Exchange Bank v. Hines (3 Ohio St. 1, 1853)

Bartley, C. J.

Several interesting and important questions are presented for determination in this case, the most prominent of which involves the validity of the statute of the *13th of April, [6 1852, for the assessment and valuation of all property in this state, and for levying taxes thereon according to its true value in money. It is claimed that this law is in conflict with the constitution of the state, on the alleged ground, that it imposes a burden of taxation on the property of the complainant, employed in banking, greater than that which it imposes on the property of individuals; also, that it is repugnant to the constitution of the United States, on the alleged ground that it is in violation of a material and important provision, in the charter of the bank, contained in the statute of the 24th of February, 1845, to incorporate the State Bank of Ohio and other banking companies, which, it is claimed, constitutes a contract between the claimant and the State of Ohio.

The question whether the charter of an incorporated bank is a contract, and whether, upon this ground, the banks existing under the authority of the bank law of 1845, are, by virtue of the constitution of the United States, placed beyond the reach of the legislative control of the state over the power of taxation, was very fully considered by this court at the last term, and determined against the ground taken in the bill by the complainant in this case; and we see no reason to disturb the opinion then expressed. See Bank of Toledo v. The City of Toledo et al. 1 Ohio St. 623; Knoup v. Piqua Bank, Ib. 603 ; Mechanics’ and Traders’ Bank v. Debolt, Ib. 591; and Debolt v. The Ohio Life Insurance and Trust Company, Ib. 563.

The question, whether the tax law of April, 1852, imposes a burden of taxation on property employed in banking, greater than that which is authorized by the constitution of the state, is one of grave import, requiring a careful and full examination. And the difficulties and embarrassments to which it has given rise, and is still causing in the collection of the public revenue, and enforcing the laws of the state, indicate the propriety of a very full expression of opinion by the court.

7] *The third section of the twelfth article of the constitution, which confers the authority for taxing property employed in banking, is as follows:

“ The general assembly shall provide by law for taxing the notes and bills discounted or purchased, moneys loaned, and all other property, effects, or dues, of every description, without deduction, of all banks now existing, or hereafter created, and of all bankers; so that all property employed in banking shall always bear a burden of taxation equal to that imposed on the property of individuals.”

This provision imperatively requires that all property, effects, and dues of every description belonging to banks should be taxed. The great variety of form and condition in which property is employed in banking, as well as its complex convolutions and varying character, is somewhat peculiar. But those things employed in this business, which constitute proper subjects of taxation, in whatever form or character they maybe found, must possess the essential elements and incidents of private property, and are therefore capable of being clearly and certainly ascertained and identified.

It is proper here to remark, that it is said to have been determined by high authority that the franchise of an incorporated bank is the subject-matter of contract, and property of a clear and distinct character. If the corpor*ate franchise of a bank be, in fact, property or effects of any description whatever, it is made a subject-matter of taxation by the imperative language of the constitution above recited, and should be placed on the list of assessments for that purpose.

But what is the fact? Does a corporate franchise, in sober truth and reality, possess the essential qualities of property? It is said that, the corporate franchise of a bank, conferring a peculiar legal capacity, and the high function of making and circulating paper money, is valuable — indeed, a thing of great value. But value is not the distinguishing attribute of property. The right of suffrage is esteemed valuable; a public office, with its emoluments, is valuable ; a license to keep a tavern, as formerly granted in this state, or a license to carry on any special business, which is prohibited’without *a special grant of authority from the government, may be [8 valuable; and a right to either df these things may be asserted and maintained in a court of justice, yet neither of them possess the essential qualities which constitute property. Our right to the free use and enjoyment of things which are in common, such as ah’, light, water, etc., is valuable; and our right to the free use of the public highways, and to many of the privileges and advantages derived from the government, may be valuable, and may be maintained by legal process. Tet none of these things come within the denomination of property. Those things which constitute the subject-matter of private property, are such as the owner may exercise exclusive dominion over in’the use, enjoyment, and disposal of them, without any control or dimunition, save only by the laws of the land. 1 Wend. Bla. 138. It is a fundamental principle, that “ property, considered as an exclusive right to things, contains not only a right to use those things, but a right to dispose of them either by exchanging them for other things, or by giving them away to any other person, without any valuable consideration in return, or even of throwing them away, which is usually called relinquishing them.” Kutherford’s Institutes, 20 Puffendorf, chap. 9, b. 7.

The statute under consideration provides as the basis for the tax upon banks: 1. The average amount of the notes and bills discounted or purchased, including all the loans or discounts of every description, at their actual value in money; and, 2. The average amount, at the like valuation, of all other moneys, effects, or dues of every description, *used and employed in banking with a view [9

It is said that capability of alienation or disposal, either by sale, devise, or abandonment, is an essential incident to property. 2 Kent. Com. 317.

