410 U.S. 356
93 S.Ct. 1001
35 L.Ed.2d 351
Robert J. LEHNHAUSEN, Petitioner,v.LAKE SHORE AUTO PARTS CO., et al.  Edward J. BARRETT, County Clerk of Cook County,  Illinois, et al., Petitioners,  v.  Clemens K. SHAPIRO et al.
Nos. 71—685, 71—691.
Argued Jan. 15, 1973.
Decided Feb. 22, 1973.
Rehearing Denied Mar. 26, 1973.

See 411 U.S. 910, 93 S.Ct. 1523.
Syllabus
An Illinois constitutional provision subjecting corporations and similar entities, but not individuals, to ad valorem taxes on personalty comports with equal protection requirements, the States being accorded wide latitude in making classifications and drawing lines that in their judgment produce reasonable taxation systems. Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, 48 S.Ct. 553, 72 L.Ed. 927, disapproved. Pp. 359—365.
49 Ill.2d 137, 273 N.E.2d 592, reversed.
William J. Scott, Atty. Gen., for Robert J. Lehnhausen.
Aubrey F. Kaplan, Chicago, Ill., for Edward J. Barrett and others.
Arnold M. Flamm, Chicago, Ill., for Lake Shore Auto Parts Co. and others.
Louis L. Biro, Chicago, Ill., for Clemens K. Shapiro, and others.
Mr. Justice DOUGLAS delivered the opinion of the Court.


1
In 1970 the people of Illinois amended its constitution1 adding Art. IX—A to become effective January 1, 1971, S.H.A., and reading:


2
'Notwithstanding any other provision of this Constitution,      the taxation of personal property by valuation is prohibited      as to individuals.'


3
There apparently appeared on the ballot when Art. IX—A was approved the following:


4
'The amendment would abolish the personal property tax by      valuation levied against individuals. It would not affect the      same tax levied against corporations and other entities not      considered in law to be individuals. The amendment would      achieve this result by adding a new article to the      Constitution of 1870, Article IX—A, thus setting aside      existing provisions of Article IX, Section 1, that require      the taxation by valuation of all forms of property, real and      personal or other, owned by individuals and corporations.'


5
Respondent Lake Shore Auto Parts Co., a corporation, brought an action against Illinois officials on its behalf and on behalf of all other corporations and 'non-individuals' subject to the personal property tax, claiming that the tax violated the Equal Protection Clause of the Fourteenth Amendment since it exempts from personal property taxes all personal property owned by individuals but retains such taxes as to personal property owned by corporations and other 'non-individuals.' The Circuit Court held the Revenue Act of Illinois, as amended by Art. IX—A, unconstitutional as respects corporations by reason of the Equal Protection Clause of the Fourteenth Amendment.


6
Shapiro and other individuals also brought suit alleging they are natural persons who own personal property, one for himself and his family, one as a sole proprietor of a business, and one as a partnership. A different trial judge entered an order in these cases dismissing the complaints except as to Shapiro and members of his class. The trial judge held that all other provisions of Illinois law imposing personal property taxes on property owned by corporations and other 'non-individuals' were unaffected by Art. IX—A, in line with the statement on the ballot, quoted above.


7
All respondents in both cases appealed to the Illinois Supreme Court, which held that Art. IX—A did not affect all forms of real and personal property taxes but only personal property taxes on individuals, which it construed to mean 'ad valorem taxation of personal property owned by a natural person or by two or more natural persons as joint tenants or tenants in common.' 49 Ill.2d 137, 148, 273 N.E.2d 592, 597. As so construed, the Illinois Supreme Court held that the tax violated the Equal Protection Clause of the Fourteenth Amendment. Id., at 151, 273 N.E.2d, at 599, one Justice dissenting.2 The cases are here on writs of certiorari which we granted. 405 U.S. 1039, 92 S.Ct. 1307, 31 L.Ed.2d 579.


