Summary
upholding occupational "employer tax" of two dollars per month for each employee located in Denver earning more than $250 per month, and an occupational "employee" tax of two dollars per month on all employees earning more than $250 per month
Summary of this case from Town of Eagle v. ScheibeOpinion
No. 23940. No. 23941.
Decided February 5, 1969. Rehearing denied February 17, 1969.
Action by plaintiffs challenging the legality of three city ordinances and seeking a permanent injunction restraining Denver from enforcing any or all of them. From judgment in favor of plaintiffs as to Ordinance No. 234, Series of 1968, Denver brought error. And from judgment dismissing the complaint and decreeing Ordinances Nos. 232 and 233 to be valid and enforceable, plaintiffs brought error.
Affirmed.
1. ADMINISTRATIVE LAW AND PROCEDURE — Ordinance — Provision — Questions — Exhaustion. Where ordinance provided administrative procedures for answering myriad administrative questions, administrative procedures must be exhausted before review may be had in the courts.
2. COURTS — City — Earnings Tax Ordinance — Invalid — Denver v. Sweet — Constitutional Law — Stare Decisis. With reference to Ordinance No. 234 which is entitled "Earnings Tax," Supreme Court, under the doctrine of stare decisis, adheres to its decision in Denver v. Sweet, 138 Colo. 41, 329 P.2d 441 which holds that article X, section 17 of the Colorado constitution vests exclusive nondelegable power in the General Assembly to levy income taxes and that city is therefore without power to enact an ordinance imposing an income tax, hence, under the circumstances, Ordinance No. 234 is deemed to be invalid.
3. Doctrine of Stare Decisis — Uniformity — Certainty — Stability — Settled Law. Under the doctrine of stare decisis courts are very reluctant to undo settled law; especially, since this doctrine has for its object uniformity, certainty and stability of the law and the rights acquired thereunder.
4. Doctrine of Stare Decisis. The doctrine of stare decisis is firmly embedded in Colorado law.
5. Prior Decision — Basic — Change — Legislative — People — Amendments — Constitution. Where prior decision has become basic part of state jurisprudence, any changes deemed necessary should come from the legislature or from the people by their exercise of power to initiate amendments to the constitution.
6. TAXATION — Legislature — Apportion — Income Taxes — Constitution. The state legislature can apportion state income taxes among several counties, cities, or school districts without any constitutional prohibition.
7. MUNICIPAL CORPORATIONS — Business Occupational Privilege Tax — Ordinance — Valid — Stare Decisis — Constitutional. With reference to Ordinance No. 232 designated as a "Business Occupational Privilege Tax" and which applies to all persons engaged in any business, trade, occupation, profession or calling of any kind having a fixed or transitory situs within Denver, for any period of time in a calendar month, and which imposes a tax at the fixed rate of $2 per month measured by the number of owners, partners and also the employees performing services for such business who receive compensation therefrom in excess of $250 per month, held, under the circumstances Ordinance No. 232 is deemed to be valid and sans constitutional restrictions; this tax is not an income tax, and under the doctrine of stare decisis is deemed to be a valid occupational privilege tax.
8. Employee Occupational Privilege Tax — Ordinance — Valid. With reference to Ordinance No. 233 designated as an "Employee Occupational Privilege Tax" which declares that the performance of service within Denver by an employee for an employer for any period of time in a calendar month for wages is the exercise of a taxable privilege and which imposes a tax at the rate of $2 a month for each and every month for which such employee is for any period of time employed and exempting from the tax those whose compensation for such service is less that $250 per month, held, under the circumstances Ordinance No. 233 is deemed to be valid; the tax involved herein is not a valid tax on income but rather an occupational tax on individual employees.
9. Ordinance — Employee Occupational Privilege Tax — Exemption — Classification — Reasonable. Under Ordinance No. 233 designated as an "Employee Occupational Privilege Tax," Supreme Court is of the view that the exemption for those who receive less than $250 a month income is a concrete way of exempting those who perform only minimal services within Denver, and as so viewed, the classification is not arbitrary and is reasonable.
