Stockler v. State, Dept. of Treasury

• Citation: 255 N.W.2d 718,75 Mich.App. 640
• Decision Date: 16 May 1977
• Docket Number: Docket No. 27624
• Parties: Lawrence J. STOCKLER, on his own behalf, and on behalf of those similarly situated, Plaintiff-Appellant, v. STATE of Michigan, DEPARTMENT OF TREASURY and State Treasurer, Defendants-Appellees.
• Court: Court of Appeal of Michigan (US)

Page 718

255 N.W.2d 718

75 Mich.App. 640

Lawrence J. STOCKLER, on his own behalf, and on behalf of those similarly situated, Plaintiff-Appellant, v. STATE of Michigan, DEPARTMENT OF TREASURY and State Treasurer, Defendants-Appellees.

Docket No. 27624.

Court of Appeals of Michigan.

May 16, 1977.

Released for Publication July 20, 1977.

Stockler & Heldt by Lawrence J. Stockler, Detroit, for plaintiff-appellant.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Richard R. Roesch, Asst. Atty. Gen., for defendants-appellees.

Before KELLY, P. J., and J. H. GILLIS and MAHER, JJ.

J. H. GILLIS, Judge.

Plaintiff appeals as of right the trial court's declaration upholding the constitutionality on the challenged grounds of the "Single Business Tax Act", ¹ M.C.L.A. § 208.1 et seq.; M.S.A. § 7.558(1) et seq. This case has been presented to us on the following stipulated facts:

"The Plaintiff Lawrence J. Stockler, is a resident of the Township of West Bloomfield, County of Oakland, State of Michigan, and is doing business at 1924 Guardian Building, Detroit, Michigan.

"That on the 8th day of October 1975, Plaintiff commenced litigation in the Circuit Court for the County of Wayne seeking to have declared unconstitutional Act 228 of PA 1975, being known as the Single Business Tax Act.

"In response to Plaintiff's Complaint, the Defendant filed a Motion for Summary Judgment, an Amended Complaint was filed and thereupon Motion for Summary Judgment was filed on behalf of the Plaintiff as to Count 1 and the parties respectfully submitted their issues to be determined by the Trial Court as a matter of law upon the briefs. On the 10th day of February, 1976, the Trial Court wrote its Opinion Denying Plaintiff's Motion for Summary Judgment as to Count 1, and granting Summary Judgment as to Defendant's Motion for Summary Judgment on all counts. On the 20th day of February, 1976, the Circuit Court Judge entered an Order accordingly."

The SBTA is a new and experimental piece of legislation. No other state has a similar statute. We admit some confusion in trying to understand the various provisions and the economic theory of the SBTA. It has been analyzed as a "psuedo" value-added tax in that it taxes what one has added to the economy in contrast to an income tax which taxes what one has derived from the economy. See, generally, Symposium The Michigan Single Business Tax Act, 22 Wayne L R 1017 (1976). The act provides for a "specific tax of 2.35% upon the adjusted tax base of every person with business activity in this state which is allocated or apportioned to this state." M.C.L.A. § 208.31(1); M.S.A. § 7.558(31)(1). In short, the tax base is determined by adding back to Federal taxable income certain items previously deducted, for example, wages paid and interest paid, and then subtracting certain items included in Federal taxable income, for example, interest and dividends received. M.C.L.A. § 208.9; M.S.A. § 7.558(9). Certain deductions and exemptions are then subtracted to determine the adjusted tax base. M.C.L.A. § 208.23; M.S.A. § 7.558(23), M.C.L.A. § 208.35; M.S.A. § 7.558(35).

Plaintiff raises five issues, all challenging the constitutionality of the SBTA. As did the trial court, we will address each issue individually; however, before proceeding to do so we think it wise to make a few general comments and observations.

Statutes are presumed to be constitutional. When one contends that a statute is unconstitutional the burden rests on him to point out with specificity the provision of the constitution that is violated. Huron-Clinton Metropolitan Authority v. Boards of Supervisors of Five Counties, 300 Mich. 1, 12, 1 N.W.2d 430 (1942); Young v. Ann Arbor, 267 Mich. 241, 243, 255 N.W. 579 (1934). Our job is to decide the questions as they have been presented. It is not our job, but rather the Legislature's, to determine the wisdom and the policy reasons for imposing a particular tax. See C. F. Smith Co. v. Fitzgerald, 270 Mich. 659 670, 259 N.W. 352 (1935), and authorities cited therein.

The instant case was filed on October 8, 1975. The SBTA went into effect on January 1, 1976. Obviously, when the suit was commenced plaintiff had not as of that time been assessed. Thus, plaintiff's attack on the SBTA is facial. His arguments are superficial and general, often lacking the support of even a hypothetical. We support a liberal view of declaratory judgments. GCR 1963, 521, Kuhn v. East Detroit, 50 Mich.App. 502, 213 N.W.2d 599 (1973), lv. den., 391 Mich. 815 (1974), Anno: Tax Questions as Proper Subject of Action for Declaratory Judgment, 11 A.L.R.2d 359, and note that in the present case, defendant has stated that it will meet the constitutional challenges "head on". However, it is necessary that there be a case or controversy for a declaratory judgment. GCR 1963, 521, Washington-Detroit Theatre Co. v. Moore, 249 Mich. 673, 229 N.W. 618 (1930); Kuhn v. East Detroit, supra. See also United Public Workers of America v. Mitchell, 330 U.S. 75, 67 S.Ct. 556, 91 L.Ed. 754 (1947).

