State Ex Rel. Edwards v. Query
| Decision Date | 28 February 1946 |
| Docket Number | No. 15806.,15806. |
| Citation | 37 S.E.2d 241 |
| Court | South Carolina Supreme Court |
| Parties | STATE ex rel. EDWARDS et al. v. QUERY et al. |
STATE ex rel. EDWARDS et al.
v.
QUERY et al.
No. 15806.
Supreme Court of South Carolina.
Feb. 28, 1946.
[37 S.E.2d 242]
Original proceeding in the Supreme Court for injunction by the State of South Carolina, on the relation of G. B. Edwards and others, against Walter G. Query and others, as members of the South Carolina Tax Commission, and Jeff B. Bates, as State Treasurer, challenging the constitutionality of the 1945 Act providing for refund of certain portion of gasoline taxes to specified users.
Injunction pendente lite dissolved, permanent injunction refused, and petition dismissed.
Samuel Want and James S. Verner, both of Darlington, for petitioners.
John M. Daniel, Atty. Gen., M. J. Hough, T. C. Callison, and Claude K. Wingate, Asst. Attys. Gen., and S. S. Tison, Sol., of Bennettsville, for respondent.
STUKES, Justice.
Perhaps the best way to approach the problem presented by this case is to first examine the former so-called gasoline tax diversion suits (State ex rel. Edwards v. Osborne, 193 S.C. 158, 7 S.E.2d 526; and Id., 195 S.C. 295, 11 S.E.2d 260), for they involved vitally different facts and are not at all controlling of the instant issues. They were concerned with legislative attempts to divert large amounts of the proceeds of the gasoline tax to purposes foreign to its levy--in fact, to meet deficits in state appropriations for other than highway activities. But the present is not an effort to divert but to exempt a single class of users from payment of the tax except to the extent of one cent per gallon. It should be here explained parenthetically that the mechanics of the law, which require payment in full of the existing gasoline levy and formal application for refund of all save one cent per gallon on that used in tractors and other farm machinery, are for the purpose of preventing frauds in the refunds. The plan is, in effect, an exemption from the tax (except one cent per gallon) on gasoline used in the specified farm machinery, on farms and for farm purposes.
The former Edwards cases, supra, applied sections 2 and 3 of article X of the state constitution of 1895, and the attempted legislative acts there under review were found to be in violation of them. Other constitutional questions were expressly avoided. A mere reading of the decisions is sufficient to show their present inapplicability so they need not be further discussed in order to distinguish them. This disposes adversely to petitioners of their question II, which imputes unconstitutionality of the act for diversion of tax revenues in violation of Art. X, sec. 3.
However, light upon the issues now before us is provided by these former Edwards cases. That reported in 195 S.C. 295, 11 S.E.2d 260, 263, contains an analysis of sec. 5969 of the Code of 1942 which was sec. 8 of the Act of 1929, 36 Stat, at p. 682, and an adjudication of the order of priority of the purposes to which the gasoline taxes (and motor vehicle license fees) are devoted by law. We quote from the opinion as follows:
"The section then provides for the disbursement of the funds in the order stated, for (1) costs of administration, etc., not exceeding $450,000 annually; (2) maintenance of debt service on (a) State Highway Certificates of Indebtedness, and (b) reimbursement agreements; (3) sinking fund payments; (4) road maintenance; (5) road construction and other purposes."
It is seen at a glance that the petitioners who are bondholders, owners of "State Highway Certificates of Indebtedness, " are in a very preferred position with respect to their right to payment from the revenues. If there is any net loss of taxes from the operation of the act, which the legislature has found not only will not occur but an increase will result, before these creditors suffer there would have to be such loss as to more than exhaust all of the otherwise available funds for (1) road construction and "other purposes, " (2) road maintenance, (3) sinking fund payments, and (4) reimbursement agreements. Thus the fear which they assert is plainly imaginary (in view of the official figures hereinafter) rather than real and their position cannot possibly be a practical one.
The latter is demonstrated by the published report of the meeting of the State Highway Commission in December 1945 when they proceeded pursuant to the following provision of Code sec. 5969: "Not more than
[37 S.E.2d 243]thirty days prior to the beginning of each calendar year the state highway commission shall make an estimate of the revenues to be received by the * * * department during said calendar year from said gasoline tax and motor vehicle license tax and shall also estimate the amounts required, " etc. The stated report of Dec. 20, 1945, reveals an estimated cash balance of $11,-500, 000 as of Jan. 1, 1946, less commitments of $2,550, 000, leaving a balance of $8,950,-000. Revenues for the 1946 calendar year were estimated at $12,725, 000, making a total of cash and anticipated revenues of $21,-675, 000; and 1946 expenses were estimated at $7,956, 751.39, leaving a balance for road maintenance and construction of $13,718,-248.61.
