At the outset, the Court did not regard the equal protection clause as having any bearing on taxation. 192 It soon, however, took jurisdiction of cases assailing specific tax laws under this provision, 193 and in 1890 it cautiously conceded that ''clear and hostile discriminations against particular persons and classes, especially such as are of an unusual character, unknown to the practice of our government, might be obnoxious to the constitutional prohibition.'' 194 But it observed that the equal protection clause ''was not intended to compel the States to adopt an iron rule of equal taxation'' and propounded some conclusions valid today. 195 In succeeding years the clause has been invoked but sparingly to invalidate state levies. In the field of property taxation, inequality has been condemned only in two classes of cases: (1) discrimination in assessments, and (2) discrimination against foreign corporations. In addition, there are a handful of cases invalidating, because of inequality, state laws imposing income, gross receipts, sales and license taxes.
Classification for Purpose of Taxation .--The power of the State to classify for purposes of taxation is ''of wide range and flexibility.'' 196 A State may adjust its taxing system in such a way as to favor certain industries or forms of industry 197 and may tax different types of taxpayers differently, despite the fact that they compete. 198 It does not follow, however, that because ''some degree of inequality from the nature of things must be permitted, gross inequality must also be allowed.'' 199 Classification may not be arbitrary. It must be based on a real and substantial difference 200 and the difference need not be great or conspicuous, 201 but there must be no discrimination in favor of one as against another of the same class. 202 Also, discriminations of an unusual character are scrutinized with special care. 203 A gross sales tax graduated at increasing rates with the volume of sales, 204 a heavier license tax on each unit in a chain of stores where the owner has stores located in more than one county, 205 and a gross receipts tax levied on corporations operating taxicabs, but not on individuals, 206 have been held to be a repugnant to the equal protection clause. But it is not the function of the Court to consider the propriety or justness of the tax, to seek for the motives and criticize the public policy which prompted the adoption of the statute. 207 If the evident intent and general operation of the tax legislation is to adjust the burden with a fair and reasonable degree of equality, the constitutional requirement is satisfied. 208
One not within the class claimed to be discriminated against cannot raise the question of constitutionality of a statute on the ground that it denies equal protection of the law. 209 If a tax applies to a class which may be separately taxed, those within the class may not complain because the class might have been more aptly defined nor because others, not of the class, are taxed improperly. 210
Foreign Corporations and Nonresidents .--The equal protection clause does not require identical taxes upon all foreign and domestic corporations in every case. 211 In 1886, a Pennsylvania corporation previously licensed to do business in New York challenged an increased annual license tax imposed by that State in retaliation for a like tax levied by Pennsylvania against New York corporations. This tax was held valid on the ground that the State, having power to exclude entirely, could change the conditions of admission for the future and could demand the payment of a new or further tax as a license fee. 212 Later cases whittled down this rule considerably. The Court decided that ''after its admission, the foreign corporation stands equal and is to be classified with domestic corporations of the same kind,'' 213 and that where it has acquired property of a fixed and permanent nature in a State, it cannot be subjected to a more onerous tax for the privilege of doing business than is imposed on domestic corporations. 214 A state statute taxing foreign corporations writing fire, marine, inland navigation and casualty insurance on net receipts, including receipts from casualty business, was held invalid under the equal protection clause where foreign companies writing only casualty insurance were not subject to a similar tax. 215 Later, the doctrine of Philadelphia Fire Association v. New York was revived to sustain an increased tax on gross premiums which was exacted as an annual license fee from foreign but not from domestic corporations. 216 Even though the right of a foreign corporation to do business in a State rests on a license, yet the equal protection clause is held to insure it equality of treatment, at least so far as ad valorem taxation is concerned. 217 The Court, in WHYY v. Glassboro 218 held that a foreign nonprofit corporation licensed to do business in the taxing State is denied equal treatment in violation of the equal protection clause where an exemption from state property taxes granted to domestic cor porations is denied to a foreign corporation solely because it was organized under the laws of a sister State and where there is no greater administrative burden in evaluating a foreign corporation than a domestic corporation in the taxing State.
