In re Magnes' Estate

• Decision Date: 20 June 1904
• Citation: 32 Colo. 527,77 P. 853
• Parties: In re MAGNES' ESTATE. v. ELDER, Treasurer. BROWN
• Court: Colorado Supreme Court

77 P. 853

32 Colo. 527

In re MAGNES' ESTATE.

BROWN v. ELDER, Treasurer.

Supreme Court of Colorado

June 20, 1904

Error to County Court, City and County of Denver; Ben B. Lindsey Judge.

In the matter of the estate of Peter Magnes, deceased. There was a judgment relative to the inheritance tax, and Samuel R Brown, administrator of deceased, brings error; Charles S Elder, treasurer of the city and county of Denver, being defendant in error. Affirmed.

H. W. Spangler, for plaintiff in error.

N. C. Miller, Atty. Gen., for defendant in error.

CAMPBELL J.

The sole question for determination is whether the so-called inheritance tax law of this state is valid. It is said to contravene several provisions of our state and federal Constitutions. As throwing light upon the object of this legislation, and as pertinent to some of the objections made to it, a brief reference to the history of the state's financial condition and standing will be helpful:

By section 11 of article 10 of our Constitution, as originally adopted, the minimum rate of taxation on property for state purposes was two, and the maximum rate six, mills on each dollar of valuation, depending upon the amount of taxable property within the state. As amended in 1891 (Sess. Laws 1891, p. 89), which amendment is still in force, such rate can never exceed four mills on each dollar of valuation. From the beginning of our state history, down to the year 1901, the public revenue received into the state treasury for state purposes was not sufficient to meet the expenses of the three great departments of government, and to provide an adequate support for the different state institutions. Whether the shortage was due to excessive appropriations, or to failure of the executive assessing officers to fix the valuations as the laws require, it is neither profitable to inquire, nor necessary to determine. It is enough for our present purpose to say that different Governors of the state and its various executive officers and the courts have repeatedly called to the attention of the General Assembly the annual deficits in the state revenues, and suggested methods for liquidating and preventing a recurrence of the same. At one session of the General Assembly a plan was adopted for lowering the rate which counties might levy for county purposes; the thought being that such limitation would result in increased valuations of property, which would inure to the benefit of the state. If such plan had been adhered to, and the rate kept sufficiently low, the financial situation might have been relieved, but at the close of the fiscal year of 1900 the state's financial statement was unsatisfactory. There were then outstanding obligations of the state, evidenced by defaulted warrants and certificates of indebtedness, in large amount, bearing interest at more than the then legal rate, which could not be paid; and it seemed practically impossible to get sufficient revenue from a direct tax on property even to pay current expenses of the government--much less, to take up these matured obligations. Such was the condition that confronted the Thirteenth General Assembly when it convened in January, 1901. To meet and remedy it, that body passed a comprehensive revenue measure, the chief object of which was to provide adequate funds for state purposes. Because of imperfections in the act pointed out by the courts, apparently by general consent of the different departments the act was deemed invalid; and so, the emergency being great, the Governor convened the General Assembly in special session in 1902; and, as appears from his proclamation and message thereafter submitted, the primary object of the call was to enable the General Assembly to provide ways and means for securing more revenue for the general purposes of the state. At such special session there was introduced and passed by the General Assembly a comprehensive revenue measure, entitled 'An act in relation to public revenue.' Acts Sp. Sess. 1902, c. 3. Included therein from sections 21 to 41, both inclusive, are what constitute our present so-called inheritance tax provisions, which are the subject of attack in this case. These particular sections, though once declared by this court objectionable legislation (In re Inheritance Tax, 23 Colo. 492, 48 P. 535), were taken bodily from the statute of Illinois, and after the same had been construed by the Supreme Court of that state and held constitutional under provisions substantially the same as our own. By section 21 of this act, 'All property, real, personal and mixed, which shall pass by will or by the intestate laws of this state from any person who may die seized or possessed of the same while a resident of this state, * * * is subject to a tax at the rate hereinafter specified,' and all persons so receiving such property, in whatever capacity, are made liable for the tax until the same is paid. The section provides that when the beneficial interests shall pass to or for the use of 'any father, mother, husband, wife, child, brother, sister, wife or widow of the son or the husband of the daughter,' or to an adopted child, or to one to whom the deceased stood in the acknowledged relation of a parent, or to any lineal descendant, the rate of tax shall be $2 on every $100 of the clear market value of such property so received, provided that the sum of $10,000 of any such estate shall not be subject to any such duty or taxes, and only the amount in excess of $10,000 shall be subject thereto. When the beneficial interests to any property or income therefrom shall pass to or for the use of any uncle, aunt, niece, nephew, or any lineal descendant of the same, the tax is $3 on every $100; and in all other cases on every $100 of the clear market value of what passes, and at the same rate for any less amount, on all estates of $10,000 and less, $3; on all estates of over $10,000, and not exceeding $20,000, $4; on all estates over $20,000, and not exceeding $50,000, $5; and, on all estates over $50,000, $6; and there is a proviso that, where the estate is of less value than $500, it shall not be subject to any duty or tax at all. Section 22 provides that 'when any person shall bequeath or devise any property or interest therein or income therefrom to mother, father, husband, wife, brother, sister, the widow of the son, husband, of the daughter, or a lineal descendant during the life or for a term of years and remainder to the collateral heir of the decedent, or to the stranger in blood or to the body politic or corporate at their decease, or on the expiration of such term, the said life estate or estates for a term of years shall not be subject to any tax and the property so passing shall be appraised immediately after the death at what was the fair market value thereof at the time of the death of the decedent, * * * and after deducting therefrom the value of said life estate, or term of years, the tax prescribed by this act on the remainder shall be immediately due and payable to the treasurer of the proper county.' There is a proviso that persons beneficially interested, if they elect not to pay the same until they shall come into the actual possession and enjoyment, shall give bond for securing the payment of the amount due when they do come into possession. The other sections are purely administrative in character, and are not material to this review.

