State Ex Rel. Edwards v. Query

37 S.E.2d 241, 207 S.C. 500, 1946 S.C. LEXIS 50

• Court: Supreme Court of South Carolina
• Decided: February 28, 1946
• Docket: 15806
• Status: Published

Opinions

Mr. Associate Justice Stukes

delivered the majority Opinion of the Court.

Perhaps the best way to approach the problem presented by this case is to first examine the former so-called gasoline tax diversion suits (State ex rel. Fdwards v. Osborne, 193 S. C., 158, 7 S. E. (2d), 526, and idem., 195 S. C., 295, 11 S. E. (2d), 260) for they involved vitally different facts and are not at all controlling of the instant issues. They were concerned with legislative attempts to' divert large amounts of the proceeds of the gasoline tax to purposes foreign to its levy, in fact, to meet deficits in state appropriations for other than highway activities. But the present is not an effort to divert but to exempt a single class of users from payment of the tax except to the extent of one cent per gallon. It should be here explained parenthetically that the mechanics of the law, which require payment in full of the existing gasoline levy and formal application for refund of all save one cent per gallon on that used in tractors and other farm machinery, are for the purpose of preventing frauds in the refunds. The plan is, in effect, an exemption from the tax (except one cent per gallon) on gasoline used in the specified farm machinery, on farms and for farm purposes.

The former Edwards cases, supra, applied sections 2 and 3 of Article X of the state constitution of 1895, and the attempted legislative acts there under review were found to be in violation of them. Other constitutional questions were expressly avoided. A mere reading of the decisions is sufficient to show their present inapplicability so they need not be further discussed in order to distinguish them. This disposes adversely to petitioners of their question II which imputes unconstitutionality of the act for diversion of tax revenues in violation of Art. X, sec. 3.

However, light upon the issues now before us is provided by these former Edwards cases. That reported in 195 S. C., 295, 11 S. E. (2d), 260, contains an analysis of sec. 5969 of the Code of 1942 which was sec. 8 of the Act of 1929 (36 Stat. at p. 682) and an adjudication of the order of priority of the purposes to which the gasoline taxes (and motor vehicle license fees) are devoted by law. We quote from the opinion as follows:

“The section then provides for the disbursement of the funds in the order stated, for (1) costs of administration, etc., not exceeding $450,000.00 annually (2) maintenance of debt service on (a) State Highway Certificates of Indebtedness, and (b) reimbursement agreements (3) sinking fund payments; (4) road maintenance; (5) road construction and other purposes.”

It is seen at a glance that the petitioners who are bondholders, owners of “State Highway Certificates of Indebtedness”, are in a very preferred position with respect to their right to payment from the revenues. If there is any net loss of taxes from the operation of the act, which the legislature has found not only will not occur but an increase will result, before these creditors suffer there would have to be such loss as to more than exhaust all of the otherwise available funds for (1) road construction and “other purposes”, (2) road maintenance, (3) sinking fund payments, and (4) reimbursement agreements. Thus the fear which they assert is plainly imaginary (in view of the official figures hereinafter) rather than real and their position cannot possibly be a practical one.

The latter is demonstrated by the published report of the meeting of the State Highway Commission in December 1945, when they proceeded pursuant to the following ing provision of Code sec. 5969: “Not more than thirty days prior to the beginning of each calendar year the state highway commission shall make an estimate of the revenues to be received by the * * * department during said calendar year from said gasoline tax and motor vehicle license •tax and shall also estimate the amounts required”, etc. The stated report of Dec. 20, 1945, reveals an estimated cash balance of $11,500,000.00 as of Jan. 1, 1946, less commitments of $2,550,000.00 leaving a balance of $8,950,000.00. Revenues for the 1946 calendar year were estimated at $12,725,-000.00, making a total of cash and anticipated revenues of $21,675,000.00; and 1946 expenses were estimated at $7,-956,751.39, leaving a balance for road maintenance and construction of $13,718,248.61.

The commission’s estimate of 1946 “expenses” is comprised of the following items and amounts (No future fiscal or calendar year now contains heavier debt maturities) :

Administration and Collection of Revenue $ 400,000.00

Accident Claims 25,000.00

Reimbursement to Counties and Road and Bridge Districts :

Principal $ 1,125,475.36

Interest 190,326,03

1,315,801.39

Less: Earmarked Funds Held for Retirement of Principal $ 11,500.00 1,304,301.39

Certificates of Indebtedness:

Principal $ 4,845,000.00

Interest 1,382)450.00 6,227,450.00

Sinking Fund Deposit '00

Total $7,956,751.39

(An apparent discrepancy is noted between sec. 5969 of the Code and the above-quoted summary of it in the opinion in the second Edwards case, 195 S. C., 295, 11 S. E. (2d), 260, in the detail of the order of priority of the application of the highway department revenues. The statute (36 Stat., at p. 682) ranks reimbursement obligations (payments to or for counties, highway and bridge districts) ahead of principal and interest on state certificates of indebtedness. But this is now unimportant, in any event, because the re imbursement program is nearing its end of payments thereunder and borrowing is and will be done by the sale of state certificates of indebtedness.)

