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MR. TUTWILER:- I think, if we get the rates recommended for city service it will be on the basis that the service is somewhat different from the interurban and the steam, and the same rate of pay is not applicable. If the interurbans get the rate now paid the steam railroads I think they will be satisfied. VICE-PRESIDENT HARRIES:- The next in order is the Report on Taxation Matters, to be presented by Chairman C. L. S. Tingley.

MR. TINGLEY:- The Committee on Taxation Matters is composed of a representative of every state in the Union, and consequently it is a Committee of which it is almost impossible to get a meeting. There had been no meeting of the Committee until last Monday, when ten members were present. The Committee, however, through individual work has secured the data that is here, so that the report, while it has not been reviewed by a majority of the Committee, is the work of the Committee as a whole.

REPORT OF THE COMMITTEE ON TAXATION

MATTERS

To the American Electric Railway Association:

GENTLEMEN:- Your Committee on Taxation matters begs leave to submit the following report:

Pursuant to the recommendation of the Committee last year data sheets covering State laws on taxation of electric railways were sent to the 47 members of your Committee; 39 of whom returned the blanks filled out and 8, namely the members from Idaho, Maryland, Montana, Nevada, New Hampshire, South Carolina, Vermont and Wyoming failed to respond. It is hoped, however, that follow-up work will secure the desired data before long.

The responses received show that taxes are assessed under general law in fourteen States, under special laws in twenty-one States and under both general and special laws in four States. By State Boards in twenty-one States, by local assessors in seven States and by State Boards and local assessors in eleven States. They show further that gross receipts are taxed in eleven States, net receipts are not taxed in any State, that capital stock is taxed in eight States, that bonds are taxed in four States, that other loans are taxed in three States, that tangible property is taxed in twenty-one States and that property as a whole is taxed in seventeen States. That municipalities have power (whether exercised

or not) to tax gross receipts in twelve States, to tax net receipts in five States, to tax capital stock in two States, to tax bonds in one State, to tax loans in one State, to tax tangible property in seventeen States, to tax the property as a whole in seven States. To require paving in thirty-seven States, to levy car licenses in twenty States, to levy pole licenses in sixteen States, to require street sweeping in eleven States, to levy bridge licenses or taxes in fourteen States, and that in six States the power is given to impose other special burdens or payments. These responses have been tabulated by States and are annexed hereto and made a part of this report.

In addition to the above there was sent to each member of the Committee a form letter to be signed by him and sent with a data sheet to each Company in his State to ascertain the Municipal practice under the law, to which 191 responses have been received and have been tabulated, but as time has been too short to permit of an analysis being made of this tabulation, the tabulation is filed in the Secretary's office and when in more complete form will be printed.

Taxation in some form is as old as is the history of man and one would naturally suppose that it would have been reduced to something like an exact science ere this, but it is very apparent that legislative bodies all over the world are seizing upon subjects for taxation which are the most easily reached irrespective of the incidents thereof, and in a well considered paper on the incidents of taxation by A. C. Pleydell, Secretary of the New York Tax Reform Association, presented before the First National Conference on State and Local Taxation, the following language is used:

"It is impossible in a brief paper to discuss the shifting of all kinds of taxes with the modifications that result from the non-enforcement of law or from the competition of other classes of goods or of persons less heavily taxed, but a few general principles and a few examples will cover the various classes of taxes. With the increased complexity of our social organization an increased amount of taxes are paid to the collectors by persons who immediately add them to the price of goods or services. These taxes may for convenience be spoken of as shifting directly. In this class are all the various taxes on manufacturing and business that add to fixed charges and must be collected from customers or the manufacturer or merchant cannot continue in business."

It is quite apparent that these remarks cannot apply to the business of electric railways, more particularly those operating wholly in Cities, as they cannot add the tax to the rate and it must therefore either be borne by the stockholder, or if shifted to the consumer is done in decreased efficiency in service and not in direct payment.

