issuance of bonds backed by tax on the transfer of real property held violative of Amendment 20, because Amendment 20 applies not only to evidence of indebtedness for which the State's faith and credit is pledged, but also to evidence of indebtedness for which any of its revenue is pledged, and real estate transfer tax was a revenue of the state
How later courts described this case
- issuance of bonds backed by tax on the transfer of real property held violative of Amendment 20, because Amendment 20 applies not only to evidence of indebtedness for which the State's faith and credit is pledged, but also to evidence of indebtedness for which any of its revenue is pledged, and real estate transfer tax was a revenue of the state
- setting forth the general test for determining whether the remaining portion of an act will be sustained after the invalid provision is stricken
- An "excise" tax is an `"inland imposition paid sometimes upon the consumption of the commodity, and frequently upon the retail sale."' CITING Black's Law Dictionary.
- supplemental opinion on grant of rehearing
Written by the judges who cited it.
The opinion
George Rose Smith, Justice, concurring and dissenting. On rehearing, concurring in part and dissenting in part. I join in the majority holding that money raised by taxation must be appropriated by the General Assembly before it can be spent. We have not one but two constitutional provisions prohibiting the withdrawal of funds from the public treasury except in pursuance of a specific legislative appropriation. Ark. Const., Art. 5, § 29, and Art. 16, § 12. The State’s financial stability depends to a great degree upon that wholesome restriction on the spending power. The importance of this constitutional principle was clearly stated in Dickinson v. Edmondson, 120 Ark. 80 , 178 S. W. 930 , Ann. Cas. 1917C, 913 (1915), in words frequently quoted in later cases:
[I]t is plain that the framers of the Constitution intended to place an unmistakable limitation upon the authority of public officials in paying out public funds, and to declare that all the State funds which are within the purview of that provision must be held in the treasury, until a specific appropriation thereof has been made by the Legislature. The power of the General Assembly with respect to the public funds raised by general taxation, is supreme, and no State official, from the highest to the lowest, has any power to create an obligation of the State, either legal or moral, unless there has first been a specific appropriation of funds to meet the obligation. (My italics.)
I also join the majority in rejecting the suggestion that the General Assembly can circumvent such an important constitutional limitation simply by directing that tax money be held in a special bank account rather than be commingled with other public funds. If the constitutional prohibition could be sidestepped as easily as that, it might as well not have been written in the first place. Quite obviously, as the Supreme Court of Michigan held in a similar situation, the reference to the “treasury” means the State’s public funds in general, rather than any particular room in the state capitol or any particular bank account. People v. McKinney, 10 Mich. 54 (1862). We recognized a narrow exception to the general rule, with respect to cash funds, in Gipson v. Ingram, 215 Ark. 812 , 223 S. W. 2d 595 (1949), but that opinion emphasized again and again that the court was referring only to cash funds not derived from the levy of taxes. That case is not authority for the view that money raised by the power of taxation can be spent without a legislative appropriation.
I am unable, however, to agree with the majority holding, on rehearing, that Act 239 is severable; that is, that the levy of the documentary stamp tax is valid even though, for want of an appropriation, the revenue derived from the tax must accumulate as an idle fund in the state treasury for at least two years, and conceivably for a decade or more, until the legislators are able to agree upon the manner in which the ever-increasing fund is to be spent.
The majority’s view, in my opinion, is so unrealistic as to be an excursion into the realm of fancy. We all know that the levy of a new tax is probably the most unpopular of all measures to come before any legislature. We all know that the lawmakers can be persuaded to approve a new tax only upon a clear showing that the money is needed urgently and immediately. Yet four members of this court now solemnly declare that the General Assembly of the State of Arkansas would have insisted upon the levy of this new tax even if the legislators had known that the ensuing revenues could not be spent for at least two years and would idly accumulate in the public treasury for that length of time. I daresay that never in the history of any of the fifty states has any legislative body ever levied a new tax merely for the pleasure of seeing the money lie unused in the public coffers for the indefinite future. The majority have not convinced me that the members of our General Assembly were so utterly unaware of the wishes of their constituents as to embark upon such a course by the enactment of the act now in controversy. Let it be shown on the permanent records of this court that I dissent.
Harris, C. J. and Byrd, J., join in this opinion.