(It appears from the above tabulation that the department contemplates no contribution from 1946 receipts to the “sinking fund”. But almost certainly there will be. It is required by sec. 5972 of the 1942 code (sec. 11 of the Bond Act of 1929, 36 Stat., at p. 684) that whenever the departmental revenues exceed those of the next preceding year by more than five per cent., one-half of the excess shall go into this fund. It is a sort of safety valve and not a true sinking fund as that term is ordinarily used, for the highway obligations are issued to mature serially and the maturities, principal and interest, are met from current revenues or the proceeds of the sale of new obligations, and are not paid from the so-called sinking fund. It has thereby grown to over a million and a half dollars and constitutes a back-log of safety to the department and the holders of its obligations, including petitioners.)

From the foregoing figures it is seen that after payment of the operating expenses of the department and its 1946 financial obligations from its cash balance and estimated receipts there will remain an estimated $13,718,248.61 for maintenance and construction of state highways, which only will be reduced, if indeed there is any reduction of revenue (which the legislature says not) resulting from the law now opposed.

Furthermore, it is within common knowledge that there has been a great increase in the consumption of gasoline, and therefore in the receipt of gasoline taxes, since the recent removal of the war-necessitated rationing, and it is generally anticipated that there will be a further marked increase in consumption when more automobiles are available for use for pleasure and in business. The Commission has not given full weight' to these factors; its estimate of 1946 revenue is patently too low. As stated above, it has estimated total revenue at $12,750,000, which includes only $10,000,000 from the five-cent gasoline tax. This is only a little more than the lean war years. The actual receipts from such tax during the last five fiscal years were as follows, in nearest thousands:

1940-41 .....................$ 12,147,000.00

1941-42 ..................... 12,766,000.00

1942-43 ..................... 8,935,000.00

1943-44 .....................' 9,207,000.00

1944-45 ..................... 9,639,000.00

In the month of November, 1944, the receipts were $810,-244.38; in November 1945 (the last month for which official figures are available), with rationing ended, $1,064,168.85. In view of this increase of over thirty per cent, it appears that a conservative 1946 estimate would at least equal the last pre-war year and substantially top twelve million dollars instead of the ultra-conservative figure of $10,000,000-.00, adopted by the commission in its December estimates. The same story of increase occurs in the receipts of motor vehicle license taxes. In November 1943, they were $618,-647.75; November 1944, $648,495.75; and November 1945, $798,886.05. But all of this is “carrying coals to Newcastle” for the facts and figures of the commission already make impossible any lack of means to meet the debt obligations of the department. This is recognized, and practically admitted, in the petition before us, where it is said in paragraph VI as follows:

“The said statute constitutes a step in the process of occasional or systematic attrition of the revenues of the South Carolina Highway Department which were levied for a special purpose and appropriated to the accomplishment of such purpose, creating a precedent under which many other special classes of users of gasoline are in effect invited to peti tion the General Assembly for similar relief from the five cents (5$) gasoline tax.”

But the validity of the present statute does not depend upon what legislation may come hereafter, and whether it is a bad example in policy or expediency is not for the court to determine and should not influence our decision of this case. Moreover, the theory of the law is that its working will not cause a depreciation in the revenue, but actually an appreciation. (The argument that it might as reasonably be anticipated that a reduction of the gasoline tax on all users would increase consumption is unsound for here it has been found that present users of the inferior, untaxed fuels will convert their machines to the use of gasoline which will be taxed at one cent per gallon, and more farmers will adopt machines in place of work animals, thereby creating two new classes of consumers of gasoline. All of which appears quite reasonable.)

Nevertheless, petitioners finally say in argument (for their question IV) that the act violates the state and federal constitutions for it impairs the obligations of their contracts —their certificates of indebtedness.

Intertwined with this question is that of petitioners numbered I, which will be first discussed, that consideration of the constitutionality of the act should not be affected by its preamble because (a) the conclusions of it are contrary to facts of which the court will take judicial notice; (b) it is a prognostication instead of findings of actual fact; and (c) it is not within the legislative power to adjudicate such a fact as this to the exclusion of inquiry by the court.

The effect of a legislative finding of fact by way of express preamble or by implication from the passage of the law is an interesting and important question which has not heretofore received much consideration by this court, but see reference thereto in the discussion of the Bond Act of 1929 in State ex rel. Richards v. Moorer, infra. (See also, Woodworth v., Gallman, 195 S. C., 157, 10 S. E. (2d) 316). Counsel for petitioners and respondents take extremely opposite views, neither of which is sustained by what appear to be the better considered authorities. The petitioners say that in a case of the present character, where the legislation does not deal with the public health, public safety, public convenience, or other matters affecting the general welfare of all the people, it is not within the power of the General Assembly to adjudicate factual issues to the exclusion of inquiry by the courts. But the distinction of the necessity for effect upon the general welfare of all the people is not clear and is asserted without citation of authority. On the other hand, respondents contend that the legislative finding is conclusive upon the courts. However, it is easily seen upon erven slight consideration that such a rule as the latter would upset the balance of powers between the legislative and judicial departments, and the latter would be rendered powerless m many cases to relieve the people from unconstitutional legislation. And the legislature and the courts are but servants of the people, each independent of the other in their respective spheres but always subject to constitutional limitations.

