Petition for a Writ of Certiorari — Foley v. Comptroller of the Treasury

COMPTROLLER OF THE TREASURY.

STATE OF MARYLAND

Respondents

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TABLE OF CONTENTS

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Rt 2 denial of equal protection of the law for the

Shate of Marylend to tax the net taxable income of

the Petitioners at a higher rate than that of other

chimems of the State of Maryland oo iw a

EERE ea I a a F

AUTHORITIES CITED

Cases” .

Baker ¥. Carr, 369 U.S. 186, 82 S.C. 691, 7 L.B4.24

RL ie Wahaes Witte eee 4

Gleustein v. Tax Comm... 176 Nd. 423, 428, 4 24

Mitiwecctiaac che tite ee etl $

Breshaber Union P. R. Co., 240 US. i, 36 S.C.

EE RS5vr a cebkeeudokesccste, 1c. les. s

City of Bewon v RR Seaman NO Us.

409, 76 SQX. 69841958)... ts s

Harper v v. Vieginia State Board of Education, 383 US.

663,85 SX. 1079196). sissis

Knowlton v. Moore, 178 U.S. 41, 20 SC. 767 (1900) Maes

Miranda v. Arizona, 384 U.S. 486. 86 S.Ci. 1602.

6OLGAeneqims)..........istitsstiti*s ‘ 6

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Reynolds v. Gams, 377 US. $33, 88 BOX. 1962, 12

1 wd de

STS Cot RRKRNSSRARSABAAS v0 4

Rayer Guano Co. v. Vaginas: 788 US. 412.4050.

EO ree re ere ere $

Save of Wincor v. 5. C. Penny Co.. 311 US. 435,

Eh ac SAREE hE KAR EE SAAS Ws 6

Srewert Dry Geed Co. v. — |

S25, POUR. WBA CNSES) mw, 6

US, pe a Rema of Ste of times 18 F oe

IS ha cc cncercucacesrs. 6

Valentine v Great Atlanta and Pacifx Tea Co. 29°

US. 32, 57 SAX. 56, 81 EBS. 2207988) en 6

Weich v. Wenry, 305 U.S. 134,59 SX. 121 (7988). $

limited States Consetutron

Fourte wth Amendment Noe as os es inset 2.3.5.6

Constitution of State of Maryland. Article 2 ( ( ‘( ‘(‘( ‘( .étéitié«; 5

Sere Stareres.

Anmotated Code of Marytond 1.1969 Repl. Voi.)

_ Aaticde 81, Section 28a) eT a a?

Title 28,US. Code t257? cena eeeeseeees nie lg 2

WACIS NB... Dia ci Mada irs s

I ok cnnnderddacudnuesses ees $

| CONTENTS OF APPENDIX

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Supreme Court of the United States

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Ht. THOMAS FOLEY.AND

MARY V. FOLEY

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she judgment of the Court of Apperis of Maryland. entensd

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A. ‘OPINIONS BELOW

All opinions of the Courts of Maryland are set forth in

Appendices A and C.

B. THE GROUNDS UPON WHICH THE JURISDICTION

OF THIS COURT IS INVOKED

Jurisdiction in this Court is invoked under Title 28. U.S.

Code 1257 (3) and Rule 19, Subdivision | of the ruies of

this Court.

C. QUESTION PRESENTED FOR REVIEW

Does the progressive nature of the Maryland income tax

violate the Equal Protection Clause of the Fourteenth

Amendment to the Constitution of the United States?

D. CONSTITUTIONAL PROVISION AND

STATUTE INVOLVED |

The Constitutional provision involved herein is that por-

tion of Amendment XIV relating to equal protection of the

law (Appendix D).

The Statute involved is the Annotated Code of Maryland

(1969 Repl. Vol.): Article 81, Section 288a) which

imposes a progressive rate of tax on the net annual income

of individuals. (Appendix E)

E. STATEMENT OF THE CASE AND

MATERIAL FACTS

The appellants, on August 9, 1968, submitted an amended

income tax return for the tax year 1967 claiming a partial

refund of taxes paid on the incomes of the appellants. The

amount claimed is Four Hundred Thirty-Nine Dollars |

($439.00). The basis of the claim was then and is now as

follows:

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® Amendment XIV, Section 1, of the Constitution of the

United States says that no state may “deny any person

ithi ‘its j . li ti the j ti Of the law.”

We claim that a tax of Five Hundred Ten Dollars

($510.00) on the taxable income of H. Thomas Foley rep-

resents a rate of about 5% and that a tax of Three Hundred

Seven Dollars ($307.00) on the taxable income of Mary V.

Foley represents 2 rate of about 4.7%. ‘

We claim, therefore, that this represents denial of equal

protection of the law in that the rate for persons with the

lowest taxable income is lower, i.e., 2%. |

Therefore, we claim that all monies over and above 2%

of the taxable income are collected unconstitutionally

2 To sum up: one man: one vote: one tax rate.

On October 16, 1968. the Comptroller of the Treasury

through the office of Benjamin F. Marsh. Income Tax Divi-

On October. 28, 1968, a Petition of Appeal was filed with

the Maryland Tax Court in Baltimore. (Income Tax No.

156). ae :

On July 23, 1969, a hearing was held on the appeal.

- On August 8, 1969, an Order of Court in the Maryland

Tax Court affirmed the action of the Comptroller deny ing

the Petitioners’ claim for a refund. |

~ On September 2, 1969, an Order for Appeal and Petition

for. Review of this adverse decision was filed with the Cir-

cuit Court for Prince George's County , Maryland.

On November 19, 1969. this case (Law No. 41,585) was

heard before Judge Roscoe H. Parker, who affirmed the

opinion of the Maryland Tax Court.

On May 27, 1970, an appeal was filed with the Court of

Appeals of Maryland in Annapolis, Maryland. (Appendix

)

On September 16, 1970, -this appeal (No. 30) was heard

by the Court of Appeals of Maryland.

On October 20, 1970, that court affirmed the judgment

of the Circuit Court for Prince George's County. (Appen-

dix C)

F. ARGUMENT AMPLIFYING THE REASONS

RELIED ON FOR ALLOWANCE OF THE WRIT

In recent years this Court has expanded the application

of the Equal Protection Clause, most notably in regard to

apportionment of state legislatures (Baker v. Carr, 369 U.S.

186, 82 S.Ct. 691, 7 L. Ed. 24 663 (196 ), Reynolds v.