State taxation of insurance companies, insulated from Commerce Clause attack by the McCarran-Ferguson Act, must pass similar hurdles under the Equal Protection Clause. In Metropolitan Life Ins. Co. v. Ward, 219 the Court concluded that taxation favoring domestic over foreign corporations ''constitutes the very sort of parochial discrimination that the Equal Protection Clause was intended to prevent.'' Rejecting the assertion that it was merely imposing ''Commerce Clause rhetoric in equal protection clothing,'' the Court explained that the emphasis is different even though the result in some cases will be the same: the Commerce Clause measures the effects which otherwise valid state enactments have on interstate commerce, while the Equal Protection Clause merely requires a rational relation to a valid state purpose. 220 However, the Court's holding that the discriminatory purpose was invalid under equal protection analysis would also be a basis for invalidation under a different strand of Commerce Clause analysis. 221
Income Taxes .--A state law which taxes the entire income of domestic corporations which do business in the State, including that derived within the State, while exempting entirely the income received outside the State by domestic corporations which do no local business, is arbitrary and invalid. 222 In taxing the income of a nonresident, there is no denial of equal protection in limiting the deduction of losses to those sustained within the State, although residents are permitted to deduct all losses, wherever incurred. 223 A retroactive statute imposing a graduated tax at rates different from those in the general income tax law, on dividends received in a prior year which were deductible from gross income under the law in effect when they were received, does not violate the equal protection clause. 224
Inheritance Taxes .--There is no denial of equal protection in prescribing different treatment for lineal relations, collateral kindred and unrelated persons, or in increasing the proportionate burden of the tax progressively as the amount of the benefit increases. 225 A tax on life estates where the remainder passes to lineal heirs is valid despite the exemption of life estates where the remainder passes to collateral heirs. 226 There is no arbitrary classification in taxing the transmission of property to a brother or sister, while exempting that to a son-in-law or daughter-in-law. 227 Vested and contingent remainders may be treated differently. 228 The exemption of property bequeathed to charitable or educational institutions may be limited to those within the State. 229 In computing the tax collectible from a nonresident decedent's property within the State, a State may apply the pertinent rates to the whole estate wherever located and take that proportion thereof which the property within the State bears to the total; the fact that a greater tax may result than would be assessed on an equal amount of property if owned by a resident, does not invalidate the result. 230
Motor Vehicle Taxes .--In demanding compensation for the use of highways, a State may exempt certain types of vehicles, according to the purpose for which they are used, from a mileage tax on carriers. 231 A state maintenance tax act, which taxes vehicle property carriers for hire at greater rates than similar vehicles carrying property not for hire is reasonable, since the use of roads by one hauling not for hire generally is limited to transportation of his own property as an incident to his occupation and is substantially less than that of one engaged in business as a common carrier. 232 A property tax on motor vehicles used in operating a stage line that makes constant and unusual use of the highways may be measured by gross receipts and be assessed at a higher rate than taxes on property not so employed. 233 Common motor carriers of freight operating over regular routes between fixed termini may be taxed at higher rates than other carriers, common and private. 234 A fee for the privilege of transporting motor vehicles on their own wheels over the highways of the State for purpose of sale does not violate the equal protection clause as applied to cars moving in caravans. 235 The exemption from a tax for a permit to bring cars into the State in caravans of cars moved for sale between zones in the State is not an unconstitutional discrimination where it appears that the traffic subject to the tax places a much more serious burden on the highways than that which is exempt. 236 Also sustained as valid have been exemptions of vehicles weighing less than 3000 pounds from graduated registration fees imposed on carriers for hire, notwithstanding that the exempt vehicles, when loaded, may outweigh those taxed; 237 and exemptions from vehicle license taxes levied on private motor carriers of persons whose vehicles haul passengers and farm products between points not having railroad facilities or farm and dairy products for producers thereof. 238