There is a valuable, exhaustive annotation upon the subject of legislative findings in 82 Law. Ed., 1244, following report of the case of United States v. Carolene Products Company, 304 U. S., 144, 58 S. Ct., 778, 82 Law. Ed., 1234. It is there pointed out that there are many instances where the constitutionality of an act depends upon pertinent facts and in such a case it is presumed from the mere passage of the act that there was a finding of such facts as were necessary to authorize the enactment. However, by the better rule, such implied or express finding is subject to judicial review, and the court may consider extrinsic evidence for this purpose, although the statute will not be held unconstitutional unless such (legislative) finding is clearly erroneous. 11 Am. Jur., 820, 822; Weaver v. Palmer Bros. Co. (1926), 270, U. S., 402, 70 L. Ed., 654, 46 S. Ct., 320; Borden’s Farm Products Co. v. Baldwin (1934), 293 U. S., 194, 79 L. Ed., 281, 55 S. Ct., 187; see also Cooley’s Constitutional Limitations, 8th Ed., Vol. 1, p. 379, 380.

The respondents were not called upon in this case to present evidence of presumed facts and the unquestioned rule is that there is a presumption in favor of the existence of the facts necessary to justify the constitutional passage of the act. And here there are expressly stated conclusions of fact which the Court cannot brush aside as irrational. Aside from the demands of justice, a proper respect for the General Assembly, a coordinate branch of the government, requires otherwise. Before us is a brief, amicus curiae, filed with our premission by the South Carolina Farm Bureau. In it appears the following :

“At the hearing before the Ways and Means Committee in the Hall of the House of Representatives the following facts were presented:

“That there were, according to the U. S. Census, 8,400 farm tractors in South Carolina in 1939; that this number now probably has reached 10,000 tractors; that of this 10,000 tractors by far the greater part operate on kerosene and other fuel oils, using gasoline (about one gallon per day) for starting and warming only; that the highest estimate of gasoline burning tractors was 1,500 tractors, the lowest 650 tractors, and the tractors using gasoline exclusively were small tractors, used for light work and consuming on the average about 10 gallons of gasoline per day; that the average fuel consumption of the non-gasoline-using tractors (which are the general purpose tractors most commonly used), is from 20 to 30 gallons of fuel per day and that such tractors use about one. gallon of gasoline per day for starting and warming only; that based on the above figures, and using the maximum estimate of gasoline-using tractors, present gasoline tax revenue per day of operation is as follows:

1,500light tractors at 10 gallons per day at 6‡ tax .......:........................$ 900.00

8,500 gen. purpose tractors at 1 gallon per day 6‡ tax.............................. 510.00

Total Revenue per working day..........$ 1,410.00

“Applying to the same figures the one (1/;) per gallon tax provided in the Act in question, we find:

1.500 light tractors at 10' gallons at 1‡ per gallon tax.............................$ 150.00

8.500 gen. purpose tractors at 18 gallons at 1‡ per gal. tax ......................... 1,530.00

Total Revenue per working day under Act of 1945 .....’.........................$ 1,680.00

Total Revenue per working day under 6‡ tax 1,410.00

Increased Revenue per working day under Act of 1945 ........................$ 270.00

“On the basis of 200 working- days this means an increase of $54,000.00 in revenue per year, using the figures most favorable to petitioners’ contention. Using the figure of 650 gasoline burning tractors, however, and calculating as above we find that revenue will be increased $159,-400.007’

The experience of the State of Mississippi is referred to in argument, where it is said that 1.45% of the total gasoline revenue has been refunded during the last four years, but there is no Way of determining how much more gaso-line was consumed in the farm machinery of that State because of the five-sixths agricultural refund, so there may well have been a real increase in the net taxes collected. The latter is what the legislature has found will happen here, as is indicated by the evidence before them, some of it quoted above.

On the other hand, petitioners’ counsel submit information upon the experience of the State of North Dakota, which, however, is said to be as unlike South Carolina as Mississippi is alike, and there over seventy per cent, of the whole collections of gasoline tax has been refunded under the terms of a similar law. That State is a sparsely settled one, more dominantly agricultural than ours, with highly mechanized farms, and their law is not before us. It may contain less safeguards against fraud than 'ours or that of Mississippi. Possible fraud has been introduced into the argument as reason against the validity of the Act, but improperly so for it relates only to the wisdom and expediency of the law, with which the court is not concerned.

