Court Opinion

ID: 6696622
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:53:31.679237+00
Date Added: 2024-06-11T12:49:47.997712
License: Public Domain

CLARK, C. J.,
concurs in all tbat is said in tbe opinion of Stacy, J., and adds: There is no provision of law or tbe Constitution tbat purports to exempt tbe income of judges from taxation. "What tbe Constitution provides, and which no statute can repeal, is tbat “tbe compensation” which tbe law shall allot from time to time for tbe support of tbe judges “shall not be subject to diminution.” It can make no difference in what way tbe reduction in tbe allowance to tbe judges shall be made, or wbetber it is before or after tbe salary is fixed. "When tbe Legislature has fixed tbe amount which they deem necessary as a salary for tbe support of tbe judges, they cannot diminish tbat amount in any mode. A tax upon a salary is necessarily a diminution of it.
Tbis provision grew up in tbe wisdom of experience, because it was essential for tbe well-being of tbe public tbat those selected for tbe judicial function, who are to pass upon tbe'delicate relations between man and man, and between tbe Government and tbe individual, shall be free from any possibility tbat tbe amount allotted for their support may be in tbe power of a hostile party, or a manipulated faction, in tbe legislative department who might at will reduce tbe means of livelihood of tbe judges.
Tbe power to tax is not only tbe power to destroy, but whatever department in tbe Government can levy or reduce or impose taxes is tbe controlling power, and to guarantee to tbe judicial departments of tbe State independence in tbe discharge of tbe duties to which tbe people have assigned them, tbe Constitution provides not tbat tbe income of any judge is exempt from taxation, but tbat “tbe salaries of tbe judges shall not be diminished during their continuance in office”; and to say tbat the imposition of taxes upon tbat salary would not be a diminution of tbe salary is a proposition tbat no .man can assert in tbe presence of any taxpayer.
*112Formerly the judges in England were removable at the will of the executive. This made the king an absolute monarch at a time when the kings claimed also the right to share in the levy of taxes. The conflict between the executive and the legislative power over the question of taxes brought about the great civil war in England, the decapitation of one king, and the exile of another.
When the power of taxation was transferred by the revolution of 1688 to the legislative department, and as a further guarantee the kings were deprived also of the right to veto legislation, there still remained the power in the king to control the action of the courts by the appointment and removal of the judges. When the American Constitution was framed, the necessity of the absolute independence of the three departments of Government — legislative, executive, and judicial — -was asserted, and to secure the latter from absolute subjection by removal from office at the will of the executive, they were declared irremovable except by impeachment; and to avoid their subjection to the legislative department their independence was guaranteed by a provision that while their salaries, or their allowance for necessary support, were necessarily fixed by the Legislature, once fixed they could not be reduced, and, of course, if their salaries could be taxed for any purpose this provision would be a nullity.
In 1862, in the crisis of the great Civil War, when Chief Justice Taney and a majority of the Supreme Court were faced by a hostile majority in Congress, this provision was disregarded by a statute. That court rose equal to the occasion, and maintained the vital guarantee of judicial independence conferred upon them by the Constitution of 1787. Chief Justice Taney promptly called the matter to the attention of Salmon P. Chase, then Secretary of the Treasury, and one of the leaders of the opposite political party, and asserted the determination of the court to uphold this constitutional guarantee of the independence of the judges in a most vital respect. Judge Chase, although a strong partisan (and later Chief Justice of the 'Court himself), valued his oath of obedience to the Constitution and the absolute necessity of an independent judiciary which would become a dependent one if the legislative department could at will reduce its compensation. He abandoned the attempt to exert the power of Congress to diminish by taxation the “fixed” compensation allowed to judicial officers.
There the matter rested, until recently an attempt was again made to place the judiciary in the power of Congress by asserting the right to reduce their compensation. The matter was brought before the Court within the last two years in Evans v. Gore, 253 U. S., 245, and the bulwark of the independence of the judiciary was unqualifiedly sustained in that case.
