The experience of Massachusetts in this respect is regarded as the more striking because there the difficulty does not lie mainly in the administration of the tax laws, because the assessors are usually honest, competent, and zealous. While in other States there are grave abuses and corrupt laxity, in this State the standard of public duty continues to be high, the assessors intelligent and experienced, and the cause of failure is not in official dereliction, but lies in the system itself. It is maintained on one hand that the difficulty lies in the method of valuation and assessment of such property by local assessors, and that the remedy is to be found in more stringent assessment by State officials at some uniform rate; and on the other hand, that the whole system is bad, irrespective of the complication arising from local assessment; that the taxation of securities involves double taxation, is unjust, and in any case impossible of satisfactory execution by local or State officials.

The commission, in discussing the taxation of foreign securities in the hands of citizens of the Commonwealth, expresses the opinion that the method of taxing such securities as property within the State is taxed is bad in principle as well as ineffective in practice, and that while such citizens should be required to contribute in some way to the public burdens-not with respect to the property represented by such securities, but with respect to the income therefrom-they should not be taxed on the securities in the same manner as if they held property in the State. It is pointed out that the attempt to enforce such taxation by the rigorous and drastic measures frequently proposed would not only be ineffectual upon such an elusive form of property, but to the extent accomplished would be double taxation and unjust; that with the rate of interest upon such securities not exceeding 4 per cent, and the average rate of local taxation 1 per cent, the taxation amounts to one-third of the entire income, while no civilized country in ordinary times has ever imposed with success an income tax of more than 3, or at most 5, per cent; that such a taxation results in general evasion and perjury, and that the taxation of such securities by rigid sworn returns is most demoralizing and ineffective; that the method of local assessment is not the root of the evil, but that the fundamental cause is the futile endeavor to tax securities-mere evidences of ownership of property-by the same methods and at the same rate as tangible, visible property.

RECOMMENDATIONS OF THE TAX COMMISSION.

The commission therefore proposes a radical change in existing methods, and recommends that all securities and evidences of debt representing ownership or interest in property outside the State be not subject to the general tax on property. This, they say, would do away with all questions of double taxation and administrative difficulties and make the legislation of the State with respect to such securities consistent with itself.

With this recommendation the commission, recognizing the injustice and inequality of exempting the holders of securities and obligations from taxation and the necessity of requiring some contribution to the taxes of the State in some reasonable proportion to means, is impelled to the consideration of substitutes for such tax.

Considering a tax upon income as such substitute, while recognizing such a tax as in principle the most equitable that could be devised, and in practical working preferable to the present system, the difficulty under present conditions of administering such a tax with certainty and equality of treatment as between different taxpayers is thought to be too great to warrant the recommendation of its adoption. The commission fails, however, to present any forcible or logical reasons or argument to justify the assumption that such a tax levied by State authorities by reasonable methods would be impractical in its results, or the apprehension expressed that it would result in evasion and concealment to so great an extent as to render it ineffectual and deservedly unpopular.

The commission seems to magnify the objection to requiring from the holder of such securities a statement or return for taxation, such as would not appear objectionable in business as a basis for credit, and to be oversolicitous of the feelings of those whose sensitiveness is principally aroused by the desire to dodge taxation.

Animated by this objection, which is regarded with undue seriousness, the commission seeks for a substitute for the taxation of such securities and obligations which would obviate the necessity of rigorous methods for discovery of property by returns.

Referring to the Pennsylvania method-designated as a compromise policy, in its effect not far from a State income tax on securieties-of taxing such securities at the uniform rate of 4 mills on each dollar of the value, or $4 on each $1,000 of

value, the commission concludes that its practical working in that State is not satisfactory, and expresses the opinion that this method offers no advantages over that of a State income tax.

The Connecticut method of taxing such securities-subjecting them to a uniform State tax of $2 per $1,000 of value by registration-is also considered, but while some advantages are conceded, it is not regarded as satisfactory in its operation or results.

The commission, in its search for methods of taxation of such property owners which would relieve them from a declaration and yield more certain and uniform contributions of revenue, recommends two modes as feasible and avoiding the objections referred to; namely, the extension of the existing inheritance tax to yield a substantial increase in revenue, and a tax on occupants of habitations, or a tax on presumed or estimated income based on the expenditure of the taxpayer for dwelling-house purposes. It proposes a graded tax on all persons occupying dwellings of an annual rental value exceeding $400, and, in view of this tax, the abolition of the present tax on incomes from professions, trade, or employment.” These further innovations upon the "simple system of the general property tax" are proposed for the commendable purpose of securing still greater variety in the methods of taxation, to correspond with the growing complexity in the ownership and distribution of wealth. It is suggested that if the changes recommended were made and followed in other States as well, they would avoid double taxation and result for the country as a whole in a sound and consistent system of local and State taxation.

