Inherent Powers of the State: Taxation

• Taxation, eminent domain, and police power are inherent powers of the state.
• These exist independently of the Constitution.
• They are legislative and presuppose equivalent compensation.

Taxation

• Taxation is the process by which the government raises revenue.
• The primary purpose is to raise revenue.
• Secondary purposes include reducing wealth inequalities, maintaining employment, and controlling inflation.
• It can also regulate to promote general welfare using state police power.
• Taxation is based on the necessity of government and reciprocal duties between the state and citizens.
• Citizens pay taxes for the benefits of an organized society.
• Taxes are vital for the government to function and serve its people.
• Manifestations of lifeblood theory include tax imposition without an explicit Constitutional grant.
• It also includes the right to select objects of taxation and no injunctions stopping tax collection.
• The power of taxation is comprehensive but subject to limitations.
• It is inherent in sovereignty, legislative in character, and subject to constitutional limits.
• Tax processes include levying, a legislative act, and collection, an administrative one.
• The legislature determines the subject, purpose, amount, and manner of tax collection.
• Principles of a sound tax system include fiscal adequacy.
• It also includes equality or theoretical justice, and administrative feasibility.

Distinctions Among Inherent Powers

• Taxation supports the government, police power promotes general welfare, and eminent domain serves a public purpose.
• Taxation and police power are exercised only by the government.
• Eminent domain may be used by government, public service companies, and utilities.
• Taxation affects a community or class; eminent domain affects individual property owners.
• Taxation provides equivalent protection and benefits.
• Police power offers no direct benefit but maintains a healthy society.
• Eminent domain provides market value compensation.
• Taxation transfers public funds.
• Police power restricts injurious property use.
• Eminent domain transfers property rights.
• Taxation has no limit, police power is limited to license costs, and eminent domain pays fair market value.
• Taxation and eminent domain are inferior to the non-impairment of obligations clause.
• Police power is superior to that clause.

Inherent and Constitutional Limitations

• Inherent limitations restrict power, while constitutional limits are in the Constitution.
• Public purpose affects the state's inhabitants as a community.
• International comity prevents taxing foreign governments.
• Territorial jurisdiction limits tax laws to state boundaries.
• Double taxation taxes the same thing twice by the same authority within the same period.
• Government entities are exempt from tax unless proprietary functions are involved.
• The power to tax cannot be delegated.
• A test of rightful taxation is that the proceeds must support the government or promote community welfare.
• A tax for private purposes is unconstitutional.
• Public purposes include education, science, infrastructure, disaster relief, and social welfare.
• A person may be taxed where there is a relationship justifying the levy.

Situs of Taxation

• Situs of taxation is the place of taxation.
• The basic rule is the state with jurisdiction over the subject.
• Poll tax situs is residence
• Real property tax situs is property location
• Tangible personal property tax situs is physical location
• Intangible personal property tax situs is owner's domicile
• Income tax situs is taxpayer's residence or citizenship
• Business tax situs is business location
• Gratuitous transfer tax situs is transferor's residence or property location
• Multiplicity of situs occurs when income is exposed to being taxed in several taxing jurisdictions
• Remedies include exemptions, deductions, or treaties.

International Comity

• International comity involves courteous and friendly agreements between nations.
• This is based on sovereign equality, usage among states, and the rule against suing a foreign government.
• International law is part of a country's law.
• Congress cannot delegate the power of taxation
• Exceptions include fixing tariff rates delegated to the President, power to tax can be delegated to local governments etc.
• Government agencies performing governmental functions are tax-exempt unless expressly taxed.

Constitutional Limitations

• Double taxation is direct double taxation by the same authority.
• Constitutional rules in taxation include due process, equal protection, and uniformity.
• Restrictions include no imprisonment for poll tax non-payment; no contract obligation impairment.
• There is an exception with regards to religious freedom, and non-appropriation for religious purposes.
• Congress can grant tax exemptions by majority vote. It needs to include the concurrence of a majority of all the members of each House.
• Congress needs to authorize the President to fix tariff rates.
• All money for special purposes should be treated as a fund.
• Local governments can create revenue sources and levy taxes.
• They also have a just share in national taxes.
• Deprivation with due process of law under valid law after fair procedures.
• Procedural due process requires an opportunity to be heard.
• Tax must be for public purposes, within jurisdiction, and without arbitrariness.
• Equal protection requires equal treatment within the same circumstances.
• Classification is allowed if there is a substantial distinction relevant to the issue including existing and future conditions.
• The rule of taxation ensures uniformity and equity.
• Uniformity means taxing the same class at the same rate.
• Equity involves a fair tax burden based on ability and benefits.
• Congress evolves a progressive system to emphasize direct taxation based on ability to pay.
• Equal protection refers to like treatment, and uniformity and equity refer to proper relative treatment.