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Wheeler v. State, 127 Vt. 499, 253 A.2d 136

Facts

The plaintiff, a nonresident taxpayer, earned income in Vermont and was subject to a tax calculated as 25% of his federal tax liability, reduced by the percentage of his adjusted gross income that was not derived from Vermont. In 1968, 30% of his total income was earned in Vermont, leading to a Vermont tax liability of $106.00 after applying the formula. This case followed a previous ruling in Wheeler v. State, which had validated the application of progressive tax rates to nonresident taxpayers.

According to the findings, 30% of this taxpayer's 1968 income was earned in Vermont, amounting to $2,765.59 out of his total earnings of $9,219.00. His liability to Vermont was computed first as 25% of his Federal tax, then reduced again by 70%, corresponding with the share of his income not earned in Vermont. His Vermont tax was $106.00.

Issue

Does the Constitution of the United States bar a State from imposing an effective graduated income tax on nonresidents which, for the purpose of applying the effective graduated rates to which residents are subject, takes into account the nonresident's total net income from all sources, and then reduces the tax by the ratio of in-state income to total income?

Rule

The imposition of a tax on nonresident income based on a percentage of the federal tax liability, adjusted for the proportion of income earned in the state, does not violate equal protection principles.

The imposition on Vermont income of nonresident of tax equal to 25% of nonresident's federal tax on income from all sources reduced by percentage equal to percentage of adjusted gross income which was not Vermont income was not a denial of equal protection.

Analysis

The court applied the established rule from the previous Wheeler case, determining that the tax formula did not discriminate against nonresidents. The court reasoned that the tax was fairly calculated based on the taxpayer's total income, and the reduction for non-Vermont income was a legitimate method of ensuring that nonresidents were taxed equitably in relation to their Vermont earnings.

The tax commissioner and the lower court found no justification for departing from the results in Wheeler v. State, supra 127 Vt. -, 249 A.2d 887.

Conclusion

The court affirmed the lower court's judgment, concluding that the tax formula was constitutional and did not violate the taxpayer's rights.

Judgment affirmed.

Who won?

The State of Vermont prevailed in the case, as the court upheld the constitutionality of the tax formula applied to nonresident taxpayers, finding no error in the application of the law.

The court's final decision or holding in 1–2 sentences.

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