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burdens. The franchise tax, the gross and net earnings tax, the personal property tax, the realty tax, all are met with indiscriminately-applied sometimes by local boards, sometimes by boards of State equalization, but almost invariably in utter disregard of any principle.

"A more striking and in some respects discouraging example of general confusion as regards an important matter of fiscal legislation could hardly be imagined.

"The conclusions reached by the committee as the result of their investiga tions can be very briefly stated. The requisites of a correct system of railroad, as of other taxation, are that it should, in so far as it is possible, be simple, fixed, proportionate, easily ascertainable, and susceptible of ready levy. Very few of the systems now in use in this country were found to possess any of these requisites. So far from being fixed, they are, most of them, extremely arbitrary and fluctuating. Neither are they proportionate, as in some cases the measure of valuation is the market price of securities; in others, the arbitrary estimates of appraisers; in yet others, gross receipts, and in others, local assessment. That the tax should be almost impossible of ascertainment under these circumstances does not need to be said. As to being susceptible of ready levy, any tax assessed on and paid by a railroad corporation is that; but it would appear that a large portion of the taxes now nominally levied must either be evaded or else are in the nature of double taxation, for the securities on which they are assessed are, in the eye of the law, personal property, assessable at the residence of the owner. If, therefore, these securities, whether bonds or stock, are taxed to the corporation in the State where its road is situated, they are as personal property subject to a further tax in the place of the holder's residence, if he happens to reside in another State; if such securities are not taxed to the corporations, then, whether they are taxed at all must depend upon the honesty of the holder, wherever he lives, or the astuteness of the local taxgatherer. The utmost inducement to fraud and evasion is thus systematically held out. For the conscientious holder of stock or bonds there may be no escape from double taxation of the most oppressive kind, while for the unscrupulous the door for evasion is wide open. "The conclusion at which your committee arrived was that all the requisites of a sound system were found in taxes on real property and on gross receipts, and in no others-in fact, that when these were properly imposed no other taxes were or could be necessary, as nothing would escape untaxed. Under this system the real estate of the railroad corporations held for corporate use, outside of their right of way, would be locally assessed exactly in the same way as the real estate of private persons or of other corporations adjoining it was assessed. There would be no distinction made in regard to it. It is the ordinary tax on real property. Beyond that a certain fixed percentage established by law and of general application should be assessed on the entire gross earnings of the corporations, and this should be in lieu of all forms of taxation on what is known as personal property. Under this system the rolling stock of the corporation would not be assessable, nor its securities, whether stock or bonds, either indirectly through the corporation or directly in the hands of those owning them. The entire burden, be the same more or less, would be imposed in one lump on the corporation and levied directly. It does not need to be pointed out that this system is perfectly simple; that under it taxation is fixed by a general law and not by local valuations; that it is thoroughly proportionate, inasmuch as the amount levied depends on the amount of gross receipts; finally, it can be ascertained by anyone, and can by no possibility be evaded.

The apportionment of a levy on gross receipts among the several States through which a single railroad may run is, in this country, undoubtedly attended with much difficulty, and the committee have given careful consideration to the subject. The conclusion at which they have arrived is that it should be made a matter of mutual understanding among the States, and that, as the levies must be independent, they should be apportioned according to mileage. That is, real estate owned by each corporation, outside of its right of way, should be locally assessed where it is situated, without regard to the fact that it belongs to a corporation and is used for railroad purposes. The vast and costly terminal grounds in New York, Chicago, and all the other great trade centers, would thus be locally taxed at those centers, and on the basis of valuation for similar adjoining land there in use. Real estate in the country, on the other hand, would be taxed at the country or agricultural valuation. The realty outside of the right of way being thus disposed of for purposes of taxation on fixed principles easily understood, the entire gross earnings of the corporations should be subject to assessment by each State through which its road might run in the proportion in which the miles of road in that State bear to its whole number of miles. The percentage of the levy would

