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The commission, however, concluded that whatever the difficulties, it was not wise to delay an honest attempt to find the value of such properties by the best possible test. It expressed the belief that the distribution of the value of such property between the States according to mileage in each State is the only practical method and as nearly accurate as any that could be devised.

In the adoption of a method for determining the value of this class of property, the commission rejected as unduly expensive the employment of experts to determine the physical value of the railroads--a method employed by the Michigan tax commission during the past year with results of very questionable worth, even for the purpose of comparison in taxation. Two principal sources of evidence were obtainable, the first being the reports of railroads containing accounts of the cost of the roads and equipment, issues of stocks and funded debts, gross and net earnings, operating expenses, interest and dividends paid, etc.; the second being to take the market price of the capital stock and funded debt of each road for a certain period and find the value by the aggregate value of all the stocks and bonds.

The average market value of the stock and bonds was compiled from the best and most reliable sources obtainable for periods of 1,3, and 5 years, and the value of railroad property in Wisconsin, determined by the mileage plan.

The market values ascertained by this method were as follows: Five-year average

$217,995, 718 Three-year average.

231, 350, 451 One-year average.

252, 318,776 Taking the aggregate value of all the taxable real and personal property of the State as ascertained by the methods hereinbefore set forth and the total taxes raised for the year 1891 the tax rate upon that valuation, it was found, would have been 1.1545 per cent. For the purpose of comparsion of the taxes paid by the owners of real and wrsonal property with that which would fall on railroads on the ad valorem basis, the commission took the average market price of the capital stock and debt for the 5-year period. It was then shown that, extending this illustrative tax upon that basis, the amount of tax would be $2,516,760.56. Based upon the 3-year average and the 1-year average, the tax would of course be correspondingly higher.

It was further shown that if, instead of using the average rate referred to, the aggregate value of real and personal property was added to the aggregate value of the railroads on the 5-year basis, and the amount of taxes raised from both classes in 1899, the general taxes and the license taxes, the rate would be 1.102, and the amount paid by the railroads at that rate would have been $2,402,312.81.

The commission also took into consideration the fact that “a too radical change might affect the value of the roads and cause the rates charged for traffic to be increased.” From these ingenious investigations and comparisons the commission concluded that it would not be wise to change the existing license-fee system until it was more thoroughly tested, after so fixing the rates that the tax on gross earnings would be placed upon a basis equitable in comparison with the tax on other property.

This general conclusion would appear to be much safer and sounder than the methods employed in the comparisons. In fact, these methods illustrate, as stated by the New Jersey commission,“ how impracticable it is to compare two things which are essentially dissimilar; how difficult and unsatisfactory it is to make a correct and just comparison of two systems of taxation based upon dissimilar principles.” Such comparisons are perhaps useful for general purposes, but obviously constitute an unsound basis for tax legislation. The principles upon which the respective methods are based must be the primary consideration, and the comparative valuation thus obtained secondary.

In pursuing these methods of comparison of the accurate maximum values of one class of property, including the elements, tangible and intangible, which go to make up earning capacity, with other classes of property based upon property estimate and conjecture, it is obvious that liberal allowance must be made through the judgment and discretion of those conducting the comparisons, and that numerous elements of doubt and uncertainty are likely to be determined in favor of classes coming under the general property tax. A reliable authority has stated, in substance, that the method of arriving at values by capitalizing earnings at a certain percentage (or by market value of bonds and stock) must be regarded as entirely distinct from the property or valuation method, and for all practical purposes amounts to a tax upon earnings.

The application to one class of property, peculiar and complex in character, of a method of valuation which includes not only tangible property values, but such intangible elements as franchises, terminal connections, traffic arrangements, business management, etc., and to other classes the methods employed by the assessors for ascertaining values of real and personal property in general, can hardly be regarded by business and industrial interests as affording an approx, imately reliable basis of comparison or as calculated to deduce sound and logical conclusions. The soundness and justice of the conclusions reached necessarily depend very largely upon the good judgment of the commissioners.

Valuations were also placed upon the properties of street railways, telegraph companies, and telephone companies by somewhat similar methods for like purposes of comparison.

RECOMMENDATIONS OF THE COMMISSION. In making recommendations the commissioners “have sought to be conservative, keeping in mind, while seeking remedies for the evils laid bare, that too radical an effort to bring relief might tend to neutralize the good which would follow upon an immediate equalization of the tax burden.”

The conclusions of the commission may justly be regarded as more sound than the methods employed for comparison of property values and as reflecting great credit upon the judgment and discretion of the commission. They recommend as follows:

MAINTAIN LICENSE-FEE SYSTEM. That the license-fee system of collecting taxes from certain corporations be maintained, at least until it be given a test under conditions that will make the returns received from it more nearly equal to what would be collected from the same properties on an ad valorem basis.

