Court Opinion

ID: 9530589
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:01:22.260026+00
Date Added: 2024-06-11T13:28:10.922346
License: Public Domain

MR. JUSTICE RYAN, dissenting: I am firmly convinced that the tax sought to be imposed by the Chicago ordinance falls within the limitations of section 6(e) of article VII of the 1970 Constitution which provides: “A home rule unit shall have only the power that the General Assembly may provide by law (1) *** (2) to license for revenue or impose taxes upon or measured by income or earnings or upon occupations.” (Emphasis added.) Before specifically stating the basis for my conclusion it should be noted that in his argument before the trial court, a verbatim transcript of which is contained in the record, counsel for the City of Chicago admitted that the ordinance was drafted to circumvent the constitutional limitation italicized above. The pressing needs created by the urbanization of the rural society which existed at the time of the adoption of the 1870 Constitution may have justified judicial construction of that document in later years circumventing certain of its rigid proscriptions. However, there is no reason to countenance a deliberate attempt to circumvent the express limitations of the 1970 Constitution two and one-half years after its effective date. The provisions of section 6 of article VII grant to home-rule units broad taxing powers and the prior decisions of this court have construed those grants liberally. With such a broad taxing authority it hardly seems necessary at this early date through judicial construction of an ordinance deliberately drafted to circumvent this limitation, to eliminate one of the few restrictions which the constitutional convention saw fit to impose upon the home-rule power to tax. The Committee on Local Government explained that the reason for the limitation on the authority to impose a tax upon occupations was not only to prevent the evasion of the income tax restriction but: “In addition, the reference to occupation taxes will prevent the proliferation of various business and occupation taxes at the local level. *** This exception to home-rule taxing powers is justified on the ground that a large number of various and varying occupation taxes could impair the efficient operations of business within the state.” 7 Proceedings 1673. The plaintiffs argued the dire consequences of such a proliferation of taxes upon occupations throughout the State disguised as taxes upon employers and urged that such a tax is contrary to the above quoted reasons for the limitation. However, the majority of this court brushed this argument aside by replying that the simple answer to this argument is found in sectibn 6(g) of article VII. Of course this “simple answer” ignores the simple facts of political life because section 6(g) requires a vote of three fifths of the members of each house of the General Assembly to deny or limit the power of a home-rule unit to tax. Those in whom political power is concentrated in home-rule units and who exert considerable influence over members of the General Assembly are not likely to freely surrender this lucrative power to tax occupations. All of which makes it highly unlikely that the “simple answer” of a three-fifths vote in each house will ever be achieved. The more realistic and practical answer would be to acknowledge that under section 6(e) of article VII a home-rule unit does not have the power “to license for revenue or impose taxes upon or measured by income or earnings or upon occupations,” unless that power is granted by the General Assembly which may be done by a simple majority vote. This would appear to be in accord with the intent expressed by the Committee on Local Government that the imposition of taxes on occupations should be subject to the control of the General Assembly lest proliferation of these taxes impair the efficient operation of business within the State. The City argues and the majority opinion finds that this court has historically and traditionally spoken of an occupation tax as a tax on a given occupation. Therefore, since the tax imposed by the ordinance is not on a given occupation but covers a broad cross-section of occupations (in fact, taxes all occupations) it is not, according to the majority, an occupation tax within the prohibition of the constitutional provision. The majority quotes from Reif v. Barrett, 355 Ill. 104, to support this conclusion. Although the language in Reif does refer to a given business or occupation the decision in Reif did not relate to a given or specific occupation or business. Rather that case involved the validity of the Retailers’ Occupation Tax Act and held that the legislature had the inherent power to tax the occupation of those persons engaged in the business of selling tangible personal property to purchasers for use or consumption. Thus, the tax in Reif did not involve a tax on a given or specific occupation such as grocer, butcher, restauranter, dry goods merchant, etc. but rather that case was concerned with a general occupation tax covering all classes of occupations engaged in the business of selling tangible personal property to purchasers for use or consumption. Also in Stiska v. City of Chicago, 405 Ill. 374, this court held that an “amusement” occupation tax levied by the City of Chicago under authority granted by the General Assembly covered a wide range of specific occupations under the term “amusement.” Thus, historically this court has not limited the application of occupation taxes to specific or given occupations but has rather used the term in a generic sense. Regardless of how this court has interpreted or applied occupation taxes in the past, contrary to the conclusion of the majority opinion it is clear that the kind of tax imposed by the ordinance under consideration was within the contemplation of the delegates of the constitutional convention when section 6(e)(2) of article VII was fashioned and adopted. As the majority opinion indicates, the case of City and County of Denver v. Duffy Storage and Moving Co., 168 Colo. 91, 450 P.2d 399, was discussed at length in the convention. This case involved the validity of three ordinances enacted by the City of Denver under its home-rule powers. One of the ordinances (ordinance No. 234) imposed a tax on earnings which the city conceded to be an income tax. The Supreme Court of Colorado had previously held in City and County of Denver v. Sweet, 138 Colo. 41, 329 P.2d 441, that Denver, as a home-rule city, did not have the constitutional authority to impose an income tax. In Duffy the court held the ordinance No. 234 invalid as an income tax. In Colorado, however, there was no limitation upon a home-rule city’s authority to impose an occupation tax, and thus, as stated in the majority opinion of this court, the city of