Court Opinion

ID: 9419711
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:51:10.322783+00
Date Added: 2024-06-11T17:22:20.115605
License: Public Domain

Mr. Justice Douglas,
concurring.
Prior to the Revenue Act of 1942 there was a great lack of uniformity among the States in the incidence of the federal estate tax. In most of the States the accumulations *364of the husband (who typically is the bread-winner) were taxed in their entirety on his death. In the community property states the tax generally reached only half of the accumulations because of the theory that they were the product of the wife’s as well as of the husband’s activities. It was this disparity which Congress sought to eliminate. As stated in the House Report (H. Rep. No. 2333, 77th Cong., 2d Sess., pp. 35-37),
“For the purpose of Federal estate taxation, husband and wife living in community-property States enjoy a preferential treatment over those living in non-community-property States. This is due to the fact that all of the property acquired by the husband after marriage, through his own efforts, in a community-property State is treated as if one-half belonged to the wife. In non-community-property States, all such property is regarded as belonging entirely to the husband.”
There are contained in the Report tables showing the difference in the amount of the federal estate tax in the community property States and in the other States, after which the Committee makes the following comment,
“. . . in some instances there is an entire exemption from the Federal estate tax for the reason that the omission of one-half of the community property reduces the husband's net estate below the minimum exemption of $40,000. Moreover, this halving of community property greatly reduces the estate tax because of the progressive rates. For example, under the present law, a net estate of $50,000 will pay an estate tax of $500 in a non-community-property State and no tax in a community-property State. An estate of $100,000 will pay a tax of $9,500 on the death of the husband in a non-community-property State and a tax of $500 on the death of the husband in a community-property State.
“If the wife dies within 5 years of her husband, the remaining $50,000 upon which the husband paid no estate *365tax will be subject to an estate tax of $500. Thus, the total tax paid on this $100,000 estate in the community-property State will be $1,000 as compared with $9,500 in the non-community-property State or a tax saving of $8,500. In the case of a $5,000,000 estate, the tax saving in a community-property State will amount to as much as $485,800 and in the case of a $10,000,000 estate, the tax saving in a community-property State will amount to as much as $1,171,800.”
And see S. Rep. No. 1631, 77th Cong., 2d Sess., p. 231.
Much may be said for the community property theory that the accumulations of property during marriage are as much the product of the activities of the wife as those of the titular bread-winner. But I can see no constitutional reason why Congress may not credit them all to the husband for estate tax purposes. The character and extent of property interests under local law often determine the reach of federal tax statutes. Helvering v. Stuart, 317 U. S. 154, 161-162, and cases cited. And see Cahn, Local Law in Federal Taxation, 52 Yale L. Journ. 799. Yet that is not always so. United States v. Pelzer, 312 U. S. 399. Taxation is eminently a practical matter. Congress need not be circumscribed by whatever lines are drawn by local law. It may rely, as Tyler v. United States, 281 U. S. 497, 502-503, held, on more realistic considerations and base classifications for estate tax purposes on economic actualities. It was held, to be sure, in Hoeper v. Tax Commission, 284 U. S. 206, that a State could not assess against the husband an income tax computed on the combined total of his and his wife’s income. But I can see no reason why that which is in fact an economic unit may not be treated as one in law. For as Mr. Justice Holmes pointed out in his dissent, there is a community of interest “when two spouses live together and when usually each would get the benefit of the income of each without inquiry into the source.” And he went on to say *366“Taxation may consider not only command over, but actual enjoyment of, the property taxed.” 284 U. S. pp. 219-220. Cf. Helvering v. Clifford, 309 U. S. 331, 335-337.
The Congress has not gone the full distance here. It has not included in one estate all the property owned by husband and wife. So far as this case is concerned, it has only included in the estate of the husband the accumulations which under the community property system are deemed to have been produced by the joint efforts of him and his wife. I can see no obstacle to that course unless it be the uniformity clause of the Constitution. Art. I, § 8, Cl. 1. But there can be no objection on that score. On the facts of this case the law goes no further than to eliminate the estate tax advantage which a married rancher, business man, etc., in Louisiana has over those similarly situated in the common law States. Congress, to be sure, has disregarded the manner in which Louisiana divided “ownership” of property between husband and wife. But as between husband and wife, notions of “vested interests,” “ownership,” and the like, established by local law, are no sure guide to what “belongs” to one or the other in any practical sense. We would be blind to the usual implications of the intimate relationship of marriage if we forced Congress to treat such divisions of “ownership” the same way it does divisions of “ownership” among strangers. I find no such compulsion in the Constitution.
Mu. Justice Black joins in this opinion.