CHAPTER VIII. BANK TAXATION. In 1899 the commission commenced the investigation of the taxation of banks with other matters closely connected with such taxation and which might affect the industrial and financial interests of the state. The first step was to request the national, state and private banks of the state for information showing the capital, surplus and undivided profits, assessed value of capital, banking house and other real estate, taxes paid, and interest paid by the bank on deposits for each of the years 1899, 1900 and 1901. The blank statement sent to the bankers for information called for answers to the following inquiries. (1). Capital stock paid in. Surplus. Undivided profits less current expenses and taxes paid. (2). The total assessed valuation of the shares of capital stock. (3). The assessed value of real estate owned and occupied as the banking house. (4). Total deduction of indebtedness from value of shares of stock. (5). Total amount of state, county and local taxes paid on shares of capital stock. (6). Total amount of state, county and local taxes paid on banking house. (7). The assessed value of real estate other than the banking house. (8). Amount of taxes paid on last item of real estate. (9). The amount of United States Revenue tax paid on capi tal and surplus. (10). Rate per cent. of taxes on property for state, county and local taxes in the assessment district where bank is located. (11). The rate of interest paid on certificates or time deposits. The blanks mailed to private bankers who issue no shares of stock, varied from the foregoing in calling for the assessed value of capital instead of shares of stock, and the capital of private bankers is entered in a subsequent table with state and national banks under the designation of shares of capital stock. In response to the call for information the banks to the number of 198 in 1899, 220 in 1900, and 272 in 1901 returned the statements with complete information on substantially all the items called for. The reports of a few banks in each year omitted answers to some of the material items, and in consequence of such failure the reports could not be used in compiling the statistics. The ratio of assessed value to par value of capital varies somewhat widely in the different counties of the state, but on the average a marked increase in the assessed valuation of bank capital has occurred throughout the state in the last three years. The compilation of the capital, surplus, undivided profits, assessed value and taxes paid by the banks returning complete statements to the commission appear in the following table. Summary of Capital, Real Estate, Assessed Valuation and Taxes for the Years 1899, 1900 and 1901 of National, State and Private Banks Reporting to the Tax Commission. The statistics present several features worthy of careful consideration; the most significant being the ratio of the assessed value to capital from 77 per cent. in 1899 to 80 per cent. in 1900, and to 98 per cent. in 1901. The rate per cent. on the asessed value has also increased for all of the items except real estate other than banking house in 1901. The increased assessments and the rate of taxation of the several items are as follows: The above taxes $299,082 paid in 1901 do not include $35,362 on banking-house, $9,091 on other real estate or $39,433 United States revenue tax. An increased assessed valuation would be expected in 1900 and 1901 fom the efforts made to secure uniform assessments of all property more nearly to cash value. When assessments are higher, a lower tax rate would ordinarily follow unless expenses are greater in the district where banks are located. This does not appear to be true of bank property except for real estate other than banking house in 1901. TAXATION OF BANK DEPOSITS. In the administration of the assessment laws the commission received many inquiries from assessors and boards of review concerning their duty and power to compel bankers to produce their books for inspection or furnish a list of the names of depositors with amounts on deposit. The question was of such serious importance that it became necessary to advise assessors of the extent of their power and the limitations upon the exercise of the power. In the pamphlet to Assessors and Boards of Review, issued in May, 1902, the following was said: "The question is sometimes asked whether for the purposes of discovering moneys, bankers may not be compelled to testify as to the amount of the deposits of their customers.. It is perhaps true that bankers have no clear legal excuse for refusing to testify. But as is well known, the relations between a banker and his customer are of the most confidential nature, and no honorable banker would violate that confidence by disclosing the affairs of his customers if he could avoid it. There is no particular penalty for a refusal to give such evidence, the case in this respect being the same as that of any other person called upon by the assessor to give evidence as a witness relating to the property of others. Perhaps all such witnesses as well as property owners who refuse to be sworn or to testify would be subject to proceedings for contempt under the provisions of section 4066, Statutes 1898; but in any case where such proceedings may be deemed advisable they should ordinarily be taken against the property owner who refuses to be sworn or to testify rather than against a witness, especially a witness whose knowledge is acquired under the seal of confidence and honor." A better idea of what the taxation of deposits means to the bankers, depositors, borrowers and to the business affairs of the state is obtained when the magnitude of the banking interests are fully comprehended and for that purpose an examination. of the resources and liabilities of the banks is necessary. The last statement available showing the aggregate resources and liabilities of state, national and private banks with cash on hand separate from the amount due from banks is of date December 13, 1900, in the annual report of the Bank Examiner for 1900, p. viii, and is as follows: |