Sproul v. State Tax Commission

SLOAN, J.,

specially concurring.

I concur in the result of the majority and have no vigorous quarrel with the means of reaching that result. This case was heard in Pendleton in October of 1962. In the meantime the parties were aslced for additional briefs in answer to specific questions asked by this court. It is apparent, therefore, that decision in this case has been difficult to reach. Justice Denecke has performed a yeoman’s service by his extensive work which has provided an answer to the case satisfactory to the majority.

The obstacle course that has delayed decision has been the effort to test the tax by a particular label. That is: Is the tax a property tax, a police power tax, a privilege tax or what? This attempt to identify the tax by a label can be attributed to the influence of Cooley on Taxation; the last edition of which was published in 1924 and the earlier work by Cooley himself is almost a century old. It appears to me that this kind of testing is no longer feasible. The ever more diligent search by local and state governments to find new forms of taxation, will shortly, if not now, compel this court to examine the legislative power as limited by the Federal and -State Constitutions, particularly the latter. It is my view that we should now meet the problem head on and not lend further complexity to the ultimate decision by straining the limits of the police power. In this instance, the sole purpose of the -tax was to raise revenue. The regulatory features of the Forestry Code are distinct and separate and -bear little relationship to the taxing *604acts. The tax should be treated as a means of raising revenue.

This opinion may be of assistance to no one. It is hoped, however, that as these problems multiply some of the discussion that follows may provide some guideposts.

First concern should be given to the declaration of legislative policy found in the questioned statutes. This policy is particularly important for classification of the lands and of the methods of taxation in respect to forest lands.

This declaration of policy and the basis for classification are found in ORS 477.005:

“(1) The preservation of the forests and the conservation of the forest resources through the prevention and suppression of forest fires hereby are declared to be the public policy of the State of Oregon.
“(2) In order to accomplish the purposes of the policy stated in this section:
“(a) The need for a complete and coordinated fire protection system is acknowledged; and
“(b) This chapter shall include all persons and activities designated in this chapter, irrespective as to whether or not such person or activity is concerned with the harvesting, cutting, removal or marketing of trees, timber or other forest products.”

and ORS 321.011:

“The prevention and suppression of forest fires on forest lands for the preservation of forest resources and the continuous growth of timber on lands suitable therefor are declared to be the public policy of the State of Oregon. The Legislative Assembly recognizes that the forested areas situ*605ated within eastern Oregon predominate in Ponderosa pine trees and associated species, and that the forested areas situated within western Oregon predominate in Douglas fir and associated species; that because of this difference in species, different forest fire protection problems exist in eastern and western Oregon, and different logging conditions and circumstances in each necessitate varied forest practices in the disposal of forest slashings and debris; and that, therefore, in order to give recognition to such differences and their effect on the accomplishment of the public policy stated in this section, certain classifications of forest lands within the State of Oregon are established by ORS 821.005 to 321.255.

Other sections directly relating to the taxing sections of the Act are referred to in the majority opinion. As the majority opinion emphasizes, these sections of the Code are confusing. However, it seems clear that the whole of the Act gives an intrinsic statutory meaning to the words “forest lands,» a meaning unrelated to any other literal connotation of the words. This becomes important when the legislative power to set apart and specially tax such lands is considered.

Next in order are the Oregon constitutional limitations on the legislative taxing power. In 1917 the people of Oregon amended the constitutional limitations. These amendments substantially increased that power. The pertinent sections before and after amendment read:

“No tax or duty shall be imposed without the consent of the people or their representatives in the legislative assembly; and all taxation shall be equal and uniform.» Article 1, § 32.

That section was amended in 1917 so as to read:

“No tax or duty shall be imposed without the consent of the people or their representatives in *606the Legislative Assembly; and all taxation shall be uniform on the same class of subjects within the territorial limits of the authority levying the tax.”

Article 9, § 1 before the 1917 amendment read:

“The legislative assembly shall provide by law for 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, * *

After the 1917 amendment the section now provides:

“The Legislative Assembly shall, and the people through the initiative may, provide by law uniform rules of assessment and taxation. All taxes shall be levied and collected under general laws operating uniformily throughout the State.”

