution.
*587The majority quotes language from Billings that “ ‘. . . the election during the taxing period of the owner to take advantage of one of the elements which are involved in ownership—the right to use . . .’ ” as being descriptive of what is being taxed by the Business Use. and Occupancy tax. The majority continues by asserting that Wanamaker’s has the choice whether or not to use its property for business. No such choice exists.
In Dawson, the United States Supreme Court held a Kentucky “annual license tax” of 50 cents a gallon upon all whiskey either withdrawn from bond or transferred in bond from Kentucky to a point outside that state to be a property tax, and therefore concededly invalid under the Kentucky uniformity clause. 255 U.S. at 291, 41 S. Ct. at 274.4 The Court stated: “‘The whole value of the whiskey depends upon the owner’s right to get it from the place where the law has compelled him to put it, and to tax the right is to tax the value.’ To levy a tax by reason of ownership of property is to tax the property.” Id. at 294, 41 S. Ct. at 275. Compare Thompson, Auditor v. Kreutzer, 112 Miss. 165, 72 South. 891; Thompson, Auditor v. McLeod, 112 Miss. 383, 73 South. 193, L.R.A. 1918C, 893, Ann. Cas. 1918A, 674. The Thompson v. McLeod case relied upon by Mr. Justice Brandéis held that the right to extract turpentine from standing trees was the only use to which the property could be put, and that a tax on that right was a property tax.
The principle to be derived from these cases is clear: a taw levied on the only use to which property *588can be put is a tax levied by reason of oionership, and therefore a tax on the property,5
As noted above, the majority asserts that Wanamaker’s has a choice. However, it is one thing to talk about the freedom of choice of a potential luxury yacht owner to buy his tangible personal property overseas, and quite another to speak of a major department store’s freedom to elect to use its real property, located in Philadelphia’s central business district, for commercial purposes. Wanamaker’s commercial use of its property is the only realistic economic use to which that property can be put. The surrounding land is used for department stores or office buildings. Should Wanamaker’s convert to a warehouse, or a manufacturing concern, or an office building, it would still be subject to the tax. The only way Wanamaker’s can choose to avoid the tax is to not open for business, take down its building, or sell its land. Beyond question, a tax on Wanamaker’s commercial use of its land is a tax on ownership, and hence a property tax, as defined by the United States Supreme Court in the Dawson case.
The only case cited by the majority which arguably concerns a use tax as applied to real property is United States v. City of Detroit, 355 U.S. 466, 78 S. Ct. 474 (1958). Appellants relied on the case—particularly the language quoted by the majority—for the proposition that the use of real property can be taxed differently from the property itself. I do not understand that to be the holding of City of Detroit.
The issue in that case concerned whether a Michigan statute imposed a tax on the United States in violation of the federal immunity doctrine of McCulloch v. Maryland, 17 U.S. (4 Wheat) 316 (1819). The statute *589in question imposed a tax on private lessees and users of tax exempt property who used the property in a business conducted for profit. Any taxes due were the personal obligation of the private lessee or user, and the owner was not liable for their payment. The property involved was an industrial plant owned by the United States, and leased by Borg-Warner. The United States Supreme Court sustained the validity of the tax.
The case is analagous to our own line of cases which permit taxation of property owned by a body ordinarily tax exempt if the property is put to a private, nonpublic use. Moon Township Appeal, 387 Pa. 144, 127 A. 2d 361 (1956), and cases cited therein.
The controlling test is whether the property is used for a public or private use. West View Borough Municipal Authority Appeal, 381 Pa. 416, 113 A. 2d 307 (1955). These cases hold that normally tax exempt property is taxable if used for a non-public purpose. The use is not taxable; rather the property is made taxable because of its use.
City of Detroit is inapplicable for other reasons. The Michigan statute imposed a tax on private lessees and users of tax exempt property for private profit. The taxes due were the personal obligation of the private lessee or user, and the owner was not liable for their payment. Here, the Business Use and Occupancy Tax applies to owner-occupiers as well as tenants, and owners are secondarily liable. Also, the Michigan tax was compensatory. The tax sought to equalize the tax burden between tenants who leased from private owners and tenants who leased from tax exempt owners. The Business Use and Occupancy Tax, on the other hand, is levied on only a particular type of real estate.
The majority places great weight on the “rather seismographic test which records all tremors of use” allegedly incorporated into the tax. Examination of the formula reveals that the School Board can tax at *5901.25% of the assessed value, with an adjustment made for the number of days the building is open for business, and the amount of square footage available, but not used, for business.
Clearly the only significant changing factor in the tax is the assessed value of the land. Most on-going businesses are open the same number of days per year and have little space in their buildings not used in some aspect of the business.
Surely the chancellor was correct when he stated in his able opinion that: “Moreover, even the indirect relationship between the exercise of the privilege of business occupancy and the value of the real estate occupied is not given effect in the taxing provision. The standard of measurement is not more related to business use or occupancy than it is to residential or any other use or occupancy. In fact, the tax is measured without regard to whether the particular occupancy is an economic one. What the standard of measuring the tax is directly related to is the ownership interest in property not produced by or dependent upon the exercise of the privilege said to be taxed. Indeed, even to speak of an owner’s ‘privilege’ of occupying his real estate is itself a confusion. If someone owns real estate, he has a right to occupy it. To denominate his right a privilege is to transform it by diminishing it.”
Further, as the chancellor noted, Section 3(b) of the ordinance confirms the conclusion that the Business Use and Occupancy Tax is a property tax. Section 3(b) provides: “This authorization [to the Board of Education to impose the tax] shall not authorize this tax to be imposed upon any person exempt from real estate taxes in the City of Philadelphia.” If the tax were on a privilege, there would be no necessity to reiterate the validity of property exemptions.
What the majority does today is to judicially revise the Uniformity Clause of the Pennsylvania Con*591stitution to permit the classification of real property. This revision has no basis in reason, logic, or policy, and is clearly contrary to existing Pennsylvania law. Nor is this revision mandated by any decision of the United States Supreme Court. Thus, the majority today grants constitutional sanctity to a real estate taxing device that has no legal or economic justification and violates every heretofore recognized principle of uniformity in real estate and creates for the first time in Pennsylvania a judicially sanctioned discrimination in land taxation.6 I am as sympathetic as the majority with the substantial financial needs of the Philadelphia School District, but, to paraphrase our thoughts in Madvoay, the City Council should not be permitted to mend Philadelphia’s economy by tearing at the fabric of our Constitution.
I would affirm the decree of the Court of Common Pleas of Philadelphia and accordingly, I dissent.
Mr. Justice O’Brien joins in this dissent.