A corporate franchise, therefore, being a mere privilege, or grant of authority by the government, is not property of any description, and consequently not subject to taxation under the above provision of the constitution.

to profit. There is nothing in this provision of the law which is in conflict with the constitution. The complaint is not that the banks are taxed upon anything which is not a legitimate subject of taxation, but that -the burden of taxation imposed on pi*operty employed in banking is greater than that which the law imposes on the property of individuals; not that the rate of taxation is greater, but that, by the tenth section of the law, a large amount of the property of persons not engaged in banking, is substantially exempted from taxation, by allowing them to deduct their liabilities from the gross amount, of their moneys and credits, in furnishing their lists for taxation; and that the aggregate taxable valuation of property being thus less than it should be, the burden of taxation on property employed in banking, is proportionably too great. This, necessarily involves the question of the constitutionality of the deductions allowed by the tenth section of the law. The test, whether a question is presented for adjudication in a case, is not whether the case might not be decided on some other ground, but whether its determination becomes material in disposing of a point which is decisive, either in whole, or in part, of the case. The validity of this provision of the law, is necessarily drawn into question, has been elaborately argued by counsel on both sides, and is the main question presented by the parties for our determination in this case. The tenth section of the law is in these words: l

“ Seo. 10. In making up the amount of moneys and credits, which any person is required to list for himself or any other person, company, or corporation, he shall be entitled to deduct from the gross amount of moneys and credits the amount of all bona fide debts owing by such person, company, or corporation, to any other jierson, company, or corporation, for a consideration received; but no acknowledgment of indebtedness, not founded on actual consideration, believed, when received, to have been adequate, and no such acknowledgment made for the purpose of being so deducted, shall be considered a debt within the meaning of this section; and so much only of any liability?", as surety for others, shall be deducted, as the person making out the statement believes the surety is legally and equitably bound to pay, and so much only as he believes such surety will be compelled to pay on account of the inability or insolvency of the principal debtor; and if there are other sureties who are able 10] to contribute, then only so much as the surety in whose *behalf the statement is made, will be bound to contribute; provided, that nothing in this section shall be so construed as to apply to any bank, company, or corporation, exercising banking powers or privileges.”

' The effect of this provision, is to allow a very large amount of the moneys and credits in the state, belonging to persons not engaged in banking, to be exempt from taxation. The question whether exemptions or deductions thus permitted, are forbidden by the constitution, involves the consideration of the true interpretation of the second section of the twelfth article of the constitution, which is in the following language:

“ Sec. 2. Laws shall be passed, taxing, by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise, and also all real and personal property, according to its true value'in money; but burying-grounds, public school-houses, houses used exclusively for public worship, institutions of purely public charity, public property used exclusively for any public purpose, and personal property, to an amount not exceeding in value two hundred dollars for each individual, may, by general laws, be exempted from taxation; but all such laws shall be subject to alteration or repeal, and the value of the property so exempted, shall, from time to time, be ascertained and published, as may be directed by law.”

The manifest effect of this constitutional provision, is to make property the basis, and the sole basis, of taxation. And the object being equality and fairness, it requires, by a true interpretation:

1. That the taxes shall be assessed on all property in the state, except the subjects of the specified exemptions.

2. That the taxes shall be assessed on all property, by a uniform rule. And,

3. That all taxable property shall be taxed at its true value in money.

An exposition of the fundamental principle upon which the constitutional provisions relating to taxation are founded, may aid in. their true interpretation.

Taxation is that tribute for the support of government, imposed on property in return for the protection and advantages which the government affords to the owner. It is an essential and fundamental requisite in the exercise of the power of taxation, that the burden should be imposed or apportioned with all practicable equality and justice. See Puffendorf *ch. 9, b. 7; Ruther- [11 forth, 27, 273; Bank of Toledo v. Bond, 1 Ohio St. 699. It is with a view to this essential condition, that any people consent to confer this high civil function upon their government. Rutherforth’s Institutes of Natural Law, 272.

An unequal and unjust system of taxation prevailing in this state, was one of the most prominent causes of the call of the late constitutional convention, and of the adoption of the present state constitution. And in the formation and adoption of the constitution, the principle of taxation most just and equal in its operation, was very fully discussed and considered. It was conceded on all hands that the levying of taxps by the poll was oppressive, and should be prohibited; and property was made the sole basis of taxation. It was contended, however, by some, and has been suggested in the investigation of this case, that in adopting property as the sole basis of taxation, the most equitable rule would be to tax every person equally, not upon the value of all his property, but upon the amount which the value of all his property should exceed the amount of his indebtedness; in other words, upon the amount he would bo worth over and above the amount of his debts. This was, however, found wholly impracticable. In the complexity and various involutions of business, and the infinite variety of form and condition in which property and indebtedness are found to exist, it would not be practicable to ascertain, with any degree of certainty, equality, and fairness, the amount of property which every person was worth, over and above his indebtedness. And taxation being the tribute for the support of government, in return for the protection and advantages received by the owner, it is but fair and just that the burden should be proportioned to the amount of property owned and secured by the protecting hand of the government, and not to the amount which the value of a person’s property exceeded the amount of his indebtedness. It is not uncommon for a person to own property to a very large amount, consisting of lands and a great variety of chattel property, and yet be indebted 12] in *an amount far exceeding the value of all his property. A person might be extensively engaged in mercantile, mechanical, and other branch os of business, and the owner of property, both real and personal, to an amount exceeding a million of dollars in value, and yet be indebted to persons in other states, whose credits are beyond the roach of taxation, to an amount even greater than the value of all his property in this state. Would it be just and fair that such a person should be wholly exempt from taxation— that this immense amount of property, both real and personal, should be favored by a total exemption, because of the indebtedness of the owner? Upon such a principle, what an immense amount of productive property of the state, both real and personal, would wholly escape taxation! "What inducements would such a system hold out to persons to prolong the payment of their debts! And to what a fearful extent would it lead, in the creation of fictitious liabilities, in fraud of the revenues of the state, the detection of which, requiring evidence, perhaps, from various parts of the Union, would be wholly beyond the reach of the tax assessors.

