Missourians for Tax Justice Educ. Project v. Holden, 79708

• Decision Date: 23 December 1997
• Docket Number: No. 79708,79708
• Citation: 959 S.W.2d 100
• Parties: MISSOURIANS FOR TAX JUSTICE EDUCATION PROJECT, et al., Appellants, v. Bob HOLDEN, et al., Respondents.
• Court: Missouri Supreme Court

Page 100

959 S.W.2d 100

MISSOURIANS FOR TAX JUSTICE EDUCATION PROJECT, et al., Appellants, v. Bob HOLDEN, et al., Respondents.

No. 79708.

Supreme Court of Missouri.

Dec. 23, 1997.

Rehearing Denied Jan. 27, 1998.

Lewis C. Green, Bruce A. Morrison, Kathleen G. Henry, St. Louis, for Appellants.

Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, Chief Deputy Atty. Gen., Robert L. Presson, Hugh L. Marshall, Asst. Attys. Gen., Jefferson City, for Respondents.

Alan S. Mandel, Davidson, Schlueter, Mandel & Mandel, St. Louis, for Amicus Curiae.

ROBERTSON, Judge.

Missourians for Tax Justice Education Project, Inc., and the Missouri Association for Social Welfare are not-for-profit Missouri corporations. Each of these appellants paid sales tax during the state's fiscal years 1995 and 1996, but paid no income tax. Larry C. Gaines and LaVonne Shinn, also appellants, are individual Missouri residents who paid sales tax but no income tax during the same fiscal years.

Article X, section 18(b) of the Missouri Constitution requires the government to refund state revenues on a pro rata basis to Missouri state income taxpayers when "total state revenues" exceed the revenue limit established in article X, section 18(a) by more than one percent. Appellants insist that this refund provision violates constitutional guarantees of equal protection and due process because it discriminates against persons who paid no income taxes and these persons are generally poor. Appellants also claim that the entirety of the voter-approved tax and spending limitation contained in the constitution is too vague to accommodate rational application and, therefore, is void.

The trial court found the challenged provisions constitutional but issued a stay precluding the government from proceeding with its plans for distributing a refund pending this appeal. Because the validity of a provision of the state constitution is in question, we have jurisdiction. Mo. Const. art. V, sec. 3. The judgment of the trial court is affirmed. The stay previously entered by the trial court is dissolved.

I.

At the general election in 1980, Missouri voters approved an amendment to the constitution popularly dubbed "the Hancock Amendment." Mo. Const. art. X, sec. 16-24. The purpose of the Hancock Amendment is "to rein in increases in governmental revenue and expenditures." Roberts v. McNary, 636 S.W.2d 332, 336 (Mo. banc 1982). See Beatty v. Metropolitan St. Louis Sewer District, 867 S.W.2d 217, 221 (Mo. banc 1993) ("Reduced to its essence, the Hancock Amendment reveals the voters' basic distrust of the ability of representative government to keep its taxing and spending requirements in check.")

To achieve its purpose of reining in increases in governmental revenue and expenditures, the constitution establishes an annual revenue limit for state government and requires the state to disgorge the excess when its annual revenues exceed the constitutional revenue ceiling.

(a) There is hereby established a limit on the total amount of taxes which may be imposed by the general assembly in any fiscal year on the taxpayers of this state. Effective with fiscal year 1981-1982, and for each fiscal year thereafter, the general assembly shall not impose taxes of any kind which, together with all other revenues of the state, federal funds excluded, exceed the revenue limit established in this section. The revenue limit shall be calculated for each fiscal year and shall be equal to the product of the ratio of total state revenues in fiscal year 1980-1981 divided by the personal income of Missouri in calendar year 1979 multiplied by the personal income of Missouri in either the calendar year prior to the calendar year in which appropriations for the fiscal year for which the calculation is being made, or the average of personal income of Missouri in the previous three calendar years, whichever is greater.

(b) For any fiscal year in the event that total state revenues exceed the revenue limit established in this section by one percent or more, the excess revenues shall be refunded pro rata based on the liability reported on the Missouri state income tax (or its successor tax or taxes) annual returns filed following the close of such fiscal year. If the excess is less than one percent, this excess shall be transferred to the general revenue fund.

Mo. Const. art. X, sec. 18(a) and (b).

Appellants claim that a pro-rata refund to income taxpayers violates equal protection, U.S. Const. amend XIV, and due process. ¹ In support of their equal protection argument, appellants offer two arguments: First, they claim that the purpose of the Hancock Amendment is not a legitimate state purpose. Second, appellants urge this Court to declare poverty a suspect classification to which strict scrutiny equal protection analysis applies.

A.

