place of domicile relate to certain specified kinds taxed where situated, or where the business for which they are used is conducted. They consist in general of all goods, wares, merchandise, and other stock in trade or manufacturing within the State, whether the owners reside within or without the State. Such property is taxed where the business for which it is used is carried on, whether the owner resides there or not. The owner may reside in some other part of the State or outside the State. Stock in trade outside the State, owned by inhabitants thereof, is taxed to the owner where he lives. These provisions, however, do not apply to stock in trade owned by corporations organized within the State.

"All machinery employed in manufactures whether owned by corporations or individuals is assessed where it is situated or employed." Horses, mules, neat cattle, sheep, and swine, when kept in places other than those where the owners reside, and horses employed on stages or other vehicles for transportation of passengers, are assessed to the owner in the place where they are kept. All personal property within the State leased for profit is assessed for taxation where such property is situated, to the owner or person having possession thereof.

As to these exceptions of tangible and visible property, the statutes depart from the general rule that personalty is taxable to the owner at his place of domicile, but property of an inhabitant of the State situated without the State is treated according to the general rule.

Personal property in general is assessed for taxation by local assessors, who are directed to require all inhabitants to bring in true sworn lists of all personal estate owned by them. There is, however, no direct penalty imposed for failure to comply with this requirement, the assessors in such cases being required to ascertain, according to their best information and belief, the amount and kinds of personal estate; but from the tax assessed the taxpayer may be allowed an abatement only in case the tax exceeds by more than 50 per cent what it would have been if return under oath had been made. In actual practice, according to the best information obtainable, but a small portion of personal property, even of an intangible character, is assessed on sworn returns of taxables, the greater portion being by doomage of local assessors.

The law defines with much detail what is personal property for the purpose of taxation. It may be classified under the following heads:

1. Goods, chattels, money, and effects, wherever they are.

2. Ships and vessels not engaged in the foreign carrying trade.

3. Money at interest and other debts due the persons to be taxed over and above what they are indebted or pay interest for. Debts secured by mortgages on taxable real estate are expressly declared to be not included in such taxable debts, and may not be used by the debtor to reduce the amount of taxable debts due him. 4. "Public stocks and securities, bonds of all railroads, including street railways, stocks in turnpikes, bridges, and moneyed corporations within or without the State." But shares in corporations chartered by the State or organized under its general laws are not taxable to the holder for State, county, city, or town purposes, the taxation of such property being secured by the general franchise tax levied on corporations.

5. Income from an annuity, from ships and vessels engaged in the foreign carrying trade, and so much of the income of a profession, trade, or employment as exceeds the sum of $2,000 a year; but no income is taxable if derived from property subject to taxation.

Under this provision incomes from professions and salaries are taxable, and it has been held that incomes from trade, being derived from skill and management in business, as well as from the use of capital, are taxable, even though the property engaged in the business was already taxed.

The total valuation of personal property assessed for taxation by local assessors in 1896 was $582,319,634, the amount of taxes $8,398,980. The valuation and tax upon real estate for the same year were about three and one-half times these amounts.

In 1898 the assessed valuation of personal property was $581,646,133, and the amount of taxes $8,719,105. The assessed valuation of real estate in that year was about three and three-fourths times that of personalty. In 1899 the assessed valuation of personalty was $628,926,675, and the amount of taxes $9,344,872.

The committee on taxation of the Boston Executive Business Association reported: "The personal property of both the city and State, which under the law is subject to taxation, can not be less than twice the value of the real estate. Upon this all writers agree."

The real estate in 1896 being $2,040,000,000 in assessed value, the personalty would, on this basis, be $4,080,000,000, instead of $582,000,000.

GENERAL CORPORATION TAX.

The distinctive feature of the system of taxation of corporate property in Massachusetts is that it is administered wholly or in part by officers of the State, instead of by local officers.

The general franchise tax, so called, on corporations chartered or organized under the laws of the State, designed to reach for the purpose of taxation all the property of corporations, once and once only, is the most important tax in the general system. "It is unique in the tax experience of the States of the Union." The real estate and machinery of all corporations situated within the State are assessed by the local authorities in common with other real estate and personalty and the taxes thereon paid directly to the respective towns and cities where the property is located, the other personalty and the stock being exempt from direct focal taxation.

