A J 9256 B74 .'\5 1 P.'^l #r^ -r The date shows when this volume was taken "^'Z r- ^ To renew this book copy the call No. and give to ^ \^ the Ubrarian. AS" OlontfU 3H HOME USE RtJLES All Books subject to Recall All borrowers must regis- term the library to borrow books for home use. All books must be re- turned at end of college year for inspection and repairs. Limited books must be re- turned within the four week limit and not renewed. ■■ Students must return all books before leaving town. Officers should arrange for the return of books wanted during their absence from town. Volumes of periodicals and of pamphlets are held in the library as much as possible. For special pur- poses they are given out for a limited time. Borrowers should not use t their Ubrary privileges for the benefit of other persons. ^° "J Books of special value and gift books, when the o/\vj t giver wishes it, are not allowed to circulate. Readers are asked tore- port all cases of books marked or mutilated- I Do not deface books by marks and writiag. Ls^.^±/.x_. , , ^.^/^, 93°6 MESSAGE OF THE MAYOR TRANSMITTING KE PO BT SPECIAL COMMISSION ON TAXATION. BOSTON: ROCKWELL AND CHURCHILL, CITY PRINTERS. 1891. £■/. Cornell University Library HJ9256.B74 A5 1891 ^^^ififiRmiiPiiii'ii^ mayor transmitting report olin 3 1924 030 230 019 Office of the ^Iayor, April 3, 1891. To the Honorable the City Council: — Gentlemen, — I have the honor to transmit herewith the ver\' ai)le report of the Special Commission on Taxation ap- pointed by my predecessor to examine into the system of taxation in force in this city, and to I'eport whether any sys- tem more equitable and advantageous can be devised. Appended hereto will also be found a table prepared by the Board of Assessors, showing the amount of each species of personal property discovered in 1889, — the only 3'ear in which such a table was prepared. The total value of the personal estate thus discovered was 840,161,500; and the amount reached by the process of dooming (exclusive of l)ank stock) was $14(),2S,s,r)00. For this latter amount of course no separation into the diflerent kinds of property is possible. EespectfuUy submitted, N. ^Iatthews, Jr., Mayor. ABSTRACT OF RETURNS MADE TO THE ASSESSORS FOR THE YEAR 1889. Ward. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24. 25. Western mortgages. Debts due | Casli on i Goods, more than , hand and ".-ares, and is owed. deposits. merchandise. $900 18,000 8,500 11,000 2,700 100,900 41,700 3,500 129,200 05,000 587,800 20,400 GOO 3, COO 60,800 65,000 11,000 107,200 61,000 5.100 .$5,700 5,400 1,300 70,500 406,700 661.800 7,500 1,000 397,400 287,000 1,197,300 15,900 2,000 11,500 21,800 89,200 9,100 121,400 23,900 167,600 107,700 57,500 !5!4,400 3,300 26,200 10,100 31,900 449,800 152, ,500 16,300 68,400 830,700 929,200 688,100 22,900 9,600 17,800 156,500 114,700 2,000 109,000 123,300 23;400 103,600 63,000 69,800 Tools of I Income from Machinery, i trade , profession, etc. ' exceeding ! etc., exceed- $300. 1 ing .$2,000. .$46,200 5,,500 12,100 57.300 6,000 1,327,900 1,426,800 19.100 36,500 6,227,000 374,700 2,121,760 43,000 11,030 34,900 164,200 264,600 7,100 23,600 141,600 144,500 240,400 38,500 73.500 .■¥2,400 800 27,300 9,000 1 00 320.400 69, ion 500 25,500 128,800 20,400 155,100 800 11,500 , 13,900 ;. 40,100 '■ . .$9,200 Income from ships, foreign. 9,200 20,000 $500 1,000 2,300 2,,300 500 35,400 : 10,000 I 2,000 11,700 29,000 8,900 I 4.400 i 300 1,300,500 i $3,668,700 ■,087,100 i $12,847,700 $925,100 .$3,300 $874,300 Income from annu- ities. Vessels Horses except in for-i and eign trade. veliicles. $200 100 5,700 33,400 I 49,400 : 22,000 443,800 30,700 1,500 ' 7,800 i 800 2,700 19,400 : 94,900 ; 300 8,100 i 52,100 24,700 ' 06,800 6,100 10,300 ' 200 15,400 I $66,100 $500 4.900 900 400 1,500 .$8,200 $600 300 2,200 200 100 9,500 4,400 i 300 900 1,400 13,700 100 8,400 42,100 .$3,200 400 3,600 11,600 Household furniture exceeding $1,000. $600 Shares in foreign cor- po rations. Railroad and other bonds. Municipal or city bonds. State bonds. Domestic. I Foreign. Domestic. Foreign. Domestic. 22,800 8,100 8,400 6,800 74,500 72,300 7,400 I 4,400 400 3,700 10,800 21,000 500 7,000 32,200 16,300 16,700 8,400 14,400 $339,400 7,000 500 500 17,000 4,000 20,800 28,900 250.200 9,000 4,100 7,600 17,100 3,100 25,600 4,200 3,600 0,.500 1,700 .$412,000 Foreign. $6,500 $10,130 $1,8 70 16,100 11,700 65,200 106,800 29,600 2,900 589,800 380,600 4,464,200 229,000 3,500 42,700 1,000 115,300 175,200 99,500 333,700 129,700 536,100 302,400 19,100 $7,660,600 17,550 10,090 108,160 3,340 7,270 59,700 386,490 187,100 582,626 8,500 6,800 61,900 5,300 77,500 22.500 16,900 2,520 39,438 $12,740 30,351 ' 18,850 29,910 I 156,777 9,170 $11, .300 $6,200 513,922 175,700 3,113,375' 122,100 9,540 49,240 127,818 8,700 9,075 28,400 143,229 48,800 4,440 5,700 114,150 62,700 94,900 700 84,200 156,500 6,500 33,800 348,514 100,000 171,100 109,700 24,000 1,000 12,700 46,200 45,800 ... 29,500 \... 8,000 37,500 11,700 8,000 8,100 66,195 3,200 22,800 27,100 9,870 3,300 $1,500,426 $5,382,05 $381,158 139,399 $148,760 $1,330 fiOO 5,800 1,170 1,700 1,000 $11,600 23 24 25 51,000 5.100 107,600 03,000 107,700 69,800 57 500 240,400 38,500 73,500 $1,300,500 i $3,608,700 ,087,100 : §12,847,700 29,000 8,900 4,400 300 06,800 6,100 10,300 200 15 400 8925,100 I .f3,300 , ,$874,300 $60,100 400 1,500 S8,200 Total Valuation Personal Estate, 1889, less Bank Stock 13,700 100 8,400 8,400 14,400 3,600 6,500 1,700 530,100 302,400 19,100 22.500 16,900 2,520 171,100 109,700 8,000 22,800 27,100 . 