Collins v. Humphrey, 286.

• Decision Date: 21 April 1930
• Docket Number: No. 286.,286.
• Citation: 27 S.W.2d 102,181 Ark. 609
• Parties: COLLINS v. HUMPHREY, Auditor, et al.
• Court: Arkansas Supreme Court

Page 102

27 S.W.2d 102

181 Ark. 609

COLLINS v. HUMPHREY, Auditor, et al.

No. 286.

Supreme Court of Arkansas.

April 21, 1930.

Appeal from Pulaski Chancery Court; F. H. Dodge, Chancellor.

Suit by Oliver W. Collins against J. Oscar Humphrey, Auditor, and another. From a decree dismissing the complaint, plaintiff appeals.

Affirmed.

Oliver W. Collins, a citizen and taxpayer of Columbia county, brought this suit in equity against J. Oscar Humphrey, as auditor, and Ralph Koonce, as treasurer of the state of Arkansas, to enjoin them from issuing and paying any warrants issued pursuant to the appropriations authorized by Acts 180, 266, 267, and 364, passed by the Legislature of 1929.

According to the allegations of the complaint, the Legislature of 1929 passed Act 118, known as Income Tax Act of 1929, "providing for the Levying, Collecting and Paying of a Tax on Incomes." Acts of 1929, vol. 1, p. 573. The act was approved March 9, 1929. Section 4 provides that such tax shall first be assessed, levied, collected, and paid in the year 1929, with respect to the net income received during the calendar year of 1928. Section 22 provides that all returns for the first taxable year under the act shall be filed on or before the 15th day of August, 1929. Section 24 provides for the time and payment of the tax. Section 41 provides for the distribution of the tax. It provides that the state treasurer shall credit the first $500,000 annually to the charities fund, the next $700,000 annually to the common school equalization fund, and all of the remainder to a special fund to be used solely for the purpose of reducing the state tax on property.

At the same session of the Legislature, act 180 was passed, which was "An Act to Provide Adequate Buildings for the Hospital for Nervous Diseases and for the Tuberculosis Sanitarium, the Issuance of State Bonds, and for Other Purposes." This act was approved March 22, 1929. Acts of 1929, vol. 2, p. 884. Section 11 provides for annual payments from revenue under act 118 of 1929; remainder to go to reduce the state property tax. Section 11 of the act reads in part as follows: "To provide for the payment of said `State Construction Bonds' the first Forty Thousand Dollars ($40,000.00) collected in 1929, and the first One Hundred Sixty Five Thousand Dollars ($165,000.00) in the year 1930, and the first Two Hundred and Seventy-five Thousand Dollars ($275,000.00) annually thereafter collected under Act No. 118 of the Acts of the General Assembly of the State of Arkansas of the year 1929, and allotted to the `Charities Fund' under said Act No. 118 shall be set aside by the State Treasurer into a sinking fund to be known as the `State Construction Fund.' annually for the retirement of interest and principal of said State Construction Bonds. The remainder of $460,000.00 left in 1929 and the remaining $335,000.00 in 1930 and the remaining $225,000.00 annually thereafter left out of the $500,000 Charities Fund, as provided for in Section 41 of said Act No. 118 of the Acts of 1929, shall go to the Property Tax Reduction Fund and be used to reduce property tax as provided in Section 41 of said Act No. 118 of the Acts of 1929."

The Legislature of 1923 passed act 118, commonly known as our Severance Tax Law. Acts of 1923, p. 67. The act was approved February 14, 1923. Section 14 provides that two-thirds of the proceeds of the tax shall be wholly dedicated to the common schools of the state. The section further provides that the remaining one-third shall be credited to the county within which such taxes are collected. Section 15 provides that the county allotments shall be distributed, one-half to the highway fund of the county, and one-half to the common school fund of the county, and to be further allotted and distributed under the general law.

The Legislature of 1929 passed act 266, appropriating part of the funds collected under the Severance Tax Law to the support and maintenance of the State School for the Blind. This act was approved March 27, 1929. Acts of 1929, vol. 2, p. 1148. The same Legislature (act 267) likewise appropriated part of the funds collected under the Severance Tax Law to the support and maintenance of the State School for the Deaf. This act was approved March 27, 1929. The Legislature of 1929 (act 364) also appropriated out of the funds from the Severance Tax Law for the support and maintenance of the state board of education. The act was approved April 3, 1929. Acts of 1929, vol. 2, p. 1472.

