Culliton v. Chase

Citation25 P.2d 81,174 Wash. 363
Decision Date08 September 1933
Docket Number24491.
CourtUnited States State Supreme Court of Washington
PartiesCULLITON et al. v. CHASE et al. McKALE'S, Inc., et al. v. SAME.

Appeal from Superior Court, Thurston County; D. F. Wright, Judge.

Actions by William M. Culliton and others and by McKale's, Inc. and others against Samuel H. Chase and others, members of the State Tax Commission. The actions were consolidated for trial and appeal. From an adverse decree, defendants appeal.

Affirmed.

See also, 22 P.2d 1049.

G. W Hamilton and John W. Hanna, both of Olympia for appellants.

Newman H. Clark and M. F. Mathewson, both of Seattle, J. T. Trullinger, of Olympia, and Preston, Thorgimson & Turner and Lundin, Barto & Devin, all of Seattle, for respondents.

Lane & Thomspon, grinstead, laube, Laughlin & Meakim, George Donworth, Charles T. Donworth, Allen, Froude, Hilen & Askren, McMicken, Ramsey Rupp & Schweppe, Peters, Evans & McLaren, McCormack & Maxwell, and A. Emerson Cross, all of Seattle, Charles W. Hall, of Vancouver, and E. W. Anderson and Yantis & Brodie, all of Olympia, amici curiae.

HOLCOMB, Justice.

Alleging that the state income tax law (Initiative No. 69, chapter 5 p. 49, Laws of 1933) was unconstitutional, respondents instituted two actions, which were consolidated for trial and appeal, against the members of the state tax commission, to secure a permanent injunction restraining defendants from enforcing the act mentioned. The trial court was of the view that the challenged act offended against the uniformity requirement of the Fourteenth Amendment to the State Constitution and was therefore void. The demurrers to the complaints were overruled and a decree was entered permanently restraining the enforcement of the act, from which decree comes this appeal.

The Fourteenth Amendment to the State Constitution reads: 'The power of taxation shall never be suspended, surrendered or contracted away. All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership. All real estate shall constitute one class: Provided, That the Legislature may tax mines and mineral resources and lands devoted to reforestation by either a yield tax or an ad valorem tax at such rate as it may fix, or by both. Such property as the Legislature may by general laws provide shall be exempt from taxation. Property of the United States and of the state, counties, school districts and other municipal corporations, and credits secured by property actually taxed in this state, not exceeding in value the value of such property, shall be exempt from taxation. The Legislature shall have power, by appropriate legislation, to exempt personal property to the amount of three hundred ($300.00) dollars for each head of a family liable to assessment and taxation under the provisions of the laws of this state of which the individual is the actual bona fide owner.'

The income tax law provides:

'Section 1. Existing methods of taxation, primarily based on property holdings, are inadequate, inequitable and economically unsound. Present conditions point the need of a new subject matter for taxation, which should be based on the ability to pay. Earnings for a given period are a fair measure of such ability.
'The people of the state of Washington, therefore, exercising herein their supreme power and fundamental right, declare their purpose hereby to tax all annual incomes within the state as such, and not as property.
'There shall be assessed, levied, collected and paid annually, a tax on all net income as hereinafter provided, by every person residing within the State of Washington or by his personal representative in case of death; and by every nonresident of the state, upon such income as is derived from property located or business transacted within the state, except as hereinafter exempted. * * *'

The system of granduated rates adopted by the income tax law imposes upon the taxpayer a rate of taxation that progresses and becomes larger with the increase in the amount of his taxable income.

Respondents insist that, under the constitutional definition. 'The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership,' a tax on income derived from property is a tax on the property from which the income is derived; therefore the method of classification adopted by the income tax law is violative of the requirements of the State Constitution that 'all taxes shall be uniform upon the same class of property.'

Unless the income tax constitutes a tax on property, the uniformity clause of the State Constitution is not violated. If income taxes '* * * are to be deemed a property tax, constitutional limitations applicable to property taxes must be applied. * * * If they are excise taxes, such limitations are not applicable.' Cooley, Taxation (4th Ed.) § 1743.

The fact that the income tax law was passed as an initiative measure is of no controlling importance, nor can it be likened to an amendment to the Constitution. The Constitution provides the means, methods, and processes for its own amendment.

