Duffy v. Burrill

• Decision Date: 13 November 1919
• Citation: 234 Mass. 42,125 N.E. 135
• Parties: DUFFY et al. v. BURRILL, Treasurer and Receiver General. DANE v. SAME.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

234 Mass. 42

125 N.E. 135

DUFFY et al.

v.BURRILL, Treasurer and Receiver General.

DANE

v.SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 13, 1919.

Report from Supreme Judicial Court, Suffolk County.

Petitions for writs of mandamus by Maurice A. Duffy and others and by Ernest B. Dane against Charles L. Burrill, Treasurer and Receiver General of the Commonwealth. On report by a single justice of the Supreme Judicial Court for determination by the full court. Petitions dismissed.Felix Rackemann, Lincoln Bryant, and John Abbott, all of Boston, for petitioners Duffy and others.

Philip Nichols, of Boston (Ralph A. Stewart, of Boston, of counsel), for petitioner Dane.

Henry A. Wyman, Atty. Gen., and Wm. Harold Hitchcock, Asst. Atty. Gen., for respondent.

RUGG, C. J.

The primary object of these proceedings is to test the constitutionality of St. 1919, c. 314. That act provides for the distribution among the several cities, towns and taxing districts of the income tax collected by the commonwealth, under the provisions of St. 1916, c. 269, and acts in amendment thereof enacted pursuant to article 44 of the amendments to the Constitution. By that amendment full power is granted to the general court to levy a tax on income, to classify property in respect of income, and to exempt from other taxation property the income of which is thus taxed. One effect of that amendment is to withdraw from the scope of the general requirement of chapter 1, § 1, art. 4, of the Constitution to the effect that all property taxes be proportional, whatever is rightly made subject to the income tax. Tax Commissioner v. Putnam, 227 Mass. 522, 116 N. E. 904, L. R. A. 1917F, 806.

By St. 1916, c. 269, and acts in amendment thereof, the assessment and collection of the income tax is vested in the tax commissioner and his subordinates. These are state officers as distinguished from public officers selected by the various municipalities of the commonwealth, hitherto under the law chiefly charged with the assessment and collection of property taxes. Incidentally attack is made upon the propriety of this method of assessing and collecting the income tax. The only point within our jurisdiction to consider is whether this method violates any provision of the Constitution. No limitation in the original Constitution, in amendment 44, or in the other amendments, prevents the general court from committing to a state officer or officers appointed by the Governor, rather than to the assessors and collectors of the several cities and towns, the levy and collection of the income tax. The corporation franchise tax, the foreign corporation, street railway and other excise taxes, are familiar instances of the assessment and collection of certain kinds of taxes through state rather than municipal officers. Their constitutionality in this particular is not open to doubt. The income tax law also, in this respect, is free from any constitutional weakness. The power to tax is a sovereign power. It is an attribute of the commonwealth. Cities and towns have no inherent power to levy taxes. They can exercise only those powers to tax which have been delegated to them by the General Court as the representative of the commonwealth. They can levy taxes only on the property and for the purposes established by the General Court acting within its constitutional limitations. Power has not been delegated by the General Court to the several municipalities to levy the income tax. It is retained as a direct incident of sovereignty. The income tax thus is a state tax. The several municipalities have been abolished as taxing districts so far as concerns intangible personal property, which by the income tax law is practically exempted from local taxation because made to contribute what has been determined by the Legislature to be its fair share toward the support of government through the imposition of the income tax. The commonwealth has been made a single taxing district for this purpose. The income tax is a general tax assessed equally upon all inhabitants of the commonwealth in proportion to their respective incomes from the designated sources.