LICENSE FEE TO BE COLLECTED FROM RAILROADS.

That the annual license fee to be paid by the railroads in lieu of all other taxes shall be a percentage of the annual gross earnings graded from a minimum of 3 per cent to a maximum 55 per cent, the graduation and classification to be as follows: Three

per cent of the gross earnings of all railroads whose gross earnings do not exceed $2,000 per mile; the rate thereafter to be increased from the minimum of 3 per cent by adding thereto one-tenth of 1 per cent for each $100 of gross earnings per mile until the gross earnings per mile shall equal $4,500 and the maximum rate of 51 per cent is reached; and 51 per cent of the gross earnings of all railroads whose gross earnings per mile are $4,500 and over. Thus, railroads whose gross earnings are equal to $3,000 per mile will pay 4 per cent; $4,000 per mile, 5 per cent; $4,500 per mile, or over, 57 per cent.

The railroads in 1900 on the earnings of 1899 paid the sum of $1,546,720.68 on gross earnings of $39,487,403.67. The above classification on the per cent of the gross earnings if applied to the gross earnings of the railroads in 1899 will give a revenue of approximately $2,150,000.

SHALL NOT BE A WAIVER.

That the payment of a license fee on the gross earnings reported to the State treasurer by the railroads, and the granting of a license to operate the railroad in the State shall not be a waiver of the right to recover such further sum as investigation may show ought to have been paid.

REASSESSMENT.

That in case the taxation of railroads under the license fee system shall be held invalid on grounds not affecting the justice or equity of the tax a State board shall be designated and empowered to reassess the amount of the license fee which should have been paid upon the property of the railroad corporations at the actual value, and to levy a tax thereon for the use of the State.

STREET RAILWAYS AND ELECTRIC LIGHTING AND POWER COMPANIES.

That the annual license fee charged the above-named companies shall be a percentage of the gross receipts ranging from a minimum of 3 per cent to a maximum of 5 per cent, graded and classified as follows: Three per cent of the annual grous rocaipts of all companies whose earnings per annum shall not exceed $25,000; and thereafter to be increased from the minimum rate of 3 per cent by adding thereto one-tenth of 1 per cent for each additional $7,500 of gross receipts over $25,000 until gross receipts of $100,000 are reached, when the rate will be 4 per cent; and increased from 4 per cent by adding thereto one-tenth of 1 per cent for each additional $10,000 of gross receipts over $100,000 until annual gross receipts of $200,000 are reached, when the rate will be 5 per cent; then 5 per cent on the gross receipts of such companies whose gross receipts per annum shall exceed $200,000.

TELEPHONE COMPANIES.

That the annual license fee which shall be charged telephone companies shall be a percentage of the gross receipts, ranging from a minimum of 3 per cent to a maximum of 5 per cent, graded and classified as follows: Three per cent on the gross receipts of all telephone companies whose gross receipts per annum shall not exceed $25,000; the rate thereafter to be increased from the minimum rate of 3 per cent by adding thereto one-tenth of 1 per cent for each additional $7,500 of gross receipts over $25,000 until gross receipts of $100,000 are reached, when the rate will be 4 per cent; thereafter to be increased from 4 per cent by adding thereto one-tenth of 1 per cent for each additional $10,000 of gross receipts over $100,000 until $200,000 of gross receipts are reached, when the rate will be 5 per cent; then 5 per cent on the gross receipts of such companies whose gross receipts per annum shall exceed $200,000.

TELEGRAPH COMPANIES.

That telegraph companies operating in the State be taxed on the ad valorem basis, the assessment to be made by a State board the same as in the case of sleeping car, express, freight line, and equipment companies.

EXPRESS COMPANIES.

That Chapter III, laws 1899, be changed so as to more specifically define the property to be deducted in making the assessment of express companies. The companies have made the claim that the property “not used in the business of such express company" should be deducted before making the assessment of their property. It was contended in the hearings before the State board of assessment that a large amount of personal property, consisting of stocks, bonds, mortgages, and other securities constituting the capital of the companies was not used in the express business. While such property is not actually used in the transportation business of the companies, it gives strength and credit, which enable them to do a large amount of business. The State board of assessment being in doubt as to the right to include such property in the valuation of the express companies, have allowed such deduction in view of the indefinite provisions of the statute.

FOREIGN CORPORATIONS.

