# Alco Parking Corp. v. Pittsburgh

> Supreme Court of Pennsylvania · July 2, 1973 · 453 Pa. 245

URL: https://www.frixlaw.com/law-library/cases/6260810

## Case

- **Full name:** Alco Parking Corporation v. Pittsburgh
- **Court:** Supreme Court of Pennsylvania
- **Decided:** July 2, 1973
- **Citations:** 453 Pa. 245; 307 A.2d 851; 1973 Pa. LEXIS 414
- **Precedential status:** Published
- **Opinion:** Dissent by Eagen
- **Judges:** Bkien, Brien, Eagen, Jones, Manderino, Nix, Pomeeoy, Pomeroy, Roberts
- **Cited by:** 40 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Reversed on other grounds by City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/6260810

## Opinion text

Dissenting Opinion by
Mb. Justice Eagen :
I emphatically dissent!
It is not and may not be questioned that the City of Pittsburgh has the power to tax a parking transaction for revenue purposes under the Local Tax Enabling Act, Act of December 31, 1965, P. L. 1257, 53 P.S. §6902. See also, University Club v. Pittsburgh, 440 Pa. 562 , 271 A. 2d 221 (1970). However, the majority rule that this particular tax on parking transactions imposed by the City of Pittsburgh is confiscatory, and, hence, amounts to an unconstitutional taking of private property without due process of law. Neither the facts in the record or the pertinent case law support this conclusion. In fact, every case cited by the majority in support of its conclusion reaches the opposite result.
Thirty-three years ago in Philadelphia v. Samuels, 338 Pa. 321 , 12 A. 2d 79 (1940), this Court held that before a tax may be ruled confiscatory the challenging taxpayer must establish two facts: (1) that the tax is forcing a substantial, as distinguished from an occasional businessman out of business; and (2) the challeged tax cannot be passed on to the consumer. To the same effect, see Philadelphia v. Elgin’s Garages, Inc., 342 Pa. *271 142 , 19 A. 2d 845 (1941). Even a casual reading of tbe instant record discloses the complaining-plaintiffs have failed to establish either one of these facts. Moreover, the trial court whose findings of fact have the force and effect of a jury’s verdict and which, incidentally, the majority opinion ignores, specifically found on ample evidence in the record: (1) the demand for parking space in the City of Pittsburgh far exceeds the supply; (2) none of the plaintiffs have increased their rates because of the tax involved; (3) the plaintiffs have not attempted to pass on the increased tax to their parking patrons; and (4) when the City’s Parking Authority recently raised its rates, it experienced only a temporary reduction in the number of cars seeking use of its parldng facilities. Furthermore, after reviewing the evidence the trial court concluded that the complaining-plaintiffs are continuing to make a profit from their operations, though it may not be as great a margin as desired, and if any privately-owned parking operators are forced out of business it will be only a few borderline cases. It is obvious, therefore, that the majority opinion fails to comport with our rulings in Philadelphia v. Samuels, supra, and Philadelphia v. Elgin’s Garages, Inc., supra.
Focusing now on the decisions of the Supreme Court of the United States, it can he stated as a general principle that under normal circumstances the power to tax is unlimited 1 and the due process clause of the Fifth *272 and Fourteenth Amendments is not a limitation upon the taxing power of the legislative branch of the government. 2
*273 In Magnano Co. v. Hamilton, 292 U.S. 40 , 54 S. Ct. 599 (1934), the Supreme Court explained under what circumstances the due process clause limits a taxing statute: “Except in rare and special instances, the due process of law clause contained in the Fifth Amendment is not a limitation upon the taxing power conferred upon Congress by the Constitution. . . . And no reason exists for applying a different rule against a state in the case of the Fourteenth Amendment. . . . That clause is applicable to a taxing statute such as the one here assailed only if the act be so arbitrary as to compel the conclusion that it does not involve an exertion of the taxing power, but constitutes in substance and effect, the direct exertion of a different and forbidden powei, as, for example, the confiscation of property. . . . Collateral purposes or motives of a Legislature in levying a tax of a kind within the reach of its lawful power are matters beyond the scope of judicial inquiry. ... Nor may a tax within the lawful power of a state be judicially stricken down under the due process clause simply because its enforcement may or will result in restricting or even destroying particular occupations or businesses . . . unless, indeed, as already indicated, its necessary interpretation and effect be such as plainly to demonstrate that the form of taxation was adopted as a mere disguise, under which there was exercised, in reality, another and different power denied by the Federal Constitution to the state.” Id. at 44-45 , 54 S. Ct. at 601-02 . Thus, the due process clause only affects the validity of a taxing statute where it can be ascertained the statute is “arbitrary”, and not an exercise of the taxing power, but a “disguise” for the exertion of a different and unlawful power. The majority opinion does not indicate this taxing statute qua taxing statute is invalid, or the taxing measure “does not involve an exertion of the taxing power”, which are the guidelines established by the Supreme Court of the *274 United States. Rather, the majority opinion focuses on the tax rate and its enforcement, and I view this as error. It is one thing to say a taxing statute is arbitrary and beyond the reach of the taxing power of the legislative branch, a point I do not contest, but it is quite another to say the exercise of the lawful taxing power is a violation of due process of law because of a high tax rate.
