State ex rel. Haggart v. Nichols

• Decision Date: 07 March 1935
• Docket Number: No. 6401.,6401.
• Citation: 66 N.D. 355,265 N.W. 859
• Parties: STATE ex rel. HAGGART et al. v. NICHOLS, State Tax Com'r, et al.
• Court: North Dakota Supreme Court

66 N.D. 355

265 N.W. 859

STATE ex rel.HAGGART et al.

v.NICHOLS, State Tax Com'r, et al.

No. 6401.

Supreme Court of North Dakota.

March 7, 1935.

Syllabus by the Court.

1. A legislative enactment is presumed to be constitutional. This presumption is conclusive unless it is clearly shown that the enactment contravenes some provision of the Constitution of the state or of the United States.

2. It is not the function of the courts to review or revise legislative action, but to ascertain and give effect to the legislative will as expressed in the Constitution and the statutes. When a legislative enactment is held void it is not because the courts have or exercise any control over the legislative power, but because the will of the people as expressed in the Constitution is paramount to that of their representatives as expressed in the statute; and it is the duty of the judges under their oaths of office to give effect to the will of the people as expressed in the fundamental law.

3. The power of taxation is not dependent upon a constitutional grant. It is an attribute of sovereignty inherent in the state, and provisions in a State Constitution in relation to taxation are not intended as grants of power, but as limitations on the state's taxing power.

4. The power of taxation is legislative in its nature and belongs exclusively to the legislative branch of the government. The Legislature must determine all questions of necessity, discretion, or policy involved in ordering a tax and in apportioning it. The courts cannot review the determination of the Legislature in regard thereto or interfere with the enforcement of the tax unless such enforcement will result in infringement of constitutional rights.

5. Except as limited by the provisions of the Federal Constitution the power of a state as to the mode, form, and extent of taxation is unlimited where the subjects to which it applies are within her jurisdiction.

6. The Fourteenth Amendment to the Constitution of the United States does not compel the states to adopt a rigid rule of equal taxation, nor prevent the classification of property for purposes of taxation, or the imposition of different rates upon different classes.

7. A tax purporting to be laid upon a subject within the taxing power of the state is not to be condemned by the application of any artificial rule, but only where the conclusion is required that its necessary operation and effect is to make it a prohibited exaction.

8. A constitutional requirement that “taxes shall be uniform upon the same class of property, including franchises, within the territorial limits of the authority levying the tax” (Const.N.D. § 176) does not forbid classification of property, subjects, or persons for purposes of taxation.

9. Where conflict with federal power is not involved, a state tax law is not in conflict with the Fourteenth Amendment to the Federal Constitution unless it proposes, or clearly results in, such flagrant and palpable inequality between the burden imposed and benefit received as to amount to arbitrary taking of property without compensation.

10. Constitutional requirements that “taxes shall be uniform upon the same class of property” (Const.N.D. § 176) and that no state shall “deny to any person within its jurisdiction the equal protection of the laws” (Const.U.S. Amend. 14) are met when the law operates on all alike under the same circumstances-when no greater burden is imposed on one person or species of property than on another similarly situated or of like character.

11. The graduated rate feature of the North Dakota income tax law is a valid exercise of the Legislature's power to classify; it operates equally and uniformly upon all in like circumstances and does not contravene the uniformity provision of the State Constitution (Const.N.D. § 176) the equal protection of the laws clause of the Fourteenth Amendment or the due process clauses of the State (Const.N.D. § 13) and Federal Constitutions (Const.U.S. Amend. 14).

12. The tax imposed by the North Dakota income tax law (Comp.Laws Supp.1925, §§ 2346a1-2346a50, as amended) is in no case a tax on real property within the purview of section 179 of the State Constitution so as to require assessment to be made in the county, city, township, village, or district.

13. For reasons stated in the opinion, it is held that certain alleged discriminatory provisions of the law are not violative of the constitutional provisions invoked by plaintiffs, and that the power to remedy the conditions of which appellants complain is vested in the lawmaking power, and is not vested in the courts.

Appeal from District Court, Burleigh County; Jansonius, Judge.

Action by the State, on the relation of W. R. Haggart and others, against Lee Nichols, State Tax Commissioner, and others. From an order sustaining a demurrer to the complaint, plaintiffs appeal.

