Dane v. Jackson, 720
| Decision Date | 01 June 1921 |
| Docket Number | No. 720,720 |
| Citation | 65 L.Ed. 1107,41 S.Ct. 566,256 U.S. 589 |
| Parties | DANE v. JACKSON, Treasurer, etc |
| Court | U.S. Supreme Court |
Mr. Philip Nichols, of Boston, Mass., for plaintiff in error.
[Argument of Counsel from pages 590-594 intentionally omitted] Mr. William Harold Hitchcock, of Boston, Mass., for defendant in error.
In this proceeding we are asked to review and reverse a judgment of the Supreme Judicial Court of Massachusetts, holding valid an act of the General Court (General Acts 1919, c. 314), providing for the distribution of the proceeds of an income tax among the towns, cities and taxing districts of that state, against the contention that it violates the due process and equal protection of the law clauses of the Fourteenth Amendment to the Constitution of the United States.
By amendment to the Constitution of Massachusetts, approved by the people in 1915 (xliv), the General Court was given power to impose a tax at different rates upon income derived from different classes of property but at a rate uniform throughout the commonwealth on incomes derived from the same class of property and to exempt the property producing such income from other taxes.
Pursuant to this authority, a law was enacted in 1916 (General Acts 1916, c. 269), which it is sufficient to describe as taxing, with exceptions negligible here: Income received from bonds, notes, money at interest and debts due the person paying the tax; dividends on shares of any corporations not organized under the laws of Massachusetts; dividends on shares in partnerships, associations or trusts, the interest in which is represented by transferable shares; and income derived from professions, employments, trade or business. Intangible property, the income from which is taxed by the act, is practically exempted from local taxation.
The validity of this act is not assailed.
Prior to the enactment of this law, the taxing subdivisions of the state had taxed the real estate and tangible and intangible personal property, within their respective jurisdictions, for both state and local purposes, and the exemption from local taxation of intangible property, provided for in the act, necessarily resulted in an important reduction in their revenues.
The proceeds of the income tax thus provided for were distributed by temporary acts applicable only to the years 1917 and 1918, but in the year 1919 the act was passed, the validity of which is assailed in this proceeding, which provides, in substance: That the state treasurer shall pay to each city, town and district, from the income tax collected for the year 1919, an amount equal to 90 per cent. of the difference between the average amount of the tax levied on tangible and intangible personal property therein in the years 1915 and 1916 and the average that would be produced by a tax upon the personal property actually assessed therein for the years 1917 and 1918 at the average of the rates of taxation prevailing therein in 1915 and 1916. In each succeeding year, until and including the year 1927, the amount payable was reduced to an amount 10 per cent. less than it was for the next preceding year. Any amount collected in any year prior to 1928, in excess of the required payments must be distributed to the cities, towns and districts of the state in proportion to the amount of the state tax imposed upon each for such year, and in 1928 and thereafter the whole of the amount of the income tax must be so distributed each year.
It is obvious that it was the purpose of this act to reimburse the various taxing subdivisions until the year 1928 to the extent thought necessary to supply the loss which each would sustain by the withdrawal from its taxing power of the intangible property the income of which was taxed by the state, and that prior to 1928 any excess of the income tax fund over such requirements, and beginning with that year and continuing thereafter, the whole of that fund, should be distributed to such subdivisions in proportion to the amount of the state tax paid by each.
The petition in the case is one for mandamus and the essential allegations of it are: That the petitioner, an inhabitant of the town of Brookline, in the years 1919 and 1920 derived income from intangible personal property and otherwise which rendered him subject to the provisions of the Income Tax Act of 1916; that the state tax in Massachusetts is imposed upon towns and cities in proportion to the value of the real estate and tangible personal property and polls taxable therein, without regard to intangible property or incomes taxed; that a sum in excess of $1,000,000 was raised in the year 1920 by the taxation of the inhabitants of Brookline upon incomes derived during the year 1919 from intangible property located in that town and on other income earned therein, and that as great an amount will be in like manner raised in 1921; that under the distribution statute of 1919 there will be returned to the town of Brookline not more than $500,000 in the year 1920, and in each year thereafter a less amount, until in the year 1928 not more than $250,000 will be returned to it, while other towns, having greater real estate and tangible personal property valuation for taxation, will receive much more than their inhabitants will have contributed to the income tax fund; and that such payments may be used by the cities and towns receiving them, if they so elect, for the exclusive use and benefit of their own inhabitants for local and 'proprietary' purposes, which would not in any degree contribute to the benefit of the petitioner, or of the inhabitants of Brookline or of the citizens generally of the commonwealth. Upon these allegations a writ of mandamus, commanding the respondent not to distribute any of the income tax collected in the years 1920 or 1921, was prayed for.
Upon demurrer the petition was dismissed.
This statement of the case shows that it is admitted: That the Income Tax Act of 1916 is a valid law; that the contention is, only, that the act of 1919, providing for distribution of the tax, is unconstitutional; and that this contention rests wholly upon the allegation of the petition that such amount of the income tax collected by the state from the plaintiff in error and from other inhabitants of Brookline as may be returned...
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