1. A tax imposed by a city upon the gross receipts of a private
corporation, engaged in the business of furnishing electric light
and power to consumers for hire, cannot be adjudged violative of
the equal protection clause of the Fourteenth Amendment merely
because the city, under authority from the state, engages in the
same kind of business, in active competition with the private
corporation. P.
291 U. S.
623.
2. With respect to such business and its taxation, the city and
the private corporation are clearly to be classed in different
categories, for reasons that are in no way affected by calling the
city's activity "proprietary," instead of "governmental." P.
291 U. S.
624.
Page 291 U. S. 620
3. The Fourteenth Amendment does not protect private business
from the risk of competition with business carried on by the state
in the exercise of its reserved power. P.
291 U. S.
625.
4. Objection to the vagueness and uncertainty of a tax as
defined by a municipal ordinance
held obviated by its
practical construction in this case by a competent administrative
officer with the approval of the state court.
Pacific Telephone
& Telegraph Co. v. Seattle, ante, p.
291 U. S. 300. P.
291 U. S.
626.
5. Surrender of the power of taxation is not implied in a
contract by a city granting to a public utility the license or
franchise to use the streets for a term of years, and a later
ordinance exacting payment of an annual tax on the gross receipts
of the utility company as a condition precedent to its use of the
streets does not impair the obligation of the contract. P.
291 U. S.
627.
172 Wash. 668, 21 P.2d 727, affirmed.
Appeal from the affirmance of a judgment dismissing the
complaint of the Power & Light Company on demurrer, in a suit
to recover the amount of a gross receipts tax paid to the state,
and to enjoin future collections.
MR. JUSTICE STONE delivered the opinion of the Court.
This is an appeal under § 237 of the Judicial Code from a
judgment of the Supreme Court of Washington, 172 Wash. 668, 21 P.2d
727, 728, sustaining a municipal license or excise tax, assailed by
appellant as infringing the Fourteenth Amendment and the contract
clause of the Federal Constitution.
An ordinance of the City of Seattle of May 23, 1932, imposes an
annual license tax upon the privilege of carrying on the business
of selling or furnishing electric light
Page 291 U. S. 621
and power to consumers. The tax is 3% of the gross income from
the business "in the city" during the fiscal year next preceding
the tax year for which the license is required. The suit, brought
to recover an installment of the tax already paid and to enjoin the
collection of future installments, was heard and decided upon
demurrer to appellant's complaint.
Both appellant, a Massachusetts corporation acting under a
municipal franchise, and appellee, the City of Seattle, acting by
state authority, are engaged and actively compete in the business
of furnishing electric light and power to consumers for hire. By
state law, the city is given plenary power to fix rates for the
electric current which it distributes, and its rates are not
subject to regulation and control by the Public Service Commission,
as are those of appellant. Section 10390, Remington's Rev.Stat. of
Washington. Revenues of the city from its electric light business
are required by the city charter, Article VIII, § 9, to be
deposited in a special "city light fund," separate from the general
funds of the city, and transfer from one fund to the other, except
by direction of the city council, is forbidden by the city charter.
Article IX, § 17. Section 6 of the ordinance, in terms, imposes the
same tax on the city, "so far as permitted by law," as that levied
on appellant. But it appears that the city, acting under a state
statute, § 9491, Remington's Rev.Stat. of Washington, enacted
before the taxing ordinance, has issued bonds the payment of which,
both principal and interest, is secured by the revenue of its
electric light business. Appellant contends that, by the statute,
municipal ordinance, and the terms of the bonds themselves, this
pledge is superior to all other charges upon the gross revenue, and
that the city cannot lawfully pay the tax. It appears that, in
fact, the city has not paid the tax or made any provision for
paying it. The state court, in passing on this question, said:
Page 291 U. S. 622
"The city has not allocated, and probably cannot allocate, any
of the revenues of its power and light business to the payment of
such a tax. Bonds have been issued in excess of $30,000,000 against
the revenues from that business, and those bonds are a prior lien
on the entire income from it -- taking precedence even over
operating charges. Conceding that the city's light and power
revenues could be subjected to the tax, no machinery is set up in
the ordinance to accomplish such an end. Furthermore, in making up
its budget for 1932, no provision was made for the levy of general
taxes to cover the excise provided for in the ordinance. So the
problem must be met as though § 6 had been omitted from the
ordinance. . . . [P. 671.]"