10. CONSTITUTIONAL LAW — Ordinance — Duty — Employer — Withholding of Tax — Employee — Valid — Due Process. There is no constitutional prohibition against an ordinance which requires employer to withhold employee's tax from employee's wages; such imposition does not place a burden upon the employer as to be deemed confiscatory and constituting the taking of property without due process.
Error to the District Court of the City and County of Denver, Honorable Edward J. Keating, Judge.
Max P. Zall, City Attorney, W. Keith Peterson, Assistant, Earl T. Thrasher, Assistant, for City and County of Denver, et al.
Creamer Creamer, George Creamer, for Duffy Storage and Moving Co., et al.
Kenneth G. Bueche, General Counsel for the Colorado Municipal League, Amicus Curiae.
Gordon D. Hinds, City Attorney, City of Pueblo, Amicus Curiae. Herman H. Feldman, for Air Line Pilots Association, Amicus Curiae.
Two writs of error are involved herein. They are directed to two determinations entered by the trial court in a declaratory judgment suit filed in Denver district court by several corporate and individual plaintiffs for themselves and as representatives in a class action. The City and County of Denver and the individual city office-holders named as defendants and appearing herein both as plaintiffs and defendants in error will be referred to collectively as Denver. The plaintiffs below will be referred to as such. They too are here as both plaintiffs and defendants in error.
Plaintiffs challenge the legality of three city ordinances enacted by the Denver City Council. Two of them — Ordinances No. 232 and No. 233 — already are in effect and have been since January 1, 1969. One — Ordinance No. 234 — is by its terms to become effective on March 31, 1969. A declaration of invalidity as to all of them was sought by plaintiffs, with the prayer that a permanent injunction issue restraining Denver from enforcing any or all of the ordinances. Judgment of the court was entered granting relief as prayed only as to Ordinance No. 234, Series of 1968. And to this Denver brought writ of error. The court decreed that Ordinances No. 232 and 233 were valid and enforceable and entered judgment dismissing the complaint as to those two ordinances. To this plaintiffs brought writ of error.
We elected to consolidate both writs of error for oral argument. We consolidate the cases in this opinion, separating, however, the ordinances as affected thereby, and the disposition of the several issues involved.
We state at the outset that what is not involved or intended to be covered in this decision are the rights, exemptions and immunities of the individual employers and employees as they may believe their respective positions to be under the definitions in and the terms of the ordinances. This is by reason of the stipulation of the parties that:
"Plaintiffs, in their said representative capacity, do no act with relation to any special circumstances or matters with relation to the subject ordinances, or any of them, as they may affect particular individuals * * *."
We further add that with reference to the myriad administrative questions which may arise as to the named plaintiffs in their individual capacities or as to other individuals similarly situated relating to their special circumstances under the ordinances held to be valid, there is provided in these ordinances administrative procedures which must be exhausted before review may be had in the courts.
Also we further state that what we do hold herein is limited as provided in the stipulation to the "questions of power, jurisdiction and authority [of Denver] to pass and enforce the several ordinances and the taxes and impositions asserted to be made by them."
SUPREME COURT NO. 23940 THE QUESTIONS AS TO ORDINANCE NO. 234
This ordinance is entitled "Earnings Tax." We need not summarize its provisions nor analyze them. Denver concedes that it is an income tax, and further admits that if we were to adhere to a 1958 decision of this court it is an invalid ordinance under our holding in Denver v. Sweet, 138 Colo. 41, 329 P.2d 441. In the Sweet case this court held that article X, section 17, of the Colorado constitution vests exclusive nondelegable power in the General Assembly to levy income taxes and that Denver was therefore without power to enact an ordinance imposing an income tax. Denver takes the unequivocal position that this court was wrong in Sweet and urges — yea pleads vehemently — in its argument that we overrule that decision.