then be greater or smaller according to the law of the State, but the proportion of the whole amount upon which the levy was to be made would be fixed and always easy of ascertainment. The disposition of the tax thus levied, when paid into the hands of the State authorities-whether it should be retained in the State treasury or distributed among localities, either those through which the road might run or those in which the holders of its securities reside-would be matter for adjustment by legislation. It could either be retained in the State treasury or paid back into the local treasuries or the counties or towns in which the roads are located on mileage proportions or ratably distributed among all the municipalities of the State. It is a tax on transportation, whether of persons or property. It is very possibly as equitable a method of raising money by taxation as can be devised. If it could. therefore, once be uniformly and properly adjusted, the distribution of the results of the tax would present very few difficulties. All communities, and every part of each community are dependent, more or less directly, on railroad transportation. A general tax upon it, if properly imposed, would be felt not unequally by all, and might, perhaps, not unjustly be shared by all. As will be seen on reference to the accompanying reports, this method of imposing an indirect tax is not uncommon in Europe. In France, especially, a large revenue, which has amounted to more than $20,000,000 a year, has been thus levied. This is not, however, properly a railroad tax, but rather a tax collected through the instrumentality of the railroads, the companies operating them being, in so far, used as taxgatherers.

"Recurring, however, to the railroad tax proper-that is, to the sum collected from the railroads as their fairly proportionate part of the common burden— where this tax is now levied as an entirety by the State government, the most usual method of distribution is to divide it among the counties and municipalities through which each road runs in proportion to the length of it therein. In Massachusetts the tax is paid over to the place of residence of the individual stockholder, and any undistributed balance is paid into the treasury of the State. In Michigan the whole amount of the tax is paid to and retained by the State, being devoted to special purposes. In Mississippi, where there is a franchise tax, onehalf of it goes to the counties through which the road runs, the balance to the State. In New Hampshire, again, one-fourth of the tax is paid to the towns through which the road passes, in proportion to the amount expended in each town for right of way and taxes. The other three-quarters is divided among the towns in proportion to the stock owned therein. In this respect, therefore, as in all others, the existing State systems afford every variety of precedent. The distribution to be made of a tax after it is collected in no way, however, affects the proper method of collecting it. It must so largely depend on local exigencies that no general rule regulating it would seem to be possible.

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'Finally, the committee will say, that of all the systems of taxation examined by them, those in use in England, among the countries of Europe, and in Michigan and Wisconsin, among the States of the Union, seem to them most intelligent and in conformity with correct principles. The Michigan and Wisconsin systems would seem to be especially commendable. The systems in use in many of the older States, on the contrary, and notably in the States of Massachusetts, New York, Pennsylvania, and Ohio, are very cumbersome, and present hardly any features worthy of study or imitation.

"That of Massachusetts, for instance, is based upon no recognized principle, would admit of evasions in a most obvious way, and is impossible of any general application. The fundamental idea with it is that the capital stock represents the property, and that its market value will, therefore, approximately measure it for purposes of taxation. A heavily-bonded road under this system practically escapes taxation; and again, where the stock is owned outside of the State in which the road is situated the tax levied on it inures not to the State of the owner's residence but to that in which the property is located. Under such a system it hardly needs to be said that the taxation fluctuates widely in amount, and that, the amount of debt behind the capital stock being disregarded, the burden bears no necessary relation to actual earning capacity, whether net or gross. Clumsy and devoid of scientific merit, as it unquestionably is, however, the Massachusetts system would seem to be preferable to that still in use in New York, concerning which the State assessors, in their annual report for 1873, expressed the opinion that under it there was no uniform rule for any road in any county, each assessor being governed entirely by his own views.' In certain towns the railroads appear to pay about one-third of the entire taxes, while the assessed valuation in 1878 varied from $400 per mile to $100 per rod. The difference in the assessment of the New York Central and Hudson River road, where for all purposes that the road can be used it is of the same value to the company, is $24,000 per mile. In

short, it is scarcely an exaggeration to say that the assessments are as unlike as the complexion, temperament, and dispositions of the assessors.' It does not need to be pointed out that a system such as this, and it is the system in most general use, compels the corporations in self-defense to an active participation in local politics. Indeed, it is not too much to say that as a system it is open to almost every conceivable objection.

It does not seem necessary to proceed in the enumeration of States, as the objections to which the system of each is open will readily suggest themselves to anyone at all familiar with the principles of correct taxation, on reference to the accompanying abstract of those systems. It is very apparent that the subject of railroad taxation is one which, in this country, has as yet received very little mature consideration. With a view to affording some basis for better legislation, the committee submit with the accompanying documents, the following form of law, in which the phraseology of the Michigan statute has been very closely followed. C. F. ADAMS, Jr., of Massachusetts, "W. B. WILLIAMS, of Michigan, "JNO. H. OBERLY, of Illinois,

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Committee."

