McPherson v. Fisher

• Decision Date: 05 July 1933
• Citation: 23 P.2d 913,143 Or. 615
• Parties: McPHERSON v. FISHER et al., State Tax Commission.
• Court: Oregon Supreme Court

23 P.2d 913

143 Or. 615

McPHERSON v. FISHER et al., State Tax Commission.

Supreme Court of Oregon

July 5, 1933

In Banc.

Appeal from Circuit Court, Multnomah County; Robert G. Tucker Judge.

Suit by Ruth C. McPherson against Earl L. Fisher and others, as the State Tax Commission. From a decree of dismissal, plaintiff appeals.

Affirmed.

W. Lair Thompson and Ralph H. King, both of Portland (Arthur K McMahan, of Albany E. O. Immel, of Eugene, and McCamant Thompson & King, of Portland, on the brief), for appellant.

Willis S. Moore, of Salem (I. H. Van Winkle, Atty. Gen., on the brief), for respondents.

CAMPBELL, Justice.

This is a suit instituted under chapter 335, p. 572, General Laws of Oregon, 1931, for the purpose of reviewing the action of the state tax commission in refusing to assess plaintiff's intangible income tax for the year 1931 under the law known as the Property Tax Relief Act of 1929, § 69-1501 et seq. Oregon Code 1930.

Plaintiff during the entire year of 1931, was the wife of George L. McPherson, and for that year had a net income from intangibles owned by her separately of $488.94. For the same year, her husband had a net income from all sources in excess of $3,000. Plaintiff made her income tax return for the year 1931 on forms furnished by the tax commission showing the above facts, and was assessed a tax, at the rate of 8 per cent. on her full income, amounting to $39.11, which was paid in semiannual installments. Thereafter she petitioned the tax commission for a revision of the tax assessed against her. The commission denied her petition. She thereupon brought this suit under section 28, chapter 335, p. 585, Oregon Laws 1931, in the county of her residence within 60 days after receipt of notice of the order of the tax commission denying her petition for revision, her contention being that chapter 335, Oregon Laws 1931, and particularly division b of subdivision 1 of section 11 thereof, is unconstitutional, in that it violates the due process and equal protection clauses of the Fourteenth Amendment of the United States Constitution; that it is repugnant to sections 20 and 32 of article 1, and section 1 of article 9, of the Oregon Constitution.

A demurrer was filed to the complaint on the grounds (1) that the court had no jurisdiction of the subject-matter, and (2) that the complaint did not state facts sufficient to constitute a cause of suit. The demurrer was sustained, and, plaintiff declining to further plead, the suit was dismissed. Plaintiff appeals.

The pleadings present two questions: (1) Is the procedure adopted sufficient to give the court jurisdiction to entertain this suit? (2) Is the Intangibles Income Tax Act of 1931 (chapter 335, Oregon Laws 1931) constitutional?

"The controversy is one as to the boundaries of legislative power. It must be dealt with in a large way, as questions of due process always are, not narrowly or pedantically, in slavery to forms or phrases." Justice Cardozo in Burnet v. Wells, 53 S.Ct. 761, 764, 77 L.Ed. -.

We approach the consideration of the constitutionality of the statute with the thought that the legislative branch of the government, in enacting the law, had in mind the various provisions of the Constitutions of the United States and of the state of Oregon. We must presume that the enactment is valid. We understand that the burden of proof is on the party attacking its invalidity to establish his contention, and that, before we should declare the act void, by reason of conflict with the organic laws of the country, we should be convinced beyond a reasonable doubt of its repugnance thereto. We must also realize that we are not concerned with, nor permitted to take into consideration, the "desirability, expediency, policy, justice, or wisdom of its enactment." Eastern & Western Lumber Co. v. Patterson, 124 Or. 112, 258 P. 193, 196, 264 P. 441, 60 A. L. R. 528; Wright v. Beveridge, 120 Or. 244, 251 P. 895; Kinney v. Astoria, 108 Or. 514, 217 P. 840; Astoria v. Cornelius, 119 Or. 264, 240 P. 233. The duty of raising revenue is one that the Constitution has declared absolutely to be a legislative function only.

"No tax *** shall be imposed without the consent of the people or their representatives in the legislative assembly. ***" Article 1, § 32, Oregon Constitution.