Denver reiterates the arguments now that were presented in the Sweet case, plus advancing its reasons as to why it believes the decision was erroneous. On the other hand, plaintiffs present detailed and lengthy arguments as to why Sweet was and is a correct decision. We decline to reargue or rediscuss the several issues raised in Sweet. We adhere to the Sweet decision under the doctrine of stare decisis.
What we consider to be a rather general statement of the purposes of stare decisis is to be found in Creacy v. Industrial Commission, 148 Colo. 429, 366 P.2d 384, wherein this court stated:
"* * * Under the doctrine of stare decisis courts are very reluctant to undo settled law. This doctrine has for its object, uniformity, certainty, and stability of the law and the rights acquired thereunder. * * *"
That the doctrine of stare decisis is firmly embedded in Colorado law may be gleaned from the latest pronouncement of this court on the subject, In re Interrogatory of the Governor, 162 Colo. 188, 425 P.2d 31, wherein we stated:
"* * * We have, of course, examined carefully our earlier decisions relating to the matter * * *. In our opinion, the result obtained in each of those cases is 'right, and not 'wrong.' But even if the results be a so-called 'wrong' decision, we would not be justified in overruling those cases unless there be compelling reasons for so doing. * * *"
Significantly applicable to the case at bar are the cases of People v. McPhail, 118 Colo. 478, 197 P.2d 315, and Wolf v. People, 117 Colo. 279, 187 P.2d 926.
In Wolf v. People, supra, this court stated:
"* * * We are not unconscious of the fact that that rule [stare decisis] is frequently ignored, with the general approval of the courts, for certain definite and often valid reasons. Among these are doubtful decisions handed down by closely divided courts and recent decisions establishing rules not yet firmly embedded in the jurisprudence of the jurisdiction. No such reason can possibly exist here. * * *"
In the McPhail case, supra, we find the following apt language:
"When a question arises here which has been before this court in a case clearly in point, has been ably argued by competent counsel, received our careful consideration, been unequivocally decided, and that decision has stood unchallenged over a long period of years, we have no disposition to reopen the subject while constitution and statutes remain unaltered. Such is the situation now confronting us."
The criteria set out in those cases point up that the doctrine of stare decisis should be applied to Sweet. That case was obviously a contested one, with both sides arguing ably and persuasively. The arguments raised by Denver at this time are basically those presented to our court in the Sweet case. The Sweet opinion was a unanimous decision of the court, with one judge not participating. It has been the law for eleven years. There have been no constitutional changes relating to the question. There have been no intervening circumstances indicating a reversal except the need of Denver for increased revenue, which factor existed at the time of Sweet and which factor now is not sufficient to cause the abandonment of stare decisis.
More succinctly, the Sweet opinion has now become a basic part of Colorado jurisprudence. In these circumstances any changes deemed necessary should come from the legislature or from the people by their exercise of the power to initiate amendments to the constitution. This guiding principle we set forth in Smith v. People, 120 Colo. 39, 206 P.2d 826, as follows:
"* * * The only answer to this question is that the law as declared and interpreted over many years is well established, and our function is to declare the law as we find it. If a change in long established judicial precedent is desirable, it is a legislative and not a judicial function to make any needed change. * * *"
Under the Sweet decision and under the amendment to article X, section 17, of the Colorado constitution, the legislature can apportion state income taxes among the several counties, cities or school districts without any constitutional prohibition. It has so done only in the case of school districts.
We conclude, then, that continued adherence to the Sweet decision is governed by stare decisis and that this court should not overrule that decision.
SUPREME COURT NO. 23941 THE QUESTIONS ON ORDINANCE NO. 232
This ordinance is designated as a "Business Occupational Privilege Tax." It applies to all persons, as defined, "engaged in any business, trade, occupation, profession or calling of any kind having a fixed or transitory situs within Denver, for any period of time in a calendar month within Denver." It imposes a tax at the fixed rate of $2 per month, measured by the number of owners, partners and also the employees performing services for such business who receive compensation therefrom in excess of $250 per month.