There has been an erroneous approach to the whole problem of considering a legislative finding which has been reached after evidence in the form of legislative hearings. The burden of the attack is upon petitioners, which they have not met at all. Their argument seems to ignore the presumption of accuracy of the legislative findings and attacks them with repeated and vehement denials, but no proof. The burden does not rest upon respondents to prove the presumed, in the absence of a factual showing to the contrary.

There is much interesting argument in petitioners’ briefs to show that it is economically profitable for South Carolina machine-farmers to pay the full six cents tax and use gasoline rather than the untaxed, cheaper crude oil or kerosene. But that is not the point of the legislation. The use of the taxed or the untaxed, less efficient fuel occasions a financial handicap to South Carolina farmers, in competition with those of other states, which the law is intended to remove. But that, too, is beside the point. However, it is worth citing from the arguments, which appear to be undisputed, that three-fourths of the states of the Union pro vide tax exemption or concession in this respect to farm-used machinery, and no condemnatory court decisions thereabout have been cited.

The foregoing answers points (a) and (c) of petitioners’ question I; and reverting to their objection (b) to the finding of the legislature of no loss of revenue, that it is rather a prognostication, that also is untenable. Practically all tax laws look to the future and their results are not predictable with mathematical accuracy. Upon the cited evidence, and possibly other and additional which is not before us, the General Assembly has decided that the gasoline tax revenue will not decline but increase. How could it otherwise make such determination, except from observation of the operation of the law? There comes to mind the old story in rhyme of the fearful mother who instructed her darling daughter to learn to swim by hanging her clothes on a hickory limb but admonished her not to go near the water.

Our leading case upon state highway financing is State ex rel. Richards v. Moorer, 152 S. C., 455, 150 S. E., 269. It appears also to be a prime authority upon the value and importance of a legislative finding in the form of a preamble to an act. It was said in the opinion concerning the Bond Act of 1929, which recited prognostic findings in its preamble, as follows:

“It (the General Assembly) first satisfied itself of the sufficiency for this purpose of the gasoline tax and the license fees to be collected during a period of years. In the preamble it is declared: ‘The State Highway Commission has made a conservative estimate of revenues and liberal estimate of expenses, from which it appears that the revenues to be derived annually during the next twenty-four years from the gasoline tax and the motor vehicle fees will be sufficient, without resorting to a property tax, to pay the sums required’,” etc.

It cannot be less accurately said now that the legislature has satisfied itself that enabling farmers to operate their machinery with gasoline instead of less efficient but tax-free kerosene or crude oil will not adversely affect the revenues from the gasoline tax. In fact,- they have found (and the court has not found, and has no evidence before it to find, differently) that one cent tax (imposed by the act) upon the farm-used gasoline will increase the revenues.

The opinion in Richards v. Moorer contains -the further significant language, apropos here: “So, in order to meet the contingency * * * the legislators, as good business men, having at heart the best interest of the state in the accomplishment of the thing sought to be done, provided * * *” etc.

Is there anything before us in this contest to indicate that the legislature is not still composed of “good business men, having at heart the best interest of the state”, or that they are less reliable fact-finders than they were in 1929 ? We do not think so.

It seems to- us that the factual situation so forcibly shown by the figures which have been cited leaves nothing in the contention that the act impairs the contracts of the petitioners who are certificate holders. The funds which petitioners say will be curtailed by the operation of the act are not pledged in their entirety, by any means, to the payment of the financial obligations of the highway department; and it is not even so alleged by the petitioners. Payment of the certificates and interest thereon is only one of the purposes, second, in order of priority only to the cost of operation of the department, which latter is limited to $450,000.00 per year, now estimated at the lesser figure of $400,000.00. Reference to the official figures given in some detail above shows the impregnably secure position of the petitioners who hold certificates of indebtedness.

The Legislature has found, and not unreasonably as we have seen, that there will be no loss of revenue, but let us take petitioners’ position at its best and by their own contention, for which we copy from their brief, as follows:

“Taking figures comparable with those in other states which have a similar exemption, it may be estimated that something like five million gallons per year would be involved in the refunds under the Act, after the same becomes more widely known and understood by farmers. Five million gallons with the five (5‡) cents tax imposed would yield the State Two Hundred and Fifty Thousand ($250,000.00) Dollars in revenue. It therefore would take thirty-million gallons of gasoline to produce at five-sixths of a cent per gallon the revenues that would be lost through the elimination of the five (5‡) cents gasoline tax.”

It may fairly be assumed that this is an extreme view of the possibility of reduction in revenue by application of the law' for it is the extent of petitioners’ argument upon the point and is, of course, widely diverg-ent from the legislature’s finding that there will be no loss, but increase, of revenue under the law. Application of petitioners’ contended annual loss of $250,000.00 to the aggregate of the revenues of the department shows at a glance its comparative insignificance. Such loss would only serve to curtail construction and would not touch the ability of the department to meet its obligations to petitioners and other certificate holders. It would at worst reduce the annual construction of new highways by about twenty-five miles or less, under the current, published cost of bituminous surfacing. There is no allegation of the petition which is in contradiction of this plain fact, no claim that the working of the law, in the most pessimistic view of it, will affect the payment of the principal and interest of the obligations held by petitioners and other like certificate holders. That is the inconsistency of petitioners’ position upon this point. Their contracts from the state will not be, in fact, impaired, in the worst view of the law but there will only be decreased the maintenance and construction funds of the department. This the legislature is not prohibited by the constitution from doing.

