Tax exemption

“ Any exemption whatever, under an income tax, be it small or great, except to the absolutely indigent, is purely arbitrary; and the principle once allowed may be carried to any extent. Any exemption of any portion of the same class of property or incomes is an act of charity which every patriotic American citizen ought to reject upon principle and with scorn, except under circumstances of great want and destitution. Equality and manhood, therefore, demand and require uniformity of burden in whatever is the subject of taxation. ”

“ This requirement in the construction of legislative grants, especially tax exemptions, is merely an aspect of respecting legislative purpose. A legislature is not to be presumed to have relinquished its power of taxation beyond the narrowest rational reading of an exemption. ”

“ The inference is sought to be drawn in favor of exemption, if the legislature did not affirmatively grant the right to tax. We cannot assent to any such view, and we could come to no such conclusion from an examination of the General Statutes cited by counsel. It is a complete overturning of the universal rule in regard to taxation. The power and the right to tax are always presumed, and the exemption is to be clearly granted. Mere silence is the same as a denial of exemption. ”

“ Whether the present exemption entails that degree of involvement with government that presents a threat of fragmentation along religious lines involves, for me, a more subtle question than deciding simply whether neutrality has been violated. Unlike the subsidy that my Brother Douglas foresees as the next step down the road, tax exemptions to nonprofit organizations are an institution in themselves, so much so that they are, as THE CHIEF JUSTICE points out, expected and accepted as a matter of course. ”

“ It necessarily follows from the immunity created by federal authority that a state may not subject one to a greater burden upon his taxable property merely because he owns tax-exempt government securities. Neither ingenuity in calculation nor form of words in state enactments can deprive the owner of the tax exemption established for the benefit of the United States. ”

“ Even if these could be counterbalanced, the practise of tax exemption has become so general that it is quite as easy for an industry to secure it in one locality as another, and the result is a practise of community throat-cutting without any appreciable benefits. ”

“ It seems to me the moment it is admitted that the gross-receipt tax is an irrevocable contract, thereby it necessarily results that an exemption from taxation was provided for. The object of forbidding exemptions from taxation is not alone to secure revenue, but is to preserve untrammeled by contract the fulness of all the lawful power of taxation in the successive repositories of such power. ”

“ This seems so obvious that I cannot find words to express the thought that a particular person or property is irrevocably taken, by contract, beyond the reach of the legislative right to tax by any lawful mode deemed from time to time to be best for the public interest, without at the same time saying that by such an irrevocable contract an exemption from taxation is created. ”

“ What is Exemption from Taxation?—An exemption is freedom from a burden or service to which others are liable; but an exemption for a public purpose, or a valid consideration, is not an exemption except in name, for the valid and full consideration, or the public purpose promoted, is received in lieu of the tax. Xor is an exemption from taxation a discriminating burden on those who pay an income tax, provided the person or institution benefited by the exemption is a pauper, or a public charitable institution ”

“ If the Government may not impose a tax upon the expression of ideas in order to discourage them, it may not achieve the same end by reducing the individual who expresses his views to second-class citizenship by withholding tax benefits granted others. When government denies a tax exemption because of the citizen's belief, it penalizes that belief. ”

“ No one has ever suggested that tax exemption has converted libraries, art galleries, or hospitals into arms of the state or put employees 'on the public payroll.' There is no genuine nexus between tax exemption and establishment of religion. ”

“ It cannot be assumed that Congress at a time when it was withdrawing allotted lands from their former exemption in order that Indian citizens might assume the just burdens of state taxation, intended to extend a tax exemption by implication. In any case the Secretary of the Interior has never, by rule or regulation or other action, purported to exempt such lands from state taxation. ”

“ The importance of the case arises out of the fact that the claimed exemption may well extend to millions of persons (whose work nowise differs from that of their fellows in private enterprise) who are employed by municipal subdivisions and districts throughout the nation and that, on the other hand, the powers of the states to tax may be inhibited in the case of hundreds of thousands of similar employees of federal agencies of one sort or another. ”

“ The ruling that a tax upon net income is without the scope of the exemption cannot be adjudged unreasonable, for it will be found to be supported by decisions in many other states, and even, indeed, by decisions of this court. ”

“ The exemption of interstate business from the type of State taxation here involved is now made complete.
A business engaging in activities in two or more States should bear its part of the tax burdens of each. If valid, non-discriminatory taxes imposed in these States create 'multiple' burdens, such 'burdens' result from the political subdivisions created by our form of government. They are the price paid for governmental protection and maintenance in all States where the taxpayer does business. ”

“ Thus in every civilized country there is an exemption of small incomes, which it would be manifest cruelty to tax, and, the power to make such exemptions once granted, the amount is within the discretion of the legislature, and, so long as that power is not wantonly abused, the courts are bound to respect it. In this law there is an exemption of $4,000, which indicates a purpose on the part of congress that the burden of this tax should fall on the wealthy, or at least upon the well-to-do. ”

“ The acts of Congress, confirming previous agreements, provided that the lands allotted should be non-taxable while the title remained in the original allottee and provided for alienation within certain periods. The state argued nevertheless that there was in fact no tax exemption but that the provision for it was but an additional prohibition against a forced sale [1] and that when restrictions against alienation were removed by the act of Congress of 1908 (35 Stat. 312) the provision for tax exemption went as a necessary part thereof. ”

