I think the views of this case expressed in the opinion written by Judge Holcomb are correct.
The taxes intended to be raised by the law appear to be reasonable and fair, and, assuming that incomes should be taxed, a system of graduated rates that become greater as the amount of taxable income increases, such as is provided for in this act, is a good *Page 380 one. That question, however, is not here. The sole question here relates to the validity of the act under the fourteenth amendment to the state constitution.
I wish to speak more fully of the history of the amendment and of the act, each with respect to the other. In 1929, sixty-three financial associations from different sections of the state brought an action against the members of the state tax commission to enjoin the enforcement of chapter 151, Laws of 1929, p. 380, providing for a tax measured by income upon banks and financial corporations. The action was dismissed by the trial court upon sustaining a general demurrer to the complaint.
In reversing the judgment of the trial court in June, 1930 (Aberdeen Savings Loan Assn. v. Chase, 157 Wn. 351,289 P. 536, 290 P. 697, 71 A.L.R. 232), this court said:
"The question of whether or not the act which we are now considering imposes a tax upon appellants for the privilege of exercising their corporate powers within this state, or whether, on the other hand, it purports to impose a tax directly uponproperty, to wit, upon the net income earned by appellants upon which the amount of tax due is to be computed, or upon the occupation with which appellants are en-engaged, is important." (Italics mine.)
The decision was that it was a tax upon property, to wit, upon net income earned, and that the act in question violated the fourteenth amendment to the United States Constitution guaranteeing the equal protection of the law, which holding it was said rendered unnecessary any discussion of the subject of the uniformity of taxation provision of the state constitution. The decision was by six judges; three other judges dissenting in two opinions. Thereafter, on rehearing the case (157 Wn. 391), it was unanimously said: *Page 381
"In order to clarify the situation, the court now states that the opinions above cited were rendered with a view to determining the questions presented by the cases at bar . . .; that the majority of the court was of the opinion that the legislation therein attacked must be held, under the decisions of the supreme court of the United States, to attempt to establish a propertyand not an excise or corporation franchise tax." (Italics mine.)
Amidst the general and special publicity of the fact that this court had thus decided that income is property, the fourteenth amendment to the state constitution was adopted at the following general election in November, 1930. That amendment struck out certain sections, including § 2 of article VII of the constitution, which section provided that "the legislature shall provide by law a uniform and equal rate of assessment and taxation on all property in the state, according to its value in money," etc. However, it was carried into amendment 14, which provides:
"All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word `property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership."
And now, if asked whether income is property within the meaning of the fourteenth amendment to the state constitution, a perfect answer could be given by quoting the language of the amendment — "The word `property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership." Thus, this court, in Aberdeen Savings Loan Assn.v. Chase, 157 Wn. 351, 289 P. 536, 290 P. 697, 71 A.L.R. 232, decided that income is property for the purposes of taxation, and the people, by a constitutional amendment, thereafter decided likewise. *Page 382
In this situation, the income tax law was passed at the general election in 1932, as initiative measure No. 69. Confessedly, the act upon its face fixes rates of taxation that become greater with the increase of the amount of taxable income. The amendment to the constitution provides, however, "that all taxes shall be uniform upon the same class of property," etc. This principle of uniformity in taxation has been preserved at all times in our constitution, as appears from article VII, § 2, of the constitution, and from the fourteenth amendment. It might be reasonable, under the amendment, to provide that, for taxation purposes, horses be put in a class and bear a rate of taxation different from that of lands devoted to reforestation; but not so with a band of one thousand horses compared with another band of two thousand horses, nor one acre of land devoted to reforestation compared with other two acres of land devoted to reforestation.
The constitutional amendment speaks of the same class ofproperty. One who pays a tax on a $2,000 taxable income pays a tax on precisely the same class of property as one who pays a tax on a $1,000 taxable income, and to tax the one at a progressively higher rate than the other positively violates the other clause of the amendment, that all taxes shall be uniform upon the same class of property.
The fact that some of the terms of the act prescribe personal penalties, if the owner of the property fails to perform his duties, does not, in my opinion, convert the act into one that operates in personam. The act is essentially one for the taxation of property for public revenue purposes. Section 1 in plain language says: "There shall be assessed, levied, collectedand paid annually a tax on all net income," etc.
The provisions of the act in question are prohibited *Page 383 by the limitations contained in the fourteenth amendment to the state constitution.
MILLARD, J., concurs with MITCHELL, J.