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Kelley v. Kalodner

Supreme Court of Pennsylvania

September 30, 1935, Argued ; November 25, 1935

[No Number in Original]

Opinion

 [*182]   [**599]  OPINION BY MR. CHIEF JUSTICE FRAZER:

Joseph J. Kelley, a taxpayer of the City of Philadelphia, brought this bill in equity, over which we have assumed original jurisdiction, to obtain an injunction restraining The Telegraph Printing Company, a corporation, and appropriate officers of the Commonwealth of Pennsylvania from carrying [***2]  into effect the provisions of an act of assembly approved July 12, 1935, P.L. 970, imposing a graduated income tax for school purposes on residents of Pennsylvania, including fiduciaries, and on income of nonresidents derived from property or business in Pennsylvania. The relief sought by plaintiff is predicated upon the theory that the act in question is, in several respects, in violation of the Constitution of the Commonwealth and for that reason void and of no effect. In behalf of defendants the attorney general appeared before us and vigorously urged the validity of this legislation.  [*183]  In our consideration of the question, we have also had the benefit of briefs and arguments of other learned counsel, some appearing for the intervening plaintiffs, Harper and Ingersoll, and others as amici curiae. We are highly appreciative of the assistance rendered us by all these gentlemen in the determination of the difficult and important issue here involved.

The act referred to above, the constitutionality of which is attacked by plaintiff's bill, is too lengthy to be set forth verbatim in this opinion. It will suffice to say that the statute provides a comprehensive system [***3]  for the levy and collection of an annual tax upon the entire net income of residents of Pennsylvania and upon the net income received by nonresidents from property owned or from any business or occupation carried on within this Commonwealth. Gross income is defined in the act as including the "gains, profits and income derived from salaries, wages or compensation for personal service, of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of, or interest in, such property, also from interest, rent, dividends, securities, or the transaction of any business, carried on for gain or profit, and all other income derived from any source whatever, including income derived through estates or trusts by the beneficiaries thereof, whether as distributed or as distributable shares." Numerous exemptions are permitted by the act for the computation of "gross income" as well as deductions for the determination of "net income." Taxpayers are allowed a deduction for living expenses in the amount of $1,000 in the case of a single person, and $1,500 for [***4]  the head of a family or a married person. In addition a deduction of $400 is authorized for each dependent under eighteen years of age. The tax is imposed at the rate of two per cent of the amount of incomes not exceeding $5,000; two and one-half per cent of the amount over $5,000 but not exceeding  [*184]  $10,000; three per cent of the amount over $10,000 but not in excess of $25,000. Higher rates are applied on incomes within higher brackets, with a  [**600]  provision taxing all income over $100,000 at the rate of eight per cent.

The principal objection to the bill is that it violates sections 1 and 2 of article IX of the Constitution of Pennsylvania which reads as follows: ] "Section 1. All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws; but the General Assembly may, by general laws, exempt from taxation public property used for public purposes, actual places of religious worship, places of burial not used or held for private or corporate profit, institutions of purely public charity, and real and personal property owned, occupied, and used by [***5]  any branch, post, or camp of honorably discharged soldiers, sailors and marines."

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320 Pa. 180 *; 181 A. 598 **; 1935 Pa. LEXIS 757 ***

Kelley et al. v. Kalodner et al.

Prior History:  [***1]  Bill in equity. Original jurisdiction, Miscellaneous Docket No. 6, No. 156, in case of Joseph J. Kelley et al. v. Harry E. Kalodner, Secretary of Department of Revenue, et al. Act complained of held unconstitutional, and, for reasons stated, bill in equity retained.

CORE TERMS

income tax, property taxes, income derived, exemptions, taxes, excise tax, taxation, levied, cases, rule of uniformity, occupations, exceeding, excise, personal property, purposes

Tax Law, State & Local Taxes, Administration & Procedure, General Overview, Personal Property Taxes, Exemptions, Income Taxes, Real Property Taxes, Assessment & Valuation, Estate & Gift Taxes, Governments, Legislation, Interpretation