XTnder such a system, the most legitimate subjects of taxation would be liable to be withdrawn from the grand levy of the state every year. A, owning a farm assessed for taxation at ten thousand dollars, sells out to B, on a credit of ten years, for ten thousand dollars, and removes to Indiana, taking with him bis credits. B, owning nothing but the farm, and being indebted to the full extent of its valuation, would be entitled to hold it exempt from taxation ; and A, holding his credits in another state, would be beyond the reach of an assessment on them here. Again, C, residing in Kentucky, but owning personal property on his farm in Ohio, consisting.of horses, mules, and cattle, assessed for taxation at fifty thousand dollars, sells out to D on an extended credit for fifty thousand dollars. D would be entitled to hold this personal property exempt from taxation, while 0 is beyond the reach of taxation on his credits. And again, E purchases a stock of goods, and embarks in the ^mercantile business on his own capital, to the amount of [IS twenty thousand dollars. And F goes to New York and. purchases goods to the amount of twenty thousand dollars, on credit, and brings them into this state, and engages in the mercantile business to an extent equal to that of E. Under the system of taxation in question, E would be compelled to pay a tax upon his whole capital invested, while F, requiring equal protection from the government, would do a business on his twenty-thousand dollars’ worth of goods, exempt from all taxation. And this principle of taxation, carried out, would enable merchants in New York city, who are indebted more than they are worth, to bring their merchandise to Cincinnati, to the utmost extent of their control, and undersoil our own citizens, from the very fact that they could hold their property and do business wholly exempt from taxation. A system of taxation so unfair and unjust in its operation as this, would never be tolerated by any intelligent community.

It must be conceded to be exceedingly difficult, if not wholly impracticable, to devise any system of taxation which shall be perfect in the equality and fairness of all its burdens. But the principle adopted and established by the constitution is certainly the only one which admits of an approximation to such a standard. This provision requires all property of every description in the state, to be taxed by a uniform rule and at its true value in money, with the exception of certain enumerated exemptions, in favor of charity, religion, the burial of the dead, and the public interests, etc.

The language of the constitution is comprehensive and explicit in the requirement, that all property of every description, excepting only that which falls within the specified exemptions, should be taxed. The only exception or exemption allowed in favor of individuals, is to be found in the words, “personal property to an amount not exceeding two hundred dollars in value, for each individual, may, by general laws, be exempted from taxation.” It has ever been the humane policy of our laws to allow a certain amount of personal 14] *property, sufficient to include the most essential and necessary articles for the support of a family, to be exempt from execution for the payment of debts. And it is in accordance with this benevolent regard for the necessities of life, that this limited exemption from taxation, in favor of individuals, is authorized by the constitution. But the very fact of this express exemption, excludes the idea that any other or further exemption can be made. • The language of the constitution authorizing the tax upon the property of individuals, is substantially as follows: Laws shall be passed taxing all the property of every description, belonging to individuals, excepting that personal property, to an amount not exceeding two hundred dollars for each indibiduai, may, by general laws, be exempted from taxation. This impei’ative requirement of the constitution, that all property should be taxed, is not to be evaded by any circuity or indirection. And to allow an individual, in furnishing the list of his property for taxation, to reduce the amount of his taxable property to an extent equal to the amount of his liabilities; or in other words, to deduct the amount of his liabilities from the amount of his taxable property, whether it consists of money and credits, or other property, would, in substance and effect, amount to the same ■thing as an express exemption from taxation, to the extent of such deduction.

It has been claimed that section second of the constitution above recited, specifies two distinct classes of property, prescribing a different mode of taxation for each, and not requiring tbe same rate or burden to be assessed upon each. Thus, it is said, that moneys, credits, investments in bonds, stocks, joint stock companies, etc., are required to be taxed by a uniform rule ; but that all other property, both personal and real, is required to be taxed at its true value in money. If this interpretation be correct, the great object of these constitutional j>rovisions, which has been supposed to be equality and fairness in taxation, might.be defeated; for it would permit a burden of taxation to be imposed upon a person *-whose prop- [15 erty consisted of real estate, or some kind of personal property, infinitely greater than that which is imposed on a person whose property consists of moneys, credits, bonds, stocks, etc. But it is manifest, from the context and spirit of these provisions, that it was the intention of the constitution to provide an effectual barrier against a fruitful source,of oppression and misrule, arising from inequalities in taxation, by putting an end to all legislative discretion as to what should be taxed, what should bear the heaviest burden of taxation, and what and how much should be exempted from. taxation.

What is meant by the words, “ taxing by a uniform rule?” And to what is the rule applied by the constitution ? No language in the constitution, perhaps, is more important than this; and to accomplish the beneficial purposes intended, it is essential that they should be truly interpreted, and correctly applied. “Taxing ” is required to be “ by a uniform rulethat is, by one and the same unvarying standard. Taxing by a uniform rule requires uniformity, not only in the rate of taxation, but also uniformity in the mode of the assessment upon the taxable valuation. Uniformity in taxing, implies equality in the burden of taxation ; and this equality of burden can not'exist without uniformity in the mode of the assessment, as well as in the rate of taxation.. But this is not all. The uniformity must be co-extensive with the territory to which it applies. If a state tax, it must be uniform over all the state; if a county, town, or city tax, it must be uniform throughout the extent of the territory to which it is applicable. But the uniformity in the rule required by the constitution, does not stop here. It must be extended to all property subject to taxation, so that all property may be taxed alike, equally — which is taxing by a uniform rule. The constitution of the United States (article 1, section 8), provides, that “ all duties, imposts, and excises, shall be uniform, throughout the United States.” The predicate of the uniformity 16] here required, is not the articles required *to be taxed, but the duties, imposts, and excises, which import of themselves, a tax upon specific articles of property. That rule of uniformity, therefore, forbids discriminations in duties, not as between different articles of property, but as to localities, requiring the same tax as between different places throughout the United States, upon the same specific article. But the rule of uniformity in taxation, required by our state constitution, has a direct reference to the things taxed — to all taxable property — and forbids discrimination in the burden upon the different subjects of taxation. “Laws shall be passed taxing by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise ; and also all real and personal property, according to its true value in money,” etc. No discriminations are allowed here to be made between, the tax upon moneys and that upon credits ; or between the tax upon credits and that upon stocks. Ail must be taxed by the same equal , rule. There must be uniformity in the tax upon all the different articles of property, as well as uniformity in the tax upon each.