When considering claims that a law violates the Equal Protection Clause, the first step is to determine whether the statutory scheme "operates to the disadvantage of some suspect class or impinges upon a fundamental right explicitly or implicitly protected by the Constitution...." San Antonio Independent School Dist. v. Rodriguez, 411 U.S. 1, 17, 93 S.Ct. 1278, 1288, 36 L.Ed.2d 16 (1973); State Board of Registration v. Giffen, 651 S.W.2d 475, 479 (Mo. banc 1983). If so, the statutory scheme receives strict judicial scrutiny to determine whether the classification is necessary to accomplish a compelling state interest. Id. If the classification neither burdens a suspect class, nor impinges upon a fundamental right, the only issue is whether the classification is rationally related to a legitimate state interest. Friedman v. Rogers, 440 U.S. 1, 17, 99 S.Ct. 887, 898, 59 L.Ed.2d 100 (1979); Giffen, supra, 651 S.W.2d at 479. The burden is on the person attacking the classification to show that it does not rest upon any reasonable basis and is purely arbitrary. Lindsley v. Natural Carbonic Gas Co., 220 U.S. 61, 78-79, 31 S.Ct. 337, 340-41, 55 L.Ed. 369 (1911); City of St. Louis v. Liberman, 547 S.W.2d 452, 458 (Mo. banc 1977). Under this analysis a classification is constitutional if any state of facts can be reasonably conceived that would justify it. McGowan v. Maryland, 366 U.S. 420, 426, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961); Liberman, supra, 547 S.W.2d at 458.

A suspect classification exists where a group of persons is legally categorized and the resulting class is "saddled with such disabilities, or subjected to such a history of purposeful unequal treatment, or relegated to such a position of political powerlessness as to command extraordinary protection from the majoritarian political process." Rodriguez, 411 U.S. at 28, 93 S.Ct. at 1293-94. Classifications based on wealth/poverty do not fit this description.

That wealth classifications alone have not necessarily been considered to bear the same high degree of suspectness [sic] as have classifications based on, for instance, race or alienage may be explainable on a number of grounds. The "poor" may not be seen as politically powerless as certain discrete and insular minority groups.... [P]ersonal poverty is not a permanent disability; its shackles may be escaped. Perhaps most importantly, though, personal wealth may not necessarily share the general irrelevance as a basis for legislative action that race or nationality is recognized to have.

(Emphasis added). Id. at 121, 93 S.Ct. at 1342. (Marshall, J., dissenting). Thus, the United States Supreme Court "has never ... held that wealth discrimination alone provides an adequate basis for invoking strict scrutiny...." (Emphasis added). Id. at 29, 93 S.Ct. at 1294-95.

The use of the word "alone" in the Rodriguez majority opinion and dissent is significant. Where the Supreme Court has applied strict scrutiny to a wealth-based classification, it has found that the wealth-based classification also implicated a fundamental right. ² As appellants lay no claim to a loss of any fundamental right in connection with the refund plan contained in section 18(b), they ask this Court to declare poverty a suspect classification on that basis alone. We decline their invitation and hold that the classification between income taxpayers and other taxpayers established in section 18(b) does not create a suspect classification.

B.

A legal classification considered under a rational basis standard will survive judicial examination if the state's purpose in creating the classification is legitimate, Zobel v. Williams, 457 U.S. 55, 60, 102 S.Ct. 2309, 2312-13, 72 L.Ed.2d 672 (1982), and "if any state of facts reasonably may be conceived to justify" the classification chosen to accomplish that purpose. McGowan v. Maryland, 366 U.S. at 426, 81 S.Ct. at 1105.

Appellants rely on Zobel and Quinn v. Millsap, 491 U.S. 95, 109 S.Ct. 2324, 105 L.Ed.2d 74 (1989), apparently convinced that these cases reject wealth-based classification under a rational basis test and, therefore, control this case. We disagree.

In Zobel, Alaska decided to distribute a financial windfall to the state resulting from the discovery of oil at Prudhoe Bay to the state's adult residents. The plan, initiated in 1979, permitted each adult resident to receive a specified dollar amount for every year of residency since statehood in 1959. Short-term Alaska residents challenged the plan, claiming that the enhanced dividend payment to long-term Alaskans violated the Equal Protection Clause. Alaska argued that the dividend created a financial incentive for persons to establish and maintain residence in Alaska, encouraged prudent management of the fund created from the oil revenues and recognized residents' undefined contributions to the state during their years of residency since statehood. The plurality opinion found the first two objectives "not rationally related to the distinctions Alaska seeks to make between newer residents and those who have been in the State since 1959." Id. at 61, 102 S.Ct. at 2313....