3,300 1,700 1 ,000 i $5,382,057 $439,399 $339,400 8412,000 $7,000,000 $1,500,426 $384,158 $148,760 $11,600 $ 1 86,450,00. RECAPITULATION. , Western mortgages Debts due more than is owed . . Cash on hand and deposits Goods, wares, and merchandise. Machinery, etc Tools of trade exceeding §300 Income from profession, trade, or employment over -$2,000. income from sliips in foreign trade Income from annuities Vessels except in foreign trade Horses and vehicles Household furniture exceeding $1,000 Shares in foreign corporations Kailroad and other bonds -< „ (_ Foreign . . ,, . . , -i u J f Domestic. Municipal or city bonds |j.o,.gign .. State bonds ■ Domestic. Foreign . . Total 81,300,500 .032381 3,668,700 .091348 4,087,100 .101766 12,847,700 .319900 925,100 .023034 3,300 .000082 874,300 .021760 66,100 .001646 8,200 .000204 42,100 .001048 3? 9, 400 .008450 412,000 .010258 7,660,600 .190744 1,560,426 5,382,057 .038855 .134001 384,158 439,399 .009563 .019408 148,760 11,600 .003404 .000288 $40,161,500 100% To His Honor the Mayor and to the City Qouncil of the City of Boston : — The task assigned to this Commission is to examine into the system of taxation in force in the city of Boston, and to report whether any system more equitable and advantageous can be devised. We address ourselves to the question as one of practical business. That the question is not one of mere theoretical interest is shown by the following table : — Annual expenditure Plt capita share of per cai)ita. Interest-bfaring debt. 1st. City burden . 2d. County burden 3d. State burden . 4th. National burden Total burden . . $47 04 $137 38 Thus it appears that the annual contribution for govern- mental expenses of all kinds by every head of a family of five persons is $235.20, and that the liability by every head of a family to his share of government debts is $686.90. It will be observed that nearly four-fifths of the burden of an- nual expenditures is the city's, and nearly ten-elevenths of the debt. A reduction of tariff would make the proportion of local expenditure much larger. Ninety per cent, of the expenditure, exclusive of national taxes, is the city's expenditure. Therefore, the city is the real ][)arty interested, or the party $37 7.3 $123 40 68 • 2 61 3.5 6 00 13 63 most interested. Ninety per cent, of the money she raises by taxation, she raises to spend within her own limits for her own purposes. The amounts raised for State and County purposes are comparatively of small consequence. What is true of Boston is true of each town and city in the State. The great bulk of taxes raised by each is expended within its own limits for its own purposes. The question is a local one. The Powers or the City are Limited. The city of Boston has not the right to tax whom and what she will. She can only tax what the State permits her to tax, and the power of the State is again limited, being sub- ject to the paramount authority of the United States. The United States has a paramount power of taxation which covers every citizen and every species of property throughout the lenoth and breadth of all the States and Ter- ritories. The power of the United States is unlimited, with the single exception that the Constitution forbids thelev^'ing of a tax upon exports. The United States government has a right to tax real estate, incomes, personal property of every description, and to collect money by license fees ; in short, an absolute paramount power to tax everything except exports. It has the exclusive right to levy duties upon imported merchandise. It has the right to levy an excise or internal revenue tax upon beer, wine, and spirits, and exercises this right so fully as to practically exclude the State govern- ments from any possible revenue from this source except by way of license fees from sellers. The revenue of the United States is now derived from duties on imported goods, and from the internal revenue tax upon wine, beer, spirits, and tobacco. The State is expressly prohibited by the Constitution of the United States from levying any tax upon imported goods. The Stiite is practiciilly excluded from deriving revenue by a tax on spirits and tobacco, because under its paramount autliovity the United States now fully taxes those articles. The State cannot tax any bonds of the United States, because of the principle long since established by political economists, and many years ago recognized by the highest judicial authority in the United States, namely, that " a tax upon the lender is a tax upon the borrower." The United States government cannot sell a taxed bond for as much as it could an untaxed bond ; therefore the State can- not tax these bonds, because it would impair the borrowing power of the United States. Neither has the State power to levy such taxes upon goods and transportation as to create any restriction upon inter-state commerce. It cannot levy a duty upon any goods coming into this State from another State, nor can it levy any tax the l>urden of which, like a