Lutz, Atty.-Gen. v. Arnold, Atty. Tr.

Dissenting Opinion.

Fansler, C. J., Roll, J.

—The importance of the constitutional questions involved compel us to give our reasons for dissenting from the majority.

That the power of taxation is inherent in the legislature, that subjects may be selected and classified for the purpose of taxation, and that persons and property may be exempted from taxation, in the absence of constitutional limitations, is well settled. And in this state it is well settled that in respect to excise taxes, that is taxes other than those levied upon property, the legislature has power to select subjects for taxation and to exempt others. The majority opinion holds that the law here in question levies an excise tax. Whether the weight of authority sustains this view may well be doubted. See

Miles et al.

v.

Department of Treasury of the State of Indiana et al.

(1935), (Ind.) 193 N. E. 855 . But, as we view it, the law is unconstitutional without regard to whether it be treated as an excise or a tax upon property.

An excise is a tax levied upon callings, occupations, or privileges, and thus is assessed against the individual and not against property, or against the individual on account of his ownership of property.

Miles et al.

v.

Department of Treasury of the State of Indiana et al., supra.

And if the 'tax in question be an excise it is clearly not a tax upon the tangible property referred to in the act. Section 31 of the act provides, in effect, that intangible property shall be exempted from the regular

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ad valorem tax with which it has been heretofore burdened, and with which all property has been burdened. Article 10, section 1, of the Constitution of Indiana provides :

“The General Assembly shall provide, by law, for a uniform and equal rate of assessment and taxation; and shall prescribe such regulations as shall secure a just valuation for taxation of all property, both real and personal, excepting such only for municipal, educational, literary, scientific, religious, or charitable purposes, as may be specially exempted by law.”

It is not claimed that the intangibles sought to be exempted are “for municipal, educational, literary, scientific, religious, or charitable purposes,” and it is universally recognized that the legislature may not exempt any other classes of property from taxation. This was recognized in

State Board of Tax Commrs.

v.

Holliday, supra,

although it was held in that case that, while the legislature might not expressly exempt life insurance policies from taxation, since they are property, the failure of the legislature to provide machinery for levying and collecting a tax, had the practical effect of leaving them unburdened by a property tax. The soundness of the reasoning supporting this view has been questioned for the reasons set out at length in the opinion of Howard, C. J., who dissented, Which dissenting opinion was concurred in by Monks, J. But in this case we have not the state of facts that confronted the court in the Holliday case, for, in respect to intangible property, there is now, and always has been, a method provided by statute for its assessiment, and we are firmly of the opinion that the rule laid down by the majority in that case should not be extended to permit the legislature to exempt any class of property which it may choose to exempt merely by repealing the law which provides machinery for levying an assess

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ment upon such property. We quote from the dissenting opinion in the case referred to (p. 241):

“But, if the legislature could not, by positive enactment, exempt from taxation any property except that explicity provided for in the Constitution, can it be said that it could accomplish this end by simply failing to make any enactment on the subject? Can the legislature do by indirection what it could not do directly? Can it do by silence what it could not do by speaking? It would be strange, indeed, if that were possible.”

Such a rule would have the effect of making the constitutional provision absolutely nugatory, and permitting the legislature to except from taxation not only property for the purposes set out in the Constitution, but any other class of property which the legislature itself might deem it wise or expedient to exempt. It is true also that in the case of

State ex rel. Lewis

v.

Smith

(1902), 158 Ind. 543 , 63 N. E. 25, 214 , it was held that the mortgage exemption statute was constitutional, two of the justices dissenting, however. The majority seemed to rely to some extent upon the case of

State Board of Tax Commrs.

v.

Holliday, supra,

but in the main based their conclusion upon the theory that one who mortgages property alienates a portion of it, and that to value property with a deduction for a mortgage is merely to arrive at a net value, and that the Constitution does not require that property be assessed at its gross value.. This latter theory has been accepted in the past as justifying the deduction of debts from credits and assessment upon the net value. But these cases do not go far enough to justify, nor should they be extended so as to justify, the legislature in wholly exempting a class of property which is recognized as taxable property from the burden of taxation as such. And in our view it follows that if the tax provided for is an excise, a mere tax upon persons, because of certain privi

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leges, it is not a burden upon intangible property at all, and hence the act is unconstitutional, since it leaves one recognized class of property exempt from the burden of taxation. It might be said that, if the tax is treated as an excise, only the exemption feature need be held unconstitutional, and thus intangible property would still be subject to the regular ad valorem tax which was levied upon it before, and subject to the excise tax provided for in the act, in addition to other taxes. But it is perfectly clear that this was not the legislative purpose or intention, since the act provides that the tax shall be in lieu of all other taxes except certain excises.

