Stebbins v. Riley

• Citation: 268 U.S. 137,45 S.Ct. 424,69 L.Ed. 884
• Decision Date: 13 April 1925
• Docket Number: No. 227,227
• Parties: STEBBINS et al. v. RILEY, State Controller
• Court: United States Supreme Court

268 U.S. 137

45 S.Ct. 424

69 L.Ed. 884

STEBBINS et al.

v RILEY, State Controller.

No. 227.

Argued March 9, 1925.

Decided April 13, 1925.

Mr. Carey Van Fleet, of San Francisco, Cal., for plaintiffs in error.

Mr. R. W. Smith, of Sacramento, Cal., for defendant in error.

Mr. Justice STONE delivered the opinion of the Court.

This case is here on a writ of error to the Supreme Court of California to review the determination of that court upholding the constitutionality of the Inheritance Tax Act of the state of California enacted in 1917 (St. 1917, p. 880), particularly subdivision 10 of section 2 of the act, which prescribes the method of determining the market value of the property transferred, for the purpose of fixing the amount of the tax. Subdivision 10 of section 2 reads as follows:

'In determining the market value of the property transferred, no deduction shall be made for any inheritance tax or estate tax paid to the government of the United States.'

The decedent left a gross estate exceeding $1,800,000, on which the federal estate tax amounted to the sum of $128,730.08. In fixing the amount of inheritance tax due to the state of California upon the residuary legacies, the state tax appraiser, acting pursuant to the provisions of subdivision 10 of section 2, did not deduct the amount of federal estate tax. In consequence the total amount of state tax assessed upon the residuary estate was $37,699.30 greater than it would have been, had the federal estate tax been deducted from the residuum of the estate before fixing the amount of the state tax. The superior court of San Francisco county, having jurisdiction in the premises, confirmed the tax, and the Supreme Court of California, on writ of error, held that the tax was in accordance with the laws and the Constitution of California, and was not a denial of due process or equal protection of the laws under the Fourteenth Amendment of the Constitution of the United States. Stebbins v. Riley, 191 Cal. 591, 217 P. 1073.

It is urged here that the California Inheritance Tax Act of 1917 is a succession tax; that the provision of the taxing law requiring that there shall be no deduction of the federal tax in fixing the fair value of the legacy on which the state tax is levied is an arbitrary discrimination, bearing no relation either to the persons succeeding to the decedent's estate or to the amount which the taxpayer taxes by succession; and that it is accordingly a taking of property without due process of law, and because of the inequalities in the amount of the tax resulting from the application of the taxing statute to successions there is a denial of the equal protection of the laws. On the other hand, it is urged that the so-called 'right' of acquiring property by devise or descent is not a property right, but a mere privilege, the creature of state law, and the authority which confers it may impose conditions upon its exercise; that in consequence the state may tax the privilege, discriminating not only between the status of those who inherit and the amounts which they thus acquire, but discriminating likewise between inheritances or legacies of like amount which are transmitted from estates of varying size, if the discrimination is based upon or bears some reasonable relation to the size of the whole estate transmitted on the death of the decedent. In presenting this aspect of the case, it was argued by the appellant on the one hand that there was a natural right to inheritance entitled to the protection of the due process clause of the Fourteenth Amendment, and by the appellee on the other that the legislative authority could deny wholly the privilege of inheritance, and consequently could place unlimited burdens upon it.

There is much in judicial opinion to suggest that a state may impose any condition it chooses on the privilege of taking property by will or descent, or, indeed, that it may abolish that privilege altogether, and for this reason that a state is untrammeled in its power to tax the privilege. See Mager v. Grima, 8 How. 490, 12 L. Ed. 1168, United States v. Perkins, 163 U. S. 625, 16 S. Ct. 1073, 41 L. Ed. 287; Knowlton v. Moore, 178 U. S. 41, at page 55, 20 S. Ct. 747, 44 L. Ed. 969; Campbell v. California, 200 U. S. 87, at page 94, 26 S. Ct. 182, 50 L. Ed. 382.

But we do not find it necessary to discuss the issue thus raised, for it has been repeatedly held by this court that the power of testamentary disposition and the privilege of inheritance are subject to state taxation and state regulation and that regulatory taxing provisions, even though they produce inequalities in taxation, do not effect an unconstitutional taking of property, unless as was said in Dane v. Jackson, 256 U. S. 589, 599, 41 S. Ct. 566, 568 (65 L. Ed. 1107) the taxing statute 'results in such flagrant and palpable inequality between the burden imposed and the benefit received, as to amount to the arbitrary taking of property without compensation—'to spoliation under the guise of exerting the power of taxing," citing Bell's Gap R. Co. v. Pennsylvania, 137 U. S. 232, 237, 10 S. Ct. 533, 33 L. Ed. 892; Henderson Bridge Co. v. Henderson City, 173 U. S. 592, 615, 19 S. Ct. 553, 43 L. Ed. 823; Wagner v. Baltimore, 239 U. S. 207, 220, 36 S. Ct. 66, 60 L. Ed. 230.

The subject-matter of an inheritance taxing statute may be either the transmission or the exercise of the legal power of transmission of property by will or descent (United States v. Perkins, 163 U. S. 625, 629, 16 S. Ct. 1073, 41 L. Ed. 287; Plummer v. Coler, 178 U. S. 115, 125, 20 S. Ct. 829, 44 L. Ed. 998; New York Trust Co. v. Eisner, 256 U. S. 345, 41 S. Ct. 506, 65 L. Ed. 963, 16 A. L. R. 660), or it may be the legal privilege of taking property by devise or descent (Magoun v. Illinois Trust & Savings Bank, 170 U. S. 283, 18 S. Ct. 594, 42 L. Ed. 1037; Knowlton v. Moore, 178 U. S. 41, 20 S. Ct. 747, 44 L. Ed. 969; Campbell v. California, 200 U. S. 87, 26 S. Ct. 182, 50 L. Ed. 382).

Even assuming that a state does not, under the Constitution of the United States, possess unlimited power to curtail the power of disposition of property at death or the privilege of receiving it by way of inheritance, there is nevertheless no constitutional guaranty of equality of taxation. The power of the states to discriminate in fixing the amount and incidence of taxation upon inheritances is undoubted. A state may levy a tax upon the power to dispose of property by will, graduated by the size of the legacy, and it may grant exemptions. See Plummer v. Coler, supra; Keeney v. Comptroller of N. Y. 222 U. S. 525, 32 S. Ct. 105, 56 L. Ed. 299, 38 L. R. A. (N. S.) 1139. It may discriminate between property which has not borne its full share of taxation in the testator's lifetime and other property passing to the same class of transferees. Watson v. State Comptroller, 254 U. S. 122, 41 S. Ct. 43, 65 L. Ed. 170. It may fix a graduated succession tax, even though the amount of tax assessed does not vary in proportion to the amount of the legacy received by persons of the same class. Magoun v. Illinois Trust & Savings Bank, supra. It may fix a succession tax which imposes a tax upon inheritances to brothers and sisters and not on those to daughters-in-law and sons-in-law. Campbell v. California, supra.

The guaranty of the Fourteenth Amendment of the equal protection of the laws is not a guaranty of equality of operation or application of state legislation upon all citizens of a state. As was said in Magoun v. Illinois Trust & Savings Bank, supra, at page 293 (18 S. Ct. 598):

'It only prescribes that that law have the attribute of equality of operation, and equality of operation does not mean indiscriminate operation on persons merely...