1. The tax herein imposed is attacked upon the ground that it lacks the elements of uniformity and equality which section 3 of article 10 was intended to secure, and is in excess of the limited rate of four mills on each dollar of valuation which, as it is said, the general assembly may not, under section 11 of the same article of our Constitution, exceed in securing revenue for general state purposes. In the late case of Parsons v. People, 32 Colo. 221, 76 P. 666, it was held that section 3 applies only to taxes upon property, and not to a privilege or occupation tax, and that in raising revenue for state purposes the General Assembly is not restricted to a tax on property at the limited rate of four mills prescribed by section 11, but may select other subjects of taxation, such as occupations and privileges. A careful investigation will disclose that, with few exceptions, where similar questions have been raised in other states and in the Supreme Court of the United States, an inheritance or succession tax has been held not to come within the purview of the uniformity and equality clause of State Constitutions, and that the power to impose the same is to be found in the sovereign power of taxation which the state possesses to the fullest degree, except as limited in its organic act. In these decisions substantially every objection as to the lack of uniformity and equality, and the alleged arbitrary and unjust discriminations which these provisions are said to exhibit, and that they contravene various sections of our Bill of Rights affecting the property rights of citizens, have been considered and decided adversely to the contention of counsel for plaintiff in error. It is not necessary for us to make an argument in support of their validity, and, if we should do so, the result would be largely a repetition of the reasoning of the Supreme Court of the United States and of many state tribunals. We shall content ourselves merely with the general statement taken from the opinion of the Supreme Court of the United States in Magoun v. Illinois Trust & Sav. Bank, 170 U.S. 283, 18 S.Ct. 594, 42 L.Ed. 1037, in which the decree of the Circuit Court of the United States for the District of Illinois upholding the validity of the act of which ours is a substantial copy was affirmed--that the constitutionality of such taxes is based upon two principles:...