Sims, 377 US. 533, 84 S.Ct. 1362, 12 L. Ed. 2d 506

(1964)). Indeed, this Court has unequivocally stated that

it intends to scrutinize closely those classifications which

might invade or restrain fundamental rights and liberties

asserted under the Equal Protection Clause (Harper v. Vir-

ginia State Board of Education, 383 U.S. 663, 86 S.Ct.

1079 (1966). In this same case, the Court also proclaimed

that, a

“Equal Protection Clause is not shackled to political

theory of particular era and court in determining

what lines are discriminatory is not confined to his-

toric notions of equality, any more than due process

is restricted to fixed catalogue of what was at given

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Knowlton v. Moore, 178 US. 41, 20 S.Ct. 74 is from

1900 and involves a progressive federal tax. XIV

Amendment was not in question. Breshaber » Union P.R.

Co., 240 U.S. 1, 36 S.Ct. 236, from 1916, involves federal

tax and turned on due process. p

The most recent case cited that reached this Court is /

Weich v. Henry, 305 U.S. 134, 59 $Cr. 12) (1938). which

involved graduated taxation on corporate dividends Justice

XIV Amendment. _ definition of the limitations of . <

case by case basis. (16 A C.J.S. 318) In both Blaustein y.

Tax Comm , 176 Md. 423, 428. 4 A.2d 861 (1939), and

Royster Guano Co. v. Virginia, 253 5. 412. 40 $.C1. S60

(1970), cited by the Court of Appeals as authority allow-

ing states to make reasonable Classification (discrimination ).

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State of Wisconsin v. J. C. Penny Co., 311 US. 435, 6l S.

Ct. 246 (1941), and U.S. v. Dept. of Revenue of State of —

Miinois, 191 F. Supp. 723 (1961).) =

Although this CGurt has made an cullngs os segieds 0

graduated state income tax, it has deciar-d unconstitutional

@ graduated gross sales tax on merchants on the basis of |

denial of equal protection. (Stewart Dry Good Co. v. Lewis,

294 US. 550, $5 S.Ct. $25, 79 L-Ed. 1054 (1935).) This

finding was affirmed in Valentine v. Great Atlantic end

Pacific Tea Co., 299 US. 32,-57 S.Ct. 56, 81 L.Ed 22

(1936).

in its opinion, the Court of Appeals of Maryland avoids

the question of whether or not there is equal protection of

the citizens of Maryland as to the rate of taxation of annual

net income. instead, it relied upon “reasonable classific-

etion™ as its basis for sustaining the constitutionality of

Maryland's graduated income tax. The question of reason-

ableness or unreasonableness is irrelevant. The mere fact

that the State discriminates among its citizens with respect

to rate of taxation of annual net income is per se uncon:

stitutional under XIV Amendment. This Court itself has

said as much in Miranda v. Arizona, 384 U.S. 436, 86 S.Ct.

1602, 16 L.Ed.2d 694 (1966) when it declased “where

rights secured by the-Constitution are involved, there can

be no rule making or legislation which would abrogate

them.” This principle should be applicable to all matters

Because of the importance of the constitutional questions

raised herein and because of the recent dynamic applications,

of XIV Amendment, petitioners unge the court 1 estume

jurisdiction over this matter. a

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the Comptroller's denial of the appellants’ claim for refund

of income tax for the tax year 1967. ( aa

1. Is the Fousteenth Amendment of the Constitution of

the Unsted Statcs applicable to the 1967 Maryland mcome

tax lew?

STATEMENT OF FACTS

The appetiants. on August 9. 1968. submitted an amended

income tax return for the tax year 1967 clasming a partial

refund of taxes paid on the incomes of the appellants. The

amount claimed is Four Hundred Thisty-Nine Dollars

(5439.00). The basis of the claim was then and is now as

~ follows:

Articie 2 of the Constitution of the State of Maryland

states: “The Constitution of the United States and the Laws

made, or which be made in pursuance thereof, and aii

Treaties made, ot which shall be made under the authority

of the United ave and shall be the Supreme Law of

_ the State; and the judges of this state, and-ull the people of

this state, ase, and chall be bound thereby; anything in the

Constitution or Law of this State to the contrary not with-

standing.” ) |

Amendment XIV, Section |, of-the Constitution of the

United States says that no state may “deny any person

within its jurisdiction the equal protection of the law.”

We claim that a tax of Five Hundred Ten Dollars

($510.00) on the taxable income of H. Thomas Foley repre-

sents a rate of about 5% and that a tax of Three Hundred

Seven Dollars ($307.00) on the taxable income of Mary V.

Foley sepresents a rate of about 4.7%.

We claim, therefore, thet this represents denial St equal

plateation of Gio tow ts Git the cate fer gessens with the

lowest taxable income is lower, i.c., 2%.

Therefore, we claim that 2if monies over and above 2%

of the taxable income are unconstitutionally =

| To sum up: one man; one vote; one tax rate.

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son, denied the claim. : :

On October 28, 1968, a Petition of Appeal was filed with

the Maryland Tax Court in Baltimore. (income Tax No.

156).

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able by analogy to the State Constitution (the Fed-

eral formula does not apply). Furthermore, the

Supreme Court has further stated ‘where rights

secured by the Constitution are involved, there can

be no rule making or legislation which would abro-

gate them.’ This principle while set forth in the

Miranda case, a criminal case, should be applicable

in any citizen vs. state question.”

In his opinion affirming the opinion of the Maryland Tax

Court, Judge Parker chose not to address himself to the

points raised in appellants’ Petition. Instead, he offered

’ other grounds for his opinion when he said “The one-man

one-vote rule as proved by the Supreme Court was restricted

to a vote at a public election and did not intend to set the

standards for changing tax structures. The Supreme Court

has long held that any reasonable standard adopted by the

State to raise necessary revenues to perform its function of

government is constitutional so long as it is reasonable

within the due process of law.” .

As to the intent of the Supreme Court, the appellants can

find no specific restriction in their rulings (Baker v. Carr,

369 U.S. 186, 82 S.Ct. 691, 7 L.Ed 2d 663 and Reynolds

v. Sims, 377 U.S. $33, 84 S.Ct. 1362, 12 L.Ed 2d 506.

which would limit the one man one vote principles to public

elections. Indeed, what the Court seems to have been say-

ing in a variety of recent decisions, both civil and criminal.

is that évery state must treat all its citizens in an equal

fashion, the only limitation being “nearly as is practicable”

in the determination of election districts.