That the statutes prescribing the conditions upon which foreign corporations are permitted to transact business in this State be amended in important particulars to secure their better regulation, control, and taxation. Such corporations should at least be compelled to file their charters or articles of incorporation and pay the same fees as are required of domestic corporations. They should also make reports of the capital employed within the State, and such other information as may be demanded. A reasonable license fee should be imposed on such corporations for the privilege of exercising the corporate powers and franchises in carrying on their business within the State.

INHERITANCE OR SUCCESSION TAX.

That a change be made in chapter 355, laws of 1899, which provides for a tax on inheritances or transfers of personal property. This is generally commended as a just and wise measure, and reaches for taxation a large volume of intangible property which would otherwise escape. The act, however, has two provisions which exempt certain property that ought to pay the inheritance tax." The first is that part of section 11 which reads as follows:

There shall be deducted from such valuation an amount equal to the fair valuation of all personal property over and above $10,000 upon which the testator, intestate, grantor, vendor, bargainer, or donor has paid the previous year a personal property tax.”

This provision should be stricken out. The other provision which should also be stricken out is the last clause of section 19, which reads as follows:

“In case of any transfer of any shares of the capital stock of any corporation which owns real estate, the proportionate market value of its real estate taxed as such shall be deducted from the appraised value of any such shares so transferred and taxed as herein provided.”

The real estate of the corporation, the proportionate value of which is to be deducted from the appraised value of the capital stock, may be situated in this or other States, so that the clause as it now stands will result in the exemption of capital stock to a large extent from the payment of the inheritance tax, as nearly every corporation owns more or less real estate. The increasing volume of this species of intangible property now escaping ordinary taxation should at least be subject to the inheritance tax. Section 13 of the law conferring jurisdiction upon the county court to determine the cash value of the estate, without appointing appraisers, should be amended so as to provide for notice of the time and place of hearing, which is essential to the validity of the proceedings.

IOWA.

In this State considerable effort of a conservative character has been made during recent years to improve the crude and inadequate general property tax system adopted in an early day, before corporate property had assumed any considerable proportions. The progress of reform in the taxation of property in corporate and intangible forms and the adoption of more modern methods has, however, apparently been impeded by the ambiguous constitutional provision that the property of all corporations for pecuniary profit shall be subject to taxation the same as that of individuals;" by the tenacity with which public sentiment of the State clings to the idea of taxing such forms in “ the same manner, to the same extent, at the same rates, and for the same purposes " as the property of individuals, and the apparent reluctance to supplement the general property tax by the adoption of entirely separate and distinctive methods for the taxation of special classes of corporate property by uniform State assessments. Considerable progress has, however, been made since the report of the tax commission in 1893 by the revision of the tax code in 1897, and the good effects of changes already made will doubtless be conducive to still greater progress in that direction.

The report of the tax commission referred to is a contribution to the literature of taxation in American States lacking in positive force and virility. It was the avowed “aim of the commission, next to bringing about a readjustment of the burdens of taxation, to see that these burdens were not increased." It expresses the firm belief that the bill proposed by it, if placed upon the statute book, would accomplish both these reforms; that it would even “have a tendency actually to lessen the public burdens as to those who now pay taxes."

Thus prepared, “ the measure is submitted for the critical consideration of the people who must furnish the revenues of the State and the counties, and to whom these revenues belong for disbursement." As an educational source regarding just, uniforın, and progressive taxation, to the people who must “furnish the revenues,” it falls short. The commission seems to follow rather than lead public sentiment.

Still it would hardly be charitable to conclude that the commissioners proceeded upon the assumption of the adequacy of the existing system of taxation in that State. Rather should it be inferred, from the fact that only a portion of the changes recommended were followed by the legislature in the revision of the tax code in 1897, that they sought what was then attainable in legislation rather than the framing of correct scientific methods and theories of taxation. Some deficiencies in the existing methods and in administration are mildly set forth, but no positive or radical changes in methods are recommended, the commissioners apparently confining themselves to the better enforcement of the prevailing general property tax and its adaptation to changing economical conditions.

They advert to the fact that corporations are multiplying out of all proportion to the increase of population; that statutory provisions for taxing corporations in general remain practically unchanged since the time when there were very few of them in the State, and are so unsatisfactory that assessors in many cases pay little or no attention to their listing; yet they confine themselves to the recommendation of a corporation organization tax and aim to render the manner of listing and assessing corporations clear and unambiguous and so as to secure from them contributions to the public revenue proportioned in amount to those supplied by individuals."

No definite recommendations were made or opinions expressed upon the question of divorcement of the sources of the State and local revenues, any opinion for or against such a change being expressly withheld, the bill presented simply containing alternative provisions in that regard, resulting in the retention of the existing method.

The recommendations of the commission in respect to organization tax, corporation tax, inheritance tax, and other suggestions were followed in part only by the legislature in the revision of the code, although the laws were con

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