Beals v. State

Winslow, C. J.

The plaintiff, having paid a large inheritance tax under protest, presented her claim to the legislature for a refund of the tax on the ground that the inheritance tax law was unconstitutional. The claim was rejected, and she now brings action in this court under the terms of sec. 3200, Stats. (1898), to recover the tax so paid, and the state demurs to her complaint. At the threshold of the case the state claims that the order of the county court of Milwaukee county fixing the amount of the tax and assessing the same against the estate is res adjudicata on the question and that the plaintiff *552should have appealed directly therefrom, and hence cannot jirosecute this independent action. We do not regard this point as well taken. The inheritance tax law is a law providing’ for the levying of a state tax. For very palpable reasons of convenience some of the matters concerning the administration of the law are committed to the county court in which the estate is being administered. Among these matters are the determining of the value of the estate and the assessment of the tax thereon. While these matters are closely connected with the settlement of the estate and the court acts upon them in a judicial manner, and thus it may properly be said, as held in Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627, that the acts are so far judicial in their nature that their performance may properly be committed to the county court, still it seems plain that both of these acts are really but steps in the enforcement of a tax law of the state rather than judgments in judicial controversies. . Hence we conclude that the preliminary objection must be overruled.

Upon the merits of the case the only question is as to the constitutionality of the inheritance tax law (ch. 44, Laws of 1903, as amended by ch. 249, Laws of 1903). This question was presented to the court in very full and able arguments in the case of Nunnemacher v. State, 129 Wis. 190, 108 N. W. 627. The case was given long and careful consideration in this court, and the present case might perhaps be now decided by simply referring to the Nunnemacher Case and applying the doctrine of stare decisis. However, owing to the fact that several new and interesting arguments are now presented, and in deference to the ability and earnestness of the counsel who have presented the present case for the plaintiff, we have deemed that it was our duty to thoroughly re-examine the question and review the former holding carefully in order to correct the ruling then made, if convinced that it was erroneous.

Inheritance taxation was held to be constitutional in the *553Nrmnemacher Case on. the ground that it is excise taxation levied on the transfer of property and not on the property itself, ’and hence not subject to the rule of uniformity as applied to taxation of property, but subject alone to the general rule of uniformity in legislation, namely, the rule that there must not be unjust discrimination or purely arbitrary classification, or, in other words, that the law must operate alike on all persons similarly situated.

The first argument made in the present case is one not made in the former case, and is in effect that, while the law (ch. 44, Laws of 1903) in sec. 2 provides for the taxation of the transfer of estates not exceeding in value $25,000, it provides in sec. 3 in effect that the transfer of the first $25,000 in an estate exceeding that sum shall not be taxed, and that only the transfer of the amount exceeding $25,000 shall be subject to taxation. If this be true, the law is manifestly bad under the ruling in the case of Black v. State, 113 Wis. 205, 89 N. W. 522, because it discriminates unjustly between persons in the same situation. The law provides in sec. 2 that when the property or interest transferred exceeds in value the exemption allowed by the law, but does not exceed in value $25,000, the tax imposed shall be according to a table of rates following, which are called the primary rates, and range from one to five per cent, according to the nearness of relationship of the beneficiary to the decedent. In sec. 3 it is provided that, “when the amount of the clear value of such property or interest exceeds $25,000, the rates upon such excess shall be” according to a certain table of rates progressive in their nature as the amount of the property increases. Then follows a table of exemptions applicable to all estates. It is very plain that, if secs. 2 and 3 be considered alone, there is a hiatus!. By the words used, transfers of property not exceeding $25,000 in value are taxed, while no specific provision appears for taxation of the transfer of the first $25,000 of an estate exceeding that sum. Exact construction of the *554language of the two sections can lead to no other result. There are, however, other provisions of the law which deserve and must receive consideration before a construction so manifestly unintended should be adopted. If, by the express language of other provisions, it conclusively appears that the intent of the legislature was to tax the first $25,000 (except exemptions) in all estates, great or small, and that the apparent hiatus in secs. 2 and 3 is the result merely of an inaccurate and careless use of language, then the court will be justified in construing the law as the legislature intended it, notwithstanding the lapse in secs. 2 and 3.