The commission's estimate of 1946 "expenses" is comprised of the following items and amounts (No future fiscal or calendar year now contains heavier debt maturities):
-------------------------------------------------------------------------------
|Administration and Collection of Revenue | |$ 400, |
| | |000.00 |
|-----------------------------------------------------|-----------|-----------|
|Accident Claims | |25, 000.00 |
|-----------------------------------------------------|-----------|-----------|
|Reimbursement to Counties and Road and Bridge |$1,125, | |
|Districts Principal |475.36 | |
|-----------------------------------------------------|-----------|-----------|
|Interest |190, 326.03| |
|-----------------------------------------------------|-----------|-----------|
| |$1,315, | |
| |801.39 | |
|-----------------------------------------------------|-----------|-----------|
|Less: Earmarked Funds Held for Retire-ment of |$ 11, |1, 304, |
|Principal |500.00 |301.39 |
|-----------------------------------------------------|-----------|-----------|
|Interest |$4,845, | |
| |000.00 | |
|-----------------------------------------------------|-----------|-----------|
|Sinking Fund Deposit |1, 382, |6, 227, |
| |450.00 |450.00 |
|-----------------------------------------------------|-----------|-----------|
| | |00 |
|-----------------------------------------------------|-----------|-----------|
|Total |$7,956, | |
| |751.39 | |
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(An apparent discrepancy is noted between sec. 5969 of the Code and the above quoted summary of it in the opinion in the second Edwards case, 195 S.C. 295, 11 S. E.2d 260, in the detail of the order of priority of the application of the highway department revenues. The statute, 36 Stat. at p. 682, ranks reimbursement obligations (payments to or for counties, highway and bridge districts) ahead of principal and interest on state certificates of indebtedness. But this is now unimportant, in any event, because the reimbursement program is near-ing its end of payments thereunder and borrowing is and will be done by the sale of state certificates of indebtedness.)
(It appears from the above tabulation that the department contemplates no con tribution from 1946 receipts to the "sinking fund." But almost certainly there will be. It is required by sec. 5972 of the 1942 code, sec. 11 of the Bond Act of 1929, 36 Stat. at p. 684, that whenever the departmental revenues exceed those of the next preceding year by more than five per cent, one-half of the excess shall go into this fund. It is a sort of safety valve and not a true sinking fund as that term is ordinarily used, for the highway obligations are issued to mature serially and the maturities, principal and interest, are met from current revenues or the proceeds of the sale of new obligations, and are not paid from the so-called sinking fund. It has thereby grown to over a million and a half dollars and constitutes a back-log of safety to the department and the holders of its obligations, including petitioners.)
From the foregoing figures it is seen that after payment of the operating expenses of the department and its 1946 financial obligations from its cash balance and estimated receipts there will remain an estimated $13,718, 248.61 for maintenance and construction of state highways, which only will be reduced, if indeed there is any reduction of revenue (which the legislature says not) resulting from the law now opposed.
Furthermore, it is within common knowledge that there has been a great increase in the consumption of gasoline, and therefore in the receipt of gasoline taxes, since the recent removal of the war-necessitated rationing, and it is generally anticipated that there will be a further marked increase in consumption when more automobiles are available for use for pleasure and in business. The Commis-
[37 S.E.2d 244]sion has not given full weight to these factors; its estimate of 1946 revenue is patently too low. As stated above, it has estimated total revenue at $12,750, 000, which includes only $10,000, 000 from the five-cent gasoline tax. This is only a little more than the lean war years. The actual receipts from such tax during the last five fiscal years were as follows, in nearest thousands:
1940-41 $12,147, 000.
1941-42 12, 766, 000.
1942-43 8, 935, 000.
1943-44 9, 207, 000.
1944-45 9, 639, 000.
In the month of November 1944, the receipts were $810,244.38; in November 1945 (the last month for which official figures are available), with rationing ended, $1,064, 168.85. In view of this increase of over thirty per cent it appears that a conservative 1946 estimate would at least equal the last pre-war year and substantially top twelve million dollars instead of the ultra-conservative figure of $10,000, 000...
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