8
The Equal Protection Clause does not mean that a State may not draw lines that treat one class of individuals or entities differently from the others. The test is whether the difference in treatment is an invidious discrimination. Harper v. Virginia Board of Elections, 383 U.S. 663, 666, 86 S.Ct. 1079, 1081, 16 L.Ed.2d 169. Where taxation is concerned and no specific federal right, apart from equal protection, is imperiled,3 the States have large leeway in making classifications and drawing lines which in their judgment produce reasonable systems of taxation. As stated in Allied Stores of Ohio v. Bowers, 358 U.S. 522, 526—527, 79 S.Ct. 437, 440—441, 3 L.Ed.2d 480:


9
'The States have a very wide discretion in the laying of      their taxes. When dealing with their proper domestic      concerns, and not trenching upon the prerogatives of the      National Government or violating the guaranties of the      Federal Constitution, the States have the attribute of      sovereign powers in devising their fiscal systems to ensure      revenue and foster their local interests. Of course, the      States, in the exercise of their taxing power, are subject to      the requirements of the Equal Protection Clause of the      Fourteenth Amendment. But that clause imposes no iron rule of      equality, prohibiting the flexibility and variety that are      appropriate to reasonable schemes of state taxation. The      State may impose different specific taxes upon different      trades and professions and may vary the rate of excise upon various      products. It is not required to resort to close distinctions      or to maintain a precise, scientific uniformity with      reference to composition, use or value.'


10
In that case we used the phrase 'palpable arbitrary' or 'invidious' as defining the limits placed by the Equal Protection Clause on state power. Id., at 530, 79 S.Ct., at 442. State taxes which have the collateral effect of restricting or even destroying an occupation or a business have been sustained, so long as the regulatory power asserted is properly within the limits of the federal-state regime created by the Constitution. Magnano Co. v. Hamilton, 292 U.S. 40, 44—47, 54 S.Ct. 599, 601—602, 78 L.Ed. 1109. When it comes to taxes on corporations and taxes on individuals, great leeway is permissible so far as equal protection is concerned. They may be classified differently with respect to their right to receive or earn income. In Lawrence v. State Tax Comm'n, 286 U.S. 276, 283, 52 S.Ct. 556, 558, 76 L.Ed. 1102, a state statute relieved domestic corporations of an income tax derived from activities carried on outside the State, but imposed the tax on individuals obtaining such income. We upheld the tax against the claim that it violated the Equal Protection Clause, saying:


11
'We cannot say that investigation in these fields would not      disclose a basis for the legislation which would lead      reasonable men to conclude that there is just ground for the      difference here made. The existence, unchallenged, of      differences between the taxation of incomes of individuals      and of corporations in every federal revenue act since the      adoption of the Sixteenth Amendment, demonstrates that there      may be.' Id., at 283—284, 52 S.Ct., at 558.


12
It is true that in Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389, 48 S.Ct. 553, 72 L.Ed. 927, the Court held that a gross receipts tax levied on corporations doing a taxi business violated the Equal Protection Clause of the Fourteenth Amendment, when no such tax was levied on individuals and partnerships operating taxicabs in competition with the corporate taxpayers. Justices Holmes, Brandeis, and Stone dissented. Id., at 403—412, 48 S.Ct., at 555 558. Mr. Justice Holmes stated:


13
'If usually there is an important difference of degree      between the business done by corporations and that done by      individuals, I see no reason why the larger businesses may      not be taxed and the small ones disregarded, and I think it      would be immaterial if here and there exceptions were found      to the general rule. . . . Furthermore if the State desired      to discourage this form of activity in corporate form and      expressed its desire by a special tax I think that there is      nothing in the Fourteenth Amendment to prevent it.' Id., at      403, 48 S.Ct., at 555.