In this connection there has been published in the press, and the fact is contained in the record, that the department is planning a construction program for the next three years which will entail the expenditure of $42,000,000.00 by its own large means and prospects and such federal aid as will be obtainable during that period. Under petitioners’ estimate in argument of an annual loss of $250,000.00 on account of the law now assailed, the forty-two million dollar three-year construction program would be reduced to $41,-250,000.00 ($42,000.00 — 3 yrs. x $250,000.00 Annual loss). The contest is thus seen to be of not near the consequence that the pleadings promised.

Petitioners’ main reliance for their argument that the law violates the contract clauses of the state and federal constitutions in the case of Martin v. Saye, 147 S. C., 433, 145 S. E., 186, which, upon examination, does not sustain the contention. There the applicable section (No. 4) of the 1927 act which was under review (35 Stat. 1081) provided that the premium and accrued interest received from the purchaser of the bonds, after payment therefrom of certain expenses, “shall be applied to the payment of interest on the bonds.” Thus the dedication was exclusive of all other purposes and objects. The court concluded that the moneys could not be diverted by subsequent legislation to the improvement of other roads than those for the construction of which the bonds were issued. This digest of the decision differentiates it from the present problem. Here the gasoline tax revenues are devoted to several purposes, not only to the payment of the obligations in question, but to administration, maintenance, construction of new roads, etc., as we have seen. And this is a fatal fallacy of petition ers’ argument. They treat the highway revenues as having been devoted by law to the single object of the payment of debt obligations, which is not true, and there are abundant revenues in sight for all designated purposes except that the completion of the construction of the state highway system will be somewhat deferred, if loss of revenue results from the law, and that is for the decision of the legislature. The gasoline tax is not inviolable for the purpose of paying highway indebtedness; and the contrary is the mistaken premise of petitioners’ position.

It is like the case of one who registers in a hotel and is given a room or suite there. It is his exclusive domain but he has no control over other rooms and suites which are let to others. The petitioners who are bond or certificate holders are comfortably and safely quartered in the structure of the highway revenues but their security, and therefore their right, does not extend to the whole building. It is as if the hotel proprietor -should close to occupancy another room or suite, or even a floor of such, not taken by this supposed guest. He could not complain for his accomodation would not be disturbed. Nor can petitioners complain.

Until comparatively recent years bonds issued by the state and its subdivisions were almost invariably paid by property taxes. It was (and is, in such cases) usual for the enabling act to provide for the levy of sufficient millage by the administrative officers to meet the principal and interest maturities. The statute books are full of such enactments and sections 5336, 5414, 7321 and 7329 of the Code afford examples of general laws so providing.

The levy is flexible to meet the exigencies of the circumstances; and one never heard of question being raised as to the authority and power of such administrative officers to reduce the levy when it becomes larger than necessary to meet the obligations. Yet petitioners apparently contend that no reduction of; or exemption from, the gasoline tax is legally possible by the legislature so long as there is outstanding a solitary certificate of indebtedness or there remains a mile of state road unpaved. We do not think this position is supported by reason or authority.

Logical extension and application of the petitioners’ argument would prevent the use of any of the highway revenues for any purpose other than the payment of principal and interest of petitioners’ and others’ certificates of indebtedness and reimbursement obligations. 'They are the only contracts involved. Are they impaired any more by refunding five cents of the tax on farm machinery-used gasoline, even should such course cost $250,000.00 per year, than by spending $250,000.00 on new highway construction ? We do not think so. Certainly each leaves the department equally poorer in funds. But its obligations have not been impaired in a constitutional sense, and fortunately they should not be worth one whit less in the financial markets.

It is said in one of the briefs that many of the highway bonds or certificates of indebtedness sell on today’s markets at a price which yields about half the interest rate upon which they were originally sold by the state, and their high investment value and desirability is well known. No sound reason has been suggested in this litigation why this record will not be maintained. It is an irrefutable testimonial to the fine judgment and administration of the department and commission. If and when experience is had in the working and effect of the present law we are confident that whatever changes may be necessary- or desirable in the financing of the department will be accurately ascertained and faithfully followed to the end that the splendid record will be preserved.

It is just impossible to- see any impairment of petitioners’ contracts by the act under attack, even disregarding the findings of the legislature (which have not been overcome) and granting the accuracy of petitioners’ prediction of an an nual loss in revenue of $250,000.00. The act works no deviation in the terms of the contracts and does not affect their enforceability or the means of collection. The holders have no right to the preservation of all of the highway revenues intact. The “pledge” to them is only of sufficient of the funds to pay the principal and interest of the certificates of indebtedness as they mature. And there is not the slightest danger of default in prospect, even in the view which petitioners present in argument.

