The 1910 report of the Board of Equalization of Taxes of New Jersey advocates strongly the appointment instead of the election of assessors. The board criticises sharply the requirements in most taxing districts that assessors shall be elected. Admitting that the theory of the plan is attractive it is held that it does not stand the test of practical operation. The system makes it difficult to obtain assessors who will be unbiased judges of property values, who will be impervious to local influences, who will not be affected by political considerations and whose sole aim will be to secure an assessment of all property at its true value. Upon this point the report says: "The tenure of the assessor in many cases is made to depend not upon a faithful discharge of his duty under the law but upon the extent to which he is willing to disregard the law. He is bound to feel that his own interests and the interests of his constituency are best served by low assessments rather than by assessment at true value. His judgment as to values is inevitably influenced by local politics, personal and business considerations." A general law requiring the appointment of the assessors by the mayor in all cities of the State, the details relative to the number, terms of office, salaries, etc., being determined by the city council, would be of the greatest possible benefit to such municipalities, and would dignify the office of assessor by taking it out of politics and making it a scientific profession. TAXATION OF CORPORATIONS. The Department of Commerce and Labor, under the particular supervision of Honorable Herbert Knox Smith, Commissioner of Corporations, a citizen of Connecticut, has issued two very interesting reports on the taxation of corporations, in New England States (Part I), and Middle Atlantic States (Part II). The system of taxing manufacturing, mercantile, transportation, and transmission corporations in these states is given in considerable detail. The comments thereon and the clear comparison of the different systems and methods of administration are of very great benefit to all who are interested in the taxation question, and ought to be of such definite educational advantage to the Connecticut taxpayers as to justify the following quotations: "New England presents several more or less distinct methods of corporate taxation, namely, a method closely approximating that used with reference to natural persons; another based upon capital stock -on either par or market value, and in Connecticut with bonds added; another based upon gross receipts; and another based upon mileage." "Method analogous to taxation of natural persons." "The method adopted as to manufacturing corporations - except in Massachusetts closely resembles the method as to natural persons, for the tax on capital stock in Maine and Vermont is hardly more than a fee. The same is true in Rhode Island as to all corporations except as indicated hereafter under gross receipts." TABLE I.—TAXATION OF MANUFACTURING CORPORATIONS, THEIR STOCKHOLDERS, AND THEIR BONDHOLDERS. [Unless otherwise specified, statements apply to both domestic and foreign corporations.] a This is true of domestic corporations only. b From stockholders in a foreign corporation a tax is due, but there is a deduction for a proportional part of the assessed value of machinery, goods, and real estate. c Few returns are made, however. d On condition that the corporation pays either in New Hampshire or in its home State taxes on stock or on the property represented by ita condition assumed to exist in all cases. e But not to exceed $50. f But the value of property tax is deducted; and the stock of a foreign corporation is wholly exempt when the whole stock is taxed in the home state. g On machinery only of a domestic corporation. h A domestic corporation pays on corporate excess, namely, the market value of the stock less the value of the taxed tangible property and of tax-exempt securities; but a foreign corporation pays one-fiftieth of 1 per cent. on the par value of authorized capital, the tax not to exceed $2,000. i Unless bonds are secured by an adequate mortgage on Massachusetts real estate. j But only on the difference between the market value of each share and the proportionate value per share on which the corporation was last assessed; and, in practice, few returns are made. k The exemption is conditioned on the taxation of the corporation's whole property by Connecticut or some other State; but this condition is, or is assumed to be, invariably satisfied. TABLE II. -TAXATION OF STEAM RAILROAD CORPORATIONS, THEIR STOCK- [Unless otherwise specified, statements apply to both domestic and foreign corporations.] Maine,... No.. No.... No.... No.... Yes b.. No.... Yes. New Hampshire,..... Yes.. Yes.. Yes.. No d.. No.... No.... Yes. Vermont,. Massachusetts,. Rhode Island, No.. Nof.. Nof.. Yes.. Yes f.. No h.. Yes. a But buildings are taxed, and land and fixtures outside the right of way. b On the average gross transportation receipts per mile within the State. c Not by towns, but included in the State's valuation. d The value of stock is, however, considered in the State's valuation. e Real estate used for railway purposes is not taxed if the corporation elects to pay the tax on gross receipts. (See note f.) Real estate not used for railway purposes is taxed locally. If There is a tax of 1 per cent. on the whole property, unless the corporation elects to pay the tax on gross receipts; and the practice is to pay the latter tax. g But not to exceed $50. h But the stock of foreign railway corporations not operating in Vermont is taxable unless taxed in the home State. i There is an exemption of the right of way and of railway buildings thereon; but property thus exempted is really taxed under corporate excess. j On machinery only; and machinery inside the right of way is exempt, save as reached under corporate excess. k On corporate excess. All railways operating in Massachusetts are incorporated there. I The exemption does not extend to stock in foreign corporations not operating in Massachusetts. Im Not enforced as to rolling stock. n But only on the difference between the market price and the proportionate amount per share at which the corporation was last assessed; and in practice few returns are made. o But property not used for railway purposes is taxed. p On Connecticut's fraction of the entire value of stock and bonds, deducting taxed real estate and deducting securities issued to pay for property outside the State or for property taxed in the State or for securities of other railways. q The exemption does not extend to the bonds of railways not doing business in Connecticut. "Method based on corporate excess." "The method adopted in Massachusetts as to manufacturing and mercantile corporations, rests upon corporate excess,' namely, the market value of the capital stock diminished by the assessed value of tangible property taxed. In Connecticut this method, somewhat modified, is applied to steam and street railway companies. The modification in Connecticut consists in treating bonds as if they were stock." (Taxation of corporations, Part I, pages 16 and 17.) "Taxation of intangible personality in New England." "The problem of how to tax what is known as 'intangible personalty, including rights, credits, corporate securities, and money at interest, is still unsolved in New England as it is in other parts of the country. "Shall intangible personalty be exempt entirely from taxation, on the theory that otherwise there is double taxation? Shall it be taxed with a low uniform rate? Or shall further attempts by way of doomage and the like be made to collect the local general property tax thereon? 