CONCURRING OPINION. I concur in the original holding and in the present action of the court in overruling the petition for a rehearing. At the time the decision was rendered *Page 513 I entertained some doubt as to whether the taxes imposed by the legislative acts involved in this suit are excise or property taxes. But after more mature consideration I am convinced that they are excise taxes. Assuming that to be true it is urged that the sections of chapters 81, 82 and 83 of the Acts of 1933, which purport to relieve the intangibles from a property tax violate § 1, Art. X of our Constitution granting an exemption from property taxes on intangible personal property which is not used "for municipal, educational, literary, scientific, religious, or charitable purposes."
This court has recognized the definitely restrictive force of the non-exemption provision of § 1, Art. X; and in the recent case of Stark v. Kreyling (1934), 207 Ind. 128, 188 N.E. 680, it was held that the General Assembly cannot authorize exemptions of property from taxation unless the particular property is actually devoted to "municipal, educational, literary, scientific, religious, or charitable purposes." But the problem presented by the contention that certain sections of the tax acts of 1933 violate Art. X of the Constitution is whether the inhibition against tax exemptions encompasses and destroys the sovereign power of the General Assembly to select and classify the subjects of taxation.
It is elementary that the General Assembly's power to select subjects of taxation is unlimited, except insofar as such power is restricted by some provision of the Constitution; and Art. X contains no provision which expressly requires the General Assembly to select all classes of real and personal property of the state as subjects of taxation.
Consequently we can reach the conclusion that Art. X mandates the General Assembly to subject all real and personal property to a property tax only by drawing an inference to that effect from the provision limiting the *Page 514 power of the General Assembly in setting up the machinery for "assessment and taxation" and from the provision which limits the legislative power to exempt to "only such property" as is devoted to "municipal, educational, literary, scientific, religious, or charitable purposes."
The case of State Board of Tax Commissioners v. Holliday (1898), 150 Ind. 216, 49 N.E. 14, is of special significance in considering the extent of the legislative power over taxation. In that case the question was whether taxing officials could assess insurance policies as personal property. It was admitted that "a policy of insurance is a chose in action governed by the same principles applicable to other agreements involving pecuniary obligations" (Hutson v. Merrifield [1875], 51 Ind. 24, 29) and there was no contention that the General Assembly did not have the power to include such policies within the general class of personal property for purposes of taxation. But appellees' position on appeal was as follows:
"1st. That assuming that such policies are personal property of such a nature as to fall within the literal terms of the tax law above quoted, yet that the legislature has provided no regulations for the valuation of such policies; and in the absence of such regulations the State Board of Tax Commissioners cannot, as appellees contend, usurp the functions of the legislature, and discharge the duties enjoined upon it by the Constitution to `prescribe such regulations as shall secure a just valuation of all property.' 2nd. That the legislature did not intend to include life insurance policies in the language above quoted, `all property within this State' or the words `all other goods, chattels and personal property,' or in section 53, providing the form of the schedule, by the words `credits,' `demands and claims.'"
The appellant contended that life insurance policies *Page 515 being "personal property within the meaning of the tax law of 1891 and the Constitution" it was the duty of the taxing officials to list and value them for taxation. This court stated its conclusions as follows:
"We therefore conclude that the legislature did not intend to make life insurance policies subjects of taxation, and failing to provide any regulations for, or manner of assessing or valuing such policies for taxation, if they do fall within the literal words of the tax law of 1891, we hold that the act of the State Board of Tax Commissioners, in providing regulations for, and ordering them to be assessed for taxation was without authority of law and void."
Parties to this appeal who urge the unconstitutionality of the sections which relieve intangibles from a property tax, point out that in the Holliday case insurance policies had never been selected as subjects of taxation, or, if they had, the General Assembly had not provided any rule for assessing and valuing them for taxation; while in the instant case previously enacted statutes had selected intangibles for taxation and had provided rules for assessing and valuing them. If the foregoing distinctions have legal significance it is because (1) the General Assembly has no power to withdraw from the subjects of taxation any class of property which has once been subject to taxation; and (2) any such withdrawal constitutes an exemption.
The brief of the State Board of Tax Commissioners in opposition to the petition for a rehearing urges that the foregoing contention is unsound for two reasons: "First it is based upon the false premise that all property by virtue of the constitutional provision is subject to taxation unless specially exempted by law, whereas no property is subject to taxation until made so by legislative enactment. Second, it is based upon a gross misconception of the character of an exemption." We *Page 516 quote the following from the brief in support of the second proposition:
"The claim that such construction does nullify the exemption provision, supra, is based upon a gross misconception of the character of an exemption. An exemption takes property which is in the taxable class and removes it from taxation upon some designated ground of ownership or use. An educational institution may own for the purposes of education, real estate, tangible personal property and intangible personal property. Assume that the legislature has selected all of the above classes of property for taxation. They thereby become taxable unless exempted, which under the Constitution the legislature may do, but, having selected all classes for taxation, the legislature cannot exempt a manufacturing establishment which possesses all three classes. On the other hand, the legislature may withdraw intangible personal property from taxation, and as a result thereof both the educational institution and the manufacturing establishment will be relieved from paying tax on such intangible personal property but not on the principle of an exemption, but because the same is not in the taxable class. Exemption as permitted by section 1 of article 10 of the Constitution is a discrimination within a taxable class on the basis of municipal, educational, literary, scientific, religious or charitable purpose. Selection, on the contrary, is the determination of the taxable class, and unless impressed with such arbitrary methods of classification as violate the equal privileges and immunities provision of the Constitution, it is valid. When the class has been determined and subjected to the tax by the legislature — and no property is taxable unless so selected by the legislature — any exemptions must be such only as are authorized by the Constitution. If the class is withdrawn from property taxation, as is the case under consideration, there is nothing upon which the exemption limitation of the Constitution can operate. The acts under consideration, therefore, do not violate the above exemption limitations."