If the measure is to be considered a property tax, and not an excise, it must fall. The effect of the act is to provide that intangibles shall be assessed for taxation at their fair cash value, the same as any other property, but that they shall be taxed by a different rule and rate than any other property. That is to say, they shall pay twenty-five cents upon each $100.00 of cash value for all purposes, and regardless of the rate levied against other property for the same period. The case of

Board of Commrs., etc.

v.

Johnson

(1909), 173 Ind. 76 , 89 N. E. 590 , is relied upon as sustaining the view that this can be done, but in .that case it is held merely that property may be classified, and different methods applied to different classes for the purpose of determining its value; that is to say, for the purpose of assessing it, but it is said in that case that the Constitution “does, require a rate that is uniform and equal.” The question has been discussed many times by this court, and no case has been called to our attention, nor do we find one, in which it is suggested that the legislature has power under the Constitution to tax different classes of property at different rates.

And, when the entire act is considered, it is too plain

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for argument that its entire purpose is merely to tax intangible property at a lower rate than tangible property. This, we are convinced, the Constitution forbids.

It may be true, as suggested in the majority opinion, that in the past the owners of intangible property have evaded the law and have falsified their tax returns and, by ingenious devices, escaped the burden which the law put upon their property; that, in defiance of the law, they refused to submit to having their property taxed at the same rate as other property, and that the legislature, recognizing this fact and feeling itself impotent to enforce the tax provided for, compromised and, in fact, consented to confer a partial exemption upon this class of property, and to accept what the owners of such property would consent to pay, and leave whatever burden remained to be carried by other property and other taxes. But this is abdication. This is surrendering the legislative prerogative to the dictation of the owners of a class of property. This is ignoring the mandate of the Constitution as it has always been interpreted, that the legislature shall not tax one class of property at one rate and another class at a lesser rate. It will be noted further that the tax to be collected under the act goes to the state and county general fund and to the school fund of cities and townships. Thus the property in question is exempted from any contribution whatever to the maintenance of civil city or civil township government. The act has the following provisions:

“Sec. 2. On and after the passage of this act, every person residing in and/or domiciled in this state, shall pay a tax to the State of Indiana at the rate and in the manner provided in this act, for the right to exercise any one or more of the following privileges:

“(a) Signing, executing and issuing intangibles.

“(b) Selling, assigning, transferring, renewing,

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removing, consigning, mailing, shipping, trading in and enforcing intangibles.

“(c) Receiving the income, increase, issues and profits of intangibles.

“(d) Having and possessing the right to transmit the same by will and of making gifts thereof and therefrom and of having the right to allow such property to pass to other persons by descent under the intestate laws of the State of Indiana.

“ (e) For the right to have such intangibles separately classified for taxes levied, assessed and collected on account thereof and/or measured thereby.”

“Sec. 3. A tax hereby is imposed by this act and shall be (a) five cents on each twenty dollars or fractional part thereof, of the actual value of every current intangible; and (b) five cents per annum or fractional part thereof over one year on each twenty dollars of the actual value or fractional part thereof of each annual intangible.”

Whether the act intends to provide a tax upon the actual value of the intangibles themselves, as provided in section 3, or upon the right to exercise the privilege of signing notes or other intangibles, is not clear. Nor is it clear whether, by section 2, it is intended that the right to exercise the privilege of signing notes is to be taxed without regard to whether notes are actually signed, or whether the tax is to be imposed upon exercising the privilege, and to the extent to which it is exercised. By another provision of the act, one who holds an intangible over a period of years is required to pay a tax each year for the privilege of selling or assigning it, notwithstanding he has not exercised the privilege. These provisions of the act are so obscure that it is impossible to determine exactly to what privileges and to what intangibles the act is intended to apply. And, since administrative officers and courts have no power to legislate, but may carry out an express legislative intention only, we believe the act should be held void for uncertainty.

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It is, therefore, our view that, whether viewed as an excise tax or a property tax enactment, the statute is unconstitutional.