66 Summarizing, it is seen that the 'low uniform rate ' method is popular in New England. It already exists in Connecticut, where it is giving satisfaction, while commissions in three other States of its group recommend it. 66 The systems of corporate taxation in New England are certainly not final. No one of the States is perfectly satisfied. Changes are made from time to time. It should be borne in mind, therefore, that the description given herein presents the system in force on January 1, 1909, but footnotes bring the matter up to April 15, 1909." (Taxation of corporations, Part I, pages 19, 21, and 22.) "Unique features." "The features of the taxation system in Connecticut in 1909 are three: 66 'First, The collection of the state taxes independent of the towns, there being no state general property tax. (January, 1909.) Second, The privilege to holders of intangible property of paying to the State a low uniform tax thereon instead of the local property tax. "Third, The unique method of estimating the value of steam and street railway property on a basis of funded and floating indebtedness and market value of capital stock." (Taxation of corporations, Part I, page 127.) General results. "The general results of the study of corporate taxation as it has been carried by the Bureau that is to say, in New England and the Middle Atlantic States. are these: 66 (1) Each State has a system of its own, and as yet there is no marked tendency toward uniformity. "(2) No State at present treats all corporations in exactly the same way, and as between the several sorts of corporations the tendency still seems to be toward further differentiation. (3) In most of the States changes are so frequent as to indicate that as yet a satisfactory and ultimate method has not been discovered. 66 (4) The income from corporate taxation is almost invariably increasing, partly because of increase in the number and size of corporations, and partly because of changes in methods of taxation. 66 (5) There is a tendency toward separating sources of local revenue from sources of state revenue, and the taxation of corporations tends to become a source of state revenue only, with the exception that corporation lands, other than rights of way are still usually taxed like the lands of individuals. 66 (6) The taxation of corporations is chiefly administered by state officials. "From these results it is safe to infer that each State would probably gain something by studying the systems of other states." (Taxation of corporations, Part II, page 2.) Consequent importance to the states of diversity in systems of corporate taxation. "The examples which have been given are enough to show that by the diversities in systems of taxing corporations and their issues of securities capitalists are tempted to live in some States rather than others, and to discriminate between States as places for incorporation and for doing business. It is a question of public policy whether it is for the interest of the country to have these artificial temptations toward the concentration of capitalists and of incorporation and of business. It is one of the objects of this report to present the facts of corporate taxation as an aid in the determination of such questions." Questions raised. 66 "The presentation of the systems of taxation established in the New England and Middle Atlantic States raised several questions: (1) Should taxation be intentionally so framed as to lay special burdens upon corporations? On the one hand, it can be contended that corporations are merely artificial creatures of the States and that they should pay well for the exceptional privileges enjoyed by them; on the other hand, it can be contended that corporations are essential to business as at present conducted, and that, by reason of the comparative ease with which their investments and operations can be ascertained, they actually bear a heavier burden of taxation even when no theoretical discrimination is made against them. (2) Should shareholders and bondholders pay taxes in addition to the taxes paid by the corporation on the corporate property? On the one hand, it can be contended that the corporation is an artificial entity distinct from the persons interested in it; on the other hand, it can be contended that the corporation and the persons interested in it are identical in fact, and that to tax the corporations and those persons simultaneously is to burden the same persons twice. (3) Is it inequitable to tax either a corporation or its stockholders on the basis of the market value of the stock? On the one hand, it can be contended that thus the tax is based both upon property and upon expectation, and that in the case of natural persons expectation is never taxed; on the other hand, it can be contended that corporate organization facilitates the capitalization and present realization, in a sense, of merely expected profit and that in recognition of the advantage thus conferred by the State it is only fair to exact a special burden. 66 (4) Should a State permit outside corporations to do business within its borders upon terms more favorable than those exacted from the corporations of the State itself? On the one hand, it can be contended that comity requires the free admission of corporations from other States; on the other hand, it can be contended that a corporation is in legal theory existent only within the boundaries of the sovereignty creating it, and that at any rate it is inexpedient and unfair to admit corporations upon any other basis than the bearing of at least as heavy burdens as are imposed upon those chartered by the State itself. 66 (5) Should the States differ from one another in their systems of corporate taxation? On the one hand, it can be contended |