Affirmed.H. C. Young and Richardson, Thorp & Wattam, all of Fargo, Murphy & Toner, of Grand Forks, and Sullivan, Fleck & Sullivan, of Mandan, for appellants.

P. O. Sathre, Atty. Gen., and T. A. Thompson, Asst. Atty. Gen., for respondents.

CHRISTIANSON, Judge.

This action involves the constitutionality of the state income tax law. 1925 Supplement, §§ 2346a1 to 2346a50, as amended by chapters 239, 240, Laws 1929; chapters 283, 284, Laws 1931; chapter 253, Laws 1933; and chapter 271, Laws 1935.

It was instituted to restrain the tax commissioner, the Attorney General, and the state treasurer from enforcing the law. It is alleged in the complaint that the relators now are and for many years have been residents of the state of North Dakota and that a portion of the net income of each of them is taxable under the provisions of the state income tax law as income received from property, both real and personal, and that a portion of such net income is taxable as income received for personal services. It is further alleged that according to the provisions of the law a person who fails to make a return as therein prescribed is made guilty of a misdemeanor and rendered subject to fine and imprisonment, and also is made liable for a penalty up to $1,000. It is further alleged that the defendants will enforce the law against the relators unless they are prevented from so doing by appropriate judgment.

The state income tax law provides for a tax at graduated rates, ranging from 1 per cent. on net incomes not in excess of $1,000 up to 15 per cent. on all net incomes in excess of $15,000. The law is administered by the state tax commissioner, and returns of taxpayers are required to be filed with him.

These provisions are mentioned in the complaint, and it is alleged that the law violates the due process and equal protection clauses of the Fourteenth Amendment to the Constitution of the United States and the following three provisions of the State Constitution:

Section 13. “No person shall * * * be deprived of life, liberty or property without due process of law.”

Section 176. “Taxes shall be uniform upon the same class of property including franchises, within the territorial limits of the authority levying the tax.”

Section 179. “All taxable property except as hereinafter in this section provided, shall be assessed in the county, city, township, village or district in which it is situated, in the manner prescribed by law.”

The defendants demurred to the complaint on the ground that it fails to state facts sufficient to constitute a cause of action. The demurrer was sustained and the plaintiffs have appealed.

Appellants do not question that the Legislature had power to levy, or provide for the levy, of an income tax, but they contend: (1) That a tax on income is a tax on property and that, hence, such tax is limited by the rule of uniformity prescribed by section 176 of the State Constitution and the rule of localized situs of assessment prescribed by section 179 of the State Constitution; (2) that even if the tax should be considered an excise tax it would still be invalid for the reason that the rule of uniformity prescribed by section 176 of the Constitution applies to “all taxes”; (3) that under the rule of uniformity the same rate of taxation must be applied to all incomes without regard to the amount thereof and that the graduated tax rate violates this rule; (4) that under the rule of localized situs of assessmentthe income tax must be assessed in the city, town, village, or county in which the property which produced the income is situated; (5) that the provisions of the North Dakota income tax law are so arbitrary, capricious, and confiscatory that they violate section 13 of the State Constitution and the due process and equal protection of law clauses of the Fourteenth Amendment to the Federal Constitution.

In appellants' brief on this appeal their contentions are succinctly stated thus:

“Plaintiffs contend that the income tax law taxes ‘property’ and that the tax is not uniform but is graduated, the amount varying on the same class of property by virtue of the graduated provisions. Also, that the property is not assessed in the local subdivision, but is assessed by the tax commissioner at Bismarck.

Plaintiffs further contend that the North Dakota income tax law is arbitrary, capricious and confiscatory, violating Section 13 of the North Dakota Constitution and the Fourteenth Amendment to the Federal Constitution. * * *

Even if it (the income tax) should be considered an excise, yet it would be invalid for the * * * reason that the words ‘all taxes' in the uniformity clause would include excises, as well as property taxes.”

Before entering upon a discussion of the specific questions raised by the appellant, it is proper to consider the fundamental rules which must be applied in the determination thereof.

The sole ultimate question presented to this court is whether the state income tax law is violative of certain provisions of the State and Federal Constitutions, and, hence, null and void.

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