duty, would restrict the importation or exportation of mer- chandise or other property. As the city of Boston is subordinate to the State, from which it derives all its powers, it cannot, of course, exercise any powers of taxation which the State itself does not possess. The city of Boston, therefore, cannot tax exports or imports, foreign or domestic. It cannot tax the bonds of the United States, though held by its own citizens. Wine, spirits, beer, and tobacco are already taxed. Consequently the city is restricted to the taxation of such real and per- sonal property situate within its limits, or situate elsewhere and owned by its citizens, as the State of Massachusetts by law permits to be taxed. The Present Law. The law of the State under which the city acts is contained in the 11th, 12th, and 13th chapters of the Public Statutes. The first section of Chapter 11 authorizes a poll tax. The second section provides that all property, real and personal. of the inhabitants of the State, not expressly exempted, shall be subject to taxation. Imported goods in the original package, and United States bonds, are necessarily exempted, as above stated. By the third section, real estate subject to taxation is defined as all land within the State. By section four, as construed by our Courts, personal property includes all personal property, and all evidences of personal property found within the Commonwealth, whether owned l)y residents or by others ; and also includes all personal property out of the State owned by any inhabitant of the State. Taxation covers every species of personal pro[)erty, and every form of evidence of personal property, except debts secured by mortgage upon real estate when the real estate is within the Commonwealth. The tax upon all real estate within the city, and upon all personal property here, or owned by individuals and part- ners living here, including shares in corporations outside of the Commonwealth, is collected directly by the city. The Commonwealth of Massachusetts, however, itself col- lects the taxes upon all corporations within the State. The town or city in which the corporation is situated is allowed to tax the real estate and machinery of a corporation. The State collects of every corporation a tax upon the aggregate market value of all its shares, less the valuation of the real estate and machinery as made by the local assessors. The tax collected from corporations by the State is distributed by it to towns and cities in proportion to the number of shares held by the citizens of each town and city respec- tively. The State retains the tax on all shares belonging to non-residents. The practice under these laws is for the assessoi's of the city to value annually all the real estate. This they do, upon the whole, very fairly. The amount of taxable personal property is ascertained by the statements of the owners and the process of dooming. The city's total receipts for the taxable year of 1889 (ex- cluding Iwrrowed money) amounted to . . 117,031,482 The cit3' received from the corporation tax paid by the State, license fees, rents, interest, etc 5,899,646 and raised by direct levy . , . . *$11,132,836 (^*including $493,597.43, tax of preceding year) . Of this direct tax, three-fourths, in round numbers, was derived from real estate, and one-fourth from personal property. The result of exempting all personal property from tax- ation would, even if the exemption docs not increase the value of real estate, — if no economy is accomplished, and no new sources of revenue found, only be therefore to increase the rate of taxation to about $17.31 per thousand, the as- sessed valuation of real estate now being about $620,000,000. The System a Failure. That the present system of taxation in ^bissachusetts is in- equitable, is assumed in the order providing for the appoint- ment of this Commission, and the experience of our citizens year after year has made it a subject of general knowledge. The system is condemned by the numerous followers of Mr. Henry George. It is condemned by every business man who thinks upon the matter. It is condemned by ail the important newspapers in the country. The governments of the wealthiest States constantly call attention to its evils. It may be that the laboring man is selfish in his opinions. It may be that the property-owner is selfish in his. If so, it is remarkable that they agree. It maybe that the officials are over-zealous and prejudiced. There is, however, one class of persons who study the subject as a matter of pure reason, and who are less likely to be influenced by prejudice 8 or selfish motives. These persons are the teachers in our universities and students of political economy who give their lives to the pursuit of knowledge, and who have neither official position nor wealth to gain or lose as a result of their opinions. There is no good reason for asserting that be- cause a man studies a subject as an abstract question, his opinion is for that reason of less value. If a man who is as intelligent as his fellow-citizens studies political economy, his opinion on a question of taxation deserves for that reason more respect. Bearing this in mind, it is significant that political economists generally agree in condemning our sys- tem. The sentiment