Whether by this statement the Court intended to decide that the
city could not lawfully pay the tax, or assumed that to be the case
for the purpose of the decision it is unnecessary to determine, for
appellant further insists that, even though the tax were paid by
the city to itself, it would impose no actual burden.
Asserting that no effective tax is imposed with respect to the
business carried on by the city, appellant argues that the taxation
of its competing business is a denial of equal protection and
deprives it of its property without due process. The tax is also
assailed because the measure of it is vague and uncertain and
because, by imposing a license tax upon the privilege of doing the
business, the ordinance impairs appellant's franchise contract
which gave it the right to conduct the business.
In sustaining the constitutionality of the tax, the state court
found it unnecessary to ascertain whether, under the city charter
and ordinances, and state law, the tax, if paid by the city, must
be paid from its city light fund, rather than from its general
fund, or to what extent moneys may now or hereafter be transferred
from one
Page 291 U. S. 623
fund to the other, or how far the general fund raised by
taxation may be used otherwise, either directly or indirectly, to
aid the city's electric lighting business. We do not attempt to
resolve these questions here. Decision that the city is not
authorized by existing law to aid its light fund by taxation,
without disposing of the constitutional question decided by the
state court, would entail the decision of other questions, arising
under the equal protection and contract clauses, not raised or
considered in the case. Moreover, the appellant insists that, in
any case, payment of the tax would neither relieve appellant of its
burden nor impose a comparable burden on the city, since the same
hand would both pay and receive the tax, and there is no
constitutional limitation on the power of the city to use the tax
when collected for the maintenance of the city's business.
Standard Oil Co. v. City of Lincoln, 114 Neb. 245, 207
N.W. 172, 208 N.W. 962,
aff'd per curiam, 275 U.S. 504.
All the questions thus suggested are met and disposed of by
decision of the constitutional question which the state court
decided and which we decide here.
1. There is no contention that appellant's franchise or any
contract relieves it generally from the duty of paying taxes. It is
not contended that a state or municipality, merely because it fails
or is unable to tax its own property or business, is prohibited
from taxing like property or business. The contention here is that
constitutional limitations are transgressed only because the tax
affects a business with which the taxing sovereign is actively
competing. For that reason, it is argued that the taxation involves
a forbidden discrimination and deprives appellant of its property
without due process, since the combined power of the city to tax
and to compete may be used to destroy appellant's business. As
appellant asserts that the tax can impose no effective burden on
the city, its
Page 291 U. S. 624
contention is, in effect, that the city, by virtue of the
Fourteenth Amendment, upon entering the business, forfeited its
power to tax any competitor.
In conducting the business by state authority, the city is
exercising a part of the sovereign power of the state which the
Constitution has not curtailed. The decisions of this Court leave
no doubt that a state may, in the public interest, constitutionally
engage in a business commonly carried on by private enterprise,
levy a tax to support it,
Green v. Frazier, 253 U.
S. 233;
Jones v. Portland, 245 U.
S. 217, and compete with private interests engaged in a
like activity,
Standard Oil Co. v. City of Lincoln, supra;
Madera Waterworks v. Madera, 228 U. S. 454;
Helena Water Works Co. v. Helena, 195 U.
