Campbell v. Shaw
| Decision Date | 26 August 1897 |
| Parties | JAMES CAMPBELL v. JONATHAN SHAW, ASSESSOR FIRST TAXATION DISTRICT. HONOLULU IRON WORKS COMPANY v. JONATHAN SHAW, ASSESSOR FIRST TAXATION DISTRICT. |
| Court | Hawaii Supreme Court |
Submitted August 6, 1897.
APPEALS FROM CIRCUIT JUDGE, FIRST CIRCUIT.
Syllabus by the Court
An Act entitled " An Act to provide revenue for the government by the assessment and collection of tax on income" held to be unconstitutional and void, on the ground that Section one of the Act imposes the tax in violation of Article eleven of the Constitution which requires that taxation must be proportional.
A. S Hartwell, Kinney & Ballou, for plaintiffs.
A. G M. Robertson, for defendant.
OPINION
These cases came before a Circuit Judge of the First Circuit Court and pro forma decrees were entered sustaining the demurrer interposed. By agreement the cases were heard by us in vacation, on the 5th and 6th instant.
The Legislature of 1896, passed on the 12th of June of that year Act 65 entitled " An Act to Provide Revenue for the Government by the Assessment and Collection of Tax on Income." By the terms of the Act returns are to be made by the 31st of August of this year.
The actions are bills in equity, claiming that the Act in question is unconstitutional and void and pray that the Act may be so declared and that the defendant as Tax Assessor for the First Taxation District may be enjoined from assessing and collecting the tax by the said Act imposed. The demurrers aver the constitutionality of the Act.
In Campbell's case, the ten points made were that the Act is unconstitutional and void because-
(a) The said income tax law requires the plaintiff to pay taxes on income, either in the form of money or in investments representing the same, upon which the plaintiff is taxed under the provisions of Act 51.
(b) The said income tax law exempts from income tax all persons having an income of less than $2, 000 and also corporations companies or associations organized and conducted solely for charitable, religious, educational or scientific purposes, including fraternal beneficiary societies, orders or associations operating upon the lodge system and providing for the payment of life, sick, accident or other benefits to the members of such societies, orders or associations, and dependents of such members: the stocks, shares, funds, real and personal property, or securities held by any fiduciary or trustee for charitable, religious, educational or scientific purposes.
(c) The said income tax law allows an exemption of two thousand dollars upon incomes under four thousand dollars, whereas no such exemption is allowed upon incomes over four thousand dollars.
(d) The said income tax law exempts from an income tax all profits realized from sales of real estate purchased more than two years previous to the close of the year for which income is estimated.
(e) The said income tax law makes no deduction for any amount paid out for new buildings, permanent improvements or betterments made to increase the value of any property or estate.
(f) The said income tax law taxes the salaries of the President and of the Justices of the Supreme Court as officers of the Republic.
(g) The said income tax law necessarily requires double and duplicate taxation of property.
(h) The said income tax law unreasonably and unlawfully exempts persons and property from taxation.
(i) The said income tax law does not require each member of society to contribute his proportion or share of taxes.
(j) The said income tax law requires no returns or taxes of mercantile firms and imposes no taxes on partnership property, income or gains other than by requiring returns from and taxing individual members of such firms in respect of their several interests in the firm property and income derived therefrom, whereby much partnership property and income are necessarily untaxed, resulting in an unlawful discrimination against the property and income of incorporated mercantile associations, as well as of other corporations and of individuals.
(k) The said income tax law is otherwise unconstitutional and void.
In the Honolulu Iron Works Company's case fourteen reasons that the Act is unconstitutional and void are alleged, as follows:
(1) That the exemption of incomes under two thousand dollars from taxation is unconstitutional, being in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(2) The provision allowing an exemption of two thousand dollars upon incomes under four thousand dollars, whereas no such exemption is allowed to incomes over four thousand dollars is unconstitutional and void, being in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(3) The provision allowing an exemption of two thousand dollars upon all incomes of persons having an income under four thousand dollars whereas no such exemption whatever is allowed corporations having an income under four thousand dollars, is unconstitutional and void as being in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(4) The provision making it lawful for any assessor who shall be of the opinion that a return is false or fraudulent or contains any under-statement to summon any person, vice-president, manager, resident manager or agent of, or any person having the possession, custody or care of books of account containing entries relating to the business of such person or corporation, wherever residing or found, to appear before him and produce such books at a time and place named in the summons, and to give testimony or answer interrogations under oath respecting any objects liable to tax or the returns thereof, and in case of any return of a false or fraudulent list, the imposition of two hundred per cent. penalty in addition to the tax imposed, is unconstitutional and void, being in conflict with Article 8 and (or) Article 6 of the Constitution of the Republic of Hawaii.
(5) The provision that when any person or corporation having a taxable income refuses or neglects to render any return or list of income required by law, or renders an understated, false or fraudulent return or list, that the assessor shall make according to the best information which he can obtain, and on his own view and information, such return according to the form prescribed of the income liable to tax possessed by such person or corporation, and that the said assessor shall assess the income; and in case of any return of a false or fraudulent list or valuation that he shall add 200 per cent. to such tax, and in case of a refusal or neglect to make a list or return, or to verify the same, he shall add 100 per cent. to such tax, is unconstitutional and void, being in conflict with Article 6 and (or) Article 8 of the Constitution of the Republic of Hawaii.
(6) The provision making it lawful for the assessor of the division in which any corporation is assessable, whenever he shall believe that a true and correct return of the income of such corporation has not been made, to make an affidavit of such belief and of the grounds on which it is founded, and if the Minister of Finance shall on examination thereof conclude there are good grounds for such belief, then and thereupon making it lawful for him to issue a request in writing to such corporation to permit an inspection of the books of such corporation to be made, and if such corporation refuses to comply with such request, then making it lawful for the assessor of the division to make, from such information as he can obtain, an estimate of the amount of such income and then add one hundred per cent. thereto, which said assessment so made is made the lawful assessment of such income, and not subject to appeal, is unconstitutional and void, being in conflict with Article 10 and (or) Article 8 of the Constitution of the Republic of Hawaii.
(7) The entire law imposing a tax on incomes is unconstitutional and void for the reason that in connection with Section 17 of Act 51 of the Session Laws of 1896, passed prior to the income tax law, which section provides that: " In estimating the aggregate value of each such enterprise for profits there shall be taken into consideration the net profits made by the same, and also the gross receipts and actual running expenses, " etc., the said income tax law results in duplicate taxation, and is in conflict with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(8) The entire income tax law is unconstitutional and void for the reason that, taken in connection with Sections 14 and 16 of Act 51, Session Laws of 1896, passed prior to said income tax law, said income tax law results in duplicate taxation of all income received between the 1st day of July and the 1st day of January of each year, and remaining as money on hand on the 1st day of January, thus conflicting with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(9) The entire income tax law is unconstitutional and void for the reason that, taken in connection with Sections 14, 15 and 16 of Act 51, Session Laws of 1896, passed prior to said income tax law, it results in duplicate taxation of all income received between the 1st day of July and the 1st day of January of each year, and invested in real and (or) personal property within the jurisdiction of this Republic, thus conflicting with Article 11, Section 2, and (or) Article 12 of the Constitution of the Republic of Hawaii.
(10) The said income tax law is unconstitutional and void...
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