is spreading so rapidly that it seems almost needless to rehearse any of the facts or arguments which prove the justness of current opinion. The burden of the tax upon personal property is an un- reasonable one. The burden of a tax of $15 per thousand on land is easier to bear than a tax of the same rate on evidences of personal property. Land cannot be borrowed by one nation of another nation, or even by one town of another. The value of land, and the rent or profit, is local. It has no universal price. The value of land here is not diminished by the supply of land in London and Am- sterdam. The value of money and the interest or profit is universal. jMoney can be borrowed. Broadly speaking, all the money in the world forms one mass, which is con- stantly readjusting itself to a common level. The supply in London and Amsterdam affects the value of money here, so that the returns upon invested capital are about the same here as abroad. The return on a safe bond now has become 3^ per cent, to 4Jr per cent., instead of (3 per cent, to 7^3^ per cent., as it was a few years since. A tax of $15 on an income of $45 is an unreasonable burden. It is an exaction which no man will willingly suffer. .Suppose every laboring man Avere forced to work without pay in the public service one hundred days in each year (one-third of his time). Suppose one-third of his 9 income was so reijuired, would he be patient? The tax on persona! property is harder to bear than a tax on hind, because the burden of the tax is not so readily- distributed. The holder of a four per cent, bond of the C. B. & Q. R.R., if he is taxed, pays the tax out of his own pocket, because his being taxed is an accident. It is not a payment under the universal law of trade, but a piece of ill-luck, like having his pocket picked of the same sum. The risk of such accident is greater in Massachusetts than anywhere else, because our system is more ingenious, and greater vigilance is exercised. The risk in New York and in Chicago is much less. In Philadelphia there is no risk at all. In foreign countries taxes of this character vary from live to twelve per cent, upon income. If all civilized nations were able to and did tax the lender on every railroad bond in the world $15 a thousand, there is no doubt that the C. B. & Q. R.R. would have to pay about one and one-half per cent, above the present average interest rates. While London and Berlin, Xew York and Philadelphia, stand ready to lend the C. B. & Q. R.R. at four per cent., that railroad will not pay five and one-half per cent, to a citizen of Massachusetts, who wants the extra one and one-half per cent., because he may be taxed. The taxation of real estate on the other hand is not acci- dental. It is not a matter of accident which of two stores on Washington street will be exempt. It is not certain, as in the case of personal proi3erty, that at least half of them will be exempt, and at the same time uncertai7i which half it will be. On the contrary, the tax is a known clement in every transaction between the borrower (or tenant ) of the real estate and the lender (or owner). The amount is known and fixed. If a few more stores are wanted they cannot be shipped from London by the next steamer. One who lets a store on Washington street can exact the 10 tax, in addition to the rent on both land and building, from his tenant, who in turn collects it in the price of his goods. The landlord gets a certain net return, while the Massachu- setts man who invests in personal property must do it in competition with the world of untaxed lenders. A tax of $15 per $1,000 does not take one-third of the rent of land ; but it does take one-third of the income of personal property. Double Taxation. The policy of our laws is to tax all property, personal as well as real. ]\loreover, in the attem[)t to guard against the possibilit}^ of any property escaping taxation, laws have been passed under which real estate in some cases and per- sonal property in many cases is subject to double taxation. Generally speaking, the determination of the question whether real estate or personal property is to suffer a double tax de- pends not upon the character of the property itself, but upon the nature of the ownership of that property. A few years ago one form of double taxation was abol- ished. Explanation can best be made by an example. A owns a piece of real estate worth five thousand dollars, and B has no propertj^ at all. The amount of taxable property, then, is five thousand dollars, being the property belonging to A. Under the law as it was prior to 1881, if A conveyed his real estate to B and took B"s note for five thousand dol- lars, secured by a mortgage of the estate, B was taxed for five thousand dollars as the holder of the real estate, and A was taxed for another five thousand dollars as the holder of the note. The total amount of property had not increased, and yet the amount of the tax on that property was doubled, simply because the ownership of the property had changed. So soon as this form of double taxation was understood the Legislature wisely put an end to it. In such cases the only actual property is the real estate, and the mortgaue 11 deed simply indicates the quiUity and tlie extent of the inter- est which the