Denver by ordinance No. 232 imposed an occupation tax upon those engaged in business measured by the number of employees performing services for such business. Also, by ordinance No. 233 the city of Denver imposed a tax upon each employee for the privilege of performing services within Denver for an employer for wages. Both ordinance No. 232 and 233 were attacked as being in fact income taxes which the city had no authority to impose. However, the Supreme Court of Colorado by a divided court as to ordinance No. 233 (the tax on employees) held that it was not an income tax but was an occupation tax. As to ordinance No. 232, by a unanimous court it was held that the tax on the employer was an occupation tax. Thus, ordinance No. 232 and ordinance No. 233 were held not to be income taxes and invalid but occupation taxes which were constitutionally permissible in Colorado. In light of this the explanation of the convention’s Local Government Committee’s proposal by its Chairman Parkhurst assumes definite meaning. As the majority opinion states, Chairman Parkhurst said: “So we were aware of the sequence of cases in Colorado, ***, when we devised this, and we attempted to in our constitution avoid the end run that was successfully used in Colorado.” 4 Proceedings 3157. The sequence of cases referred to was first, the Sweet case holding that home-rule units had no authority to impose an income tax; second, the holding in Duffy that ordinance No. 234 was invalid as an income tax; third, the holding that ordinance No. 232 which imposed the tax on the employers was not an income tax and invalid but an occupation tax and valid, and fourth, the holding that ordinance No. 233 imposing a tax on employees was likewise not an income tax and invalid but an occupation tax and valid. When Chairman Parkhurst referred to the end run in Colorado he was referring to the use of the occupation tax as it was used in ordinances 232 and 233. When he stated that we attempted in our constitution to avoid this end run he was referring to the specific prohibition against the imposition of taxes upon occupations. It is true as stated in the majority opinion that some of the delegates doubted that an occupation tax could be used as a means of indirectly imposing an income tax. However, it is clear from the debates that the convention intended to prohibit the type of tax which the city of Denver had imposed by its ordinance No. 232 and which the Supreme Court of Colorado had unanimously approved in Duffy. The majority opinion refers to the discussion of the Duffy case by Delegate Carey when he spoke in support of the Meek amendment which attempted to delete the prohibition against the imposition of taxes upon occupations. Delegate Carey referred to the three taxes imposed by the ordinances of the city of Denver and to the decision in the Duffy case. He pointed out that the court struck down the ordinance that imposed an income tax, and he also referred to the less-than-unanimous decision of the court in upholding the “Employee Occupational Privilege Tax.” In discussing the “Business Occupational Privilege Tax” on the employer he stated: “But it was seven to nothing on the business occupational tax, and I think that clearly indicates that the Colorado court felt that the business should bear part of the tax burden for the privilege of operating within the city, and their conclusion was that this broadened the area of permissible taxation and was an important advance for home rule cities in Colorado. I support the Meek amendment. I oppose any tax based upon or measured upon income — a city income tax or a payroll tax — but it just makes good sense for the city to have the opportunity to tax a business using their facilities and requiring tax monies to give them that privilege.” 4 Proceedings 3163. Following extensive discussion, including many references to the Colorado case, the Meek amendment was defeated. (4 Proceedings 3171.) Another attempt to adopt a similar amendment was likewise defeated. (4 Proceedings 3371.) A third attempt to delete the prohibition against imposing a tax upon occupations was presented by Delegate Elward, and this amendment was also defeated. 5 Proceedings 4167-4169. In summary, the delegates were well aware of the Denver occupation tax on employers. They were familiar with the holding of the Colorado Supreme Court that this tax was an occupation tax. On three occasions amendments were offered to remove from the committee proposal the limitation on a home-rule unit’s authority to impose an occupation tax. Delegate Carey, in speaking on behalf of the Meek amendment, had specifically urged that home-rule units be authorized to impose a tax on employers similar to the one that Denver had imposed. The three amendments were defeated and the committee proposal was adopted and is incorporated in section 6(e)(2) of article VII. These debates and the action taken by the constitutional convention leave no doubt that the term “occupations” as used in that section of our Constitution encompasses a tax such as the city of Denver imposed by its ordinance No. 232. The ordinance of the City of Chicago is similar in all material respects to the provisions of ordinance No. 232 of the city of Denver with the exception, of course, that its drafters studiously avoided the use of the words “occupation tax” or words of similar import. However, as noted above, Delegate Carey had lauded the Duffy decision for the just result of compelling businesses to bear a part of the tax burden for the privilege of operating within the city and urged that a similar tax be authorized in Illinois. This suggestion was rejected. Yet counsel for the City of Chicago in a memorandum filed with the trial court in support of its motion to dismiss the complaints in this case stated: “The clear purpose of the tax is to require that employers that use the services of the City of Chicago to make a profit should pay a fair share of the expenses incurred by the City of Chicago in providing those services and facilities.” It thus appears that although the proponents of the occupation tax lost their battle in the constitutional convention, they were not dismayed. They simply relabeled their effort in the form of this ordinance and now by virtue of the decision of this court have accomplished the same thing that was denied to them by the constitutional convention. Contrary to the conclusion of the majority opinion I find that the convention debates indicate a clear understanding on the part of the delegates as to the nature of the taxes they were prohibiting home-rule units from imposing when they referred to “taxes upon or measured by income or earnings or upon occupations.” For these reasons I would hold the ordinance of the City of Chicago under consideration in this case invalid. UNDERWOOD, C.J., and DAVIS, J., join in this dissent.