Two questions are posed for resolution:
1. What kind of a tax is provided by the ordinance?
2. Does Denver have the power and authority to pass and enforce such an ordinance?
It is contended by the plaintiffs that this tax is also an income tax and therefore Denver is prohibited from imposing such a levy by the Sweet case. We do not agree. The ordinance in all of its essential details is almost identical in one manner or another with similar ordinances which we have held valid in the following cases: Post v. Grand Junction, 118 Colo. 434, 195 P.2d 958; Jackson v. Glenwood Springs, 122 Colo. 323, 221 P.2d 1083; Ping v. City of Cortez, 139 Colo. 575, 342 P.2d 657; Englewood v. Wright, 147 Colo. 537, 364 P.2d 569.
In Post v. Grand Junction, supra, the ordinance imposed an occupation privilege tax upon all persons engaged in the sale of malt, vinous and spirituous liquors. In upholding the tax this court said:
"At the outset it is pertinent to observe that municipal authority, in the absence of constitutional restrictions, to impose occupational excise taxes purely for revenue for the support of its government, no longer is open to serious question. * * *"
The ordinance in Jackson v. Glenwood Springs, supra, imposed an occupational tax upon operators of a business in Glenwood Springs at the following rates: "The sum of $20.00 for the first owner, partner, manager or employee; plus $6.00 for each additional owner, partner, manager or employee up to 9; plus $1.00 for each employee in excess of 9." This court overruled the several constitutional objections raised against the tax and held it to be a valid occupational tax.
In Ping v. City of Cortez, supra, this court upheld a $25 occupational tax imposed on every business in the City of Cortez.
Arguments much the same as are advanced here were presented in Englewood v. Wright, supra, and disposed of in that decision. In that case the power of Englewood to impose an occupational tax was conceded. Those who objected to it argued that the tax was an income or property tax improperly levied; that the classifications were arbitrary; that the ordinance permitting imposition of a jail sentence or fine for nonpayment was in violation of the constitutional guarantee against imprisonment for debt. All of these contentions were rejected by this court then, and we do so now. The terminology aside, it is clear that the Denver ordinance is similar to the Englewood tax. The Englewood case is strong precedent for the validity of the tax sought to be imposed by Denver's "Business Occupational Privilege Tax." Here again the doctrine of stare decisis, on which municipalities have extensively relied in the imposition of similar taxes, dictates that the four cited cases have settled the law and set at rest constitutional questions raised herein.
THE QUESTIONS ON ORDINANCE NO. 233
This ordinance is designated "Employee Occupational Privilege Tax." It declares "the performance of service within Denver by an employee for an employer as herein defined for any period of time in a calendar month for wages as herein defined is the exercise of a taxable privilege * * *." It imposes also a tax at the rate of $2 a month for each and every month for which such employee is for any period of time so employed. Exempted from the tax are those whose compensation for such services is less than $250 per calendar month.
It is argued by the plaintiffs that this is a flat tax on income. We are not persuaded that this is true. The tax is limited to an employee engaged in an occupation, i.e., one who is performing such service for an employer, as defined, within Denver for any period of time in the calendar month upon a salary, wage, commission or other compensation basis. Other monetary earnings, no matter how substantial, from interest or investments or the like (all of which would be "income") are not taxed.
It is further contended that the four cases previously cited involving the occupation taxes levied in Grand Junction, Glenwood Springs, Cortez and Englewood are limited to persons engaged in business or self-employment and are not authority for taxing individuals working for others. We detect no valid limitation in the rule pronounced in those decisions just because the cities involved therein did not extend their taxes beyond the limits noted in their respective ordinances.