mortgagor and the moi-tgagee have in that real estate. The property is not increased by the execution of a mortgage. A and B together own no more than A owned originally, but instead of A's having the sole and al)solute title to the real estate, that title, after the sale to B and the mortgage back by him, is vested in B, subject to tlic contin- gency of being taken away from B and re-transferi'ed to A. Most closely allied to the now al)olished double taxation of mortgaged real estate, is the still existing doul)le taxation of mortgaged personal property. Suppose that A, instead of owning real estate, has a stock of merchandise worth five thousand dollars, and that B, as before, has no property at all. The amount of taxable property is then tive thousand dollars. A, wishing to retire from business, and having confidence in B, who is young and enterprising, sells liis stock of merchandise to B for five thousand dollars, and takes B's note for that amount, either secured by a mortgage on the merchandise or unsecured. As the law now stands, B is th'en taxed for the stock of merchandise I)elonging to him, and A is taxed for the note. A and B together own no more than they did before, but the amount of property, in the contemplation of the assessors, is doubled. B not only pa3's the tax assessed to him, but he is also obliged to pay a rate of interest on the note sufficient to enable A to receive a proper percentage after paj'ment of the tax assessed upon him. View the case from another stand-point. If A and B to- gether own personal property worth five thousand dollars, and each has a bill of sale defining the nature and extent of his ownership in such property, no one. pretends to claim that each should be taxed for the full amount of the prop- erty ; but if the interest of A in such personal pro[)erty is a contingent mortgage interest, then the property is doul)ly taxed to the extent of A's interest therein. In other words, the property is doujjly taxed because the nature of 12 its ownership has changed. There is strange inconsistency in a scheme of taxation under which the amount of taxable property is increased by the making of a loan when the loan is secured by a mortgage of personal property or not secured at all, but is not increased when the loan is secured by a mortgage of real estate. Again, corporate bonds are only formal notes running general]}^ for a series of years. They may be secured by a mortgage or pledge of real estate or personal property or l)oth, or they may be unsecured. Suppose the case of a corporation with a capital stock of a hundred thousand dollars, the whole of which has been invested in personal property. The corporation then wants another hundred thousand dollars with wliich to carry on its business. It finds X, who is ready to furnish the hundred thousand dollars, and take the bonds of the corporation therefor. Before this transaction the amount of taxable property of the corporation was the value of its personal property, plus the value of its franchise, as indicated by the premium, if any, at Avhich its capital stock sold in the market, and X was taxable on his hundred thousand dollars of cash. In such a case as this, there is, after the transaction, no more taxable property in contemplation of our laws than there was before. The corporation, having a hundred thou- sand dollars more in its treasury, and being indebted to the amount of a hundi'ed thousand dollars, is taxed for the same amount as it was before it negotiated the loan, and the money-lender is taxaljle for his hundred thousand dollars of bonds instead of his hundred thousand dollars in cash. If, however, an individual attempts to do the same work which the supposed corporation has done, — if an individual l)ays out a hundred thousand dollars for the same personal property, and then borrows a hundred thousand dollars with which to carry on his l)usiness, he will be taxed for the value of his investment, and will also be taxed on the hundred thousand dollars of cash which he has on deposit. No al- 13 lowfince ov deduction is made for his indebtedness. His bonds or notes will further be taxed to the person holding them. Hence, if an individual does what the supposed corporation did, he is punished for so doing l)y having a portion of his property doubly taxed. Individuals should not be subjected to burdens from which corporations are free. If a man has one hundred thousand dollars in personal property and owes fifty thousand dollars, the real value of his property is but fifty thousand dollars. Fifty thousand dollars and not one hundred thousand dollars is the measure of his ability. That is all for which in justice he should be taxed. The ability of a man who has one hundred thousand dollars in personal property and owes fifty thousand dollars is not as great as the ability of a man who has one hundred thousand dollars and owes nothing. To tax the note in the hands of the holder and to tax the giver of the note for all his property, without making any deduction for his indebted- ness, is a double tax which is entirely inconsistent with the principle of taxing every man according to his aliility. A note or bond for a thousand dollars is an evidence of property. It is a certificate that the holder of the note has