In re Opinion of the Justices

• Decision Date: 06 March 1911
• Citation: 79 A. 31,76 N.H. 588
• Parties: In re OPINION OF THE JUSTICES.
• Court: New Hampshire Supreme Court

79 A. 31

76 N.H. 588

In re OPINION OF THE JUSTICES.

Supreme Court of New Hampshire.

March 6, 1911.

Application by the Speaker of the House of Representatives for the opinions of the Supreme Court Justices on the constitutionality of a proposed tax law. Opinion rendered.

On February 13, 1911, the Speaker of the House of Representatives requested the opinions of the Justices of the Supreme Court in accordance with the following resolution, which was adopted by the House of Representatives on February 7th.

"Whereas, it appears to the House of Representatives that a tax at a uniform, specific rate, lower than that assessed upon property in general, on stock in public funds, stock in corporations, and money on hand or at interest, in view of the uses to which the various classes of property are put, the income derived from them, and the benefit which they receive from governmental protection, will more nearly than existing methods of taxation result in each citizen contributing his share of the expense of such protection, and will also have the effect of producing, in fact, a larger contribution to the public revenues from property of the above-named classes; and,

"Whereas, the House of Representatives has under consideration the passage of a bill which shall provide for the levy by cities and towns throughout the state of a tax upon certain classes of intangible property in the following terms, viz.:

"Personal property of the classes hereinafter enumerated is hereby exempt from all taxation other than that imposed by this act, and shall hereafter be subject to an annual tax of one-half of one per cent on each dollar of the fair cash value thereof, viz:

"(1) Stock in public funds, including all United States, state, county, city, or town stock or bonds, and all other interest-bearing bonds not exempt from taxation by the laws of the United States, or [not] specifically exempt by the laws of this state.

"(2) Stock in corporations in the state, except where the property represented by the stock is taxable directly to the corporations.

"(3) Stock in corporations located out of the state, owned by persons living in the state, except where either the stock or the property represented by it is taxed in the towns or states where the corporations are located.

"(4) Money on hand or at interest more than the owner pays interest for, including money deposited in any bank other than a savings bank within this state, or loaned on any mortgage, pledge, obligation, note, or other security, whether on interest, or interest be paid or received in advance.

"Resolved, that the Speaker of this House be directed to obtain the opinion of the Supreme Court as soon as possible as to whether, if the act were passed, the foregoing provisions would violate any portion of the Constitution of the state of New Hampshire."

Robert W. Upton submitted a brief in support of the proposed law.

To the House of Representatives:

Our opinions are asked as to the constitutional validity of certain proposed legislation as to taxation. The act set forth in the resolution of inquiry fixes, in lieu of all other taxes, a tax at a uniform rate, lower in proportion to its value than that upon property in general, upon certain subjects enumerated in four paragraphs. As under modern business conditions actual money on hand must be practically negligible as a subject of taxation, the different subjects enumerated are all included in the terms "money on deposit or at interest," and the question relates to the constitutional validity of a tax of this character upon credits. The legal and economic errors possibly involved in any tax upon credits are discussed at length in the report of the Tax Commission of 1908. "Whether the public expense is more justly and wisely divided by an inevitably unsuccesful effort to tax all property, or by the taxation of some class or classes of property that can be easily, equally, and certainly taxed, and the tax of which is equitably collected for the public from all classes of people by the higher government, is not a judicial question. If there is a class of property, the tax of which, by the natural law of tax distribution and equalization, would be eventually paid in just proportion by the whole community, the common burden may be wholly put upon that class. The nonassessment of other classes of property would not be an exemption of any class of people." Morrison v. Manchester, 58 N. H. 538. As to the wisdom of the proposed legislation, our opinions are not, and could not be, required.

The questions of law involved upon which we may be constitutionally required to advise either branch of the Legislature are: (1) The legal validity of a tax on credits; (2) If such a tax may be imposed, may it be imposed upon the value of such property at a rate different from that upon property in general; and (3) may it be imposed at a fixed rate, regardless of the sum to be raised.

