Volume 81 — New Hampshire Reports

<p>(1) Upon income derived as dividends and interest from stocks, bonds and other interest-bearing credits and indebtedness, except savings bank deposits, at the average rate of taxation determined as now by law required when applied to the property of railroads, telegraph companies, etc.?</p> <p>(2) Upon income described above, at any reasonable rate so long as the same rate is applied to all such income taxed?</p> <p>In propounding the foregoing questions it is to be assumed that any law enacted would provide for exemptions of non-taxable securities required by the Federal Constitution or statutes enacted thereunder, or required by any state contracts of exemption which may not lawfully be impaired, • — • that it would provide for the taxation of national bank stock or the income therefrom in such manner only as Congress has permitted, •— and, further, that it might provide for exemption of income up to a certain reasonable amount.</p> <p>(3) Upon gasoline or motor vehicle fuels of like nature sold in this state, at the flat rate, for example, of two cents on every gallon sold, or an excise tax on the sale of gasoline?</p> <p>In propounding the question under (3) it is to be assumed that the revenue derived would be expended for the protection, care, maintenance, repair or construction of highways, and that the law would not attempt to interfere with interstate commerce.</p> <p>(4) Would any Constitutional provision be violated by substituting for the existing flat rate of five per cent a series of rates, graduated or progressive according to the amount of property which passes by will or inheritance to “collaterals” as they are described in that part of Section I, chapter 37, Laws of 1919, which reads, — “and all such property which shall pass to or for the use of any other person . . . shall be subject to a tax of five per cent of its value for the use of the state”?</p> <p>Respectfully yours,</p> <p>William J. Ahern,</p> <p> Speaker of the House of Representatives. </p> <p>Hon. William J. Ahern,</p> <p> Speaker of the House of Representatives. </p> <p>Sir:</p> <p>In response to yours of March 21st, ult., transmitting a Resolution of the Elouse passed that day, the undersigned, justices of the supreme court, submit the following in answer to the inquiries therein contained:</p> <p>I. In 1915 the House of Representatives required our opinions upon the question “whether any constitutional provision would be violated by imposing a tax at the uniform rate upon money received as interest or dividends.” Upon this question the justices were not agreed. Four, understanding “the uniform rate” to mean the rate applied in the taxation of other property in the taxing district, failed “to discover any substantial ground upon which” they “would be justified in advising that the proposed act is clearly in violation of any provision of the state constitution,” while the opinion of one of the justices was adverse to the constitutionality of the proposed legislation.</p> <p>The first question of those now submitted is a repetition of the question asked in 1915. The views then held are still entertained. There seems to be no occasion for the justices then answering to add to what was then said. The opinions then submitted are printed in the Journal of the House for 1915, page 435, and in the 77th Volume of the Law Reports, page 611.</p> <p>II. This question implies that the rate of the proposed tax is to be different from that upon other property. If by any process of reasoning a rate can be reasonable which is unequal or disproportional, reasonableness of that character is outside our constitution, and we are all agreed that a tax at an arbitrary rate which is not a proportional distribution of public expense is not permitted by the fundamental law. State v. Express Co., 60 N. H. 219.</p> <p>III. The third inquiry relates to “ a tax . . . upon gasoline -or motor vehicle fuels of like nature sold in this State, at the flat rate, for example, of two cents on every gallon sold, or an excise tax on the sale of gasoline.” A tax levied upon the privilege of selling gasoline is clearly outside the power to levy “proportional and reasonable assessments, rates and taxes.” State v. Express Co., 60 N. H. 219; Curry v. Spencer, 61 N. H. 624. But your inquiry seems to suggest that what is intended is not the levy of a tax, but rather that the purpose in view is to fix a charge, or toll, for the use of the public highways of the state. It is within the legislative power to provide that all highways, or any specified highways, shall be toll roads, and open to travel only upon the payment of a specified charge.</p> <p>“Although, ordinarily, turnpikes are built and owned by corporations created by the State, for the purpose of constructing and maintaining them, what the State may do indirectly through such agencies it may do directly; that is, it may itself lay out and construct such improved public roads, and charge reasonable tolls to all persons using the same.” Kane v. Titus, 81 N. J. L. 594, 597. Many instances might be cited where governmental undertakings are supported in whole or in part by charges made upon those who avail themselves of the advantages afforded thereby. Water works, sewers, wharves, locks and canals are often maintained in this manner. Charges made in this way are not taxes. “There is no analogy between the imposition of taxes and the levying of tolls for improvement of highways, and any attempt to justify or condemn proceedings in the one case by reference to those in the other must be misleading. Taxes are levied for the support of government, and their amount is regulated by its necessities. Tolls are compensation for the use of another’s property, or improvements made by him.” Sands v. Manistee &c. Co., 123 U. S. 288, 294.