Beeland Wholesale Co. v. Kaufman, 3 Div. 198

Citation234 Ala. 249,174 So. 516
Decision Date18 March 1937
Docket Number3 Div. 198
PartiesBEELAND WHOLESALE CO. v. KAUFMAN, Chairman, Alabama Unemployment Compensation Commission, et al.
CourtAlabama Supreme Court

Rehearing Withdrawn June 1, 1937

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Bill by Beeland Wholesale Company against Jacob L. Kaufman, as Chairman of Alabama Unemployment Compensation Commission Lucien C. Brown, and James A. Lipscomb, as associate members of such commission, and A.A. Carmichael, as Attorney General for declaratory judgment as to validity, and to enjoin enforcement, of the Unemployment Compensation Law. From a decree sustaining a demurrer to the bill, complainant appeals.


BROWN J., dissenting in part.

Denson & Denson, of Opelika, and Martin, Turner & McWhorter, of Birmingham, for appellant.

A.A. Carmichael, Atty. Gen., Thos. Seay Lawson, C.L. Rowe, and Peyton D. Bibb, Asst. Attys. Gen., Nicholas E. Stallworth, of Mobile, and Joseph P. Chamberlain and Noel T. Dowling, Sp. Assts. to the Atty. Gen., for appellees.

FOSTER Justice.

The purpose of this litigation is to test the validity of an act of the Legislature, as amended, known as the "Unemployment Compensation Law." Gen.Acts of 1935, p. 950; Gen.Acts of 1936, Ex.Sess., pp. 176, 225, 228.

Briefly stated for the immediate purpose of stating the issues, it may be said to require certain employers and employees to make regular contributions to a fund to be paid to the employees of that class, when unemployed, according to the requirements and restrictions fully expressed. The employer means any person or corporation who has employed at least eight persons in each of twenty or more calendar weeks in 1935, or any subsequent calendar year (omitting further detail), excepting certain specified classes of employment.

Employee means any person employed by an employer, who is subject to this act and in employment subject to it. The contributions by the employers are based upon a definite percentage of the monthly pay roll of each such employer, respectively, until 1941, and each year thereafter, when the commission shall classify employers in accordance with their benefit experience, and shall determine for each employer the rate of contribution which shall apply to him through that year based on that classification. Such classification shall be with respect to the degree of unemployment hazard, taking into account all relevant and reasonable factors. The rate of contribution by employees is fixed at a definite per cent. of his wages. All contributions by both employers and employees are paid into a trust fund handled by a treasurer elected by the state commission set up to administer the act. We need not detail the particular provisions regulating the payment of benefits, when payable and the conditions on which payments are to be made. They are matters which do not affect the legal questions here presented.

Appellants insist that the contributions are tax assessments, and that as such they are made to extend to an arbitrary class, without due regard to others who should bear the burden, and that they are not assessed according to the extent to which each such employer has contributed to unemployment, on a merit rating basis, but upon a straight line proportion applicable to all employers, according to his monthly payroll. They argue that there is a vast diversity of employment, and so dissimilar in character that it is arbitrary for unemployed of all such employments to be on the same scale of benefits from a fund to which employers have largely contributed, but whose business is not even remotely connected with that in which the unemployment may have occurred. They also contend that the tax is an income tax, as applied to employees, not within the Income Tax Amendment (Const.1901, Amend. No. 25), and is therefore a property tax, and violates sections 211, 214, and 217 of the Alabama Constitution; and further, that the Alabama Act is not operative unless the Federal Social Security Act, 42 U.S.C.A. §§ 301-1305, is constitutional, and that it is unconstitutional, and should be so declared because it violates Amendment No. 5, due process, and the tax was not laid for a purpose authorized by article 1, section 8, Federal Constitution, not being for the general welfare of the United States, and exerts an illegal coercion on the states to enact an unemployment compensation law.

Appellants also contend that the Alabama act violates the due process clause of section 6, Alabama Constitution, and the Fourteenth Amendment to the Federal Constitution, in that the tax or contribution is not laid for any governmental function of the state or its subdivisions or any other public purpose, but its effect is to tax one class of citizens for the personal and private benefit of another class, and that it therefore also violates section 23 of the Alabama Constitution. The right is questioned because the contributions are nothing but taxes, and must be rested on the taxing power of the State.

