Dane v. Jackson

Background

A resident of Brookline challenged a Massachusetts law that distributes state income-tax proceeds among cities, towns, and districts. The income tax itself (enacted after a 1915 state constitutional amendment and a 1916 income-tax law) taxed income from intangible property and exempted that property from local taxation, reducing local revenues. The 1919 law set a formula to reimburse localities for that loss, with staged payments through 1927 and different distribution rules beginning in 1928. The petitioner asked a court to stop the State Treasurer from distributing the funds to other towns.

Reasoning

The Court examined whether the 1919 distribution violated the Fourteenth Amendment’s due process or equal protection clauses because some taxpayers might not personally benefit from money sent to other towns. It held the income tax applies uniformly to all qualifying income, and the distribution formula is part of a wider state tax system designed to correct serious local inequalities—such as wealthy owners of intangible securities clustering in low-tax towns. The Court emphasized that federal courts should not rewrite state tax systems unless a law causes extreme, palpable inequality amounting to arbitrary taking, and it relied on the presumption that municipalities will use funds for public purposes.

Real world impact

The decision leaves the 1919 distribution scheme in place, so towns and cities may receive reimbursements under the statutory schedule and later proportional distributions. It confirms that state legislatures have wide discretion to design tax and distribution systems, and that federal courts will intervene only for extreme constitutional injustices.