</p> <p>Tolls that are reasonable in amount, and not discriminatory, have uniformly been upheld. Constitutional limitations upon the taxing power have no application to such a levy. Carson v. Brockton, 175 Mass. 242; S. C., 182 U. S. 398; Merrimack River Savings Bank v. Lowell, 153 Mass. 556; Silkman v. Water Commissioners, 152 N. Y. 327; City of East Grand Forks v. Luck, 97 Minn. 373; Wagner v. Rock Island, 146 iLL. 139; Alter v. Cincinnati, 56 Ohio St. 47; Jones v. Water Commissioner, 34 Mich. 273; Huse v. Glover, 119 U. S. 543; Hendrick v. Maryland, 235 U. S. 610.</p> <p>It is a matter of common knowledge that since the advent of the use of automotive vehicles upon highways large sums have been expended in making the conditions more favorable for that class of traffic. No reason appears why the legislature may not impose upon those who accept the benefits of such highway improvement and maintenance a reasonable charge for the use made. It is upon this ground that the state registration systems for automobiles have been sustained. The purpose of these laws is “to secure some compensation for the use of facilities provided at great cost from the class for whose needs they are essential and whose operations over them are peculiarly injurious.” Hendrick v. Maryland, supra, 622.</p> <p>It is apparent that the exaction of a toll, as in the case of a bridge, could not be put into practical operation in reference to the present-day use of highways generally. Some other measure of the use must be found, and the determination of what measure shall be adopted is within the province of the legislature. “No constitutional objection lies in the way of a legislative body prescribing any mode of measurement to determine the amount it will charge for the privilege it bestows.” Kane v. Titus, supra, 598. “It is clearly within the discretion of the State to determine whether the compensation for the use of its highways by automobiles shall be determined by way of a fee, payable annually or semiannually, or by a toll based on mileage, or otherwise.” Kane v. State of New Jersey, 242 U. S. 160, 168.</p> <p>While the payment proposed will not be an exact measure, yet it will so far approximate thereto as to be within the power of the legislature to adopt'. The charge cannot be imposed upon sales of gasoline, etc., generally, but only when the commodity is sold for consumption in the operation of vehicles upon the highways. A charge so limited amounts to the same thing, in substance, as a toll for the use of the highways, and may lawfully be imposed by the legislature.</p> <p>IY. In 1911 the House of Representatives asked the opinion of the justices as to the validity of proposed legislation imposing a graduated inheritance tax upon property passing to lineal descendants.</p> <p>Upon the question of the validity of provisions determining the rate to be imposed by the amount of property concerned, the justices in the time then available were unable to answer the question. In 1919 a statute was enacted graduating the tax substantially as proposed in 1911. No case under this act has been brought before the court. The present iriquiry as to the legality of such a tax upon collateral inheritances presents the same question.</p> <p>As the House has seen fit to re-open the question which no one interested has so far cared to raise, we have no choice except to give the House the opinions we entertain.</p> <p>In 1878 the legislature adopted “an act to defray the cost of probate courts.” Laws 1878, c. 74. This act provided that “all estates settled in the probate courts of this state and all transfers of property from the dead to the living, by gift, bequest or devise, and every succession made under the laws of this state, regulating the distribution of intestate estates . . . shall pay one per cent on the value of said estates . . . provided that all legacies or property passing by will or by the laws of this state to husband or wife, children and grandchildren of the person who died possessed as aforesaid, shall be exempt from tax or duty.” This provision was incorporated in c. 64 of the General Laws, and a further limitation upon the exemption having been repealed (Laws 1879, c. 57, s. 16) the constitutionality of the tax or duty imposed by the foregoing language was assailed in Curry v. Spencer, 61 N. H. 624. In this case it was decided in 1882 that the tax thereby sought to be imposed could not be upheld because “immunity from disproportional taxation being expressly reserved in our bill of rights, and the power of proportional taxation only being granted,” no ground was found upon which the tax could be upheld, “for” it is said in the opinion “if it is to be regarded as a tax on property, it is open to the objection of unequal and double taxation, and if it is to be regarded as a tax upon a civil right or privilege, it is discriminating and disproportional.” This decision was accepted as a correct exposition of the principles of the existing constitution as applied to legislation of this character, and at the next session of the legislature the statute was repealed in toto. -Laws 1883, c. 50. In the constitutional convention of 1902 propositions apparently intended to leave the whole matter of taxation to the discretion of the legislature were rejected, as was also a resolution introduced by Mr. Ham of Portsmouth authorizing the imposition of “assessments, rates, and taxes upon the estates of deceased persons, or upon bequests, devises or inheritances, exceeding 810,000, said rates to be graded or proportioned in such way or manner as the general court may direct.” Jour. Conv. 1902, pp. 249, 250, 594, 628. The resolution finally adopted, when presented to the convention for approval, made the proposed article read: “The public charges of government, or any part thereof, may be raised by taxation upon polls, estates, and other classes of property including franchises and the transfer or succession of property by will or inheritance.” By amendment at this stage the words “the transfer and succession of property” were stricken out and the words “property when passing” inserted in their place. Jour. Conv. 1902, pp. 595, 601, 625, 626.