*113In tbis State, while we bad adopted tbe .English guarantee of tbe irremovability of tbe judges at tbe will of tbe executive, we did not place in our Constitution at Halifax, in 1716, a guarantee of tbe independence of tbe judiciary by forbidding legislative reduction by taxation, or otherwise, of tbe salaries allotted. In tbe third decade of tbe last century there were legislative threats to coerce tbe judicial department, and when tbe Convention of 1835 met, tbe people of tbis State wisely saw fit to put in their Constitution tbe guarantee of tbe independence of tbe judiciary in tbe same words that bad been placed in tbe U. S. Constitution, nearly fifty years previously, and which now appears in every Constitution in tbe country, to wit: “Tbe judges shall at stated times receive for their services a compensation, which shall not be diminished during their continuance in office.”
There are but 25 judges in North Carolina, whose offices are created by tbe Constitution, and these only, and seven beads of tbe Executive Department, are protected by tbis constitutional guarantee. It is true that tbe plaintiff’s attorney states that tbe diminution of tbe aggregate salaries of these judges by tbis taxation amounts to tbe sum of only $1,000, approximately, and tbe widespread discussion by those who would destroy tbe independence of tbe judiciary seems based upon tbe idea that tbe.independence of tbe judiciary is not worth that much to tbe public. But tbe men who framed tbe Constitution of tbe United States, and those who amended our Constitution in tbis respect to conform thereto in 1835, did not estimate tbe value of a constitutional guarantee by such standard. It is of infinite importance to tbe people of tbis State who know what tremendous influence can be brought in time of stress by great aggregations of capital to control legislation, and, if possible, to influence or subject tbe judges to tbe tyranny of that power.
It has been asserted that tbe amendment of 1920 destroyed tbe long and sacred independence thus guaranteed to tbe judges. That amendment .was submitted in tbe following words, and has no possible bearing upon tbe question now before us: “Amend Art. Y, sec. 3, by repealing tbe proviso in said section that no income shall be taxed when the property from which tbe income is derived is taxed, and substituting in lieu thereof tbe following: Provided, tbe rate of tax on incomes shall not in any case exceed 6 per cent, and there shall be allowed the following exemptions, to be deducted from tbe amount of any incomes, to wit:. For a married man with a wife living with him, or to a widow or widower having minor child or children, natural or adopted, not less than $2,000; to all persons not less than $1,000; and there may be allowed other deductions (not including living expenses), so that only *114net incomes are taxed.” It may be seen at once that this amendment bas no reference whatever to the constitutional guarantee that the “compensation” allowed the judge shall not be diminished, but merely strikes out the provision that “the income shall not be taxed when the property from which the income is derived is taxed, and limits the rate of taxation to 6 per cent, the latter (the limitation) being the real object in view.'
The salary of the judges is not derived from “property,” but is simply an allowance for their support, and if any is left over at the end of the year, such remnant becomes “property,” and is taxable as such, as was held in Purnell v. Page, 133 N. C., 129, and this amendment does not in the remotest degree apply thereto in any aspect. Furthermore, if the amendment was not intended for the entirely different purpose of limiting rate of taxation upon the incomes of great corporations and other large aggregations of wealth down to 6 per cent, it has had that effect. In England the income tax is graduated and runs from 1 to 84 per cent, and a heavily graduated income tax has been found absolutely necessary in the United States, France, and other countries, both for the support of the Government and that great aggregations of wealth should be reduced by taxation by graduated scale, while those with small means should be exempted or taxed much more lightly.
When recently the United States Congress reduced the graduated income tax on large amounts from 68 per cent to 50 per cent there was strong censure from the vast body of the people, who felt that the burdens on inordinate wealth should not be reduced; while in this State, almost without discussion, the limitation on the income tax was reduced to 6 per cent! Possibly this was the true object of that amendment, and it can be seen readily that this amendment has no reference whatever to the constitutional provision, which, following the example of the U. S. Constitution, was adopted to guarantee to the judges immunity from hostile legislation in the reduction of their salaries, and which clause in the Constitution remains unaltered.