In a paper read before the same conference on the taxation of public service corporations by Prof. Adam Shortt of Queens University, Kingston, Ont., and a member of the Tax Commission of the Province of Ontario, the following interesting language is used:

"One very important reason for the special treatment of public service corporations as regards taxation lies in the fact that under modern conditions the public is ever more insistent on regulating the rates and charges of these corporations and otherwise closely supervising their service and their obligations to the community. This public regulation naturally restricts within very definite limits the opportunities of the corporation to augment income or even to maintain it. If therefore the public insists upon having cheap rates they must in all fairness correspondingly moderate the taxation of the corporations, for regulating rates is levying taxes in kind,

"After a careful survey of the various aspects of the subject and a comparison of views with representatives of tax gatherers and tax payers, I have been led to believe that a tax of 3 per cent, on gross income is a sufficiently high tax for a railway, with not more than 2 per cent. for other corporations. Lower rates, however, should be provided for exceptional cases where there were obviously few or no net profits, but as already indicated the absence of net income is no valid argument against a certain minimum of taxes."

Before the same conference Prof. Carl C. Plehn of the University of California presented a paper on the taxation of public utilities corporations, and in arguing in favor of the gross earnings tax, Prof. Plehn continues:

was

"The recent California Commission after investigating in a most thorough fashion every railroad in that State which might be affected, including roads operating under conditions almost as varied as imagination can suggest, found that such a tax would be very nearly equitable to every road with a possible execption of one. That one a small, narrow gauge road operating in connection with a steamship and lumber company in such a way that the accounts of the three departments were so inextricably intertangled that the net earnings were not easily distinguishable, so that the fact that it was an exception was a matter of grave doubt. The economic explanation of this apparent anomaly is probably to be found in the actual outwork of the long recognized principle that the rate of profit on capital in all employment tends to an equality. (Mill Principles of Political Economy.)"

While further in the same paper Prof. Plehn says:

"The determination of the rate of taxation which should be applied to the gross earnings of different classes of corporations is not so difficult as might at first thought appear. We have a fairly accurate idea of what constitutes a just tax on property. In the United States at large the average for real estate, the only class of property fully taxed, is not far from one per cent. on the full market value of the property. For purposes of illustration we may assume that one per cent. on property is a fair rate with which to compare taxes levied on some other basis. Should someone else decide for his

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own part that some other rate is fair he can easily raise or lower the rates at which we may arrive in proportion as is fair rate property" higher or lower than one per cent."

This whole paper of Prof Plehn's is worthy of careful consideration by all interested in this subject, and more particularly by those of us who are operating Interstate properties as a discussion of the division of Interstate taxation is interesting and valuable.

C. L. S. TINGLEY, Chairman,

J. H. WILSON,

C. J. GRIFFITH,
F. E. RUSSELL,
JOHN A. BRITTON,
JOHN A. BEELER,
L. S. STORRS,
O. T. CROSBY,
D. S. CARLL,

ALBA H. WARREN,

W. H. GLENN,

L. C. HAYNES,

R. I. TODD,

P. P. CRAFTS,

A. M. PATTEN,

F. W. BACON.
D. A. HEGARTY,
HOWARD CORNING,

L. G. TURNER,
H. C. PAGE,
F. W. BROOKS,
W. J. HIELD,

A. B. PATERSON,
A. H. ROGERS,

J. H. WHITE,

W. A. SMITH,
J. BRODIE SMITH,
GEO. H. BARKER,
E. S. FASSETT,
H. W. PLUMMER,
C. P. BROWN,
DANA STEVENS,
A. H. CLASSEN,
F. I. FULLER,

C. L. S. TINGLEY,
A. E. POTTER,
P. H. GADSDEN,
F. M. MILLS,
PERCY WARNER,
J. S. WELLS,
W. J. JONES,
I. L. MELOON,
A. B. GUIGON,
GUY W. TALBOT,
G. O. NAGLE,
GEO. B. WHEELER,
GEORGE KIDD,

H. M. HOPPER,

J. W. CROSBY,

Committee on Taxation Matters.

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