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CRS Annotated Constitution

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[p.1821]
FOURTEENTH AMENDMENT
SECTION 1. RIGHTS GUARANTEED:
TRADITIONAL EQUAL PROTECTION:
ECONOMIC REGULATION AND RELATED
EXERCISES OF THE POLICE POWER

Taxation

At the outset, the Court did not regard the equal protection clause as having any bearing on taxation.192 It soon, however, took jurisdiction of cases assailing specific tax laws under this provision,193 and in 1890 it cautiously conceded that “clear and hostile discriminations against particular persons and classes, especially such as are of an unusual character, unknown to the practice of our government, might be obnoxious to the constitutional prohibition.”194 But it observed that the equal protection clause “was not intended to compel the States to adopt an iron rule of equal taxation” and propounded some conclusions valid today.195 In succeeding years the clause has been invoked but sparingly to invalidate state levies. In the field of property taxation, inequality has been condemned only in two classes of cases: (1) discrimination in assessments, and (2) discrimination against foreign corporations. In addition, there are a handful of cases invalidating, because of inequality, state laws imposing income, gross receipts, sales and license taxes.

Classification for Purpose of Taxation.—The power of the State to classify for purposes of taxation is “of wide range and flexibility.”196 A State may adjust its taxing system in such a way as[p.1823]to favor certain industries or forms of industry197 and may tax different types of taxpayers differently, despite the fact that they compete.198 It does not follow, however, that because “some degree of inequality from the nature of things must be permitted, gross inequality must also be allowed.”199 Classification may not be arbitrary. It must be based on a real and substantial difference200 and the difference need not be great or conspicuous,201 but there must be no discrimination in favor of one as against another of the same class.202 Also, discriminations of an unusual character are scrutinized with special care.203 A gross sales tax graduated at increasing rates with the volume of sales,204 a heavier license tax on each unit in a chain of stores where the owner has stores located in more than one county,205 and a gross receipts tax levied on corporations operating taxicabs, but not on individuals,206 have been held to be a repugnant to the equal protection clause. But it is not the function of the Court to consider the propriety or justness of the tax, to seek for the motives and criticize the public policy which prompted the adoption of the statute.207 If the evident intent and general operation of the tax legislation is to adjust the burden with a fair and reasonable degree of equality, the constitutional requirement is satisfied.208

One not within the class claimed to be discriminated against cannot raise the question of constitutionality of a statute on the ground that it denies equal protection of the law.209 If a tax applies to a class which may be separately taxed, those within the class may not complain because the class might have been more[p.1824]aptly defined nor because others, not of the class, are taxed improperly.210


