Court Opinion

ID: 6696704
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:53:48.275378+00
Date Added: 2024-06-11T16:01:16.255153
License: Public Domain

Stagy, J.,
concurring: I concur fully in all that is said in the clear and able opinion of Associate Justice Adams, speaking for the Court. But, in view of the wide range of discussion which the case has taken, I deem it not amiss to add the following:
Article V, section 3, of the State Constitution provides: “Laws shall be passed taxing by a uniform rule all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise; and, also, all real and personal property, according to its true value in money.”
It will be observed that this provision does not require the Legislature to levy a tax on investments in bonds, stocks, etc., in the hands of the individual holders thereof, nor is there any provision in the Constitution requiring that such investments shall be taxed twice. Section 40 of the Machinery Act of 1921 specifies what shall be enumerated on the tax list of each individual taxpayer; and item 21 of said section is as follows: “Money, investments, stocks and bonds, and shares of stock in incorporated companies which are not taxed through the corporation itself.” Note the words, “which are not taxed through the corporation itself.” The purpose of this language was to exempt from taxation in the hands of individual shareholders certificates of stock in corporations, where the State had already exercised the right to tax such stock through the corporation itself, or “at its source,” as it is sometimes called. Manifestly, so far as the constitutional mandate is concerned, it is immaterial whether the Legislature impose a uniform tax on such investments in the hands of the individual shareholders or levy and collect such tax through the corporation itself. The method to be employed is one involving a question of state-craft, to be determined by the Legislature, and not for the courts to decide. Our functions are judicial, and we have no power to levy assessments or to devise a scheme of taxation. Fert. Co. v. McFall, 128 Tenn., 645.
*515(A certificate of stock is simply a written acknowledgment by a corporation of tbe interest of tbe bolder in its property and franchises.^ It bas no value, except that derived from tbe company issuing it; and its legal status is in tbe nature of a cbose in. action. Tbe value of all tbe property owned by a corporation, of whatever kind, including its franchise, is tbe true and fair measure of tbe value of all its stock. When it is said that a person owns a certain number of shares of stock, it is meant that such person bas a right to participate in tbe profits of tbe corporation, and in its property on dissolution, after payment of its debts, in tbe proportion that tbe number of bis shares bears to tbe whole capital stock. Clark on Corporations, ch. 10; R. R. v. Comrs., 87 N. C., 426; Redmond v. Comrs., 87 N. C., 122.
That tbe stock of a corporation bas no intrinsic value separate and apart from tbe property of tbe corporation is clearly shown from what is said in Gibbons v. Mahon, 136 U. S., 549, and Towne v. Eisner, 245 U. S., 418, relative to a stock dividend :
“A stock dividend really takes nothing from tbe property of tbe corporation, and adds nothing to tbe interests of tbe shareholders. Its property is not diminished, and their interests are not increased. After such a dividend, as before, tbe corporation bas tbe title in all tbe corporate property; tbe aggregate interests therein of all tbe shareholders are represented by tbe whole number of shares, and tbe proportional interest of each shareholder remains tbe same. Tbe only change is in tbe evidence, which represents that interest, tbe new shares and tbe original shares together representing tbe same proportional interest that tbe original shares represented before tbe issue of new ones. In short, tbe corporation is no poorer and tbe stockholder is no richer than they were before.” See, also, Logan County v. U. S., 169 U. S., 255.
But more directly to tbe point at issue is tbe language of Chief Justice Chase in Van Allen v. The Assessors, 70 U. S., 598:
“It is true that tbe shareholder bas no right to tbe possession of any part of tbe corporate property while tbe corporation exists and its affairs are honestly managed. He bas committed bis .interest, for a time, to tbe possession and control of tbe corporation of which be is a member, and be bas only a member’s voice in tbe management of it.
“So a man who bas leased a farm bas no right to possession or control during tbe lease; but who denies bis property in tbe farm? And if a dozen owners join in tbe lease, bas not each one an interest in tbe property to tbe extent of one-twelfth? (And if, under tbe law or by agreement, tbe lessee be required to pay tbe tax on tbe farm, who would contend that tbe owner should pay it again?)
