Amidon v. Kane
| Decision Date | 24 June 1971 |
| Parties | D. Curtis AMIDON, Rodney D. Mayhew and Marvin M. Zimmerman, Appellants, v. Robert KANE, Secretary of Revenue of the Commonwealth of Pennsylvania, et al. Richard A. TILGHMAN, and all other residents and taxpayers of the Commonwealth of Pennsylvania, Appellants, v. Robert KANE, Secretary of Revenue for the Commonwealth of Pennsylvania. CONCERNED TAXPAYERS OF ALLEGHENY COUNTY, an unincorporated association by Dortha Charles and Charles Baldwin, Trustees ad litem, et al., Appellants, v. COMMONWEALTH of Pennsylvania and Robert Kane, Secretary of the Department of Revenue. |
| Court | Pennsylvania Supreme Court |
Frank P. Lawley, Jr., Deputy Counsel, William H. Smith, Chief Counsel, Auditor General Dept., Harrisburg, for appellee.
No. 9. Sidney M. DeAngelis, Norristown, for appellants.
No appearance for appellee.
No. 10. Robert E. Wayman, Pittsburgh, for appellant.
Israel Packel, Counsel to the Governor, Harrisburg, for appellee.
Before BELL, C.J., and JONES, EAGEN, O'BRIEN, ROBERTS, POMEROY and BARBIERI, JJ.
In this consolidated appeal, we are asked to review a May 20, 1971 decree of the Commonwealth Court dismissing three separate complaints in equity challenging the constitutionality of the recently enacted Personal Income Tax provided by Article III of the Tax Reform Code of 1971, adopted March 4, 1971, Act No. 2, 72 P.S. § 7101 et seq. 1
The various plaintiff-appellants advance four arguments in support of their claims that the Personal Income Tax is repugnant to the Pennsylvania Constitution. First, it is contended that the tax violates Article VIII, Section 12(a) by virtue of its enactment without the Governor's submission to the General Assembly of a balanced operating budget. Second, it is urged that the tax constitutes an illegal delegation of legislative power in contravention of Article II, Section 1. Third, it is claimed that the tax illegally exempts property from taxation in violation of Article VIII, Section 5. And finally, it is argued that the tax ignores the mandate of Article VIII, Section 1 that '(a)ll taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, * * *.'
After careful and considerable study, we conclude that the tax in question offends the constitutional requirement of uniformity and that it is for this reason invalid.
Preliminarily, it is noted that we are not unmindful of the fiscal problems and difficulties besetting the Commonwealth. We must at the same time, however, emphasize that our awareness and full appreciation of these problems cannot in any way enlarge or otherwise affect our limited constitutional role in this adjudication.
The selection of subjects for taxation, their classification, and the method of collection are legislative matters. Jones & Laughlin Tax Assessment Case, 405 Pa. 421, 175 A.2d 856 (1961). Thus, this Court may not consider the wisdom of a challenged tax or the purpose of its enactment. Blauner's, Inc. v. Philadelphia, 330 Pa. 342, 198 A. 889 (1938). So long as a statute is constitutional, the Legislature is the sole judge of its necessity or expediency and a court cannot refuse to enforce it on any ground that it is unjust, unwise, inexpedient, obsolete or contrary to any supposed policy or custom. Olin Mathieson Chemical Corporation v. White Cross Stores, Inc., 414 Pa. 95, 98, 199 A.2d 266, 267 (1964); Lurie v. Republican Alliance, 412 Pa. 61, 65, 192 A.2d 367, 370 (1963); Commonwealth ex rel. Kelley v. Cantrell, 327 Pa. 369, 193 A. 655 (1937); Commonwealth ex rel. Kelley v. Clark, 327 Pa. 181, 193 A. 634 (1937); Harris v. Mercur, 202 Pa. 313, 51 A. 969 (1902); Journeay v. Gibson, 56 Pa. 57 (1868);
Conversely, however, we cannot deem a legislative enactment constitutional merely because it may seem in our view to be just, made public statistics compiled by the enjoys unanimous popular support. The Constitution is in matters of state law the supreme law of this Commonwealth to which all acts of the Legislature and of any governmental agency are subordinate, Pittsburgh Railways Co. v. Port of Allegheny County Authority, 415 Pa. 177, 202 A.2d 816 (1964); Cali v. Philadelphia, 406 Pa. 290, 177 A.2d 824 (1962), and it is our duty and responsibility to consider Only whether the legislation meets or violates constitutional requirements. Stander v. Kelley, 433 Pa. 406, 250 A.2d 474 (1969). Accordingly, quite aside from the instant tax's possible social, economic or other merit, we must determine whether it satisfies the constitutionally mandated standard of uniformity.
