Murchison v. McNeill, 60 N.C. 220, 1 Win. 220 (1864)

June 1864 · Supreme Court of North Carolina

60 N.C. 220, 1 Win. 220

DUNCAN MURCHISON and others vs. HECTOR McNEILL

Clause 19, section 80, sqheihilo.í?, of the act of. the General Assembly 01 18G2’3, imposing a tax oí all the nett profits above 75 per cent on the cost of prodm tion on oviry j'-rr >n or corporation motiuflicturiug uinon or woolen cloth. &e., is consfitniumai.

This was an action oí" assumpsit for money' had and received, tried before Osborne, Judge attbe Fall Term, 18(53, of Cumberland Superior Court, on the general issue.

It appeared that the plaintiffs were'manufacturers of cotton ,goods in Cumberland County, and had made a profit of $1500 over 75 per cent on the cost of production upon yarns and cloth which they bad manufactured before the ratification of the act of 1862’3, entitled <: Revenue,” and between the 1st day of January, 1863, and the date of its ratification. The plaintiffs paid the money under protest to the defendant, the Sheriff of Cumberland County, who demanded payment under the penalty of the Act. The plaintiffs gave notice to the defendant at the time of paying the money that- they would sue to recover it hack, as money paid bv compulsion without authority of law. • -

The Jury under the direction of the Judge, found a verdict for the defendant. The plaintiff excepted to the direction of the Court, and from the judgment on the vérdict appealed to this Court.

Moore for the plaintiffs.

Buxton lor the defendant.

Moore for the plaintiff.

The Revenue act of '¡863, luts-fied on 11-th February, oh. 57, s. 86, § 15. schedule B, lays a tax of the entire 2>rofits of the manufacture beyond 15 per cent, made between the first day of January preceding, and the passage of the law. Has the legislature the power to do this ? This species of taxation is not. without precedent. See among others Rev Coed, c. 99, s. 19, 20, 22, where the profits of money, stocks and trades, for 12 months preceding the first day of April, 1855, are taxed by act passed by the legislature of November, 1854. The point, however, is now for the consideration of the judiciary.

It is conceded that every species of property is the legitimate subject of taxation. Every dung valuable io the citizen, being the object of protection by the sovereign, ought to contribute to maintain the government. ■ Property in all its forms, whether visible and, tangible, or consisting of mere rights, as contracts to pay money, or of franchises and privileges, which the sovereign may grant or withhold, as to keep a ferry, or to manufacture cloth.

The power to tax is a power to withdraw from the possessor of property a certain portion of it in kind or value. If any one he taxed, who does not own property of some species, the tax is necessarily laid on the being, existence or head. This is a capitation or poll tax. A tax on all persons whatever, is a poll tax, so is a tax on all males, or on all males of the age of forty years. The modifications are merely changes from a universal poll tax to poll taxes,by classes. Any thing else may serve to designate the classes as well as age. Thus a tax upon foreigners, or upon men six-feet high, or such as live south of a certain line, is a poll tax. A tax upon A, because of his ownership of land, slaves or credits, is a tax on property, and so also upon B, because of his being allowed to manufacture cloth, for the license is property.- But a tax upon all persons who owned lands, slaves or credits ; or manufactured cloth, or labored in the field, or in factories in the year 1860, is a poll tax by the dWs. Tire taxed poll class in this case being pointed out by their former ownership and occupations, and in the others by their ages, height and place of'residence.

A tax on the profits of an employment is a tax on property ; but a tax on a class of men, because of profits which they made a year ago, is a tax on their polls, unless it is .intended that the tax shall fall on the identical profits which might be in existence at the time of the passage of the law. .

A tax in future oh all manufacturers, according to theii capital, or sales, or profits, is an equal tax, and a tax on property ; but a tax on all persons, who two years ago were, such manufacturers, according to their then capital, sales and profits, is a tax upon them because of their antecedent employment, and a poll, tax by class. A tax laid upon two men by reason of a slave owned by each of them two years since of $5 on one of them, and of $10 oh the other, would be void ; and equally so would be a tax upon the' profits derived two years ago from these slaves, because the'profits might be twice as great in one case as in the-other. A tax laid.on past profits, if valid for a year past, is valid for ten-consecutive years or for the .firs!- or any other year of the ten. In many cases it would completo the ruin of decayed fortunes, and fall very lightly on those of sudden prosperity. Such a tax would he an act of mere confiscation. I aaa aware that there is nothing in our Constitution, save what relates to poll, land and slaves, which, effects the otherwise unlimited power of the legislation to select its subjects of .taxation. *