</p> <p>The language adopted and the discussion show conclusively that the convention had in mind the taxation of property as distinguished from privilege, and that it was intended to meet the objection raised in Curry v. Spencer that as a taxation of property an exaction of this character was “unequal and double taxation.” In this form the amendment was submitted to and adopted by the people. In Thompson v. Kidder, 74 N. H. 89, the existing statute, which exempts from its provisions property passing to direct heirs and for charitable and public purposes, was attacked because of necessary conflict with fundamental provisions of the constitution and because it did not apply to all property passing by will or inheritance. In this case it was thought to be unnecessary to define with scientific accuracy the nature of the tax because of the express language by which it was authorized. The statute was upheld in spite of the disproportion, inequality and double taxation necessarily involved when the tax was considered in relation to other taxation, because its express authorization disclosed an intent on the part of the people to subject themselves to such disproportion, inequality and double taxation as could not be avoided if the tax were imposed. The law was found to be an equal law as applied to all persons alike, and the objection that all property was not taxed was supported by the familiar rule in this jurisdiction that only such property is taxable as the legislature declares shall be taxed. Whether the theory of the amendment and the law that the exaction is a tax upon property is correct, or not, is immaterial upon the question of power to impose such a tax, but the plain understanding that it is a property tax limits the extent of the power in its practical application. In this State probably no constitutional principle is better understood than that the taxation of property requires a proportional valuation and a uniform rate. It is conceded by all the authorities that a property tax graded by the amount of property is in conflict with the provisions requiring equality and uniformity which pervade all the constitutions.</p> <p>The proposition whose constitutionality is submitted by the resolution of the House of Representatives contemplates taxation of this character by a rate increasing arbitrarily at fixed points according to the value of the property upon which it is imposed.</p> <p>The proposal apparently is an attempt to exercise the powers proposed in the resolution of Mr. Ham which was rejected by the convention. Upon the question of the constitutionality of such legislation the cases are in conflict. They have all been carefully examined, but in the view of the question herein taken their discussion would not be useful. Jurisdictions in which to sustain the legislation it has been necessary to investigate the nature of the tax and in which it has been ascertained that it is a privilege and not a property tax, and that hence the general limitations applicable to property taxation are not involved, do not aid here where taxation of property passing by will or inheritance is specifically authorized. The only question is the extent of the power intended to be conferred by the amendment of 1903. In the light of the proceedings in the convention and the language in which the proposed amendment was submitted to the people, it seems to us clear that the matter in hand was regarded, perhaps incorrectly, as a property tax, and that from the permission given for the imposition of such a tax it cannot be inferred that it was intended that the ordinary and familiar rules of property taxation should be disregarded except in so far as is necessary to the imposition of any tax of this character. An inheritance tax can be made equal and proportional so far as to render it uniform upon all property upon which it is imposed. The questions submitted, in our opinion, are answered by the statement in the opinion in Thompson v. Kidder, where after reaching the conclusion that “the purpose to authorize such a tax being clear, the intent to avoid any existing provision contrary thereto follows” it is said: “but although the power to impose an inheritance tax is clear, it must be exercised so far as possible in accordance with all other provisions of the constitution.”</p> <p>The proposed legislation lacks equality and uniformity which can be given to an inheritance tax, and in our opinion is beyond the power intended to be given by the amendment of 1903.</p> <p>Frank N. Parsons,</p> <p>John E. Young,</p> <p>April 2, 1923. Robert J. Peaslee,</p> <p>William A. Plummer.</p>

Resolved, that the Speaker of the House be and hereby is directed to obtain from the Justices of the Supreme Court their opinion upon the following questions of law which are of serious importance to the financial welfare of the state, namely — Whether a tax, such as is described in Chapter 65, Laws of 1923, is constitutional: 1.

<p>The following answer was returned:</p>