We think the language of other sections of the act actually forbids such a construction of secs. 2 and 3 as the plaintiff contends for. It is very significant that sec. 4, which provides for exemptions, is a general section fixing the exemptions to be allowed in all estates, both great and small, and is intended to cover the whole subject of exemptions. It is manifestly unreasonable to suppose that the legislature imagined, when they provided this careful and complete code of exemptions, that they had already made an enormous exemption of $25,000 in favor of all beneficiaries who were fortunate enough to receive more than that sum. But the first section of the act is quite conclusive. This section is the section which imposes the tax and enumerates the transfers which come within the law. Leaving out matters immaterial here, it provides that “a tax shall be and is hereby imposed upon any transfer of any property, real, personal or mixed, or any interest therein, ... in the following cases: [here follow five clauses defining the transfers which are to be subject to the tax.] The tax so imposed shall be upon the clear market value of such property at the rates hereinafter prescribed, and only upon the excess of the exemptions hereinafter granted.” No. warrant can here be found for leaving out any transfer from the operation of the tax, whether large or small, except only transfers of property thereinafter spe*555cifically exempted. The tax is imposed upon any transfer of' any property except the exemptions, and this must be held to be controlling. After so sweeping a declaration of the purpose of the law, it would take something more than a technical hiatus in the details of the act to take property out of' the provisions of that section which is evidently intended to-be the effectual and potent section. This construction makes-the law reasonable and constitutional and relieves the legislature of any charge of inconsistency or favoritism, and we have-no hesitation in adopting it.

Another new argument is made in the present case to this-effect: It is said that, because this court held in the Nunnemacher Case that the right to inherit or devise property was-a natural right which could not be entirely abrogated by the legislature, therefore it was a property right, and hence an-inheritance tax must logically be held to be a tax upon a property right and subject to the provision that it must be absolutely uniform. It is admitted that the universal current of authority holds that inheritance taxes are not taxes levied upon property, though their amount may be measured by the value of the property involved, hut are excise taxes levied upon the transfer of property, or, as it is sometimes said, upon the transaction. But it is said (as the fact is)that the decisions so holding have all been rendered by courts which hold that the right to receive property by inheritance or will is the creation of the legislature and may be totally abrogated at will, and as this court holds that these rights are-natural rights, not subject to abrogation by the legislature, the principle cannot logically apply.

The conclusion does not follow from the premises. Taxes-frequently are levied upon transactions or occupations which are matters' of inherent and natural right, as well as upon transactions and occupations which are made lawful or possible only by virtue of statutory law. In other words, the-legislature is not limited to the levying of excise taxes upon *556privileges, transactions, or occupations which, it alone authorizes and which it can entirely abolish. Mr. Cooley says (2 ■Cooley, Taxation, 3d ed. 1091) : “What is true of property is true of privileges and occupations also. The state may tax ■all, or it may select for taxation certain classes and leave others untaxed.” In the absence of special constitutional restrictions, the only limitations are that there should be no ■unjust discrimination or arbitrary classification, and, in case ■of the exercise of inherent rights, that taxation shall be reasonable, and shall not be so great as to result in a practical taking away of the right.

The two arguments which we have treated are practically the only arguments advanced in the present case which were not advanced and fully considered in the Nunnemacher Case. 'Our conclusion being that they cannot prevail, we have left •only a reconsideration of the points made in the Nunnemacher •Case and now reiterated in the present case. It seems that it would avail little to again traverse the ground gone over in that case. The justices who concurred in the decision of that case, after reconsiderihg the whole subject, are of the opinion that the decision was right upon all points involved. So far as the writer is concerned, he feels that it would be impossible for him to state the positions taken by the court any more •clearly than they are there stated. If that opinion be not a satisfactory and fairly logical meeting of the contentions made against the law, the writer feels that he would not be .able to write one now.

The points there decided and now reaffirmed may be briefly recapitulated thus:

(1) The right to receive property by inheritance or will in an inherent right, subject to reasonable regulation and taxation, but not to abrogation by the legislature.
(2) Sec. 1, art. VIII, of our constitution does not limit taxation to property only, and hence the legislature may levy *557excise taxes upon, privileges, occupations, business transfers, or transactions.
(3) As to the taxation of property, there can be no classification which interferes with substantial uniformity of rate based upon value.
(4) As to excise taxation, there may be proper classification and different rates applied to the different classes, and the term “uniformity of taxation” means simply taxation which acts alike on all persons similarly situated.
(5) The inheritance tax levied by ch. 44, Laws of 1903, is-not a tax upon property or property rights in any sense, but. purely an excise tax levied upon the “transfer” or transaction, and merely measured in amount by the amount of property transferred.
(6) Neither the classification between relatives in various degrees and strangers nor the progressive features of the law violate the true principles of classification, and as excise taxation is only subject to'the general principle that all persons-similarly circumstanced shall be treated alike, and not to the-rule of uniformity as applied to property taxation, the law does not violate the constitutional mandate in this respect.

It follows that the general demurrer to the complaint on the ground that it does not state a cause of action must be-sustained, and, it being apparent that no amendment can be made which will remedy the defect, judgment for the defendant dismissing the action, with costs, will be entered.

. By the Court. — It is so ordered