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The constitution of Michigan imposes upon the legislature the duty to provide a uniform rule of taxation, except upon property paying specific taxes; and it provides that taxes shall be levied upon such property as shall be prescribed by law, and that all assessments shall be on property at its cash value.

Following these constitutional provisions, the legislature at the time of the formation of the State government enacted laws providing a general system of taxation of the property of the State by two separate and distinct methods, designated as “ general tax” and “specific tax."

The most important part of the tax system is the general tax on property. The laws first, in a general way, provide that all property, real and personal, within the jurisdiction of the State not expressly exempted shall be subject to taxation.

They provide for the annual assessment of all property in the State, including corporate property, with certain exceptions, such corporate property to be assessed to the corporation in its name as to a natural person, in the several townships, villages, and cities of the State by the supervisors of the several townships and wards, or in villages and cities where provision is made in the acts of incorporation or charter for some other assessing officer, then by such other assessing officer. The general property tax assessment is made by local assessors for local and State purposes, the amount of State taxes each year being apportioned by the auditor-general of the State among the several counties in proportion to the valuation of the taxable property therein, and this is again reapportioned by the board of supervisors of each county among the several townships and wards and levied in the same manner.

This system of general property taxation, adopted at an early date, when the greater portion of the property of the State consisted of real estate, although somewhat changed and supplemented in details from time to time by the attempts of different legislatures to adapt it to the needs of a rapidly growing State, continues to the present time, and now, in many respects, appears crude and antiquated under the changed conditions of industrial development, and ill adapted to the just and equitable taxation of the enormously increased amount of personal property in the State, which is largely in corporate form.

Through this system substantially all the real property of the State is assessed upon the rolls in the various localities, but the mingling of local and State taxes naturally results in systematic attempts by local assessors to secure advantage for their respective localities by a reduced property valuation, notwithstanding the constitution and statutes impose upon them the duty of assessing property at its true cash value. A comparatively small portion of the personal property, individual and corporate, is assessed. Intangible personalty, especially, in great part escapes.

From statistics of assessment and taxation gathered by the auditor-general from the different counties of the State and published in his report for 1870, it appears that the cash value of all real and personal property upon the tax rolls was a little more than three times the assessed valuation of the same property. While since that time no such systematic attempt to determine the relation of assessed valuation to cash value of property has been made, it is probably safe to assume that the same difference still exists.


The State subjects to taxation "all property, real and personal, within the jurisdiction of the State not expressly exempted.

The exemptions are of three kinds:

First. Property used not for gain, but for purposes which it has been thought well to cherish and encourage.

Second. Property of corporations exempt by reason of paying specific taxes. Third. Certain exemptions made with a design to prevent the burden of taxation from being unduly heavy upon those not able to bear it without undue hardship.

The real property expressly exempted consists of all public property; the real estate of libraries, benevolent, charitable, scientific, and educational institutions incorporated under the laws of the State; that of all religious societies, agricultural societies, and military organizations, and corporate property exempt by reason of specific tax.

Personal property expressly exempt consists of that of societies above enumerated; shares in building and loan associations, and mortgages and other securities held by such associations; pensions receivable from the United States; so much of credits as shall equal the amount of debts owed; the library, family pictures, and one sewing machine of each individual or family, and wearing apparel of each individual; household furniture, furnishings, and fuel of each householder not exceeding $500, and personal property in connection with his business to the value of $200; the working tools of any mechanic, not exceeding $100; all mules, horses, and cattle not over 1 year old, and sheep and swine not over 6 months old, and all domestic birds.


For the purpose of taxation, personal property includes substantially everything of that nature, tangible and intangible, not specially exempted by law, and is particularly classified in special statutes.

Property actually invested in business outside the State is not included. Debts are deductible from credits only, and the balance of credits of every kind is tasable. Shares in foreign corporations owned by citizens are taxable to the owners.