While the salaries of the judges can be fixed from time to time, it is with the provision that they cannot be diminished. On the contrary, as to the executive officers, who are: the Governor, Lieutenant-Governor, Secretary of State, Auditor, Treasurer, Su£>erintendent of Public Instruction, and Attorney-General — seven officials — it is provided in the Constitution, Art. Ill, sec. 15, that their salaries shall neither be increased nor diminished during the time for which they shall be elected. This shows an intention on the part of the organic instrument that while those seven officers are protected from a diminution of their *115salaries, there is a prohibition against their being increased. There is no such fear shown as to the possible influence of the judiciary who are protected solely against diminution of their allowance.
The history of this State shows that there has at, no time been a fear of the possibility of excessive increase in the compensation allowed to the judges. It is a well known fact that the salaries of the highest Court in this State are very largely less than that allowed to the lowest judges on the Federal bench, and that the salaries of the judges of this ’ Court are far less than the average salary allotted even to the judges of the other states, irrespective of size, wealth, area, or population. Indeed, in at least two states the salaries of their state judges are three times higher than the support granted to any judge of this State. Those who created our Constitution were not unaware that there was no fear, and their judgment was correct, of excessive salaries for the judiciary in this State. The object sought, as in the U. S. Constitution, was to protect the judges from being in the power and at the mercy of hostile legislation, which otherwise could diminish the salary of the officers selected by the people to construe and guard the constitutional rights of its citizens.
But it has been said that if the salaries of the judges cannot be reduced they are “a privileged class.” This guarantee that they shall not be placed in the power of a possibly hostile Legislature is not given to the judges as a privilege to them, but as a protection to those who need an impartial administration of justice, unaffected by unfriendly influences.
It makes a privileged class only in the same sense as the exemption from State taxation of the salaries of all Federal officers in the State, many hundreds or thousands in number, including the salary of a IT. S. Cabinet officer (for the last 8 years), two U. S. Senators, ten Congressmen, three United States judges, hundreds of postmasters and United States officials of all kinds, while the only State officials whose salaries are exempted from taxation are the seven State officers in the Executive Department named in the Constitution, and the State judges referred to in this section of the Constitution, who are at present 25 in number— and the exemption of these few was made for historical and constitutional reasons of sufficient importance to have such exemption placed in the Constitution, not as a compliment or privilege to them, but as a protection to the public at large that they might be free from any possible improper influence in the discharge of their important duties.
The exemption of the salaries of all these Federal officers from State taxation amounts to a very large sum, and makes a very large “privileged class,” if that makes such a class. The provision that the salaries of the *116judges shall not be diminished while in office no more makes “a privileged class” than the provision in the Constitution which exempts from poll tax all men over fifty years and all women. It is no more a special privilege than Art. V, sec. 5, of the Constitution, 'which exempts municipal property from all taxation, and also authorizes the General Assembly to exempt property held for educational, scientific, literary, charitable,. or religious purposes, libraries, household and kitchen furniture, agricultural implements, and the personal property of every citizen not exceeding $300. This $300 personal property exemption removes from the families of the working people the fear of the sheriff’s visit to every little home or farm which may now retain free of taxes the family milch cow, household and farming utensils, etc. This last exemption, though authorized by the Constitution ever since 1868, was not increased from $23 to $300 by statute till certain influences were seeking a restriction of taxation on great incomes by a limitation of 6 per cent, and as soon as that limitation was imbedded in the Constitution there were instantly strenuous but justly unsuccessful efforts to repeal the legislation by which the small belongings of the poor had been exempted by statute to the amount of $300, and it was earnestly sought to again reduce the exemption to $25 when their votes were not needed to restrict the income tax to a limitation of 6 per cent on great masses of wealth.
Prior to the restriction of the income tax to 6 -per cent, the power to tax all incomes was in this State as unlimited as it still is under the United States and other Governments, and if the salary of the judges had been taxed, contrary to the plain language of the Constitution, as income, and not protected from diminution by taxation, it would have been possible to have laid any tax whatever upon judges not entirely agreeable to the political or personal views of a majority of any Legislature, and thus have forced their removal. Even though since the limitation of income tax to 6 per cent (though this was done, not for the protection of the judges, but for the benefit of an entirely different class), if the salaries “were subject to diminution” it would still be possible for the Legislature to lay a tax upon a judge as “exercising a vocation or calling,” at any rate the Legislature might see fit. The only protection and guarantee to the judiciary department in this State is that wisely laid by the Convention of 1835, copied from the Constitution of the United States, which provides that the salaries of the judges shall not be diminished during their term of office.
