AMIDON v. Kane

279 A.2d 53, 444 Pa. 38, 1971 Pa. LEXIS 757

• Court: Supreme Court of Pennsylvania
• Decided: June 24, 1971
• Docket: Appeals, 8, 9 and 10
• Status: Published

Opinions

Opinion by

Mr. Justice Roberts,

In this consolidated appeal, we are asked to review a May 20, 1971 decree of the Commonwealth Court dismissing three separate complaints in equity challenging the constitutionality of the recently enacted Personal Income Tax provided by Article III of the Tax Reform Code of 1971, adopted March 4, 1971, Act No. 2, 72 P.S. §7107 et seq.¹

The various plaintiff-appellants advance four arguments in support of their claims that the Personal Income Tax is repugnant to the Pennsylvania Constitution. First, it is contended that the tax violates Article VIII, Section 12(a) by virtue of its enactment without the Governor’s submission to the General Assembly of a balanced operating budget. Second, it is urged that the tax constitutes an illegal delegation of legislative power in contravention of Article II, Section 1. Third, it is claimed that the tax illegally exempts property from taxation in violation of Article VIII, Section 5. And finally, it is argued that the tax ignores the mandate of Article VIII, Section 1 that “[a] 11 taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, . . . .”

After careful and considerable study, we conclude that the tax in question offends the constitutional requirement of uniformity and that it is for this reason invalid.

Preliminarily, it is noted that we are not unmindful of the fiscal problems and difficulties besetting the Commonwealth. We must at the same time, however, emphasize that our awareness and full appreciation of these problems cannot in any way enlarge or otherwise affect our limited constitutional role in this adjudication.

The selection of subjects for taxation, their classification, and the method of collection are legislative matters. Jones & Laughlin Taw Assessment Case, 405 Pa. , 175 A. 2d 856 (1961). Thus, this Court may not consider the wisdom of a challenged tax or the purpose of its enactment. Blauner’s, Inc. v. Philadelphia, 330 Pa. 342, 198 Atl. 889 (1938). So long as a statute is constitutional, the Legislature is the sole judge of its necessity or expediency and a court cannot refuse to enforce it on any ground that it is unjust, unwise, inexpedient, obsolete or contrary to any supposed policy or custom. Olin Mathieson Chemical Corporation v. White Cross Stores, Inc., 414 Pa. 95, 98, 199 A. 2d 266, 267 (1964) ; Lurie v. Republican Alliance, 412 Pa. 61, 65, 192 A. 2d 367, 370 (1963); Commonwealth ex rel. Kelley v. Cantrell, 327 Pa. 369, 193 Atl. 655 (1937) ; Commonwealth ex rel. Kelley v. Clark, 327 Pa. 181, 193 Atl. 634 (1937); Harris v. Mercur, 202 Pa. 313, 51 Atl. 969 (1902); Journeay v. Gibson, 56 Pa. 57 (1868); Steiner v. Coxe, 4 Pa. 13 (1846) ; see also Commonwealth v. Life Assurance Company of Pennsylvania, 419 Pa. 370, 377-78 n. 11, 214 A. 2d 209, 215 n. 11 (1965), appeal dismissed, 384 U.S. 268, 86 S. Ct. 1476 (1966).

Conversely, however, we cannot deem a legislative enactment constitutional merely because it may seem in our view to be just, expedient, necessary or wise, or because it enjoys unanimous popular support. The Constitution is in matters of state law the supreme law of this Commonwealth to which all acts of the Legislature and of any governmental agency are subordinate, Pittsburgh Railways Co. v. Port of Allegheny County Authority, 415 Pa. 177, 202 A. 2d 816 (1964) ; Cali v. Philadelphia, 406 Pa. 290, 177 A. 2d 824 (1962), and it is our duty and responsibility to consider only whether the legislation meets or violates constitutional requirements. Stander v. Kelley, 433 Pa. 406, 250 A. 2d 474 (1969). Accordingly, quite aside from the instant tax’s possible social, economic or other merit, we must determine whether it satisfies the constitutionally mandated standard of uniformity.

