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The segregation of State from local taxes is the distinguishing feature in the system of taxation in this State. Since the year 1884 there has been no direct State tax levied on real and personal property, the revenues derived from the special tax on railroad and canal corporations, riparian lands, the franchise tax on miscellaneous corporations, the tax on intestate estates and collateral inheritances, and official, judicial, and other fees being sufficient to defray all State expenses.

The general system of taxing corporations directly by the State is efficient, simple, certain, and economical so far as it extends.

The confusion in the scattered and fragmentary laws of New Jersey upon the subject of taxation renders it exceedingly difficult to ascertain and determine just what the existing system as to the general property tax is, in all its details.

This confusion is, according to the statements of the Siate tax commission, one of the principal causes of improper or negligent administration of the tax laws, and the means by which much of the evasion of proper taxation is accomplished.

The codification of the laws relating to taxation is greatly needed and would alone improve the taxation of property in that State.


The principal form of local taxation is upon an ad valorem valuation of real and personal property not exempt as returned by assessing officers in local taxing districts.

A poll tax not to exceed $1 is also assessable to every male inhabitant of full age, excepting volunteer soldiers and sailors, paupers, and insane persons, which is not generally enforced, especially in the cities where it is less popular than in the country districts.


By a constitutional provision, all property is required to be assessed for taxation under general laws and by uniform rules according to its true value; and the statutes of the State, following out this constitutional provision, expressly direct that property shall be assessed according to its full and actual value. The meaning of the phrase “true value” has been construed by the courts to be that amount of money that any given piece of property would exchange for in money, or the amount of money its holder would be willing to sell it for when not obliged to sell—that is, its real market value.

The usual exemption from taxation is granted to the property of charitable, educational, religious, and public institutions, and also limited exemptions to soldiers, sailors, firemen, and veterans. The amount of exemptions allowed under these heads in 1899 was nearly $100,000,000 of property valuation, and the State board of taxation notes the gross abuse of these privileges and recommends the greatest possible limitation thereof consistent with sound public policy.

Stocks and other personalty situated outside the State, owned by citizens of the State, upon which taxes are shown to have been assessed and paid where located within 12 months prior to the date of assessment in New Jersey, are exempt from taxation.

The assessment of property in general is made by a single officer elected in each township and borough for a term of 3 years; but in many municipalities the assessors are variously appointed or elected, and are variously designated as assessors, commissioners of assessment of taxes, commissioners of assessment, or board of assessment and revision of taxes. These boards consist of 1, 2, 3, or 5 members, with clerks to assist them.

All property, real and personal, including exempt property, is required to be annually assessed by such officers at its true value. "Real estate, individual or

corporate, is required to be assessed in the local taxing district where it is located, and to each inhabitant liable to such tax at the place of his residence. The personal property of nonresidents is taxed in the taxing district where situated. The personal property of corporations is assessed in the taxing district where the principal office is located; and if there is no principal office, in the township or ward where the operation of such company is carried on. Pipes under ground, whether owned by individuals or corporations, are taxable as real estate in the township where such pipes are located.

DEDUCTIONS FOR DEBTS. Any person or corporation in the State is entitled to deductions of bona fide indebtedness from the assessment of real and personal estate, providing a verified statement is made to the assessor of the debts owing and desired to be deducted, to whom owing, and where creditors reside, and also a statement of the total amount of real and personal property of the taxpayer, including mortgages held and other debts due and owing from solvent debtors, and also a statement showing when the indebtedness for which said deduction is claimed was incurred and a detailed list of the securities or property claimed to be exempt from taxation and of the dates of purchase of such securities or property, together with a declaration under oath that such indebtedness was not incurred or securities or property purchased with intent to escape taxation, but in good faith. Penalties are imposed for making a false statement and for transferring property to escape taxation. It is specially provided that no deduction shall be made from the taxable value of real estate on account of the indebtedness of the owner to any State or national bank, but such deductions may be made from personalty.

