Lehnhausen v. Lake Shore Auto Parts Company

PETITIONER: Lehnhausen
RESPONDENT: Lake Shore Auto Parts Company
LOCATION: Paris Adult Theater

DOCKET NO.: 71-685
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: Supreme Court of Illinois

CITATION: 410 US 356 (1973)
ARGUED: Jan 15, 1973
DECIDED: Feb 22, 1973

Arnold M. Flamm - for Lake Shore Auto Parts Co. and others
Aubrey F. Kaplan - for Edward J
Louis L. Biro - for Clemens K
William J. Scott - for Robert J

Facts of the case


Media for Lehnhausen v. Lake Shore Auto Parts Company

Audio Transcription for Oral Argument - January 15, 1973 in Lehnhausen v. Lake Shore Auto Parts Company

Warren E. Burger:

-- in two consolidated cases, 71-685, Lehnhausen against Lake Shore Auto Parts, and 71-691 Barrett against Shapiro.

Mr. Scott, you may proceed whenever you are ready.

William J. Scott:

Mr. Chief Justice, may it please the Court.

The cases for the Court this morning involve the legitimate and reasonable attempt of the representatives of the people of the State of Illinois to bring in our cake an unworkable tax structure, into accordance with the problems of our modern day society and bring a taxing system that was based in the time when Illinois was an agricultural State over hundred years ago in the line with the concepts of today when we were one of the largest industrial States in the nation.

The tax under consideration was the Personal Property Tax which is unworkable, unjust and unfair to the people of our State.

Now its administration it varied completely throughout the State.

The bulk of the funds came from the assessments and corporations that were easy to ascertain and easy to enforce due to the fact that we could dissolve the corporation if they failed to file their papers and to pay their taxes.

The tax in individuals was administered variously throughout 102 different counties.

One example of the discrepancy was that the downstate agricultural community, the individuals paid $27 million in 1970, and in the industrial areas of Chicago, it was less than $2 million.

It was virtually impossible to ascertain the intangibles and then some of the means of assessing they took into consideration that to tax it at the full rate would be almost a confiscation of the property.

For that reason, the legislature, the elected officials and the members of the delegation to the new constitutional convention all strived to develop an orderly way of phasing out this tax.

Along with that proposition, the legislatures of the State in 1969 also voted to impose the State income tax in the State for the first time.

That income tax was held constitutional by the Supreme Court of Illinois despite the fact that there was a difference in classification of the tax rate for corporations and individuals.

During that same year, the legislature by a joint resolution of the Senate and the House overwhelmingly placed a referendum before the people of the State, stating that the new order to be adopted by the people would eliminate an ad valorem tax on individuals.

That resolution was adopted overwhelmingly, somewhere between seven and eight out of every person in the State voted for it.

The new Constitution took this into consideration of an orderly phase out of the Personal Property Tax, and they provided that for any tax that was eliminated before January 1, 1971 that there could be no new tax placed on this substitute for it, realizing that this had been the main purpose of our State Income tax and that the budgets of the local school districts and local governments had been determined accordingly.

However, with the desire to completely phase out the Personal Property Tax by 1979, the delegates to the constitutional convention provided that any taxes that were eliminated on personal property after January 1, 1971, or in other words, the day after this constitutional amendment, the 1870 Constitution would have become effective, would have to be replaced by a substitute source of revenue on that same source.

So we are talking about the question of whether or not there is any meaningful tax relief for the individual citizens of Illinois as was designated by the legislature, by their elected officials, by their delegates to the constitutional convention in line with the will of the people of the State.

In the case at hand, the Lake Shore Auto Parts Corporation attacked the constitutionality of the Revenue Article providing for the Personal Property Tax, saying that by virtue of the amendment to the 1870 Constitution, the Revenue Article became unconstitutional, claiming that it violated the Federal Constitution and Equal Protection of law.

Faced with that possibility, that the Revenue Article would be unconstitutional and that over $300 million worth of finances every year would be lost to the School District, resulting in a complete chaos in our local government, the Supreme Court of Illinois ruled that the Revenue Article was not unconstitutional because of the amendment, but went on to rule that the amendment to the Constitution was unconstitutional under the Federal Constitution.

In doing so, they reacted without the consideration of the existing fact that a new Constitution had been adopted by delegates representing people of the State and had been adopted by the people of the State.

Now that Constitution specifically recognized the facts involved in the Article 9 Amendments to the previous Constitution and provided for a complete phasing out of the Personal Property Tax.

As a matter of fact new Constitution also placed on the State for the first time in history, the responsibility for the primary funding of education in the State that there was an attempt to modernize our whole taxing structure and to deal with the responsibilities of government.

That under this reasonable scheme it was designed to remove the tax first from the people that have been treated most unjustly, and then do systematically remove the tax completely and that the responsibility of financing schools and local governments would be met by other form such as our new State Income Tax and based on the constitutional obligation that the primary responsibility for education in the State now became --

William J. Brennan, Jr.:

I am not quite clear with Attorney General.

I gather as to ad valorem taxes against corporations, is there a phasing out timetable?

William J. Scott:

Yes sir.

William J. Brennan, Jr.:

And that in some -- is that in a provision of the an existing Constitution or something that's --

William J. Scott:

Yes, what had happened was that in 1970, the State convened a constitutional convention, and for the first time in a hundred years revised our Constitution completely.

In that Constitution, the delegates specifically took notice of this problem that we had in the Personal Property Tax and provided for a phasing out completely of the Personal Property Tax by 1979.