The Personal Income Tax contained in Article III of the Tax Reform Code of 1971 operates as follows: Section 305 of the Code purports to impose a tax “[f]or the privilege of receiving, earning or otherwise acquiring income from any source whatsoever . . . .” However, the annual tax of 3%% is levied not upon all income “from any source whatsoever” but rather only upon “the taxable income of the taxpayer”. “Taxable income” is defined in Section 302(q) to mean with a few specific variations “the same as 'taxable income’ as defined in the Internal Revenue Code . . . .”²

The concept of taxable income in the Internal Revenue Code is of course an artificial construct, in many ways far removed from the common and ordinary meaning of the term income. For example, income derived from gifts and inheritances, interest on the obligations of a state or political subdivision, contributions by employers to employee health and accident plans, and the first one hundred dollars received by a taxpayer as dividends from domestic corporations is all specifically excludable from taxable income.³ In addition, the Internal Revenue Code permits the deduction of myriad items from actual or gross income in order to compute taxable income.⁴ 5Some of the more common and well known examples of such deductions are real estate taxes, interest on real estate mortgages and other personal financing, alimony payments, and various other state and local taxes.⁵

The structure of the Pennsylvania Personal Income Tax may be alternatively illustrated and perhaps clarified by consideration of the following schematic summary of Internal Revenue Service Form 1040, the officially prescribed form for individual federal income tax returns.⁶

TABLE I

FORM 1040

Lime No. Description

12 WAGES, SALARIES, TIPS

13 -¡-DIVIDENDS

14 -¡-INTEREST

15 -¡-OTHER INCOME (business income; capital gains;

pensions and annuities, rents and royalties, partnerships, estates or trusts, etc.; farm income; miscellaneous income)

16 TOTAL (LINES 12-15)

17 —ADJUSTMENTS (sick pay; moving expenses;

employee business expense; self-employed retirement plan)

18 ADJUSTED GROSS INCOME

47 —DEDUCTIONS (medical and dental expenses;

taxes; contributions; interest; mise.)

49 —PERSONAL EXEMPTIONS

50 TAXABLE INCOME

In other words, the Pennsylvania Personal Income Tax is tied directly to “line 50” of IES Form 1040, the amount appearing on that line being subject to the 31/2% annual tax.

As is readily apparent from an examination of Table I, most of the discrepancies between an individual’s actual total income “from any source whatsoever” and his Pennsylvania “taxable income” arise as a consequence of the subtraction of the various adjustments, deductions, and exemptions appearing between lines 16 and 50. As to some taxpayers, however, even line 16 does not reflect all income from whatever source. As stated above, the Internal Revenue Code provides that certain species of income are altogether excludable from taxable income. Thus, for example, a person whose only income is in the form of interest received from state or municipal bonds (tax exempts) need not report any of such income on any of the lines prior to line 16 with the result that the amount entered on line 16 will be zero.

After defining taxable income in terms of the federal tax base,⁷ the Tax Reform Code of 1971 provides four types of tax credits. Section 316 allows a credit for income taxes imposed by another state, Section 317 provides a similar credit for 30% of certain local taxes, and Section 318 deals with a credit for taxes paid by a trust on accumulated income. Finally, Section 319 sets out a variable schedule of “vanishing tax credits” for the benefit of individuals whose state taxable income does not exceed $9,900.

Does then the foregoing scheme of taxation conform to the requirements of the Uniformity Clause?

The constitutional imperative of uniformity in the imposition of taxes has remained unchanged since its first adoption in the Pennsylvania. Constitution of 1874.⁸ Article IX, Section 1 of that constitution directed without qualification that: “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.” Legislative proposals to amend the Uniformity Clause were rejected by the electorate in 1913 and 1928,⁹ and the May, 1967 referendum submitted to the people of Pennsylvania concerning whether a constitutional convention would be called specifically provided that the convention would not revise that portion of the constitution. Likewise, the constitutional convention enabling act stated in no uncertain terms that “. . . nor shall that part of Article TX, Section 1 of the Constitution providing that: ‘All taxes shall be uniform . . .’ be modified, altered or changed in any respect whatsoever.” Act of March 16, 1967, P. L. 2, §7, [1967] Pa. Laws 7. (Emphasis added.)