Amendment 14, which replaced article 7 of our Constitution, was adopted by the people by the proper method in 1930. The income tax law was passed by the people in 1932. All laws on any subject whatever, enacted by either the people or the Legislature, must be governed by the provisions of the Constitution in force at that time. 'The people in their legislative capacity are not, however, superior to the written and fixed Constitution.' State ex rel. Berry v. Superior Court, 92 Wash. 16, 159 P. 92, 94.

The pertinent portion of Amendment 14 of our Constitution is: 'All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership.'

The initiative act in question is clearly one for public revenue.

It would certainly defy the ingenuity of the most profound lexicographer to formulate a more comprehensive definition of 'property.' It is 'everything, whether tangible or intangible, subject to ownership.' Income is either property under our Fourteenth Amendment, or no one owns it. If that is true, any one can use our incomes who has the power to seize or obtain them by foul means. There being no other classifications in our Constitution but real and personal property and intangible property, incomes necessarily fall within the category of intangible property. No more positive, precise, and compelling language could have been used than was used in those words of our Fourteenth Amendment. It needs no technical construction to tell what those words mean. The overwhelming weight of judicial authority is that 'income' is property and a tax upon income is a tax upon property.

None of the decisions from other states have any bearing upon the law Before us, because of our peculiarly forceful constitutional definition and the difference in their constitutional authorization or restriction.

In State ex rel. Bolens v. Frear, 148 Wis. 456, 134 N.W. 673, 689, 135 N.W. 164, L. R. A. 1915B, 569, 606, Ann. Cas. 1913A, 1147, an income tax act enacted in 1911 was apparently set out in full by the court and is almost identical with our own income tax act. There are some unimportant differences not necessary to mention. The constitution of Wisconsin had been amended in 1908 (article 8, § 1). It previously had provided that 'The rule of taxation shall be uniform, and taxes shall be levied upon such property * * * as the legislature shall prescribe,' which provision was amended by the addition of the following words: 'Taxes may also be imposed on incomes, privileges and occupations, which taxes may be graduated and progressive, and reasonable exemptions may be provided.'

Previous to the adoption of this amendment, the Supreme Court of Wisconsin had held an income tax law unconstitutional. In passing upon the income tax act of 1911, the Supreme Court of that state, among other things, said: 'Words could hardly be plainer to express that idea than the words used. From them it clearly appears that taxation of property and taxation of incomes are recognized as two separate and distinct things in the state Constitution. Both may be levied, and lawfully levied, because the Constitution says so. * * * The people of Wisconsin have said that 'property' means one thing, and 'income' means another; in other words, that income taxation is not property taxation, as the words are used in the Constitution of Wisconsin.'

How different from the situation here. We have no constitutional provision authorizing taxation of income as one thing and property as another. We have only the constitutional provision that property 'shall mean and include everything, whether tangible or intangible, subject to ownership.' Until we have such a constitutional amendment, the hands of the people, as well as the Legislature, in enacting laws, are tied.

It has been definitely decided in this state that an income tax is a property tax, which should set the question at rest here. Aberdeen Savings & Loan Association v. Chase, 157 Wash. 351, 289 P. 536, 290 P. 697, 71 A. L. R. 232. Even though some of us dissented from the majority decision, the dissenting opinions show that the case was thoroughly considered and the opinion of the majority should govern. In future cases, even a...

