Court Opinion

ID: 6360674
Source: CourtListenerOpinion
Date Created: 2022-06-24 23:35:30.203186+00
Date Added: 2024-06-11T15:49:40.601534
License: Public Domain

Opinion by

Judge Kramer:
(Concurring and dissenting in part)
This case involves very important issues, presented to this Court under its original jurisdiction, in which the plaintiffs question the constitutionality of the State income tax provisions of the Tax Reform Code of 1971, Article III, Act of March 4,1971, P. L. , Act No. 2, 72 P.S. 7107, et seq. (hereinafter referred to as the Tax Code). Because of the importance of the issues raised, this Court has given this case the status of an emergency priority. The pleadings were completed only about twenty days before this writing, and it was not until about, ten days ago that we were informed that testimony would not be taken and that the matter would be submitted to this Court on briefs and argument. The case was specially set and argued on Monday, May 17, 1971, and because the Pennsylvania Supreme Court has already indicated that it desires to hear and dispose of these cases promptly, the Judges of this Court have filed their opinions as soon as possible in an effort to aid all parties concerned, as well as all of the taxpaying citizens of the Commonwealth.
With the exceptions of Section 317 (the thirty nercent of local tax credit) and Section 319 (the so-called vanishing tax credit), I concur with the majority and hold that the Tax Code meets the constitutional standards of uniformity (Article VIII, Section 1 of the Pennsylvania Constitution).
*389The Pennsylvania Supreme Court has long recognized that it is not possible to obtain absolute or perfect uniform and equitable taxation. In Commonwealth v. Delaware Div. Canal Company, 123 Pa. 594 620-21 (1889), the Pennsylvania Supreme Court in upholding the taxation of corporate loans at nominal value in contrast to other items at actual value, concluded: “Absolute equality is, of course, unattainable; a mere approximative equality is all that can reasonably be expected ... If there is a substantial uniformity . . . even when there may be some disparity of results, if uniformity is the purpose of the Legislature, there is a substantial compliance. . . .”
If we were to strictly construe Article "VIII, Section 1* of the Pennsylvania Constitution, we would have to rule against the use of federal taxable income (line 50 of the Internal Revenue Form No. 1040) as the “tax base” upon which to apply the State tax rate (3y2 percent); but the Pennsylvania Supreme Court has already held that the use of federal taxable income for corporate income tax returns is constitutional, in spite of the many deductions and exemptions permitted in a corporate return. See Turco Paint and Varnish Company v. Kalodner, 320 Pa. 421, 184 A. 37 (1936); Commonwealth v. Eastern Motor Express, Inc., 398 Pa. 279, 157 A. 2d 79 (1960); Commonwealth v. Warner Bros. Theatres, Inc., 345 Pa. 270, 27 A. 2d 62 (1942).
The argument of the plaintiffs that use of the federal tax base is an improper delegation of powers likewise has been answered by the Pennsylvania Supreme Court in the case of Commonwealth v. Warner Bros. *390Theaters, Inc., supra. The Court there held that there was no unconstitutional delegation of legislative power in a statute which permitted the use of a federal tax base. determined by the federal laws for the corporate state' income taxes.
The reasons why I cannot concur with the majority on Sections 317 and 319 of the Tax Code are set forth in the following enumerated paragraphs:
.- 1. Because of the Pennsylvania Supreme Court holding in Kelley v. Kalodner, 320 Pa. 180 at 186, 181 A. 598, at 601 (1935), we must first recognize the State income..tax as a. property tax. The Kelley case points out that there is some, authority that a tax on income from trades, occupations, or professions may not be.a.property tax (citing Pollock v. Farmers Loan and Trust Company, 158 U.S. 601, 637, 15 S. Ct. 912 (1895 ) )„ but in any event it is well established that uniformity applies to all taxes in Pennsylvania.