The commission finally recommends the abolition of existing taxes on intangible personalty, such as stocks, bonds, and loans on mortgages, the inheritance and habitation taxes being relied upon to yield an equivalent revenue.

MINORITY REPORT.

One member of the commission presented an elaborate and characteristic minority report, vigorously opposing most of the recommendations of the majority.

The difference in the positions of the respective branches of the commission upon fundamental propositions apparently arises from the fact that they occupy different view points as to the nature of the general property tax system as applied to the industrial and property conditions existing in the Commonwealth.

Both are animated by the same commendable purpose-the attainment of the greatest possible degree of justice and equality in the practical application of a system of taxation.

Both evidently agree upon the essential principles of taxation, but the majority is apparently moved by a sense of the inadequacy of existing methods alone to provide a practical operation of those principles, while the minority evidently has abounding faith in the efficiency of the system if properly supplemented and enforced by legislation and correct administration.

The majority recognizes the necessity of adopting other methods in conjunction with those existing for the assessment and taxation of certain kinds of corporate and intangible property, which it assumes can not be properly reached through existing methods alone, while the minority affirms the efficiency of the present system through proper administration to reach for taxation all kinds of property.

The majority is apparently impelled to the conclusion that the principle of self-assessment of taxables through verified property statements, supplemented by coercive measures for its enforcement, and the self-assessment of townships and wards by the competitive valuation method, have proven utter failures in the practical experience of States, while the minority is impressed with the conviction that the success of these methods is a question of proper administration.

Brief reference to some of the points in his report will suffice to indicate his views and his trend of thought upon the subject of taxation; and inasmuch as he voices the sentiment of a large class of people active in the advocacy of their opinions, such reference may not be out of place in this report.

His conviction that every taxable should be compelled to contribute to the support of government and society according to his ability, and that ability to contribute is justly measured by the value of his property, in whatever form it exists, is unyielding. He exhibits no patience, leniency, or toleration towards the "taxdodging constituency," and his policy is that of compulsory equality of taxation by uniform assessment and taxation of all kinds of property through coercive

measures.

The way to reduce the tax rate without increasing the tax valuation, he says, is simply to secure the payment of the tax upon property that escapes. He vigorously protests that the present tendency, as shown in the demands for exemption from taxation of those who have the most of the world's wealth, rests upon the theory that the prosperity of the State is in direct proportion to the exalted privileges of the few. He inveighs against that tendency and urges that "Massachusetts should stand as the conserver of her ancient rights and privileges, and should insist upon a system of equal taxation, exempting only the poor, the unfortunate, the aged, and such institutions as shall best advance the interests of the whole people."

He favors the taxation of securities of all kinds, contending that they are not merely evidences of property, but actual property to all intents and purposes, subject to transfer and sale, and that the taxation of such property is not, in the proper sense of the term, "double taxation." He opposes the abolition of this tax and favors its enforcement by drastic penal measures, bitterly condemns evasion and tax dodging on the part of citizens, and characterizes one who by willful concealment evades his tax as "a lawbreaker with malice prepense."

The man who refused to pay his poll tax was incarcerated for his refusal, and the common people, unlearned in tax theories, might well ask: Why should not the millionaire who evades the tax be liable to as severe a penalty?"

He recommends that the "vast sums escaping taxation through imposition upon the generous provisions of the State" by deposits in savings banks favored in taxation should be reached, and that amounts on deposit exceeding $500 be taxed above the present reduced rate.

He maintains in sweeping generalities that intangible personalty should be taxed as all other property, and that a system should be adopted to prevent its escape, to the end that the State might enjoy a rate so low that one class would not be burdened with the weight of the taxes of others.

He agrees with his associates that "the great bulk of intangible properties do escape taxation," and has much to say about the "privileged classes" who own such property and the power of the State to "compel obedience to the law."

He commends the sound sense of the Maine commission of 1899: "We have no sympathy with the idea that because some men will defraud the revenue, because they will conceal property, commit perjury, and resort to all conceivable trickery to prevent taxation, therefore the whole classes of property which they would thus hide from the assessor should be exempted by law."