Footnotes

192 Davidson v. City of New Orleans, 96 U.S. 97, 106 (1878) .
193 Philadelphia Fire Ass’n v. New York, 119 U.S. 110 (1886) ; Santa Clara County v. Southern Pacific R.R., 118 U.S. 394 (1886) .
194 Bell’s Gap R.R. v. Pennsylvania, 134 U.S. 232, 237 (1890) (emphasis supplied).
195 Id. The State “may, if it chooses, exempt certain classes of property from any taxation at all, such as churches, libraries, and the property of charitable institutions. It may impose different specific taxes upon various trades and professions, and may vary the rates of excise upon various products; it may tax real estate and personal property in a different manner; it may tax visible property only, and not tax securities for payment of money; it may allow deductions for indebtedness, or not allow them. All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the state legislature, or the people of the State in framing their Constitution.” See Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356 (1973) ; Kahn v. Shevin, 416 U.S. 351 (1974) ; and City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974) .
196 Louisville Gas Co. v. Coleman, 227 U.S. 32, 37 (1928) . Classifications for purpose of taxation have been held valid in the following situations:
Banks: a heavier tax on banks which make loans mainly from money of depositors than on other financial institutions which make loans mainly from money supplied otherwise than by deposits. First Nat’l Bank v. Tax Comm’n, 289 U.S. 60 (1933) .
Bank deposits: a tax of 50 cents per $100 on deposits in banks outside a State in contrast with a rate of 10 cents per $100 on deposits in the State. Madden v. Kentucky, 309 U.S. 83 (1940) .
Coal: a tax of 2 1/2 percent on anthracite but not on bituminous coal. Heisler v. Thomas Colliery Co., 260 U.S. 245 (1922) . Gasoline: a graduated severance tax on oils sold primarily for their gasoline content, measured by resort to Baume gravity. Ohio Oil Co. v. Conway, 281 U.S. 146 (1930) ; Exxon Corp. v. Eagerton, 462 U.S. 176 (1983) (prohibition on pass–through to consumers of oil and gas severance tax).
Chain stores: a privilege tax graduated according to the number of stores maintained, Tax Comm’rs v. Jackson, 283 U.S. 527 (1931) ; Fox v. Standard Oil Co., 294 U.S. 87 (1935) ; a license tax based on the number of stores both within and without the State, Great Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412 (1937) (distinguishing Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933) ).
Electricity: municipal systems may be exempted, Puget Sound Co. v. Seattle, 291 U.S. 619 (1934) ; that portion of electricity produced which is used for pumping water for irrigating lands may be exempted, Utah Power & Light Co. v. Pfost, 286 U.S. 165 (1932) .
Insurance companies: license tax measured by gross receipts upon domestic life insurance companies from which fraternal societies having lodge organizations and insuring lives of members only are exempt, and similar foreign corporations are subject to a fixed and comparatively slight fee for the privilege of doing local business of the same kind. Northwestern Life Ins. Co. v. Wisconsin, 247 U.S. 132 (1918) .
Oleomargarine: classified separately from butter. Magnano Co. v. Hamilton, 292 U.S. 40 (1934) .
Peddlers: classified separately from other vendors. Caskey Baking Co. v. Virginia, 313 U.S. 117 (1941) .
Public utilities: a gross receipts tax at a higher rate for railroads than for other public utilities, Ohio Tax Cases, 232 U.S. 576 (1914) ; a gasoline storage tax which places a heavier burden upon railroads than upon common carriers by bus, Nashville C. & St. L. Ry. v. Wallace, 288 U.S. 249 (1933) ; a tax on railroads measured by gross earnings from local operations, as applied to a railroad which received a larger net income than others from the local activity of renting, and borrowing cars, Illinois Cent. R.R. v. Minnesota, 309 U.S. 157 (1940) ; a gross receipts tax applicable only to public utilities, including carriers, the proceeds of which are used for relieving the unemployed, New York Rapid Transit Corp. v. New York, 303 U.S. 573 (1938) .
Wine: exemption of wine from grapes grown in the State while in the hands of the producer, Cox v. Texas, 202 U.S. 446 (1906) .
Laws imposing miscellaneous license fees have been upheld as follows:
Cigarette dealers: taxing retailers and not wholesalers. Cook v. Marshall County, 196 U.S. 261 (1905) .
Commission merchants: requirements that dealers in farm products on commission procure a license, Payne v. Kansas, 248 U.S. 112 (1918) .
Elevators and warehouses: license limited to certain elevators and warehouses on right–of–way of railroad, Cargill Co. v. Minnesota, 180 U.S. 452 (1901) ; a license tax applicable only to commercial warehouses where no other commercial warehousing facilities in township subject to tax, Independent Warehouses v. Scheele, 331 U.S. 70 (1947) .
Laundries: exemption from license tax of steam laundries and women engaged in the laundry business where not more than two women are employed. Quong Wing v. Kirkendall, 223 U.S. 59 (1912) .
Merchants: exemption from license tax measured by amount of purchases, of manufacturers within the State selling their own product. Armour & Co. v. Virginia, 246 U.S. 1 (1918) .
Sugar refineries: exemption from license applicable to refiners of sugar and molasses of planters and farmers grinding and refining their own sugar and molasses. American Sugar Refining Co. v. Louisiana, 179 U.S. 89 (1900) .
Theaters: license graded according to price of admission. Metropolis Theatre Co. v. Chicago, 228 U.S. 61 (1913) .
Wholesalers of oil: occupation tax on wholesalers in oil not applicable to wholesalers in other products. Southwestern Oil Co. v. Texas, 217 U.S. 114 (1910) .
197 Quong Wing v. Kirkendall, 223 U.S. 59, 62 (1912) . See also Hammond Packing Co. v. Montana, 233 U.S. 331 (1914) ; Allied Stores of Ohio v. Bowers, 358 U.S. 522 (1959) .
198 Puget Sound Co. v. Seattle, 291 U.S. 619, 625 (1934) . See City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974) .
199 Colgate v. Harvey, 296 U.S. 404, 422 (1935) .
200 Southern Ry. v. Greene Co., 216 U.S. 400, 417 (1910) ; Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, 400 (1928) .
201 Keeney v. New York, 222 U.S. 525, 536 (1912) ; Tax Comm’rs v. Jackson, 283 U.S. 527, 538 (1931) .
202 Giozza v. Tierman, 148 U.S. 657, 662 (1893) .
203 Louisville Gas Co. v. Coleman, 227 U.S. 32, 37 (1928) . See also Bell’s Gap R.R. v. Pennsylvania, 134 U.S. 232, 237 (1890) .
204 Stewart Dry Goods Co. v. Lewis, 294 U.S. 550 (1935) . See also Valentine v. Great Atlantic & Pacific Tea Co., 299 U.S. 32 (1936) .
205 Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933) .
206 Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389 (1928) . This case was formally overruled in Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356 (1973) .
207 Tax Comm’rs v. Jackson, 283 U.S. 527, 537 (1931) .
208 Colgate v. Harvey, 296 U.S. 404, 422 (1935) .
209 Darnell v. Indiana, 226 U.S. 390, 398 (1912) ; Farmers Bank v. Minnesota, 232 U.S. 516, 531 (1914) .
210 Morf v. Bingaman, 298 U.S. 407, 413 (1936) .
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