At the argument- in this case, counsel .for the defendants agreed that Article III of the Tax Code is a property-tax. The reason that this finding is imperative, to this case is that without such a determination the vanishing tax credit (Section 319 of the Tax Code) does not qualify for the special' tax treatment authorized by Article VIII, Section 2(b) (ii.) which reads as follows: “(b) The General Assembly may, by law: (ii) Establish as . a. class or classes -of subjects of taxation the property or privileges of persons who, because of age, disability, infirmity or poverty are determined to he, in need-of tax exemption or of special tax provisions, and for any such class or classes, uniform standards and qualifications; . .The Commonwealth, or any other taxing authority, may adopt or employ such class or classes and standards and qualifications, and except as herein provided may impose taxes, grant exemptions, or make special tax provisions in ¿ccordance therewith. *391No exemption or special provision shall be made under this clause with respect to taxes upon the sale or use of personal property, and no exemption from any tax upon real property shall be granted by the General Assembly under this clause unless the General Assembly shall provide for the reimbursement of local taxing authorities by or through the Commonwealth for revenue losses occasioned by such exemption;” (Emphasis added.)
2. With regard to the vanishing tax credit provisions, the Legislature clearly stated its intent in the Tax Code to be as follows: “Section 319. Tax credit for taxpayer class.— (a) Declaration of legislative purijose. The General Assembly, in recognition of Section 2(b) (ii) of Article VIII of the Constitution of Pennsylvania which provides for the establishing as a class or classes of subjects of taxation, the property or privileges of persons who, because of age, disability, infirmity or poverty, are determined to be in need of tax exemption or of special tax provisions, hereby declares as its legislative intent and purpose to execute its power under such constitutional provision by establishing a special tax credit provision, as hereinafter provided in subsections (b) and (c) of this section.” (Emphasis added.)
The problem is that the Legislature nowhere described what “age, disability, infirmity or poverty” really are. There is no legislative measure or standard by which one may “determine” who is in “need of tax exemption or of special tax provisions” as Article VIII, Section 2(b) (ii) of the Constitution requires. There is no relationship between the Tax Code’s “taxable income” (Section 302(q)) and “age, infirmity, disability or poverty”. If the wealthy can take advantage of Section 319, and it is not necessary that testimony be taken to prove that they obviously can, then Section *392319 of the Tax Code cannot be said to meet the purpose of Article VIII, Section 2(b) (ii) of the Constitution.
It doesn’t take much imagination to determine that a millionaire who has all his holdings in tax-free and exempt Pennsylvania state or Pennsylvania municipal securities, but does have some minor taxable income, will have no Pennsylvania state income tax to pay. Likewise some citizens will be able to have an annual income in the five figures and still pay no state income taxes, because of Section 319.
Although the intent of the Legislature may be meritorious, its actions in Section 319 of the Tax Code fall far short of the constitutional requirement of Article VIII, Section 2(b) (ii) and Article VIII, Section 1 (uniformity). In attempting to grant relief to the poor of our society the Legislature failed to establish those constitutional standards necessary to permit Section 319 of the Tax Code to be upheld.
The defendants properly argue that the underlying basic aim in these cases which test the constitutionality of tax statutes is equality in the taw burden. Section 319 of the Tax Code does not meet that test. In fact, it results in inequality in view of the fact that some wealthy Pennsylvania citizens who are not in “need” of tax relief will not share in the tax burden.
It is not for this Court to instruct the Legislature on how to grant relief of tax burdens to the poor, the aged, the disabled, or the infirm. Whether the Legislature does it by restrictions to the availability to such tax relief through maximum holdings (realty or personalty) of the individual, or a maximum allowable amount of exempt securities, or an outright description of persons entitled to such relief (even using federal standards now existing for aid to the impoverished) is within the legislative discretion rooted in *393classification, of taxable subjects, in which the law of this Commonwealth has been very liberal. But the mere statistical formula set forth in Section 319 of the Tax Code, which by its own language is the sole determination of which taxpayers are poor or aged or disabled or infirm falls short of the necessary constitutionally required standards, and should not be permitted to stand under the present law of this State.
The clear intent of Article VIII, Section 2(b) (ii) is to help people who need some relief from the burden of taxes because of their economic status in our society. This writer agrees wholeheartedly with that philosophy. This writer is not umnindful of the plight of the poor, and by writing this dissent is much chagrined to oppose an attempt to carry out such a good plan. However, I am unalterably committed to the principle that the Constitution must be interpreted under its plain meaning and intent. It is clear to me that Section 319 of the Tax Code does not provide for equality in the tax burden, but rather fosters and compounds many of those evils and inequalities of the federal income tax system, which provides additional benefits to those very fortunate citizens who are able to avoid paying their fair share of the burden of operating our government through tax advantageous investments.
