Is the Power to Tax the Power to Destroy?
1. Power to tax is the power to destroy (Marshall Dictum) refers to the unlimitedness and the degree or vigor withwhich the taxing power may be employed to raise revenue.- the financial needs of the State may outrun any human calculation, so the power to meet those needs bytaxation must not be limited even though taxes become burdensome or confiscatory.2. Power to tax is not the power to destroy while the Supreme Court sits (Holmes Dictum) the power to tax knowsno limit except those expressly stated in the Constitution.
Marshall and Holmes Dictum Reconciled
Although the power to tax is almost unlimited, it must not be exercised in an arbitrary manner. If the abuse isso great so as to destroy the natural and fundamental rights of people, it is the duty of the judiciary to holdsuch an act unconstitutional.
Purposes and Objectives of Taxation
1. Revenue basically, the purpose of taxation is to provide funds or property with which the State promotes thegeneral welfare and protection of its citizens.2. Non-Revenue(KeyPR2EP)
Promotion of general welfare
Reduction of social inequality
Encourage economic growth
Power of Judicial Review in Taxation
As long as the legislature, in imposing a tax, does not violate applicable constitutional limitations orrestrictions, it is not within the province of the courts to inquire into the wisdom or policy of the exaction, themotives behind it, the amount to be raised or the persons, property or other privileges to be taxed.The courts power in taxation is limited only to the application and interpretation of the law.Note: The principle of judicial non-interference extends to the administrative realm.
Aspects of Taxation
Levy or imposition of the tax (tax legislation)
Enforcement or tax administration (tax administration)
Basic Principles of a Sound Tax System(KeyFAT)
Fiscal Adequacy sufficiency to meet government expenditures and other public needs.
Administrative Feasibility/ Convenience capability of being effectively enforced.
Theoretical Justice based on the taxpayers ability to pay; must be progressive. (Ability to Pay Theory)
TAXATION POLICE POWER EMINENT DOMAIN
To raise revenue To promote public purpose through regulations To facilitate the States need of property for publicuse
2. Amount of Exaction
No limit Limited to the cost of regulation, issuance of the license or surveillance No exaction; but private propertyis taken by the State for public purpose.
- No special or direct benefit is received by the taxpayer; merely general benefit of protectionNo direct benefit is received; a healthy economic standard of society is attained A direct benefit results in theform of just compensation to the property owner
4.Non-impairment of Contracts
- Contracts may not be impaired Contracts may be impaired Contracts may beimpaired
5.Transfer of Property Rights
- Taxes paid become part of public funds No transfer but only restraint in its exercise Transfer is effected in favor of the State
- All persons, property and excises All persons, property, rights and privileges Only upon a particularproperty
Systems of Taxation
Global System Scheduler System
A system employed where the tax system views indifferently the tax base and generally treats incommon all categories of taxable income of the individual. A system employed where the incometax treatment varies and is made to depend on the kind or category of taxable income of thetaxpayer.