In the opinion of the writer the foregoing is sound. *Page 517 It is clear that the exemptions contemplated in § 1 of Art. X are exemptions of property on the basis of use and not on the basis of the nature or character of the property, and presuppose that the particular items of property which are exempted belong to a class of property which has been subjected to taxation by the General Assembly in an exercise of its power to select the subjects of taxation. Consequently we come back to the question of the power of the General Assembly to classify property for the purpose of selecting subjects for taxation. And more particularly, to the question of whether the provisions of § 1, Art. X, deprive the General Assembly of the power to reclassify personal property into tangibles and intangibles for the purpose of withdrawing intangibles from the classes of property subject to a property tax.
The actual holding of this court on the facts in the Holliday case (supra, p. 515) is not determinative of the foregoing question. But the principles announced and the reasoning therefrom appear to support the conclusion that the General Assembly had the power to withdraw intangibles from the general class of property taxables. "The power of taxation is a sovereign power and belongs exclusively to the legislative department of the government. The power of the legislature over the subject of taxation admits no limitation except where specially imposed by the Constitution itself." (State Board, etc., v. Holliday,supra.) In applying the foregoing principle to the construction of § 1, Art. X,1 this court spoke as follows: *Page 518
"This constitutional provision does not confer the power of taxation, because that power being sovereign, it is inherent in the legislature. But the provision is rather a limitation upon the power to tax. It is, therefore, a legislative power to select the subjects for taxation, and this constitutional provision imposes the duty and limitation upon the legislature of providing by law regulations or methods for a just valuation of all property, both real and personal, for taxation. Where the legislature has not exercised this power, no other department of the state government can supply the omission; and where no such regulation has been prescribed by law as to any particular species of property, then such property cannot be taxed. This conclusion may rest either on the inference from such failure to prescribe such regulations that the legislature did not intend to select that particular species of property as a subject for taxation, or regardless of the legislative intent the failure to prescribe such regulations leaves such property unselected as a subject for taxation."
It is evident that this court thought the limiting provisions of § 1, Art. X, left unimpaired the sovereign and inherent legislative "power to select the subjects for taxation"; and that the limitations on "the power to tax" related only to the kind of taxing system which Art. X made it the duty of the General Assembly to provide. This must be correct unless the restrictive provisions which are expressly directed to the mechanics of the taxing system necessarily imply a restriction on the substantive power to select the subjects for taxation. The requirement that the General Assembly "shall provide, by law, for a uniform and equal rate of assessment and taxation" cannot be the source of an implied restriction of the legislative power to select subjects of taxation; and the clause "prescribe such regulations as shall secure a just valuation of all property, both real and personal," cannot be said reasonably to constitute a constitutional mandate to the General Assembly to *Page 519 select all property, both real and personal, as subjects of taxation. It seems more reasonable to assume that it is a mandate to prescribe regulations to secure a just valuation for taxation of all property which is subject to taxation. And since § 1, Art. X, does not purport to select subjects for taxation it follows that the power of the General Assembly in that respect is full, unimpaired and continuing.
If the foregoing is sound then the General Assembly of 1933 did not violate § 1, Art. X, of the Constitution when it, in effect, reclassified personal property into tangibles and intangibles for the purpose of withdrawing intangibles from property taxables. Furthermore, in the opinion of the writer, there is, for purposes of taxation, such a substantial difference between intangible and tangible personal property that the classification does not violate the constitutional prohibition against the granting of special privileges and immunities. (§ 23, Art. I, Indiana Constitution.)
In explanation of my original concurrence despite my then doubts about the nature of the intangible tax, I should state that I believe that intangibles can be treated as a separate class of personal property for the purpose of imposing a lower rate per centum than is imposed upon other personal property. In my opinion the appeal brief of the State Board of Tax Commissioners clearly establishes that "rate," as used in section 1, article X, was intended to mean and, reasonably construed, must mean "mode" or "rule" or "method," and not rate per centum of tax; and that the "equal and uniform rate" restriction does not prevent classification for the purpose of imposing different percentages of tax. The rate per centum of tax is merely one element of the equal and uniform method of assessment and taxation. Consequently I believe that the intangible tax provisions *Page 520 would not violate section 1, article X, even if it were necessary to hold that the tax is a property tax. But since I am convinced that it is an excise tax I concur with that holding as well as in the general result reached in the opinion of Hughes, J.
1 Note 1. "The General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation; and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law." § 1, Art. X, Indiana Constitution.