Bacon v. Board of State Tax Com'rs

• Decision Date: 27 February 1901
• Citation: 126 Mich. 22,85 N.W. 307
• Parties: BACON v. BOARD OF STATE TAX COM'RS.
• Court: Michigan Supreme Court

85 N.W. 307

126 Mich. 22

BACON v. BOARD OF STATE TAX COM'RS.

Supreme Court of Michigan

February 27, 1901

Application by the state, on relation of Thaddeus W. Bacon, for a writ of mandamus to compel the board of state tax commissioners to reduce an assessment of the relator's property. Writ denied.

Grant J., dissenting.

Avery Bros. (Joseph Walsh, of counsel), for relator.

Horace M. Oren, Atty. Gen., for respondent.

LONG, J.

Relator is a citizen of this state, a resident of the city of St Clair, and the owner of a number of shares of stock of the New York Central & Hudson River Railroad Company, of the state of New York. He is assessed upon the tax roll of said city $50,000 for personal property. This assessed valuation includes shares of stock held by him in said railroad company. The real estate of said company, and its capital stock in excess of the real estate, are taxed in the state of New York. The stock owned in the state of New York is not taxed. The relator appeared before the board of state tax commissioners at a meeting held in said city August 29, 1900 and made application to have said assessment reduced by reason of the fact that, as the property and franchises of said corporation are taxed in the state of New York, the stock is not taxable in this state. The board refused to reduce said assessment, and the matter is presented to this court upon petition for mandamus to compel such reduction.

The question raised by the parties involve the construction of certain subdivisions of section 3831, Comp. Laws 1897. Those provisions are as follows: 'For the purposes of taxation personal property shall include: * * * (5) All goods, chattels and effects belonging to inhabitants of this state situate without this state, except that property actually and permanently invested in business in another state shall not be included. * * * (7) All shares in corporations organized under laws of this state when the property of such corporation is not exempt or is not taxable to itself, or when the personal property is not taxed. * * * (9) All shares in foreign corporations, except national banks owned by citizens of this state.'

It is contended by counsel for relator:

