Double Trouble

Northwest Airlines Inc. flies over eight states and Canada. But its home port is St. Paul's Holman Municipal Airport, which lies in Ramsey County. In 1939 Ramsey County decided to slap a personal property tax on all of Northwest's planes, and sent it a bill for $16,913. Northwest objected, arguing: Northwest was already taxed on its planes by Minnesota and six other states, mainly on the mileage flown in each. Why should it pay a tax twice? Alarmed, the other 18 U.S. airlines joined Northwest in fighting the tax.

Last week, the U.S. Supreme Court, in a 5-to-4 decision, upheld the right of Minnesota to levy the full tax. The decision muddled the problem of airlines taxation even more. In the majority opinion, Justice Felix Frankfurter held that: 1) Minnesota had the right to levy the full tax because Northwest was incorporated there; 2) the right of other states to tax Northwest was a matter "not now before us." Although Justice Hugo Black concurred, he objected because the decision still left Northwest wide open to taxation by other states. Then he politely argued against "judicial formulation of general rules" (i.e., legislative acts by the courts) in a tax area in which Congress has not legislated. In this, they were joined by Chief Justice Harlan F. Stone in the dissenting opinion.

In effect, the Court had two majorities, one giving any state in which an airline is incorporated the right to tax its personal property 100%, the other giving all other states in which it operates the right to pile their own taxes on top. The result, wrote Chief Justice Stone gloomily, may be to tax airlines "far in excess of their value" and impose such a tax burden that "few interstate carriers . . . could survive."

The one hopeful note for airlines was the Court's agreement that the job of clearing up the muddle is one not for the Court but for Congress. At week's end, the Civil Aeronautics Board was hastily preparing to draft legislative recommendations. It hoped to get action on them in Congress in time to avert a crippling financial blow to U.S. airlines.

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