We know of no authority of a state to take the property of a citizen except by way of taxes or eminent domain. It is said in Moog v. Randolph, 77 Ala. 597, 602, that "there is a clear line of demarcation between the taking power of a government, and the right of eminent domain, which is not properly distinguished in many of the adjudged cases, thus sometimes tending to confusion. Taxation is the just proportion of the citizen's share or contribution to the support of the government, while eminent domain involves the idea of a forced contribution, beyond, or in excess of his share." It is also said that the taxing power is not limited by the constitutional restrictions on the right of eminent domain.

The statement is frequently made that ordinary money is not subject to the power of eminent domain, since compensation of an equal amount must be paid for it, and is therefore in the nature of a forced loan. 20 Corpus Juris, 588. Eminent domain is in the nature of a forced sale of property rights for an amount of money equal to its value, although originally, and without constitutional provision, the state could take property for public use without compensation, though in excess of the just share of the citizen to the expense of government. Steele v. County Commissioners, 83 Ala. 304, 3 So. 761.

The contributions here in question are not justified as an exercise of the right of eminent domain, but are based upon a claim that they represent the just proportion of certain citizens' share to the support of the government. They are taxes, and can be justified only as such.

The power to tax is an inherent attribute of sovereignty. It is not a power delegated to the states. It is vested by the Constitution in the Legislature subject only to the restrictions in the State and Federal Constitutions. Except in respect to due process and equal protection of the laws, it has been pointed out that the constitutional restrictions on the Legislature of Alabama in this respect extend only to property taxes, Phoenix Carpet Co. v. State, 118 Ala. 143, 22 So. 627, 72 Am.St.Rep. 143; Phoenix Assur. Co. v. Fire Department of Montgomery, 117 Ala. 631, 23 So. 843, 42 L.R.A. 468; Phelps v. Union Bank & Trust Co., 225 Ala. 238, 142 So. 552, except as now limited by the Income Tax Amendment.

Subject to such limitations the Legislature's acts in imposing taxes are reviewable only by an exercise of the electorate and invoke no power of the judiciary. Stein v. Mobile, 24 Ala. 591, 614; Capital City Water Co. v. Board of Revenue of Montgomery, 117 Ala. 303, 23 So. 970.

Taxes may be laid by the state on persons, property, rights, and privileges. State v. Weil, 232 Ala. 578, 168 So. 679. The purpose of giving a designation to a tax, as being a certain one of those just enumerated, is to determine if there is a limitation or restriction in the Constitution on such a designated tax. That is, whether it violates the restrictions on property taxes, or due process and equal protection, if the tax is personal or an excise. The police power does not confer on the state a right to tax which it did not already possess. The police power of the state furnishes occasion for expenditures. It is not to be measured by the power of cities and counties to license for police purposes. They have no right to license or lay any tax except as it is granted to them. Mills v. Court of County Commissioners, 204 Ala. 40, 85 So. 564; Phoenix Carpet Co. v. State, supra.

When their authority is to license for police purposes only, they cannot license for the general revenue. Police power then measures the power to tax in that sphere. Standard Chem. & Oil Co. v. Troy, 201 Ala. 89, 77 So. 383, L.R.A.1918C, 522; Van Hook v. City of Selma, 70 Ala. 361, 363, 45 Am.Rep. 85. But the police power of the state in no respect measures its power to tax. However, we will show that if a tax is earmarked for a certain police purpose, if that purpose is not in the police power, the tax falls with it. So much is said as applicable to both taxes, employers' and employees'.

We will first refer more directly to the tax on employers. It has no aspects of a property tax. It is not measured by property ownership, or income, but on a feature of its outgo, and is unquestionably an excise. Therefore the restrictions on property taxes have no application. Sections 211, 214, and 217, Constitution. But it must square with due process and equality.

It is contended that it does not meet that requirement because manifestly all employers have not and will not contribute to unemployment with equal responsibility; and their businesses are so dissimilar and far removed from each other that it is an inequality to require all to contribute ratably to...

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