We must appreciate the fact that it is very difficult, if not nigh impossible, to construct a revenue raising law, by which it can be demonstrated to a mathematical certainty that the tax burden is laid evenly on each taxpayer according to his ability to pay or benefits received. Nor can such an act be so framed as to make the duty of contributing to the cost of government a pleasure to all taxpayers. "The average citizen can usually contemplate with undisturbed serenity the law that imposes a tax on the other fellow." With these fundamentals in mind, we proceed to the further consideration of the cause.

1. It is unnecessary to pass upon the question of procedure at this time. Plaintiff, in her opening brief, asserts that section 28 of chapter 335, Oregon Laws 1931, makes provision for this kind of a suit. In her reply brief, she claims that the suit is brought under section 69-1528 and section 69-1529, Oregon Code 1930. We are not concerned at this time with the procedure by which the case got to this court. It is here. The circuit court, in which it was tried, is a court of competent general jurisdiction, and had jurisdiction of the subject-matter and of the parties. The statute has made provision for the maintenance of such a suit "in any court of competent jurisdiction." Chapter 335, section 28, Oregon Laws 1931. The state thereby consents that such a suit may be maintained. The controversy has been presented in such a way that the court may determine the questions involved without injury to any one. It is important that the procedure laid down by the Legislature should be followed in order that parties have a trial in the manner provided by law. However, "procedure is a means to an end and not a fetish to be worshipped."

The Intangibles Income Tax Act of 1931 (chapter 335, Oregon Laws 1931) must be read in connection with the Property Tax Relief Act of 1929 (chapter 448, General Laws of Oregon, 1929, section 69-1501 et seq., Oregon Code 1930). The Property Tax Relief Act of 1929 imposes a tax upon every individual with respect to the taxpayer's entire net income from every source whatsoever. Id.§ 69-1503. "'Net income' means the gross income *** less the deductions allowed by this act." Id. § 69-1505. The term "gross income" does not include "interest, dividends and/or other income which may be otherwise taxed by this state as income of the taxpayer." Id. § 69-1506, subd. 2.

"There should be deducted from the net income of individuals the following exemptions:

"(a) In the case of a single individual, a personal exemption of $1,500.

"(b) In the case of the head of a family, or a married individual living with husband or wife, a personal exemption of $2,500. A husband and wife living together shall receive but one personal exemption of $2,500 against the aggregate net income; and in case they make separate returns the personal exemption of $2,500 may be taken by either or divided between them." Id. § 69-1513.

The Legislature at its session in 1929 also enacted chapter 429, p. 636, of the General Laws of Oregon 1929, being an act imposing a tax on the gross income from intangibles, that is, on the gross income from money and credits, denied as money at interest, bonds, notes, claims, and demands, etc. Chapter 429, General Laws of Oregon 1929. This act (afterwards declared unconstitutional, Redfield v. Fisher, 135 Or. 180, 292 P. 813, 295 P. 461, 73 A. L. R. 721), was approved by the Governor March 8, 1929. The Property Tax Relief Act of 1929 was approved March 9, 1929; therefore the tax on gross incomes from intangibles had already been imposed, and such incomes were exempted from the class of income covered by the Property Tax Relief Act of 1929. At its session in 1931, the Legislature, with the intention of avoiding the features of said chapter 429, repugnant to the Constitution, enacted the Intangibles Income Tax Act of 1931, being chapter 335, Oregon Laws 1931, the act under consideration. This act imposed a tax on every "individual and corporation *** with respect to the taxpayer's net income as herein defined." Id. § 3. Net income is defined as "the gross income of the taxpayer from intangibles less the deductions allowed by this act." Id. § 7. "'Intangibles' means and includes money at interest, bonds, notes, claims. ***" Id. § 2, subd. 9.

"There shall be deducted from the net income the following exemptions:

"(a) In the case of a single individual, a personal exemption to be determined by subtracting from $1,500 his combined net income from all sources as defined in this act and chapter 448, General Laws of Oregon, 1929, but in no case shall such exemption exceed $500.

"(b) In the case of the head of a family, or a married individual living with husband or wife, a personal exemption to be determined by subtracting from $2,500 his combined net income from all sources as defined in this act and chapter 448, General Laws of Oregon, 1929, but in no case shall such exemption exceed $800. A husband and wife living together shall receive but one personal exemption provided in this paragraph, not exceeding $800, against their aggregate net income and in case they make separate returns, the personal exemption may be taken by either or divided between them." Id. § 11, subd. 1.

Plaintiff challenges the right of the Legislature to impose a tax on her intangibles income without exemption simply because she has a thrifty husband who has an income of more...