In re Opinion of the Justices

• Decision Date: 25 February 1930
• Citation: 270 Mass. 593,170 N.E. 800
• Parties: In re OPINION OF THE JUSTICES.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

270 Mass. 593

170 N.E. 800

In re OPINION OF THE JUSTICES.

Supreme Judicial Court of Massachusetts.

Feb. 25, 1930.

Answers to questions propounded to the Justices of the Supreme Judicial Court by resolution of the House of Representatives.

Section 1 of the bill referred to follows:-

Section 1. (a) There shall be assessed, levied and collected, in accordance with the provisions of this chapter, from each taxpayer and each taxpayer shall pay for each taxable year a tax of one per cent upon any net business income, as defined in section two, after deducting any credits allowable against net business income as provided in the first three paragraphs of section one (b), and a tax of three per cent upon any net income from intangibles, as defined in section two and computed as hereinafter provided, after deducting any credits allowable against net income from intangibles as provided in section one (c).

(b) In determining the amount of net business income subject to tax there shall be allowed to each individual taxpayer the following credits and exemptions:

(1) In the case of a single person without dependents a personal exemption of fifteen hundred dollars;

(2) In the case of a taxpayer who on the last day of the taxable year is the head of a family, or a married person living with husband or wife, a personal exemption of three thousand dollars. A husband and wife living together shall receive but one personal exemption of three thousand dollars against their aggregate net business income and in case they make separate returns a personal exemption of three thousand dollars may be taken by either or divided between them;

(3) A further exemption of two hundred and fifty dollars against net business income for each person, other than husband and wife, depending upon and receiving his chief support from the taxpayer if such dependent person on the last day of the taxable year is under twenty-one years of age or is incapable of self support because mentally or physically.

(c) The exemptions and credits set forth in subsection (b) shall be applied and allowed in the following order and manner:

(1) Said exemption and credit shall be reduced first by the subtraction of any amounts of income not taxable under this chapter, but required to be returned by the provisions of section twenty-five;

(2) Any balance of such exemption or credit shall be applied next against net business income taxable under this chapter;

(3) Any balance of such exemption or credit shall be applied next against net income from intangibles taxable under this chapter, except that the total exemption and credit applicable against net income from intangibles in no event shall exceed the sum of one thousand dollars if the taxpayer is unmarried with no dependents on the last day of the taxable year, or the sum of fifteen hundred dollars if the taxpayer is married or the head of a family on said last day of the taxable year.

(d) If the total net income of the taxpayer, or of a husband and wife living together, whether taxable or not, required to be returned under the provisions of section twenty-five, exceeds ten thousand dollars, such a taxpayer shall not be entitled to the credits and exemption allowed by subsection (b) of this section, except that such a taxpayer shall be entitled to such credits and exemption, reduced, however, by the amount by which such taxpayer's total net income exceeds ten thousand dollars.

The Commonwealth of Massachusetts, House of Representatives, February 6, 1930.

Whereas, There is pending before the General Court a bill entitled ‘An Act Imposing a General Tax on Personal Incomes,’ printed as Appendix A in House Document No. 900 of the current year, a copy of which is annexed hereto; and

Whereas, Doubt exists as to the constitutionality of said bill if enacted into law; therefore be it

Ordered, That the opinions of the Honorable the Justices of the Supreme Judicial Court be required by the House of Representatives on the following important question of law:

Are the personal exemptions and credits provided in section one of the bill valid under the provisions of the Forty-fourth Amendment to the Constitution of the Commonwealth, permitting the General Court to grant reasonable exemptions from income taxes authorized by said amendment, and otherwise constitutional?

Frank E. Bridgman, Clerk.