In addition to its unbroken historical continuity, the constitutional standard of uniformity also possesses widespread and far reaching application. While some other jurisdictions adhere to the view that uniformity applies only to property taxes,¹⁰ our particular constitutional mandate that “[a]ll taxes shall be uniform . . .” is quite clear, and it is settled that this mandate applies to all species of taxes. As was stated in Saulsbury v. Bethlehem Steel Co., 413 Pa. 316, 196 A. 2d 664 (1964) : “The question of whether or not the constitutional requirement of uniformity applies to a particular kind of tax depends upon the peculiar wording of the requirement itself. The Pennsylvania Constitution specifically states that ‘All taxes shall be uniform, upon the same class of subjects.’ (Emphasis supplied.) This language is as broad and comprehensive as it could possibly be and must necessarily be construed to include all kinds of taxes, be they in the nature of property or excise levies. The Pennsylvania constitutional provision is all inclusive and is clearly not limited to requiring uniformity on property taxes alone. See Banger’s Appeal, 109 Pa. 79 (1885); Cope’s Estate, 191 Pa. 1, 43 A. 79 (1899); Kelley v. Kalodner, supra [320 Pa. 180, 181 Atl. 598 (1935)]; Com. ex rel. v. A. Overholt & Co., Inc., 331 Pa. 182, 200 A. 849 (1938); and 51 Am. Jur., Taxation, §157.” Id. at 319, 196 A. 2d at 666. It is thus quite clear that the instant tax must satisfy the requirement of uniformity.

The substantive content of the Uniformity Clause is of course less susceptible to precise definition than is the scope of its application. However, certain general principles are well established. As this Court declared in the Allentown School District Mercantile Tax Case, 370 Pa. 161, 87 A. 2d 480 (1952) : “[The Uniformity Clause] means that the classification by the legislative body must be reasonable and the tax must be applied with uniformity upon similar kinds of business or property and with substantial equality of the tax burden to all members of the same class: Commonwealth v. Girard Life Insurance Co., 305 Pa. 558, 158 A. 262; Knisely v. Cotterel, 196 Pa. 614, 46 A. 861; Dufour v. Maize, 358 Pa. 309, 56 A. 2d 675; Commonwealth v. McCarthy, 332 Pa. 465, 3 A. 2d 267; Dole v. Philadelphia, 337 Pa. 375, 11 A. 2d 163____

“Uniformity requires substantial equality of tax burden: Com. v. Overholt & Co., Inc., 331 Pa. 182, 200 A. 849; Com. v. Repplier Coal Co., 348 Pa. 372, 35 A. 2d 319; Moore v. Pittsburgh School District, 338 Pa. 466, 13 A. 2d 29. While taxation is not a matter of exact science and perfect uniformity and absolute equality in taxation can rarely ever be attained (Wilson v. Philadelphia, 330 Pa. 350, 352, 198 A. 893), the imposition of taxes which are to a substantial degree unequal in their operation or effect upon similar kinds of business or property, or upon persons in the same classification, is prohibited: Cf. Com. v. Overholt & Co., Inc., 331 Pa. 182, 190-191, 200 A. 849; Pollack v. Farmers’ Loan and Trust Co., 157 U.S. 429, 599. Moreover while reasonable and practical classifications are justifiable, where a method or formula of computing a tax will, in its operation or effect, produce arbitrary or unjust or unreasonably discriminatory results, the constitutional provision relating to uniformity is violated: Turco Paint & Varnish Co. v. Kalodner, 320 Pa. 421, 184 A. 37; Hans Rees’ Sons v. North Carolina, 283 U.S. 123.

“We may aptly repeat what was said by (former Chief) Justice Maxey in Com. v. Overholt & Co., Inc., 331 Pa., supra, page 191: ‘A tax to be uniform must operate alike on the classes of things or property subject to it. . . Id. at 167-68, 170, 87 A. 2d at 483, 484.

In addition to these general principles, two prior decisions of this Court are particularly pertinent to our disposition of this appeal.