parted with a thousand dollars, and that such thousand dollars is in the hands of somebody else. The tax may be laid either upon the man who has the money, or upon the man who is entitled to have the money returned to him at some future time. There is no good reason why the man who has the money, and the man who has it not, and who has a certificate that he has it not, should both be taxed. It is sti'ange that the idea was ever conceived that the unount of taxable property is increased by the making of a oan. Suppose two beggars should go to a restaurant, and one tf them should say to the proprietor, " I have twenty-five ents which I have borrowed from my friend here, and he as my I. O. U. for twenty-five cents; thus, you see, that I 14 have twenty-five cents and he has property to the amount of twenty-five cents ; so that we two together have fifty cents' worth of property, and we want fifty cents worth of food." Such a cUiim would be as reasonable as it is to claim that the amount of property to be taxed increases when one man loans some of his property to another man. Under our tax system, whenever a loan is made, unless it is secured by a mortgage of real estate, the amount of taxable propeity is increased by the amount of the loan, and, when a debt is paid, the amount of taxable property is decreased by the amount so paid. If every man should pay his debts mil- lions of taxable property would disappear. To test the justice of the taxation of a piece of paper, such as a note, bond, or certificate of stock, we reconniiend the following experiment: — Let the experimenter take a ten-dollar gold piece in his left hand. Let him write an I. O. U. ten dollars, and hold it in his right hand. Then exchange the two. Get the gold piece in the right hand, and the I. O. U. in the left. Are you ten dollars richer by this process ? Are you rich enough in consequence to pay two taxes instead of one? Try the experiment with a friend. Let him hand you his I. O. U., and you hand him the gold. Are you two any richer? Do you two become able by this process to pay two taxes? Call in a third man. Hand him your I. O. U. for ten dollars, and your neighbor's I. O. U. for ten dollars, as col- lateral. Are you three able, in consequence, to pay three taxes on the original ten dollars ? In this case the law, as it stands, gives the city three taxes on the ten dollars. He who n)aintains that the present laws are just and equal must prove that the act of passing the I. O. U. from your right hand to your left creates an additional ten dollars. He must show wliy a check for a trunk is worth as much as the trunk in addition to the value of the trunk itself. 15 Would not a tax on a trunk check be absurd ? A trunk check, if the trunk contains gold, and the check is in the form of a receipt and agreement to deliver, is taxable. When the problem is reduced down to its simplest terms, it comes to this : After a tax has been levied upon all real estate and upon all tangible personal property, any tax upon the evidence of ownership of such real or personal property is double taxation. All taxation of bonds of corporations, whether organized under the laws of this or other States, is such double taxation. Moreover, as other States as well as Massachusetts tax all the property of the corporations or- ganized by their authority, any tax imposed by this State upon the shares of stock in a foreign corporation is double taxation. When a resident of this State is taxed for the market value of his shares in a foreign corporation, the prop- erty, real and personal, which makes up that market value is doubly taxed. It is taxed in the State where the tangible property is ; it is taxed in this State where the person who owns an interest in that tangible property lives. In fact, as the market value of corporate stock is made up in part of the corporate franchise, we tax our citizens for their ownership in franchises granted by other States. There is another form of douI)le taxation which affects a large amount of property. If a resident of this State owns personal property in another State, whether it be cattle, or machinery, or merchandise, he is, under the laws of this State, taxable for that property here, whether he has or has not any evidence of such ownership in writing. Inasmuch as other States as well as the State of Massachusetts tax such per- sonal property within their own limits, the result is that such propert3' is doubly taxed. On the other hand, if a resident of this State owns a piece of land in another State, he is not taxable here for such land. The excuse given for taxing a resident of this State for personal property actually in an- other State is that personal property, in contemplation of 16 law, follows the residence of its owner. That this excuse is simply a subterfuge is shown by the fact that when we find personal property in this State belonging to a resident in another State, we tax it here because it is here, and because it has not, in fact, followed the residence of its owner. He who approves the present law must maintain that it is just to exempt real estate taxed in another State, and not just to exempt personal property taxed in another State. A proposition to tax real estate outside of the Common- wealth would be looked