The remainder of the property of corporations (except banks and some other corporations, taxation of which is provided for by special statutes), as determined by the market value of outstanding shares in excess of the value of real estate and machinery taxed locally, is assessed and taxed by the State directly and payment made in the first instance to the State treasury; a large portion of the taxes so raised is then distributed among the towns and cities of the State. This annual corporation tax applies to corporations of the most various kinds, such as manufacturing and trading establishments, railroads, street railways, gas and electric-lighting companies, electric-power companies, private water-supply companies, telegraph and telephone companies, and certain insurance companies. This general corporation tax is assessed by the tax commissioner of the State, valuation being based upon returns from the corporations and from local assessors and such other information as the commissioner may obtain.

Every corporation subject to this tax is required to return annually to the tax commissioner, under oath of its treasurer, a complete list of its shareholders and their places of residence, the number of shares owned by each, the amount of capital stock of the corporation, its place of business, the par value and the market value of its shares on the 1st day of May, and a detailed statement of the works, structures, real estate, and machinery subject to local taxation within the State; in the case of railroad and telegraph companies, the whole length of their lines and the length of so much of their lines as is within the State; in the case of other corporations, the amount, value, and location of all works, structures, real estate, and machinery owned by them subject to taxation without the State. Returns to the tax commissioner are also made by the local assessors, showing the names of all corporations and containing statements of their property and the amounts for which such property is valued for local taxation.

From these returns or from other sources, at his discretion, he not being bound by the returns of the corporation as to the value of corporate franchises or by the returns of local assessors as to the value of the property assessed locally, the commissioner ascertains the true value of the shares of each corporation, which is designated as the "true value of its corporate franchise."

The commissioner, in certain cases, is authorized to examine the books of corporations and to examine, under oath, the treasurer and directors.

The tax commissioner then, from the aggregate value of the shares of the corporation thus determined, makes the following deductions:

First. In the case of railroads and telegraph companies whose lines extend beyond the State, he deducts such a proportion of the whole valuation as that part of the line without the State bears to the entire line, and also deducts an amount equal to the value of real estate and machinery located and subject to taxation within the State as determined by him.

Second. In the case of a telephone company, so much of the whole valuation as is proportional to the number of telephones used or controlled by it without the State is deducted, and also the value of all stock in other corporations held by it upon which it has paid a tax for the preceding year.

Third. In the case of an insurance company, the value of mortgages on real estate held by it subject to local taxation.

Fourth. In the case of all other corporations, there is deducted an amount equal to the value of the real estate and machinery subject to local taxation within or without the State.

The true value of corporate franchises, thus diminished, is then taxed at a rate which is regarded as the average rate of taxation in the State, determined by an apportionment of the whole amount of money to be raised by taxation upon property in the State during the current year, as returned by local officials, upon the aggregate valuation of the preceding year.

The amount of the tax thus computed on corporate excess is paid by each corporation to the State treasurer, upon notice from the tax commissioner of the amount due, thus reducing the expense of collection to a minimum.

The weakness of this system of taxation upon corporate excess is the method of determining the rate of taxation, which theoretically fair and equal as compared with other property, is likely to be practically unequal and excessive because of the more accurate method of ascertaining the "true value" of the property assessed. The "average rate" obtained by this method is apt to be unequal and misleading, and laws similar in general provisions have in some States been held unconstitutional and void as violating the requirement of uniformity provided in State constitutions. A better method, in some respects, would be a rate fixed by law.

However, it is claimed that under penalties applied with ease and certainty these taxes are, as a rule, paid promptly and with little complaint, the corporations readily adjusting themselves to them. This tax having been paid into the State treasury is in part distributed among cities and towns of the State and in part retained by the State. Such proportion of the tax as corresponds to the number of shares of stock owned by residents of the State, as shown by the corporation's list of stockholders, or such other evidence as the tax commissioner may obtain, is paid to the several cities and towns where such shareholders reside. The remainder of this tax, representing shares of stock held outside the State, is retained in the State treasury. This apportionment of tax according to the residence of shareholders is thought to work inequitably.

