Associated Industries of Missouri v. State Tax Commission of Missouri

RENDLEN, Judge,

dissenting.

I respectfully dissent.

By the terms of §§ 137.016.1, RSMo Cum.Supp.1984, and 137.115.5, RSMo Supp. 1985, real property improved by a residential structure containing not more than four dwelling units is “residential property” and is assessed at nineteen percent of its true value, while real property improved by a residential structure containing five or more dwelling units is within the subclass of “utility, industrial, commercial, and railroad property” and is assessed at thirty-two percent of its true value. The legislature is empowered to define the three subclasses of real property, (1) “residential property,” (2) “agricultural and horticultural property,” and (3) “utility, industrial, commercial, railroad, and all other property not included in subclasses (1) and (2).” Mo. Const, art. X, § 4(b). However, the legislature’s discretion to so define is not unfettered for there are constitutional limitations upon the legislature’s authority to classify property for purposes of taxation.

For the reasons stated by Judge Donnelly in his dissenting opinion, Mo. Const, art. X, §§ 4(a) and 4(b) must be read together. Thus through its efforts to “define” property in the three subclasses of real property, Mo. Const, art. X, § 4(b), the legislature must classify property “based solely on the nature and characteristics of the property, and not on the nature, residence or business of the owner, or the amount owned.” Mo. Const, art. X, § 4(a). The challenged classifications fail this requirement. Additionally, § 137.016.1(1), in distinguishing residential structures based upon whether they contain “not more than four dwelling units,” is further division in direct contradiction to the constitutional prohibition, Mo. *925Const, art. X, § 4(b), that “subclasses (1), (2), and (3) shall not be further divided.”

Furthermore, there appears no rational basis for the distinction for tax purposes between residential structures containing four dwelling units and those containing five, and it therefore violates equal protection and due process, U.S. Const, amend. XIY, and the uniformity clause of Mo. Const, art. X, § 3. The “uniformity clause” of Mo. Const, art. X, § 3, requires that classification of property for purposes of taxation not be “palpably arbitrary.” State ex rel. Transport Manufacturing & Equipment Co. v. Bates, 359 Mo. 1002, 224 S.W.2d 996, 1000 (banc 1949).

[W]hile the General Assembly may enact statutes applicable to and classifying certain persons or property for taxation purposes yet such classification must include all persons or objects naturally falling within the class. Constitutional class taxation must include within the established class all who belong in it and must exclude all who do not belong in it. All in each natural class must be taxed or exempted alike. A natural class may not be split.

Id. Similarly, due process requires that taxes not be based upon a “palpably arbitrary” plan, Bridges Asphalt Co. v. Jacobsmeyer, 346 Mo. 609, 142 S.W.2d 641, 643 (1940), and equal protection demands that classifications made for purposes of taxation have a “rational basis” and not be “palpably arbitrary.” Allied Stores, Inc. v. Bowers, 358 U.S. 522, 527, 79 S.Ct. 437, 441, 3 L.Ed.2d 480 (1959).

As conceded by the principal opinion, we previously have struck down classifications for which there were no rational bases. In State ex rel. Transport Manufacturing & Equipment Co. v. Bates, 359 Mo. 1002, 224 S.W.2d 996, 1000-1001, we held unconstitutional a motor vehicle use tax levied upon those with a seating capacity of not more than nine passengers but not upon those having a seating capacity of ten or more, concluding that the distinction was “without reason or rational basis.” Similarly, in Airway Drive-In Theatre Co. v. City of St. Ann, 354 S.W.2d 858, 860-62 (Mo. banc 1962), we held unconstitutional an annual license tax of $1.50 per speaker levied upon drive-in theaters where indoor theaters were taxed at the flat rate of $50 per year, concluding that the distinction was “arbitrary, unreasonable and without substantial justification.” In State ex rel. Garth v. Switzler, 143 Mo. 287, 45 S.W. 245, 252-54 (1898), this Court held unconstitutional a law intending to impose a “collateral succession tax” of 5% on property valued up to $10,000 but an additional 7½% tax on property in excess of $10,000, concluding such to be “an arbitrary classification, without rhyme or reason.” Additionally, in City of St. Louis v. Spiegel, 75 Mo. 145,147 (1881), we held unconstitutionally discriminatory a “meat-shop ordinance” imposing a $25 tax in one part of the city and a $100 tax in another part. Similarly in the case sub judice, I discern no rational basis for taxing differently buildings with not more than four dwelling units and those with five or more. Such classification for tax purposes is “palpably arbitrary.” The vague rationales hypothesized by the defendants and the principal opinion for classifying a building of four units as “residential” property but one of five units as “commercial” leave me wholly unpersuaded. The property, whether four units or five, falls within the same natural class.

The numerical classifications sustained in the cases relied upon by the principal opinion, Collins v. Director of Revenue, 691 S.W.2d 246 (Mo. banc 1985); Crane v. Riehn, 568 S.W.2d 525 (Mo. banc 1978); Bopp v. Spainhower, 519 S.W.2d 281 (Mo. banc 1975), are readily distinguishable from the present. In Collins, 691 S.W.2d at 249-50, appellants challenged the statutory scheme for the summary suspension of driving privileges as violative of equal protection, contending that the separate classification for persons with a blood alcohol content of .13 percent or greater was arbitrary and capricious in view of the legislative presumption that persons with a blood alcohol content of at least .10 percent are intoxicated. We rejected the claim, concluding that, because it is "clear that *926the proportion of people whose driving ability is impaired and the extent of that impairment rises with increasing blood-alcohol levels,” “there exists some ‘reasonable basis’ for the legislative classification.” Id. at 250. However it is not at all so clear that multi-unit dwelling structures transform from residential to commercial property as the number of units increases from four to five. In Crane, 568 S.W.2d at 527-30, we rejected plaintiffs’ equal protection challenge to a statute requiring the spouse and minor children of a decedent survived by a parent to bring a wrongful death action within one year of decedent’s death even though the spouse and minor children of a decedent not survived by a parent had two years in which to bring a wrongful death action. But in Crane, unlike in the present case, there was a rational basis for treating the two classes differently since where decedent was survived by parent as well as by spouse or minor children the claim passed to the parents of the decedent if the spouse and minor children failed to sue within the one-year period. Id. Finally, in Bopp, 519 S.W.2d at 286-89, we rejected plaintiff’s equal protection challenge to a statute allowing a city not within a county, a first-class county operating under charter and not containing a city or part of a city of over 400,000 inhabitants, and any city of 400,000 inhabitants wholly or partially within a first-class county to levy a sales tax for transportation purposes without voter approval, though any other city with a population of 500 or more could levy a tax only upon voter approval. There, unlike here, a rational basis existed for the classification, i.e., the more acute public transportation problems found in large metropolitan areas. Id.

For the reasons stated, I would affirm the trial court’s judgment.