I dissented from my brothers when the opinion in this case was handed down without formally stating the grounds of my dissent. A petition for rehearing having since been filed, which is still pending, I have decided upon reflection to file a dissenting opinion for the following reasons:
(1) The question involved herein has been correctly decided contrary to views expressed in the majority opinion in the case of the Protest of the Skelton Lead Zinc Company's Gross Production Tax, 1919, handed down December 14, 1920, and in which a petition* for rehearing has since been granted.
(2) In the former case the Attorney General confessed the illegality of a gross production tax levied under the precise circumstances as the tax assailed herein, to wit: Where the leases were made by Quapaw Indians not declared incompetent at the time the leases were made, but who were later declared incompetent by the Secretary of the Interior.
(3) The precise federal question herein involved has been definitely decided by the Supreme Court of the United States contrary to the views expressed in the majority opinion in several well-considered cases.
(4) As in my judgment it would be inimical to the business involved as well as to the interest of the state again to open for discussion a federal question which seems to me to be definitely put at rest by repeated decisions of the highest court in the land having jurisdiction thereof, I deem it to be my duty to the members of the court who have come on to the bench since the majority opinion was handed down to file a dissenting opinion in order that they, as well as the members who participated in the majority opinion, may be advised of my views in a definite way, before passing upon the pending petition for rehearing.
In the Matter of the Protest of the Skelton Lead Zinc Company's Gross Production Tax, 1919, the protest of the company questioned the validity of the gross production tax as applied to leases made by the Quapaw Indians under three different circumstances as follows:
First. Leases made by Indians who have never been declared incompetent by the Secretary of the Interior under the authority to do so conferred by that part of the provisions *Page 104 of the act of Congress allotting the lands of the Quapaw Indians in severalty.
Second. Leases made by Indians not declared incompetent at the time the leases were made but who were later declared incompetent by the Secretary of the Interior.
Third. Indians whose leases were made after they were declared incompetent, such leases being at all times subject to the supervision and control of the Department of the Interior.
In the case at bar the taxes, as we have seen, were levied under the second set of circumstances. In the original opinion in the Skelton Lead Zinc Company Case, supra, which upon petition for rehearing was withdrawn and replaced by another opinion reaching a contrary conclusion (In re Skelton Lead Zinc Co. Gross Production Tax, 1919, 81 Okla. 134,197 P. 495), the court discussed the question presented for review as follows:
"As the Attorney General in his brief concedes that he is unable to draw any substantial distinction between leases made under the second and third circumstances stated above and the leases made under the circumstances existing in the cases wherein the Supreme Court has heretofore held that the lessees were federal agencies and not subject to taxation pursuant to the laws of the state, it will not be necessary to notice the questions presented under those two subheads. The cases referred to by the Attorney General, which we agree are in point to the effect stated, are as follows: Choctaw, O. Gulf R. Co. v. Harrison, 235 U.S. 292, 59 L.Ed. 234; Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U.S. 522, 60 L.Ed. 770; Large Oil Co. v. E.B. Howard, State Auditor of Oklahoma, 248 U.S. 549."
In the case at bar the Attorney General has not filed a brief, for the reason, no doubt, that the cause was tried upon the same agreed statement of facts as the Protest of the Skelton Lead Zinc Co. Case, supra, and he is still satisfied with his view as to the controlling effect of the Supreme Court cases just cited and considers them decisive of the case at bar. This, it seems to me, ought to set at rest forever the question involved herein. But in the face of this the court upon its own initiative has undertaken to set forth reasons why the cases just Cited are erroneous, and therefore not controlling, and I wish briefly to notice some of the points of distinction pointed out by the court in the majority opinion.
In the first place, without overruling the construction placed upon the present gross production law by this court in Large Oil Company v. Howard, 63 Okla. 143, 163 P. 537, the court holds that, inasmuch as the taxes levied under this act are in lieu of all other taxes and the act further provides that if the tax assessed is greater or less than the tax on the property of said producer would be if taxed upon an ad valorem basis, the State Board of Equalization may lower or raise the rate to make the tax conform to the prescribed standard, the law does not impose a tax upon the business of the producer nor upon his mineral leases nor upon his mineral rights, but does, when rightly understood, in effect impose a tax upon the producer's tangible property within the state, which is permissible.