“So, if for tbe time tbe property of tbe shareholder is placed beyond bis direct control and converted into property of tbe association, bow *516can that circumstance affect the intrinsic character of his shares as shares of the whole corporate property? How can a man’s shares of any property be the subject of valuation at all if not with reference to the amount and productiveness of the property of which they are a part % What value can they have except that given them by that amount and that productiveness ? A certificate of title to a share is not a share. It is evidence of. the shareholder’s interest. His interest may be transferred by the transfer of the certificate; but it is not the certificate that is valued when the worth of the share is estimated either by the speculator in the market or by the tax assessor. It is the property which it represents that is valued by the speculator often with reference to speculation only, but by the public officer, always, if he does his duty, by the real worth of the property, all things considered.”
Undoubtedly the State, in creating a corporation, may provide for the taxation locally of all its shares of stock, whether owned by residents or nonresidents; and this, by virtue of the authority of the chartering state to determine the basis of organization and the liability of all of its shareholders. Corry v. Baltimore, 196 U. S., 466; Hannis Dist. Co. v. Baltimore, 216 U. S., 285. Under this principle, North Carolina levies a tax upon all the issued and outstanding capital stock of domestic corporations, regardless of where the holders of said stock may reside. Revenue Act, sec. 82. Such shares are, therefore, exempt from taxation in the hands of resident stockholders, because the corporation itself pays the tax. If the stock were not taxed in this way, the State would lose all the revenue derived from the tax paid by the corporation on shares held by nonresidents, for it is only through the corporation that such shares may be taxed at all. Comrs. v. Tobacco Co., 116 N. C., 441. “In ease of shareholders not residing in the State, it is the only mode in which the State can reach their shares for taxation.” Nat. Bank v. Commonwealth, 16 U. S., 361.
The “capital stock” of a corporation, strictly speaking, is the amount in money or property subscribed and paid in, or secured to be paid in, by the shareholders, and always remains the same unless changed by proper legal authority. Burrall v. Railroad Co., 75 N. Y., 211. The phrase in its technical sense, is not used to indicate the value of the property of the corporation, and takes no account of profits or losses. S. v. Morristown Fire Assn., 23 N. J. L., 195. The surplus of a corporation is no part of its capital stock. Farrington v. Term., 95 U. S., 687. The “capital” of a corporation, on the other hand, is a broader-term, and includes all the funds, securities, credits, and property of every kind and description whatsoever belonging to the corporation. “The word 'capital’ is unambiguous. It signifies the actual estate,, whether in money or property, which is owned by an individual or a corporation. In reference to a corporation, it is the aggregate of the *517sum subscribed and paid in, or secured to be paid in, by tbe sbarebolders, with the addition of all gains or profits realized in the use and investment of those sums, or, if losses have been incurred, then it is the residue after deducting such losses.” Comstock, C. J., in People v. Commissioners of Taxes, etc., 23 N. Y., 219. In revenue statutes, as is the case with us, the words “capital stock,” as applied to corporations, are often used interchangeably with the word “capital,” and both are frequently used to express the same thing, to wit, the entire property and assets of the corporation. Christensen v. Eno, 106 N. Y., 97.
■ It is of no avail to say that capital stock and shares of stock are separate and distinct pieces of property, and therefore taxable, one in the name of the corporation and the other in the hands of the individual shareholders, when, as a matter of fact, the State taxes both (in the sense they are spoken of as different pieces of property) through the corporation itself. Farrington v. Tenn., supra; Bank v. Tenn., 161 U. S., 146. Our statutes provide that every item or element of worth tending to impart value to the shares of stock of a corporation shall be reported to the taxing authorities of the State for purposes of assessment and taxation. Therefore, by whatever name it may be called, every “investment in stocks” is taxed at least one time in North Carolina, and this is all that the Constitution requires. In those cases where the courts have drawn a distinction between the capital stock of the corporation and the shares of stock in the hands of the individual holders thereof, the term “capital stock” was employed in a different sense from that in which it is used in the statutes now before us. See opinion of Mr. Justice Nelson in Van Allen v. The Assessors, 70 U. S., 573, and Bradley v. The People, 71 U. S., 459; Nat. Bank v. Commonwealth, 76 U. S., 359; 7 R. C. L., 195; Clark on Corp., ch. 10. Under our revenue laws, the shares of stock themselves, and all of them, are required to be listed for taxation by the corporation and not otherwise. Trust Co. v. Lumberton, 179 N. C., 411.