While the law does not refer in express terms to the taxation of notes and mortgages, they are regarded as taxable to the owner under the provisions for taxa tion of credits and other personal property not expressly enumerated. Such property, however, has almost entirely escaped taxation under the existing system. The State tax commission is, however, making special effort throughout the State to bring such property upon the tax rolls.

In 1891 a law was enacted providing that a mortgage or other obligation secured by lien on real estate should be treated as an interest in real estate for the purposes of taxation; that the value of property less the value of the security should be taxed to the owner and the value of the security assessed separately to the owner thereof in the assessing district where the property so affected was located. The provision was not thoroughly enforced, and in practice the taxes on both land and mortgage were, by contract between the parties, paid by the owner of the land. Confusion and dissatisfaction resulted, and the law was repealed in 1893.


Rigorous provisions for the listing of personal property for taxation have been apon the statute books for many years, but have in practice been ignored.

The assessment of personalty by local assessors has been almost entirely by estimate without statement of taxpayers and has been characterized by extreme laxity and neglect, resulting in low, unequal assessment of a portion only of tangible personalty and the escape of substantially all intangible property. At a recent session of the State legislature, however, the laws constituting the listing system were amended in important particulars and a vigorous effort has since been made by the board of State tax commissioners, hereafter referred to, to enforce them.

By the change of the word “may” to “shall” the duty of the local assessor to require a statement under oath from every person of full age and sound mind" whom he believes to have property not exempt from taxation is made mandatory. The assessor's and the taxable's duties in this regard are minutely defined. Every resident owner of the State, individual or corporation, is required to give a carefully detailed list of all personalty, tangible and intangible; and severe penalty, by fine or imprisonment, is imposed for willful neglect or refusal to make out such statement or for answering questions falsely.

The assessing officers or members of the State board are especially empowered to examine under oath any other person thought to have knowledge of the property of such negligent taxable concerning such property, and arbitrarily to assess such amount of real or personal property as they may deem reasonable and just.

An interesting case bearing upon the legal effect of the intentional undervalnation and omission of property by assessors in making up the assessment rolls, illustrating the infirmities of the general tax system, was recently decided by the supreme court of the State. (Auditor-General v. Pendill et al., decided March 27, 1900.)

Where the evidence showed an intentional omission of personal property, an intentional undervaluation of a large part of the personal and real estate, not accidental, not inadvertent, but known and intentional, the entire assessment roll was held to be void.

The listing of property of corporations will be referred to in counection with the subject of corporate taxation.

BOARD OF STATE TAX COMMISSIONERS. In 1899 a law was passed creating a board of State tax commissioners to exercise supervisory control over local tax officers. It was vested with arbitrary power and authority for the enforcement of the tax system of the State, and charged with the duty of investigation and recommending future legislation upon the subject of taxation.

The board consists of three members, appointed by the governor, and the full term of service is 6 years. The members are given access to the records and files of the State and of counties, townships, and municipalities, the right to examine the books and papers of any person or corporation owning property liable to assesssment, and the power to summon and examine witnesses. It is required to exercise supervision over all the assessing officers of the State, and to take such measures as will secure the enforcement of the tax laws, “ to the end that all the properties of the State liable to assessment for taxation shall be placed upon the assessment rolls and assessed at their actual cash value."

The duty is imposed upon it to confer with and advise assessing officers as to their duties, and to institute proper proceedings to enforce the penalties and liabilities imposed upon public officers, officers of corporations, and individuals failing to comply with the laws; to receive complaints and correct errors and irregularities; to visit each county at least once a year, to hear complaints concerning the laws.collect information as to its workings, and see that officers comply with the law, that violations are punished, and that proper suggestions as to amendments and changes are made; to ascertain the assessed and equalized valuation of all property listed for taxation throughout the State; to inquire into and ascertain the valuation of the property of corporations paying specific taxes, and the actual rate of taxation based upon property valuation; to investigate the revenue laws and systems of other States, and with the aid of all information and experience obtained, recommend to the legislature at each session such amendments and changes of the revenue laws of the State as may seem proper to remedy injustice and irregularity and facilitate the assessment and collection of public revenue; to report to the legislature at each regular session specifically the true valuation of the properties of corporations paying specific taxes, and rates actually paid thereon, and the true valuation of all other properties of the State, and the rate of taxation thereon, to the end that the legislature may have the requisite information to rearrange the rates or system of taxation on such property, so that all properties may be uniformly taxed.