 Dor background Information on uniformity clauses around tbe country, see Hellerstein, State and Local Taxation 32-44 (1961) ; Newbouse, Constitutional Uniformity and Equality in State Taxation 9-48 (1959).

 See discussion infra, pp. 7-9.

 Section 37 was repealed by the Underwood Tariff Act of October 3, 1913, c. 16, §14, S, 38 Stat. 201.

 Mr. Justice Brandéis noted that the United States Supreme Court was able to pass on whether the tax in question was a property tax, and thus violated Kentucky’s uniformity clause— a gtiestion of local law—because there had been no decision by the highest court of the state interpreting the law. Dawson v. Kentucky Distilleries & Warehouse Co., 255 U.S. 288, 292, 41 S. Ct. 272, 274 (1921).

See generally, Matthews, The Function of Constitutional Provisions Requiring Uniformity in Taxation, 38 Ky. L.J. 31, 187, 377, 396-405, 503 (1949-50).

 As Roland Hatfield, the then Commissioner of the Minnesota Department of Taxation stated at a symposium conducted by the Tax Institute of America: “. . . I have observed in respect to the classified property tax system that it cannot work equitably; that it has no effective brake on it; and that it leads to changes in the property tax law which are inspired by politics rather than by economics. In general, I think it is a hazardous experiment to start. If you want the opinion of one who comes from the only state which has a totally classified tax system, let me say that I have recommended and I am still going to recommend that the legislature take steps to reverse this process, if possible. We would like to get back to a property tax system.” Hatfield, “Minnesota’s Experience with Classification” in The Property Tax: Problems and Potentials 244 (1966).