The first of these, Kelley v. Kalodner, 320 Pa. 180, 181 Atl. 598 (1935), involved a 1935 Pennsylvania statute imposing an annual tax upon the entire net income of Pennsylvania residents and upon net income received by nonresidents from property owned or from any business or occupation carried on in the Commonwealth.¹¹ That act authorized many exemptions for purposes of calculating “gross income” and numerous deductions for the computation of “net income”. It likewise sought to enact a standard deduction for living expenses ($1,-000 in the case of single persons and $1,500 in the case of married persons and heads of households), and an additional $400 deduction for each dependent under the age of eighteen. The tax was then imposed upon net income at a graduated rate: incomes under five thous- and dollars were taxed at 2%; incomes between five and ten thousand dollars at 2y2%; incomes between ten and twenty-five thousand dollars at 3%; etc. Reasoning as follows, this Court declared the tax invalid: “The question then arises, does the act fulfill the rule of uniformity prescribed by the Constitution. Plaintiffs contend it does not and for several reasons. The first is that the provision exempting from taxation those persons whose incomes fall below $1,000 or $1,500, depending upon whether they are single or married, shows upon its face a lack of uniformity. There can be no doubt that these exemptions were inserted for the purpose of putting the burden of the tax upon those most able to bear it, but it results in taxing those whose incomes arise above a stated figure merely because the legislature believes their incomes are sufficiently great to be taxed. It is obvious that the application of the tax is not uniform. . . . Moreover, the tax is in violation of the uniformity clause in its application to the persons whose incomes fall within the various brackets designated in. the act. . . .” 320 Pa. at 188-89, 181 Atl. at 602 (emphasis added). The Kelley decision, in other words, clearly involved an alternative holding: the tax was deemed constitutionally deficient both because of the personal exemptions and because of the graduated rate.

The second of the two decisions most significant to the instant case is Saulsbury v. Bethlehem Steel Company, supra, decided in 1964. In that case we ruled then an “occupation and occupational privilege tax” which exempted individuals with an annual income of less than $600 transgressed the limits of uniformity. In so holding, this Court reaffirmed the rule of Kelley v. Kalodner and largely on the basis of that decision concluded that: “If a tax is levied on an occupational privilege, it must apply to all who share the privilege. Part of this class may not be excused, regardless of the motive behind the action.” 413 Pa. at 320, 196 A. 2d at 666 (emphasis added).

It is true that the challengers of the constitutionality of state or local taxation bear a heavy burden in their efforts to overturn such legislation. See, e.g., Commonwealth v. Life Assurance Company of Pennsylvania, supra, at 376-77, 214 A. 2d at 214. Nevertheless, in comparing the taxing scheme in Kelley and Saulsbury with that involved in the instant case, the conclusion is unescapable that the personal income tax presently challenged violates uniformity. Although the Tax Reform Code of 1971 purports to impose a flat 3%% tax upon “taxable income”, the concept of “taxable income” already reflects the federal personal exemptions for the taxpayer and his qualified dependents. (See Table I, supra, lines 49 and 50.) Thus, built-in to the Tax Reform Code of 1971 are exactly the same elements of nonuniformity as were condemned in both Kelley and Saulsbury.

A further noteworthy feature of inequality is the instant tax’s exclusion from taxable income of all interest received on the obligations of the Commonwealth or any of its political subdivisions. The Tax Reform Code of 1971 imposes in its own terms a tax “[f]or the privilege of receiving, earning or otherwise acquiring income from any source whatsoever . . . .” The holder of tax exempt Pennsylvania securities certainly enjoys this privilege of receiving income yet is not taxed for the privilege but instead is given a tax preference. This situation is manifestly contrary to our holding in Saulsbury that a tax upon a privilege “. . . must apply to all who share the privilege.” In addition, despite the existence of a legislative policy favoring this type of tax preference for state and local obligations of this Commonwealth, such a legislative policy cannot prevail over a clear constitutional mandate of uniformity.

