Court Opinion

ID: 9418822
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:40:24.558482+00
Date Added: 2024-06-11T17:22:11.425123
License: Public Domain

Mr. Justice Cardozo,
dissenting in part.
I am unable to concur in the opinion of the court to the extent of its holding that the tax upon the net receipts of premiums for casualty insurance is a denial to the appellant of the equal protection of the laws.
The validity of a tax depends upon- its nature, and not upon its name. St. Louis Compress Co. v. Arkansas, 260 U.S. 346, 348; Federal Land Bank v. Crosland, 261 U.S. 374, 378; Louisville Gas Co. v. Coleman, 277 U.S. 32, 38; Educational Films Corp. v. Ward, 282 U.S. 379, 387.
In the State of Illinois there has long been a usage, reinforced by statute until 1927, whereby property subject to an ad valorem tax is to be assessed at 30% or later 60% of its value, and no more. The highest court of that state held for many years that within the meaning of this rule of debasement, the tax upon the net receipts *551of foreign fire and inland navigation companies was a tax upon property, or at least was to be assessed in the same way. Chicago v. Phoenix Insurance Co., 126 Ill. 276; 18 N.E. 668; National Fire Ins. Co. v. Hanberg, 215 Ill. 378, 380; 74 N.E. 77; People v. Cosmopolitan Fire Ins. Co., 246 Ill. 442, 448; 92 N.E. 922. This continued to be the practice till 1921. In that year and for a time afterwards, the Court determined that the tax did not come within the rule of debasement, but was a tax upon a privilege. People v. Kent, 300 Ill. 324; 133 N.E. 276; People v. Barrett, 309 Ill. 53; 139 N.E. 903; Hanover Fire Ins. Co. v. Carr, 317 Ill. 366; 148 N.E. 23. The companies affected by the new ruling attacked the discrimination as unconstitutional, and brought the controversy here. In 1926, this court held that the denial of the 30% debasement to foreign corporations brought about an inequality so gross in comparison with the burdens of domestic corporations as to vitiate the tax and the statute that imposed it. Hanover Ins. Co. v. Harding, 272 U.S. 494. Following that decision, the Supreme Court of Illinois receded from the position that it had taken in 1921, and held that there must be a debasement of value as in the case of taxes upon property. Hanover Fire Ins. Co. v. Harding, 327 Ill. 590, 601; 158 N.E. 849; People v. Franklin National Ins. Co., 343 Ill. 336; 175 N.E. 431.
No descriptive epithet applied to the tax by the Illinois court or any other can transform the essential nature of the tax into something other than it is. St. Louis Compress Co. v. Arkansas, supra; Federal Land Bank v. Crosland, supra; Educational Films Corp. v. Ward, supra. No descriptive epithet can make a tax upon the net receipts of the business of the whole year the same as one upon the property located on a particular day of the year within the area of the taxing district, or the same as one upon the capital or income of investments. If the foreign corpo*552rations subjected to this tax on net receipts had taken the gross receipts out of the state at once after collection, or had placed them in an insolvent bank with the result that nothing remained when the assessment day arrived, the tax would still have been due without the abatement of a dollar. Fidelity & Casualty Co. v. Board of Review, 264 Ill. 11, 14; 105 N.E. 704. On the other hand, nothing would have been due if no premiums had been collected during the year, though the profits of earlier years were still within the county. The tax, whatever its label, is upon the operations of a business. Generally in the United States, though perhaps not abroad, a tax so imposed is spoken of as an excise. Flint v. Stone Tracy Co., 220 U.S. 107, 145; cf. Encyclopaedia of the Social Sciences, vol. V, article “ Excise”; Seligman, Essays in Taxation, 9th ed., pp. 161, 165, 169. It is what it is, no matter what one calls it. It is a tax on net receipts.
This court did not hold in Hanover Ins. Co. v. Harding, supra, that if the tax was an excise, it would be void for that reason, though the assessment were to be debased. All that was held was that calling it an excise would not save it if the benefit of debasement was withheld in a discriminatory way. By the same, token, calling it a property tax does not condemn it if debasement is allowed. The Illinois court did not hold, in retracting the description of a tax upon a privilege, that a tax upon investments is identical with a tax upon the net receipts of the business of the year. Things so essentially different would not become the same even if a court were to confuse them and speak of them as one. The Illinois court held no more than this, that whatever the differences between the taxes, the two would be viewed as if they were taxes upon property for the purpose of applying the prescribed percentage’ of debasement. If the tax upon net receipts, including casualty insurance premiums, would not effect a denial of the equal protection of the laws in the event that the *553Supreme Court of Illinois, while debasing the assessment, had described the tax as an excise, it does not effect such a denial 'because the court, rightly or wrongly, has described it as something else. New York Cent. R. Co. v. Miller, 202 U.S. 584, 596. The question still is, what kind of classification is permissible when the yearly net receipts are the subject matter of the tax and the measure of the burden?