It has been said, though not by the distinguished counsel who appeared for the defendant in this case, that this guarantee by the Constitution against the diminution of. the salaries of the judges by legislative enactment is “antiquated and a technicality.” In this manner the entire *117Constitution, built upon tbe experience of tbe ages, and providing for tbe protection of tbe weaker classes of society against tbe greed and arrogance of tbe powerful, would cease to exist by merely labeling any constitutional guarantee “antiquated and a technicality.”
Tbe Constitution of a State and of tbe Union is tbe very foundation of law and order. It is tbe protection of tbe weak against tbe strong, and safeguards tbe masses against tbe machinations of tbe powerful combinations of selfish interests. It is tbe bulwark against anarchy, corruption, and tbe deadly, insidious, and ever-active power of “high finance,” but is without strength unless guarded and upheld by an independent judiciary. Thus upheld, tbe Constitution — State and National —is to tbe people at large “tbe shadow of a great rock in a weary land.”
Nothing could be more disagreeable to tbe men whom tbe people of this State have thought worthy to place in tbe chief administration of tbe laws of tbe State than to have a controversy raised as to tbe constitutional guarantee of tbe small compensation allowed them for their support, from hostile attack from whatever source it may come. There is not one of them who would not rather have paid many times over tbe petty sum demanded.by tbe defendant- tax collector in this case but they bad their duty clearly marked out before them by an oath to protect tbe administration of justice, pure and uninfluenced by any hostile power, and to maintain and support tbe Constitution of the State. Each and every member of tbe judiciary of this State must feel that they are only tbe temporary depositories of that power, and that it is their duty to pass it on to their successors protected by tbe guarantee which is given in tbe Constitution, not for tbe benefit of themselves, of their predecessors, or their successors, but as a guarantee that by whomsoever administered there can be no undue influence possibly exerted to control tbe occupants of tbe bench.
Tbe Court did not put this provision in tbe Constitution, but it was inserted by tbe Convention and people in 1835, in view of its urgent necessity. Tbe Court cannot strike it out because we, or anybody else, might not approve it. "We must follow tbe long-settled construction and tbe common-sense meaning that to tax a salary necessarily “diminishes” it to that extent. Tbe Court is under the Constitution, and cannot change it at will.
Tbe defendant in this case, as appears by tbe record, when asked to submit to tbe courts an agreed case for tbe construction again of this provision of tbe Constitution, so as to minimize as far as possible tbe clamor that was being aroused in certain quarters, either to intimidate or to annoy tbe judges, who were simply doing their duty, curtly refused to do so, and stated that “he bad decided” that tbe constitutional provi*118sion did not protect the judges from taxation of their salaries, and tbat “be intended to collect tbe amount be bad notified them that they must pay.”
When, overruling a previous decision of tbe Tax Commission, tbe defendant, of bis own will, decided to remit to a great corporation tbe sum of $110,000 in taxes, which must be made good by being collected from other and poorer persons, there was no one to be found then to seek, and be certainly did not ask, judicial review of bis act. To make good this $110,000 by collecting unconstitutionally $1,000 a year out of tbe judges will take 110 years, and if interest is counted it will take between 300 and 400 years — very poor financiering for tbe Revenue Department.
There can be no vaster or more irresponsible power than this, which can shift at will tbe burden of taxation from one class to another, without review, in a State which professes to live under “a government of laws and not of men.” It can therefore never be known in a legal way whether the conduct of the defendant on that occasion was valid or not; No one seemed called upon to present that great matter to judicial construction for a legal ascertainment of the facts and the law on so great a matter, but when he attempted to destroy the constitutional bulwark for the protection of the courts in their integrity, though the amount was small, the plaintiff, true to his duty and to the best traditions of his profession, and of his office, and to the Constitution that he had sworn to obey, interposed by an appeal to the courts.
Years ago George W. Kirk, when presented with a writ from the courts, treated it with indignity, and said that “it had played out.” The people of North Carolina made their reply to that indignity to their Constitution and laws and their judiciary in a manner that will not soon be forgotten.