S. 383.
We need not stop to inquire whether the equal protection clause
was designed to protect the citizen from advantages retained by the
sovereign, or to point out the extraordinary implications of
appellant's argument when applied to expansions of government
activities which have become commonplace. It is enough for present
purposes that the equal protection clause does not forbid
discrimination with respect to things that are different. The
distinctions between the taxing sovereign and its taxpayers are
many and obvious. The private corporation, whatever its public
duties, carries on its business for private profit, and is subject
to the obligation, common to all, to contribute to the expense of
government by paying taxes. The municipality, which is enabled to
function only because it is a tax gatherer, may acquire property or
conduct a business in the interest of the public welfare, and its
gains, if any, must be used for public ends. Hence, equal
protection does not require a city to abstain from taxing the
business of a corporation organized for profit merely because, in
the public interest, the municipality has acquired like property or
conducts a like business.
Page 291 U. S. 625
These differences are not lessened, nor the constitutional
exaction of uniformity increased, because the city competes with a
business which it taxes.
Compare Springfield Gas & Electric
Co. v. Springfield, 257 U. S. 66;
Hollis v. Kutz, 255 U. S. 452;
Emergency Fleet Corp. v. Western Union, 275 U.
S. 415. The state may tax different types of taxpayers
differently even though they compete.
State Board of Tax
Commissioners v. Jackson, 283 U. S. 527;
Alaska Fish Salting & By-Products Co. v. Smith,
255 U. S. 44;
Hammond Packing Co. v. Montana, 233 U.
S. 331;
Quong Wing v. Kirkendall, 223 U. S.
59. It could not plausibly be argued that a private
nonprofit corporation distributing electric current to consumers at
cost could not be exempted from taxes borne by others serving the
same wants.
Compare Louisville Gas & Electric Co. v.
Coleman, 277 U. S. 32,
277 U. S. 40;
German Alliance Insurance Co. v. Kansas, 233 U.
S. 389,
233 U. S. 418;
Citizens' Telephone Co. v. Fuller, 229 U.
S. 322. A business which, in private hands, might be
exempted from taxation because not conducted for private profit is
no less privileged because its capital is supplied by the
government which controls it in the public interest. These
considerations are in no way affected by calling the city's
activity "proprietary," instead of "governmental."
Compare
South Carolina v. United States, 199 U.
S. 437,
with Murray v. Wilson Distilling Co.,
213 U. S. 151,
and Metcalf & Eddy v. Mitchell, 269 U.
S. 514.
The injury which appellant fears may result is the consequence
of competition by the city, and not necessarily of the imposition
of the tax. Even without the tax, the possibility of injury would
remain, for the city is not bound to conduct the business at a
profit. The argument that some way must be found to interpret the
due process clause so as to preclude the danger of such an injury
fails to point the way. Legislation may protect from the
consequences of competition, but the Constitution
Page 291 U. S. 626
does not.
Helena Water Works Co. v. Helena, supra; Vicksburg
v. Henson, 231 U. S. 259. The
Fourteenth Amendment does not purport to protect property from
every injurious or oppressive action by a state,
Memphis Gas
Co. v. Shelby County, 109 U. S. 398,
109 U. S. 400;
St. Louis v. United Railways Co., 210 U.
S. 266,
210 U. S. 276,
nor can it relieve property of congenital defects,
Madera
Waterworks v. Madera, supra, 228 U. S. 456.
It does not preclude competition, however drastic, between private
enterprises or prevent unequal taxation of competitors who are
different. Those were risks which appellant took when it entered
the field. No articulate principle is suggested calling for the
conclusion that the appellant is not subject to the same risks
because the competing business is carried on by the state in the
exercise of a power which has been constitutionally reserved to it
from the beginning.
Such was the decision in
Madera Waterworks v. Madera,
supra, where this Court pointed out that, in the absence of
any contract restriction, the Fourteenth Amendment does not prevent
a city from conducting a public waterworks in competition with
private business or preclude taxation of the private business to
help its rival to succeed.
See also Springfield Gas &
Electric Co. v. Springfield, supra. Such must be our decision
now.