Previous to the Constitutional amendment of 1834, Art. 4, s. 3, ordaining that ccqiUatioii Tax shall he, catmlupoii all ■persons subject to The. same, the entire revenue might nave been levied on white poll, black poll, or land, or upon any other subject of taxation, whether rights in action, privileges, or franchises. After that amendment, and before ordinance No. 22, of June'25th, 18(>1, (taxing binds and slaves alike, according to valuation,) the entire revenue ' might have been levied exclusively on land alone ; or alone upon white and'black poll jointly ; or upon-any other class of taxable subjects papable of yielding enough. Since the Ordinance No. 22, the restriction on taxation may be placed under four heads-.

1. Poll tax -can be laid upon free males only, over the age of twenty-one and under the age of forty-five years, and must be equal upon all persons subject thereto.

2. The tax on each poll must, at least, be as great as the tax imposed on §300 worth of land.

3. There is no Constitutional injunction on the Legislature to raise any portion of the taxes from land, slaves, or free poll: but the entire revenue may be raised from the other subjects of taxation alone ; or from these three alone."

4. But, as a corollary'from the article and ordinance aforesaid, if any one of these subjects, land, slaves, or poll be taxed, all of them must be.

There is no principle in taxation that would allow, amongst us a tax upon past profits after they shall have lost their identity. As well lay a tax upon the corn that was made and consumed years ago. To call" upon a man now for a portion of the products long since made and consumed by fire or use,, or changed into other taxable subjects, presents the idea of a poll tax measured by the fortune or misfortune ; by the prudence or carelessness of the past. Because of its being necessarily a tax on the being it is a poll tax, and because of its gross inequality, it is mere confiscation. It is not a property tax, for tbe property was not in existence. It is not a tax on rights or dioses in action ; it is not a tax on the license 'of production, for the privilege to do that is past, and was granted without price. Such a tax represents the sovereign, as allowing for a series of years, a free exercise of all trades and employments, and all at once demanding to he paid for the past privilege, and assessing every man’s bead, according to tbe profits which may have been made during those years-. Such a tax, besides being an unequalcapitation tax, would dissiesea freeman of his Liberties and freehold, and deprive him of bis property, otherwise than “'by the law of tbe land.”

A. tax upon profits in the future is a tax upon the thing itself as it comes into being. It is like a tax upon corn by the tithing system. A tax upon every glass of wine one may-take, is a tax upon the future, privileges of drinking wine, but a tax upon all the glasses of wine drunk in past times is a tax on the drinhnr. 1 Tbe ’profits of two professional men in 1850,. may have been for one $20,000, and for tbe $500. In 1864 their profits may have been reversed by the gradual chango of their fortunes ; yet by taxing past profits tbe poor man is taxed much heavier than the wealthy. Does not this prove that the tax is on the behig —a pol 1 tax ?

'Battle J.

The'General Assembly, by an Act which went into effect the 11th day of February, 1863, imposed a tax of all tbe nett profits above seventy-five. per.cent, upon tbe cost of production on every person or corporation manufacturing cotton or woolen cloth, or a mixture of both, from and after the first day of January of the same year The plaintiffs were manufacturers of cotton cloth on the first day of January, 1863, and continued to he so during that year, and having, as they admitted, made a-profit of $1500 in their business, between the first day of January and the 11th day of February, they paid the same t;> t.:-; Sheriff under protest, and brought this action to recovo:-' i~ badc. '