The decisions of the United States Supreme Court (which of course, are controlling of the construction of the contract clause of the federal constitution) which are cited in the opinion of Mr. Justice Lide are, in our view, of no help here. Reference to them shows that they were concerned with other problems than that now presented and, on that account, they need not be reviewed. Their facts differentiate them.

The nearest approach to the facts of this case that we have been able to find in the decisions of the Supreme Court is Gilman v. Shebygan, 67 U. S., 510, 17 L. Ed., 305. There a city issued bonds under an act which required the levy of taxes upon all of the taxable property of the city for the payment of the bonds. Some years later, with the bonds outstanding, the state legislature passed an act whereby it was required that the levy should thereafter be on real estate exclusively, exempting personalty. A defaulting real estate taxpayer attacked the subsequent act upon the ground that the bond issue was authorized upon a tax on all the taxable property and the bonds were issued and taken upon the faith of that act, the provisions of which constituted a contract with the bondholders which the subsequent act sought to violate. On this contention the Supreme Court said: “The imposition, modification, and removal of taxes, and the exemption of property from such burdens, is an ordinary exercise of the power of state sovereignty. There is no pledge, express, or implied, that this power should not thereafter be exercised.” The Court further commented that there was no allegation that the remaining tax levied, on real estate alone, was insufficient, and remarked that the bondholders were not complaining. The latter at first blush seems rather to weaken the decision as an authority here, but upon reflection we think it loses none of its weight on that account. In this case bondholders (certificate holders) are before us, but they have no grounds of complaint. They are shadowboxing. Their rights áre uninjured and there is no prospect of injury to them or impairment of the obligations of their contracts. The conclusion of the court in Gilman v. Sheboygan is consonant with the expression which is found in the rather recent case of Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U. S., 502, 86 L. Ed., 1629, 62 S. Ct., 1129, as follows: “The Constitution/ is ‘intended to preserve practical and substantial rights, not to maintain theories.’ Davis v. Mills, 194 U. S., 451, 457, 24 S. Ct., 692, 695, 48 L. Ed., 1067.”

Suppose gasoline should soon become obsolete as a motor fuel and fall into disuse, which is not a fantastic thought in this “atomic” age of rapid scientific development, would petitioners resist repeal of the gasoline tax (then worthless) and the levy of another tax, with the proceeds of which the obligations held by them might be paid? Hardly, and yet their present “theory” would still stand. The one position is scarcely less practical than the other.-

While possibly not directly in point, the case of Michaels v. Barrett, 355 Ill., 175, 188 N. E., 921, is interesting for it involved attack upon the statutory diversion of a portion of the gasoline tax revenues of that state from formerly designated purposes to pay interest and principal maturities of bonds issued to obtain relief funds for aid of the destitute in the recent depression. The point was urged in that litigation, as here, that contracts for the payment of highway bonds were impaired by the diversion. The statute there under attack provided that one-third of the proceeds of the state gasoline tax should be apportioned to the counties and disbursed, first, to pay the interest on, and the maturing principal of, the emergency relief bonds, and thereafter for any one or more of seven purposes, one of which was -the payment of highway bonds. The court held that under these circumstances the contractual relationship asserted by the plaintiff taxpayer did not arise and pithily said that a nonexistent obligation cannot be impaired. The problem was at least similar to ours now and the Illinois court’s solution is helpful, for the certificate-holding petitioners before us have no contract right to all of our state gasoline tax revenues and, being unable to rightfully assert such, cannot successfully claim the constitutional impairment of a contract which does not exist.

Just as there is no contract impairment of petitioners’ certificates because there was and is no contract to hold subject to them all of the proceeds of the five cents gasoline levy, there is no impairment in the constitutional sense because the ability of the state to meet the obligations is not jeopardized. This is the simple but satisfactory answer to the controversy and is illustrated by many of the state and federal decisions collected in the annotation in 156 A. R. R., 1264. It is there said by the editor, with supporting cases in the footnotes:

“The constitutional objections to legislation reducing the taxing power of a municipality would not seem to be applicable where the municipality still has adequate revenues or resources with which to pay its obligations according to their terms. A constitutional limitation upon the rate of taxation by municipalities may be applied even to levies for the purpose of paying pre-existing debts of the municipality, unless there is an actual impairment of such obligations. * * * And a statute changing the basis or method of assessing- property for taxation does not unconstitutionally impair the obligation of pre-existing bonds, although resulting in a reduction of taxes, if sufficient revenues will remain available under the new mode of assessment to pay the principal and interest of the obligations as they become due.”