Mortgages on real or personal property are not assessable for taxation unless a deduction therefor shall have been claimed by the owner of the property and allowed by the local assessors, in which case they are assessable for taxation by such assessor, and the taxes are payable where the property covered by the mortgage is located.

The State board has adopted a rule requiring each assessor to notify assessors in other districts of deductions claimed for debts due from creditors therein.

By an act known as the “five counties act," it is made lawful for owners of land in the counties of Hudson, Essex, Union, Bergen, and Passaic, and in the cities of Trenton, New Brunswick, and Camden to enter into agreements with holders of mortgages on lands therein not to apply for any deductions, by reason of any mortgage, from the taxable value of such lands.

The counties and cities named in this act lie contiguous to New York City, and to this fact the act, one of the most curious statutes in American tax legislation, making one tax law for one part of a State and a different law for the remainder, is attributable. Prior to 1869 New Jersey had a uniform law for taxing mortgages, providing that the person giving a mortgage should pay the tax on it and deduct the tax from the principal or interest in settling with his creditor, the result of which was that mortgages falling due were foreclosed and new loans were not readily obtainable. In 1869 a statute was enacted exempting from taxation mortgages in the growing counties near New York City, for the relief of the inhabitants of those particular counties. This was modified by the “ five courties act” above referred to, which is still in force, and which is said to operate to draw capital away from New York and into New Jersey.

Mortgages on lands exempt from taxation are taxable to the mortgagees at the place of their residence.

Deductions allowed from the assessed valuation of property in 1899 amounted to $36,403,620, and the privilege is said to be grossly abuced by taxpayers throughout the State.

BOARDS OF EQUALIZATION AND REVIEW. The assessment is revised and equalized by township committees, borough councils, and the common councils of cities and villages, by county boards of equalization, commissioners of appeal, and the State board of taxation.

In 1891 the State board of taxation was established, for the equalization, revision, and enforcement of taxation. This board is composed of four members, no more than two members of which may belong to the same political party. They have power and authority to hear and determine the appeals of individuals, corporations, and municipalities from tax assessment, and to make such rules, orders, recommendations, and directions as they may deem necessary to secure the revision, equalization, and enforcement of taxation within the State. They are empowered to investigate the methods of local assessors, and may cause assessments to be made under their direction, and by another assessor if the local assessor fails to comply with the law or the directions of the board. The members of such board receive an annual compensation of $2,500 each, and are required to make an annual report and such recommendations as to laws and methods of taxation as they may deem advisable to the State legislature.

The efforts of this board have been efficient in obtaining improvement in assessments, in correcting errors, and in procuring improvement in legislation and administration of taxation laws generally.

As before stated, real and personal property generally is relieved from State taxation and assessed for local purposes only, except as to an apportioned State school tax. The assessment of corporate property for local purposes will be referred to under a subsequent head.

The assessed valuation of real estate in 1899 was $755,276,846, and that of personal property $141,456,551, 84.1 per cent of the whole valuation being real estate and 15.9 per cent personal property, the relative ratios varying in different counties from 92.6 per cent and 7.4 per cent, respectively, to 64.6 per cent and 35.3 per cent; the proportion of personalty assessed in agricultural counties being much greater than in the counties containing large cities.

While the separation of the State and local taxes removes the principal cause for rivalry among assessors for relief from State taxes through undervaluation, there is still an apportionment among local taxing districts of a State school tax, tending to some extent to induce competitive undervaluation, and through that and local causes the evils resulting from defective assessments by local assessors still exist in a marked degree, notwithstanding the removal of the cause mentioned.

The tax commission of 1897, in the discussion of the local system, says that the assessors do not comply with the constitutional mandate and make the assessments upon a standard of true value, but assess at less than true value; nor as a rule do they succeed in listing and taxing all the intangible property subject to taxation. This is noticeably so in cities, resulting in part from inherent difficulties, and in part from the fact that local public sentiment does not encourage and support the local assessor in resorting to such inquisitorial methods, so called, as seem necessary to unearth and reach all of this class of property.

