CLASSIFICATION OF PROPERTY FOR PUR

POSES OF TAXATION.

I. EQUALITY IN TAXATION.

The constitutions of most of the States of the Union were formed under the influence of a very literal interpretation of the principle of equality before the law. This was especially true with respect to taxation, and hence it is common to find a constitutional requirement that taxes shall be equal or uniform. In those States in which the courts have held this to require all forms of property to be taxed at the same rate, this limitation upon the taxing power runs counter to the opinion now commonly held by students of finance that it may be both politically and economically advantageous to tax different kinds of property or even different amounts of the same kind of property at different rates. To tax one kind of property at a lower rate than another does not necessarily mean the giving of an unjustifiable concession or the granting of a special favor. It is often the only means of equalizing the public burden which different kinds of property may be called upon to bear. In Massachusetts the principle of a varying rate in taxation has been recognized in the Forty-first Amendment to the Constitution by which the Legislature is authorized "to prescribe for wild or forest lands such methods of taxation as will develop and conserve the forest resources of the commonwealth," and in the Forty-fourth Amendment in which authority is given to levy an income tax which "may be at different rates upon income derived from different classes of property." With these exceptions, however, the Constitution requires that all taxes levied shall be "proportional." But the Supreme Judicial Court has carefully distinguished taxes from excises, and while it has rigorously interpreted the word "proportional" as applied to taxes, it has opened a way to relief by removing excises from the operation of the rule of uniformity. In Oliver v. Washington Mills (1865), 11 Allen, 268, 274, the Court said:

The words "tax" and "excise," although often used as synonymous, are to be considered as having entirely distinct and separate significations, under the provisions of the Constitution of Massachusetts, c. 1, sec. 1, art. 4. The former is a charge apportioned either among the whole people of the State, or those residing within certain districts, municipalities or sections. It is required to be imposed, as we shall more fully explain hereafter, so that, if levied for the public charges of government, it shall be shared according to the estate, real and personal, which each person may possess; or, if raised to defray the cost of some local improvement of a public nature, it shall be borne by those who will receive some special and peculiar benefit or advantage which an expenditure of money for a public object may cause to those on whom the tax is assessed. An excise, on the other hand, is of a different character. It is based on no rule of apportionment or equality whatever. It is a fixed, absolute and direct charge laid on merchandise, products or commodities, without any regard to the amount of property belonging to those on whom it may fall, or to any supposed relation between money expended for a public object and a special benefit occasioned to those by whom the charge is to be paid. Portland Bank v. Apthorp, 12 Mass. 252, 255. Commonwealth v. People's Savings Bank, 5 Allen, 431.

Of the remaining States of the Union thirty-four permit property to be classified for purposes of taxation. Nineteen of these States accomplish this by express constitutional provision, and as an indication of the present trend of opinion it is significant that thirteen of the nineteen have adopted this provision within the past twenty years. (See post, page 14.)

II. WHAT IS A "PROPORTIONAL" TAX.

The term "proportional" has been interpreted in many decisions of the Supreme Judicial Court. Some of the more important are here indicated. In Portland Bank v. Apthorp (1815), 12 Mass. 252, 255, the Court said:

Those taxes must be proportional upon all the inhabitants of, persons resident, and estates lying, within the Commonwealth. The exercise of this power requires an estimate or valuation of all the property in the Commonwealth; and then an assessment upon each individual, according to his proportion of that property. To select any individual or company, or any specific article of property, and assess them by themselves, would be a violation of this provision of the Constitution.

In Oliver v. Washington Mills (1865), 11 Allen, 268, 275, Chief Justice Bigelow said that taxes "should be laid on property, real and personal, within the Commonwealth, so that, taking all the estates lying within the Commonwealth' as one of the elements of proportion, each taxpayer should be obliged to bear only such part of the general burden as the property owned by him bore to the whole sum to be raised." learned judge then continued:

The

This rule of proportion was based on the obvious and just principle that the benefit which such person derives from the government has direct relation to the amount of property which he possesses and enjoys under its sanction and protection. It was to prevent this essential principle from being violated or disregarded, and to render it certain that taxation for general purposes of government should be made equal, that it was expressly provided in the Constitution that a valuation of estates within the Commonwealth should be taken anew decennially at least, and oftener if the Legislature should order. Having regard to these explicit provisions of the Constitution, we think it clear beyond dispute that an unlimited discretion on the subject of taxation, especially as to money raised for the public charges of government, was not reposed in the Legislature.

In Cheshire v. County Commissioners (1875), 118 Mass. 386, 389, the Court said:

That provision requires that all taxes levied under its authority be "proportional and reasonable," and forbids their imposition upon one class of persons or property at a different rate from that which is applied to other classes, whether that discrimination is effected directly in the assessment or indirectly through arbitrary and unequal methods of valuation. No enactment respecting taxation under this clause conforms to its provisions if it directly and necessarily tends to disproportion in the assessment.

In Northampton v. County Commissioners (1887), 145 Mass. 108, 109, the Court expressed similar views in these words:

If, for instance, the Legislature should arbitrarily designate a certain class of persons on whom, or a certain class of property on which, a tax was to be imposed, without reference to any rule of proportion, or without regard to the share of the public charge which either should bear relatively to that borne by other persons or property, or without regard to any special benefit which might accrue to the property subjected to the tax, such imposition would be unlawful.