In the argument; here the counsel for the i.iamiiff c---; tends that tho Legislature had no power am..-/ upon the pace profits oí the plaintiff's business. He insist'..: that ‘.be tax is in effect a capitation i<x, ,ui:d as .such, is ::n posed contrary to the Ordinance of the Convention of 1861, entitled, “ An Ordinance in relation to taxation.1' That ordinance provides that, all free males over the age of tweny -one years and under tin: age of forty-live years shall bo snog"'! to a capitation lax, not less than the tax laid on lauto; rhe value of three hundred dollars, and ao other free person shall he liable to such luxation ; and at,-,.') Inna an ; slaves shall be taxed according to their value, and the tax ->n slaves shall be as much but not more than that on hintl according to their respe-.ive values ; but the tax ou (slaves may be laid ou t heir general average value in the ¡Stake or on their value in classes in respect to age, sex. and other distinctive properfic . In the discretion of th'-(«cneriil Assembly, .and the value b a-.-.essed in such mode.- us may be pro scribed, by law.’" Ji is manifest that if the tax to whi.fb the plaintiffs object be a capitation tax, it is not as-sehi uccordanee with -the provisions of this ordinance, and (no act imposing it is in violation of the iiimhimeiital Taws of the State'. and is therefore void. The question then is. ein .he rex bo & emeu a captation or poll tax ? The lOtiusm insists1 t i;al it is for ¡he following reasons; A tax, i on i ■<? lau>., fram uises. slaves or oilier pe, sima] ei.¡i. ami ebw.iiis 'i a act:ou wifr.fr. a man now owns. ;s a tax . . if..-, properly, amt is a ieguiimitp imped upon him. ¡tro he .'my h" r’ghtfuily lam .1 on tii# profm of his hitsim ss, pr • -mm ■■ *uh. f.u ,. femuu I-- .hlh’V a ..y • ■mficalnr btisiu.'ss, promssion or iru !e. mui a tax ou.it.iy aif.cle or u,-:,!11: formef r nvned. hut which he has herc-io- >r; e -a. miief. ic-d. or f T.vye l, or upnnffce profits of a bitiir.es:-., oroi'e:, don or irmla widen he followed, or in wliicb be w:;.;} engaged, in bygone tunes, which prolits he has consumed, hist, destroyed, or <’owe: tod into some other hind of-,.; ,.:<í-rlv ; or upon a lice i * < V: .'Stole' c granted, to pur.sue a business profession or trade which he has ceased to follow or be engaged in, can not be called a tax on property profits or licenses, because when it is imposed, the subjects of it have no existence. Being'’ past and gone, they are to be considered as if they never had been. Such .a tax then, can be only upon the person. It is to all intents and purposes, nothing more nor less than a capitation or poll tax. This is a succinct statement of the argument of the plaintiff's counsel, presented by him, however, in a variety of views, and with many ingenious illustrations.. Of its force and conclusiveness, we do not feel'ourselves called upon to judge; because we do not think it .applies to the law’ in question, as we shall now endeavor to show.

The act required that the manufacturers of cotton cloth, who carried on their business from and after the first day of January, 1863, should pay annually a certain tax upon their profits. It ,was well known to those who passed the act that such manufacturer* did not, 'and from the nature of their business, could not, ascertain and declare a dividend of profits, either daily, weekly or monthly. Hands had to be employed, raw materials purchased and a great many things done before sales could be made and accounts stated.so.as to show what the profits were. It <vas well known, too, to the legislature that partnerships and corporations were in the habit of declaring dividends at certain stated-periods, usually annually or .semi-annually, but never as frequently as monthly, or even quarterly. It was further known that winter was mainly the time for preparing the ensiling years’ work by hiring workmen, purchasing supplies, &c., and hence was the time for expenses rather than profits, for the latter were.'to be realized after-wards. Hence, there could he no profits, properly speaking, for the first month or two of the year, and when they did accrue the law would be in' force and would apply to them as present and accruing,' and not past profits. It certainly can be, no” objection to the validity of the act that the work and materials which-were to produce the profits after its ratification ware in existence prior.to that time.

But it may bo said that the bill of exceptions states ás a fact that a certain sum 'was realized as profits between the first day of January, 1863, and the 11th day of February of-the same year, when the act was ratified, and that we must take the fact to be so, without enquiring'as to how it was ascertained. A sufficient reply, we think, is-this that the law directed the tax upon the profits to be paid annually, and clearly means such profits as are ascertained in the usual way, and at the usual stated periods. If the plaintiffs kept their hooks so as to have a balance sheet of profits and loss struck de die in diem or from w.eek to week, or month to month, it ought to have been so stated in the case ; for we know that such a course, iu business of the kind in which they were engaged,-is not common, even if it be possible. They certainly had no right to do what we suspect they did — that is, make out the account of profits at the end of a half year, and then calculate the average per month or week. Profits have never in fact been realized in such way; .and the legislature never intended that they should be asoertaine 1 by such a ’node of calculation.

Our conclusión then is that the act of the legislature in question did not apply to profits past and gone, but to profits then, in t'.io process of being made,' and which were in fact ascertained and declared after the law went into effect, and that consequently the act is-constitutional and valid. . . *

Judgment affirmed.