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32 cases
  • Hunton v. Commonwealth
    • United States
    • Virginia Supreme Court
    • January 16, 1936
    ...Nelson, 349 Ill. 579, 182 N.E. 909; Tax Commissioner, Trefry Putnam, 227 Mass. 522, 116 N.E. 904, L.R.A. 1917F, 806; Culliton Chase, 174 Wash. 363, 25 P.(2d) 81. The claim that the Pollock Case is a complete and ultimate authority for holding that a tax on income derived from property is a ......
  • State v. McCollum
    • United States
    • Washington Supreme Court
    • September 27, 1943
    ... ... perpetuates injustice and impairs statutory rights of ... property. In Culliton v. Chase, 174 Wash. 363, 25 ... P.2d 81, 83, this court, speaking through Judge Holcomb, ... said: 'In future cases, even a dissenting ... ...
  • Hale v. Iowa State Board of Assessment and Review
    • United States
    • U.S. Supreme Court
    • November 8, 1937
    ...v. Fisher, 135 Or. 180, 192, 292 P. 813, 295 P. 461, 73 A.L.R. 721; Kelley v. Kalodner, 320 Pa. 180, 185, 181 A. 598; Culliton v. Chase, 174 Wash. 363, 25 p.(2d) 81; Jensen v. Henneford, 185 Wash. 209, 216, 53 P.(2d) 607. ...
  • Hunton v. Commonwealth
    • United States
    • Virginia Supreme Court
    • January 16, 1936
    ...Nelson, 349 111. 579, 182 N.E. 909; Tax Commissioner, Trefry v. Putnam, 227 Mass. 522, 116 N.E. 904, L.R.A. 1917F, 806; Culliton v. Chase, 174 Wash. 363, 25 P.(2d) 81. The claim that the Pollock Case is a complete and ultimate authority for holding that a tax on income derived from property......
  • Request a trial to view additional results
3 firm's commentaries
  • The Turbulent Ride For Washington's New Capital Gains Tax May Have Come To A Screeching Halt
    • United States
    • Mondaq United States
    • March 4, 2022
    ...levied on real and personal property. Further, it examined prior attempts to enact a graduated tax on net income. In Culliton v. Chase, 174 Wash. 363 (1933), the Washington Supreme Court held on two grounds a graduated income tax to be unconstitutional. First, it distinguished an income tax......
  • The Turbulent Ride For Washington's New Capital Gains Tax May Have Come To A Screeching Halt
    • United States
    • Mondaq United States
    • March 4, 2022
    ...levied on real and personal property. Further, it examined prior attempts to enact a graduated tax on net income. In Culliton v. Chase, 174 Wash. 363 (1933), the Washington Supreme Court held on two grounds a graduated income tax to be unconstitutional. First, it distinguished an income tax......
  • Washington Now Has An Income Tax
    • United States
    • Mondaq United States
    • April 20, 2023
    ...to ownership." 2. Quinn v. State, No. 100769-8, slip op. (Wash. 2023) (en banc). 3. Id. at 3. 4. RCW 82.87.060(1). 5. Culliton v. Chase, 174 Wash. 363, 385, 25 P.2d 81 6. Id. 7. Quinn at 19. 8. State ex rel. Stiner v. Yelle, 174 Wash. 402, 407, 25 P.2d 91 (1933). 9. Quinn at 21. 10. Stiner ......
4 books & journal articles
  • Income Taxation in Washington: in a Class by Itself
    • United States
    • Seattle University School of Law Seattle University Law Review No. 1-03, March 1978
    • Invalid date
    ...Second Report 21 (1968); Advisory Comm'n on Intergovernmental Relations, Significant Features of Fiscal Federausm 1-4 (1974). 5. 174 Wash. 363, 25 P.2d 81 (1933). 6. Unless otherwise noted: a. "court" refers to the Washington Supreme Court; b. "amendment 14" refers to amendment 14 of the Wa......
  • A Washington State Income Tax-again?
    • United States
    • Seattle University School of Law Seattle University Law Review No. 16-02, December 1992
    • Invalid date
    ...See infra notes 66-71, 220-47 and accompanying text. 4. Initiative 69 was overturned by a 5-4 decision in Culliton v. Chase, 174 Wash. 363, 25 P.2d 81 (1933). The 1935 personal net income tax was similarly found by the same five justices to violate Article VII, Section 1, of the state const......
  • Catalytic Courts and Enforcement of Constitutional Education Funding Provisions
    • United States
    • University of Georgia School of Law Georgia Journal of International & Comparative Law No. 49-1, 2021
    • Invalid date
    ...pursued under sectarian agents is to give credit for sectarian teaching and influence contrary to Const. art. 9, § 4."); Culliton v. Chase, 25 P.2d 81 (Wash. 1933) (holding "graduated income tax statute . . . unconstitutional" because "[i]ncome is 'property' within Constitution requiring un......
  • Initiative Process in Washington
    • United States
    • Seattle University School of Law Seattle University Law Review No. 24-03, March 2001
    • Invalid date
    ...136 Wash. 2d 595, 606, 963 P.2d 869 (1998) (traditional rules of statutory construction apply to initiatives); Culliton v. Chase, 174 Wash. 363, 373-74, 25 P.2d 81 (1933) (initiatives subject to constitutional mandates). The Supreme Court has found term limits unconstitutional, Gerberding v......

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