Congress has expressly provided that shares of stock in national banks, wherever held, shall be taxable in the State, and only in the State, where the bank is located; thus recognizing the propriety and really suggesting the wisdom of taxing shares of stock in a corporation only at its home office or through the company issuing the same. U. S. Revised Statutes, sec. 5219 (Comp. St., sec. 9784); Merchants Nat. Bank v. Richmond, 256 U. S., 635; Home Savings Bank v. Des Moines, 205 U. S., 503; Nat. Bank v. Owensboro, 173 U. S., 664; Aberdeen Bank v. Chehalis County, 166 U. S., 440; Mercantile Bank v. New York, 121 U. S., 138; Tenn. v. Whitworth, 117 U. S., 129; Evansville Bank v. Britton, 105 U. S., 322; Nat. Bank v. Commonwealth, 76 U. S., 353.
This arrangement, which has been followed by the General Assembly of North Carolina from time immemorial, does no violence to the letter *518or to tbe spirit of tbe constitutional provision above recited, but is, in fact, in conformity witb it. Tbe Legislature bas never tbougbt it necessary to tax shares of stock in domestic corporations twice in order to comply witb tbis provision of tbe Constitution.
In a case from Obio, witb a constitutional provision exactly similar to tbe one in tbe North Carolina Constitution, and under a statute of that state, exempting shares of stock in domestic corporations from taxation in tbe bands of individual shareholders, when tbe same was paid by tbe corporation itself, tbe Supreme Court of tbe United States recognized and treated witb approval tbe principle and arrangement there adopted. See Sturges v. Carter, 114 U. S., 511, and Jones v. Davis, 35 Ohio St., 474. As stated above, tbe constitutional provision was identical witb ours, and tbe exemption in tbe Obio statute was as follows: “No person shall be required to list for taxation any share or shares of tbe capital stock of any company, tbe capital stock of which is taxed in tbe name of such company.” See, also, opinion of Mr. Justice Wayne in Gordon v. Appeal Tax Court, 3 Howard, 133.
In addition to Obio, tbe following states have adopted policies of taxation, in regard to corporate stock, either similar to or identical witb tbe legislation in tbis State, though it is conceded that their constitutional requirements may be different, to wit: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Yirginia, Washington, West Virginia, Wisconsin, and District of Columbia. In short, so far as I have been able to ascertain, no state in tbe American Union bas adopted and carried into actual practice tbe policy advocated by tbe plaintiff in tbis suit. Indeed, tbe adoption of such a system by our Legislature, in my judgment,'would be exceedingly unwise and fraught witb incalculable barm to tbe State, for justice would be a stranger to such a system.
Our domestic corporations are fully taxed. They pay a franchise tax, also an ad valorem tax on all their real, personal, and tangible property in accordance witb tbe Constitution, and then they list all tbe shares of their capital stock for tbe owners thereof, and pay tbe taxes thereon for tbe shareholders at a valuation fixed by tbe State’s taxing officers. Thus, all tbe property of North Carolina corporations, including all tbe shares of stock, whether owned by citizens of North Carolina or nonresidents, contribute to tbe support of our State Government and its subdivisions.
Tbe fallacy of tbe plaintiff’s argument lies in tbe fact that it is based on a false premise. He assumes that shares of stock in domestic corpo*519rations are not taxed at all under our present revenue laws, when, as a matter of fact, just tbe reverse is true. Because tbe Legislature bas adopted one policy, and be thinks another should be pursued, falls far short of proving bis case. This establishes no more than a difference of opinion between him and the law-making body of the State. His views have been expressed in tbe legislative balls, but they have met with disapproval there. Then, why should they be considered all-controlling here, when it is not within our province or power to say which method should be followed?
“Within constitutional limits, the power of the Legislature in matters of taxation is supreme, and its action cannot be revised or annulled by the judicial department. Nor can the courts be authorized or required by statute to levy and collect taxes, as that is a legislative function, and not judicial.” Black on Const. Law (3 ed.), p. 93.