EXPRESS, TELEGRAPH, AND TELEPHONE COMPANIES.

Prior to 1899 express companies doing business in Michigan were required by law to procure each year from the State treasurer certificates of license or authority to do business, and, as a condition precedent to the issuing or renewal of certificates, to pay into the State treasury a specific tax on the gross amount received by them within the State for the year previous.

The amount of taxes paid by such companies in 1898 was $2,608.53. In 1898 the rate was changed from 1 to 5 per cent on gross receipts, and the tax at the new rate in 1899 was $13,680.56.

The companies doing business under this law within the State were the Adams, American, Canadian, Dominion, National, Pacific, United States, and Western. Prior to 1899 every telegraph and telephone line built and operated within the State was required to furnish the auditor-general on or before the first Monday of July of each year a statement under oath showing the number of miles owned, operated, or leased, number of separate wires, number of stations, instruments in use, number of poles, and miles of wire used. Upon receipt of such statement a board of review, consisting of the auditor-general, State treasurer, and commissioner of the land office, assessed such lines at the true cash value thereof. The rate of tax levied and collected upon such assessment was what such board should determine to be the average rate of taxes, general, municipal, and local, throughout the State during the previous year, which rate was ascertained from the records of the auditor-general's office. This was payable to the State treasurer in lieu of all other taxes, State and local.

Under this law the average rate of taxation for 1897 was found by the system of computation employed to be 3 per cent, and the taxes payable by such companies for the fiscal year ending June 30, 1898, amounted to $60,506.71.

In 1899 the average rate was fixed at 2.08 per cent, and the taxes in 1899 were $70,058.81.

The telegraph and telephone law (in a test case hereinafter referred to under the heading "The Atkinson Law") was held to be unconstitutional by the supreme court in April, 1899, and in June of that year a new law for the taxation of express, telegraph, and telephone companies was passed.

By this new law every such company doing business in the State is required to furnish the auditor-general an annual sworn statement showing the following facts concerning its operation for the year.

In the case of express companies:

(a) The name and locality.

(b) The amount of capital stock, and amount paid in thereon.

(c) The number of agencies or places of business in the State.

(d) The amount of gross receipts on current business in the State for the previous year.

(e) The total number of miles over which the company does business in the State.

In the case of telegraph and telephone lines:

(a) The total number of miles owned, operated, or leased within the State. (b) The total number of miles in each separate line or division thereof, together with the number of separate wires thereon, and the counties through which the line is carried, and in which the business is conducted.

(c) The total number of telegraph or telephone stations on each separate line, and the number of instruments in use therein, together with the number of stations maintained.

(d) The average number of poles per mile.

(e) The number of poles and number of miles of wire used for each exchange or line.

(f) The amount of gross receipts on the current business in the State during the preceding year.

A penalty of $1,000 is imposed upon any company failing or neglecting to make such report or making a false report, and a continued willful violation or refusal to make such report may be cause for forfeiture of its franchise.

A specific tax is imposed upon the "property and business" of such companies, operating within the State, "equal to an amount to be computed in the following manner:"

Upon the gross receipts of such companies derived from business within the State, 3 per cent thereof. This tax is in lieu of all other taxes upon the properties and business of such companies, except real estate not used in the operation of their business.

Under this law the amount of taxes charged against express companies for the fiscal year ending June 30, 1900, was $14,806.82, and against telegraph and telephone companies $44,753.64.

THE ATKINSON LAW OF 1899.

The reform of or change in the existing methods for the taxation of the property of railroads and other public corporations has been the subject of vigorous political controversy in this State during the past few years, and the legislature in 1899 passed a new law providing for the assessment and levy of taxes upon the property of railroad, express, telegraph, and telephone companies, making a radical change in the methods of taxation of such property, taking it out of the specifictax system and bringing it under the general-property tax.

It provided for the appointment by the governor of a State board of assessors, consisting of 3 members, who should have access to the books, papers, and accounts of the departments of State, of counties, townships, and municipalities, with the power to examine witnesses under oath as to corporate property, and the right to examine books, papers, and accounts of any corporation owning property to be assessed by said board. It imposed upon said board the duty to assess all property in the State of railroad, express, telegraph, and telephone companies.

