Pingree v. Auditor General

Montgomery, J.

I concur in the opinion of Mr. Justice Hooker. I think it cannot be maintained that a tax on property based on assessment is a specific tax. The definition of “specific tax” stated by Judge Cooley is a tax which “imposes a specific sum by the head or number, or by some standard of weight or measurement, and which requires no assessment beyond a listing and classi*105fication of the subjects to be taxed.” Cooley, Tax’n (2d Ed.), 238. It is true, the capital stock of a corporation may be made the basis of the levy of a specific tax or franchise tax, but this is a method of measuring the tax without resort to assessment. In Burroughs, Tax’n, 168, referring to the federal decisions on the subject, the author states:

“When the rax is on the nominal capital of a bank, without regárd to the value of the property of which it is composed, such a tax is annexed to the franchise as a royalty for the grant, and is a tax on the franchise, and not on the property.”

But the Supreme Court of the United States, in Adams. Express Co. v. Ohio State Auditor, 165 U. S. 195, 226, in speaking of a tax imposed under the Nichols law of Ohio, which is, in this respect, similar to the statute involved in this case, say, “The taxation is essentially a property tax.” So, in State v. Jones, 51 Ohio St. 492, the court labored to show that the tax under the Nichols law was a property tax; i. e., that the good will enhanced the value of the taxable property, and might be considered, in assessing the value of the property, as property. It was said:

“ If, by reason of the good will of the concern, or the skill, experience, and energy with which its business is conducted, the market value of the capital stock is largely increased, whereby the value of the tangible property of the corporation, considered as an entire plant, acquires a greater market value than it otherwise would have had, it cannot properly be said not to be its true value in money, within the meaning of the constitution, because good will and other elements indirectly entered into its value.”

The authoritative decisions under the Nichols law (i. e., that of the Ohio supreme court and that of the federal supreme court) both rest upon the ground that the tax imposed was a tax on property, and not a tax on fran: chise or privilege.

The distinction between a franchise tax and a tax *106on property is well illustrated by two decisions of the federal supreme court. In People of New York v. Commissioners of Taxes, 2 Black, 620, it was held that, as a tax on the national securities cannot be levied by a state or local municipality, the same result could not be reached by taxing the value of the stock of a bank which was wholly invested in such securities. But in the case of Provident Institution v. Massachusetts, 6 Wall. 611, the court had under consideration the statute of Massachusetts which provides for a 'tax on the average amount of deposits standing on the books of the institution. The court held this a tax on the franchise, and not a property tax. Referring to the case of People of New York v. Commissioners of Taxes, the court said:

‘ ‘ The statement of that case shows that the assessment was made under a then recent law of the State, which required the tax to be imposed upon a valuation of the stock, like the property of individual citizens, and not, as formerly, on the amount of the nominal capital, without regard to the depreciation. The prior system of taxation in that State was different, and this court admits that, according to that system, it was immaterial as to the character or description of the property which constituted the capital, as the tax was one annexed to the franchise as a royalty for the grant, .and was imposed wholly irrespective of the character of the property.”

In Hamilton Manfg. Co. v. Massachusetts, 6 Wall. 632, the court went still further. There the tax was assessed upon the excess of the market value of the capital stock over the assessed value of the real estate and machinery of the corporation. The court held this to be a tax on franchise, and not on property. So, in the same case, the supreme judicial court of Massachusetts had reached the same result. The reasoning by which the result was reached is shown by reference to the opinion of the court in Com. v. Hamilton Manfg. Co., 12 Allen, 302. The court say:

“The statute does not require that there should be any return made of the personal property held by corporations *107to the board of commissioners who are to fix the amount on which the assessment is to be reckoned; nor is there any valuation or estimate of such property to be made in order to arrive at the amount of the excise or duty. ”

In the same opinion the court say:

“It certainly cannot be contended that the legislature can legitimately impose a tax on property in the name or under the guise of levying an excise or duty. Such legislation would be a palpable evasion of a distinct and clearly-defined constitutional restriction, and would substitute an unequal and arbitrary system of taxation upon property for one which was intended by the constitution to be equal and proportional.”

In no case to which my attention has been called has a tax imposed on the property of a corporation at a valuation fixed by assessors been treated as a tax on a franchise, as distinguished from a tax on property. The case last cited comes the nearest to so holding of any, and ■ this makes the market value of the shares the basis, and distinctly negatives the right to so treat a valuation fixed by assessment. The case of Bailey v. Fuqua, 24 Miss. 497, distinguishes between a specific and an ad valorem tax. The test adopted is whether the tax is assessed on value, and, as the. statute under consideration so provided by clear implication, it was held not to provide a specific tax. See, also, City of Brookfield v. Tooey, 141 Mo. 619.

It is contended, however, that the specific taxes provided for in our Constitution may be taxes on property, and that this implies that they may be assessed upon value. I do not think the latter proposition is necessarily a sound deduction from the former. The exception from the rule of uniformity provided by section 11, of property paying specific taxes, does necessarily imply that specific taxes may, in one sense, be laid upon property. In one sense, specific taxes are laid on property when the capital stock of the corporation, or its gross earnings, is made the basis for a levy; and yet, as we have seen, taxes so levied are specific taxes, or taxeá on the franchise, within accepted definitions.

*108The argument made that the statutes in force when the Constitution was adopted, and which were continued in force, provided for taxes on property which were by the Constitution treated as specific taxes, is sufficiently answered by my Brother Hooker. As pointed out by him, none of these acts provided for an assessment on the property • according to value, but the rate was fixed and calculated on the basis of capital invested, without regard to depreciation.

Is the tax imposed uniform with that imposed,upon other property bearing the same relation to the State ? Treating the tax imposed as one on property, based on valuation, and not as a specific tax, the corporations and associations mentioned in this act can no more be discriminated against, as to the assessments madé or taxes exacted, than can merchants, manufacturers, or farmers. The tax levied in this act is the average rate of all taxes levied by the State, counties, and municipalities throughout the State. A telephone company in Tecumseh, where the local taxation added to the state tax may not exceed l£ per cent., may, under this act, be required to pay 2£ per cent. Under the Atkinson bill, a railroad in the Northern Peninsula is required to pay the same rate as one having a terminus in Detroit, and extending through territory in which local improvements are expensive, and schools are maintained at great cost.

Grant, C. J., Moore and Long, JJ., concurred with Montgomery, J.