State v. Philadelphia, Wilmington & Baltimore Railroad

Alvey, J., delivered the following dissenting opinion: I dissent in toto from the opinion of the majority of the Court filed in this case ; and while I shall refrain from a general discussion of the questions presented by the record, there is one fundamental question in regard to which I shall state briefly the grounds of my dissent. That gross receipts of a railroad company, upon which the tax in this case was levied, under the Act of 1812, ch. 234, are not property, within the meaning and contemplation of the 15th Article of the Bill of-Rights of this State, and may, therefore, be taxed without restriction, is a proposition to which I can never yield assent. What are such receipts if not personal property? And if personal property, upon what principle are they to be distinguished from other personal property within the meaning of the Bill of Rights ?

The rule of taxation as prescribed by the 15th Article of the Bill of Rights has reference to real and personal property, as those two well defined classes of property are known and understood, and makes no manner of distinction between the one species of real or the one species of personal property and another. Whatever falls within the one class or the other is within the letter, and also within the spirit and reason, of the provision of the Bill of Rights. To make distinction by construction, such as is made in this case, and thus withdraw property from the protection of the restriction imposed by the Article ³⁸⁶ referred to, is at once to break down and destroy the great safe-guard against arbitrary and capricious taxation. For what does it signify that the Legislature is restrained from imposing any other than an equal and uniform tax on the road-bed or rolling stock, with all other real and personal property of the State, if it can by taxing the gross receipts or earnings of that very property, actually empoverish the corporation ?

If the gross receipts are not within the protection of the Bill of Rights, then there is no restriction upon the power of taxation with respect to them. They are entirely subject to any arbitrary or capricious levies that the Legislature may think proper to make. And thus the most enterprising, industrious and adventurous portions of the community are liable to be made the victims of excessive taxation. For it is not confined to railroad companies, but all corporations, and.even individuals, are liable to have their gross earnings taxed without limit or restriction, upon the same principle that the tax on gross receipts is supported in this case.

And so, by construction, the great fundamental rule which has existed as a part of the Constitution from the foundation of the State, requiring equality and uniformity in the imposition of taxes, becomes a mere platitude, without force or meaning, only requiring a little device on the part of the Legislature to evade all the restriction that its language imports. I certainly know of no case that decides that the gross receipts or earnings of a corporation are not property, in the strictest sense of the term. On the contrary, according to my reading of the cases, they all concede that such receipts are property of the corporation, as much so as anything else owned by it. Such was certainly conceded and declared in the case of the State Tax on Railway Gross Receipts, 15 Wall., 284 .

In that case, the Supreme Court, in speaking of the tax and upon what it was imposed, said: “ The tax is laid upon the gross receipts ³⁸⁷ of the company; laid upon, a fund which has become the property of the company, mingled with its other property, and possibly expended in improvements or put out at interest. The statute does not look beyond the corporation to those who may have contributed to its treasury. The tax is not levied, and, indeed, such a tax cannot he, until the expiration of each half-year, and until the money received for freights, and from other sources of income, has actually come into the company’s hands. Then it has lost its distinctive character as freight earned, by having become incorporated into the general mass of the company’s property.” And in the case of this very corporation against Bayless, 2 Gill, 355 , the profits of the road, received in respect to that portion of it lying between the Susquehanna river and the Delaware State line, were held by the Court of Appeals to be part of the property of the corporation, and therefore embraced by the exemption of the shares of the capital stock from taxation ; and it is a little difficult to understand how the decision of that case can be reconciled with the decision of the present.

Nor can I assent to the proposition that this tax is to he regarded as a tax on the franchise or business of the corporation, measured by the amount of its gross receipts, and therefore not within the restriction imposed by the 15th Article of the Bill of Rights. The tax, by the very terms of the law, is “levied annually upon the gross receipts of all railroad companies worked by steam.” It is, therefore, a specific levy upon the particular fund, requiring a certain proportion of it to be paid over to the State. But if the terms of the law were different, I utterly deny that the State has power, under the Bill of Rights, to impose an arbitrary tax, without reference to value, and uniformity of assessment with other property of the State, on the franchise of the corporation. The franchise of the corporation is not only property, but is property of the most valuable kind, essential to the very ³⁸⁸ existence of the corporation itself.

If we were without authority in our own Courts, the language of the Supreme Court of the United States, in the case of the Wilmington R. Co. vs. Reid, 13 Wall., 264 , is very explicit on this point. It was there insisted that the franchise was something entirely distinct from the property of the corporation, and that the Legislature, while' it was restrained from taxing the property was not inhibited from taxing the franchise. "But the Court said that that position was equally unsound with the others taken in the case. Nothing, say the Court, "is better settled than that the franchise of a private corporation — which in its application to a railroad is the privilege of running it and. taking fare and freight — is property, and of the most valuable kind, as it cannot he taken for public use even without compensation.