Those who criticise our revenue laws would have the Legislature to double the tax on the corporate holdings of progressive North Caro-linians who have invested their money in all kinds of industrial and commercial enterprises within the State; and this, it should be remembered, in face of the fact that only residents would pay such tax, for nonresident holders of stock in domestic corporations would be exempt from its payment. No state can levy a tax, except through the corporation itself, on shares of stock in the hands of nonresidents of the taxing state, for such property is beyond its jurisdiction. Metropolitan L. Ins. Co. v. New Orleans, 205 U. S., 395.
The principle of taxation here sought to he established is in vogue nowhere in this country.. Then why should it be adopted in North Carolina? Ordinarily, under modern conditions, capital will cooperate to achieve large and beneficial results only in corporate form; and, if it is to be taxed twice in the same jurisdiction, it will flee from the borders of the State and seek investment under fairer and more favorable laws.
The constant agitation of this matter can serve no good purpose; and, while the case might be allowed to go off on a question of procedure, it is probably not amiss for us to say that, in our opinion, the policy heretofore established by the Legislature, and now in vogue in this State, is entirely permissible and is in full compliance with the constitutional requirement above recited, and that the sections of the Eevenue and Machinery Acts here called in question are valid.
Walker and Hoee, JJ., concurring.
ClabK, C. 3\,
Not concurring in the dismissal of the action: The Constitution of North Carolina, Art. V, sec. 3, provides: “Laws shall be passed taxing by a uniform rule all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwisej and, also, all real and personal property, according to its true value in money.”
*520Tbe statute of which, the plaintiff complains on behalf of himself and other taxpayers appears near the end in a very long section, to wit, sec. 4, ch. 34, Laws 1921, and is as follows: “Individual stockholders in any corporation, joint-stock association, limited partnership, or company paying a tax on its capital stock shall not be required to pay any tax on said stock or list the same, nor shall corporations legally holding capital stock in other corporations in this State, upon which the tax has been paid by the corporation issuing the same be required to pay dny tax on said stock or list the same.”
“Investments in stocks” are made by those who buy them, or otherwise acquire them, and not by the corporations who sell them. The owners of the stock possess them absolutely, have a right to devise, sell, or otherwise dispose of them. The corporation which has sold the stock has received the purchase price therefor, and has parted with and has no control over the stock of the purchaser to whom it has sold. The corporation is no wise liable for the debts of the stockholder and the stockholder is no wise liable for the debts of the corporation. The two are entirely separate and distinct. The owner has acquired this stock as he would acquire livestock and the seller has sold it and received the purchase price just as the seller of livestock or any other property.
Compare the clear language of the Constitution and the statute. It would be impossible to conceive of any more direct and palpable conflict with the Constitution, which requires that “investments in stocks” shall be taxed like all other property, “according to its true value in money,” than this statute, which exempts “investments in stocks” from all taxation. It does not require one to be a lawyer, but simply the capacity to read the English language to see the absolute conflict between this statute exempting these immense accumulations of capital invested in stocks and bonds and the Constitution, which requires without equivocation that they shall be taxed.
Indeed, in the very same chapter, Laws 1921, ch. 34, sec. 6 (7), it is recognized that all stocks are the property of the owner and not the property of the corporation, for it is provided that as to the inheritance taxes, the State Tax Commission shall “determine the amount of inheritance tax due the State of North Carolina on the transfer of any such bonds or stocks; it shall determine the value of such bonds or stock, and shall have full authority to do all things necessary to make full and final settlement of all such inheritance taxes due, or to become due, and shall make prompt return to the State Treasury of all such taxes collected.” In this section the whole subject of bonds and shares of stock of any decedent holder is treated, and it is provided that such stocks and bonds are liable to the payment of the inheritance tax prior to any other creditor. It regulates the transfer of such stocks and bonds as *521tbe property of tbe decedent to provide against fraud upon tbe State in tbe nonpayment of tbe tax tbereon as tbe property of tbe owner. Did these stocks become tbe property of tbe stockholder and taxable only by bis death? Stocks and bonds are liable for tbe debts of tbe owner, and are not liable for tbe debts of tbe corporation; if they are liable for inheritance taxes on tbe death of tbe owner, they are liable for tbe annual' taxes for tbe support of tbe Government. The fanciful theory that investments in stocks shall be exempt from taxation is contradicted by tbe very chapter in which it is contained.