14
Each of these dissenters thought Flint v. Stone Tracy Co., 220 U.S. 107, 31 S.Ct. 342, 55 L.Ed. 389, should govern Quaker City Cab. The Flint case involved a federal tax upon the privilege of doing business in a corporate capacity, but it was not laid on businesses carried on by a partnership or private individual. It was, therefore, contended that the tax was 'so unequal and arbitrary' as to be beyond the power of Congress. Id., at 158, 31 S.Ct., at 351. We had not yet held that the Fifth Amendment in its use of due process carries a mandate of equal protection.4 But the Court in dictum stated:


15
'(I)t could not be said, even if the principles of the 14th      Amendment were applicable to the present case, that there is      no substantial difference between the carrying on of business by the corporations taxed,      and the same business when conducted by a private firm or      individual. The thing taxed is not the mere dealing in      merchandise, in which the actual transactions may be the      same, whether conducted by individuals or corporations, but      the tax is laid upon the privileges which exist in conducting      business with the advantages which inhere in the corporate      capacity of those taxed, and which are not enjoyed by private      firms or individuals. These advantages are obvious, and have      led to the formation of such companies in nearly all branches      of trade. The continuity of the business, without      interruption by death or dissolution, the transfer of      property interests by the disposition of shares of stock, the      advantages of business controlled and managed by corporate      directors, the general absence of individual liability, these      and other things inhere in the advantages of business thus      conducted, which do not exist when the same business is      conducted by private individuals or partnerships. It is this      distinctive privilege which is the subject of taxation, not      the mere buying or selling or handling of goods, which may be      the same, whether done by corporations or individuals.' Id.,      at 161—162, 31 S.Ct., at 353.


16
While Quaker City Cab came after Flint, cases following Quaker City Cab have somewhat undermined it. White River Co. v. Arkansas, 279 U.S. 692, 49 S.Ct. 457, 73 L.Ed. 903, involved a state statute for collection of back taxes on lands owned by corporations but not individuals. The Court sustained the statute. Mr. Justice Butler, Mr. Chief Justice Taft, and Mr. Justice Van Devanter dissented, asserting that Quaker City Cab was not distinguishable. The majority made no effort to distinguish Quaker City Cab beyond saying that it did not involve, as did White River, back taxes. Id., at 696, 49 S.Ct., at 459.


17
In Rapid Transit Co. v. New York, 303 U.S. 573, 58 S.Ct. 721, 82 L.Ed. 1024, an excise tax was levied on every utility but not on other business units. In sustaining the tax against the claim of lack of equal protection, the Court said:


18
'Since carriers or other utilities with the right of eminent      domain, the use of public property, special franchises, or      public contracts, have many points of distinction from other      businesses, including relative freedom from competition,      especially significant with increasing density of population      and municipal expansion, these public service organizations      have no valid ground by virtue of the equal protection clause      to object to separate treatment related to such      distinctions.' Id., at 579, 58 S.Ct., at 724.


19
We reached the same result in Nashville, C. & St. L.R. Co. v. Browning, 310 U.S. 362, 60 S.Ct. 968, 84 L.Ed. 1254, where Tennessee had used one system for making assessments under its ad valorem tax law as respects most taxpayers and a totally different one for public service corporations. So far as equal protection was concerned, we said that the grievance of the particular complainant was 'common to the whole class' and not 'invidious to a particular taxpayer.'5 Id., at 368, 60 S.Ct., at 971.


20
Approval of the treatment 'with that separateness' which distinguishes public service corporations from others, ibid., leads us to conclude in the present cases that making corporations and like entities, but not individuals, liable for ad valorem taxes on personal property does not transcend the requirements of equal protection.