But it is argued that the uniform rule in taxing, required by the constitution, applies only to moneys, credits, investments in bonds, stocks, joint stock companies, etc. Why should so important a rule as that of uniformity in taxation, be established by the constitution, and then limited in its operation to a few specific classes’of personal property ? It is said that all other property is to be taxed “ according to its true value in money.” This requirement, however, only fixes the standard for ascertaining the taxable valuation, and does not necessarily imply equality and uniformity, either in the rate and mode of assessment, or in the different localities throughout the state. The taxable valuation may be fixed according to the true value of property in money, and yet discriminations be made between different classes of property, and between different localities in the state, imposing unequal and unjust burdens of taxation. 17] *The language of the constitution is capable of a reasonable and consistent interpretation. The taxing power conferred, is coupled with a qualification or rule for its government. “Laws shall be passed, taxing, by a uniform rule, all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise; and also,” — what?—'“taxing” (by the same rule, of course) “all real and personal property,” etc. The implication carries with it the qualification annexed to the taxing power, expressed in the first clause of the sentence. If this had not been the case, the term “ taxing ” would have been repeated in the second clause, disconnected from the qualification attached it in the first clause, so as to read, “ and also, taxing all real and personal property according to its true value-in money."

The provision for taxing property “ according to its true value in money," in the second clause of the section, applies to all property, both real and personal, of every description, including the enumerated articles of moneys, credits, stocks, etc., mentioned in the first clause. The words “ all real and personal property,” in their legal import, include everything which is the subject-matter of private property. It is true that several classes of personal property, consisting of moneys, credits, stocks, etc., are expressly mentioned in the first clause of the section; but this was inserted by way of precaution and certainty, and not with the view of giving them any new and distinctive character taking them out of the denomination of personal property. Some years ago, moneys, credits, investments in bonds, stocks, joint stock companies, etc., were not subject to taxation in this state; and there has been much controversy, not only as to the propriety, but also touching the right of taxing credits and investments. in bonds, stocks, etc. To remove all question of doubt, therefore, on this subject, it was thought proper to require, by an express enumeration, that “ all moneys, credits, investments in bonds, stocks, joint stock companies,” etc., should be taxed. This provision, arising out of abundant ^caution, was not intended [18 to give these enumerated things any new distinctive classification, nor does it in fact exclude them from the denomination of personal property, to which, by their nature and legal incidents, they belong.

Mr. Broom, in his “Selections of Legal Maxims,” page 415, says: “ That the maxim, expressio unius est exclusio alterius, requires always great caution in its application. Thus, where general words are used in a written instrument, it is necessary in the first instance to determine whether those general words are intended to include other matters beside such as are specifically mentioned, or to bo referable exclusively to them; in which latter case only can the above maxim be properly applied.” In the interpretation of legal instruments, words used out of abundant caution are often to be tolerated at the expense of tautology. The object of the language of the constitution under consideration was comprehension, not exclusion. The words, “all real and personal property," therefore, in the second clause of this second section, are to be taken in their most comprehensive legal import, including every kind of real and personal property whatsoever, not excepting the several classes of -personal property expressly mentioned in the first clause of the section. If this interpretation be in any sense liable to the charge of tautology, it certainly is not to that of repugnancy. If this had not been the meaning intended by the constitution, there would have been added to the words “ all real and personal property,” these words: “other than that above mentioned.” It is more in harmony with the settled rules of construction to convict the law-maker of some inelegancies in rhetoric, and the use of unnecessary words, than to depart from the leading object and intent of the instrument. This section of the constitution,’ therefore, would have expressed the same thing had the phraseology been as follows: “Laws shall be passed taxing, by a uniform rule, all real and personal property, according to its true value in money, 1 including all moneys, credits, investments in bonds, stocks, joint stock companies, or otherwise.'”

19] *Any other interpretation than this would lead to consequences at variance with the manifest spirit and true intention of the constitution. If moneys, credits, investments in bonds, stocks, joint stock companies, etc., may be subjected to a different rate of taxation from that imposed on other kinds of property; or if moneys, credits, investment in bonds, stocks, etc., may be taxed at less than their true value in money, while all other property is required to be taxed at its true value; in either ease, great and unfair inequalities may be created by legislative discretion. For example, a person owning property worth one hundred thousand dollars, consisting of moneys, credits, and investment in bonds, stocks, etc., might be taxed at the rate of ten per cent., while a person owning an equal amount of other kinds of property was required to pay a tax at the rate of two per cent.; or a person owning property of the value of one hundred thousand dollars in moneys, credits, and investment in bonds, stocks, etc.,, might be taxed at a uniform rate of taxation, but an unequal assessment on only fifty per cent, of its actual value, while all other property is taxed at its true value in money. In either case the inequality would be glaring and unjust. There can exist no sound reason why a person, whose property consists of moneys, credits, stocks, etc., should, bear a less burden of taxation than that which is imposed on the lands and chattels of the agriculturist; the implements, machinery, and materials of the manufacturer; or the goods and wares of the merchant. And the constitution, truly interpreted, recognizes no such distinction.