2. The definition of gross income by § 2 of the ordinance, which
is assailed as vague and indefinite, is that considered in
Pacific Telephone & Telegraph Co. v. Seattle, ante, p.
291 U. S. 300. By
§§ 10 and 20, the comptroller of the city is required to make rules
and regulations, having the force of law, for carrying the
ordinance into effect, and to provide blank forms of return upon
which the taxpayer is to enter such information as the comptroller
may require to enable him to compute the tax. As appellant alleges
that it has received its license and paid the first installment of
the tax, it appears that a practical construction has been
Page 291 U. S. 627
given to the ordinance by an administrative officer competent to
give it, which the state court has upheld. It is thus apparent that
the ordinance, as construed, is sufficiently definite to enable the
appellant to comply with it, and, as appellant's return for
taxation and the method of computing the tax are not disclosed by
the record, no constitutional infirmity in the ordinance is
revealed.
See Edelman v. Boeing Air Transport, Inc.,
289 U. S. 249;
Pacific Telephone & Telegraph Co. v. City of Seattle,
supra.
3. Appellant asserts a contract under its franchise to use the
streets of the city for the purpose of carrying on its business for
an unexpired term of years. It argues that the franchise is a
contract license to carry on the business, and that the exaction of
a tax as a condition precedent to the enjoyment of the license will
operate to destroy the privilege granted by the franchise. This
argument was made and answered in
Memphis Gas Co. v. Shelby
County, 109 U. S. 398, and
in
St. Louis v. United Railways Co., 210 U.
S. 266. Surrender of the state's power to tax the
privilege is not to be implied from the grant of it. Hence,
appellant took its franchise subject to the power of the state to
tax the granted privilege in common with all other privileges and
property in the state. Without a clearly expressed obligation on
the part of the city to surrender that power, the contract clause
does not limit it.
See Wiggins Ferry Co. v. East St.
Louis, 107 U. S. 365;
New Orleans City & Lake R. Co. v. New Orleans,
143 U. S. 192;
Postal Telegraph Cable Co. v. Charleston, 153 U.
S. 692;
cf. Knoxville Water Co. v. Knoxville,
200 U. S. 22.
Affirmed.
MR. JUSTICE VAN DEVANTER, specially concurring.
I concur in the judgment of affirmance, but not in the principal
part of the court's opinion.
The appellant, the power company, assails the ordinance imposing
the tax on the following grounds:
Page 291 U. S. 628
1. The ordinance contravenes the equal protection clause of the
Fourteenth Amendment to the Constitution of the United States in
that it lays the tax on the appellant's electric light and power
business, but not on the like and competing business of the
city.
2. The ordinance offends the due process clause of that
Amendment in that it prescribes severe penalties and liabilities
for nonpayment of the tax, and yet defines "gross income," on which
the tax is to be computed, so vaguely that the amount of the tax
cannot be ascertained with reasonable certainty.
3. The ordinance impairs the franchise contract entitling the
appellant to conduct its business within the city for a term of
fifty years, and thereby infringes the contract clause of the
Constitution, in that it makes the continued enjoyment of the
franchise depend on the payment of the tax.
The assault is confined to this taxing ordinance. Other
ordinances, some provisions in the city's charter, and still other
enactments have a real bearing on the matter, but their validity
under the Constitution of the United States is not called in
question.
I agree that the second and third grounds of the assault must be
held untenable for the reasons stated in the opinion, and I further
agree that the first ground must fail -- but for reasons
essentially different from those which the opinion announces.
The first ground proceeds on the theory that the city is free to
accord equal treatment to the two competitive businesses, but, by
its ordinance, unreasonably and arbitrarily discriminates against
the business of the appellant and in favor of its own business by
subjecting the former to the tax and omitting or refusing to
subject the latter to a like burden. It therefore is of first
importance to ascertain what the ordinance provides and what are
the
Page 291 U. S. 629
circumstances which surrounded its adoption and in which it is
to be applied.