“ The legislatures of most of the states have affirmed the same principle, by inserting in their general tax acts an exemption of property belonging to the United States. Such a provision, as has been well observed by the supreme court of Connecticut in West Hartford v. Water Com'rs, above cited, is not the foundation of the exemption, but is inserted only from abundant caution, and because the assessment of taxes is to be made by local officers skilled in the valuation of property, but presumably unlearned in legal distinctions. ”

“ Exemptions are never to be presumed. On the contrary, the presumptions are always against them. The exemption of the property for twenty years only is equivalent to an express power to tax after that time.
It is said, however, that both provisions of the statute can stand,-that which exempts the capital and that which taxes the tangible property,-if the part of the property which represents the capital is exempted, and that which represents the bonded debt is taxed; but we certainly have no clear manifestation of any such intention by the legislature. ”

“ The latter years during which the law for the exemption for indebtedness was in force witnessed most heinous procedures in tax-dodging. The language of the constitution did not impose upon the legislature the enactment of exemption laws and yet avoidance of double taxation and exemption for indebtedness were aims wholly in harmony with the constitutional injunction to tax all property at a uniform and equal rate. ”

“ As for the Free Exercise Clause challenge, the court determined that denying the deduction did not prevent Hernandez from paying for auditing and training sessions and thereby observing Scientology's doctrine of exchange. Moreover, granting a tax exemption would compromise the integrity and fairness of the tax system. ”

“ The State is at liberty to tax the property in question at the same rate, and, consequently, to as great an extent as it does other property. The exemption contended for is from county and other local taxation. The State may appropriate all the tax it is at liberty to impose to its own uses. ”

“ It is true that when a corporation claims an exemption from taxation, it must show that the power to tax has been clearly relinquished by the state, and if there be a reasonable doubt about this having been done, that doubt must be solved in favor of the state. ”

“ It is also said that if a license tax on the franchise is enforced it must be paid out of the capital, and so, in effect, be a tax upon the capital. That argument would make in every case an exemption of the capital a relief from all taxation, for every tax must in the last analysis come out of the capital. But what, under those circumstances, becomes of the doctrine of a strict construction of a contract exemption of taxes? ”

“ The exemption of building and loan associations from the operation of the tax is a different matter. The equal protection clause of the Fourteenth Amendment does not preclude a state in imposing taxes from making exemptions, provided the power is not exercised arbitrarily. ”

“ Less broad and absolute alternatives are available and are adequate for the purpose of protection without creating the evils of total exemption.
The alternative methods available for avoiding the multiple state tax burden may now be stated. They are: (1) To apply the Adams ruling, stopping such taxes at the source, unless the tax is apportioned, thus eliminating the cumulative burdens; [41] (2) To rule that either the state of origin or the state of market, but not both, can levy the exaction ”

“ Powers, supra, consideration seems to be of little importance except as bearing on interpretation, that the payment of an alternative tax is consideration for exemption from nothing except its alternative. On the other hand the provision for an indorsement upon the security hardly is reconcilable with less than a permanent exemption; it is said that so the law generally has been understood; and the ground taken by the Appellate Division in the case that we have cited indicates that they were not prepared to deny that the exemption even of mortgages looked beyond the year. ”

“ In computing the amount of tax levied hereunder, however, for any year, there shall be deducted from the values, or from the gross income of the business, as the case may be, an exemption of ten thousand dollars of the amount of such values or gross income. Every person exercising any privilege taxable hereunder for any fractional part of a tax year shall be entitled to an exemption of that part of the sum of ten thousand dollars which bears the same proportion of the total sum that the period of time during which such person is engaged in such business bears to a whole year. ”

“ If they wished or intended to have an exemption of any kind from taxation, or felt that it was necessary to the profitable working of their business, they should have required a provision to that effect in their charter. The Constitution of the United States does not profess in all cases to protect property from unjust and oppressive taxation by the states. ”

“ We have, then, an ordinance which taxes, without exemption, the privilege of carrying on a business a part of which is that of a governmental agency constituted under a law of the United States and engaged in an essential part of the public business, communication between the officers and departments of the Federal government. The ordinance, making no exception of this class of business, necessarily includes its transaction within the privilege tax levied. This part of the license exacted necessarily affects the whole, and makes the tax unconstitutional and void. ”

“ The well-established principle is invoked that a tax upon the instrumentalities of the States is forbidden by the Federal Constitution, the exemption resting upon necessary implication in order effectively to maintain our dual system of government. ”

“ For example, when a railroad charter, subject to repeal, exempted the company from all taxation except a certain percentage on the cost of its works, it was held that this exemption was not repealed by a subsequent general tax law, enacting that all corporations should be taxed for the full amount of their property as other persons are taxed, and repealing all laws inconsistent therewith. ”

“ The general classification, namely, that the right to a partial exemption from a tax upon one class of income will depend upon whether the taxpayer is in receipt of income of another class with respect to which a different exemption applies, does not seem to us to be open to the objection that it is arbitrary or capricious, simply because, like any other general rule of taxation, its administration may involve incidental instances of inequality. ”

“ Figure 9 and Figure 8 in Book III plot the tax situation and the effect of M and B for curvature c = 0 (in the considered range) , and for Holland 2002.
Indexation of exemption
We already mentioned the OECD (1986) report that taxes generally are indexed on inflation. This indexation though is not consistent over time. The Economist (1991:45-46) reported:
“the most intriguing proposal now doing the rounds in Congress (...) is to increase the personal tax exemption (the amount by which taxable income is reduced for each person in a household) . In 1948 the exemption was set at $600 a person ”