While these are the precise grounds unavailingly urged by the state authorities for upholding the gross production law of 1908 in Railroad Co. v. Harrison, supra, and the present law in Large Oil Co. v. Howard, supra, and the other cases cited, the right of the state to tax these federal agencies or their property, it seems to me, does not turn so much on the question, what is the nature of the tax, as upon whether the tax does in truth deprive the federal agency of the power to serve the government as it was intended to serve it — does it hinder the efficient exercise of its power? Union Pacific R. Co. v. Peniston, 18 Wall. 550, 21 L.Ed. 787.
No matter what the state courts may hold as to the nature of the tax, this still is the federal question, which can be answered only by taking the whole scheme of taxation into account. And the application of this settled principle to particular cases, so as not to hedge on the taxing power of the state on the one hand, or the power of the federal government to protect its own agencies on the other, is not without some difficulty. As was said by Mr. Justice Day in discussing a similar question in United States Express Co. v. Minnesota,235 U.S. 335:
"The state must be allowed to tax the property and to tax it at its actual value as a going concern. On the other hand, the state cannot tax the interstate business. The two necessities hardly admit of an absolute logical reconciliation. Yet the distinction is not without sense. When a Legislature is trying simply to value property, it is less likely to attempt to or effect injurious regulation than when it is aiming directly at the receipts from interstate commerce. A practical line* can be drawn by taking the whole scheme of taxation into account. That must be done by this court as best it can."
Assuming that these cases, in so far as applicable, state the rule correctly, let us inquire what items of property or elements *Page 105 of value must be taken into consideration by the taxing officers in making the levy under the present act. Section 1 of chapter 39, Sess. Laws 1916, provides that every person engaged in the mining or production of ores bearing lead, zinc, jack, etc., shall pay to the State Auditor a tax equal to one-half of one per cent. of the gross value of such ores, less the royalty interest. Another part of the same section provides that the payment of the taxes thus imposed shall be in full and in lieu of all taxes by the state, counties, cities, townships, school districts, and other municipalities upon any property rights attached or inherent in the rights to said mineral leases for the mining of asphalt and ores bearing lead, zinc, jack, gold, silver, or copper, etc., and upon mining rights and privileges for the minerals aforesaid belonging or appertaining to land.
This part of the section unquestionably provides for a straight gross production tax based on the gross value of all the ores, less the royalty, produced by the taxpayer by the use of all the instrumentalities pertaining to his business.
Another part of the same section provides that the State Board of Equalization, upon its own initiative, may, and upon complaint of any person who claims that he is taxed too great a rate herein shall, take testimony to determine whether the taxes herein imposed are greater or less than the general ad valorem tax for all purposes would be on the property of such producer subject to taxation for the district or districts where the same is situated, including the value of oil, gas, or mineral lease, or of the mining or mineral rights, the machinery, equipment, or appliances used in the actual operation of, in and around any such well or mine, the value of the oil, gas, asphalt, or any of the said mineral ores produced and any other element of taxable value in lieu of which this tax herein is levied. The said board shall have power to and it shall be its duty to raise or lower the rates herein imposed to conform thereto.
Now an analysis of the applicable parts of the act discloses that the first part of section 1 provides for a straight gross production tax equal to one-half of one per centum of the gross value of ores bearing lead, zinc, jack, etc., produced, less the royalty; and that the second part of the act merely makes it the duty of the State Board of Equalization, either upon its own initiative or upon complaint of the taxpayer, to see that the taxes thus imposed are not greater or less than the general ad valorem taxes for all purposes would be upon the property of such producer, subject to taxation, including the value of oil, gas, or mineral lease, or of the mining or mineral rights, the machinery, equipment, appliances used in the actual operation of, in and around such well or mine, the value of the oil, gas, asphalt, or any of the said mineral ores produced and any other element of taxable value in lieu of which the tax is levied.