If the defendant tax collector desired to submit this question to the courts because he thought that the long line of judges had erred, it was his right to do so; and, on the other hand, it is to the perpetual honor of the plaintiff that he met the issue squarely, unintimidated by organized effort put forth to intimidate the courts or to convince the public that they were corrupt. The $1,000 or more which the defendant might have collected by taxation, if the judges of the State had been wanting in courage to face the concentrated abuse that has been heaped upon them, would have been small compensation for this attempted violation of the Constitution, contrary to the uniform decisions of the courts of this State and of the United States.
The paragraph in question was placed in the Constitution of this State, as already said, by the Convention of 1835, being copied from the same provision in the Constitution of the United States, and has been kept unchanged to this date. There was no question raised of its literal *119and plain meaning. Twenty-one years later, in 1856, tbe reason for it was stated in an admirable opinion by Attorney-General Batcbelor, approved by tbat able Court — Frederick Nasb, Richmond M. Pearson, and William H. Battle. From tbat bonr to tbis tbat decision bas been followed, and often reiterated in tbe Supreme Court of tbe United States and by tbe courts of tbis State, and always upon tbe same ground, tbat it was a constitutional guarantee to tbe judges of tbeir independence, for if it did not mean tbat its insertion was useless. Not only bas tbis been repeatedly decided by a long line of judges, among tbem many of tbe ablest and purest men wbo bave adorned tbe bistory of our State, but tbey bave all acted upon and accepted it as tbe true and only construction of tbe Constitution — among tbem tbe able and distinguished gentleman now tbe Attorney-General of tbe State, while at one time be himself occupied a seat upon tbe Supreme Bench of North Carolina.
In Purnell v. Page, 133 N. C., 125, now nearly twenty years ago, the Supreme Court of tbis State, in an unanimous opinion by a bench of five judges, representing both political parties, held: “Tbe Legislature is presumed to know tbe law, and when it levied a tax upon incomes it did not intend to authorize tbe tax upon incomes exempt by tbe Constitution of tbe State or Federal Government from such taxation. Tbe act of tbe officer in attempting to collect such tax is not authorized by law, and be was properly’ restrained from selling.” Tbis interpretation bas been approved as late as 177 N. C., 97, and there bas been nothing in tbe decisions of tbis Court or of tbe United States Supreme Court contrary to tbe above decisions and conduct of tbe judges in tbis matter.
We would impute to tbe defendant, upon tbe record, no motive other than bis zeal of increasing bis tax collections by tbe sum of $1,000 or more, even though tbis must be done in violation of tbe Constitution. Tbe brief of tbe distinguished counsel for tbe plaintiff points out tbat instead of obtaining tbis petty sum by violation of tbe Constitution, tbe defendant could largely increase tbe public revenue, not by violation of tbe Constitution, but in accordance with its provisions and decisions of tbis and tbe United States Supreme Court. The brief says tbat if tbe defendant desired to enforce tbe Constitution as it is written, and as be knows it bas been decided by tbe courts of tbis State and of tbe United States, be might well turn to tbe Constitution, Art. Y, sec. 3,' which provides: “Laws shall be passed taxing, by uniform rule, all moneys, credits, investments in bonds, sioclcs, joint-stock companies, or otherwise; and also all real and personal property, according to its true value in money.” Tbe defendant tax collector knows, as every man in the’ State should know, tbat tbis constitutional provision, which not only all office holders, but all voters are sworn to obey, is not being complied with. To quote tbe language of tbe distinguished counsel for tbe plain*120tiff, “The Constitution, demands that a tax shall be paid by corporations upon their property, and that the holders of the stock of these companies shall likewise pay a tax on about 800 millions of dollars of ‘stocks,’ which are allowed to escape taxation in violation of this explicit requirement of the Constitution,” and counsel asked that “this be settled by the courts and in accordance with the Constitution and the laws of the State and not otherwise”; and also further suggests that “this defendant might find it consistent with his duty and oath of office to inquire into the status of large property holders of this State and see whether or not they are paying taxes as the Constitution requires, rather than to undertake to collect taxes from those which the Constitution expressly exempts.”