upon as monstrous. The idea would not be tolerated an instant. Yet its exemption from taxation here cannot be justified except for reasons which are equally conclusive for the exemption of personal prop- erty. The inconsistency of our laws may be shown in still another way. If, as has been stated, a person holds a deed of real estate situated in another State, he is not taxed here for such real estate. On the other hand, if he holds a cer- tificate of stock of a corporation in another State, the property of which corporation consists in part of real estate and in part of personal estate, or wholly of real estate, he is taxed in this State for the full value of his interest therein. Again, if a resident of this State owns personal propei-ty or corporate property consisting of personal and real estate situated in another State, he is taxable for such property in this State ; but if a corporation, organized under the laws of another State, and owning real and personal, or simply per- sonal property in that State, takes up its habitation in this State, such corporation is not taxed here for either the real or the personal estate situated in such other State. Some few foreign corporations have taken up their abode in this State. A great many have taken up their aljode in the city of New York. If we should impose upon such corporations a tax like that which we impose upon an individual owning similar property, they would all leave the State before the next tax day. 17 The phraseology of the constitution of this State shows clearly that its framers did not intend to give to the General Court power to tax either real estate or personal pro^jerty beyond the limits of the State. "Full power and authority is given and granted to the General Court ... to impose and levy proportional and reasonalile assessments, rates, and taxes upon all the inhal)itants of and persons resident and estates lying luithin the said Oominomvealth, and also to im- pose and levy reasonable duties and excises upon any produce, goods, wares, merchandise, and commodities whatsoever brought into, produced, inanufactiired, or being ivilhin the same.'' (Constitution of Mass., Part Second, Chap. 1, Sect. 1, Art. IV.) For many years after the adoption of the constitution there was no taxation either of real or personal property out- side the limits of the State. It was not until 1835 that the Supreme Court rendered a decision upholding the taxation of a citizen of this State for shares owned by him in a cor- poration organized under the laws of the State of New York, and it was not until the time of our Civil War that the double taxation of pei'sonal property, as now carried on, was fully developed in practice and sustained by the Courts. The necessities of the times may have had some influence upon the course of judicial decision. In spite of the foregoing provision of the constitution, it is provided by statute that "Personal estate shall, forthe purposes of taxation, include goods, chattels, money, and effects wherever they are, . public stocks and securities, stocks in turnpikes, bridges, and moneyed corporations, iritJiin or without the State," eic. (P. S., Chap. 11, Sect. 4.) " All personal estate, within or 'without the Commonwealth shall be assessed to the owner," etc. (P. S., Chap. 11, Sect. 20.) The ground on which the constitutionality of this statute is sustained is that personal property follows the situs of 18 its owner. This principle, however, is not followed out with reference to personal property in this State belonging to a resident in another State. In such case the personal property is taxed here because it is here, and because it has not followed the situs of its owner. In the State of New York, the Court of Appeals being called upon to interpret a statute which read as follows : " All lands and personal estate within the State shall be sub- ject to taxation," held that lands and personal estate within the State meant lands within the State, and personal estate within the State, and did not mean to include in any way personal property outside of the State. (Hoyt w. Conmiis- sioners of Taxes, 23 N. Y., 224.) In rendering the decision of the Court Judge Corastock said, "The fundamental requisite of a well-adjusted system of taxation is that it be harmonious ; but harmony does not exist unless the taxing power is exerted with reference ex- clusively either to the situs of the property or to the resi- dence of the owner. Both rules cannot obtain unless w^e impute inconsistency to the law and oppression to the tax- ing power. Whichever of these rules is the true one, which- ever we tind to be founded in justice and the reason of things, it necessarily excludes the other." As bearing upon the intent and true meaning of our con- stitution, it should further be noted that the rejected consti- tution of 1778 did not limit the taxation of estates to those lying within the State, but conferred upon the Legislature the general power to lev^^ proportional and reasonable assess- ments, rates, and taxes. If, on the ground that personal property follows the situs of its owner, it is, under the constitution, permissible to tax a resident of this State for personal propert}' in another State, then the same principle demands that personal