By the tenth section of the law above recited, two classes of personal property, consisting of moneys and credits, are selected out; i and in effect, favored by an. exemption from taxation to the extent of the owner’s liabilities. Moneys, and, to a great extent, credits, constitute the most productive form of property. Those who jnvest their cap’ital in moneys and credits, and devote their attention to dealing in these *forms of property, generally make [20 large and certain profits. Why the attempt at a partial exemption of these two kinds of property from taxation, in violation of the plain language of the constitution, requiring laws to be passed taxing all moneys, credits, etc. ? Special exemptions or advantages of this kind to favor any particular class of persons, or any particular branch of business, are at war with the spirit and fundamental principles of our government. Yet this discrimination is strenuously insisted on by persons who sincerely repudiate the policy of unequal and unjust legislation. The reason which has probably led to this mistaken and unconstitutional provision of law is founded in the peculiar nature of the property thus partially exempted from taxation. Money, as such, has no inherent or intrinsic value within itself other than its exchangeable value. Being the medium of exchange itself, it is the most convenient and certain means of obtaining articles of property which possess intrinsic value for use or consumption. The only legitimate and useful purpose of money, therefore, being that of exchange, it is constantly passing from one person to another. A person may have a thousand dollars on hand on the day on which the assessor obtains the list of his property for taxation, and on the next day be required to pay it out on his liabilities, and not again during the year have on hand at any one time money to the amount of one hundred dollars. Again, a person may, in carrying on a particular branch of business, have on hand money to an amount exceeding one thousand dollars almost constantly during the year, and on the day before the assessor calls for hi's tax list, have even ten thousand dollars ; but on that day pay it out in the payment of debts, or otherwise, and on the following day, when his list of property is furnished to the assessor, have no money whatever for taxation.

Property in credits, in regard to its nature and character, is 21] somewhat similar to money. Many of the forms of credits *are passing daily from hand to hand, and in the exchange of property, performing some of the functions of money. The amount of the credits of persons engaged in business, vary largely from day to day. So that the amount of a person’s credits on the day on which the assessor calls for the tax list, may be no indication of the amount of his credits generally during the year.

These peculiarities in moneys and credits, which may have led to the unwarranted provision allowing a partial exemption by the deduction of liabilities, indicate rather the propriety of a provision ■for ascertaining the taxable valuation of moneys and credits, by an -average value or amount during the year, after the mode of listing ;and valuing'the stock in trade of the merchant, the manufacturer, -or the exchange broker. This is peculiarly the case in regard to •the listing and valuation of the moneys and credits of the merchant, whose stock in trade is taxed by an average valuation. For .•example, a .merchant engages in business on an investment of ¡twenty thousand dollars in goods, and in the progress of his sales, he converts his goods into moneys and credits, so that at the end of three months he has reduced his stock of goods to ten thousand dollars ; and has, for his sales five thousand dollars in money, and five thousand dollars in credits. He collects his credits, and from time to time during the year, reinvests his money and the proceeds of his credits so as to keep up an average of fifteen thousand dollars worth of goods during the year. But at the end of the year, when the assessor calls upon him for the list of his taxable property, his stock of goods is reduced to the amount of ten thousand dollars, but the amount of his moneys and credits increased to ten thousand dollars. This law would subject him to a tax upon «fifteen thousand dollars valuation of stock in trade, and ten thousand dollars valuation in moneys and credits, making five thousand dollars over and above his investment at any one period. 22] ^Although the taxable valuation of the moneys and credits of the merchant, and perhaps, of the moneys and credits of every other person, should be ascertained by an average for the year, yet the rule for estimatiug the taxable valuation is left, by the.constitution, to legislative discretion. The rule of taxation is prescribed by the constitution; but the mode of ascertaining the value of property is regulated by law. The fact, therefore, that the taxable valuation of moneys and credits, is obtained by an estimate of the' amount on hand at the time the tax list is called for, instead of an application of the rule of making an average for the year, does not conflict with the constitution.

It has been argued that “ stock in trade ” is subject to a different rule of taxation from that which is imposed on other property. This is a mistake. The difference consists, not in the rule or burden of taxation, but simply in the mode of ascertaining the valuation. The principle of valuing by an average has been introduced because stock in tradeis constantly changing the article of its investment, and varying in the quantity on hand,’ from month to month.

The constitution places “moneys and credits ” on precisely the same footing, and subject to the same rule, as a basis of taxation, with all other taxable property, real and personal. Upon what principle, not applicable to other taxable property, can the amount of “ moneys and credits,” as a basis of taxation, be reduced and exempted from taxation to the extent of the owner’s liabilities? A person who has $5,000 of money on hand, and $5,000 more invested in notes and obligations, is certainly as able to pay his taxes as a person whose property consists of a farm worth $5,000, and cattle, horses and other live stock, worth $5,000. The former, as a general thing, makes larger profits than the latter, and calls most frequently for the aid of the government to protect and enforce his rights.