There is an earlier annotation, 109 A. L. R., 817, in which practically the precise question before us is treated. The discussion refers to the power of a taxing authority to exempt property which was subject to a tax levied for pre-existing indebtedness, and whether such subsequent exemption is contrary to the constitutional guaranties against impairment of obligations. The cases reviewed, including Gilman v. Sheboygan, supra, principally involved property taxes and not the more modern license or sales taxes, such as our gallonage tax upon gasoline, but the principle is the same, and appears to be well-settled. The following is quoted from the annotation (109 A. L. R., at p. 818, 819):

“According to the weight of authority, supported by decisions of the United States Supreme Court, the issuance of bonds or the incurring of other obligations by a municipality under the authority of a statute providing for an annual tax on the ‘taxable property’ in the municipality for the payment thereof, does not give rise to a contractual obligation not to exempt thereafter any property from the class of taxable property existing at the time of incurring the obligations; and hence, such an exemption, which would otherwise be within the power of the legislature and which does not unreasonably deplete the security of pre-existing obligations, does not impair the obligation thereof, within the prohibition of the contract clause of the Federal Constitution. Gilman v. Sheboygan (1863) 2 Black. (U. S.), 510, 17 L. Ed., 305; Arkansas S. R. Co. v. Louisiana & A. R. Co (1910), 218 U. S., 431, 54 L. Ed., 1097, 31 S. Ct., 56; State, Hall, Prosecutor v. Parker (1869), 33 N. J. L., 312; Bailey v. Sutch (1867), 6 Phila. (Pa.), 408. And see Palo Verde Irrig. Dist. v. Seeley (1926), 198 Cal., 477, 245 P., 1092.”

If petitioners’ position were granted, that the law in operation will cause the gasoline tax receipts to fall off, despite the factual finding of the General Assembly to -the contrary, it should be observed that there is no practical difference between decreasing the revenue for highway purposes and increasing the obligations upon it, certainly so far as bondholders’ interests are concerned. We have in mind the repeated legislative additions to the system of state highways. Statistics before us show that the mileage has grown from about 6,000 in 1929 to approximately 17,000' when the commitments of existing legislation are fulfilled. Petitioners urge this growth of the system against the validity of the present law, but they do not contend, as consistency requires of them, that the various legislative acts adding mileage are unconstitutional diversions of highway revenues in the respective amounts required for the additional expenditures for maintenance and construction. They are expenditures which were not encompassed within the stated purposes of the Bond Act of 1929 and surely lessen the overall ability of the highway department to meet its obligations.

The act of 1936, No. 831, 39 Stat., 1557 (which was passed over executive veto as was that before us) contained provisions for reductions in the annual license tax fees theretofore imposed upon motor vehicles (compare the rates provided by sec. 5894 of the 1932 Code), which were pledged for highway purposes and the payment of road and bridge obligations by the Act of 1929, 36 Stat. 670 (Code of 1942, sec. 5947 et seq.), just as plainly and effectively as were the proceeds of the five cents per gallon gasoline tax. The 1936 act was under constitutional and other attack in the action reported as State ex rel. Coleman v. Lewis et al., 181 S. C., 10, 186 S. E., 625. A multitude of points of alleged vulnerability was made and disposed of by the court, but that now pressed was apparently not even raised. Similarly, act No. 770 of 1934 provided a reduction of 50% in the annual license fees of most vehicles; and No. 1196 of the same year even provided a refund of 50% of certain motor vehicle fees already legally collected (38 Stat., pp. 1348 and 2257), all without court contest. Moreover, the tax upon gasoline consumed in aircraft was lifted from the purpose to which it was formerly dedicated by the Act of 1929 and devoted to the support of the State Aeronautics Commission and its activities by Act No. 317 of 1935, 39 Stat. 447 (Code of 1942, sec. 7112-20), the propriety of which seems never to have been challenged in the courts. Upon these occasions holders of state highway obligations were evidently undisturbed and we think the present petitioners who complain see only a bogeyman.

From the foregoing it appears that the legislature has not diverted any gasoline tax revenues or endangered the payment of the obligations for which they are pledged, so the contract clauses of the federal and state constitutions have not been violated by the challenged enactment. The latter is inescapably true for there is no impairment or possibility of such. Petitioners’ argument that funds for the completion of the State Highway System will be depleted, if true in its factual phase (which has not been shown), is beside the point of this litigation. It goes only to legislative policy with which the court has nothing to do. The recent course of legislation indicates that the system will grow in mileage like the proverbial snowball does in circumference, and the means to complete it will never quite catch up. (The last example is Act No. 167 of 1945, 44 Stat. 261, adding five thousand more miles.) But that, again, is a matter for the General Assembly, not the court.

The only remaining charge of unconstitutionality (petitioners’ No. Ill) is as follows: “The said Act violates the provisions of the United States and South Carolina Constitutions which prohibit the denial of the equal protection of the laws to all citizens of the State and which prohibit the granting of an exemption from taxation to the arbitrarily defined class specified in the Act.”