Now, plainly, a tax on the net receipts of a business of a particular kind is not condemned as void for the reason that a like tax or an equal one is not laid on the net receipts of every other kind of business. Bell’s Gap R. Co. v. Pennsylvania, 134 U.S. 232, 237; Pacific Express Co. v. Seibert, 142 U.S. 339, 351, 353; Adams Express Co. v. Ohio, 165 U.S. 194, 223, 228; Southwestern Oil Co. v. Texas, 217 U.S. 114; Oliver Iron Co. v. Lord, 262 U.S. 172; Stebbins v. Riley, 268 U.S. 137, 142; Ohio Oil Co. v. Conway, 281 U.S. 146, 159; Union Bank v. Phelps, 288 U.S. 181. Not even the appellant makes any contention to the contrary. If it did, it would be driven to maintain that the whole statute must fall, and not merely so much as affects the casualty premiums. To say that a tax on the net receipts of one kind of business is void because a like tax is not laid on different forms of business would mean that the net receipts of insurance companies may not be taxed without laying a like tax on manufacturers and merchants. The cases above cited make it clear to the point of demonstration that this is not the law. “ The state may tax real and personal property in a different manner.” Bell’s Gap R. Co. v. Pennsylvania, supra; Ohio Oil Co. v. Conway, supra. “ It may impose different specific duties upon different trades and professions, and may vary the rate of excise upon different products.” Ibid. Nowhere is it' intimated that what was approved would have been condemned if there had been in the statute a glossary that gave the tax another name.
*554With the aid of this analysis the path is cleared to a conclusion. A tax upon the receipts of a business is not invalid as of course because some forms of business are hit and others are exempt. To bring about that result the assailant of the tax must be able to satisfy the court that the classification had its origin in nothing better than whim and fantasy a tyrannical exercise of arbitrary power. Ohio Oil Co. v. Conway, supra, p. 160; Stebbins v. Riley, supra; Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78. This is the heavy burden that the appellant must sustain. Is it a whimsical and fantastic act to tax foreign fire insurance companies upon all their net receipts, including those derived from casualty premiums, when no such tax is imposed upon the receipts of insurance companies that do a casualty business only? If so, the arbitrary quality of the division must have its origin in the fact that the activities of the one class overlap to some extent the activities of the other. But plainly there is no rule th^t overlapping classes can never be established in' the realm of taxation except at the price of an infringement of the federal constitution. The recognition of such a rule means that a department store may not be taxed on the net receipts of its business unless all the many activities thus brought under a single roof are taxed in the same way when separately conducted. Cf. State Board of Tax Commissioners v. Jackson, 283 U.S. 527; Liggett Co. v. Lee, 288 U.S. 517, 532. There must be a tax on the business of the draper, the jeweler, the shoemaker, the hatter, the carpet dealer, and what not. For the same reason, the proprietor of a retail market dealing in meats and groceries and vegetables and fruits will then escape, at least proportionately, a tax upon receipts if the statute does not cover the business of the shopkeeper who -derives a modest income from the sale of peanuts and bananas. There are few taxes' upon earnings that would pass so fine a sieve. The rule, if *555there is any, against the creation of overlapping classes for purposes of taxation is manifestly not one of general validity. The range of its application must depend upon the facts.
Fire insurance companies in Illinois, though organized in other states, have never been allowed to do a general casualty business. It is misleading to argue about them on the assumption that they are appropriately described as casualty insurers. For a long time they were restricted to the risks of fire, lightning and tornadoes, and those of inland navigation and transportation. Act of March 11, 1869; Act of May 31, 1879; Act of June 30, 1885. Then in 1905 (Act of May 16, 1905), they were permitted to insure against the leakage of sprinklers, pumps, and other apparatus of that order. In 1912 (Act of June 11, 1912), the list was increased by adding the risk of damage to property through the use of motor vehicles, but not the risk of liability for damage to the person. In 1925 (Act of June 30, 1925), there was a revision of the form of the then existing statutes, but with little change of substance. After the revision just as formerly the casualty policies written by the fire companies were confined with negligible exceptions to liability for loss through the use of pumps and sprinklers, and liability for damage to property through the use of motor vehicles. They occupied only a small part of the total casualty business.
The accuracy of this statement is perceived upon a survey of the activities of the casualty companies. These companies insure against bodily injury, disability or death as a consequence of accident. They indemnify merchants and other business men against loss by reason of giving credit to customers. They guarantee against loss by burglary or theft or the breakage of glass. They insure against any hazard resulting from the maintenance or use of automobiles or other vehicles, whether there is *556personal injury or death or only damage to property. Act of April 21, 1899 as amended by Act of January 30, 1919 and June 28, 1921.