1. That the statute, in providing for taxation on foreign stocks, in unconstitutional, in that it is not uniform and equal. The argument is that because, under this statute, an individual holding stock issued by a domestic corporation which pays taxes on its capital stock is not taxed on such individual stock so held by him, the same rule must be applied to persons owning stock in a foreign corporation whose capital stock is taxed. One owning shares in a corporation is substantially the owner of an aliquot part of the property of the corporation, although the legal title of such property is vested in the corporation, and not in him. The value of his shares can never vary greatly from the value of the property they represent. This is as true of shares of stock in foreign corporations as in those of domestic corporations. The law taxes both, with the exception of cases where the property of the corporation is taxed in this state. Stated thus (and this is the effect of subdivisions 7 and 8, taken together), there is no want of uniformity of method or rule; and there is no impropriety in thus stating it, for the constitution cannot be supposed to have been framed with a view to what other states might do. It has no jurisdiction over corporations of other states; and when its citizens embark in foreign corporate enterprises, and pay money to them, taking certificates of stock therefrom, this state cannot tax the property of such corporation in its possessions outside of this state. Yet, substantially, its citizens have as much property as before; and, if not taxed in another state, there is no reason why it should not be taxed here, like the stock of domestic corporations. The state has said, in effect, to its citizens, 'if you invest your property in corporations, you shall be taxed upon the shares, except where the property of the corporation is taxed to the corporation by this state.' We may doubt the abstract justice of this; but we believe the state has the power to tax the shares of residents in foreign corporations, and that this power is not affected by the action of another state in imposing taxes upon the corporations. Michigan owes much to the investment of foreign money in her corporations which she taxes, and it is probably to her interest that moneys so invested be not taxed again elsewhere; but she is powerless to prevent it, though it goes without saying that the property, in effect, is taxed twice. There are the questions of policy and abstract justice involved, both protesting against double taxation; but the legislatures of the states are judges of both policy and propriety, so long as the constitutions have not forbidden it, and the weight of authority supports the claim that, in the absence of clear and express prohibition, they have not. In the case of Youngblood v. Sexton, 32 Mich. 406, a tax was objected to as violating the constitutional rule of equality and uniformity. It was said: 'If precise point here is that the tax is unequal and unjust because it is not levied in propertion to the business done, then the objection is without force. It may possibly be true that an apportionment according to the business done would have been more just, but a question of this nature concerns the legislature, and not us. Courts cannot annul taxes because of their operating unequally and unjustly. If they could, they might defeat all taxation whatsoever, for there never was yet a tax law that was not more or less unequal and unjust in its practical workings. * * * Apportionment of taxation is purely a legislative function.' In Insurance Co. v. City of New Orleans, 1 Woods, 89, Fed. Cas. No. 7,052, it was said: 'This is a suit for $1,000 tax on a foreign insurance company not chartered in this state, but transacting business therein. * * * It is resisted on the ground that the same statute imposes but a tax of $500 upon an insurance company incorporated by the laws of the state and transacting business therein. The defendant contends that the distinction made between these two classes of cases is in violation of article 14 of the state constitution, which declares that 'taxation shall be equal and uniform throughout the state.' The provision of the constitution relied on by defendant has not deprived the legislature of the power of dividing the business of legislation into classes. It merely obliges the legislature to impose an equal burden upon all those who find themselves in the same class.' This doctrine is supported by State v. Lathrop, 10 La. Ann. 398; Hughes v. City of Cairo, 92 Ill. 339; Lee v. Sturges, 46 Ohio St. 153, 19 N.E. 560, 2 L. R. A. 556; Sturges v. Carter, 114 U.S. 511, 5 S.Ct. 1014, 29 L.Ed. 240; Graham v. St. Joseph Tp., 67 Mich. 652, 35 N.W. 808. We think the determination of this question is for the legislature, and not subject to review by the courts. It appears from the statute itself that shares in foreign corporations are taxed in this state but once, and the shares in domestic corporations or their representatives are also taxed. The question of the effect of statutes of foreign states cannot be considered, nor can such statutes have any effect in this suit upon the question of the uniformity of the rules of taxation. The stock has a situs in this state, and is subject to the control of the legislature for the purpose of taxation.

2. It is further contended by counsel for relator that the law of 1893 (section 3831, Miller's Compliation) has the element of doubt,--an uncertainty in it as to the intent of the legislature to include such property for taxation in this state,--as it is provided by subdivision 5 that personal property actually and permanently invested in any other state shall not be included, while subdivision 9 includes for taxation all shares in foreign corporations owned by citizens of this state, etc.; that therefore it was the intent of the legislature to provide taxation upon such property against citizens of the state; that it is evident the legislature used the word 'citizen' in its restricted sense, and that the act was intended to provide taxation against a citizen of the state residing in New York or Ohio, or any other place outside the state,--one who returns for the purpose of voting at elections, or resides for the most part in foreign jurisdictions; that the word 'citizen,' as used in this statute, was intended to reach a large class of persons who are citizens of this state and reside elsewhere that, under the construction contended for by the respondents, all citizens who are nonresidents of the state would escape taxation. It is claimed that the construction contended for by relator is made apparent from the change made in 1893 from the former provisions of the statute; that the statute of 1885 provided for taxation upon all ships, boats, and vessels belonging to inhabitants of this state, whether at home or abroad, and all goods, chattels, and effects belonging to individuals of this state without this state; that the Laws of 1889 used the word 'inhabitant' in providing for taxation upon personal property; while in the enactment of 1893 this word was eliminated and the word 'citizen' substituted; that section 3831, Miller's Compilation, by subdivision 5, provides for taxation upon all goods, chattels, and effects belonging to inhabitants of this state situated without this state, except that property actually and permanently invested in business in any other state shall be included; that the word 'inhabitants,' as used in these statutes, reaches only persons who are residents of the state,...