In Miranda v. Arizona, 384 U.S. 436, 16 L.Ed 2d 694

86 S.Ct. 1602, the Court specifically said: ‘Where rights

secured by the Constitution are involved, there can be no

rule making or legislation which would abrogate them”

(Emphasis supplied). The appellants claim that the Mary-

land income tax law of 1967 is legislation which abrogates

a right secured by the Fourteenth Amendment, namely,

equal protection of the law.

.

MEI RG AE anche TO Mt A te A te

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The question of “reasonableness” of a graduated income

tax has not been brought before the Supreme Court since

the one man-one vote rule was established.

The brief opinion of Judge Parker infers that he feels that

a graduated income tax is a reasonable standard adopted by

the State of Maryland to raise necessary revenues. The

appellants claim that a graduated income tax is unreasonable

in that it allows for a citizen with a taxable income of

$2,000 to pay a tax of $50, while a citizen with 10 times

that taxable income pays 18.8 times as much.

CONCLUSION

For the foregoing reasons, it is \espectfully submitted

that the opinions of Judge Parker be over-ruled, that the

Order of the Maryland Tax Court be reversed, and that the

Comptroller of the Treasury be ordered to pay the $439.00

refund claimed.

Respectfully submitted,

H. Thomas Foley and

Mary V. Foley

Pro se

‘

APPENDIX

IN THE CIRCUIT COURT FOR

PRINCE GEORGE'S COUNTY, MARYLAND

H. THOMAS FOLEY, and ?

MARY V. FOLEY; His Wife, !

Plaintiffs

vs Law No. 41,585

COMPTROLLER OF THE TREASURY

Defendant

DOCKET ENTRIES

1969

September 2 - (1) Order for Appeal from Denial of

income Tax Refund Affirmation and Petition for Review

of Adverse Decision Affirming Denial of Income Tax Re-

fund, filed.

September 24 - (2) Transcript of Proceedings, filed.

September 24 — (3) Photostat copy of Order of Court,

filed.

September 24th — (4) Photostat copy of Memorandum

of Grounds for Decision, filed. :

Octobér 13 — (5) Answer, filed.

November 7 — (6) Case has been definitely set for a Non-

Jury Trini for November 19, 1969, A copy of Notice filed.

November 19 — Hearing in open Court on Appeal from

Maryland Tax Court. Judge Parker; Kimmel, reporter. The

Opinion of the Maryland Tax Court is Affirmed. Appeal

dismissed

December 15 — (7) Notice of Appeal to the Court of

Appeals of Maryland, filed.

1970~

January 6 — (8) Motion to Extend Time for Transmitting

Record, filed.

94

January 8 ~ (8a) Order of Court, thereon extending time

within which to transmit record, (Judge James H. Taylor),

filed. ih

March 10 — Transcript of Proceedings, filed.

INTHE

MARYLAND TAX COURT

H. Thomas & Mary V. Foley

vs. Income Tax No. 156

Comptroller of the Treasury

| ORDER OF COURT

The above entitled case having on for hearing, testimony

having been taken and the matter considered, it is this 8th

day of August, 1969, by the Maryland Tax Court ORDERED

that the action of the Comptroller denying the petitioners’

claim for a refund be and the same is hereby AFFIRMED.

Certified True Copy

Test: Edwin W. Lowe, Clerk

cc: H: Thomas Foley .

J. Nelson Rickards, Jr.

Jon F. Oster

eee

/ MEMORANDUM OF GROUNDS FOR DECISION

The petitioner presented no evidence in support of his

claim for a refund based on an amended return by

himself and his wife in t968 for the tax year 1967, Ne cited —

no cases to support his contention that the Constitution of

Maryland, as well as the Fourteenth Amendment to the

Federal Constitution, guaranteeing equal rights to all citi-

zens, has been violated by the application of a greater

tax rate in his case than that which is applied to persons

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with lower incomes. The main thrust of his argument was

based on a one-man. one-vote analogy, for which he like-

wise cited no authority to show its applicability here. A

number of cases have been decided confirming the right of

the State. through its legislative arm; to make reasonable

classifications with regard to the incidence of the income

tax. The validity of the graduated income tax scale has

been judicially determined many times and has been upheld

both on the Federal and State levels.

Art. 81, 8 6 classifies income taxes with other excise

taxes. in the case of Oursler v. Tawes, 178 Md. 471 (1940).

the Court of Appeals said: “Taxes laid with a political

view are not ‘property taxes’ but are such taxes as the legis-

lature may levy, not upon property but upon occupations,

privileges, contracts and things of that nature, and as to

those the rule of equality is nut applicable”. (\talics sup-

plied}. This case also held that the Federal Constitution, }

with respect to equal protection, did not prevent States —

from adjusting their systems of taxation in all proper and

reasonable ways, provided all person in like circumstances

who are affected in the same manner are treated under

the law in the same way. The case specifically held the

Maryland income tax law to be constitutional: see also

Diefendor{ v. Gallet, 10 P. (2d) 307 (idaho, 1932).

“In light of the above cited cases and the lack of affirma-

tive evidence from the taxpayer, this Court denies the claim

for a refund; | Art. 81, #229 (h)}.

PETITION FOR REVIEW OF ADVERSE DECISION

AFFIRMING DENIAL OF INCOME TAX REFUND

| (Law No. 41,585)

H. Thomas Foley and Mary V. Foley, his wife, hereby

petition this honorable court to review and reverse the deci-

sion of the Maryland Tax Court with respect to the August

8, 1969 Order of the Court, said order affirming the Comp-

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troller’s denial of applicant's claim for re{und of income tax

for the tax year 1967 (income Tax No. 156), and for rea-

sons state:

1. The applicants, on August 9, 1968, submitted an

amended income tax return for the tax year 1967 claiming

a partial refund of taxes paid on the incomes of the appli-

cants. The amount claimed is $439.00. The basis of the

claim was then and is now as follows:

Article 2 of the Constitution of the State of Maryland

states: “The Constitution of the. United States and the

Laws made, or which shall be made in pursuance thereof.

and all Treaties made, or which shall be made under the

authority of the United States, are and shall be the Supreme

Law of the State; and the judges of this state, and all the

people of this State, are, and shall be bound thereby; any-

thing in the Constitution or Law of this State to the con-

Amendment XIV Section | of the Constitution of the

United States says that no state may “deny any person

within its jurisdiction the equal protection of the law.