Property Taxes .--The State's latitude of discretion is notably wide in the classification of property for purposes of taxation and the granting of partial or total exemption on the grounds of policy, 239 whether the exemption results from the terms of the statute itself or the conduct of a state official implementing state policy. 240 A provision for the forfeiture of land for nonpayment of taxes is not invalid because the conditions to which it applies exist only in a part of the State. 241 Also, differences in the basis of assessment are not invalid where the person or property affected might properly be placed in a separate class for purposes of taxation. 242 Early cases drew the distinction between intentional and systematic discriminatory action by state officials in undervaluing some property while taxing at full value other property in the same class--an action that could be invalidated under the equal protection clause--and mere errors in judgment resulting in unequal valuation or undervaluation--actions that did not support a claim of discrimina tion. 243 More recently, however, the Court in Allegheny Pittsburgh Coal Co. v. Webster County Commission, 244 found a denial of equal protection to property owners whose assessments, based on recent purchase prices, ranged from 8 to 35 times higher than comparable neighboring property for which the assessor failed over a 10-year period to readjust appraisals. Then, only a few years later, the Court upheld a California ballot initiative that imposed a quite similar result: property that is sold is appraised at purchase price, while assessments on property that has stayed in the same hands since 1976 may rise no more that 2% per year. 245 Allegheny Pittsburgh was distinguished, the disparity in assessments being said to result from administrative failure to implement state policy rather than from implementation of a coherent state policy. 246 California's acquisition-value system favoring those who hold on to property over those who purchase and sell property was viewed as furthering rational state interests in promoting ''local neighborhood preservation, continuity, and stability,'' and in protecting reasonable reliance interests of existing homeowners. 247
An owner aggrieved by discrimination is entitled to have his assessment reduced to the common level. 248 Equal protection is denied if a State does not itself remove the discrimination; it cannot impose upon the person against whom the discrimination is directed the burden of seeking an upward revision of the assessment of other members of the class. 249 A corporation whose valuations were accepted by the assessing commission cannot complain that it was taxed disproportionately, as compared with others, if the commission did not act fraudulently. 250
Special Assessment .--A special assessment is not discriminatory because apportioned on an ad valorem basis, nor does its validity depend upon the receipt of some special benefit as distinguished from the general benefit to the community. 251 Railroad property may not be burdened for local improvements upon a basis so wholly different from that used for ascertaining the contribution demanded of individual owners as necessarily to produce manifest inequality. 252 A special highway assessment against railroads based on real property, rolling stock, and other personal property is unjustly discriminatory when other assessments for the same improvement are based on real property alone. 253 A law requiring the franchise of a railroad to be considered in valuing its property for apportionment of a special assessment is not invalid where the franchises were not added as a separate personal property value to the assessment of the real property. 254 In taxing railroads within a levee district on a mileage basis, it is not necessarily arbitrary to fix a lower rate per mile for those having less than 25 miles of main line within the district than for those having more. 255
[Footnote 195] Id. The State ''may, if it chooses, exempt certain classes of property from any taxation at all, such as churches, libraries, and the property of charitable institutions. It may impose different specific taxes upon various trades and professions, and may vary the rates of excise upon various products; it may tax real estate and personal property in a different manner; it may tax visible property only, and not tax securities for payment of money; it may allow deductions for indebtedness, or not allow them. All such regulations, and those of like character, so long as they proceed within reasonable limits and general usage, are within the discretion of the state legislature, or the people of the State in framing their Constitution.'' See Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356 (1973); Kahn v. Shevin, 416 U.S. 351 (1974); and City of Pittsburgh v. Alco Parking Corp., 417 U.S. 369 (1974).
[Footnote 216] Lincoln Nat'l Life Ins. Co. v. Read, 325 U.S. 673 (1945). This decision was described as ''an anachronism'' in Western & Southern Life Ins. Co. v. State Bd. Of Equalization, 451 U.S. 648, 667 (1981), the Court reaffirming the rule that taxes discriminating against foreign corporations must bear a rational relation to a legitimate state purpose.
[Footnote 219] 470 U.S. 869, 878 (1985). The vote was 5-4, with Justice Powell's opinion for the Court being joined by Chief Justice Burger and by Justices White, Blackmun, and Stevens. Justice O'Connor's dissent was joined by Justices Brennan, Marshall, and Rehnquist.
[Footnote 221] The first level of the Court's ''two-tiered'' analysis of state statutes affecting commerce tests for virtual per se invalidity. ''When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry.'' Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579 (1986).
[Footnote 222] F.S. Royster Guano Co. v. Virginia, 253 U.S. 412 (1920). See also Walters v. City of St. Louis, 347 U.S. 231 (1954), sustaining municipal income tax imposed on gross wages of employed persons but only on net profits of business men and self-employed.
[Footnote 243] Sunday Lake Iron Co. v. Wakefield, 247 U.S. 350 (1918); Raymond v. Chicago Traction Co., 207 U.S. 20, 35 , 37 (1907); Coutler v. Louisville & Nashville R.R., 196 U.S. 599 (1905). See also Chicago, B. & Q. Ry. v. Babcock, 204 U.S. 585 (1907).
[Footnote 245] Nordlinger v. Hahn, 112 S. Ct. 2326 (1992).
[Footnote 246] Id. at 2334-35.
[Footnote 247] Id. at 2333.