The Supreme Court of the United States has considered the issue of high tax rates in numerous instances, and in each case the Court refused to strike down the levy because of the high rate structure. In Stewart Dry Goods Co. v. Lewis, 294 U.S. 550 , 55 S. Ct. 525 (1935), the Court reviewed a gross sales tax on merchants. Speaking specifically of the extent of the burden of a tax, the Court stated:
“Every taxing law must pass the constitutional test applied by the courts to the method of imposition, but the measure of the impost rests in the discretion of the Legislature.
“To condemn a levy on the sole ground that it is excessive would be to usurp a power vested not in the courts but in the Legislature and to exercise the usurped power arbitrarily by substituting our conceptions of public policy for those of the legislative body.” Id. at 562 , 55 S. Ct. at 530 . Thus, in Stewart, the Court expressly stated the “measure of the impost” is not for the courts to consider. In Veazie Bank v. Fenno, 8 Wall. 533 (1869), again the Court reflected on the issue of high rates, stating: “It is insisted, however, that the tax in the case before us is excessive, and so excessive as to indicate a purpose on the part of Congress to destroy the franchise of the bank, and is, therefore, beyond the constitutional power of Congress.
“The first answer to this is that the judicial cannot prescribe to the legislative departments of the government limitations upon the exercise of its acknowledged *275 powers. The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected. So if a particular tax bears heavily upon a corporation, or a class of corporations, it cannot, for that reason only, be pronounced contrary to the Constitution.” Id. at 548 . See also Alaska Fish Salting & By-Products Co. v. Smith, 255 U.S. 44 , 41 S. Ct. 219 (1921). Notwithstanding these pronouncements, the Majority opinion hinges its decision on consideration of the tax rate and enforcement or more precisely, the “result” of the exertion of the lawful taxing power, an approach the Supreme Court of the United States has consistently stated to be erroneous. 3
If one focuses exclusively on the result by reviewing the tax rate and its impact, it is conceivable that every tax could be considered confiscatory. The true essence *276 of the plaintiffs’ claim is the tax rate is so high they are barred from making the profit margin they would desire. Given this fact, and accepting the majority’s rationale, it follows that a marginal business with a small profit margin could make the same claim appellants herein assert about a 5% excise tax. In this regard, the Magnano Court stated: “If the tax imposed had been 5 cents instead of 15 cents per pound, no one, probably, would have thought of challenging its constitutionality or of suggesting that under the guise of imposing a tax another and different power had in fact been exercised. If a contrary conclusion were reached in the present case, it could rest upon nothing more than the single premise that the amount of the tax is so excessive that it will bring about the destruction of appellant’s business, a premise which, standing alone, this court heretofore has uniformly rejected as furnishing no juridical ground for striking down a taxing act.” 292 U.S. at 47 , 54 S. Ct. at 602 .
The most troublesome aspect of the rationale adopted by the majority opinion is that by considering the tax rate, it is taking on a non-judicial function, and in effect sitting as a legislative body. This approach strikes at the heart of the principle of separation of powers and is, therefore, contrary to constitutional doctrine. The sum and substance of the majority’s opinion is: the tax rate is too high for the garage owners to make a substantial profit; hence, the tax is unjust and must be struck down. However, the wisdom of a tax rate is strictly for the legislative branch, and for this Court to strike a tax down because of a high rate is to usurp a legislative power. Moreover, by so doing this Court has to go beyond its power and exercise the usurped power in an arbitrary fashion by substituting its concept of public policy, or wisdom, for that of the Legislature. See Stewart Dry Goods Co. v. Lewis, supra.