prop- erty within this State belonging to residents of other States should not be taxed here. As a general rule, the most rea- sonable, the cheapest, the surest, the best way to tax prop- 19 3i'ty — personal as well as real — is to tax it where it actu- i\lly is, without reference to the residence of its owner. In the taxation of income derived from personal property there is also in tiiis State an extraordinary injustice and in- equality, which is the more surprising 1)ecause the law in regard to taxing income appears to be both jusl; and clear. That portion of section 4 of chajjter 11 of thePuldic Statntcs which declares what shall be considered as personal estate for the purposes of taxation, refers to income as follows : — "The income from an annuity, from ships and vessels en- gaged in the foreign-carrying trade within the meaning of section eight, and so much of the income from a profession, trade, or employment, as exceeds the sum of two thousand dollars a year, and which has accrued to any person during the year ending on the first day of May of the year in which the tax is assessed, but no income shall be taxed which is derived from property subject to taxation." This phrase, obviously intended to guard against the taxa- tion both of pi'operty and of the income derived from it, is similar to the con^titutional provision in a sister State which reads as follows : — "The General Assembly may also tax trades, professions, franchises, and incomes, provided that no income shall be taxed when the property from which the income is derived is taxed." A decision of our Supreme Court in the case of Wilcox V. Middlesex, 103 Mass. Reports, .')-l:4, furnishes the au- thority for the practice of the assessors in the city of Boston for taxing a merchant not only for his stock in trade, but also for a portion, if not the whole, of the income derived thereform, on the ground that such income is derived partly from the merchandise, and partly from the industry and skill of its owner in using it. It can hardly be supposed that the makers of our laws did not realize that some agency was necessary in order that in- come should be produced out of or from merchandise or 20 stock in trade, ilercliandise lying idle does not j'ield any- thing. Human agency is necessary in order to make it pro- duce any income, and the amount of income depends upon the amount of industry and skill exercised. Either, then, in such a case, all the income of a merchant should be taxed on the ground that it is not derived from property subject to taxation, or else none of it should be taxed on the ground that it is within the scope of the statute which says that no income shall be taxed which is derived from property subject to taxation. It seems very clear that the intention of the Colonial laws was to make a distinction between the " merchant, shop- keeper, and factor," who were to be doomed for what they possessed, and the artisan and professional man, who were to be taxed upon what they earned. The merchant was to pay upon his possessions ; the artisan upon his earnings or income. It may be from the force of tradition, — it may be a sur- vival of the true spirit of the law, or a reliance by the la^'man on what seems to him the plain and common-sense meaning of the statute, but certain it is that there are many men of character, capacity, and position, who frankly admit that while they submit their goods to taxation, they refuse to be taxed also on the income derived therefrom, "the law Ijeing to them as plain as any command in the decalogue." The tax of one and one-half per ci'ut. upon the income of a professional man, salaried man, or artisan, above the liberal exemjit 1(111 of two thousand dollars, is a very light one com- pared with the tax of one and one-half per cent, on the stock of goods of tlic merchant, which tax is equivalent in amount to a tax of from fifteen to thirty per cent, on the income therefrom. Not only does this vast disproportion exist, but the merchant is also taxed not only upon what he really has, but upon what he owes, since he is not allowed to deduct his debts from the amount of his taxal)le propert3^ The imposition of a tax upon the income, derived from 21 property already taxed, is most vexatious ; and, in a recent report made by a commission on taxation, composed i( three eminent citizens of the State of Maine, of whom Tudge Oliver G. Hall was chairman, they say that to tax .apital, property, land, and also the income arising from tlie employment of the same, is intoleral)le as double taxation. We have yet to learn of any other vState in the Union, or of any civilized country, where such taxation is practised. Acting under the authority of the decision in the case above cited, our assessors undertake to determine what poi- tion of the income of a merchant is derived from his stock, and what portion is due to his skill and industry in its management. In an opinion given by the Corporation Counsel, Mr. J. B. Richardson, to the Board of Assess(jrs, and printed by them under date of April 16, 1>!!I0, in reply to the inquiry whether the assessors may, under the decision in the case of Wilcox v. ^Middlesex, allow legal interest on capital, and exempt so much from the income tax, Mr. Rich- ardson makes the followin