We need not, however, limit our present analysis to these particular inequalities, for the Personal Income Tax is replete with other commonly occurring instances of nonuniformity, many of which can be conveniently illustrated in the following tables. The examples contained in these tables have been consciously chosen to reflect the state income tax liability of typical taxpayers claiming representative exemptions and deductions.¹²

TABLE II

Taxpayers “receiving, earning or otherwise acquiring [$10,000] income from any source whatsoever” (Sec. 305)

ABC

SELF WAGE WAGE

EMPLOYED EARNER EARNER

Home: $20,000 $20,000 Renter

Mortgage: $10,000 $10,000 None

INCOME DEDUCTIONS: $10,000 $10,000 $10,000

Medical

Insurance 150 150

Other 200 200

Tames

Real Estate (30 mills) 600 600

1% Local Income Tax 100 100

Pa. 3.5% Income Tax 180 210 (Standard

Pa. Sales Tax 100 100 deduction)

Gasoline Tax 80 80

Oontrlbutions

3% Contributions 300 300

Interest

Mortgage (7%%) 750 750

Auto Loan 180 180

Special

Self Employment Plan 1,000

TOTAL DEDUCTIONS 3,640 2,670 1.300

Exemptions (2) 1,300 1,300 1.300

DEDUCTIONS FROM INCOME 4,940 3,970 2,600

PA. TAXABLE INCOME 5,060 6,030 7,400

3.5% PA. INCOME TAX 177.10 211.05 259.00

ACTUAL EFFECTIVE RATE ON INCOME RECEIVED,

EARNED, OR OTHERWISE

ACQUIRED “FROM ANY 1.77% 2.11% 2.59%

SOURCE AVHATSOEVER”

TABLE III

Taxpayers “receiving, earning, or otherwise acquiring [§20,000] income from any source whatsoever” (Sec. 305)

A B C D

Self Wage Wage Wage

Employed Earner Earner Earner

Home: $40,000 $40,000 Renter Renter

Mortgage: $20,000 $20,000 None None

INCOME DEDUCTIONS: $20,000 $20,000 $20,000 $20,000

Insurance 150 150 150

Other 400 400 400

Tawes

Real Estate (30 mills) 1,200 1,200

1% Local Income Tax 200 200 200

3.5% Pa. Income Tax 410 480 570 (Stand-

Pa. Sales Tax 200 200 200 ard

Gasoline Tax 100 100 100 deduction)

Contributions

3% Contributions 600 600 600

Interest

Mortgage (7%%) 1,500 1,500

Auto Loan 270 270 270

Special

Self Employment Plan 2,000

TOTAL DEDUCTIONS 7,030 5,100 2,490 1,500

Exemptions (2) 1,300 1,300 1,300 1,300

DEDUCTIONS PROM INCOME 8,330 6,400 3,790 2,800

11,670 13,600 16,210 17,200 PA. TAXABLE INCOME

408.45 476.00 567.35 602.00 3.5% PA. INCOME TAX

ACTUAL EFFECTIVE RATE ON INCOME RECEIVED, EARNED, OR OTHERWISE ACQUIRED “FROM ANT SOURCE WHATSOEVER" 2.04% 2.38% 2.83% 3.01%

For present purposes, the most significant feature of the above tables is the fact that each taxpayer in Tables II and III, respectively, enjoy the same privilege, to wit: that of “receiving, earning or otherwise acquiring” the same dollar amount of annual income “from any source whatsoever.” Yet no two taxpayers are required to pay the same dollar amount of taxes, nor are any two taxpayers required to pay the same effective percentage rate of taxation upon their respective total incomes. (The range of rates extends from a low of 1.77% to a high of 3.01%.) Thus, the effect of the Personal Income Tax in these illustrative situations is entirely nonuniform by imposing differing tax burdens upon persons enjoying identical privileges.

These inequalities result, of course, from the manifold tax preferences afforded taxpayers depending among other things upon whether a particular taxpayer is a wage earner or self-employed, renter or home owner, etc.¹³ Thus, for example, in Table II, A enjoys a substantial tax preference over B merely because of Ms $1,000 deduction for a self-employment retirement plan, a deduction wholly unavailable to B who is a wage earner. B, in turn, enjoys an even greater tax preference over C merely because he, unlike C, owns his own home and can profitably itemize his deductions in the sum of $2,670. Because C is a renter who cannot avail himself of substantial deductions for real estate taxes and mortgage interest, his only recourse is to claim the much smaller standard deduction of $1,300. Similar inequalities are contained in Table III dealing with typical taxpayers earning twenty rather than ten thousand dollars per year, and countless other examples could be just as easily constructed.

