CHAPTER XXXI

The importance of the assessor.

An old

office under new con

ditions.

TAXATION AND FINANCE

229. The Problem of Assessing Property

THIS extract is from a recent report of the Minnesota Tax Commission:

More important than the other three groups of influences on the assessment is the assessor. While he is hampered by the public opinion created by the statutory provisions referred to above, and checked in his work by the attitude of boards of review and equalization, the fact remains, nevertheless, that he is the maker of the assessment. As Professor T. S. Adams remarked in an address at the meeting of the National Tax Association, measured in dollars and cents the work of the local assessor is far and away the most important part of our fiscal system. Continuing, he said: "Compared with the general property tax, corporation taxes, inheritance taxes and all other taxes put together pale into insignificance. In 1902 more than three-fourths of all the general revenues of the state and local governments came from taxes upon general property. ... Whether we keep or discard the taxation of personal property, the local assessor will, for many generations, continue to play the principal rôle in the work of state finance, and upon his probity and efficiency will depend the real success or failure of our system."

The local assessor is one of the heritages that came with the township system of local government. Elected each year, he is supposed to represent the ideas of the people of the township and to carry them out in the making of the assessment. The time required to do this important work is estimated by the standards of an earlier day when property was limited and what there was,

easily enumerated and valued. The pay of this officer compares favorably with the old view of an assessment. Even this is not granted in some districts, the office being put up to the man who will make the lowest bid. In other districts, the man who needs the money is given the position. In the approximately 2,600 townships in the state, the larger number of voters try to select men for the office of assessor who will make a fair assessment as judged by the community opinion. This opinion, however, does not square with the law, since the basis of taxation is in public opinion uniformity and equality as compared with neighboring towns and counties rather than the statute requirement.

The fact remains, however, that an army of assessors, each one a law unto himself, and working on different standards of value, cannot but produce great inequality of assessment even if the conditions under which he worked were ideal. Ideal conditions do not exist. The assessor in some instances is forced to recognize the political element in making his assessments, to take into consideration the demands for favors from personal friends and political associates, the lack of time, insufficient pay, and the real inherent difficulty of the task. It is this last phase of the matter that is the most important and demands the largest consideration. The local assessor system as now organized under the law, while not a failure, will not permit of the kind of assessment that spells efficiency in taxation. The property holdings of individuals and companies extend into many districts of the state, so that the very conditions of competitive business demand equality of assessment, not only between individuals but as between different districts where business enterprises are located that compete with one another.

High rates of taxation are pretty sure to affect the appraisal of the local assessor who has in view the tempering of the wind to the shorn lamb. As a heavy assessment may be met by complaint against the assessor or by the removal of the parties to other towns, the determination of the assessment becomes a matter of agreement between the town authorities and the taxpayer. The forces

Factors affecting the

assessment.

Growth of the idea of

of compromise, of what the people will stand, are factors that have much to do with the placing of the assessment.

230. The Separation of State and Local Revenues

The proposal to separate state and local revenues has been made separation. many times in the last ten years. The taxing officers of the various states have almost without exception hailed the plan as a means of getting away from the difficulties, uncertainties, and inequalities of the general property tax. In brief, the idea of separation is to secure the state revenues from statewide corporations and business concerns, such as railroads, insurance companies, public utility corporations, telegraph and telephone companies, etc., and to give over to the localities the revenues arising from the taxation of real estate, and in some proposals, the tax upon the assessment of certain kinds of personal property.

Reasons advanced

for separation.

Four reasons, more or less important, and advanced with different degrees of emphasis, may be assigned for the separation of the state from local revenues: (1) The first of these reasons is the desire to secure a larger revenue to meet state expenses. This point of view emphasizes the original demand for heavier and more specific taxes upon corporations. As such taxes have been developed, the attention of legislatures and taxing officials has been drawn to the wisdom of that system of taxation and the better results ensuing from it over and above the old method of local assessments.

(2) As time wore on the need of more revenues, while insistent, no longer remained the essential element in demanding statewide taxation of specific corporations. The question of equality of assessment, ease of administration and the elimination of the annual wrangle with local assessors and corporation officials became dominant in the thought of men administering the tax laws, making the assessments, levying and collecting the taxes. This was a step toward the recognition of the more fundamental difficulties inherent in the tax system itself, those involved in the

question of equalization and the evils and inconsistencies of the personal property tax.

(3) The raising of revenues for state purposes by a general levy upon all the real and personal property of a state was, and is yet in most commonwealths, the method of securing the funds necessary to carry on the work of the state governments. Out of this system arose, because of the failure of assessors to make true value assessments, the problem of equalization in every division of government-town, village, city, county, and state. Boards of equalization were devised in the law for each of the divisions of government as seen in the boards of review, county boards of equalization, and the state board of equalization. The first was to equalize between individuals, the second between local governments, and the third between the larger divisions of local governments, the counties. Equalization tended by the very nature of the problem involved to hold the assessment down to the minimum point rather than to encourage the increase in the assessments.

(4) The last of the four reasons referred to above was the breakdown in the general property tax. So far as real estate was concerned the local assessment of real estate reached every piece of property, though often at varying assessments. The same could not be said of the personal property. The levy of a state tax upon real estate resulted in contributions in varying percentages of assessment, but the personal property tax fell upon tangible goods and failed to reach the great values bound up in securities, money and other intangible representations of wealth. To reach these by giving over the local assessment method of dealing with personal property and commuting the whole tax upon personalty of corporations and the holdings of individuals by levying a flat rate upon franchise values, capitalization of earnings, was but the inevitable result of the breakdown of the general property tax.

of separa

The advantages to be derived from the separation of state and Advantages local revenues are declared to be: (1) conformity of tax system to natural division of government; (2)

greater equality of assess

tion.

The abandonment of the general property tax

for state purposes.

ment; (3) lower tax rates; (4) the elimination of the conflicts between city and country; and (5) a greater flexibility of taxes and larger adaptation of means to end. The growth of statewide business has made it necessary to materially modify the tax system. The taxation of corporations by special acts has tended steadily to separate the sources of the state's revenues from those of the local governments. It is felt that in addition to securing a natural division of taxing function based upon the character of the government, such separation would eliminate the efforts now made to keep assessments lower, since the question would then become a local one. Local tax rates would be reduced by the amount of the former state tax and some of the old causes of strife between city and country over the assessments, no longer existing, would do away with that friction since each community would in a large measure determine its own basis of assessment. And finally each community could work out for itself the adjustment between assessment, taxes and expenditures which seemed wise to the people of the district. Two methods of securing the separation of state from local revenues have been suggested: one is known as the special taxation of corporations and the other is called the apportioning of contributions to the state on the basis of local expendi

tures.

Ist. The first method proposes the abandonment of the general property tax as a means of raising state revenues and the substitution in its place of special corporation taxes, tax on inheritances, license taxes, etc. It is not, however, every state that has sources of revenue large enough to make it possible to raise all the revenue needed from the tax on corporations and inheritances. The best that can be done in states where such is the case is to develop as far as possible the special taxes on corporations and inheritances and rely for the balance upon the taxation of the general property in the state. The state of New York has carried this plan to its logical conclusion and has accomplished the complete separation of the state revenue from the local revenues, though the general property tax still exists as the means of raising the moneys