It is true that the precise issue concerning the authority to tax everyone gainfully employed was not before the court in any previous case, but such taxes are not novel or unheard of, and in other states the taxpayers have been as ardent in their protests and objections as the plaintiffs herein, only to find that similar ordinances to that under consideration here have been held valid. For example, in Gaugler v. City of Allentown, 410 Pa. 315, 189 A.2d 264, an annual tax of $10 upon each individual, resident and nonresident alike, engaged in any occupation within the corporate city limits of Allentown, Pennsylvania, was upheld. The Pennsylvania Supreme Court said:
"It is our conclusion that the tax imposed was purely an Occupation Privilege Tax despite the fact that it does not assess a varying levy according to the nature of the employment. It taxes the privilege of all to engage in occupations within the municipality's territorial limits. This power was given by the legislature under the Act of 1947, supra. Sub-section A thereof, authorizes the imposition of taxes on 'persons, transactions, occupations, privileges, subjects and personal property within the limits of such political subdivisions.' * * *"
Colorado has a similar statute delegating like authority to statutory cities. C.R.S. 1963, 139-75-1(3) and 139-78-3(2). Home rule cities are not limited to legislative grants of authority and at the very least have every power which the legislature may delegate to cities of lesser class. For other cases on occupation taxes on individual employees see City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248; Estes v. City of Gadsden, 266 Ala. 166, 94 So.2d 744.
Persuaded as we are by the reasoning in courts of other jurisdictions, we nevertheless also hold that the four cases previously cited as upholding the validity of Ordinance No. 232 are also controlling as to Ordinance No. 233. The exemption for those who receive less than $250 a month income is a concrete way of exempting those who perform only minimal services within Denver. As so viewed, the classification is not arbitrary and is reasonable. The test quoted with approval from McCarty v. Goldstein, 151 Colo. 154, 376 P.2d 691, and Champlin Refining Co. v. Cruse, Director of Revenue, 115 Colo. 329, 173 P.2d 213, was most recently restated in District 50 Metropolitan Recreational District v. Burnside, 167 Colo. 425, 448 P.2d 788, as follows:
"Equal protection in its guaranty of like treatment to all similarly situated permits classification which is reasonable and not arbitrary and which is based upon substantial differences having a reasonable relation to the objects or persons dealt with and to the public purpose sought to be achieved by the legislation involved."
COLLATERAL ISSUE
It is argued that the portion of the ordinance which requires an employer to withhold the employee's tax from the employee's wages places such a burden upon the employer as to be confiscatory and constituting the taking of property without due process of law. It is now universally recognized that there is no constitutional prohibition against such imposition upon employers who must withhold state and federal income taxes. This is also true of the requirement that the oil industry collect and pay the gasoline tax. This should be answer in itself to this argument. More specifically, however, we find the language in Rinn v. Bedford, 102 Colo. 475, 84 P.2d 827, a complete answer to this argument:
"We consider next the question whether the act may lawfully require the plaintiff as an attorney at law to collect the tax from those for whom he himself performs services. The argument that he is thereby constituted a collector of taxes against his will, and that the compensation provided for the collection is inadequate and confiscatory, must fall, for there is no distinction in principle between such collection and the collection, for instance, of a gasoline tax, which is collected by the seller from the purchaser as part of the purchase price and thereupon turned over to the government. * * *"
The judgment of the trial court holding invalid Ordinance No. 234 and the injunction issued restraining and prohibiting the city from imposing or enforcing the tax provided thereby is affirmed.
The findings of the court holding Ordinances No. 232 and No. 233 valid and the judgment dismissing the complaint as to those two ordinances are affirmed.
MR. CHIEF JUSTICE McWILLIAMS, MR. JUSTICE PRINGLE and MR. JUSTICE GROVES specially concurring.
MR. JUSTICE HODGES, MR. JUSTICE KELLEY and MR. JUSTICE LEE concurring in part and dissenting in part.