The ordinance was approved by the mayor May 25, 1932, and was to
become effective July 1 of that year. It provides in § 2 that the
word "person" in the several sections shall be taken to include a
corporation unless the context plainly shows otherwise; in
subdivision (c) of § 5 that the tax shall be applied to "every
person engaged in or carrying on" the business of selling or
furnishing electric light and power within the city, and in § 6
that subdivision (c) of § 5
"shall, as far as permitted by law, be applicable to the City of
Seattle, except that said City shall not, as a taxpayer, be
required to conform to the other provisions of this ordinance"
-- the "other provisions" obviously being those which require
sworn returns, application for license, etc.
The electric light and power business of the appellant and the
like business of the city have been and are highly competitive, and
the the only ones in the field. Both had their inception in
ordinances adopted in 1902 -- the one under which the city entered
the field being a little older than the one granting the franchise
under which the plaintiff has proceeded. Both businesses have been
greatly extended and enlarged in relative keeping with the growth
of the city.
The city's business is conducted, as is required by statutory
and charter provisions, as an independent unit distinct from all
other activities of the city, whether governmental or proprietary,
and the accounts, revenues, expenses, and funds pertaining to the
business are kept, handled, and adjusted, as is similarly required,
separately from other accounts, revenues, expenses, and funds of
the city. This independence and separation is not merely formal,
but real and persistent. The city in its governmental capacity is a
customer of its proprietary light
Page 291 U. S. 630
and power business, and obtains therefrom electric current
needed for street lighting and other municipal purposes. For this
current, the city, in its governmental capacity, pays each year a
sum which is determined after a public hearing in which all who are
interested are given an opportunity to participate. The payment is
effected by transferring money from the city's tax-supported
general fund, which is devoted to government uses, to the separate
fund into which the revenues of the proprietary light and power
business are required to be paid. The amount to be paid for such
current in 1932 was given in the city's budget as $438.750.
The decisions of the Supreme Court of the state leave no doubt
that the situation is as just stated. In
Uhler v. Olympia,
87 Wash. 1, 151 P. 117, 118, 152 P. 998, which relates to a
proposed city-owned water system designed to supply for hire both
private and municipal needs, that court says (p. 4):
"The revenues to be received under the plan proposed . . . do
not partake of the character of general funds, nor can the general
fund be invaded if they are not sufficient,"
and again (p. 14):
"The city, in meeting functions that are called governmental, is
taking [water] from the city . . . in its proprietary capacity;
therefore the general fund of the city may be charged, and the
special fund credited, with a reasonable charge for the water used
[by the city], when it is so provided in the ordinance. The city,
as a governmental entity, stands in the same relation to the system
as a private citizen who is patronizing it."
And that court further holds that, while it is admissible under
the laws of the state for a city to make "temporary loans" from the
tax-supported general fund to a special utility fund or vice versa,
or from one special utility fund to another, if the borrowing fund
is solvent and has an assured income from which repayment may be
made, it is not admissible to
Page 291 U. S. 631
make loans from one of these funds to another which is
insolvent, or to make contributions or permanent diversions from
one to another, and that attempted infractions of these
restrictions may be prevented by injunction.
Asia v.
Seattle, 119 Wash. 674, 679, 680, 206 P. 366;
Griffin v.
Tacoma, 49 Wash. 524, 529, 95 P. 1107;
Uhler v.
Olympia, 87 Wash. 1, 7, 151 P. 117, 152 P. 998;
Von
Herberg v. Seattle, 157 Wash. 141, 147, 150, 151, 288 P.
646.
Since 1916, the city has financed the extension and development
of its electric light and power business by issuing and selling
revenue bonds, without submitting the matter to the electorate or
creating an indebtedness on the part of the city. The total of such
bonds outstanding at the end of 1931 was approximately $32,000,000.
