EUGENE M. TRAVIS, STATE COMPTROLLER

The matter, manner and method of taxation has always been an important topic for consideration and discussion by professors and laymen of all countries, states, municipalities and communities. The power of taxation is essential to the very existence of any government, and is absolute and unlimited. However absolute may be the property rights of an individual, it is just and right that he bear his proportion of the cost of conducting and maintaining the government, and power to exact this is always assumed.

In this state the power of taxation rests in the Legislature. It is that body which must determine what shall be each individual's proportion of the public burden the governmental expenses. This power may be abused, and the interest, wisdom and justice of the Legislature and its relations with its constituents, furnish the only security against unjust or excessive taxation. It has been the general rule to so spread this public burden that the individual will be taxed only to the extent of the benefit he is assumed to receive from the protection afforded to his life and property. That rule is being modified and the general tendency is now to tax according to faculty or ability to pay.

The tax law of this state makes all the real estate and all

personal property liable to taxation excepting only such as is expressly exempted. It has been, and is, an opinion quite generally accepted that personal property in this state is not paying its proper proportion of the public taxes; that for some occult or obvious reason, it is not reached by the assessors; my lady's pearl necklace in the city and the plows and hoes of the farmer in the country being, in fact, equally overlooked, the latter, however, more likely to be reached because more easily visible.

The text-book writers and students of taxation seem quite generally of the belief that to reach and tax the great volume of personal property, now admittedly untaxed, would require a listing law, the chief result of which would likely be an increased number of perjurers, or the investment of assessors with inquisitorial power and authority, and a house to house inspection and appraisal, grossly obnoxious and repugnant to any free people.

At its last session, the Legislature was confronted with a serious situation; the amount required to meet the current expenses of state and municipal government, increased to a considerable extent by the World War, with its fixed charges, was the largest in the history of the state and it was deprived of any receipts from liquor taxes. To meet the existent condition it chose to enact chapter 627 of the laws of 1919 which added article 16 to the tax law, and is colloquially known as the income tax law.

The rate of tax imposed by this law is one per centum of net incomes in excess of $10,000; two per centum on the next $40,000 of such income and three per centum on such income exceeding $50,000 in any year. In arriving at gross income of a taxpayer there are excluded receipts from life insurance policies upon death of insured, returned premiums, gifts and inherited property, amounts received in form of insurance or as damages for personal injuries or sickness, salaries from federal government and interest on obligations of the United States, this state and its political subdivisions.

To compute net income, deductions are allowed for business expenses, taxes, losses, depreciation and depletion, and for gifts and contributions made to certain organizations not in excess of fifteen per centum of the taxpayer's net income. And in further

reduction, residents are allowed an exemption from net income of $1,000 to single persons and $2,000 for married persons, plus $200 for each dependent. All persons residing or doing business in the state and all persons who receive income from sources within the state, and certain estates and trusts are liable to the tax. Residents are taxable on their net income from all sources wherever earned, and non-residents only on their income derived from sources within the state.

By many, an income tax, being a tax on the individual's ability to pay, is considered the fairest method of taxation; it is claimed it tends to bring the taxpayer in closer relations to his government and arouses and sustains an interest in public affairs which is helpful to the state and would not otherwise obtain. The payment of the tax provided and imposed by the act is to be made direct to the state comptroller, the fiscal officer of the state, upon whom is imposed the duty of its collection and of the administration of the law.

It is also made his duty to formulate and publish rules and regulations to govern the computation of such tax and to prescribe forms and blanks on which the taxpayer, and withholding agents make returns; such forms and rules to be furnished to taxpayers on request. The tax is to be paid at the time the return is made. As it is estimated that there will be 750,000 returns filed, each of which must be re-computed at the comptroller's office, the volume of additional work imposed upon my office can be readily understood.

To make a fair and adequate test of the wisdom of the Legislature in enacting this law, I shall need the hearty and generous co-operation of each taxpayer, small or great, resident or nonresident, and by a just, impartial and consistent enforcement of its provisions which impose these duties upon me, I shall confidently expect such co-operation.

Regens Metravis

Comptroller.