Not only every office-holder, but every voter takes an oath to support and maintain tbe Constitution of tbe State. Such an open, not to say defiant, contradiction of this provision of tbe Constitution by tbe statute entitled tbe plaintiff, and all others of like mind, to place their complaint before tbe courts that it may be declared whether such exemption is valid or not. Tbe great railroads are now maintaining in tbe courts a complaint that they are taxed in violation of tbe Constitution. Surely tbe plaintiff and those who concur with him have a right to place before tbe judicial tribunals of tbe State a like complaint that by this statute they have been overtaxed to threefold or more tbe former tax rate, and that this is caused by tbe exemption of this vast amount of tbe “canned wealth” of tbe State, tbe money invested in stocks and bonds, which by this statute has been exempted from paying their fair share, or any share, of tbe burdens of carrying on tbe Government.
Tbe total valuation of all tbe real and personal property for tbe year 1921 filed in tbe State Auditor’s office is in round numbers $3,119 millions. Tbe estimate of tbe total valuation of stocks and bonds which are exempted from taxation is not returned to tbe Auditor’s office, but we know from tbe official records of tbe U. S. Government that tbe corporations in this State, which are in number about 6,000, return as tbe valuation of their stock to tbe Federal Government on 4,300 of these corporations $932,000,000 for tbe past year. This is a matter of which we can take judicial notice. As tbe statute requires no corporations having less than $5,000 of stocks to make this return, and as the return omits not only all stocks in corporations under $5,000, but there is no return made to tbe Government on tbe stocks held in this State issued by corporations outside of North Carolina, it is probably an under-estimate to say that all tbe untaxed stocks in this State will aggregate over fifteen hundred millions, or in round numbers, nearly one-half of tbe amount of property listed for taxation. We know that tbe taxation on tbe listed property in most of our cities averages $2.50 per $100. Putting tbe rate of taxation, State, county, and town, at tbe low average of $1 per $100, it is very clear that tbe owners of stocks in tbe State are illegally exempted annually from tbe payment of $15,000,000 of taxes. That *522is to say, that they should pay that much if there was conformity with the Constitution, which requires that “Laws shall be passed taxing by uniform rule all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise, and all real and personal property, according to its true value in money.”
This amount, which should be paid by the owners of stocks in corporations, is paid for them by adding it to the taxation of those who are not wealthy enough to have idle capital to invest in stocks.
It follows, therefore, that if all property were taxed as the Constitution requires, “uniformly, including investments in stocks and bonds,” the rate of taxation from the realty, livestock, and other personal property, and others not wealthy enough to invest in stocks, would be reduced at least one-third. This would he accomplished simply by the owners of the bonds and stocks paying taxes- thereon at the same rate as the owners of other property. They would not pay $15,000,000, for the total of taxpaying property being increased the rate would be decidedly lower.
In this estimate omission has been made of the fact that the Constitution requires that bonds should be taxed, and while we have no data, such as returns of stocks which the Federal Government gives us, we know from high authority that throughout the country there is altogether fifty billions invested in bonds which are exempted from taxation. One-half of this fifty billions is stated to be the bonds of the Federal and State Government, which are exempted from taxation upon the ground that to some extent, at least, their exemption from taxation is a collection of taxes at the source by the lower rate of interest. However, it may be as to the alleged financial reasons for exempting National and State bonds, there is no such ground for the exemption of the stocks or bonds of railroads, banks, cotton mills, water-power companies, tobacco companies, or any other corporations. They pay, and should pay, on their property, but in doing so there is no reason why those to whom they sell their stocks, and whose money they have received in exchange, . should be exempt from taxation on the stocks and bonds of these corporations on which the owners receive dividends and interest, and not infrequently nontaxable stock dividends doubling and trebling their “tax-free” holdings.
The Constitution forbids expressly the exemption of stocks and bonds, but it is clearly violated. There is no more reason that the owners of the stocks which the corporations have sold to those who own them should be exempted from taxation than that their bonds or the indebtedness by individuals should be exempt from taxation. A certificate of stock in a corporation is simply an indebtedness on which the seller agrees to pay dividends in lieu of interest. On common stock, the rate *523of tbe dividend is not fixed; on preferred stock there is a fixed rate, and stock differs in no wise from bonds except that the owner of the stock in most companies is allowed to share in the election of officers, which is at most mostly an illusory privilege, as all corporations are governed by those who arrange to control the majority of the stock.