We claim that a tax of $510 on the taxable income of

‘H. Thomas Foley represents a rate of about 5% and that a

tax of $307 on the taxable income,of Mary V. Foley rep-

resents a rate of about 4.7%.

We claim, therefore, that this represents denial of equal

protection of the law in that the rate for persons with the

low-taxable income is lower; i.e. 2%.

Therefore we claim that all monies over and above 2% of

the taxable income are collected unconstitutionally. |

To sum up: one man; one vote; oncdtax rate.

2, On'October 16, 1968 the Comptroller of the Treasury

through the office of Benjamin F. Marsh, Income Tax Divi-

sion denied the claim»\

3. On October 28, 1968 a Petition of Appeal was filed

with the Maryland Tax Court in Baltimore. (Income Tax

No. 156) :

~

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cited no cases to support his contention that

the Constitution of Maryland, as-well as the Four-

teenth Amendment to the Federal Constitution,

While these statements are true, it should also be

noted that this question has not been brought before

any Maryland Court since the enactment of the —

Maryland graduated income tax. iz

The applicants submit that this is the first case to

‘raise this question in the State of Maryland and fur- -

ther submit that lack of “authority” and previous

cases should not prejudice the court in determining

whether or not @ person's Constitutional rights have

beef violated. .

“The validity of the graduated income tax scale has

been judicially determined many times and has been

upheld both on the Federal and State levels.” While

this statement is true, it should also be noted that

the question has not been reconsidered in light of

the principles put forth by the Supreme Court of

the United States in its decision reapportioning state

legislatures. These principles are that states must

& 13a

citizens equally (one man, one vote) and

that denial of equality by the Federal Constitution

is limited to Federal jurisdiction and is not trans-

ferable by analogy to the State Constitution (the

Federal formula does not apply.y. Furthermore, the

Supreme Court has further “where rights

secured by the Constitution involved, there can

be no rule making or legislation which would abro-

gate them.” This principle while set forth in the

Miranda case, a criminal case, should be applicable

in any citizen vs. state question.

7. The applicants contend that in’ view of these recent

decisions of the Supreme Court, the cases of Oursler ¥.

Tawes, 178 Md. 471 (1940) and “Diefendorf v. Gallet,

‘ P. (2nd) 307 (Idaho, 1932) are not grounds for the Maryland

Tax Courts Affirmation of the Comptrollers action.

Wherefore, applicants H. Thomas Foley and Mary V. Foley

pray that the decision of the Maryland Tax Court affirm-

ing the Comptroller's action denying the petitioners’ claim

be reversed and that this Court order the Comptroller to

refund the amount claimed. ,

Respectfully submitted,

/s/ H. Thomas Foley

/s/ Mary V. Foley

2309 Belleview Avenue

Cheverly, Maryland 20785

(Certificate of service omitted in printing}

ANSWER

The Appellee, Comptroller of the. Treasury, Income Tax

Division, by its attorneys, Francis B. Burch, Attorney General,

and Jon F. Oster, Assistant Attorney General, for answer to

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the appeal trom the final order of the Maryland Tax Court

filed herein by the Appellants, says:

_ The allegations contained in the Petition of appeal are

denied.

WHEREFORE, the Appelice prays that the assessment

appealed from be affirmed.

/s/ Francis B. Burch

_ Attorney General

” /s/ Jon F. Oster

Assistant Attorney General

Attorneys for Appellee

(Certificate of service omitted in printing}

TRANSCRIPT OF PROCEEDINGS

Upper Mariboro, Maryland

November 19, 1969

THE DEPUTY CLERK: Law No. 41,585, H. Thomas

Foley and Mary V. Foley, his wife, v. Comptroller of the

Treasury.

THE COURT: Very well, sir. you are the moving party.

What do you have to say?

MR. FOLEY: First, | would like to correct several errors

that appear in the official transcript.

THE COURT: | am otal I cannot correct any of those.

1 wasn't there.

MR. FOLEY: These are errors of typing, et. cetera, which

1 am sure Mr. Oster might wish to agree to. it makes things —

tead with sense rather than no sense at all.

THE COURT: What page”

MR. FOLEY: Page 4, Line 15. After the word “is” it

should be. entered the words “in part.” |

THE COURT: “The statement that accompanied our ~

return is in part as follows’? Is that correct?

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MR. OSTER: | have no objection, your Honor.

MR. FOLEY: Page 5, Line 12. After the word “above”

the words “two per cent of.”

Line 16 of the same page the word is “redistricting”

than

On Page 6, Line 3. The word after “enumeration” is-

“or” rather than “of.” | ¥

THE COURT: What line are you?

{3} MR. FOLEY: Line 3, sir.

THE COURT: It is “or” rather than “of.” On page 7,

Line 21, the name of the case cited is Oursler v. Tawes. :

~ The stenographer inserted counsel’s name by mistake.

THE COURT: Very well. You are appealing this. It is

incumbent upon you to show what is wrong with what has

seen done before.

MR. FOLEY: Yes, sir. I would like to review the his-

tory of the case that comes before the Court. We filed on

August 9, 1968, an amendéd income tax return for the tax-

able year 1967 claiming a partial refund of taxes paid on

the weome of the applicants. The amount claimed was

$439.00. The baiss of the claim was then and is now as

follows: ;

“ 2 of the Constitution of the State of Maryland

states: “The Constitution of the United States and the laws

of the United States, are and shall be the Supreme Law of

the State; and the judges of this state, and al! the .

of this State, are and shall be bound thereby; anything in

the Constitution or Law of this State to the contrary not-

__. Amendment Fourteen, Section | of the Constitution of

— the United States, *. . ; nor deny any person within its

_ (4) jurisidction the equal protection of the law.”

We claim that a tax of $510 on the taxable income of

H. Thomas Foley represents a rate of about five percent

and that a tax of $307 on the taxable income of Mary V.

Foley represents a rate of about 4.7 per cent. We claim,

as ae 7

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therefore, that this represents denial of equal protection

of the law in that the rate for persons with the low taxable

income dre taxes a lower percentage, that is, two per cent.

Therefore, we claim that all monies over and above two per

cent of the - ;

THE COURT: Who is that that pays two per cent?

MR. FOLEY: Other persons. That is their basic rate

for taxable income of $2,000 or less.

THE COURT: What do you make?

MR. FOLEY: Are you interested in taxable income or

THE COURT: What they tax.

“MR. FOLEY: Taxable income that year was $10,000.

THE COURT: You say that averaged out to four per

cent?