Mr. James F. Rusling, one of the tax commission, in a special report, considers this subject more fully, and refers to the varieties and differences in the valuation and assessment of real estate in all parts of the State and to the escape of personal property from taxation almost altogether, particularly in the large cities, as shown by the evidence presented by the commission.

He says there are about 400 separate assessors and boards of assessors in the State, and nearly as many different rules of valuation and assessment. As officially reported, each assessor seems to be a law unto himself." Their valuation in no two counties agree, nor scarcely in any two cities or townships of the same county. Referring to the fact that all assessors take an oath that they have valued and assessed "all property liable to taxation in their several cities and town. ships at its full and true value, at such price as it would sell for at a fair and bona fide sale by private contract,” he says in practice they value real estate from 25 to 75 per cent of its true value, depending on the location and personal or political prejudices, and value different contiguous areas at different valuations, though of equal values really; and as to personal property they appear to make no earnest or honest effort to reach it anywhere except in agricultural districts, and even there very imperfectly. This practice has proceeded so far in New Jersey, he says, that it is now literally true that “about the only ones who now pay honest taxes on personal property are the estates of decedents, widows, orphans, idiots, and lunatics."

It is such inequalities and inequities, he says, “ that sadden and exasperate our fellow-citizens and make the cry of equal taxation’an easy rallying cry for the demagogue and anarchist.”

The State board, in 1891, when first appointed and upon a general survey of these conditions, take a philosophical view thereof and say that there is a total absence of uniformity and equality in the assessments of New Jersey, should not excite surprise so much as the fact that there is not more inequality and injustice by the 337 assessors, all acting independently of each other, and all, in fact, trying to impose on one another for the purpose of favoring their friends and localities.

While, as above stated, the efforts of the State tax board to bring about a more equitable, just, and lawful state of affairs" have, in recent years, resulted in substantial improvement in assessments and administration of the tax laws generally, and they, as well as the tax commission, have recommended remedial legislation, the progress in this direction has been slow.

The defects in the general property assessment referred to have an important bearing upon the comparison of railroad taxation with that of general property, as shown in the investigation of the tax commission hereinafter referred to.


The contributions of corporations in general, except railroad and canal companies, to the revenues of the State and municipal governments are received from:

First. A tax upon the privilege of incorporating.
Second. A license fee or franchise tax to the State.

Third. A local tax upon real estate and visible personal property by municipalities.

By the act of 1875 no tax of any kind was imposed upon the franchise or privilege of incorporating. No tax was laid upon the capital stock, and it was declared that the real and personal estate of all corporations thereafter found should be taxed the same as that of individuals. The purpose of the legislature was to treat the property and business of corporations in the same way as that of natural persons, and the only restrictions imposed were such as were thought necessary for the protection of stockholders and creditors.


Not until 1883 was any fee in the nature of a tax required to be paid on filing & certificate of incorporation, and no change in this fee has been made since then.

The payment required on filing such certificate is 20 cents for each $1,000 of the total amount of capital stock authorized, but in no case less than $25. A further fee of 20 cents per thousand of increase is charged upon increase of capital stock, and like fees upon consolidation where an increase of capital stock is authorized. The secretary of state received for fees and taxes from corporations under the general corporation act and supplement in 1899. $726,133.61. (Controller's report, p. 15.)

From the 1st of January to the 1st of August, 1899, 1,336 corporations were organized under the laws of New Jersey, with an authorized capital of $2,000,000,000.


In 1884 franchise taxes, in addition to the local taxes upon real and personal property, were first imposed upon corporations, and in this year it was provided that a certain annual tax by way of license for its franchises should be paid by all corporations, except certain corporations enjoying special privileges, which, at present, are railway, canal, banking and trust companies, savings banks, cemeteries, religious corporations, and charitable or educational associations; also manufacturing or mining companies, at least 50 per cent of whose capital stock issued and outstanding is invested in mining or manufacturing carried on within the State.

