h^^. 6X61 iV I0t3 »-'¥T Stifuta, ^tw lark Ha^^ S pfiC Jfo-X CotT) . REPORT OF THE Special Tax Commission i HJ2401 .Ari'g'Jr""'^ ''^^^^^ I Report of thp 9 j oiin '^^ '-'JU 265 106 ATLANTA, GEORGIA 1919 The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030265106 REPORT OF THE Special Tax Commission For Georgia Hugh M. Dorsey, Governor, Chairman Ex-Officio. H. R. DeJarnette, Eatonton. R. A. Denny, Rome. Seaborn Wright, Rome. E. Z. Arnold, Fort Gaines. L. R. Akin, Brunswick. E. H. Callaway, Augusta. J. H. T. McPherson, Athens. E. H. Johnson, Oxford. H. J. Ftjllbright, Tax Commissioner, State Capitol. J. W, LeCraw, Secretary, Room 133, State Capitol. Y. ATLANTA, GA. 1919 BYRD PRINTING CO., State Printers, W TABLE OF CONTENTS Page Letter of Transmittal 1 INTRODUCTION 2 1. Law Creating Tax Commission 3 2. Tlie Commission 5 3. Organization and M'eetings 5 L THE PRESENT SYSTEM 7 1. The Law 7 2. Administrative Machinery 7 3. Present System a Failure 8 4. Why the System has Failed 11 11. SUGGESTED REMEDIES 12 1. Changes in Law 12 2. Constitutional Amendment , 14 IIL REASONS FOR PROPOSED AMENDMENT 15 1. European Opinion 15 2. American Scientific Opinions 16 3. Louisiana Tax Commission 17 4. Massachusetts Tax Commission 17 5. Ohio Tax Commission 18 6. Nebraska Tax Commission 18 7. Mississippi 18 8. Wisconsin 19 9. Court Opinion 19 10. National Tax Association 20 11. Classification Used in Georgia 21 12. Address by Mnrphey Candler 22 13. Experience of Wisconsin 23 14. Minnesota's Experience 23 15. Maryland's' Experience 24 16. Virginia 25 17. Kentucky 27 18. States Using Classification 30 Pagp IV. EECOMMBNDATIONS AS TO ADMINISTRATIVE MA- CHINERY AND OTHER LAWS TO FOLLOW CON- STITUTIONAL AMENDMENT 31 1. State Tax Commission . 33 2. Deputy State Tax Commissioners . 37 3. County Boards of Review 37 4. County Tax Receiver 38 5. Other Of fieials . 39 6. Taxpayers - 40 7. Banks 41 8. Business License Tax 41 9. Corporations 42 10. Household Furniture 42 11. Income Tax 43 12. Inheritance Tax 43 13. Merchants 44 14. Real Estate 46 15. Secured Debts --- 48 16. Tax Maps ■ 51 17. Budget System 51 18. Insurance 52 19. Wild Lands 52 EXHIBITS: A. Banks 53 B. Income Tax 54 C. Inheritance Tax 55 D. Merchants 56 E. Secured Debts ^ 58 P. State Tax Commissions 59 G. South Dakota Commission 60 H. Kentucky Commission 60 I. Advance of Tax Commission 61 J. Results in Wisconsin » 62 K. Results in North Dakota 62 L. Results in Kentucky 63 M. Kentucky and Ga. Compared 65 N. Secured Debts, New York 66 0. Pennsylvania Intangible Tax {j7 Pag P. Tax Maps 67 Q. Georgia Deficit ^ 68 E. Intangible Property in Georgia 69 APPENDIX— BILLS INCORPOEATING PROPOSED CON- STITUTIONAL AMENDMENTS 71 Bill No. 1 71 Bill No. 2 73 Bill No. 3 75 MINORITY REPORT OP REPRESENTATIVE SEABORN WRIGHT — _ 77 1. Disagrees as to Method of Assessment 77 2. Disagrees as to Proposed Constitutional Amendments 82 CHART No. 1 — Percentage of Assessment in Georgia 4 CHART No. 2 — Proportionate Assessment of Real Estate, Money, etc. 13 CHART No. 3— What Classification did for Minnesota 20 CHART No. 4-Per Capita State Tax __ 28 CHART No. 5— Virginia System vs. Georgia System 34 CHART No. 6— Kentucky System vs. Georgia System 40 EEPORT OF SPECIAL TAX COMMISSION FOR GEORaiA Letter of Transmittai, : June 1, 1919. To THE Honorable Hugh M. Dorset, Governor of Georgia: The undersigned members of the Special Tax Commission, appointed under the terms of Section 14 of the Act of the General Assembly Approved August 20, 1918, have the honor to transmit here- with the report of said Commission. Hugh M. Dorset, Chairman, Ex-Officio. L. R. Akin, E. Z. Arnold, E. H. Callawat, H. R. DeJarnette, R. A. Dennt, H. J. FULLBRIGHT, E. H. Johnson, J. H. T. McPherson. INTRODUCTION. The General Assembly of 1917-18 found itself in a dilenuna when it came to the consideration of the State's financial affairs. It was charged with the duty of providing revenue for the proper