In re Construction of Revenue Law, sec. 18, 19

• Decision Date: 12 May 1891
• Citation: 48 N.W. 813,2 S.D. 58
• Parties: In re Construction of Revenue Law, §§ 18, 19.
• Court: South Dakota Supreme Court

48 N.W. 813

2 S.D. 58

In re Construction of Revenue Law, §§ 18, 19.

Supreme Court of South Dakota

May 12, 1891

The question submitted was the construction of sections 18 and 19 of the revenue law, entitled "An act prescribing the mode of making assessment and the levy and collection of taxes, and for other purposes relative thereto," approved March 9, 1891.

PER CURIAM.

Supreme Judges' Chambers. Pierre, South Dakota, May 12, 1891. To his Excellency, Arthur C. Mellette, Governor of the State of South Dakota--Sir: Your communication of date May 4, 1891 addressed to us, requesting our opinions under and by virtue of section 13, art. 5, of the constitution of the state of South Dakota, on certain matters submitted by you, has been received and considered, and we herewith most respectfully submit to you our opinions upon the questions submitted to us. Your communication is as follows: "Executive Office. Pierre, S. D., May 4, 1891. To the Honorable, the Judges of the Supreme Court of the State of South Dakota--Gentlemen The executive department of the state is seriously embarrassed by a manifest ambiguity in the meaning of sections eighteen (18) and nineteen (19) of an act of the legislature, approved March 9, 1891, entitled 'An act prescribing the mode of making assessment and levy and collection of taxes, and for other purposes relative thereto;' county officials insisting upon administering the law according to different interpretations, which, in so important a matter as providing the public revenue, cannot fail to work great injustice to the tax-payers of the state. Grave doubts are also suggested as to whether the provisions of the sections aforesaid are not in conflict with the provisions of article 11 of the constitution, which provides that taxes on all species of property shall be uniform, and based upon real values, subject to certain defined exemptions. To avoid much confusion in the administrative department, and to promote justice, I therefore have the honor to hereby require the opinion of the judges of the supreme court upon the important questions of law involved in the exercise of executive powers arising under the statutes herein-before specified, viz.: (1) Touching the question as to whether their provisions are in conflict with the constitution of the state, and therefore void. (2) If authoritative, what is their proper interpretation touching the deductions of indebtedness? I have the honor to be honorable sirs, your very obedient servant. [Signed] A. C MELLETTE, Governor of South Dakota."

The two questions submitted will be considered in the order we find them in your communication. And first, as to the constitutionality of the sections 18 and 19 referred to. Sections 18 and 19 of the revenue law of 1891, entitled "An act prescribing the mode of making assessments and the levy and collection of taxes, and for other purposes in relation thereto," approved March 9, 1891, are as follows: "Sec. 18. Credits, how listed and assessed. Any person who is required to list credits, either for himself or for any other person firm, or corporation, may deduct from the gross amount thereof the amount of all bona fide indebtedness of himself, or of any such person, firm, or corporation; but no acknowledgment of indebtedness not founded on actual consideration to the full amount of such acknowledgment at the time when the same was given, and no acknowledgment made for the purpose of being so deducted shall be considered a debt in the meaning of this section, and every person so claiming any deductions shall furnish the assessor with a list containing: First, the amount of all book-accounts; second, the amount of all notes,--due him, and also a list of the amount of all book-accounts owing by him; and he shall be required to verify the same by oath administered by the assessor. Nothing in this section shall be so construed as to apply to any bank, banker, or corporation exercising banking powers or privileges: provided, however, that any person, company, or corporation, in making up the amount of personal property required to be listed, for himself, company, or corporation, shall be allowed to deduct from the gross amount thereof any indebtedness of himself, company, or corporation if the same be owned or held within this state: provided, further, that grain held by the producer of the same, actually sold or contracted to be sold, but not delivered, shall be classed as credits. Sec. 19. What are proper deductions--Verifications of deductions. No person, company, or corporation shall be entitled to any deductions on account of any bond, note, or obligation of any kind given to any mutual insurance company, nor on account of any unpaid subscription to or installment payable on the capital stock of any company, whether incorporated or unincorporated; and in all cases where deductions are claimed from credits the assessor shall require that such deductions be verified by oath of the person, officer, or agent claiming the same; and any such person, officer, or agent knowingly or willfully making a fraudulent statement of such deductions shall be liable to a fine of not less than one hundred (100) dollars nor more than $1,000, in addition to all damages sustained by the state, county, or other local corporation, to be recovered in any proper form of action, in any court of competent jurisdiction, in the name of the state of South Dakota."