He gives little consideration to the substitution of other methods for the taxation of such persons and property, but insists that they shall be actually taxed through present methods.

He proceeds to show by statistics that the personal property of the city and State subject to taxation is at least twice the value of the real estate, and that on the basis of 2,040 millions of realty assessed in 1896, the personalty should have been 4,080 millions, or 2,750 millions more than was actually taxed.

On a total taxation of $38,519,570 of that year the added assessment of even 2,000 millions of intangible personalty would have reduced the rate to about $8.50 per $1,000.

He attributes such escape of property from taxation to the laxity of the laws and not to the system in force, and favors compulsory statements as the remedy. He favors the taxation of real-estate mortgages and denies that the exemption of the mortgage in the hands of the holder would relieve the owner of the land by a corresponding diminution of interest, as the rate of interest depends upon many other things than the rate of taxation.

He undertakes to prove by statistics that mortgage rates of interest show no greater decline where these securities are relieved from taxation, and that mortgage exemption causes no appreciable reduction of interest charges to the borrower..

He does not favor State assessment, but recommends "no new departure from the ancient policy of the State 'to tax all men according to the measures of their ability,' but rather to complete the system now in operation by such amendments as shall adapt our policy to the more complicated conditions of our time."

REPORT OF THE LEGISLATIVE COMMITTEE.

A special committee on taxation, consisting of 4 members of the senate and 11 members of the house of the Massachusetts legislature, was appointed, to which were referred the recommendations of both the majority and minority reports of the special commission above set forth, and various bills submitted for carrying out such recommendations.

The recommendations of the majority were briefly as follows:

1. An inheritance tax upon both realty and personalty of 5 per cent, exempting estates not exceeding $10,000, and abating $5,000 on estates between $10,000 and $25,000, the revenue to be divided between the State treasury and local districts. 2. A tax on occupiers in proportion to house rentals, only the excess over $400 rental being taxable.

3. Abolition of the present taxes on intangible personalty, such as stocks, bonds, loans on mortgages, and incomes, the tax under 1 and 2 being relied on to yield at least as much as is now secured from this source.

4. Assumption by the State treasury of county expenses.

5. Appropriation by the State of the revenue from taxes on corporate excess now distributed among the several cities and towns.

The minority report protested against the removal of the tax on intangible property as putting all the burdens of taxation on the poor and active and exempting the rich, and as being unconstitutional class legislation; condemned the house-rental tax, and opposed the redistribution of county expenses. The positive recommendations were the taxation of intangible personal property like all other property, and the adoption of a rigid system to prevent its escape. In detail, it advocated the increased taxation of savings banks deposits in excess of $1,000, the taxation of mortgages, and incidentally the prohibition of covenants by borrowers to assume and pay taxes on mortgages; a tax on personal property at a uniform rate throughout the State, to be determined by the average rate of the previous year, the personal tax to be doubled when sworn returns are not filed, such tax to be laid by the tax commissioner, assisted by a corps of State assessors, with power to control local assessments, who, when not otherwise employed, are to seek for the discovery of concealed personal property and the detection and punishment of those making false returns. In view of the experience of enlightened foreign nations, a graduated inheritance tax was favored for additional revenue, but not as a means of exempting intangible property.

The report of the special tax commission was given most careful consideration, and the committee held many hearings and heard a large number of witnesses both for and against the proposed recommendations. The committee says in its report that there was no evidence from the attendance upon the hearings of any widespread feeling of dissatisfaction upon the part of the taxpayers with the existing system.

The case of the petitioners, so called, or those who desired a change in the existing laws and approval of the recommendations in the majority report of the tax commission, was ably conducted by the counsel of the Anti-Double Taxation League, having a membership of 1,000 citizens of Massachusetts especially interested in the abolition of the present taxes on intangible personalty proposed by the majority. The testimony came chiefly from those who had made a specialty of the subject and had very positive views upon the proposed changes, and the arguments made in favor of such changes displayed great learning and ability. Among the numerous witnesses representing various classes of property were representatives of mining companies having large sums of money deposited in local banks and whose offices were in Boston, although many of the companies were organized in other States, who testified that if their stockholders were reached and taxed it would be necessary for them to leave the State; that the royalties and franchise taxes in other States were considerable and the taxation of stock there would be double taxation; that the State could compel them to furnish a list of shareholders (a bill for that purpose having been introduced), and if such a law were passed they would move their offices from the State.