The practical operation of the deduction allowed by the tenth section of the law, exhibits an inequality and unfairness *wholly [23 inconsistent with the spirit and evident intent of the constitution. The following supposed cases illustrate the principle of its operation : A has a capital of twenty thousand dollars, consisting of five thousand dollars in money, and fifteen thousand dollars in notes, bills of exchange, and other credits; and carries on a profitable business in dealing in moneys, credits, etc.; but he is indebted to sundry persons in the aggregate amount of twenty thousand dollars. B has capital invested in goods, wares, and merchandise to the amount of twenty thousand dollars, and carries on the business of a merchant; but he is indebted to the amount of twenty thousand-dollars. C owns property to the amount of twenty thousand dollars, consisting of a farm worth five thousand dollars, cattle and horses worth five thousand, dollars, and ten thousand dollars invested in machinery, materials, etc., employed in manufacturing; but he is indebted to sundry persons in the aggregate amount of twenty thousand dollars. Under the operation of this law, if the tenth section be valid, A would avoid all taxation, while B and C would each be compelled to pay a tax on twenty thousand dollars’ worth of property. Why should moneys, the most convertible and advantageous form of property, be favored by a partial indirect exemption, while real estate and investments in articles of merchandise, and in property employed in mechanical and manufacturing business, are taxed to the full extent of their value ? No satisfactory reason can be assigned for this inequality. Moneys and credits, more than all the other kinds of property, call for the protection and aid of the government in securing and enforcing the rights of property pertaining thereto. More than one-half of all the litigation in the state, which occupies the time of our courts of justice, relate to these two favored classes of property.

It must be conceded, that this tenth section is wholly indefensible, so far as it provides for the deduction of liabilities from “ moneys." 24] But it is said, that there is something peculiar *in the nature of credits; that the credits belonging to a person do not constitute substantial property, except so far as the gross amount of his credits exceeds the gross amount of his liabilities; and that beyond this, it was not intended by the constitution to make credits the basis of taxation. Had the principle of taxation adopted been that of taxing each person, not upon all the property he owned, but upon the amount he is worth, over and above his liabilities, there might have been some foundation for this position. But as it is, the constitution makes no such distinction as that above mentioned, in regard to the taxable amount of a person’s credits, but requires all credits to be taxed by a uniform rule with other property, at their true value in money.

In legal parlance, and in the sense in which the term is used in the constitution, credits are dioses in action — things incorporeal, consisting in the right of one person to demand and recover from another, a sum of money or other things in possession. The value of a credit grows out of the right to have and receive property in possession, either by a sale and transfer of the claim to another person in exchange for money or other things, or by requiring or enforcing payment from the debtor. Credits, therefore, although fictitious, nevertheless constitute property — substantial, convertible, and productive property. Money is invested in credits for profit, and credits are given in exchange on the sale of property of all' kinds, real and personal. If É. holds a credit or obligation against B, it is not any the less valuable as property, because A may be indebted to C; and if A collect the amount of his claim against B, and apply the proceeds to the payment of his indebtedness to C, it amounts to the same thing, and is fully as valuable to him as if he had sold a tract of his land, and made the same application of the proceeds of the sale. If a person hold good obligations against sundry persons, of the aggregate value of ten thousand dollars, and be indebted to sundry other persons to the amount of ten thousand dollars, the fact of such indebtedness can neither ^lessen the amount nor the value of his obliga- [25 tions against others. The indebtedness being to persons, other than those whose obligations he holds, pould not be set off' or otherwise lessen the value of his credits. A person’s indebtedness constitutes no charge upon the credits which he holds against others, any more than it does upon any of his other property, real or personal. The constitution requires all credits, as well as “ all moneys,” etc., to be taxed. And, with deference to the opinion of others, I must confess myself wholly unable to comprehend the ground on which it has been claimed that the taxable credits of a person consist simply of the excess (if any) of the aggregate amount of his choses in action over and above the gross amount of his liabilities.

In estimating the taxable valuation of credits, they are not to be taken at their nominal amount, but like the valuation of other property, every circumstance affecting in any manner.their value should be taken into consideration. If the debtor be wholly insolvent, the credit is of no value, and therefore has no basis for taxation. If the debtor be in doubtful or failing circumstances, if the claims be disputed, contested, or involved in litigation, or if any defense by way of payment, or otherwise, either in whole or in part, against the claim, be known to exist, it should be considered, and all proper allowances made, m estimating its taxable valuation. The actual value in money of credits thus ascertained, con-t stitutes as proper a basis for taxation, as that of any other kind of property. To say that if a person be thus taxed upon his credits, " that is, upon his claims, which he holds against other persons, without deduction, he is not taxed upon his property, hut upon his indebtedness, is, to say the least of it, a most glaring absurdity.

Investments in bonds, notes, and all the various forms of credits, produce their profits in the form of interest, without' labor. Money itself on hand, is dead and unproductive capital; but invested in credits it becomes productive, and that, too, without the labor of the owner. The goods and wares of the merchant require his unre26] mitting care and labor to *make them profitable; a farm, with all its implements and stock, would be wholly unproductive without the unceasing toil of the agriculturist; and the materials, machinery, etc., of the mechanic and the manufacturer are made productive only by their being accompanied with the labor of the operatives. A tax upon all those classes of property which derive their productiveness from labor, is, to some extent, a tax upon labor. But a tax upon credits is a tax upon capital alone, in its most productive form, unmingled with labor. To exempt credits from taxation, and throw the whole burden upon those forms of property which derive their productiveness from labor, would afford a most unfair and unjust advantage to capital over labor, oppressive in its consequences to the productive interests of the country.