This board is also charged with the inspection of the several assessment rolls of the State, and empowered to direct such changes and additions as may be necessary to compliance with the laws and the correct taxation of all property. It is also given power to tax upon the current rolls in any year property that has been shown to have been omitted in previous years for the tax of the omitted period.


The real estate of all banks organized within the State is assessed to such banks where such property is located. All shares in such banks are assessed at their cash value to their owners in the place where the bank is located, except that shares owned by a person residing in the same county but in a different township or city are assessed where such owner resides.

The cash value of the real estate assessed separately to such banks is deducted from the assessed value of shares of stock. When the stock of a bank is not regularly quoted in the market, the value of shares may be determined by dividing the sum of the paid-up capital and surplus by the number of shares, deducting from each a proportionate part of the cash value of realty taxed to the bank.

The real estate and shares so valued are taxed at local rates with other assessed property.

Bank deposits are taxable by law to depositors or owners and not to the banks. In practice, however, bank deposits have not been taxed in this State.

For convenience in collecting these taxes the cashier of the bank is made the agent of the shareholders, the official duty being imposed upon him to pay the taxes assessed upon such shares of stock when called upon to do so, and charge the amount so paid against the shares of stock so taxed.

The cashier is required each year to file with the clerk of the county where such bank is located a list of the names of the stockholders, with the amount of stock held by each and their respective residences, and a heavy penalty is imposed for willful neglect to perform this duty.

Thereupon the county clerk is required to notify the assessing officer of each township of the names of each shareholder residing therein and the amount of stock held.

The principal or accounting officer of every bank whose capital is not represented by shares of stock, and every private banker, broker, or stock jobber is required each year to give to the local assessor a sworn statement showing:

First. The amount of money on hand and in transit.
Second. The amount of funds in other hands subject to draft.
Third. The amount of checks and other cash items not included in above items.
Fourth. The amount of bills receivable and other credits.

Fifth. The amount of bonds and stocks of every kind, except United States bonds and shares of capital stock held as an investment or representing assets.

Sixth. All other property appertaining to such business, except real estate.
Seventh. Amount of deposits.
Eighth. Amount of accounts payable other than deposits.
Ninth. Description and value of real estate.

The aggregate amount of items 7 and 8 are deducted from aggregate of 1, 2, 3, and 4, and the remainder, if any, assessed as moneys.

The amount of the fifth item is assessed as stocks and bonds, the sixth as other similar property, and the whole makes up the aggregate personal assessment, the real estate being assessed separately.

The property of banks being subjected to local rates of taxation upon the basis of valuation determined by the methods above described, it follows that by reason of full valuation it is much more heavily taxed than property in general, and from this excessive taxation there is no escape.

CORPORATIONS IN GENERAL. Under the tax laws of Michigan a corporation whose property is taxable under the general law stands upon the same footing as an individual. The property of both come under the general property-tax system. The real estate is assessed in the name of the corporation in the place where located.

The law as to the taxation of the personal property of corporations is not very clear, but in a general way it may be said that there is no substantial distinction between the taxation of such property and that of individual owners.

It is specifically provided that “all corporate property, except where some other provision is made by law, shall be assessed to the corporation as to a natural person, in the name of the corporation."

The provisions declaring what personal property for the purposes of taxation shall include and relating to exemptions apply to corporate property as well as to that of individuals.

Under these provisions the indebtedness of either an individual, firm, or corporation can be deducted only from credits; if no credits are shown in statement of such property there is nothing from which debts can be deducted. Where the property of corporations is taxable to itself the shares of stock are exempt from taxation in the hands of the owners.