As will become clear in the discussion of the individual issues, many of the challenges here presented are nonjusticiable. A decision as to those issues would be based on speculation. Should we decide those issues today, it would be an imposition on the Legislature and would possibly impede future litigants who may well have a factual controversy. Accordingly, we will address the issues as they are raised and where the same are premature we will decline to render a decision.

I Did the Trial Court Err in Ruling as a Matter of Law that the Michigan Single Business Tax Does Not Violate the Michigan Constitution by Imposing, Levying and Enforcing a Tax Upon the Privilege of Engaging in Certain Commercial, Business and Financial Activities in the State of Michigan?

Plaintiff's argument within issue one is twofold; first, that it is a fundamental right to engage in business activity and therefore this right cannot be taxed and, second, that the SBT, not being specifically enumerated in the Michigan Constitution, is invalid.

Plaintiff cites Murdock v. Pennsylvania, 319 U.S. 105, 63 S.Ct. 870, 87 L.Ed. 1292 (1943), in support of his contention that the right to engage in business is a fundamental right which cannot be taxed. Murdock distinguished first amendment activity from commercial activity and held that a tax could not be imposed on the privilege of engaging in the former. The right or privilege of engaging in business is an important aspect of liberty, but it is not a fundamental right. Griswold v. Connecticut, 381 U.S. 479, 85 S.Ct. 1678, 14 L.Ed.2d 510 (1965); Ferguson v. Skrupa, 372 U.S. 726, 83 S.Ct. 1028, 10 L.Ed.2d 93 (1963). Business and occupations may be regulated and taxed. United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609 (1941); Steward Machine Co. v. Davis, 301 U.S. 548, 57 S.Ct. 883, 81 L.Ed. 1279 (1937); Bay City v. State Board of Tax Administration, 292 Mich. 241, 290 N.W. 395 (1940); C. F. Smith Co. v. Fitzgerald, supra; Union Trust Co. v. Wayne Probate Judge, supra. In fact, business may be prohibited by the Legislature pursuant to its police power. Hadacheck v. Sebastian, 239 U.S. 394, 36 S.Ct. 143, 60 L.Ed. 348 (1915).

We reprint the identical portion of Young v. Ann Arbor, supra, that the trial court quoted in response to plaintiff's contention that taxes not specifically provided for in the Michigan Constitution are invalid.

"A different rule of construction applies to the Constitution of the United States than the Constitution of a State. The Federal government is one of delegated powers, and all powers not delegated are reserved to the States or to the people. When the validity of an act of congress is challenged as unconstitutional, it is necessary to determine whether the power to enact it has been expressly or impliedly delegated to congress. The legislative power, under the Constitution of the State, is as broad, comprehensive, absolute, and unlimited as that of the parliament of England, subject only to the Constitution of the United States and the restraints and limitations imposed by the people upon such power by the Constitution of the State itself.

" 'The purpose and object of a State Constitution are not to make specific grants of legislative power, but to limit that power when it would otherwise be general or unlimited.' " (Citations omitted.) 267 Mich. 241, 243-244, 255 N.W. 579, 581.

See also Huron-Clinton Metropolitan Authority v. Supervisors of Five Counties, supra; Bowerman v. Sheehan, 242 Mich. 95, 219 N.W. 69 (1928); Moore v. Harrison, 224 Mich. 512, 195 N.W. 306 (1923).

Although the Michigan Constitution lists various types of taxes and limits thereto, Const.1963, art. 9, §§ 3, 7, 8, that list is not exhaustive. Other taxes may be enacted by the Legislature provided the same are constitutionally firm. Huron-Clinton Metropolitan Authority v. Supervisors of Five Counties, supra; Walcott v. People, 17 Mich. 68 (1868), Anno: Enumeration in Constitutional Provision of Subjects of Tax as Exclusive of Power of Legislature to Add Other Subjects, 100 A.L.R. 859.

II Does the SBTA Violate Equal Protection of the Laws Under the Federal and State Constitutions in that Plaintiff is Subjected to Pay Both the State Income Tax and the SBT While Others (Corporations, Financial Institutions and Domestic Insurers) are Not Subject to State Income Tax Assessment?

Plaintiff argues that the operation of § 6(1) ² of the SBTA upon business persons not exempted from the state income tax is an arbitrary, capricious and unreasonable classification resulting in a denial of equal protection.

Our Supreme Court has held that the Legislature may choose to exempt certain persons from taxation. C.F. Smith Co. v. Fitzgerald, supra. In Lenhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351 (1973), the United States Supreme Court held that a state constitutional provision...