MR. FOLEY: Five per cent.

THE COURT: Your contention is that that is a violation

of the Constitution because they charge people with incomes

of less than $2,000 at the rate of two per cent? -

MR. FOLEY: That is right.

THE COURT... That is your argument”

(5) MR. FOLEY: Yes, sv,

THE COURT: Is that your case?

MR. FOLEY: Yes, sir.

THE COURT: Is it the same standard? _ Does it collect

two per cent from everybody”

MR. FOLEY: Your Honor, the case is based on the ides

See Sean Sareea So gamen ant Ge Cate the

State may do the same to all persons.

THE COURT: In that class. © ;

MR. FOLEY: That is what | am trying to bring before

the Court. That is, whether this is reasonable classification.

THE COURT: Can you show me where they have dis-

criminated against you with anybody in your same class’

in other words, if you and | make $10,000, aré they charg:

ing me less than they are charging you?

MR. FOLEY: The income taxes are taxed on a yearly

basis and the rates are set so that the—the rate should be

the same for all persons.

a

17a

THE COURT: You mean even though a person only

makes $2,000? :

MR. FOLEY: I don’t mind them taxing me at two per

cent if they tax him two per cent. | have no objection to

that at all.

To imerease my tax by taxing at a higher income and to

MR. FOLEY: Which class is that?

THE COURT: The $10,000 class.

MR. FOLEY: Everybody is. classified different because

sion of classes. Your class varies from time to time. My

Claim is that the State should tax individuals without look-

ing in regard to their total income. With property taxes no

matter who owns the house the tax is the same. | am try-

ing to make an analogy of income taxes to sales taxes or

property taxes, which would be the same for all people.

THE COURT: This'doesn't involve any tax on real prop-

erty. :

MR. FOLEY: I hope my income is real property.

THE COURT: Your income?

MR. FOLEY: If | get an income | have money. That

is property.

THE COURT: That is personal property.

J MR. FOLEY: Personal property, | assume, is taxed (7)

at the same rate for all persons.

THE COURT: What | am trying to get from you-!

haven't been successful so far—is that | think you agree

with me that a man that makes $2,000 is taxed at two per-

cent.

MR. FOLEY: Yes. sir.

ve

18a

THE COURT: A man that makes $10,000 is taxed at

four or five per cent.

MR. FOLEY: Yes, sir.

THE COURT: You say that is unconstitutional! per se?

MR. FOLEY: Yes, sir.

THE COURT: Even though it applies to all classes of

those people within the income bracket of $2,000 and

$10,000?

MR. FOLEY: Yes, sir.

THE COURT: Is that your case?

MR. FOLEY: Yes, sir.

THE COURT: Do you want to be heard on that?

MR. OSTER: Your Honor, | think that everybody would

be happier—including you and I—if we could establish a

constitutional principle that any man making an income,

irrespective of what that income is, would be taxed at the

same rate. What the taxpayer here is contesting is the

fact that we have established a graduated rate in Maryland.

That is his real-objection.

THE COURT: I understand that.

(8] MR. OSTER: There just simply is no case that |

know or or can find and the taxpayer has cited no case.

MR. FOLEY: May | contiiwe with the brief or the

appeal review that I filed?

THE COURT: I read it before I came in here.

MR. FOLEY: I would like to refer you to Item 6, where

the opinion of the Tax Court stated, ‘“‘He cited no cases to

support his contention that the Constitution of Maryiand,

as well as the Fourteenth Amendment to the Federal Con-

stitution, guaranteeing equal rights to all citizens, has been

violated by the application of a greater tax rate in his case

than that which is applied to persons with lower incomes.

The main thrust of his argument was based on a one man,

one vote analogy for which he likewise cited no authority

to show its applicability here.”

While these statements are true it should be noted that

this question has not been brought before any Maryland

court since the enactment of the Maryland graduated income

tax. The applicants submit this is the first case to raise

19a

this question in the State of Maryland and further submit

the lack of “authority” and previous cases should not

prejudice the court in determining whether or not a person's

constitutional rights have been violated.

THE COURT: Is there any further argument?

MR. FOLEY: Just to say further that another point

[$} I raised in the case is the fact that the cases cited by

the Maryland Tax Court are very old cases and do not re-

flect the views of the Supreme Court in the one man, one

vote cases and all citizens before the State must be treated

in an equal fashion. That was covered in Point 6(b) and 7

of my review.

THE COURT: Very well, gentlemen, the matter comes

before the Court on an appeal from the Maryland Tax Court

by way of H. Thomas and Mary V. Foley with an amended -

tax return which they filed in the State of Maryland August

9, 1968 in the amount of $439.00. The thrust of the

appellants’ contention is that he and his wife are being dis-

criminated against, as the Court understands it, in that he

is being taxed on a higher rate than a person earning con-

siderably lower than his rate of income. What he, in effect,

is doing is contesting the graduated tax rate as established

by the State of Maryland, and he says that it is unconsti-

tutional inasmuch as it is discriminating against those in a

class that earn greater sums than other classes that make

lesser sums. We are bound to agree with the Maryland Tax

Court where they «gay that it is reasonable for the State of

Maryland. through its legislative,arm to make reasonable

classification with regard to the instance of income tax.

Obviously a man making $2,000 is a man in distress regard-

less of what rate you charged him.

MR. FOLEY: That would be on taxable income rather—

THE COURT: If you don't mind, | would like to finish

[10) my opinion.

We consider that the man earning $2,000 should be taxed

at a lower rate than a man making $10,000. We might ob-

serve that those in the bracket of fifty to one hundred

20a

thousand dollars pay a great deal higher rate than you do. °

That, of course, is not desirable, but | know of no substi-

tute and | know of nothing in the Maryland Constitution

or the Declaration of Rights or in the Federal Constitution

that prohibits it. The one man-one vote rule as proved by

the Supreme Court was restricted to a vote at public elec-

tion and did not intend to set the standards for changing

tax structures. The Supreme Court has lone held that any

reasonable standard adopted by the State to raise necessary

revenues to perform its function of government is consti-

tutional so long as it is reasonable within the due process

of law. For that reason the Court affirms the opinion of

the Maryland Tax Court and dismisses the appeal.

(Whéfeupon, proceedings in the above-entitiod matter

were concluded.) .

* * «

2a

APPENDIX B

In THE

Court of Appeals of Maryland

SEPTEMBER TERM, 1970

No, 30 4

H. THOMAS FOLEY ann MARY V., FOLEY,

Appellants,

v,

COMPTROLLER OF THE TREASURY,

Appellee,

?

