Beeland Wholesale Co. v. Kaufman

BROWN, Justice

(concurring in part and in part dissenting).

I concur in the opinion of Justice FOSTER in so far as it holds that the act of Congress is not obnoxious to the due process and equal protection clause of the Fifth Amendment to the Constitution of the United States. I further concur in the opinion holding that the Alabama act, in so far as it levies a tax on employers, does not offend the said Fifth Amendment, nor the provisions of the State Constitution.

I am of the opinion, however, that the tax levied on the wages of employees, while an excise tax, is a levy on the gross income of such employees, and is offensive to Article 22 (Amendment 25) to the Constitution of 1901. The federal act designates the levy on employees as “Income Tax on Employees” (see Title VIII, 42 U. S.C.A. § 1001 et seq.). And while the Alabama act does not attempt to characterize the tax, it provides that “Each employee shall contribute to the fund one per centum of his wages. Each employer shall be responsible for withholding such contribution from the wages of his employees, shall show such deduction on his payroll records, and shall transmit all such contributions to the fund pursuant to general commission rules.” Gen.Acts 1935, pp. 955, 956, §4.

The tax on the wages of employees is bound to be an occupation tax or privilege tax, and its characterization as a nonproperty tax or “a specific tax not prohibited by the Constitution,” does not differentiate it from an “income” tax as it is clearly characterized by the act of Congress. It is not an occupation tax because it is not levied on the occupation, but is directly levied by the act of Legislature on the wages — the income of the employee — and is justified on the theory, and only on that theory, that it is for the privilege of receiving and enjoying such income under government protection. Such tax is an income tax pure and simple. State v. Weil, 232 Ala. 578 , 168 So. 679 ; People of State of New York v. Mark Graves et al., 57 S.Ct, 466 , 81 L.Ed. -, March 1, 1937.

Article 22 (Amendment 25), provides:

“The legislature shall have the power to levy and collect taxes

for state purposes on net incomes

from whatever source derived within this state, including the incomes derived from salaries, fees and compensation paid from the state, county, municipality, and any agency or creature thereof, for the calendar year, 1933, and thereafter and to designate and define the incomes to be taxed and to fix the rates of taxes provided that the rate shall not exceed 5 per cent nor 3 per cent on corporations. Income shall not be deemed property for purposes of ad valorem taxes.

“From net income an exemption of not less than fifteen hundred dollars ($1,-500.00) shall be allowed to unmarried persons and an exemption of not less than three thousand dollars ($3,000.00) shall be allowed to the head of a family, provided that only one exemption shall be allowed to husband and wife where they are living together and make separate returns for in.come tax. An exemption of not less than three hundred dollars ($300.00) shall be allowed for each dependent member of the

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family of an income tax payer under the age of 18 years.

The' legislature shall reduce the ad valorem tax from time to time when and to such an amount as the revenue derived from the income tax will justify.

In the event the legislature levies an income tax, such tax must be levied upon the salaries, income, fees, or other compensation of state, county and municipal officers and employees, on the same basis as such income taxes are levied upon other persons. All income derived from such tax

shall be held in trust for the payment of the floating debt of Alabama until all debts due on Oct. 1st, 1932, are paid and thereafter used exclusively for the reduction of state ad valorem taxes."

Mitchie’s Cumulative Supplement 1936, Code of Alabama, pp. 16, 17. (Italics supplied.) State v. Weil, 232 Ala. 578, 583 , 168 So. 679 .

This section, read in its entirety, clearly restricts the power of the Legislature to “levy and collect taxes

for state purposes

on net incomes from whatsoever source derived” at the constitutionally fixed rate; allowing exemptions of $1,500 from the income of single persons, and $3,000 for married persons, and $300 “for each dependent member of the family of an income tax payer under the age of 18 years. * * * All income derived from such tax shall he held in trust for the payment of the floating debt of Alabama until all debts due on Oct. 1st, 1932, are paid and thereafter used exclusively for the reduction of state ad valorem taxes.”

While the Legislature had the power, prior to the adoption of said article 22 (Amendment 25) to- levy an income tax as an excise tax, said power was limited by the decision of this court in Eliasberg Bros. Mercantile Co. v. Grimes, 204 Ala. 492 , 86 So. 56 , 11 A.L.R. 300 ; by characterizing such income tax “a property tax” within the influence of sections 214 and 217 of the Constitution.

The major purpose of the constitutional amendment, as held in State v. Weil, supra, was to overcome the effect of the decision in the Eliasberg Bros. Mercantile Co. Case, and to set up in the amendment the full scope and limits of legislative power in respect to such taxation.

Inasmuch as the majority opinion sustains the act in its entirety, it would be futile and a useless labor to determine whether or not the tax as to employees is separable and subject to be stricken so as to sustain the remainder.

However, on consideration stated, it is my opinion that the Legislature exceeded its power in attempting to tax the wages— the income — of employees without allowing the constitutional exemptions, and in devoting the levy to purposes other than prescribed by the amendment, and to this extent I dissent from the holding of the majority.