By law and by their own terms, these bonds are payable only from a
bond fund specially created from revenues derived by the city from
its electric light and power business.
The appellant in its complaint alleges that the gross revenues
of the business are, by law, underlying ordinances, and the terms
of the bonds, pledged to the payment of the bonds, principal, and
interest, and that
"such pledge constitutes a charge upon such gross revenues prior
and superior to all other charges whatsoever, including charges for
maintenance and operation."
Counsel for the city, while not questioning the allegation in
other respects, insist that, under the applicable law, the pledge
is not of the gross revenues, but, at most, is only of what remains
after paying costs of maintenance and operation, and that the tax
in question, if laid on the city's business pursuant to the
ordinance, may be paid from the gross revenues like other costs of
maintenance and operation.
Section 9491 of Remington's Revised Statutes of Washington,
under which appellant alleges the bonds were issued, makes
provision for setting aside and paying into a
Page 291 U. S. 632
special bond fund "any fixed proportion" or "any fixed amount"
of the "gross revenues" from the business in aid of which bonds are
issued, and for making the bonds payable "only out of such special
fund." These provisions are followed by another in the same section
declaring:
"In creating any such special fund or funds, the common council
or other corporate authorities of such city or town shall have due
regard to the cost of operation and maintenance of the plant or
system as constructed or added to, and to any proportion or part of
the revenue previously pledged as a fund for the payment of bonds,
warrants, or other indebtedness, and shall not set aside into such
special fund a greater amount or proportion of the revenue and
proceeds than in their judgment will be available over and above
such cost of maintenance and operation and the amount or
proportion, if any, of the revenue so previously pledged."
The charter of the city also contains a provision, § 18
(Fifteenth), enabling the city to establish, operate, and maintain
a plant or system for furnishing electric power and light for
industrial, individual, and municipal uses, "and to provide and
secure payment therefor in whole or in part by net earnings
therefrom."
Section 9491, under which the appellant alleges the revenue
bonds were issued, is not confined to enabling cities to supply an
electric light and power service, but is also directed to enabling
them, through the issue of like bonds to supply a street railroad
service or a water service. In 1919, the appellant, which then
owned a street railroad system in Seattle as well as an electric
light and power system, sold and transferred its street railroad
system to the city and received in payment fifteen million dollars
of revenue bonds with a supporting pledge like that which the
appellant sets forth in its complaint in
Page 291 U. S. 633
the present case. [
Footnote
1] Controversy soon arose as to whether that pledge includes
the entire gross revenue of the street railroad system, or only
what remains after paying the cost of maintenance and operation,
and much litigation ensued in which the appellant persistently
sought to establish the broader construction of the pledge.
[
Footnote 2] The litigation
resulted in decisions recognizing and sustaining the pledge in
several respects, [
Footnote 3]
but leaving undetermined the question whether it includes all of
the gross revenue or only what is left after the cost of
maintenance and operation is paid. The case of
Von Herberg v.
Seattle, 157 Wash. 141, 288 P. 646, 650, decided in 1930,
appears to have been the last of the series. The appellant was a
party and set up its contention as in the other cases. In
concluding the decision, the court said:
"We accordingly express no opinion upon the question of whether
or not wages and operating expenses of the street railway must be
paid before the application of any money in the street railway fund
to the payment of the bonds evidencing the purchase price of the
system."
In view of that acute and undetermined controversy and its
obvious bearing on the pledge given in support of the revenue bonds
pertaining to the city's electric light and power business, it is
easy to perceive why the city, in adopting the ordinance of 1932
and providing in § 6 that the tax should be applicable to the
city's business, inserted the words "as far as permitted by law."
