Wallace, C. J., concurring:
The question in hand is whether “credits” are “property” in the sense in which the latter word is employed in the thirteenth section of the eleventh article of the Constitution, which requires all “property” to be taxed in proportion to its value.
It is not doubted, of course, that even though credits be not property in the sense referred to, and consequently, not to be taxed as property, the Legislature may, nevertheless, in its discretion, impose a tax upon such credits, as for instance, it may require stamps of graduated denomination to be affixed to each promissory note or evidence of indebtedness executed, which form of tax, when put in operation, would probably enable everybody (certainly all borrowers) [250]to realize the important truth, that a tax imposed upon credits, in whatever form it be imposed, must always be paid, not by the creditor, but by the debtor.
Returning, ■ then, to the question whether credits must be considered to be “property” in the sense adverted to, it will be remembered that the affirmative was maintained here in People v. McCreery (34 Cal. 432), and upon the authority of that case was assumed in People v. Eddy (43 Cal. 331). The question, however, involving as it does the correct construction of the text of the Constitution itself, in respect to a matter of such great and constantly recurring importance as the working of the general revenue system of the State, is not, in my opinion, to be determined by reference to mere precedents, or to decisions already made.
Considerations, upon which the doctrine of stare decisis is supposed to be founded, certainly do not attach to a controversy of this character. A re-examination of the general question, wholly unembarrassed by what our predecessors or we ourselves may have said, if seen to have been ill-founded in law, does not involve either the possible disturbance of vested rights, or the overthrow of rules of property supposed to have become fixed and settled.
I am of opinion that credits are not property, in the sense in which the word “property” is used in the thirteenth section of the eleventh article of the Constitution. That credits are correctly designated as “property,” in a general sense, no one of course will deny; and that they fall within the true meaning of that word, as employed in other portions of the Constitution, is readily conceded.
But, as observed by Vattel, “it does not follow either logically or grammatically that because a word occurs in one section with a definite sense, that therefore the same sense is to be adopted in every other section in which it occurs.” (Book 2, Ch. 17, Sec. 285.)
It certainly requires neither discussion nor authority to show that in searching for the true sense in which a word has been used in a particular instance, it is proper—in fact, often indispensable—to consider as well the subject-matter which it concerns, as the immediate connection in which it [251]was used. Neither philology, nor criticism, of themselves, afford safe rules for the interpretation of the language of statesmen used in establishing a system of finance, and providing for the fiscal necessities of the State.
The language found in the thirteenth section of the eleventh article of the Constitution, referred to, is as follows: “Taxation shall be equal and uniform throughout the State. All property in this State shall be taxed in proportion to its value,” etc.
This provision of the Constitution established the cardinal rule that property taxation in this State should always be imposed upon an ad valorem, as contradistinguished from a specific basis, and may be paraphrased thus: ‘ ‘All the actual wealth within this State shall be equally burdened with the support of the Government.” That “property,” as here employed in the Constitution, and “actual wealth,” as used in the paraphrase, are synonymous, and that each of them alike excludes mere credits, is believed to be demonstrable. In the nature of things, both the scale of public expenditure indulged and the consequent degree of taxation necessary for its supply have reference to the actual aggregate wealth for the political community to Avhich government looks for support. These habitually vary as the State is popularly said to be comparatively rich or comparatively poor.
The Legislature, in making up the budget, must necessarily therefore look to the aggregate amount of actual wealth in the hands of the people and borne upon the tax-rolls. This constitutes the capacity to pay, which it is always indispensable for the statesman to consider. And in considering it, how, it may be asked, can it be supposed that the aggregate wealth of the people—their actual capacity to pay taxes—is at all made up of credits—the mere indebtedness OAving by individual members of the body politic to others of its members ?
An answer would perhaps most readily be found in supposing, were such a thing possible, that the entire tax-rolls exhibited nothing but such indebtedness. Taxation attempted under such circumstances would of course be wholly fanciful, as bavin#? no actual basis for its exercise.
[252]It must result, therefore, that mere credits are a false quantity in ascertaining the sum of wealth which is subject to taxation as property, and that, in so far as that sum is attempted to be increased by the addition of those credits, property taxation, based thereon, is not only merely fanciful, but necessarily the unconstitutional imposition of an additional tax upon a portion of the property already once taxed. Thus, if there be within the State only one million and a half in actual material wealth, and if there be in addition a half million of credits, a tax of one per cent, imposed upon the two millions thus made up, will prove to be in reality a double tax upon that portion of the one million and a half of actual wealth which is represented a second time as credits; from which double tax the remainder of the actual wealth, however, will escape altogether. To illustrate: let it be supposed that it is shown by the roll that the one million and a half of actual wealth is made up of one million in goods and one-half million in money, and that the loan of the half million in money has created tlje half million in credits. It will be seen that while the one million in goods is set down upon the roll but once, the half million of money is set down twice for the purposes of taxation—once as money in the hands of the borrowers—again as money in the hands of the lenders—in the form of “credits”—that is to say, the promissory notes given by the borrowers. The goods being represented but once are taxed but once; the money, however, being represented twice upon the assessment-roll is twice taxed. This assuredly is not ihe equal taxation of property guaranteed by the Constitution.
The taxation thus imposed nominally upon “credits’’ having resulted in the double taxation of the money, the additional tax must, of course, be paid by some one. And here all human experience, as well as the settled theories of finance, concur that it is not the lender who pays—-but the borrower. The borrower is the consumer. The interest which he pays to the lender is the prime cost of the delay for which he has contracted. If the government, by the imposition of additional taxes, increase the cost, the borrower, being the consumer, must pay it. The truth of this [253]proposition is indeed so generally recognized that it is not unusual to insert, in the instrument by which the repayment of the loan is secured, a distinct covenant upon the part of the borrower to refund to the lender all taxes which the latter may be compelled to pay by reason of the loan; and even where the covenant is omitted, the lender is doubtless fully protected at the expense of the borrower, by the exaction of an increased rate of interest upon the loan. To hold, therefore, that “credits” constitute “property” within the intent of the thirteenth section of the eleventh article of the Constitution, would be to attribute a meaning to the word property, as there used, which would not promote, but would utterly defeat the uniformity of property taxation in this State which it was the principle purpose of that section to secure.
I, therefore, concur that the judgment of the court below be reversed.