APPEAL FROM THE Circuit Count ror PRINCE GEORGE'S

County (Roscoe H. Parker, Judge )

BRIEF OF APPELLEE

STATEMENT OF THE CASE

Appellee accepts Appellants’ Statement of the Case.

QUESTION PRESENTED

Does the progressive rate of the Maryland income tax

violate the Equal Protection Clause of the Fourteenth

Amendment to the Constitution of the United States?

STATEMENT OF FACTS

Appellee accepts Appellants’ Statement of Facts.

22a

ss ARGUMENT ‘Ps

THE PROGRESSIVE RATE OF THE MARYLAND INCOME TAX

AS IT APPLIES TO THE APPELLANTS DOES NOT IMPOSE UPON

THEM A SUBSTANTIAL TAX BURDEN THAT IS BASED UPON

DISCRIMINATION WHICH IS ARBITRARY AND CAPRICIOUS SO

AS TO CONSTITUTE A VIOLATION OF THE EQUAL PROTECTION

CLAUSE OF THE FOURTEENTH AMENDMENT TO THE CONSTI.

TUTION OF THE UNITED STATES.

Article 81, Section 288(a) of the Annotated Code of

Maryland (1969 Replacement Volume) imposes a progres-

sive rate of tax on the taxable net income of individuals

as follows;

"There is hereby levied gad imposed for each pen

dar year beginning after December 31, 1966, a tax on

the taxable net income, as defined in § 280 (a) of every

resident individual of this State and on the taxable net

income, taxable in this State, of every individual -not

» a resident of this State. Such tax shall be at the follow-

ing rates: two percent (2) on the first $1,000.00 of

taxable income, three percent (3':) on the second

$1,000.00 of taxable income, four percent (4'') on

the third $1,000.00 of taxable income, and five percent

(5': ) of all faxable income in excess of $3,000.00." —

The Appellants contend that this graduation of rates

from two percent (2':) to five percent (5‘: ) constitutes

unequal treatment and violates the Equa! Protection Clause

of the Fourteenth Amendment to the Constitution of the

United States. As grounds for this conténtion the Appel:

lants cite the cases of Baker v. Carr, 369 U.S. 186 (1962),

and Reynolds v. Sims, 377 U.S. 533 (1964).

The Appellee has not found any recent cases sinseking

the progressive rate feature of a State income tax. The

progressive rate feature of the federal War Revenue Act of

June 1898 was attacked on grounds of fundamental prin-

ciples of equality and justice in Knowlton v. Moore, 178

or

23a

U.S. 41 (1900). In rejecting the attack, Mr. ‘ustice White

said for the Supreme Court: %

“The review which’ we have made exhibits the fact

that taxes imposed ‘with reference to the ability of

the person upon whom the burden is placed to bear

the same have been levied from the foundation of the

government, So, also, some authoritative thinkers, and

a number of economic writers, contend that a progres-

sive tax is more just and equal than a proportional one.

In the absence of constitutional limitation, the question

whether it is or is not is legislative, and not judicial.

The grave consequences which it is asserted must. arise

in the future if the right to levy a progressive tax be

recognized involves in its ultimate aspect the mere

assertion that free and representative government is a

failure, and that the grossest abuses of power are fore-

shadowed unless the courts usurp a purely legislative

function. If a case should ever arise, where an arbi-

trary and confiscatory exaction is imposed bearing the

guise of a progressive or any other form of tax, it will .

be time enough to consider whether the judicial power

can afford a remedy by applying inherent and funda-

mental principles for the protection of the individual,

even though there be.no express authority in the Con-

stitution to do so, That the law which we have con-

strued affords no ground for the contention that the

tax imposed is arbitrary and confiscatory is obvious.”

supra, pp. 109-110,

In Breshaber v. Union P. R. Co., 240 U.S. 1 (1916) the

progressive feature of the federal income tax provisions of

the Tariff Act of October 3, 1913 was attacked as an arbi-

trary abuse of power wanting in due process. In uphold-

ing the progressive feature Mr. Justice White stated the

attack disregarded “the fact that in the very early history

of the government a progréssive tax was imposed by Con-

gress, and that such authority was exerted in some, if not

all, of the various income taxes enacted prior to 1894...”

supra, p. 25.

3

Posten as J

J

24u -

Baker v. Carr, supra, involved an action under the Civil

- Rights Act brought by certain Tennessee Appellants who

alleged that the apportionment of the State legislature

deprived them of a federal constitutional right to equal,

protection of the law, A United States District Court was

asked for a declaratory. judgment invalidating the 1901

statute on which the apportionment wus based, The Appel;

lants’ argument was that although the Tennessee Consti-

tution provided for a decennial apportionment of repre-

sentatives and senators among the counties and districts

according to their respective numbers, the legislature had

failed to make such reapportionment since 1901, Because

of population changes in the past sixty years the Appellants

argued that their votes had been unconstitutionally de-

based on the grounds that the Equal Protection Clause for-

bids arbitrary and unreasonable apportionment of. legis-

lative seats. The Supreme Court held that the federal

courts had jurisdiction of the subject matter and that the

debasement .of a citizen's vote because of malapportion-

ment of a State legislature presented a justiciable contro-

versy under the Equa) Protection Clause of the Fourteenth

Amendment, The Supreme Court also determined that the

Equal Protection Clause provides manageable standards

by which lower courts eould decide upon the constitution-

ality of a State apportionment plan. No constitutiorial

standard, however, was set forth in the decision.

Approximately two years later, in Reynolds v, Sims, 377

U.S. 533 (1964), and five companion cases decided the

same day one of which was Maryland Comm. for Fair

Representation v. Tewes, 377 U.S. 695 (1964), 228 Md. 412,

the Supreme Court held that the application of the Equal

Protection Clause to State legislative districting required

that representation in both chambers of a State legislature

be apportioned by population, 7

: | .