21
In Madden v. Kentucky, 309 U.S. 83, 60 S.Ct. 406, 84 L.Ed. 590, a State laid an ad valorem tax of 50¢ per $100 on deposits in banks outside the State and only 10¢ per $1,000 on deposits within the State. The classification was sustained against the charge of invidious discrimination, the Court noting that 'in taxation, even more than in other fields, legislatures possess the greatest freedom in classification.' Id., at 88, 60 S.Ct., at 408. There is a presumption of constitutionality which can be overcome 'only by the most explicit demonstration that a classification is a hostile and oppressive discrimination against particular persons and classes.' Ibid. And the Court added, 'The burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it.' Ibid. That idea has been elaborated. Thus, in Carmichael v. Southern Coal Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245, the Court, in sustaining an unemployment tax on employers,6 said:


22
'A state legislature, in the enactment of laws, has the      widest possible latitude within the limits of the      Constitution. In the nature of the case it cannot record a      complete catalogue of the considerations which move its      members to enact laws. In the absence of such a record courts      cannot assume that its action is capricious, or that, with      its informed acquaintance with local conditions to which the      legislation is to be applied, it was not aware of facts which      afford reasonable basis for its action. Only by faithful      adherence to this guiding principle of judicial review of      legislation is it possible to preserve to the legislative      branch its rightful independence and its ability to      function.' Id., at 510, 57 S.Ct., at 872.


23
Illinois tells us that the individual personal property tax was discriminatory, unfair, almost impossible to administer, and economically unsound. Assessment practices varied from district to district. About a third of the individuals paid no personal property taxes at all, while the rest paid on their bank accounts, automobiles, household furniture, and other resources, and in rural areas they paid on their livestock, grain, and farm implements as well. As respects corporations, the State says, the tax is uniformly enforceable. Illinois says, moreover that Art. IX A is only the first step in totally eliminating the ad valorem personal property tax by 1979 but for fiscal reasons it was impossible to abolish the tax all at once.


24
We could strike down this tax as discriminatory only if we substituted our judgment on facts of which we can be only dimly aware for a legislative judgment that reflects a vivid reaction to pressing fiscal problems. Quaker City Cab Co. v. Pennsylvania is only a relic of a bygone era. We cannot follow it and stay within the narrow confines of judicial review, which is an important part of our constitutional tradition.


25
Reversed.



1
 In 1969, the Illinois Legislature had provided for the submission of the proposed amendment to a referendum vote.


2
 The result was either to reverse with directions to dismiss the complaints or to affirm the judgment that dismissed the complaints. Those two cases were heard by the Illinois Supreme Court along with a petition to file original suit with that court by one Maynard, who owned non-business personal property, and by three school districts. That petition was dismissed.


3
 Classic examples are the taxes that discriminated against newspapers, struck down under the First Amendment (Grosjean v. American Press Co., 297 U.S. 233, 56 S.Ct. 444, 80 L.Ed. 660) or that discriminated against interstate commerce (see Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157, 74 S.Ct. 396, 98 L.Ed. 583) or required licenses to engage in interstate commerce.


4
 See Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884, decided May 17, 1954, which held that federal discrimination (in that case racial in nature) may be so arbitrary as to be violative of due process as the term is used in the Fifth Amendment.


5
 In Atlantic & Pacific Tea Co. v. Grosjean, 301 U.S. 412, 57 S.Ct. 772, 81 L.Ed. 1193, a State classified chain stores for purposes of a chain store tax according to the numer of stores inside and outside the State. The Court sustained the tax, saying: 'The statute bears equally upon all who fall into the same class, and this satisfies the guaranty of equal protection.' Id., at 424, 57 S.Ct., at 776. In Carmichael v. Southern Coal Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245, a State laid an unemployment tax on employers, excluding, inter alia, agriculture, domestic service, crews of vessels on navigable waters, and eleemosynary institutions. The Court sustained the tax, saying: 'This Court has repeatedly held that inequalities which result from a singling out of one particular class for taxation or exemption, infringe no constitutional limitation.' Id., at 509, 57 S.Ct., at 872. And it added: 'A legislature is not bound to tax every member of a class or none. It may make distinctions of degree having a rational basis, and when subjected to judicial scrutiny they must be presumed to rest on that basis if there is any conceivable state of facts which would support it.' Ibid.


6
 Note 5, supar.