The provisions of section 18 are some-what ambiguous; but giving to them a liberal construction, and such as their language seems to require, they provide: (1) That a person having credits is allowed to deduct therefrom all his indebtedness, whether owned or held within or without the state; (2) that a person having personal property, presumably other than credits, is allowed to deduct therefrom such indebtedness as is held or owned within the state; and (3) that grain held by the producer of the same, actually sold or contracted to be sold, but not delivered, shall be classed as credits. No provision is made for deducting any indebtedness by a person not the owner of credits or other personal property; owners of real property only, not being entitled to any deductions whatever. Can the provisions of these sections be sustained under article 11 of the organic law of this state? The sections of this article bearing upon this subject are 2, 4, 5, 6, and 7, and are as follows: "Sec. 2. All taxes to be raised in this state shall be uniform on all real and personal property, according to its value in money, to be ascertained by such rules of appraisement and assessment as may be prescribed by the legislature by general law, so that every person and corporation shall pay a tax in proportion to the value of his, her, or its property, and the legislature shall provide by general law for the assessing and levying of taxes on all corporation property, as near as may be, by the same methods as are provided for assessing and levying of taxes on individual property." Sec. 4. The legislature shall provide for taxing all moneys, credits, investments in bonds, stocks, joint-stock companies, or otherwise, and also for taxing the notes and bills discounted or purchased, moneys loaned, and all other property, effects, or dues of every description, of all banks and of all bankers, so that all property employed in banking shall always be subject to a taxation equal to that imposed on the property of individuals. Sec. 5. The property of the United States, and of the state, county, and municipal corporations, both real and personal, shall be exempt from taxation. Sec. 6. The legislature shall, by general law, exempt from taxation property used exclusively for agricultural and horticultural societies, for school, religious, cemetery, and charitable purposes, and personal property to any amount not exceeding in value two hundred dollars for each individual liable to taxation. Sec. 7. All laws exempting property from taxation, other than that enumerated in sections 5 and 6 of this article, shall be void."

Two systems of taxation have had, and now have, their advocates. One is based upon the theory that a person should only be required to pay taxes on the value of his property left after deducting his bona fide indebtedness,--thus in effect taxing him on what he may be worth over and above his indebtedness and the other is based upon the theory that all property, real and personal, should bear the burden of taxation in proportion to its value, under a uniform system, without regard to the owner's indebtedness; that, as all property is alike protected by the government, it should all alike contribute to the support of the government. The framers of our organic law seem to have adopted the latter system, and made all property within the state, whether real or personal, including credits, the basis of taxation. Article 11 of our constitution was evidently adopted upon this theory. As will be seen, section 2 of that article declares that "all taxes to be raised in this state shall be uniform on all real and personal property, according to its value in money," etc.; section 4 enjoins upon the legislature the duty of providing for taxing "all moneys, credits, investments in bonds, stocks. joint-stock companies, or otherwise;" section 5 designates specifically what property shall be exempt without legislative action; section 6 provides specifically what property the legislature shall by law exempt, and the maximum amount of exemption that shall be allowed to individuals; and section 7 declares that all laws exempting property from taxation, other than that enumerated in sections 5 and 6 of the article, shall be void. It will thus be seen that the framers of the organic act have in most positive terms declared that "all taxes...