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Thorpe v. Mahin, 43 Ill.2d 36, 250 N.E.2d 633

Facts

The case originated from taxpayers seeking a declaratory judgment that the Illinois Income Tax Act was invalid and an injunction to prevent tax collection. The court reviewed the Act, which imposes a tax on net income at different rates for individuals and corporations. The petitioners argued that the income tax was essentially a property tax and thus unconstitutional, while the respondents contended it was a nonproperty tax.

The Act is comprehensive and contains the following general salient features. The tax is measured by net income and is imposed on the privilege of earning or receiving income.

Issue

The main legal issues were whether the Illinois Income Tax Act constituted a property tax subject to constitutional limitations and whether the General Assembly had the authority to impose such a tax.

The first question concerns the nature of the tax. Petitioners argue that it is a property tax; that, as such, it is subject to the limitations of article IX of our constitution, S.H.A., concerning a property tax; and that among the constitutional limitations the tax transcends is the one requiring a property tax to be levied by valuation on every person and corporation.

Rule

The court ruled that an income tax is not a property tax and is not subject to the limitations imposed by the Illinois Constitution on property taxes. The court also established that the General Assembly has the power to impose a tax on the privilege of earning or receiving income.

We hold that the tax in question is not a property tax and therefore does not come within the limitations article IX of our constitution imposes on property taxes.

Analysis

The court analyzed the nature of the income tax and distinguished it from property taxes, citing precedents that support the classification of income tax as an excise tax. The court found that the classifications for different tax rates were reasonable and justified based on the differences between corporate and individual income earners.

The court in Bachrach also implied that the ‘overwhelming weight of judicial authority’ holds that an income tax is a property tax. (349 Ill. 579, 591-595, 182 N.E. 915.) We have reviewed the many State cases dealing with this question and find the weight of authority to be that an income tax is not a property tax.

Conclusion

The court upheld the Illinois Income Tax Act, ruling that it is valid and that the classifications within the Act are reasonable. The judgment was in favor of the respondents.

Judgment for respondents.

Who won?

Respondents prevailed in the case because the court found that the Illinois Income Tax Act was constitutional and that the General Assembly had the authority to impose the tax.

Respondents prevailed in the case because the court found that the Illinois Income Tax Act was constitutional and that the General Assembly had the authority to impose the tax.

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