In McCray v. United States, 195 U.S. 27 , 24 S. Ct. 769 (1904), the Supreme Court stated:
*277 “Whilst, as a result of our written constitution, it is axiomatic that the judicial department of the government is charged with the solemn duty of enforcing the Constitution, and therefore in cases properly presented, of determining whether a given manifestation of authority has exceeded the power conferred by that instrument, no instance is afforded from the foundation of the government where an act, which was within a power conferred, was declared to be repugnant to the Constitution, because it appeared to the judicial mind that the particular exertion of constitutional power was either unwise or unjust. To announce such a principle would amount to declaring that in our constitutional system the judiciary was not only charged with the duty of upholding the Constitution but also with the responsibility of correcting every possible abuse arising from the exercise by the other departments of their conceded authority. So to hold would be to overthrow the entire distinction between the legislative, judicial and executive departments of the government, upon which our system is founded, and would be a mere act of judicial usurpation.
“It is, however, argued if a lawful power may be exerted for an unlawful purpose, and thus by abusing the power it may be made to accomplish a result not intended by the Constitution, all limitations of power must disappear, and the grave function lodged in the judiciary, to confine all the departments within the authority conferred by the Constitution, will be of no avail. This, when reduced to its last analysis, comes to this, that, because a particular department of the government may exert its lawful powers with the object or motive of reaching an end not justified, therefore it becomes the duty of the judiciary to restrain the exercise of a lawful power wherever it seems to the judicial mind that such lawful power has been abused. But this reduces itself to the contention that, under our con *278 stitutional system, the abuse by one department of the government of its lawful powers is to be corrected by the abuse of its powers by another department.” Id. at 58-54 , 24 S. Ct. at 775-76 . It is not within this Court’s power or function to make legislative decisions, such as the wisdom of a particular tax rate. “Once the lawfulness of the method of levying the tax is affirmed, the judicial function ceases. He deludes himself by false hope who supposes that, if this court shall at some future time conclude the burden of exaction has become inordinately oppressive, it can interdict the tax.” Stewart Dry Goods Co. v. Lewis, supra, 294 U.S. at 563 , 55 S. Ct. 530 .
The majority, however, would have us believe the rulings of the Supreme Court of the United States are not applicable to the instant case because of the element of competition. In my view, the argument that the combination of a high tax rate and government competition invalidates a taxing measure is spurious for the dual reason that the tax rate is not for us to consider, and the element of competition is basically irrelevant. Our concern is with the lawfulness of the method of levying the tax, not with these two elements. The majority apparently believes these two elements bring the tax within the Magnano rule that a tax will be considered unlawful when “its necessary interpretation and effect be such as plainly to demonstrate that the form of taxation was adopted as a mere disguise, under which there was exercised, in reality, another and different power.” But there is not one shred of evidence in the record that this is anything but a pure taxing measure for revenue purposes. There is not any evidence in the record that this measure is a “disguise”. Competition is clearly beyond the scope of this case, since our inquiry is limited to the lawfulness of the “form of taxation.” 4
*279 The majority views government competition as a new element in this area of the law, an element never presented in a factual situation to a court before. However, in the Yeasie Bank Case, the Supreme Court of the United States was faced with a comparable situation since the federal government was therein directly competing with the state banks in issuing currency. 5 A 10% tax was imposed on the notes of state banks and the effect was to put the national banks at a competitive advantage by driving the state banks out of existence. The Court never once discussed the element of competition and stated: “The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected. So if a particular tax hern's heavily upon a corporation, or a class of corporations, it cannot, for that reason only, be pronounced contrary to the Constitution ” 8 Wall., supra at 548. Thus, I do not view the element of competition as adding anything new or different to this area of the law, or as relevant to the consideration of the lawfulness of a taxing form.
Mr. Chief Justice Jones joins in this dissenting opinion.