The provision that “all investments in bonds and stocks” shall be taxed by the same uniform rate as all other property was put into the Constitution as a guarantee that those not able to purchase stocks and bonds should not be over-taxed by the exemption of owners of stocks and bonds, who are, of all people, most able to pay taxes, but whose influence might procure exemption from taxation, as it has done, notwithstanding the constitutional guarantee against it.
There is no question that has come up to this Court which is more entitled to a fair and full consideration. If the railroads are entitled to have considered their claim for over-taxation, surely the masses of the people, those who, not owning exempted property, are paying the taxes which should be paid by the property illegally exempted, have the right to have their complaint considered and the Constitution enforced by holding invalid and illegal any tax levy that taxes them and exempts so large a body of idle wealth, the taxes on which are paid by those who do not have money to invest in such exempted property.
Not only are the stocks of corporations of this State exempted, but the same chapter which levies the revenue, Laws 1921, ch. '34, sec. 3, provides that not only are individual stockholders in corporations in this State exempted from payment of taxes thereon, but the statute, Laws 1921, ch. 34, sec. 4, provides: “Nor shall any individual stockholder of any foreign corporation be required to list or pay taxes on any share of its capital stock if two-thirds in value of its entire property is situated and taxed in the State of North Carolina, or if such corporation has tangible assets within this State assessed for taxation at a value not exceeding the par value of the total stock owned by citizens of this State, and the said corporation pays franchise tax on its entire issue and outstanding capital stock at the same rate as paid by domestic corporations.”
It is to be noted that as to the franchise tax which is levied on corporations for the privilege of doing business and which is analogous to license tax paid by lawyers, merchants, and all others for carrying on business, the franchise tax has been usually one-twenty-fifth of 1 per cent, and never over one-tenth of 1 per cent, which produces an insignificant amount. There is no reason, as this Court has often held, to grant an exemption to stockholders on this ground.
It may be further noted that while there is an illusory provision that where the capital stock is more than the aggregate value of the property *524of a corporation there shall be levied a tax on the excess of capital stock. Under this head there was assessed for taxation last year only the petty sum of 17 millions of capital stock, and the total taxes paid by individuals on stocks in this State was $25,000 on a true valuation of over $1,500,000,000, as above estimated. The taxes which should have been paid by the owners of this vast body of “tax free” stocks was paid by those not able to invest in stocks and bonds.
It can be readily seen that upon a fair estimate of the stocks and bonds and other property illegally exempted from taxation there is approximately at least one-third in “tax-free” stocks, and adding “tax-free” bonds, more than one-half in value of the property in this State which pays no taxes whatever, though the Constitution requires expressly that this exempted property shall be taxed uniformly with other property. This exemption is of the property owned by the wealthiest section of the people with the result that it more than doubles the taxes upon the farmers and other real estate owners and the laborers and merchants and all others unable to spare surplus money to be invested in exempted stocks and bonds.
From the adoption of the Constitution in 1868 down to 1887 — 20 years- — -this constitutional provision that stocks and bonds should be taxed uniformly with other property according to its true value was observed. In 1887 two great railroads of this State were entirely exempt on all their property, which exemption was later declared illegal in 1892, and set aside by this Court in the well known case of R. R. v. Allsbrook, 110 N. C., 137. Though in that case, as in this, it was claimed that they had enjoyed such exemption for so long a time that they were protected in its continued enjoyment, the Court held that there was no statute of limitations that would protect an illegal exemption by lapse of time. This opinion of the Court, written by the same hand that writes this, was carried to the United States Supreme Court and was affirmed in R. R. v. Allsbrook, 146 U. S., 279. There was in their case an express agreement claimed to have been made by the State in their charter for such exemption. This Court held that the Legislature had. no power to grant such exemption. In their case, also, there was not, as in this instance, an express provision to the contrary in the Constitution which forbade the exemption of the owners of stocks from taxation.