It is alleged that the taxation of credits results in a double taxation ; thatacreditisthemere representative, the mere shadow of the property in possession, which it requires in payment; and that to tax both the credit and the property which it is said to represent, is double taxation. This is a fallacy. The value of a credit is not identical with the property which it would require to discharge it; but its value consists in the right of the creditor to require payment, and the obligation and ability of the debtor to pay. A valid credit against a responsible person, therefore, is not a mere shadow, but property possessing intrinsic value within itself. A sells his farm to B, at the price of ten thousand dollars, and takes B’s notes for .the amount, with a mortgage on the farm for security. B will pay a tax on the full value the farm, without deduction, and A will be very properly required to pay a tax on the full value of the credits against B, which he may choose to hold for many years, being paid interest thereon. The credits which A holds are profitable, valuable of themselves, transferable at any time in exchange for other property, and the means with which they may be ultimately paid, may be acquired by B many years after the notes are 27] given. These credits, therefore, are not mere shadows; %r0 not substantially identical with the property in -which they are payable, or -with which they may be ultimately paid; but they are valuable, and possess the inherent elements of property.

Again, C sells to D a stock of goods of the value of ten thousand dollars, and takes D’s notes for the amount. D will be taxed upon the full value of the goods, and C upon the full value of the notes.

And again, E has ten thousand dollars in money, which he delivers over on general deposit to E, a banker, and takes a certificate of deposit therefor. E will bo taxed on the credit, evidenced by the certificate of deposit, and E will be taxed on the money, which, by the deposit, passed absolutely to his dominion and became his property, to use and control for his own purposes. Here E is not the holder of E’s money, but stands indebted to E for the amount of the money which passed and became E’s property. It is well settled, that the right of property follows the dominion over it; and +hat in all eases of a mutuum or deposit, where the mutuary or depositary has the option to return either the same identical article, or the same amount in kind, the right of property passes with the control over it, and the mutuary or depositary is indebted to the lender or depositor for the amount. Chase v. Washburn, 1 Ohio St. 244.

In neither of these supposed cases is there any such thing as double taxation. In each of these instances each person is taxed on the actual property and value which he holds and owns in his own right. The arguments urged against this position are accompanied with strong complaints of grievous and oppressive taxation. These complaints may have just foundation, but the remedy is not by relieving one class of taxable property, and consequently throwing a proportionably greater burden on the other property-in the state, but by retrenching the unnecessary sources of public expenditure, and reducing the expenses of the government to the only true, essential, and legitimate purposes for which it was constituted.

*It has been urged, that taxing moneys and credits, creates [28 double taxation in another form; that it causes the merchant to be taxed first upon the value of his property in goods, and afterward upon the same property converted into moneys and credits ; and that it causes the manufacturer to be taxed, first upon his property in the raw material, afterward upon a part of the same property in the manufactured article; and again, upon a part of the same valuation converted by sales into moneys and credits. This is a flagrant error. And it arises not from a misconstruction of the law, but from a want of a knowledge of its provisions. There is nothing in this law requiring the same taxable valuation, whatever may be the mutations of the property in form, to be taxed more than once during the same year. The taxable property of every person is taken at his own listing under oath. And so far as the merchant’s stock of goods is reduced during the year, either by sales converting his goods into moneys and credits, or otherwise, so far he has the right, in listing the average amount of his stock in trade, to reduce the taxable valuation of his goods. In other words, in returning the average valuation of his stock in trade, the merchant is only required to take into the account, the amount of his goods in hand, making just allowance for that proportion of his goods which has been converted into moneys and credits. So it is with the manufacturer. In returning his raw material, he only takes into account the quantity actually on hand, making deductions of course for that which was consumed; and in returning the amount of his manufactured articles, he estimates only the average amount actually on hand during the year; so that it would require the addition of the average amount of the moneys and .credits received on sales during the year, to make up the full amount of his property invested in his business.

Upon this exposition of the statute, the question recurs, whether the validity of the tax imposed on property employed in banking 29] is affected by the unconstitutional provision *of the tenth section, and if so, to What extent, and in what manner.

The third section of the twelfth article of the constitution heretofore recited, provides that all property, effects, or dues of every description of all banks, and of all bankers, shall be taxed without deduction. There has been much controversy as to the true interpretation of this provision of the constitution. The section of the constitution immediately preceding this third section provides for taxing all property of every form and description, excepting the subjects of the few specified exemptions; and it has been said that there could have been no object whatever in the third section, unless it was to tax banks and bankers in a different mode, or upon a different principle, from that which was applicable to other persons. I am inclined to the opinion, however, that the history of the legislation of the state on the subject of taxation for some years prior to the adoption of the constitution, as well as the circumstances attending its formati.on, very plainly indicate the purpose of this third section. Not only the policy, but also the right of taxing capital employed in banking, had been strenuously contested, and to a considerable extent successfully resisted. There had also been much controversy as to the form of property employed in banking which should constitute a basis of taxation. With a view therefore of putting an end to the controversy on this subject, and of defining with certainty the form in which property in this branch of business should be made a basis for taxation, this third section was inserted in the constitution.

Much criticism has been spent on the requirement that all property employed in banking should be taxed “ without deduction.” This provision could not, by implication, confer a right on other persons to make deductions which are excluded by the direct language of the second section. The third section must be construed in its connection with the second section. The latter provides that laws shall be passed taxing all property, in general and comprehensive language; and this language is followed by a few specified limitations, by *way of special exemptions, among which is the [30 exemption of personal property to an amount not exceeding two hundred dollars in value for each individual. This confers legislative authority to allow each individual, in furnishing the tax list of his personal property, to deduct therefrom an amount not exceeding two hundred dollars. And this is the only exemption authorizing deductions to be made in favor of individuals. The third section, coming immediately after this provision, requires all property employed in banking to be taxed “ without deduction.” The deduction here inhibited amounts simply to an express denial to the banks of the deduction allowed in the preceding section by the exemption in favor of individuals, and has reference to it. With deference to the opinions of others to the contrary, I am unable to give any other interpretation to the language employed, which appears to me to be reasonable, and to harmonize with the other provisions of the constitution. In specifying the property which shall constitute the basis of taxation, an exemption and a deduction amount substantially to the same thing.

