214. American Budgetary Practice and the Separation of Powers.

215. Financial Necessity Forces

execute their policies in order successfully to defend them and
the publicity which parliamentary discussion guarantees.3

The essential difference between the financial practice of the
United States and that of most of the rest of the civilized world
is, as President Wilson says, that in this country the legisla-
ture "does not come into direct contact with the financial offi-
cers of the government." The consequences of the doctrine of
the separation of the powers of the government are in no other
particular quite so unfortunate as in this. While in other na-
tions all the forces of the government coöperate to produce
financial efficiency, America expects its legislatures to act alone,
unaided and unled, lest, perchance, coöperation and leadership
on the governor's part might make of him a tyrant.

The sum of the entire matter may thus be stated:-American
commonwealths in the beginning fashioned their governments
along negative lines-prohibiting certain evil actions but fail-
ing to make good action mandatory. The inevitable result was
the swift overriding by the legislatures of the spirit of the
financial prohibitions and the growth of carelessness and log-
rolling extravagance. The late Senator Carmack might have
addressed governments and constitution-makers as appro-
priately as college boys when he said,"

You cannot overcome evil by simply resisting evil; you must supplant it.
You may uproot all your weeds with the plow or burn them with fire;
but if your fields lie fallow, if they be not sown with good seed, the weeds
will grow again. So though you may think you have extirpated every
bad habit from your life, if you do not plant actively good habits in
their place, the bad habits will grow again.

Little pressed financially, having few state desires and consequently few state expenditures, the people of the states have cared little whether their finances were well or ill-managed. It Adoption of is only as taxes increase that they demand that waste shall stop and resources be carefully husbanded. When the financial burdens of a state begin to weigh upon the taxpayer there arises a demand for an executive budget.

the Budget.

The German conception that the legislature cannot refuse to vote supplies needed to support the administrative departments of the government is lucidly explained by W. J. Shepard, 4 American Political Science Review, 52, seq. Congressional Government, 146-7.

Character or the Making of the Man, pp. 38-39.

"That care should be taken to prevent the uncontrolled exercise by the gov ernor of the power to dictate financial details is emphasized in an article by Prof. S. G. Lowrie, Annals, op. cit., p. 47.

TENNESSEE NOTE.-The constitution of Tennessee contains no provisions relating to a state budget. It does, indeed, provide that no money shall be drawn from the treasury except in consequence of appropriations made by law and requires the publication of "an accurate statement of the receipts and expenditures of the public money." Furthermore, it rather narrowly prescribes the methods of raising revenue and limits the borrowing power.9 But this is all it says concerning finance.

דיי

The provision' that the governor shall from time to time give information and recommend measures to the legislature allows an opportunity, which the governor might well take advantage of, for the purpose of submitting to the legislature an executive budget. The practical results of such an innovation would depend upon the degree of harmony existing between the governor and the members of the legislature. There is nothing to prevent the governor, comptroller' and the newly-created board of control from making a budget as they do in California. The act creating the board of control provides, indeed, that "it shall be the duty of the board to present the needs of the institutions to the general assembly.

"Every special need shall be itemized and the appropriation asked for that specific purpose. The fiscal supervisor and the Board shall furnish to the Governor and to the General Assembly such information as may be required regarding appropriations requested. It is the intent and meaning of this section that all requests for appropriations for said institutions shall be placed under sole control of the Board, and that appropriations for the maintenance and for ordinary repairs and improvements thereof shall be made to the Board in single sums to be used for the several institutions according to their varying needs."

At present the regular biennial appropriation bills and occasional revenue bills are framed by a joint sub-committee of the finance, ways and means committees of the senate and house of representatives. The sub-committee consists of five members, two from the former committee and three from the latter, appointed by the speakers of the respective houses. Information relating to their needs is obtained from the officials in charge of state institutions and hearings are afforded persons who wish to advocate appropriations. There are no adequate means, however, for ascertaining the merits of recommendations and the sub-committee must rely upon its own surmises or casual information. Appropriation bills are discussed by the houses in committees of the whole, but the time is usually very limited because of the approach of the close of the session and the statutes as passed are usually faulty in technique and often burdened with jokers and other riders.