As pointed out earlier, no testimony was taken in these cases. It is conceivable that it could be proven that the number of citizens who can take advantage of this Section 319 and who do not meet the constitutional qualifications of “need” is de minimis. If that is factually true, then I would not vote to upset Section 319. Unfortunately, we have no such record, and therefore I must register this dissent.
I would hold Section 319 of the Tax Code unconstitutional and thereby permit the Legislature to pass a meaningful and constitutional tax credit restricted *394to those citizens who the constitutional framers intended to be benefitted by Article VIII, Section 2(b) (ii).
■ 3. Defendants argue' that because' of some of our local, (municipal and school) governments already have passed local taxes on the income , of citizens residing or. working within their boundaries, that Section 317 of the Tax Code was passed to alleviate a double tax burden.
Section 317 of the Tax Code reads as follows:
■': “Section :317. Taxés imposed by political subdivisions of this Commonwealth. — (a) Every resident or nonresident individual, estate or trust subject to tax under this article shall be allowed a credit against the tax otherwise due under this article equal to 30 percent of the amount of any local taxes imposed on and paid by such individual, estate or trust to any political subdivision of this Commonwealth during the calendar year 1971, except that such credit shall not apply to local taxes'imposed on real estate, realty transfers or amusements; •
“(b) For local taxes described in Section (a) imposed and paid in the taxable years beginning after December 31, 3.971, the amount of credit base provided in this section shall not exceed 30 percent of the total amount of the local taxes which were imposed upon and paid by such individual, estate or trust during the calendar year' 1971 to political subdivisions of this Commonwealth, except that in the case where no such local taxes were imposed upon and paid by such individual, estate or trust during the calendar year 1971, then the percentage rate shall be applied to the total amount of such local taxes which were imposed Upon and paid by such individual, estate or trust during the calendar year in which such taxes were first imposed and paid and the amount so determined shall each year *395thereafter constitute the base on which the tax credit rate shall be applied.”
Even a cursory reading of Section 317 highlights a disturbing fact, i.e., that tax credit for 1971 is frozen for all time to come for the taxpayer, no matter whether he moves to a new local taxing authority or changes the amount of his income.
Eesidence cannot be used as a basis for different tax burdens for the same classification. (See Danyluk v. Bethlehem Steel Company, 406 Pa. 427, 178 A. 2d 609 (1962).)
If the intent of the Legislature is, as defendants argue, to alleviate the double tax burden on those already paying an income tax on their income, one wonders why a 30 percent, or even a 100 percent tax credit was not given to all who pay such local taxes wherever and whenever they pay them. Mere convenience or protection against all local governments passing such taxes is no excuse for avoiding the constitutional requirement of uniformity. Either a uniform tax credit should be allowed or none.
It is likewise no answer to state that for the year 1971 everyone in the class is treated alike, when it is obvious that Section 317 in no way can be said to be constitutionally uniform seven months from now. This writer is fully aware of the cases which say that there should be facts in the record showing the non-uniformity to enable a reviewing court to pass upon the constitutionality of the tax provision. However, it is my belief that if the tax measure provides for an obvious lack of constitutional uniformity (as this record without testimony proves), it should be struck down immediately. It smacks of unfairness to wait until hundreds of our citizens are damaged before the courts will rule on such an obvious lack of uniformity. I would hold Section 317 of the Tax Code to be unconstitutional.
*396I find no merit in the argument of Tilghman. I agree with the majority that he has not met his burden to prove the unconstitutionality of the Tax Code based on his argument that the Governor must submit his budget to the Legislature before the Legislature can pass a new tax. To carry his argument to its logical conclusion, a governor, standing alone, could prohibit the Legislature from raising necessary revenues to pay for the cost of government by withholding his budget.
The Tax Code, in Section 1202, has provided a severability clause which would permit the striking down of some sections of the Tax Code so long as the remainder is a complete statute. Therefore, I would hold that Sections 317 and 319 of the Tax Code violate Article VIII, Sections 1, 2(b) (ii) and 5 of the Pennsylvania Constitution and that the balance of the Tax Code is complete and constitutional.

 Article VIII, Section 1. “AU taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.”