LUTZ VS.

ARANETA

FACTS
Plaintiff Walter Lutz acting as the Judicial Administrator of Antonio Jayme Ledesma’s
Intestate Estate, is pursuing the recovery of P14, 666. 40 in taxes from the collector of
Internal Revenue. The contention lies in the Constitutionality of the tax under Section 3 of
the Act, specifically questioning its validity for being exclusively directed towards aiding the
sugar industry. Lutz, argues that supporting the sugar industry does not constitute a
legitimate public purpose for imposing a tax. The Court of First Instance dismissed the case,
leading the plaintiff to escalate the matter in directly appealing to the Supreme Court.

ISSUE
Whether or not the tax provided for in CA No. 567 a valid exercise of police power?

RULING
Yes. The Court acknowledges the significance of the sugar industry in the nation,
recognizing its role as a major export product, employer of labor and source of wealth and
foreign exchange. Considering its pivotal role in maintaining currency stability, the
legislatures decision to stabilize and readjust benefits within the sugar industry aligns with
the broader concept of promoting the general welfare. The court asserts that, within its
police power, the legislature had the authority to enact laws for the industry’s stability and
address the challenges posed by increased taxes. The safeguarding of a major industry
crucial to the states wealth, which significantly impacts the welfare of a substantial position
of the population, falls within the sovereign’s police power due to its direct or indirect
connection to public interests. The constitutionality of the means outlined in Section 6 of
the law is not challenged, and if both the objective and methods align with constitutional
validity, the state is deemed justified in levying taxes to support these efforts, considering
taxation as a tool of the state’s police power.