Under this act, as I understand it, and as it was construed by this court in Exchange Oil Co. v. State, 80 Okla. 52,193 P. 999, recently handed down, the State Board of Equalization, in determining whether the gross production tax is greater or less than the general ad valorem tax for all purposes would be on the property of any particular producer or taxpayer, must consider not only the value of the tangible property of the producer, but also the value of the mineral leases or mining or mineral rights, if it follows the mandate of the statute. Therefore, assuming that the tax imposed amounts to no more than an ad valorem tax on the property would be, it is fairly obvious that the ruling of the court is in direct conflict with the ruling of the Supreme Court of the United States in Indian Territory Illuminating Oil Co. v. Oklahoma, supra, wherein it was held that such leases cannot be taxed either directly or indirectly. The Illuminating Oil Co. Case did not turn upon the question whether the leases involved were tangible or intangible personal property, or whether the taxes assailed were based upon a gross production or an ad valorem basis. It was conceded that the leases were personal property, but the court held that they were not taxable by the state either as entities or vicariously by taxing the stock of the corporation owning them, because they were the franchise by which the company was authorized to do business with the Indians, and to permit the state to tax them would necessarily interfere with an instrumentality through which the United States was performing its duty to the Indians.
"A tax upon the leases," says the learned Justice who delivered the opinion of the court, "is a tax upon the power to make them, and could be used to destroy the power to make them."
In the case at bar, after all is said that profitably can be said in relation to the nature of the tax sought to be imposed by the present act, it still remains fairly obvious that the state Legislature was aiming directly at the receipts of the producer by providing a gross production tax based upon the gross value of all ores bearing lead, zinc, or jack produced, and that the State Board of Equalization has no power to *Page 106 change this basis of taxation, that is, it has no power to change the valuation placed upon the gross production by the State Auditor. If, upon investigation, the State Board of Equalization finds the tax to be too high or too low, measured by the prescribed standard, it adjusts the matter, not by changing the valuation of the gross production, but by changing the rate of taxation. Exchange Oil Co. v. State, supra. The result of this is that whatever the State Board of Equalization finds the rate shall be, the resulting taxation still is based upon the total value of the gross production as found by the State Auditor, and necessarily must be a burden upon the entire business and property of the producer, including, as the statute prescribes, any licenses, leases, or mineral rights operated as a federal agency. A system of this kind cannot be enforced against this federal agency without interfering with an instrumentality through which the United States is performing its duty to the Indians. California v. Pacific Railroad Co., 127 U.S. 1.
This is the principal vice of the present law as applied to federal agencies. That was the vice of the gross production law of 1908, which it was held could not be enforced against a federal agency in Railroad Company v. Harrison, supra. In the present act the Legislature sought to remedy what it conceived to be the defect in the former law by declaring the tax imposed to be in lieu of all other taxation. This, however, in my opinion, was not the defect which made the law invalid, but it was invalid, as I have heretofore pointed out, because by it the state sought to cast an unauthorized burden of taxation upon the entire business, franchises, and property of a federal agency. And for this reason alone the Supreme Court of the United States in the Large Oil Company Case held the present act invalid upon the authority of Railroad Company v. Harrison and the other cases cited holding previous acts invalid, without noticing the distinction between the different acts so ably and strenuously pointed out by the Attorney General and so stressed in the opinion of the Supreme Court of the state in the Large Oil Co. Case and the dissenting opinion prepared by the Chief Justice in the Protest of the Skelton Lead Zinc Company, supra, and in the opinion of the majority of the court in the present case.
The Chief Justice in the dissenting opinion in the Skelton Case just referred to and the court in the majority opinion in the case at bar concede that the question involved in the Large Oil Co. Case, supra, grew out of the present act and was precisely the same as the question involved in the case at bar. They seem, however, to be of the opinion that that case is erroneous and not controlling, apparently assuming that the Supreme Court did not notice the real question involved because it did not discuss at length the distinctions pointed out by the state authorities, hereinbefore referred to, between the act of 1908 and the act of 1916. The Attorney General, as we have seen, confesses his inability to distinguish this case and the Skelton Lead Zinc Co. Case, supra, from the various cases decided by the Supreme Court of the United States.
In these circumstances I deem it to be the duty of this court to abide by the decisions of the Supreme Court of the United States on federal questions, trusting that high court to correct on appeal its own rulings many times repeated, if perchance it finds that error has crept into its former opinions.
For the reasons stated, I respectfully dissent from the majority opinion.
I am authorized to say that Mr. Justice MILLER concurs in this dissenting opinion.