To the Honorable the House of Representatives of the Commonwealth of Massachusetts:

The Justices of the Supreme Judicial Court respectfully submit this answer to the question in an order adopted by the House of Representatives on February 6, 1930, and transmitted to them on the following day, copy of which is hereto annexed. The question propounded is in substance whether the personal exemptions and credits provided in section 1 of the bill accompanying and a part of the Report of a Special Commission are valid under the provisions of art. 44 of the Amendments to the Constitution. That accompanying bill is a comprehensive income tax law completely revising and changing the present statutes on that subject. It is stated in that report, page 120, touching the bill: ‘The principle upon which the present income tax bill has proceeded is that of obtaining as close an approximation to a general income tax as is possible while retaining the differentiation between earned income or income received from business, or from property or activities reasonably classified with business, and income received from the use of intangible personal property. The application of the tax upon each class of income is made as general as is possible, omitting only rents and mortgage interest. * * * Because of the fact that persons deriving income from intangibles have as a rule a greater ability to pay than those deriving income from business,’ a smaller exemption is allowed against net income from intangibles. On page 25 of the report it is said: ‘The Commission believes that personal exemptions should be given only to those who really need them.’ In the light of these statements of general principles followed by the commission the provisions of section 1 of the accompanying bill may be analyzed. It there is provided that each taxpayer shall pay annually a tax of one per cent on net business income and three per cent on net income from intangibles. In ascertaining such net income certain exemptions and credits are to be made. These exemptions and credits against business income are $1,500 to a single person without dependents, $3,000 to the head of a family or a married person living with a husband or wife, both husband and wife being entitled only to a single exemption of that amount, and $250 for each dependent other than husband or wife. These exemptions and credits are to be reduced by the subtraction of income not taxable but required to be returned by section 25 and the balance, if any, is to be applied first against net taxable business income and next against net taxable income from intangibles, except that the total exemption and credit applicable against net income from intangibles in no event shall exceed $1,000 if the taxpayer is unmarried without dependents, or $1,500 if the taxpayer is married or the head of a family. If, however, the net income of the taxpayer, whether taxable or not, required to be returned, exceeds $10,000, no exemptions and credits shall be allowed. There are suitable provisions for adjustments near the border line of $10,000.

The pertinent parts of article 44 of the Amendments to the Constitution, whereby the General Court is empowered to levy a tax on income, are these: ‘Such tax may be at different rates upon income derived from different classes of property, but shall be levied at a uniform rate throughout the commonwealth upon incomes derived from the same class of property. The general court may tax income not derived from property at a lower rate than income derived from property, and may grant reasonable exemptions and abatements.’

Express authority thus is conferred upon the General Court in framing an income tax law to make ‘reasonable exemptions.’ No similar authority is conferred in terms elsewhere in the Constitution or in any of its Amendments with reference to the subject of taxation. See part 2, c. 1, § 1, art. 4, of the Constitution; article 41 of Amendments. Even without such express authority, small exemptions or exemptions of property devoted to public or quasi public uses have been made by our statutes. G. L. c. 59, § 5, as amended. The constitutionality of some of these exemptions has been upheld, Milford v. County Commissioners, 213 Mass. 162, 165, 100 N. E. 60;Day v. Lawrence, 167 Mass. 371, 45 N. E. 751;Gordon v. Sanderson, 165 Mass. 375, 43 N. E. 128, but of others it ‘has not been affirmed, and may be questionable,’ Opinion of the Justices, 195 Mass. 607, 612, 84 N. E. 499, 502. See Massachusetts General Hospital v. Belmont, 233 Mass. 190, 200-205, 124 N. E. 21;Opinion of the Justices, 261 Mass. 523, 545-547, 159 N. E. 55;Davis v. Treasurer & Receiver General, 208 Mass. 343, 345, 94 N. E. 556. The only limitation upon the legislative power to grant exemptions stated in article 44 of the Amendments is that they must be ‘reasonable.’ There is, however, the further implied limitation that such exemptions shall not conflict with other provisions of the Constitution. The Forty-fourth Amendment was adopted in part to overcome with reference to income the requirement of part 2, c. 1, § 1, art. 4, of the Constitution, that property taxes must be ‘proportional * * * upon all * * * estates' within the Commonwealth.

It is provided in article 10 of the Declaration of Rights of our Constitution: ‘Each individual of the society has a right to be protected by it in the enjoyment of his life, liberty and property, according to standing laws. He is obliged, consequently, to contribute his share to the expense of this protection. * * *’ This is the statement of a general principle. It is controlling of...