Evidently
Page 291 U. S. 634
the city understood that, if the entire gross revenue from the
business was pledged, it might be for that reason unable to pay out
any part of the revenue for another purpose. It also is easy to
perceive that the appellant, by reason of its interest in the
street railroad revenue bonds, may have regarded the present suit
as a suitable vehicle for getting its contention respecting such a
pledge before a court and possibly establishing indirectly what it
had been unable to establish through its earlier and direct
efforts. Certainly the appellant could not reasonably have expected
to enhance its chances of success in the present suit by
introducing such a contention respecting the pledge given in
support of the electric light and power revenue bonds.
Of the circumstances in which the ordinance was adopted and of
the provision in § 6 declaring the tax applicable to the city's
business, the state court said in the present suit:
"The city, in its proprietary capacity, is in competition with
appellant in the power and light business. The possible
consequences to appellant if it is subjected to an excise of 3% on
its gross revenues while its competitor escapes the burden are too
obvious for discussion. Evidently having such consequences in mind,
the city council, by virtue of § 6 of the ordinance, has undertaken
to subject the city's power and light business to the tax imposed
upon persons and corporations engaging in that business. This is
merely a more or less friendly gesture. The city has not allocated,
and probably cannot allocate, any of the revenues of its power and
light business to the payment of such a tax. Bonds have been issued
in excess of $30,000,000 against the revenues from that business,
and those bonds are a prior lien on the entire income from it --
taking precedence even over operating charges. [P. 671.] "
Page 291 U. S. 635
Counsel differ widely respecting so much of this excerpt as
speaks of the existing pledge as an obstacle to applying the tax to
the city's business. Counsel for the city say this statement rests
only on an allegation in the appellant's complaint, and was made in
the absence of a full presentation of the matter and without
intention to render a decision thereon, and they present arguments
and citations giving color to their assertion. On the other hand,
counsel for the appellant insist the statement is decisive, and
point to its letter as justifying them in so insisting. It is
obvious that the statement, when separately considered, makes
strongly for the latter view; but, when it is read in connection
with prior decisions, which it does not mention, and with charter
and statutory provisions, which are not noticed, there arises a
real doubt whether it was made as a decisive utterance or as a
recital of what was alleged and only assumed to be true. [
Footnote 4] This is a matter on which
only the state court can speak with ultimate authority, and as its
solution, as will appear later on, is not essential for present
purposes, it properly may be put to one side. When this is done,
the appellant's charge of unreasonable discrimination amounting to
a denial of equal protection needs to be examined with three
suggested views of the existing pledge in mind -- one treating it
as including only the net revenues from the city's business, as the
city asserts, another treating it as including the entire gross
revenues, but subject to payment therefrom of any tax lawfully
imposed on the city's business, and still another treating it as
including the entire gross revenues and preventing, by reason of
the contract clause of the Constitution, payment therefrom of the
tax named in the ordinance, as the appellant insists.
Page 291 U. S. 636
The ordinance, in § 6, provides that the tax "shall, as far as
permitted by law, be applicable" to the city's proprietary
business. Unless the pledge be in the way, it is plain that there
is no legal obstacle to carrying this provision into effect.
[
Footnote 5] The state court
does not suggest the presence of any other obstacle, and counsel
for the appellant do not show that there is any. On the other hand,
counsel for the city concede that the ordinance imposes the tax on
the city's business, and assert the city's willingness to pay the
tax out of the gross revenues from that business.
True, the appellant alleges in its complaint that the city
budget for 1932 did not allocate any of the revenues from the
city's business for such payment. But this allegation is of no
significance. As counsel for the city point out, the budget was
adopted late in 1931, while the taxing ordinance was not adopted
until May 25, 1932, and did not become effective until July 1 of
that year. Appellant's complaint was filed shortly after the
ordinance became effective and before the time fixed for making up
and settling another budget.
In view of the terms of the ordinance and of the city's attitude
declared by its counsel, it is manifest that, if the pledge be only
of the net revenues, the tax falls on
Page 291 U. S. 637
the city's business just as on the other, and that the charge of
unreasonable discrimination is without any basis.