The personal properties of all gas and coke companies, natural-gas companies, electric-light companies, waterworks companies, and hydraulic companies are assessed where the principal works are located. The mains, pipes, and wires of such companies laid in or along roads, lanes, streets, or alleys are assessed as personalty where the same are laid or placed. The personal property of street railroad, plank road, cable or electric road or transportation companies, bridge companies, and all otber companies except those paying specific taxes, are assessed where the principal office of the company is located, and the track, road, or bridge of any such company is held to be personal property and assessed where the same is located, placed, or laid.

Formerly street-railway companies were taxed at the rate of one-half of 1 per cent on the whole amount of capital paid in on the capital stock in lieu of all other taxes, but this law was repealed in 1882.

The property of many classes of corporations is specifically taxable to the corporations themselves by provisions in the acts under which they are incorporated.

The law for the incorporation of manufacturing companies contains the following provisions: “All corporations formed or existing under this act shall be liable to be assessed for all real and personal estate held by them in this State at its true value, and shall pay thereon a tax for township, village, city, county, and State purposes the same as other real and personal estate, and such tax shall be assessed, collected, and paid in the same manner as other taxes on real and personal estate are required to be assessed, collected, and paid: Provided, That nothing herein contained shall authorize the taxing of the capital stock of such corporations as such capital stock."

For the purpose of assisting the local assessor in determining the valuation of corporate property, each corporation taxable under the general law is required to make and deliver to him annually a sworn statement setting forth:

First. The name and location of the company.

Second. The amount of capital stock authorized and the number of shares into which it is divided.

Third. The amount of capital actually paid in.

Fourth. The market value of the stock, or, if it has no market value, then its actual value.

Fifth. The cash value of all personal property, giving each kind separately as far as practicable.

Sixth. The total of all bona fide indebtedness, except indebtedness for current expenses, excluding from such expenses all amounts paid for the purchase or betterment of said property.

Seventh. A description and value of real estate.

The amount of the seventh item is deducted from the amount of the fourth item, and the balance, if any, is assessable as the cash value of the personal estate. The amount of the sixth item is deducted from the amount of the fifth item, which is held to refer to credits, and the balance, if any, is assessed as personal property.

Special statements are required of navigation or transportation companies as to vessel and marine property.

If any corporate officer makes or verifies any false statement to an assessing officer, the intention or effect of which is to escape taxation, such person is declared guilty of a misdemeanor and is punishable by fine or imprisonment.

Severe penalties are by law imposed for neglect or refusal to make true and correct sworn statements. The assessor or board of State tax commissioners in certain cases may examine under oath any person believed to bave knowledge of such property, and are authorized to assess to any corporation neglecting or refusing to make such statement such amount of real and personal property as they may deem reasonable and just.

When the valuation of personal property is determined in the manner set forth, it is assessed to the corporation in like manner as individual property.

Until 1899 the requirement of statements of the property of corporations was discretionary with the assessors, and in practice they were generally not required, and the real and personal property of corporations under the general law was assessed by estimate of the local assessing officers as individual property, regardless of capital stock, franchise valuations, or earning power as factors, and with like result as to true valuation.

The amendment of 1899 makes the requirement of such statements mandatory, and some attempt has since been made to enforce them.

It will be observed that no specific provisions are made for the valuation or assessment of franchises, and their value, if assessed at all must be included in capital stock or personal property generally.

The crudeness and inefficiency of this system as applied to corporate property is obvious, and the undervaluation and unequal valuation of such property as compared with the real value thereof, based upon capital stock, franchises, earning power, and other material factors, and escape of property from the rolls entirely, are disclosed by the most cursory examination, and are the cause of continual controversy throughout the State.

The taxation of corporate property under the general law in Michigan is a farce and a travesty upon justice and equality of taxation.

Assessed valuations, 1896. All real estate

$805, 553, 976 Personal property, including that of corporations..

140, 455, 965 Total

946,009, 941 The total was equalized by the State board of equalization to $1,105,100,000.

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