Classifications for the Purpose of Taxation
The power of the State to classify for purposes of taxation is "of wide range and flexibility."[1048] The Constitution does not prevent it "from adjusting its system of taxation in all proper and reasonable ways. It 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 different 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, * * *"[1049] A State may adjust its taxing system in such a way as to favor certain industries or forms of industry,[1050] and may tax different types of taxpayers differently, despite the fact that they compete.[1051] It does not follow that because "some degree of inequality from the nature of things must be permitted, gross inequality must also be allowed."[1052] Classification may not be arbitrary; it must be based on a real and substantial difference,[1053] but the difference need not be great or conspicuous;[1054] but there must be no discrimination in favor of one as against another of the same class.[1055] Also, discriminations of an unusual character are scrutinized with especial care.[1056] A gross sales tax graduated at increasing rates with the volume of sales,[1057] a heavier license tax on each unit in a chain of stores where the owner has stores located in more than one county,[1058] and a gross receipts tax levied on corporations operating taxicabs, but not on individuals,[1059] have been held to be 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.[1060] 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.[1061] 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.[1062] 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 aptly defined, nor because others, not of the class, are taxed improperly.[1063]
The equal protection clause does not require identical taxes upon all foreign and domestic corporations in every case.[1064] In 1886, a Pennsylvania corporation previously licensed to do business in New York challenged an increased annual license tax imposed by that State in retaliation for a like tax levied by Pennsylvania against New York corporations. This tax was held valid on the ground that the State, having power to exclude entirely, could change the conditions of admission for the future, and could demand the payment of a new or further tax, as a license fee.[1065] Later cases whittled down this rule considerably. The Court decided that "after its admission, the foreign corporation stands equal and is to be classified with domestic corporations of the same kind,"[1066] and that where it has acquired property of a fixed and permanent nature in a State, it cannot be subjected to a more onerous tax for the privilege of doing business than domestic corporations.[1067] A State statute taxing foreign corporations writing fire, marine, inland navigation and casualty insurance on net receipts, including receipts from casualty business was held invalid under the equal protection clause where foreign companies writing only casualty insurance were not subject to a similar tax.[1068] Recently, the doctrine of Fire Asso. of Philadelphia v. New York was revived to sustain an increased tax on gross premiums which was exacted as an annual license fee from foreign but not from domestic corporations.[1069] Even though the right of a foreign corporation to do business in a State rests on a license, yet the equal protection clause is held to insure it equality of treatment, at least so far as ad valorem taxation is concerned.[1070]
Income Taxes
A State law which taxes the entire income, including that derived without the State, of domestic corporations which do business in the State, while exempting entirely the income received outside the State by domestic corporations which do no local business, is arbitrary and invalid.[1071] In taxing the income of a nonresident, there is no denial of equal protection in limiting the deduction of losses to those sustained within the State, although residents are permitted to deduct all losses, wherever incurred.[1072] A retroactive statute imposing a graduated tax at rates different from those in the general income tax law, on dividends received in a prior year which were deductible from gross income under the law in effect when they were received, is not obnoxious to the equal protection clause.[1073]
Inheritance Taxes
In inheritance taxation, there is no denial of equal protection in prescribing different treatment for lineal relations, collateral kindred and strangers of the blood, or in increasing the proportionate burden of the tax progressively as the amount of the benefit increases.[1074] A tax on life estates where the remainder passes to lineal heirs is valid despite the exemption of life estates where the remainder passes to collateral heirs;[1075] there is no arbitrary classification in taxing the transmission of property to a brother or sister, while exempting that to a son-in-law or a daughter-in-law.[1076] Vested and contingent remainders may be treated differently.[1077] The exemption of property bequeathed to charitable or educational institutions may be limited to those within the State.[1078] In computing the tax collectible from a nonresident decedent's property within the State, a State may apply the pertinent rates to the whole estate wherever located, and take that proportion thereof which the property within the State bears to the total; the fact that a greater tax may result than would be assessed on an equal amount of property if owned by a resident,[1079] does not invalidate the result.
Motor Vehicle Taxes
In demanding compensation for the use of highways, a State may exempt certain types of vehicles, according to the purpose for which they are used, from a mileage tax on carriers.[1080] A State maintenance tax act, which taxes vehicle property carriers for hire at greater rates than similar vehicles carrying property not for hire is reasonable, since the use of roads by one hauling not for hire generally is limited to transportation of his own property as an incident to his occupation and is substantially less than that of one engaged in business as a common carrier.[1081] A property tax on motor vehicles used in operating a stage line that makes constant and unusual use of the highways may be measured by gross receipts and be assessed at a higher rate than taxes on property not so employed.[1082] Common motor carriers of freight operating over regular routes between fixed termini may be taxed at higher rates than other carriers, common and private.[1083] A fee for the privilege of transporting motor vehicles on their own wheels over the highways of the State for purpose of sale, does not violate the equal protection clause as applied to cars moving in caravans.[1084] The exemption from a tax for a permit to bring cars into the State in caravans of cars moved for sale between zones in the State is not an unconstitutional discrimination where it appears that the traffic subject to the tax places a much more serious burden on the highways than that which is exempt.[1085] The exemption of small vehicles from graduated registration fees on carriers for hire,[1086] and of persons whose vehicles haul passengers and farm products between points not having railroad facilities or hauling farm and dairy products for a producer from a vehicle license tax on private motor carriers, has been upheld.[1087]