If the pledge be of the gross revenues, but subject to payment
therefrom of any tax lawfully laid on the city's business, thereby
leaving the city free to pay the tax imposed by the ordinance out
of such revenues, it still is manifest that the ordinance treats
both businesses alike, and therefore that there is no
discrimination.
If the pledge be of the entire gross revenues and, by reason of
the contract clause of the Constitution, prevents the application
of part of the revenues to the payment of the tax, it is very plain
that such discrimination as results is neither arbitrary on the
part of the city nor within the condemnation of the equal
protection clause. The contract clause and the equal protection
clause are both parts of the Constitution, and, of course, action
taken or omitted in obedience to the contract clause cannot be
regarded as a violation of the equal protection clause. Nor does
the latter clause require that a right or exemption which under the
other clause must be accorded to a particular business be also
accorded to a similar business not otherwise entitled to it.
[
Footnote 6]
It follows that in none of the suggested views of the pledge can
the appellant's charge of unreasonable discrimination be sustained.
And, this being so, there is no need for now considering which of
the suggested views of the pledge is right.
MR. JUSTICE McREYNOLDS, MR. JUSTICE SUTHERLAND, and MR. JUSTICE
BUTLER concur in this opinion.
[
Footnote 1]
Twichell v. Seattle, 106 Wash. 32, 179 P. 127;
Old
Colony Trust Co. v. Seattle, 271 U. S. 426.
[
Footnote 2]
Puget Sound Power & Light Co. v. Seattle, 284 F.
659;
Von Herberg v. Seattle, 27 F.2d 457;
Puget Sound
Power & Light Co. v. Von Herberg, 278 U.S. 644;
Puget
Sound Power & Light Co. v. Seattle, 29 F.2d 254.
[
Footnote 3]
Twichell v. Seattle, 106 Wash. 32, 179 P. 127;
Asia
v. Seattle, 119 Wash. 674, 206 P. 366;
Von Herberg v.
Seattle, 157 Wash. 141, 288 P. 646.
[
Footnote 4]
Inaccurate statements of counsel sometimes lead to erroneous
assumptions by courts.
Langford v. Monteith, 102 U.
S. 145,
102 U. S.
147.
[
Footnote 5]
Louisville v. Commonwealth, 1 Duv. 295;
Commonwealth v. Makibben, 90 Ky. 384, 14 S.W. 372;
Clark v. Louisville Water Co., 90 Ky. 515, 14 S.W. 502
(
aff'd, 143 U. S. 143 U.S.
1);
Newport v. Commonwealth, 106 Ky. 434, 50 S.W. 845, 51
S.W. 433;
Covington v. Commonwealth, 107 Ky. 680, 39 S.W.
836 (
aff'd, 173 U. S. 173 U.S.
231);
Western Saving Fund Society v. Philadelphia, 31 Pa.
175, 183;
Chadwick v. Maginnes, 94 Pa. 117;
Erie
County v. Commissioners, 113 Pa. 368, 6 A. 138;
Vilas v.
Manila, 220 U. S. 345,
220 U. S. 356.
And see Atlantic & N.C. R. Co. v. Commissioners, 75
N.C. 474;
South Carolina v. United States, 199 U.
S. 437;
Los Angeles v. Los Angeles Gas &
Electric Corp., 251 U. S. 32;
Bank of United States v.
Planters Bank, 9 Wheat. 904,
22 U. S. 907;
Curran v.
Arkansas, 15 How. 304,
56 U. S.
309.
[
Footnote 6]
Raley & Brothers v. Richardson, 264 U.
S. 157;
Packer Corp. v. Utah, 285 U.
S. 105,
285 U. S. 109;
Des Moines National Bank v. Fairweather, 263 U.
S. 103,
263 U. S.
116-117;
Union Bank & Trust Co. v. Phelps,
288 U. S. 181,
288 U. S.
187.