Whether or not these or any or all of the myriad other tax preferences implicit in Article III of the Tax Reform Code of 1971 might be thought to serve some useful social policy, the fact remains that unequal burdens are being imposed upon similar privileges in violation of the Uniformity Clause. These pervasive and impermissible discriminations between similarly situated taxpayers render Article III invalid.

We cannot agree with the Commonwealth’s contention that since the Pennsylvania Corporate Net Income Tax Act, Act of May 16, 1935, P. L. 208, as amended, 72 P.S. §3420a et seq., has been held constitutional, see Turco Paint & Varnish Co. v. Kalodner, 320 Pa. 421, 184 Atl. 37 (1936), the Personal Income Tax imposed by the Tax Reform Code of 1971 is likewise permissible.

In passing upon the validity of the corporate net income tax, this Court emphasized that it was “. . . not considering an income tax, but an excise tax for the privilege of doing business in the Commonwealth. . . .” Commonwealth v. Warner Bros. Theatres, Inc., 345 Pa. 270, 271, 27 A. 2d 62, 63 (1942) (emphasis added), and any attempted analogy between the instant tax and the corporate net income tax is unpersuasive. Corporations are artificial legal entities created with the permission of the state for the purpose of maximizing profits for shareholders, and the corporate net income tax is imposed upon a tax base which . . is the net income attributable to this state.” Turco Paint, supra at 426, 184 Atl. at 40.

Natural persons, on the other hand, cannot be likened to profit-maximizing entities. Individuals spend their resources for an infinite variety of reasons unrelated to the making of a “profit”. Thus, unlike the corporate context, it would be exceedingly difficult, if not impossible, to create a personal income tax designed to take into account the “cost” of producing individual income. Certainly the instant tax does not even attempt to do so, and the corporate net income taxes are accordingly inapposite.

In light of our decision that Article III of the Tax Reform Code of 1971 creates widespread tax preferences and thus is in direct conflict with the mandate of the Uniformity Clause, we need not pass upon the other issues presented in this appeal, namely, the validity of the vanishing tax credit provision, the validity of the thirty percent local tax credit, or whether the tax is invalid because the Governor failed to submit a balanced operating budget prior to recommending additional sources of revenue.

For the foregoing reasons, the decree of the Commonwealth Court is reversed. Each party to pay own costs.

Mr. Chief Justice Bell joins in this opinion and files a concurring opinion.

1 The decision was rendered by a divided Commonwealth Court. Judge Wilkinson filed an opinion in support of the Court’s decree in which three other judges joined. President Judge Bowman filed a dissenting opinion in which Judge Menceb joined. Judge Menceb filed a separate dissenting opinion and Judge Kramer filed a concurring and dissenting opinion.

2 Section 302(q) provides in full:

“ ‘Taxable income.’ Except as otherwise provided herein, ‘taxable income’ means the same as ‘taxable income’ as defined in the Internal Revenue Code and will include the sum of the following tax preference items as defined in section 57 of the Internal Revenue Code, as amended, (i) excess investment interest; (ii) accelerated depreciation on real property; (iii) accelerated depreciation on personal property subject to a net lease; (iv) amortization of certified pollution control facilities; (v) amortization of railroad rolling stock; (vi) stock options; (vii) reserves for losses on bad debts of financial institutions; (viii) depletion; and (ix) capital gains which is required to be returned to and ascertained by the Federal Government pursuant to said code, subject to the following adjustments:

(1) Subtraction of interest income derived from obligations of the United States Government to the extent included in adjusted gross income.

(2) Addition of interest income derived from obligations of states, political subdivisions, instrumentalities and public authorities thereof other than Pennsylvania or its political subdivisions, instrumentalities or public authorities to the extent not included in adjusted gross income.

(3) In the case of a nonresident individual, estate or trust estate or trust ‘taxable income’ and the adjustments required by subsections (a) and (b) above shall include only income derived from sources within this Commonwealth.

(4) The respective shares of an estate or trust and its beneficiaries in the additions and subtractions to taxable income shall be in proportion to their respective shares of distributable net income of the estate or trust as defined in the Internal Revenue Code. If the estate or trust has no distributable net income for the taxable year, the share of each beneficiary in the additions and subtractions shall be in proportion to his share of the estate or trust income for such year, under local law or the terms of the instrument, which is required to be distributed currently and any other amounts of such income distributed in such year. Any balance of the additions and subtractions shall be allocated to the estate or trust.