A study of the reports to the Insurance Department of Illinois exposes the overlapping segments in their comparative dimensions. Thus, in 1927, the foreign fire stock-companies of Illinois received premiums from all sources of $68,741,901.34, of which $48,266,624.47 came from fire policies, $680,645.43 from ocean marine insurance, $4,018,503.22 from inland navigation and transportation, $7,866.42 from insurance against earthquakes, $5,743,891.81 from tornado policies, $171,833.15 from insurance against damage by hail, $327,933.61 from riot insurance, $48,414.68 from miscellaneous policies; and $9,476,188.55 from the two fields where the business of fire companies and casualty companies overlap, i.e., motor vehicle property damage and sprinkler leakage ($9,207,-980.43 for the one and $268,208.12 for the other). 60th Annual Insurance Report, part I, pp. 96-105. During the same year the foreign casualty companies received premiums of $7,384,454.72 from accident and health policies, $12,728,070 from workmen’s compensation insurance, $3,274,293.63 from fidelity insurance premiums, $7,879,541.48 from automobile liability insurance, exclusive of property damage, $3,047,350.53 from liability insurance not connected with automobiles, $3,957,757.69 from insurance against burglary and theft, $4,371,869.46 from surety bonds, $1,961,445.08 from plate glass insurance, $442,020.20 from steam- boiler insurance, $161,-862.91 from engine and machinery insurance, $370,040.02 from credit insurance, $111,164.20 from property damage not connected with motor vehicles, $22,676.10 from insurance of live stock, $794,119.43 from miscellaneous policies, and finally $3,199,397.92 from motor vehicle policies covering damage to property and $44,267.48 from sprink*557ler damage insurance. The total premiums from all sources were $50,679,141.98. 60th Annual Insurance Report, part III, pp. 79-92.
This comparison makes it clear that the business of fire insurance companies as carried on in Illinois is essentially a different one from the business generally known as that of casualty insurance, though the spheres coincide for the space of a small segment. A phase or department of one business may be akin to a phase or department of another, and still the kindred branches may bear unequal taxes. Coincidence of some of the parts is not enough unless the parts are so many as to determine the identity of the whole. The vice of any different principle may be known from its consequences. The drug store of today supplies many things besides medicines and surgical appliances. ■ It has a counter where sandwiches and salads and ice cream and many other edibles are furnished to its customers. If a tax were to be laid upon the earnings of a drug store, the acceptance of the appellant’s argument would drive us to a holding that the receipts from the sale of edibles must be excluded from the reckoning in the absence of a like tax upon the proprietors of restaurants. Dealers of ready made clothing have a department of their business in which clothes are made to order. The appellant would have us say that the earnings from that department are exempt under the constitution from a tax upon receipts unless a like tax is laid upon the earnings of the merchant tailor. The legislature in that view may no longer classify the forms of business with an eye to a composite group of uniformities and differences. There must be a segregation of forms of business into their constituent activities, which, to the extent that there is identity, must be taxed for any one group as they are taxed for any other. Immunity from tax laws of unequal operation has never *558until now been pressed to that extreme. Armour & Co. v. Virginia, 246 U.S. 1, 6; Armour Packing Co. v. Lacy, 200 U.S. 226; Quong Wing v. Kirkendall, 223 U.S. 59; American Sugar Refining Co. v. Louisiana, 179 U.S. 89; Pacific Express Co. v. Seibert, supra; State Board of Tax Commissioners v. Jackson, supra; N.Y. ex rel. N.Y. & Albany Lighterage Co. v. Lynch, 288 U.S. 590; Puget Sound Power & Light Co. v. Seattle, 291 U.S. 619; A. Magnano Co. v. Hamilton, ante, p. 40.
By the very law of their being, companies whose principal business is to provide insurance against fire, but who provide casualty insurance in a very narrow field, are in a class of their own, with capacities and opportunities essentially diverse from those of companies who are incompetent to provide insurance against fire, but who do insure against almost every other imaginable risk. The state is not called upon to explain the reasons for taxing the members of the one class more heavily than it does the members of the other. The burden is on the appellant who would strike the statute down, and not on the state which invokes the presumption of validity. Weaver v. Palmer Bros. Co., 270 U.S. 402, 410; Detroit Bridge Co. v. Tax Board, 287 U.S. 295, 297. “As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record for overthrowing the statute.” O’Gorman & Young, Inc. v. Hartford Fire Insurance Co., 282 U.S. 251, 257; Lawrence v. State Tax Commission, 286 U.S. 276, 283; Williams v. Mayor, 289 U.S. 36, 42. Here the foundation fails, and with it the assault.
Nothing that was determined in Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, is at war with this conclusion. There the business done by the taxpayer was the same as that done by others to whom an exemption was allowed. Here they are not the same, though at places they overlap.
*559For many years the fire insurance companies in Illinois were without power to write a policy unless the hazards were those of fire or of inland navigation. When the power was conferred upon them to cover risks of other kinds, a statute gave them notice that they must pay taxes to the county upon the net earnings of their business from whatever source derived. They were free to use the new privilege or to reject it as they pleased. They accepted it cum onere if they accepted it at all.
Mr. Justice Brandéis and Mr. Justice Stone join in this opinion.