The court sustained a demurrer to the complaint, and the plaintiff declined to plead further; and electing to stand under his complaint, it was decreed that the complaint be dismissed for want of equity. The case is here on appeal.

Marsh, McKay & Marlin, of El Dorado, and Trieber & Lasley, of Little Rock, for appellant.

Hal L. Norwood, Atty. Gen., and W. L. Pope, Asst. Atty. Gen., for appellees.

HART, C. J. (after stating the facts).

The constitutionality of the Severance Tax Law was sustained in Floyd v. Miller Lumber Co., 160 Ark 17, 254 S. W. 450, 32 A. L. R. 811, and that of the Income Tax Act of 1929 in Stanley v. Gates, 179 Ark. 886, 19 S.W.(2d) 1000. It will be noted from our statement of the case that our Severance Tax Law of 1923 provides for a distribution of the proceeds derived from the collection of the tax by crediting two-thirds thereof to a special fund created to be known as the Severance Tax Fund of the state of Arkansas, and to be wholly dedicated to the common schools of the state; and that the remaining one-third be allocated to the county from which such taxes are collected; and that the proceeds of the Income Tax Act of 1929 are to be paid into the state treasury and are to be distributed to the charities fund, the common school equalization fund and the remainder to a Special Fund to be used solely for the purpose of reducing the state tax on property. Each of the acts provides for a continuing levy and collection of the tax for the purpose named.

It will also be observed that Act 180 of the Acts of 1929, which creates the Arkansas Construction Commission for the purpose of providing adequate buildings for the Hospital for Nervous Diseases and for the Tuberculosis Sanitarium, diverts a part of the proceeds derived from the collection of taxes under the Income Tax Act of 1929 to the payment of the "State Construction Bonds" authorized to be issued by the Arkansas Construction Commission for the purpose of providing adequate buildings for the State Hospital for Nervous Diseases, and for the Tuberculosis Sanitarium.

Likewise, acts 266, 267, and 364 of the Acts of 1929, appropriated a part of the fund collected under the Severance Tax Law, respectively to the support and maintenance of the State School for the Blind, State School for the Deaf, and State Board of Education. It is earnestly insisted that each of the acts in so diverting the funds and appropriating them to another purpose is in violation of article 16, section 11 of the Constitution, which reads as follows: "No tax shall be levied except in pursuance of law, and every law imposing a tax shall state distinctly the object of the same; and no moneys arising from a tax levied for one purpose shall be used for any other purpose."

It is first insisted that the constitutional provision applies to taxes collected from all sources and not merely to property taxes, and in this contention we agree with counsel for the plaintiff. The whole of article 16 of the Constitution is devoted to finance and taxation. It is universally recognized that the power of a state to tax exists as a necessary attribute of sovereignty, except as regulated and limited by the Constitution. The reason is that the state government could not exist or perform its functions without it. The Legislature has all the power with reference to taxation that the state has, and consequently has the right to classify taxes. Therefore the Legislature must decide when and how and for what public purpose a tax shall be levied, and must select the subjects of taxation. Cooley on Taxation (3d Ed.) vol. 1, p. 255.

It is a fundamental rule of construction that the Constitution should be construed as a whole and the various provisions on the same subject must be read in the light of each other. Little Rock v. North Little Rock, 72 Ark. 195, 79 S. W. 785. When this is done, we can perceive no good reason why the restrictions of the section under consideration should be held applicable to property taxes alone. Such limitation could certainly do no good and might lead to much confusion and would inevitably lead to great uncertainty in providing for adequate revenue with which to administer the various departments of the state government. This view is strengthened when section 12, article 16, provides that no money shall be paid out of the treasury until the same shall have been appropriated by law, and then only in accordance with said appropriation. There is nothing in either section to indicate that the framers of the Constitution intended to limit or restrict the provisions to property taxes. On the other hand, when read in connection with the other provisions on the subject, we think it plain that the restriction of the section should apply to all subjects of taxation, and that it was intended that no money arising from a tax levied for one purpose shall be used for any other purpose.

It by no means follows, however, that counsel for the plaintiff are correct in their contention that this section controls the present case. The governing rule in cases of this sort is plainly and clearly stated in 37 Cyc. 1550, as follows: "Taxes which are set apart by the Constitution of the State for particular uses can not be diverted by the legislature to any other purpose. But subject to this limitation, it is in the general power of the legislature, not only by appropriation bills, but also by directions incorporated in the revenue laws, to regulate the...