The permissive limits of taxation wrought 'by these amendments were comprehensively analyzed in Standard Lbr. Co. v. Pierce et al, 1924, 112 Or 314, 228 P 812. The full significance of the opinion can only be gained by reference to it. Extracts from the opinion are pertinent. These statements were made as to the purpose and intent of the amendments, at pages 333 and 335:

“The state Constitution as originally adopted and until changed by the amendments above set out required that all taxation should be uniform and equal and enjoined upon the legislative assembly, the duty to provide for a uniform equal rate of assessment and taxation. To that end the legislative assembly was commanded to ‘prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal.’ These constitutional mandates confined the legislative assembly in the taxation of property, to the adoption of a proportional tax; the percentage or *607rate of levy of the tax was required to be absolutely equal upon all property of whatever kind, and applied to all such property upon a relatively equal assessed valuation thereof, and while the power of the legislature to divide property selected for taxation, into classes was not restrained by these limitations, when property was once selected, that property was required to be valued and taxed at equal rates — that is, at the rates of assessment and taxation applicable to all other property: * * *****
“Notwithstanding, the state Constitution in its original form did not prevent the imposition of taxes of the character last mentioned, the conviction became general, that the limitations of the Constitution which confined the legislature in the taxation of property to a proportional tax thereon were no longer adapted to the needs of the state. Demand was made for removal of those constitutional restrictions, which prevented the classification of property in respect to its nature, condition or class, and the imposition thereon of different rates of taxation upon different classes of property; and which excluded considerations of faculty or ability to pay, equality of sacrifice or governmental advantages provided to the taxpayer; See Voters’ Pamphlet, Special Election, June 4, 1917, p. 14; Cooley on Taxation (4 ed.) '* *

The Standard Lbr. Co. case has other significance. It held that the Oregon Constitutional restrictions in respect to equality and uniformity, after the 1917 amendments, were the same as those imposed on the states by the equal protection clause of § 1 of the 14th Amendment to the Federal Constitution. 112 Or at 333; see also In Re Estate of Heck, 1926, 120 Or 80, 86, 250 P 735, 736. The importance of that determination can be realized when we examine the decisions of the Supreme Court of the United States in respect *608to the 14th Amendment as those decisions relate to problems presented by this case.

From that examination we learn that the limitations of the 14th Amendment upon the states’ power to classify and then to tax, prevents only that which is manifestly arbitrary and capricious. In decisions particularly pertinent to this ease, the court has held that the “* * * XIVth Amendment was not intended to compel the states to adopt an iron rule of equal taxation.” Bell’s Gap Railroad Company v. Pennsylvania, 1890, 134 US 232, 237, 10 S Ct 533, 535, 33 L Ed 892, 895.

“In its exercise [of governmental power] in taxation, we have said, it is competent for a State to exempt certain kinds of property and tax others, the restraints upon it only being against ‘clear and hostile discriminations against particular persons and classes.’ Discriminations merely are not inhibited, for, it was recognized, that there are ‘discriminations which the best interest of society require.’ ” * * *
* * * “In other cases it is said that facts which can be reasonably conceived of as having existed when the law was enacted will be assumed to justify it.” Heisler v. Thomas Colliery Co., 1922, 260 US 245, 255, 256, 43 S Ct 83, 84, 67 L Ed 237, 241.

In Allied Stores of Ohio v. Bowers, 1959, 358 US 522, 79 S Ct 437, 3 L Ed2d 480, many of the earlier decisions are cited and the powers of the state legislatures reiterated and emphasized. From that particular decision we learn that the State “* * * is not required to resort to close distinctions or to maintain a precise, scientific uniformity with reference to composition, use or value.” 358 US at 527. The Allied Stores opinion gives equal importance to the validity of a tax imposed *609in furtherance of a legitimate state policy if any “state of fact reasonably can be conceived that would sustain it.” 358 US at 528.

However helpful these, and other, decisions of the Supreme Court may be in support of the broad powers of the state to tax we need not look beyond the decisions of this court to ascertain the power of the legislature to classify the subject matters of taxation. This power is nowhere better expressed than in Standard Lbr. Co., 112 Or at 328:

“* * * The decisions emphasized the principle that the latitude of discretion is notably wide in the classification of subjects for purposes of taxation, and declare that the state has the right to select the differences upon which the classification shall be based and that such differences need not be clear and conspicuous. Any classification they say is permissible which has a reasonable relation to some permitted end of governmental action, and it is not necessary that the basis of the classification must be deducible from the nature of the things classified ; it is enough if the classification is reasonably founded within the purpose and policy of taxation, and if some real and substantial distinction is present a classification based thereon is reasonable if made with respect to the kind of property or the amount or value of the property or the character of the taxpayers subjected to the tax.”