The objection mainly urged against the constitutionality of St. 1919, c. 314, relates to the method of distribution of the income tax, when collected, among the cities and towns and taxing districts of the commonwealth. That method, summarily stated, is for the commonwealth to pay a progressively diminishing part of the income tax during the ten years ending with 1928 to the several cities, towns and districts having power of taxation, in a proportion based on the difference between the average amount of the tax levied upon personal property in such city, town or district for 1915 and 1916 (being the last two years before the operation of the income tax law when taxes were levied in the several cities, towns and taxing districts upon all personal property, including both intangible and tangible), and the average amount as computed by the tax commissioner that would be produced by a tax upon the personal property actually assessed in each city, town or district for 1917 and 1918 (being the first two years when the income tax was in operation and intangible personal property was exempted from local taxation and only tangible personal property was actually assessed), at an average of the rates of taxation which prevailed in 1915 and 1916, the balance of the income tax each year in excess of that part needed to make such payments, and the entire income tax subsequent to the expiration of ten years (after reimbursing the commonwealth in every year for the expenses incurred and abatements made in the transactions), to be paid by the commonwealth to the several cities and towns in proportion to the amount of the state tax imposed upon each in such year.

The several statutes enacted since the income tax law went into operation have contained as a fundamental element provision for making up to the several cities, towns and taxing districts, out of the income tax collected by the commonwealth, as near as could readily be calculated the losses sustained by them through the exemption from local taxation of the intangible personal property, which before the enactment of the income tax law had been subject to local taxation. The income tax, however, has yielded a revenue much larger than is required to make good these losses. The statute here assailed is an attempt on the part of the General Court to deal with the subject in a more comprehensive and permanent way than was possible before results were available from experience in the actual working of the income tax law.

The method embodied in the present statute is the assessment and collection of the income tax by state officers according to fixed principles of state wide application. Such unification of the territory of the commonwealth in this particular obviates differences likely to arise through divergences of opinion and practice almost inevitable among local taxing and collecting officers of the several municipalities. Out of the sums thus collected as income tax the commonwealth retains nothing for defraying distinctively state charges. It keeps only enough to reimburse itself for the expenses incurred in administering the law. The entire sum thus collected, after deducting expenses, is distributed amongst the cities, towns and taxing districts of the commonwealth. A part of this distribution for a limited period is for the purpose of making up to them in diminishing proportion the loss in intangible personal property taxable locally occasioned by the scheme of the income tax law, and the rest is distributed in proportion to the amount of state tax assessed upon the several municipalities. The state tax is assessed now upon the several municipalities in proportion to the valuation of the real estate and of the tangible personal property in each, omitting all consideration of intangible personal property owned by the inhabitants of each. The distribution of the income tax confessedly is not made to the municipalities on the footing of the amount of income tax collected from their inhabitants. That factor is ignored. The design of the statute is that the income tax shall be collected at large throughout the commonwealth and distributed to the municipalities in ratio to the valuation of all the property therein now made subject to taxation according to chapter 1, § 1, art. 4, of the Constitution, requiring proportional and reasonable taxes.

This contravenes no provision of the Constitution. The income tax is collected from the entire population of the commonwealth, so far as liable under the law to such taxation. The territory of the commonwealth constitutes a single taxing district for that purpose. The distribution of the tax is made throughout the entire commonwealth. No part is excluded from the distribution. Every city and town shares in a definite ratio. No political subdivision is selected for special discrimination or unusual favor. All are treated alike in accordance with the one uniform rule embodied in the statute. The distribution is made upon a basis different from that on which the collection is made. But it is upon a basis recognized by law and practice as just for the levying of the state tax. It hardly could be contended that the foundation upon which the state tax rests is unconstitutional because irrational, whimsical or arbitrary.

It is manifest that the uses to which the income tax can be devoted must be wholly public. Money raised by taxation can be disbursed only for public uses and not in any sense for the private advantage of individuals. The money when distributed to the several cities and towns is affected with the same public interest as when in the treasury of the commonwealth. It can be appropriated and expended only for public purposes. Lowell v. Boston, 111 Mass. 454, 15 Am. Rep. 39;Wheelock v. Lowell, 196 Mass. 220, 81 N. E. 977,124...