It is true, it is not the same sort of property as the rolling stock, road-bed, and depot grounds, hut it is equally with them covered by the general term 'the property of the company,’ and, therefore, equally within the protection of the charter.” And in this State, a franchise has been declared, in the most unequivocal terms, to he property within the meaning of the 15th Article of the Bill of Bights. Mayor & City Council of Balto. vs. Balto. & Ohio R. Co., 6 Gill, 288 . As it is apparent that the State tax attempted to he collected from the appellee, under the Act of 1872, ch. 234, imposing a tax of one-half of one per cent, on the gross receipts of the company, far exceeds the rate of taxation imposed on the other real and personal property of the State, I think such tax invalid, and that the judgment of the Court below ought to be affirmed. Robinson, J., delivered the opinion of the Court.

The main questions presented by this appeal are, first, whether the tax of one-half of one per centum upon the gross receipts of railroad companies, imposed by the Act of 1872, ch. 234, in lieu of all other taxes, is a valid exercise of Constitutional power ? and secondly, if so, whether the defendant corporation is,' by its charter, exempt from the payment of said tax? The power of the Legislature to impose a tax of this character cannot be questioned, unless there is some provision in the Constitution prohibiting the exercise of such power. A tax upon the gross receipts of railroad companies, it is contended, is an arbitrary tax upon property levied without regard to value, and not being imposed upon all property in the State, is in conflict with the Bill of Rights, which declares: “ That the levying of taxes by the poll is grievous and oppressive, and ought to be prohibited; that paupers ought not to be assessed for the support of the government; but every person in the State, or person holding property therein, ought to contribute his proportion of public taxes, for the support of the government, according to his actual worth in real or personal property; yet, fines, duties or taxes may properly and justly be imposed or laid, with a political view for the good government and benefit of the community.” Art. 15, Bill of Bights, Constitution of 1867. This Article in the Bill of Rights was not adopted for the first time by the Constitution of 1867; on the contrary, it is to be found word for word, in the Constitution of 1776, and in fact, in every Constitution adopted in this State from that time to the present, constituting thus a ³⁷⁷ part of the fundamental law of the State, for just one hundred years, and relating to a subject so vital and important, — the exercise of the power of levying taxes for the support of the government, — we might reasonably suppose by this time at least, its construction and meaning ought to he beyond all controversy ; and yet a law is seldom passed for the purpose of raising revenue, unless it he a direct assessment upon real or personal property, hut what the tax thereby imposed, is claimed to he in conflict with this provision of the Constitution.

It can hardly he necessary to say, the Bill of Rights announced no new principle in regard to the exercise of the power of taxation, on the contrary, with a phraseology somewhat varied hut unimportant, it is to he found in every standard work on the subject. That every one should contribute his proportion of the public burdens, according to the measure of his ability, and that all taxes levied upon property for the support of the government, should so far as it is practicable, he equal and uniform, may he considered as a principle underlying the American system of taxation. It was to give an authoritative recognition of a principle so just and impartial, and which challenges universal assent, that the framers of the Constitution of 1776, made it a part of the organic law of the State. Having denounced the levying of taxes by the poll as grievous and oppressive, and recognizing property, as contra-distinguished from the person, to he the proper subject of taxation, they declared that every one ought to contribute his proportion of taxes according to the value of his property, and in order that every one should hear his just proportion and no more, it follows as a necessary corrollary that all taxes levied upon property, should be equal and uniform according to its actual value.

In other words, that the Legislature should not impose a tax upon the property of one person at one rate, and upon the property of another at a different rate. ³⁷⁸ But beyond this, it was not the purpose of the framers of the Constitution, nor of the people who adopted it, to restrict or limit the Legislature in the exercise of the power of taxation. “The power of taxing the people and their property,” say the Supreme Court, “ is essential to the very existence of government and may be legitimately exercised on tbe objects to which it is applicable, to the utmost extent to which the government may choose to carry it. The only security against abuse of this power, is found in the structure of the government. In imposing a tax the Legislature acts upon its constituents. This is in general a sufficient security against erroneous and oppressive taxation.” Brown vs. McCullough, 4 Wheaton, 429 .

We must not forget too, that the Article in the Bill of Rights was first adopted in 1776, just after the beginning of the War for Independence. No human wisdom could foresee the result of that great contest, nor to what extent the necessities of the State might require the exercise of the power now under consideration, and we can hardly presume that the wise men who framed' that instrument, intended to limit the power of the Legislature in regard to it beyond what they have plainly expressed. And in order to prevent any misconstruction, they declared that in addition to taxes upon property, other taxes might he levied “for the good government and benefit of the community.” Without extending this opinion by a review of the several cases, in which this Article of the Bill of