And see the valuable contribution to the subject of classification found in Etter, Municipal Tax Differentials, 1957, 37 Ore L Rev 1, beginning at page 39. One of the bases for valid classification expressed by Mr. Etter has particular application to this case:

“Repeatedly persons and property have been classified for purposes of taxation on the basis of public policy. ‘A discrimination is not arbitrary, of course, where based on sound reasons of *610public policy.’* In Connecticut, for example, a tax classification based on tbe public policy of encouraging the development of forests has been upheld.* In Iowa, a classification for the purpose of encouraging agriculture has been upheld.* In Minnesota, a classification for the purpose of encouraging resident home ownership has been upheld.*” 87 Ore L Rev 42. (Footnotes omitted)

Decision in this case is also aided by reference to another authority that is of more than usual persuasion in attempting to define the limits of the taxing power of the Oregon Assembly. That is the work of Newhouse, Constitutional Uniformity & Equality in State Taxation, 1959. The latter is a study of the provisions of each of the state constitutions in respect to the uniformity problems in taxation and of the decisions of each of the state courts interpreting these constitutional requirements. Professor Newhouse not only considers the nature of the constitutional requirements as interpreted by court decision in each state but also makes an exhaustive comparative analysis of the differing powers to tax thereby found to repose in the several state legislatures. There is also an extensive study of the judicial decisions as they have tested the acts of the states against the 14th Amendment. In respect to the taxing power of the legislature granted by the Oregon Constitution, as interpreted by this court, in comparison to the power granted the legislature of other states, Professor Newhouse has reached these conclusions:

“* * * For example, in Minnesota, Oregon, and Pennsylvania, the courts have permitted the legislatures the greatest degree of discretion for the purpose of classifying property for effective rates, including the subclassification of real property as well as other extensive classifications.” Newhouse, *611Constitutional Uniformity and Equality in State Taxation, (1959), at page 553.
“* * * The remaining four states in this group (Delaware, Minnesota, Oklahoma, and Oregon) have no ad valorem requirement.* In the constitutions of those states there are no supplementary provisions. It is also pertinent to note that they are among the most liberal of the states in discretion allowed the respective legislatures in taxation of property.” Newhouse, Constitutional Uniformity and Equality in State Taxation, (1959), at page 673. (Footnote omitted)

It is realized that these conclusions carry persuasion only. But a conclusion based upon so complete a study, one unequaled in modern times, and based upon the comparative analysis made, must be given a preferred deference.

Thus far it appears that the lands classified as being subject to the challenged tax have this in common: They are lands which contain “* * * forested land, woodland, brushland, cutover land or clearing * * *” as distinguished from lands given over to cultivation or other non-forested lands. And they are lands “* * * which, during any time of the year, contain enough inflammable forest growth or debris to constitute a fire hazard.” Further, they are forest lands in Eastern Oregon in contrast to forest lands in Western Oregon which have been separately classified and differently taxed. The lands brought within this classification will not be, in many instances, readily identifiable and some inequality is likely to occur. That does not make the classification bad. “We must consider its general application to the classes affected, and not to certain individuals belonging to such classes. Exact equality is not possible. Practical equality is constitutional equality. The human mind has not yet *612been able to devise any scheme of taxation which will operate with unerring certainty and equality to all situations that may arise.” State v. Kozer, 1926, 116 Or 581, 591, 242 P 621, 624. And see Allied Stores of Ohio v. Bowers, 358 US at 527. The policy reasons for the classification are apparent and the need for fire protection cannot be challenged. The classification made by the statutes meets the tests of reasonableness.

Having made a reasonable classification of forest lands, which for the purposes intended had characteristics in common, was it constitutionally bad for the legislature to tax these forest lands without regard to the value of the land? I think not. In reaching that conclusion it is not necessary to now decide if the legislature could tax land for any purpose without respect to value. But the purpose here was fire protection and fire protection does not necessarily have any relationship to the value of the land. Land of little value could, at any given time, provide a greater fire hazard than land of greater value. Neither is the cost of fighting fire correlated to the value of the land. It cannot be said that the tax is excessive or confiscatory. If that were so it would present a different case. There is no hostile discrimination. These are some of the conceivable causes that could have prompted the legislature to adopt this statute. The causes are reasonable. They serve the policy expressed and intended. Pacific Express Co. v. Seibert, 1892, 142 US 339, 12 S Ct 250, 35 L Ed 1035; Allied Stores of Ohio v. Bowers, 358 US 522. The legislature has made valid provisions to solve a problem not easy of solution. The wisdom of the solution is not for a court to judge. Walter v. City of St. Louis, 1954, 347 US 231, 237, 74 S Ct 505, 98 L Ed 660. It does not violate the *613cited sections of the constitution and that is the limit of our inquiry.

The parties and the majority have attempted to place this tax in a particular category of taxation and to then test it as a property tax, or a privilege tax, or a regulatory tax or as a special assessment. The legislature is not constitutionally inhibited from adopting a tax that does not fall within the definition of any of the more common methods of exacting taxes. This tax has some of the characteristics of each of the types of taxes mentioned.

I believe the tax more nearly approaches a property tax than any of the other forms of taxation mentioned. And, for the reasons before stated, if it is treated as a property tax it does not conflict with the constitutional limitations.