I can not perceive any necessity for the words, “ without deduction” in the third section, with reference to the circulation of the banks. By special authority, a bank is permitted to use its own notes or bills as money, and to pay them out and derive the same benefit from their issue which it would from an equal .amount of gold or silver coin. The circulatioai of a bank is a source of actual wealth to it; and inasmuch as the second section of the constitution does not permit individuals to deduct their liabilities from any of their property, I can not see how the prohibition of deductions by banks could have been deemed necessary with reference to their liability to redeem 'their circulation, when individuals were not allowed to deduct their liabilities on the obligations outstanding against them.

The reason for the exemption of a small amount of property for each individual which has been heretofore alluded to, does not ap81] ply to the tax upon banks and bankers. That *is a tax upon persons in a sjiecial character, employing the property taxed in a business especially authorized by the state, and in which other persons are not allowed to engage. Banking powers are not exercised by any person in his individual eajiacity. It appears from the seventh section of the thirteenth article of the constitution, that this special authority is conferred only on associations of persons, whether incorporated or not. Every individual, however, engaged in a banking association has the full benefit of the provision for the two hundred dollars exemption, in regard to the property held-by him in his separate and individual capacity. And therefore banking associations are required to be taxed upon their property employed in their special and exclusive business, without any deduction or exemption, such as is allowed to individuals out of regard to the necessities of life.

It has been urged that the term “ bankers,” used in the third section, was intended to bring within the operation of this section the private banker and exchange broker, persons carrying on business which is open and common to all, not requiring special statutory authority in any of its departments. The business of banking, in its most enlarged signification, includes the business of receiving deposits, loaning money, and dealing in coin, bills of exchange, etc., besides that of issuing paper money. None of this business has ever required any special authority, except that of issuing notes and bills to circulate as money. o The banks created by the authority of law are those which, in addition to the ordinary business of banking common for all persons to engage in, make and issue their paper to circulate as money, which are termed banks of circulation. By a long course of legislation in this state, the business of banking has acquired a restricted legal signification, applying only to those banks which exercise the functions of issuing paper money. Such is the way in which the terms bank and banking have been used in the statutes of the state, with very few exceptions, since 1816; and such is the meaning given to them by the constitution, *as is [32 apparent from the seventh section of the thirteenth article, which is in these words:

“No act of the general assembly, authorizing associations with banking powers, shall take effect until it shall have been submitted to the people at the general election next succeeding the passage thereof, and be approved by a majority of all the electors voting at such an election.”

No other but paper-money banking ever sought statutory authority. And property employed in this kind of banking, for many years, was subject to amere nominal tax, and was claimed to be exempt from any further exercise of the taxing power. But there never was any question made as to the right of the state to tax the property of the private. banker and exchange broker who claimed no special privileges or exemptions. There could have been no object, therefore, in a special provision of the constitution to reach them. The business of the private banker and broker is one which may be carried on by any one in his individual capacity. And the very fact that the burden of' taxation on the property of individuals is made the standard by which to fix the burden of the tax upon banks and bankers, is conclusive, to my mind, that the property employed in banking, here provided for, is a tax upon banks and bankers in their specially-authorized character. With .all proper deference for the opinions of others to the contrary, I have been unable to reach any other conclusion myself than that the third section of the constitution, above mentioned, has reference to taxing property employed in banking carried on by banks of circulation, and not by private bankers and exchange brokers. The expression “ all banks and all bankers ” is very properly used in the constitution. The term “ banks" denotes the incorporated institution, and the term “ bankers ” the unincorporated associations exercising “ banking powers." It appears from the above-recited seventh section of the constitution that an act of incorporation was not deemed essential to the exercise of “banking powers;” hence the expression “ associations with banking powers,” which will apply to 33] associations of *joint partners with banking powers, as well as incorporated associations.

It is provided that all property employed in banking shall be so taxed, as always to bear a burden of taxation equal to that imposed on the property of individuals. This is not a mere corollary from the requirement, that all property of every description of “ all banks and of all bankers,” should be taxed; but it is prescribed as a rule of taxation. The burden of taxation here mentioned is not merely the rate of taxation. It expresses much more. It has reference to the actual value of all the taxable property of the person taxed, and comprehends the proportion which the tax assessed bears to the actual value of all his taxable property. So that it is required that the amount of the tax upon all property employed in banking shall bear a proportion to the actual value of the property, equal — not less, not greater, but equal — to the proportion which the amount of the tax imposed on individuals shall bear to the actual value of all their taxable property; that is, to the actual value of all their property, real and personal, after the deduction of the amount of the exemption allowed, not exceeding two hundred dollars for each individual. The constitution requires that all the property of every description owned by individuals (except that which falls within the specified exemption) should be taxed by a uniform rule, and at its actual value in money; and the burden of the tax thus imposed on the property of individuals is made the standard to which the burden of the tax upon property employed in banking is required to conform. This is the equality and fairness in taxation required by the constitution. And a statutory provision which allows a part of the taxable property of all persons not exercising banking powers to be exe