II, 24.

SII, 28.

II, 31, 33.

1III, 11.

2Elected by legislature, VII, 3.

3Appointed by the governor. Acts of 1915, ch. 20.

CHAPTER XV.

TAXATION.1

216. Constitutional Restrictions.

217.

Model Tax
Clause.

"THE most striking feature regarding local taxation in the United States," says President Wilson, is the strict limitations put upon it by constitution or statute." In their hearty hatred of taxation, American electorates have indiscriminately imposed upon the taxing power of their state legislatures lengthy constitutional restrictions governing both state and purely local taxation. Some of them are very wise, no doubt, but, as a whole, they furnish, inevitably, a serious impediment to the maintenance of just systems of taxation as economic conditions rapidly fluctuate.

4

In recognition of the fact that methods of taxation ought to change more frequently than constitutions are usually changed, the International Tax Association, memorializing the Arizona constitutional convention, in 1910, proposed that the sole constitutional provision on the subject of taxation should be,

The power of taxation shall never be surrendered, suspended, or contracted away. All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax, and shall be levied and collected for public purposes only.

"It does not seem to us expedient," the memorializers went on to say,

General References: Proceedings of the National Conferences of the National Tax Association; Readjustments in Taxation (Annals of American Academy of Political and Social Science, whole No. 147); Seligman, E. R. A., Essays in Taration; The Income Tax; West, Max, The Inheritance Tax; George, Henry, Progress and Poverty; Haig, R. M., The Exemption of Improvements from Taxation in Canada and the United States; Wealth, Debt and Taxation (Thirtieth Census, 1913).

2The State (1906 Ed.), 522,

Now "National."

*Proceedings of fifth Annual Conference, International Tax Association, pp. 453-454 (1911).

to lay any restrictions upon the power of the Legislature to exempt certain classes of property from taxation. We assume that you will provide elsewhere in your Constitution for restriction upon the power of the Legislature to pass special laws affecting localities, persons, or corporations. Embodying in the Constitution specific provision for the exemption of churches and charitable institutions, or other proper subjects for exemption, does not seem to us to be necessary. Under the provision we have recommended it would be perfectly proper to grant such exemptions by general law.

The difficulty of arousing public interest and securing the amendment of restrictive constitutional tax provisions is shown by the experience of Ohio and other States. This emphasizes the importance of confining the language of your tax provisions to a simple guarantee of fundamental rights, and avoiding phrases that may be interpreted, as has. happened in other States, as compelling a uniform rule and forbidding classification of property."

The fact is that no fewer than eleven states possess constitutional limitations upon the taxing power of the legislature contained in clauses totaling more than one thousand words and the tax clauses of one of them' are alone almost as long as the entire constitution which North Carolina adopted in 1776. On the other hand, Connecticut and New York impose almost no restrictions upon the legislative discretion in regard to taxation. The remaining constitutions vary considerably but most of them pretty thoroughly dictate the tax systems of their states -as the following brief account of the provisions of all of the state constitutions will make manifest."

218. General Property

Several dozen kinds of taxation are made mandatory by the, constitutions and there is an even greater number of required Tax. or permissive exemptions. The characteristic requirement, however, is that property generally shall be taxed at the same rate. This is the mandate for the so-called general property tax and

"The Ariz. Convention adopted the recommended text, but added other provisions (IX, 9).

Ala., Cal., Ky., La., Mo., Mont., Okla., S. C., Tex., Utah., Va. "Cal.-over 4,000 words.

Ind., Me., N. H., N. J., Po., R. I. and Vt, contain less than 200 words each, but some of them seriously limit the exercise of taxing power.

The taxation systems of all the states as they were in 1912 are minutely described by the Thirteenth Census, Wealth, Debt and Taxation (1913), Vol. 1, pp. 449, seq.

is found in twenty-six constitutions.1 The general property tax has long been the most important element of the tax systems of the states and with one or two exceptions, vestiges of it linger, at least for local taxation, in all of them. Each one, however, has its little eccentricities and an absolutely clear picture cannot be obtained except through an individual study of every state.