The corporations not foreseeing in 1887 that the State would enforce the taxation of their properties, and by the aid of other corporations, secured in addition to some extent the exemption from taxation of the stocks sold by them to investors. .This enhanced the selling price of their stocks by making them much more desirable to investors. The great increase in the number of corporations, railroads, cotton mills, tobacco companies, and for other purposes lent force to the movement to *525make all stocks more saleable by making them exempt from taxation. Tbe thin edge of tbe wedge exempting any stocks from taxation introduced in 1887 was gradually made broader, until by tbe act of 1919 it was made to exempt tbe stocks of all corporations chartered in tbis State, or wherever two-tbirds of its property, though chartered in other states, was taxed in tbis State. Tbe result has been that though there is now one and a half billions of stocks owned in North Carolina, as above estimated, only $25,000 in taxes on stocks was last year paid into the State Treasury. On this billion and a half dollars in stocks, if taxed like other property, there should have been paid fifteen millions of dollars.
Uniform taxation would not have placed, however, 15 million dollars taxation on this property, because by uniform taxation on all property alike the rate would have been largely reduced to all, to the immense relief of farmers and other owners of real estate, and all others who were unable to invest their money in “tax-free stocks and bonds.” The taxation of property equally is the simplest justice which the plaintiffs and all other citizens are entitled to demand, and the failure to observe it is in direct violation of the obligation of every citizen to maintain and support a Constitution which guarantees equality and uniformity in the taxation of property.
In reply to the above, the owners of these vast quantities of “tax-free” securities contend that to tax their stocks is double taxation. There is no requirement in the Constitution forbidding double taxation. The opinion-in-chief in this case admits this, and it has often been held, S. v. Wheeler, 141 N. C., 775; Comrs. v. Tobacco Co., 116 N. C., 448. But there is a requirement forbidding the exemption of stocks and bonds. Connor and Cheshire on Cons., 263 (1), 267, 277, citing cases.
But it is not true, either as a matter of fact or of law, that because the corporation pays tax on its property that it will be double taxation to tax the stocks and bonds which they have sold to other people, which have become the property of other people, and for which the corporations have received full value.
This matter has been often before this Court and before the Supreme Court of the United States, and in every case, without exception, it has been held in both courts that to tax the property of a corporation and to tax the purchasers of its stocks and bonds is not double taxation. Every court in states whose Constitution, like ours, requires uniform taxation of property, has also held that to tax the stocks and bonds of corporations is not double taxation. It is not “double taxation” to tax the shares in the hands of the shareholders when taxes have been laid upon the tangible property and capital stock of the corporation itself. This plea is denied by all the courts, and is unfounded in fact and in justice.
*526All courts bold that the tangible property and capital stock and franchises of a corporation are taxable as its property; that a corporation is a distinct entity from the individual shareholder, and that the payment of taxation by the corporation can furnish no claim for the exemption of the stock in the hands of the stockholder.
It is estimated, and probably justly, that more than half the wealth in the United States is either owned by corporations or is invested in their bonds and stocks. The latter is idle capital, whose owners do nothing for the public welfare, but simply live on that which comes to them without effort as coupon clippers or dividend drawers. Mr. McAdoo, late Secretary of the United States Treasury, has said, that indeed they “should pay a far higher rate of taxation than any other class in the community, since they do less for the public welfare.”
The propaganda for their total exemption from taxation has been so widespread and persistent, and the end sought is so unjust and dangerous to the foundations of society, that it will not be amiss to set out at some length what the courts have all said as to the wholly unfounded hypothesis that to tax shares in the hands of shareholders is “double taxation,” and therefore unconstitutional.
The courts all hold that the taxation of stocks in the hands of the owner is not “double taxation,” simply because the corporation itself is taxed, and even if it were, it would not be unconstitutional.
In Pullen v. Corporation Commission, 152 N. C., 553, Manning, J., for the Court said: “It is likewise well settled by the language of our State Constitution, by many decisions of this Court and of the Supreme Court of the United States, and is now generally accepted law, that the property of a shareholder of a corporation in its shares of stock is a separate and distinct species of property from the property, whether real, personal, or mixed, held and owned by the corporation itself as a legal entity. It would be useless to cite authority to support a proposition so well established and generally accepted.”