Petitioners’ discussion of this ground is brief and cites only the cases of Gregg Dyeing Co. v. Query (166 S. C., 117, 164 S. E., 588) and Eastern Air Transport, Inc., v. Tax Commission (52 Fed. (2d), 456, affirmed in 285 U. S., 147, 52 S. Ct., 340, 76 L. Ed., 673).

The petition, par. VI (b), is as follows upon the alleged point:

“The said Act discriminates against taxpayers of the class in which the petitioners belong, and in favor of farmers, by giving the latter an arbitrary exemption from the tax liability in question, and by discriminating against other special classes of users of gasoline such as the owners of stationary engines, sawmills, and boats, all to the prejudice and loss of the petitioners and other taxpayers to the extent of the depletion of the funds available for the payment of the obligations of the South Carolina Highway Department, and subjecting the petitioners and other taxpayers of the State to the risk of property and other taxation to make up the loss of revenues sustained as the result of the statute in question.”

It is seen that this reaches back into the “diversion” contention which has been found untenable. However, petitioners say in their brief : Gregg Dyeing Company case, supra, and in the Eastern Air Transport case, supra, that the public policy in this State 'is that all consumers shall pay the gallonage tax of six (6‡) cents’. As these cases hold, the burden of the tax is imposed upon the consumer of gasoline and the purpose and effect of the South Carolina legislation is to tax all users alike.”

“Although this Court recognizes the elementary principle that the constitutional requirements as to equality and uniformity of taxation are in strictness applicable only to ad valorem taxes and not to excise taxes, and that excise taxes may be imposed in a varying scale, so long as all persons in the same class are treated alike, it was held in the

The argument overlooks that public policy is as declared by the makers of the laws. Weeks v. New York L. Ins. Co., 128 S. C., 223, 122 S. E., 586, 35 A. L. R., 1482; Alderman v. Alderman, 178 S. C., 9, 181 S. E., 897, 105 A. L. R., 102. Surely it follows that a formerly existing principle of public policy cannot be invoked to extend the life of a tax which has been repealed or provision made for its refund by legislative enactment. “Rules of * * * policy, therefore, disappear in the light of expressed legislative declaration.” City of Greenville v. Query, 166 S. C., 281, 164 S. E., 844.

This portion of petitioners’ brief is quoted from again, as follows:

“It is to be borne in mind that we are not dealing with the question whether an exemption of the present character, if contained in the original 1929 Act imposing the tax, would have been constitutionally supportable. If the General Assembly had concluded then to make the exemption, it would have established a policy contrary to that arising out of the 1929 legislation and described in the Gregg Dyeing Company case, and thus would have eliminated from consideration the interlocking factors arising out of the issuance of immense amounts of funded obligations on the faith of the policy originally announced. The discriminatory characteristics of the Act would not, under such circumstances, have so deeply affected the application of constitutional provisions to the 1945 Act.”

Petitioners’ concession that exemption of farm-used gasoline in the earlier law would not have violated the equal protection provisions of the federal and state constitutions sufficiently answers any contention that such subsequent change or amendment of the law is invalid on that account, and discussion of the point need not be extended. But there is a wealth of authority for the proposition that agriculture constitutes a class which may be favored in, or exempted from, certain forms of taxation and regulation without running afoul of the equal protection provisions of the constitutions. 2 Am. Jur., 399; 12 idem, 194; 89 A. L. R., 1436, 109 idem, 570; 130 idem, 1329; State ex rel. Coney v. Hicklin, 168 S. C., 440, 167 S. E., 674 (affirmed, Hicklin v. Coney, 290 U. S., 169, 78 L. Ed., 247, 54 S. Ct., 142). It is interesting to-note that the latter case related to the use of the highways of this state.

An adjudication that an act of the legislature is violative of the constitution, state or federal, and, therefore, invalid calls into play a delicate power of the courts and should be exercised with utmost caution and only in clear cases. It is a “balance” of the government of checks and balances and constitutes a restraint upon the representatives of the people, whose the government is; and those representatives, constituting the legislature, are vested with plenary powers of government, limited only by the constitution, with which, it must be assumed, they conscientiously try to comply. In the interpretation and application of it, courts are and should be cognizant of a strong presumption in favor of the validity of legislation. It has been often said by this and other courts that unconstitutionality is found only when it is seen beyond a reasonable doubt. 16 C. J. S., 265; 11 Am. Jur., 719; 1 Cooley’s Constitutional Limitations, 371 et seq., and the myriad cases cited in the footnotes to these texts; South Carolina decisions in 7 S. E. D., 465 et seq., Constitutional Law, key number 48. We think there is no doubt of the constitutionality of the Act of 1945 which has been so vigorously assailed; but-if there were, it should be re solved in favor of validity in keeping with this tenet of constitutional government.

The majority of the Court having concurred in the foregoing, the injunction pendente lite, heretofore issued, is dissolved and permanent injunction refused.

Petition dismissed.

Messrs. Associate Justices Fishburne and OxnEr concur. Mr. Chief Justice Baker and Mr. Acting Associate Justice L. D. Tide dissent.