The most fundamental weakness of the general property tax lies in its attempt to tax in the same way at the same rate both tangible and intangible property. The growth of banks and other corporations and the consequent enormous expansion of intangibles, which the courts have held to constitute property,3 has induced constitution-makers to seek special methods of obtaining revenue from the owners thereof. Some have sought

to compel them, as it were by brute force, through added strictures and penalties, to list their invisible property. Others, however, less naively trustful in the potency of enacted laws, but somewhat more effectually, have sought the same end by means of classifying property for taxation and taxing different classes in different modes and at different rates. The glaring unfairness of attempting to tax equally two notes, both of equal

1Ala., 211, 214, 215 (Mayor v. Stonewall Ins. Co., 53 Ala., 570; M. & G. R. Co. v. Peebles, 47 Ala., 317); Ark., XVI, 5 (Pike v. State, 5 Ark.. 204); Cal. XIII. 1 (People v. Whyler, 41 Cal., 351; Hyatt v. Allen, 54 Cal., 353); Fla., IX, 1 (Hayes v. Walker, 54 Fla., 163); III., IX, 1 (Republic Life Insurance Co. v. Pollak, 75 Ill., 292; People v. Church, 232 Ill.. 158) Ind.. X, 1 (State v. Indianapolis, 69 Ind., 375; Board v. State, 155 Ind., 604); Kan., XI, 1 (Kaiser v. the State, 80 Kan., 364): La., 225 (Swords v. Baillio, 105 La.. 332); Me., IX. 8; Amend. 1914 (In re Opinion of Justices, 97 Me., 595); Miss., 112 (Adams v. Kuykendall, 83 Miss., 571); Mo.. X. 4 (Kansas City v. Whipple, 136 Mo.. 475) Mont., XII, 1, 16 (Daly Bank v. Board, 33 Mont., 105); Neb., XI, 1 (Pleuber v. State, 11 Neb., 547; State v. Poynter. 59 Neb.. 417; High School District v. Lancaster Co.. 60 Neb., 147; State v. Osburn, 60 Neb., 415); Nev., X, 1 (Ex Parte Robinson, 12 Nev., 263, 268, 269); N. H., II, 5 (Wyatt v. Board, 74 N. H., 552): N. C., V. 3 (State v. Wheeler, 141 N. C., 773); 0., XII, 2 (Cincinnati Gas Light Company v. State, 18 O. St.. 237); Ore., IX, 1 (Wallace v. Board, 47 Ore., 584; Yamhill Co. v. Foster, 53 Ore., 124); S. C., X, 1; XI, 6 (State v. Tucker, 56 S. C., 516; Laurens v. Anderson, 75 S. C., 62); S. D., XI, 2 (24 S. D., 433) Tenn., II, 28 (Ry. Co. v. Wilson Co., 89 Tenn., 597); Tex., VIII, 1 (Roundtree v. City of Galveston, 42 Tex.. 612; Lively v. Ry. Co., 102 Tex., 545; Insurance Co. v. State, 42 Tex., 639); Utah, XIII, 2 (Parker v. Quinn, 23 Utah, 332); Wash., VII, 1 (State v. Parmenter, 50 Wash., 164): W. Va., X. 1 (C. & S. Bridge Co. v. County Court, 41 W. Va., 658); Wyo., XV, 11 (Kelley v. Rhodes, 7 Wyo., 237, 253). Cases in point do not seem to exist in every state. The extent of the general property tax varies. Some states require all property not specifically exempt from taxation to be taxed uniformly. Others provide that property taxes must be uniform, which effectually prevents classification and so results in a tax upon pretty much all property.. A few states allow certain intangible property to be taxed at a different rate from property in general.

"Especially Pa.

Property is of course a legal concept merely and is not dependent upon intrinsic value. Intangibles have, obviously, no intrinsic value: they are merely evidences of the value of something else and of legally-enforceable claims thereto.