Formerly these provisions applied to street-railway companies, whether chartered in or without the State, doing business within the State, but by the act of 1898 the distribution of the franchise taxes of street-railway corporations is changed from the towns where the stockholders reside to the towns where the tracks are located, in proportion to the length of tracks therein.

Foreign telegraph companies using lines within the State are required to make like returns and pay a like tax.

Mining companies chartered or organized within the State for the purpose of mining without the State are required to make sworn reports of the amount of their capital stock, and pay thereon to the State treasurer a tax of one-twentieth of 1 per cent upon their capital stock. Such companies are also required to make accurate returns, under oath, of their business and profits, and the tax commissioner, from such report or otherwise, determines the net profits or gains of each such corporation, and assesses a tax of 4 per cent upon the amount thereof.

From the excellent report of the Massachusetts tax commissioners, made in 1897, from which source we derive much of the information herein contained, we quote the following comments upon the Massachusetts system of taxing corporations, the italicizing being our own:

"We have seen that the methods of taxing corporations chartered by the State and banks are in their main lines similar. We shall accordingly consider them together.

"The taxation of shares in domestic corporations and in banks is in striking contrast with that of bonds, foreign stocks, and other securities taxable to the holder. Here there is no demand for a statement from the individual taxpayer, no doomage by local assessors, no guesswork, no possibility of evading or diminishing taxes by change of domicile, no question of double taxation. The real estate and machinery are assessed locally, doubtless not with perfect equality and justice, but probably as carefully as would be possible under any system. The corporate excess is taxed at a uniform rate by the State. The taxes are regular and certain. They are heavy, and they yield a large revenue. The rate of taxes on corporate excess for the last 15 years has been from year to year not far from $15 per $1,000, or about 1 per cent on the capital. The assessment in 1896 was $3,829,528.02. Yet, little complaint is heard regarding these taxes-a signal proof that the taxpayers accommodate themselves, if not with ease, at least without serious complaint, to burdens which are steady, regular, predictable, and for which, in consequence, they are able to make calculations and adjust their affairs.

"The corporation tax is particularly simple, and is assessed with unerring exactness in the case of large and well-known corporations whose shares are regularly dealt in, and consequently have a publicly recorded value. Railways, banks, the larger manufacturing corporations, and others whose stocks are frequently quoted, are taxed without a word of inquiry, and without a possibility of escape. A very large number of miscellaneous corporations are in a somewhat different position. Their shares are held by a few individuals, are rarely transferred, and are without a quotable market value. In these cases the statement required by law from the corporation itself as to the market value of its shares is important. The tax commissioner may further require a transcript of the balance sheet, and other information which he deems desirable. No doubt there is a possibility of understatement by a corporation of the value of its stock, and a possibility of the manipulation of the balance sheet. There is reason to believe that sometimes taxes on corporate excess are partially evaded in this way: but the evasions are insignificant in comparison with those as to taxable securities. In any case, they affect but a small proportion of the total taxes collected from Massachusetts corporations as a whole. This part of our tax system is an excellent example of the method of taxing corporations at the source and of refraining from any dealings with the individual holder of corporate securities, a method admitted on all hands to be the simplest, most efficient, and most equitable in the taxation of corporate property.

"There are. however, some questions as to the present mode of distributing the proceeds on the taxes on corporate excess to which we think it necessary to call the attention of the general court. They are distributed, it will be remembered, among the several cities and towns according to the ownership of shares by their inhabitants. We have already referred to some anomalous results of this method of distribution. It causes disproportionately large sums to be turned over to a few towns much resorted to by persons of means. But even apart from this difficulty there are others which make it doubtful whether, under any circumstances, corporate excess should be made a direct source of revenue to the towns and cities.

"With many corporations there is a very large corporate excess. All railways, by an old decision of the courts, are exempt from local taxation on their right of way; and, in any case, the value of their real estate and machinery, taxable locally, is not a great proportion of their total valuation. This is even more strikingly true in the case of street railways. The cities and towns where the shareholders happen to reside, perhaps distant from the place where the enterprise is carried on, get the main benefit of the taxes.

66

Disproportion of a different sort appears as to some manufacturing corporations. A mill owned by a corporation may bring to a town considerable population of working people and a need for schools, streets, sewers, and water. It is true that it may also bring some increase of the taxable dwellings, but this may be comparatively small. If in the taxation of mill property there is considerable corporate excess over and above the property locally taxed, the town feels that it is deprived of resources which should fairly be called on to aid in meeting the additional expenses.