The Personal Income Tax contained in Article III of the Tax Reform Code of 1971 operates as follows:
Section 305 of the Code purports to impose a tax '(f)or the privilege of receiving, earning or otherwise acquiring income from any source whatsoever * * *.' However, the annual tax of 3 1/2% Is levied not upon all income 'from any source whatsoever' but rather only upon 'the taxable income of the taxpayer.' 'Taxable income' is defined in Section 302(q) to mean with a few specific variations 'the same as 'taxable income' as defined in the Internal Revenue Code * * *.' 2 The structure of the Pennsylvania Personal Income Tax may be alternatively illustrated and perhaps clarified by consideration of the following schematic summary of Internal Revenue Service Form 1040, the officially prescribed form for individual federal income tax returns. 6 As is readily apparent from an examination of Table I, most of the discrepancies between an individual's Actual total income 'from any source whatsoever' and his Pennsylvania 'taxable income' arise as a consequence of the substraction of the various adjustments, deductions, and exemptions appearing between lines 16 and 50. As to some taxpayers, however, even line 16 does not reflect all income from whatever source. As stated above, the Internal Revenue Code provides that certain species of income are altogether excludable from taxable income. Thus, for example, a person whose only income is in the form of interest received from state or municipal bonds (tax exempts) need not report any of such income on any of the lines prior to line 16 with the result that the amount entered on line 16 will be zero.
The concept of taxable income in the Internal Revenue Code is of course an artificial construct, in many ways far removed from the common and ordinary meaning of the term income. For example, income derived from gifts and inherintances, interest on the obligations of a state or political subdivision, contributions by employers to employee health and accident plans, and the first one hundred dollars received by a taxpayer as dividends from domestic corporations is all specifically excludable from taxable income. 3 In addition, the Internal Revenue Code permits the deduction of myriad items from actual or gross income in order to compute taxable income. 4 Some of the more common and well known examples of such deductions are real estate taxes, interest on real estate mortgages and other personal financing, alimony payments, and various other state and local taxes. 5 In other words, the Pennsylvania Personal Income Tax is tied directly to 'line 50' of IRS Form 1040, the amount appearing on that line being subject to the 3 1/2% Annual tax.
After defining taxable income in terms of the federal tax base, 7 the Tax Reform Code of 1971 provides four types of tax Does then the foregoing scheme of taxation conform to the requirements of the Uniformity Clause?
credits. Section 316 allows a credit for income taxes imposed by another state, Section 317 provides a similar credit for 30% Of certain local taxes, and Section 318 deals with a credit for taxes paid by a trust on accumulated income. Finally, Section 319 sets out a variable schedule of 'vanishing tax credits' for the benefit of individuals whose state taxable income does not exceed $9,900.
The constitutional imperative of uniformity in the imposition of taxes has remained unchanged since its first adoption in the Pennsylvania Constitution of 1874. 8 Article IX, Section 1 of that constitution directed without qualification that:
'All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.'
Legislative proposals to amend the Uniformity Clause were rejected by the electorate in 1913 and 1928, 9 and the May, 1967 referendum submitted to the people of Pennsylvania concerning whether a constitutional convention would be called specifically provided that the convention would Not revise that portion of the constitution. Likewise, the constitutional convention enabling act stated in no uncertain terms that '* * * nor shall that part of Article IX, Section 1 of the Constituting providing that: 'All taxes shall be uniform * * *' be Modified, altered or changed in any respect whatsoever.' Act of March 16, 1967, P.L. 2, § 7, (1967) Pa.Laws 7. (Emphasis added.)
In addition to its unbroken historical continuity, the constitutional standard of uniformity also possesses widespread and far reaching application. While some other jurisdictions adhere to the view that uniformity applies only to property taxes, 10 our particular constitutional mandate that '(a)ll taxes shall be uniform * * *' is quite clear, and it is settled that this mandate applies to all species of taxes. As was stated in Saulsbury v. Bethlehem Steel Company, 413 Pa. 316, 196 A.2d 664 (1964):
'The question of whether or not the constitutional requirement of uniformity applies to a particular kind of tax depends upon the peculiar wording of the requirement itself. The Pennsylvania Constitution specifically states that 'All taxes shall be uniform, upon the same class of subjects.' (Emphasis supplied). This...
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