Two methods of determining such franchise tax are provided for:
First. By computing a per cent of gross receipts or gross earnings.
Second. A per cent of the capital stock.

The first method is applied to certain specified corporations doing business within the State, wherever chartered, and the second to corporations incorporated under the laws of the State, whether exercising their functions within or without the State.


Every telegraph, telephone, cable, or electric-light company not owned by a railroad company and otherwise taxed, every gas company, palace, parlor, or sleeping-car company incorporated under the laws of the State, every fire, marine, live-stock, casualty, or accident insurance company doing business in the State, except mutual fire-insurance companies, which do not issue policies on the stock plan, is required on or before the first Tuesday in May in each year to make a return to the State board of assessors, and to pay an annual franchise tax, as follows:


These are required to report to the State board of assessors the gross amount of their receipts from business done in the State for the year ending January 1 next preceding, and are required to pay to the State an annual license fee of 2 per cent of such gross earnings.

In 1899, the gross receipts of such companies amounted to $878,784.87 and the tax to $17,575.67.


These companies pay annually one-half of 1 per cent of the gross amount of receipts for light or power supplied within the State and 5 per cent of the dividends in excess of 4 per cent paid or declared by such companies. The tax amounted in 1899 to $39,812.49.


These pay an annual franchise tax of 2 per cent of the gross amount of the receipts for fare or tolls for transportation of passengers within the State. In 1899 this tax amounted to $1,220.


These pay a tax of eight-tenths of 1 per cent of the amount of their gross receipts from the transportation of oil or petroleum in the State, or if a part of their transportation line is without the State upon such proportion of the total gross receipts of such company as the length of line within the State bears to the total length of the line. In 1899 this tax amounted to $10,758.20.


Life insurance companies incorporated under the laws of the State are required to pay a license and franchise tax of 1 per cent of the amount of their surplus on the 31st day of December each year, and in addition thereto an annual license fee or franchise tax of thirty-five one-hundredths of 1 per cent upon the total gross insurance premiums collected by such companies; but it is provided that any charges or taxes imposed by the State upon life insurance companies of other States shall be applied in rebate of such taxes. Such franchise tax in 1899, less the rebate of $11,577.73, amounted to $190,964.84.

Insurance companies other than life pay an annual franchise tax of 1 per cent of the gross annount of premiums received by such companies for insurance within the State upon property or persons within the State. In 1899 such tax amounted to $7,452.09.


Surety companies pay an annual franchise tax of 2 per cent of the gross amount of premiums received by them. In 1899 such tax amounted to $861.13.


All other corporations liable to a franchise tax on their capital stock as afore said, such as street railways, manufacturing companies, etc., pay to the State an annual license fee or franchise tax of one-tenth of 1 per cent on all amounts of capital stock issued and outstanding up to and including the sum of $3,000,000; on all sums of capital stock issued and outstanding in excess of $3,000,000 an annual franchise tax of one-twentieth of 1 per cent, and the further sum of $50 per annum per $1,000,000, or any part thereof,

on all amounts of capital stock issued and outstanding in excess of $5,000,000. Such tax in 1899 amounted to $1,063,991.53.

This tax was imposed simply for the purpose of additional revenue, and the rates were made low in pursuance of the long-established policy of encouraging rather than burdening the aggregation of capital for the purpose of business. It is not regarded as a property tax, but as a franchise tax. Franchises are not taxable as property.

The tax is computed upon the basis of the capital stock issued and outstanding, not upon authorized capital stock, and it is held that stock is issued when the company has received and accepted subscriptions for the same, whether paid or not.

As long as the corporation exists it is liable for this franchise tax. It continues after a receiver has been appointed, and until the dissolution of the company.

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