"Still another anomaly appears with regard to trading and mercantile corporations. A firm or individual carrying on mercantile or manufacturing business is taxable locally on its real estate and machinery only. Its stock in trade simply forms a part of its general assets, and is one element among the many which go to make up the value of its shares. As mercantile corporations are likely to own little or no real estate and machinery, the corporate excess is likely to be large, and the taxes are distributed mainly to the cities and towns where the shareholders reside. In most parts of the State the shareholders reside in the cities and towns where the business is carried on, and the distribution raises no question: but in the city of Boston many mercantile corporations are owned by shareholders who reside in the suburban cities and towns. The latter get the large corporate excess, while the stock in trade is not taxable in Boston. It may be that the city of Boston does not suffer seriously from this situation, for the mercantile corporations usually occupy expensive real estate and, as tenants or owners, contribute indirectly or directly to the taxes of Boston; but the suburban cities or towns which get the corporate excess certainly seem to be little entitled to the sums turned over to them in this way.

"On the whole, the present method of distributing corporate excess seems to us to be based upon a doubtful principle and to work badly in practice. It is based on the legal fiction that the situs of personal property is the domicile of its owner. But this theory has already been disregarded, so far as the tax laws are concerned, in various ways. It is not followed in the provisions as to stock in trade, live

stock, and machinery, or in the taxation of savings banks and of Insurance companies. It results in an arbitrary apportionment of large sums of money with little visible regard to the real claims and needs of the several cities and towns. We shall accordingly make recommendations for a change in this part of the tax system-for the retention of the tax on corporate excess by the State in the first instance and for the utilization of the general financial resources of the State with a regard to the just needs of the local bodies."

These recommendations have not been adopted by the legislature.

RAILROADS.

This class of property is assessed by the State tax commissioner as a unit upon "the true value of its corporate franchise," based upon verified reports and such other information as the commissioner may obtain, at the "average rate" throughout the State.

This is in lieu of all other taxes upon the property within the right of way, 5 rods in width, but all property outside this right of way is taxed locally, as other property. The value of real estate and machinery outside of this right of way, assessed by local assessors throughout the State in 1899, was $69,027,535, and the average rate was about $15.78 per $1,000, yielding about $1,089,254 in local taxes. The tax on corporate franchises of railroads in 1899 was $1,631,354.46, making a total tax of $2,720,608.

SUMMARY OF RESULTS.

The following is a summary of the results of the corporation-tax law for the year 1898:

General list

Coal mining, quarrying, and oil companies

Foreign railroad taxes.

The amount accruing to the Commonwealth is shown below:

From general list corporations:

Net amount assessed

Amount due cities and towns..

Amount due to cities and towns on account of tax on streetrailway companies ..........

Balance accruing to Commonwealth......

Total valuation of capital stock of corporations in 1898.
The valuation of real estate and machinery...

Excess on which a franchise tax is laid

STREET RAILWAYS.

$4, 184, 240.72 7,785.66 26,749.00

4, 218, 775.38

$4, 184, 240. 72 2,563, 442.01

1, 620, 798.71

569,069.29

1,051, 729.42

625, 595, 020.00 390, 392, 347.00

235, 202, 673.00

In 1898 a change was made in the methods of taxing street railways. The return to the tax commission must show, in addition to the statements formerly required, the total length of track operated, the amount of capital stock of the company, and of the dividends paid thereon during the previous year and during each year from its organization. Companies which have, from the commencement of their operation, paid dividends of 6 per cent on their capital stock, and during the year preceding the statement paid dividends exceeding in the aggregate 8 per cent upon their capital stock, are required to pay to the treasurer for every such year, in addition to the general corporate franchise tax, a tax equal to such excess of dividends.

The portion of the tax not retained by the State is to be apportioned among the several cities and towns in proportion to length of track operated in such cities and towns, instead of being distributed according to ownership of shares. Roads are also required to file with the boards of assessors in the several cities and towns through which they run annual statements of total length of track and gross receipts, upon which gross receipts the assessors assess an excise tax