To this may be added that while the amendment of 1920 provides that “incomes from property already taxed may be taxed,” by recent legislation (sec. 306 (5), ch. 34, p. 210, Laws of 1921): “Dividends from stock in any corporation, the income of which shall have been assessed and the tax on such income paid by the corporation” shall not be taxed. That is, not only the money invested in “stock” by individuals and others (amounting in this State possibly to 800 or a thousand million dollars) is absolutely exempted from taxation in defiance of the consti-. tutional provision, Art. Y, sec. 3, that “all stocks” and other personal property shall be taxed,'but it is now further provided that the income or dividends received by the stockholders, and which is paid into their pockets from such stock is exempt from taxation in spite of the recent amendment that “incomes derived from property taxed” (even if the stock had been the property of the corporation) shall be taxed. And it further provided, by a more recent act, ratified 15 December, 1921, that banking corporations may deduct from taxation 5 per cent of their surplus and undivided profits, besides, also, the total amount of the surplus and undivided profits invested in State or United States bonds or the bonds of the Federal Farm Loan Banks and Joint-stock Land Banks.
It will be seen that practically all the “canned wealth” of the State is thus exempted from all taxation in violation of the express language of our Constitution. The defendant tax collector, instead of attempting to replenish his funds by $1,000 in violation of the Constitution of this State, and of the decisions of the State and Federal Courts, might add many millions of dollars to his tax collections by obeying the highest law, the Constitution of the State, as plainly and unmistakably set forth and as construed by numerous decisions of this Court to which he has ready access.
If the defendant will thus take steps to execute the requirements of the Constitution as held by many decisions of this Court, the overwhelm*121Ing burden of taxation upon the farmers and laborers and people witb small means, all tbe producers of wealth, will be largely reduced and the burden placed where the Constitution requires it, upon the corporations and others possessed of inordinate wealth who are being permitted by the defendant to enjoy without question, by him, exemptions from taxation contrary to the Constitution which the defendant and all others have taken oath to support.
The above is written upon the theory that the defendant is seeking to uncover and collect taxes that are withheld which the Constitution requires shall be collected, and that by this action the defendant is seeking a decision along that line.
North Carolina is a growing State, increasing in population and wealth, but taxation is increasing to a still greater extent. We need better roads and better schools, and there are ample sources from which to derive revenue for those and all other necessary purposes if properly apportioned according to the Constitution, but when, as there is ground to believe, vast quantities of wealth in idle hands, largely “canned wealth,” so to speak, are exempted entirely, as in instances above referred to, contrary to the Constitution, or taxation thereon is limited by an amendment to that effect if not passed for that purpose, there will be continued and growing unrest.
This unrest cannot be met by attempting to exact $1,000 or more illegally from a small class of public servants, nor by the excitement of propaganda against them for not yielding a trust placed in their hands, but respecting the conduct of their predecessors and preserving the protection due to those who shall come after them.
The surest guarantee of the prosperity of the people is an equal and a just administration of the law by fearless officers and a just apportionment of the public burdens by taxes graduated according to the capacity of those called upon to contribute and not in an inverse ratio by being placed most heavily upon those least able to resist an unjust apportionment of these burdens.
It appears from the United States financial report that throughout the Union there are thirty thousand million dollars of “tax-free” bonds, which pay no part of the burdens of government. This is in addition to the “stocks,” which, in this State, contrary to the Constitution, are also exempted from taxation. In some few states the Constitution does not require, as ours clearly does, that all stocks shall be taxed. It also appears that there are many hundreds of men in the Union with yearly incomes of over one million dollars each, one of them really a resident of this State, but nominally resident elsewhere, with an income of three millions, and therefore not even paying the limited 6 per cent *122income tax, and with a capital, gathered np in 30 years, of over 100 millions. Who lost it? At tbe same time there are 5 millions of unemployed men throughout the country!
As this controversy to collect in $1,000 contrary to law has been largely carried on outside the courts by methods intended to intimidate the judges to decide the matter wrongfully for fear lest they should be charged with being influenced by the petty amount involved, it is not inappropriate that these things should be said. The just and intelligent people of this State can be trusted to decide correctly all questions affecting the public welfare or their rights if the facts are fully and fairly laid before them.