(5) In the case of a nonresident estate or trust, the respective shares of the estate or trust and of its beneficiaries shall be determined in the manner set forth by this subsection (q) ; however, in determining the taxable income of a nonresident estate or trust or of any nonresident beneficiary thereof, there shall be taken into account only the income of the estate or trust, or the beneficiary’s share thereof, derived from sources within this Commonwealth.”

3 See Int. Rev. Code of 1954, §§102,103,106,116.

4 See Int. Rev. Code of 1954, §§141-217.

5 Many of the deductions and exemptions allowed by federal tax law are unrelated to considerations of revenue raising or equalization of the tax burden; they pertain instead to the furtherance of various national non-tax policies. See, e.g., United States v. Pleasants, 305 U.S. 357, 59 S. Ct. 281 (1939) (charitable deductions) ; Helverimg v. Bliss, 293 U.S. 144, 55 S. Ct. 17 (1934) (exclusion of income derived from state and municipal bonds) ; E. F. Fox v. United States, 397 F. 2d 119 (8th Cir. 1968) (same).

Senator William Proxmire, Chairman of the Joint Economics Committee of the United States Congress, has just made public statistics compiled by the Treasury Department indicating that the special consideration to certain groups and types of activity afforded by various Federal tax provsions result in total Federal tax preferences amounting to approximately 40 billion dollars annually. A copy of these statistics is on file in the office of the Prothonotary of this Court.

6 See Treas. Reg. §601.602 concerning §6011 (a) of the Code: “Forms and instructions are developed by the Internal Revenue Service to explain the requirements of the internal revenue laws and regulations and are issued for the assistance of taxpayers in exercising their rights and discharging their duties under the internal revenue laws. . . .” The Regulation continues by stating that copies of all necessary forms and instructions may be obtained from district directors and also that Publication No. 481, Description of Principal Federal Tax Returns, Related Forms, and Publications may be purchased from the Superintendent of Documents, U. S. Government Printing Office, Washington, D. O. 20402.

7 As mentioned earlier, the concept of taxable income in the Pennsylvania tax does vary somewhat from the concept of federal taxable income. Whereas the Internal Revenue Code generaUy includes in taxable income interest on obligations of the United States and excludes interest on the obligations of states or their political subdivisions, the instant tax excludes interest on the obligations of the United States and includes interest on the obligations of states and political subdivisions other than Pennsylvania and its political subdivisions. Compare Int. Rev. Code of 1954, §108 with the Tax Reform Code of 1971, §§302 (q) (1), (2). In addition, the Pennsylvania tax does not give any tax preference to the “items of tax preference” contained in Int. Rev. Code of 1954, §57. See Tax Reform Code of 1971, §302(q). Finally, the Pennsylvania tax mates certain adjustments with respect to nonresident individuals and with respect to estates or trusts. See Tax Reform Code of 1971, §§302(q) (3), (4), (5).

8 Prior to 1874 there had been no express state constitutional provision on the power to tax other than the BUI of Rights with its implication “against all unjust, unreasonable and palpably unequal exactions under any name or pretext.” Washington Avenue, 69 Pa. 352, 363 (1871) ; Hammett v. Philadelphia, 65 Pa. 146 (1869) ; see Note, The Pennsylvania Constitutional Requirement of Uniformity in Taxation, 87 U. Pa. R. Rev. 219 (1938).

9 Kelley v. Kalodner, 320 Pa. 180, 192, 181 Atl. 598, 603 (1935) ; see Callendar, The Constitution—Should It Be Revised?, 29 Pa. B.A.Q. 205 (1958).

10 Cooley on Taxation, §267 (4th ed. 1924).

11 Act of July 12,1935, P. Jj. 970, formerly 72 P.S. §3402-1 et seq.

12 The hypothetical deductions included in this table closely approximate the average annual deduction taken in these general categories according to the most recent statistics available. See Internal Revenue Service, Individual Income Tax Returns: Statistics of Income 1968 at 65 (Table 2.4—Itemized Deductions by Type and by Adjusted Gross Income Classes.)

13 See notes 3 and 4, supra.