The board might inspect all the property belonging to such companies for the purpose of arriving at the true cash value thereof for the purposes of assessment and taxation; and for the same purpose might consider the reports and returns of said companies, the value of their stock as listed on the stock exchanges of New York and Boston, together with such other evidence as it might be able to obtain bearing upon the true cash value of the property, and make an assessment roll each year containing a list of all property by it assessed.

The board should then determine the aggregate taxes raised in the whole State for State, county, and municipal purposes for the current year, exclusive of special-improvement assessments; and for such purpose local officials were required to make special returns as the board might require. The board should determine the average rate of State, county, and municipal taxes throughout the State by dividing the aggregate taxes for the current year by an aggregate sum to be determined by adding to the total value of all property assessed under the act the equalized value of all property assessed in the State.

The board should then tax the property of the several companies as assessed by it at the average rate of taxation as determined by it, and the amounts so taxed should be paid to the State treasurer in lieu of all taxes for State and local purposes, not including special-improvement taxes; all such taxes to be applied, as under the existing specific tax system, to paying the interest on the educational funds of the State.

Every such company doing business in the State was required to file rigorous detailed annual statements under oath showing, among other things, the character, location, and officers of the organization; the number, par value, and market value of the shares of stock; detailed statements of real estate and value thereof; a full inventory of personal property, including money and credits owned; total value of real and personal estate outside of Michigan; in the case of railroad, telegraph and telephone companies, the whole length of their lines and the length of their lines without and within the State; statement of the entire gross receipts from business wherever done and the gross receipts in Michigan; in the case of express

companies, the length of lines of rail and water over which they did business, and the length of said lines without and within the State; and such other facts and information as the board might require.

It was specially provided that the franchises of the companies should be considered in determining the value of the property to be assessed, and in case of railroad companies owning and operating road partly within and partly without the State, the board should assess such companies for the fair proportion which their property in the State bore to their entire property. All such property was to be assessed at its true cash value, which was defined to mean the usual selling price at the place where the property might be at the time of assessment, at private sale and not at forced or auction sale. In ascertaining the value, the earning capacity of the property might be considered.

After the enactment of this law, known as the "Atkinson law," a test case was brought before the supreme court of the State under the telegraph and telephone tax law, which was somewhat similar to the Atkinson law, and that law was held to be unconstitutional and void, although it had been acquiesced in by the corporations and by the public from the time of its enactment in 1879, on the ground that being a tax on property, based on assessment, it was not a specific tax, but an ad valorem or property tax, and was not within the uniform rule of taxation prescribed by the constitution of the State, for the reason that it was based upon the average rate of taxation throughout the State, and not the local rate applicable to other assessed property.

This decision in the case of Pingree v. Auditor-General, April 25, 1899 (120 Mich., 95), was regarded as invalidating the Atkinson law.

The law as to the taxation of telegraph and telephone companies having been thus invalidated, the legislature enacted another law for the taxation of the property and business of express, telegraph, and telephone companies, which has already been referred to.

INSURANCE COMPANIES.

All insurance companies insuring lives within this State, and not deriving corporate existence from its laws, are required, at the time of filing their annual reports, to pay to the State treasurer a tax of 2 per cent on all premiums received from within the State, which specific tax is in lieu of all other taxes in the State. Plate-glass, accident, live-stock, steam-boiler, and fidelity insurance companies are required to pay a specific tax of 2 per cent on the gross amount of premiums received each year.

All foreign insurance companies, fire, marine, life, and health, pay an annual specific tax of 3 per cent upon the gross amount of all premiums received from within the State.

There is no specific tax on insurance corporations organized in Michigan, the property of such companies being taxed under the general law. The total amounts of specific taxes derived from insurance companies during the fiscal year ending June 30, 1898 and 1899, were as follows:

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Corporations organized for the improvement of river navigation are required to pay to the treasurer of the State an annual tax at the rate of 1 per cent on the whole amount of capital paid upon their capital stock, estimated each year upon the last preceding reports of such corporations, which tax is in lieu of all other taxes upon their property.

The amount of this tax in 1899 was $2,180.77.

MINING COMPANIES.

Formerly a specific tax for State purposes was imposed upon mining companies, in addition to the regular tax for local purposes, the rate being, upon copper 75 cents, on iron 1 cent, and on coal one-half cent per ton of product; but this specific

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