Early in the history of the Supreme Court of the United States, Mr. Chief Justice Marshatx in McCulloch v. Maryland, 4 Wheat 316, 4 L. Ed. 579 (1819), stated the following with respect to the unlimited nature of the taxing power:
“[T]he power of taxing people and their property is essential to the very existence of government, and may be legitimately exercised on the objects to which it is applicable to the utmost extent to which the government may choose to carry it. The only security against the abuse of this power is found in the structure of the *272 government itself. In imposing a tax, the legislature acts upon its constituents. This is, in general a sufficient security against erroneous and oppressive taxation.
“The people of a state, therefore, give to their government a right of taxing themselves and their property, and as the exigencies of government cannot be limited, they prescribe no limits to the exercise of this right, resting confidently on the interest of the legislator, and on the influence of the constituents over their representative, to guard them against its abuse.” Id. at 428, 4 L. Ed. at 607 .
In Knowlton v. Moore, 178 U.S. 41 , 20 S. Ct. 747 (1900), the Supreme Court of the United States recognized the inherent difficulty in placing a limitation on the lawful exercise of the taxing power: “In other words, the power to destroy which may be the consequence of taxation is a reason why the right to tax should be confined to subjects which may be lawfully embraced therein, even although it happens that in some particular instance no great harm may be caused by the exercise of the taxing authority as to a subject which is beyond its scope. But this reasoning has no application to a lawful tax, for if it had there would be an end of all taxation; that is to say if a lawful tax can be defeated because the power which is manifested by its imposition may when further exercised be destructive, it would follow that every lawful tax would become unlawful, and therefore no taxation could be levied.” Id. at 60 , 20 S. Ct. at 755 .
In Brushaber v. Union Pacific R. R., 240 U.S. 1 , 36 S. Ct. 236 (1916), the Supreme Court noted the due process clause is not a limitation on the lawful exercise of the taxing power stating: “So far as the due process clause of the Fifth Amendment is relied upon, it suffices to say that there is no basis for such reliance since it is equally well settled that such clause is not a limitation upon the taxing power conferred upon congress by the Constitution; in other words, that the Constitution does not conflict with itself by conferring upon the one hand a taxing power and taking the same power away on the other by the limitations of the due process clause. Treat v. White, 181 U.S. 264 ; Patton v. Brady, 184 U.S. 608 ; McCray v. United States, 195 U.S. 27, 61 ; Flint v. Stone Tracy Co., supra; Billings v. United States, 232 U.S. 261, 282 .” Id. at 24, 36 S. Ct. at 244 .
In Magnano, the Court stated: “The point may be conceded that the tax is so excessive that it may or will result in destroying the intrastate business of .appellant; but that is precisely the point which was made in the attack upon the validity of the 10 percent tax imposed upon the notes of state banks involved in Veazie Bank v. Fenno, 8 Wall. 533, 548 , 19 L. Ed. 482 . This court there disposed of it by saying that the courts are without authority to prescribe limitations upon the exercise of the acknowledged powers of the legislative departments. ‘The power to tax may be exercised oppressively upon persons, but the responsibility of the legislature is not to the courts, but to the people by whom its members are elected.’ Again, in the McCray Case, supra, answering a like contention, this court said (page 50 of 195 Ü.S., 24 S. Ct. 769, 778 ) that the argument rested upon the proposition ‘that, although the tax be within the power, as enforcing it will destroy or restrict the manufacture of artificially colored oleomargarine, therefore the power to levy the tax did not obtain. This, however, is but to say that the question of power depends, not upon authority conferred by the Constitution, but upon what may be the consequence arising from the exercise of the lawful authority.’ And it was held that if a tax be within the lawful power of .the Legislature, the exertion of the power may not be restrained because of the results to arise from its exercise.” 292 U.S. at 45 , 54 S. Ct. at 602 .
The question is raised by the majority’s approach that if the government unit was in the public transportation field, would this *279 dictate a like result. Under this example, the government would be “competing” with the parking lot owners, although the competition would be more indirect. Examples such as this show how far removed from the proper judicial function the majority will lead us. Moreover, the majority somehow suggests this tax puts the Oity at a competitive advantage; however, it is not this tax but the exemptions the Oity has from other taxes which puts the City in a better position than the private operators. Thus, it would appear under the majority approach not only this tax, and competition, but all taxes which affect the City, must be considered.
It can be argued part of the foundation of this case rests on the power of the federal government to provide currency, however, it is equally clear the case holds excessive tax rates alone will not invalidate a taxing measure.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6260810. Public record. Not legal advice.