The objection to the validity of any tax upon credits is the claim that in effect it is double taxation of the same property. "It is a fundamental principle in taxation that the same property shall not be subject to a double tax, payable by the same party either directly or indirectly." Nashua Savings Bank v. Nashua, 46 N. H. 389, 398; Cheshire County Tel. Co. v. State, 63 N. H. 167; Smith v. Burley, 9 N. H. 423, 427. But if economically or legally the taxation of credits is double taxation and constitutionally unsound, such property rights were when the Constitution was adopted, and have been ever since, treated as proper subjects of taxation. The result of this practical and continuous construction of the Constitution is that, "in this state, the taxability of money at interest is not an open judicial question. Whether the assessment of money at interest is a process of ascertaining the lender's or the borrower's just share of the public expense, or an exceptional, double, or otherwise wrongful taxation of the borrower, * * * permitted, not required, by an erroneous constitutional construction established by legislative usage and judicial recognition, we need not inquire. If the assessment of a creditor for his interest-bearing loan or money is, in effect, either a double taxation of his debtor, or a taxation of the debtor for property which, by conveyance or destruction, has ceased to be his, * * * such taxation is sustained by the authority of precedent, * * * too firmly established to be overthrown by any other authority than that of making laws." Morrison v. Manchester. 58 N. H. 538, 551, 552. The taxation of money at interest is constitutional. Glidden v. Newport, 74 N. H. 207, 66 Atl. 117.

Considering credits as a class of property subject to taxation, have the Legislature power to impose a less burden upon them in proportion to their value than is placed upon other property, either by diminishing the rate at which they are taxed or requiring them to be rated for assessment at a less percentage of their true value?

"The supreme legislative power, vested in the Senate and House of Representatives by the second article of the Constitution, includes the power of taxation, which is the power of causing a constitutional division to be made among the members of the community, of the public expense, of which each one is, by the twelfth article of the Bill of Rights, bound to contribute his share. Each one is bound to contribute his share of the expense incurred by all in protecting the life, liberty, and property of each, and promoting the common welfare. What each is bound to contribute being a debt of constitutional origin and obligation, no part of the share of one can be constitutionally exacted of another." Morrison v. Manchester, 58 N. H. 538, 549. "This power, inherent in the people, was by them delegated to the general court, subject to the condition that all taxes imposed should be proportional and reasonable upon all the inhabitants of and residents within the state, and upon all the estates within the same. While they granted the power in general terms, they qualified the manner of its execution, and determined the subjects upon which it should operate. It was confined to persons and estates." State v. Express Co., 60 N. H. 219, 236. "To establish the rules by which each individual's just and equal proportion of a tax shall be determined is a task of much difficulty, and a very considerable latitude of discretion must be left to the Legislature on the subject. Opinion of the Court, 4 N. H. 565, 570.

Since 1833, (he legislative and judicial construction of the Constitution has been that an equal division requires a proportional valuation of all property taxed and the assessment of all at the same rate. The act of January 4, 1833 (Laws 1832-33, c. 108), required the appraisal of all taxable property, or ratable estate (the term used in the act), at its full and true value in money, and that the same be estimated for assessment at one-half of 1 per cent., precisely as the statute now requires. P. S. 1901, c. 58, § 1; Id. c. 59, § 1. Chapter 58 of the Public Statutes provides for an invoice of all taxable property and requires (section 1) the selectmen to appraise all taxable property therein "at its full and true value in money." Chapter 59, relating to the assessment of taxes, provides (section 1) that "all taxes * * * shall be assessed upon the invoice, * * * estimating each poll at fifty cents, and taxable property at the rate of fifty cents on each hundred dollars of its appraised value." Whether this latter statute was intended to avoid difficulties in the arithmetical computation of individual taxes, or is merely a survival of early provincial methods of assessment, it is probably now generally disregarded in assessing taxes; and its only office is to effect the distribution of the tax between polls and estates. Modern practice generally, it is believed, treats polls as appraised at $100 each, and assesses the tax directly upon...