The remonstrants against the changes proposed by the majority report were made up largely of those who had studied the subject and had very decided opinions upon it, of assessors, who were practically a unit against them, representatives of farming interests, and mayors and solicitors of several cities of the Commonwealth; and able and learned arguments were also made against the proposed, changes.

The committee also gave careful consideration to the views and opinions of economists and writers upon the subject of taxation, and sought light upon the difficult subject in every direction by exhaustive study and investigation.

A most notable feature of the hearings was the wide divergence in the opinions and views of witnesses and counsel upon the subject of taxation and the positiveness and tenacity with which such diametrically opposite views were advocated. The nature and sources of the testimony given, coming principally from students, theorists, and assessors, comparatively little being heard from taxpayers generally, suggested to the committee the probability that the truth might lie between the extremes presented chiefly on theoretical grounds, and led to a

most careful examination of the existing system as it affects the great mass of taxpayers.

The committee says that looking at the situation broadly, and considering taxation as the art of raising necessary public revenue fairly and in a manner not only proportional but reasonable, rather than as the exact science of finding every bit of property and extracting from it the largest possible tax by strict logical rules, it may be questioned whether the strictures upon the present system, from theorists upon the one side and assessors on the other, are as deserved as might at first appear. A considerable revenue is collected, the committee says, from the tax on intangible property, and no general complaint was made by those who pay taxes out of proportion to what others pay. The conclusion was that the undeniable defects in the present system ought not to be needlessly exaggerated, and that the Commonwealth should be very slow to overturn its methods of taxation on no better ground than that they are not ideal or perfect.

In a conservative and practical spirit the features of the various changes proposed were considered and discussed from the standpoint of practical successful legislation, in the light of the circumstances which exist among the people and the industrial and political conditions existing in the Commonwealth.

Considering the views of the extreme advocates of opposing views among witnesses the committee says: "When the practical assessor is consulted for what is, and the theoretical economist for what ought to be, it is learned from the economist that what the assessor wants ought not to be, and from the assessor that what the economist wants already exists."

The committee, believing that the majority report of the special tax commission should be accepted or rejected as a whole, refused to recommend its adoption as a substitute for the existing system of taxation. The abolition of the present tax on intangible personalty could not be recommended unless some less objectionable substitute were provided which would yield the required revenue.

The proposed habitation tax was regarded as open to many objections, as a sumptuary law that would fall especially upon the most deserving class in the community, discourage marriage and residence in Massachusetts, and above all place an excessive burden upon the home, the creation and maintenance of which are of the highest importance to the well-being of the community. It would bear disproportionately upon those with moderate means, and its constitutionality was questionable.

The inheritance tax of 5 per cent on both realty and personalty was regarded as objectionable, and an inheritance tax on personalty alone at a rate which would not be burdensome would not afford an adequate substitute for the loss of revenue which would result from the exemption of intangible personalty.

The committee was unable to report favorably upon any of the recommendations proposed in the minority report for the stricter enforcement of existing laws, and did not approve of the act providing for the State assessment of personalty. It was also opposed to the graduated inheritance tax.

In regard to the petition of the Anti-Double Taxation League, providing for the exemption from taxation in the Commonwealth of personal property situated and taxed without, and shares of certain corporations organized under the laws of other States, but owned in Massachusetts, the committee said that in so far as it would exempt the taxation of personal property, such as stock in trade, cattle, and property of like nature already taxed in other States, it was not open to serious objection, but it was thought that the evil was not of sufficient magnitude to justify legislation upon the subject, in view of the complications which would follow. To the proposed exemption of shares of foreign corporations owned within the State serious objections were found.

In announcing its conclusions that it could not reccommend any legislation introducing fundamental changes in the present law or any radical changes in the administration of the law as it existed, the committee recognized the disappointment likely to be felt by both sides, and stated that the committee did not feel called upon to originate any legislation, but concerned itself with the consideration of the commission's report, with the result stated; that changes in laws so vital to the well-being of the community as those of taxation must be made only after the most careful, painstaking, and deliberate investigation; that such laws are the result of extended legislation, and the system one of growth which has more or less adequately kept pace with changes in industrial conditions; that the members of the system are so articulated that the disturbance of one more or less affects all the States; that to formulate a tax system for a new community is one thing, to revolutionize an existing system quite another; and that legislation in this direction should come only in response to a pressing and widespread demand for it. Admitting all alleged defects in the present system, the prudent legislator