Pad

Poa

25a

The Appellants in the instant case argue that the appor-

tionment by population principle which they characterize

as “one man — one vote principles to public elections”, by

analogy affects a scheme of income taxation which uses

progressive rates and that the use of such progressive rates

violates the Equal Protection Clause of the Fourteenth

Amendment. | js

Baker v. Carr, supra and Reynolds vr. Sims, supra, have

been frequently cited, however, the principles enumerated

therein by the Supreme Court have been strictly construed

and for the most part their application has been limited to -

legislative reapportionment problems. Litigants have been

unsuccessful when they attempted to apply the principles

relating to legislative apportionment to other areas of law/

Thus, in Young v. State, 220 So. 2d 843 (Ala. 1969), the

Supreme Court of Alabama, in a second degree: murder

case, refused to draw an analogy between an Alabama law

which permitted a jury to separate arid the situation in:

volving the denial of equal franchise in Baker v. Carr,

supra, and Reynolds v. Sims, supra; in Schweitzer v, Clerk ©

for City of Plymouth; 164 N.W. 2d 35 (Mich. 1969), the de-

cisions of Baker v. Carr, supra, and Reynolds v. Sims, supra,

were rejected by the Supreme Court of Michigan as sup-

port for the argument that the equal protection clause was

violated by a city charter provision requiring property

ownership to qualify for public office; and in Cor v. Katz,

204 N.Y. Supp’ 2d 544 (1968), the Court of Appeals of New

York held that “the one man — one vote” principle was

not applicable to and did not invalidate statutes providing

for allocation and election of judges of a City-wide Civil

Court of the City of New York, because the principle was

not intended to regulate the election of judges whose func-

tions are solely judicial.

.

?

?

”

a

| 260

In the famous case of Welch v, Henry, 305 U.S, 134 (1938)

involving a broad attack on the income tax law of the |

State of Wisconsin which included a retroactive graduated -

tax on corporate dividends, Justice Stone stated for the

Supreme Court at page 145 that: ;

"it is @ commonplace that the equal protection clause

does not require a state to maintain rigid rules of equal

taxation, to resort to close distinctions, or to maintain -

& precise scientific uniformity, Possible differences in.

tax burdens, not shown to be substantial, or which

are based on discrimination not shown to be arbitrary

or capricious, do not fall within the constitutional

prohibition,” | : 7

aoe CONCLUSION

It is respectfully submitted that the statement quoted

above by the Supreme Court in Welch v, Henry, supra,

remains the standard by which:a State income tax should

be measured against the Equal Protection Clause. The

Appeliants have failed to show that their tax burden is —

substantial nor that it is based upon a discrimination which

is arbitrary or capricious and, therefore, the Appellee re-

quests that the judgment of the Circuit Court ‘or Prince

George's County be affirmed,

Respectfully submitted,

Francis B, Burcu,

| _ Attorney General,

se: Jon F, Oster,

Assistant Attorney General,

For Appellee.

, 2h

APPENDIX C

_IN THE COURT OF APPEALS OF MARYLAND

° No. 30

SEPTEMBER TERM, 1970

H. THOMAS FOLEY and

MARY V. FOLEY

; o Mt

COMPTROLLER OF THE TREASURY |

See. eee

Hammond, C.J.

Barnes

McWilliams

Finan

Singley

Smith

Digges,

JJ.

Opinion by Finan, J.

Filed: October 20, 1970

The appellants, as income taxpayers for the year 1967,

claim a partial refund from the appellee (Comptroller of the

Treasury) for taxes paid, on the premise that the progres-

sive rate of the Maryland income tax provided by Code

(1969 Repl, Vol.), Art. 81, § 288(a), violates the equal pro-

tection clause of the Fourteenth Amendment of the Con-

stitution of the United States. The lower court affirmed

the holding of the Maryland Tax Court which had found

no merit to the appellants’ challenge. This Court, likewise,

finding no validity to the appellants’ contentions affirms

the lower court.

ory

Pe

e AURORE MET “yop

28a

Fhe appellants advance the novel theory that by wnulogy

the “one man-—one vote” doctrine, promulgated by the

United Stutes Supreme Court in the state legisluture reap-

portionment cases of Baker v. Carr, 369 U.S. 186, B2 S.Ct.

691 (1962), and Reynolds v. Sims, 377 U.S, 533, 84 S.Ct.

1362 (1964), should be extended to embrace not only the

principle of “one man- one vote,” but also One tax rate,

The Statute in question provides:

"There is hereby levied und imposed for each

calendar year beginning ufter December 31, 1966,

# tax on the taxable net income, as defined in

§ 280(a) of every resident individual of this State

and on the taxable net income, taxable in this State,

of every individual not 4 resident of this State, Such

tax shall be at the following rates: two percent

(2%) on the first $1,000.00 of taxable income, three

percent (3%) on the second $1,000.00 of taxable :

income, four percent (4%) on the third $1,000.00

of taxable income, and five percent (5%) of all tux-

able income in excess of $3,000.00" Maryland Code.

(1969 Repl, Vol.), Art, 81, # 288(y), SS

The graduation of rates from two percent (2% )No five

(5%) is the alleged inequity about which the appellants

complain, stating: "This variation in tax rate in of itself

represents an inequality in that each taxpayer is not taxed

in a similar manner, ***,”

The appellants also emphasize that this is the first time

that this issue has been presented to this Court and that

the precedents upon which the State relies are all decisions

prior to the “one man—one vote” decision of Baker v. Carr,

supra. We might be disturbed by this argument if we

thought there was much dispute over the validity of a grad-

uated income tax when measured uguinst the Fourteenth

Amendment, or that Baker v. Carr presented any true anal-

ogy. Actually, the constitutionality of a gruduated income

tax, insofar as the Fourteenth Amendment is concerned, is

now universally accepted as hornbook law und we fail to

sectors | | ier.

29a

- ee

find where the principle of Baker v. Carr has any applica- ,

tion to the instant case under any rationale.

The validity of a progressive or graduated income tax,

Measured against the equal protection clause of the Four-

th Amendment, was challenged and upheld as early as

in the case of Knowlton v. Moore, 178 U.> 41, 20

S.Ct, 747 (1900), in which the War Revenue Act of June

1898 was the subject of attack. In upholding the Act, Mr.

