18. Lutz v. Araneta, G.R. No.

L 7859

Facts:

Commonwealth Act No. 567, as amended, otherwise known as the Sugar Adjustment Act, is designed
to obtain a readjustment of the benefits derive from the sugar industry and to stabilize it to prepare it for
the eventuality of the loss of its preferential position in the United States market and the imposition
of the export taxes.

Plaintiff, Walter Lutz, as a Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, appeals
to recover the amount of P14, 666.40 paid by the estate tax under Section 3 of the Act for the crop years
1948-1949 and 1949- 1950 from the collector of Internal Revenue. Lutz argued that the tax imposed by
the law in question was void and unconstitutional because such imposition was only levied for the
purpose of aiding and supporting the sugar industry, which in his opinion, is not a public purpose for
which a tax may be constitutionally levied.

Issue:

Whether or not the support of the sugar industry is a public purpose for which a tax can be levied under
the Constitution.

Ruling:

Yes, the support of the sugar industry is a public purpose for which a tax can be levied under the
Constitution.

The Court claims that Lutz’s assertion that the tax provided by Commonwealth Act No. 567 is a pure use
of the taxing power is the basic defect in his argument. The tax is imposed for regulatory purposes to
provide a means for the threatened sugar industry to be stabilized and rehabilitated. The enactment of
the Act is primarily an exercise of the police power. Since the production of sugar is one of the great
industries in our country, it employs thousands of laborers, contributes significantly to the state’s
wealth, and is a significant source of the foreign exchange needed by the government. Therefore, its
promotion, protection, and advancement, have a significant positive impact to the general welfare.
Hence, it was competent for the legislature to find that the general welfare demanded that the sugar
industry should be stabilized in turn; and in the wide field of its police power, the law-making body
could provide that the distribution of benefits therefrom be readjusted among its components to enable
it to resist the added strain of the increase in taxes that it had to sustain.