Justice White said for the Supreme Court:

“The review which we have made exhibits the

fact that taxes imposed with reference to the ability

of the person upon whom the burden is placed to

bear the same have been levied from the foundation

of the government. So, also, some authoritative

thinkers, and a number of economic writers, con-

tend that a progressive tax is more just and equal

than 4 proportional one. In the absence of consti-

tutional limitation, the question whether it is or is

not is legislative and not judicial. The grave con-

sequences which it is asserted. must arise in the

future if the right to levy a progressive tax be recog-

nized involves in its ultimate aspect the mere asser-

tion that free and representative government 1s a

failure, and that the grossest abuses of power are

foreshadowed unless the courts usurp a purely legis-

lative function. Ifa case should ever arise, where

an arbitrary and confiscatory exaction is imposed

bearing the guise of a progressive or any other form

of tax, jt will be time enough to consider whether

the judicial power can afford a remedy by applying

inherent and fundamental principles for the protec-

tion of the individual, even though there be no

express authority in the Constitution to do so. That

the law which we have construed affords no ground -

for the contention that the tax imposed is arbitrary

and confiscatory, is obvious.” 178 U.S. at 109-1 10,

In the cuse of Oursler v. Tawes, 178 Md. 471, 13 A.2d

763 (1940), this Court had before it the question of the

validity of certain aspects of the Maryland Income Tax Law

30a

of 1939, Ch. 277, § 12 of the Acts of 1939. There was no

issue regarding a graduated income tax, as there was none

at that time; however, several other challenges to the con-

stitutionality of the law were made. One involved the dif-

ference in the net income tax on resident individuals of this

State and on the net income taxable in this State of indivi-

dual non-residents. There were also issues concerning

whether the Act required a taxpayer having an investment

income to actually pay a tax in part on gross income. The

issues in that case are not of moment now, but what is

pertinent is the following language of this Court regarding

the right of the Legislature to establish reasonable classific-

ations for the purpose of taxation:

“To whatever classification the species of income

tax may belong, it is controlled by the basic princi-

ples which govern either excise or property taxation.

The first of these is that, independently of consti-

tutional provisions, and subject only to the limit-

ations placed upon it by. the Federal Constitution,

the power of taxation is inherent in a sovereign

State, because the right to tax underlies its own

Constitution, and is-not granted by it. Stated dif-

ferently, the right may be regulated and limited by

constitutional mandates, but it exists without

express authority in the fundamental law as a neces-

sary attribute of sovereignty.

* * *

“First of all, it may ‘be observed that the Federal

Constitution has not undertaken to lay down any

hard and fast rule with respect to due process of

law, the equal protection of the laws, or as to privi-

leges and immunities; and _as tersely summarized in

Board of Commnrs. etc. v. Johnson County, 173

Ind. 76, 89 N.E. 590, 593; ****Nor does the equal

protection clause prevent the states from adjusting

their systems of taxation in all proper and reason-

able ways. *** If all persons who are in like circum-

stances, or affected alike, are treated under the laws

the same, there is no deprivation of equal protection

3la

of the law. *** The classification itself must be

based upon natural réasons, upon reasons which

naturally inhere in the subject matter, upon real

difference existing between the classes, and so as to

produce: no distinction between members of the

same class.’ ’’ at 482-483

A case containing language of similar import to that

found in Oursler is Blaustein v. Tax Commn., 176 Md. 423,

428, 4 A.2d 861 (1939), wherein the United States Supreme

Court opinion in Royster Guano Co. y. Virginia, 253 U.S.

412, 40 S.Ct. 560 (1920), is quoted at length, as authority

for the proposition that the Fourteenth Amendment does

not prevent the states from resorting to reasonable classific- °

ation for the purpose of taxation. See also Breshaber vy.

Union PR. Co., 240 U.S. 1, 36 S.Ct. 236 (1916).

A case giving strong support to the validity of a pro-

gressive income tax enacted by a state is that of Welch »:

Henry, 305 U.S. 134, 59 S.Ct. 121 (1938). At issue was

the constitutionality of the income tax law of the State of

Wisconsin, which included a retroactive graduated tax on

corporate dividends. The United States Supreme Court

speaking through Mr. Justice Stone stated:

“* * * It is a commonplace that the equal pro-

tection clause does not require a State to main-

tain rigid rules of equal taxation, to resort to close

distinctions, or to maintain a precise scientific uni-

formity. Possible differences in tax burdens, not

shown to be substantial, or which are based on dis-

crimination not shown to be arbitrary or capricious,

do not fall within the constitutional prohibition.”

305 U.S. 134 at 145. |

Interesting treaties which shed further light on the “Equal

Protection Limits Upon Taxation” are Commentaries on

the Constitution of the United States, by Chester James

Antieau (Dennis & Co. Inc. Buffalo, N.Y. 1960), beginning

at p. 107 and Constitutional Uniformity and Equality in

State Taxation, by Wade J. Newhouse, Jr. (Michigan Legal

Studies 1959), University of Michigan, Ann Arbor, begin-

ee a ee

324 ,

ning at p. 606. In this latter work the author cites numer-

* OUS Cases in note 22 p. 607 in support of the constitution-

ality of a graduated income tax, including Shaffer v. Carter,

252 U.S. 37, 40 S.Ct. 221 (1920), and Magoun vy. Ill: Trust

& Savings Bank, 170 U.S. 283, 18 S.Ct. 594 (1898).

The gist of the reasoning of the cases and authorities is

that the imposition of a graduated income tax does not per

se constitute arbitrary or discriminatory classification of

taxpayers. In fact, as was stated by the Court in Knowl-

ton, “* * * a number of economic writers, contend that a

progressive tax is more just and equal than a proportional

one. * * *.” The question of the means of taxation to be ~

employed is a legislative function and, as long as that means

is not discriminatory or arbitrary in its classifications of

taxpayers, the courts may not reject it.

We conclude that the legality of a graduated.or progres-

sive income tax, such as we have in this State, insofar as the

equal protection clause of the Fourteenth Amendment of

the United States Constitution is concerned, requiescit in

pace and should not be disturbed.

JUDGMENT AFFIRMED, APPEL-

LANTS TO PAY COSTS.

aietieeshatiames te tadiaiies Lodo ea

33a

~ APPENDIX D

U.S. Constitution, Amendment XIV

“Section 1. . . nor shall any State... deny to any

person within its jurisdiction the equal protection

of the laws.”

APPENDIX E

Annotated Code of Maryland (1969 Repl. Vol.): Article

81, Section 288(a)

“There is hereby levied and imposed for each cal-

erfdar year beginning after December 31, 1966, a

tax on the taxable net income, as defined in § 280

(a) of every resident individual of this State and on

the taxable net income, taxable in this State, of

every individual not a resident of this State. Such

‘tax shall be at the following rates: two percent (2)

on the first $1,000.00 of taxable income, three per-

cent (3%) on the second $1,000.00 of taxable

income, four percent (4%) on the third $1,000.00

of taxable income, and five percent (5%) of all tax-

abie income in excess of $3,000.00.” °