mainten- ance of the various State departments. To do this, within the law, it was restricted to a levy of 5 mills upon the ad valorem valuation of property returned for taxation, together with receipts from a poll tax, inheritance and numerous business license taxes, and the rental income from the State's railroad property, etc. These sources of revenue had proved inadequate for this purpose for several years and there was, therefore, accumulating quite a consider- able floating debt. To make the problem more dif- ficult the high prices incident to conditions brought about by the world war had greatly increased the necessary living expenses of every state official and employee, and also increased the general expense acount of practically every department of the State 's business. The Legislature found itself face to face with the question of more income, more debt or such a retrenchment in expenditure as would seriously impair the usefulness of several departments of the State's business, some of the most important of which were already but poorly maintained. The members of the Legislature knew that the material wealth of the citizens of the State was greater than ever before and were at a loss to know just why such a condition should have come about. Not having time during the regular session to satisfactorily in- vestigate the causes which had brought about the ex- isting situation, they provided for a Special Tax Commission as set out in the following extracts from the Act approved August 20, 1918: 1. Law Creating Tax Commission. Section 14. Special Tax Commission. Within ten days from the adjournment of the present General Assembly the Governor shall appoint three business men, citizens of Georgia, and the President of the Senate shall appoint two Senators, and the Speaker of the House three members of that body, who, to- gether with the Governor as ex-officio chairman shall constitute a Special Tax Commission for Georgia. This Commission, together with the State Tax Commissioner acting as consulting and advisory member, shall thoroughly investigate Georgia's pres- ent tax system, comparing its methods and efficiency with those of other States and countries. Should they deem it advisable, the Commission may hold as many as six meetings in different sections of the State, to which the general public shall be invited and at which any citizen may have the right to dis- cuss with them any phase of the taxation question as it affects the interest of any section of the State or any class of its people. Upon the completion of their investigations they shall make up and place in the hands of the Govf nor, to be transmitted by him to the 1919-20 General Assembly within the first five days of the opening session, a report embodying their conclusions and recommendations. A copy of this report shall be forwarded by the Gove/tnor to each member of 1919-20 General Assembly at least ten days before they convene. The commission shall also make up an abridged copy of its findings couched in non- technical language and clear in expression, and ten thousand copies of which shall be printed and dis- tributed through the Governor 's office to the citizens 3 ? 5 1 1 1 o -< Eh H I 1 ! 5> 1 ^ 1 ^ ^ 1 1 5i 1 1 1 1 l-H CO ■* V? >0 ^ ^ U g O h ■ ^ s * ts t? o § ■ ■ H g H In H ■ o H 1 1 B 1 1 1 S P4 B 1 H 1 B 1 B B a Eh ^ M 1 1 ■ 1 1 B B ■ Z m ■ n H H ■ ■ ■ ■ H H ■ ■H H ^1 ■ ■ ■ ■ ^ 1 ■ H 1 H 1 1 1 1 03 CO H ■ ^1 B ^B H 65 6§ 6? ■ feS 6? 6? 6? ^ 6? ^ DO CO la t- 1C3 CO 00 o o O Ol CO m M ■5|l CO ■^ CQ ■>!< CO CO M i 00 CJ 00 C<1 00 r-t rH 1-1 l-H rH l-H l-H r~t T-i rH l-H r-l 05 05 r-l i-t l-H tH a> OJ rH rH OJ 05 rH f-i 1 li > go iS of the state, and a copy of which shall be forwarded to each newspaper in the State with the request that they publish the same as a matter of common inter- est. The purpose and intent of this being to ac- quaint the citizens of the State with existing condi- tions and suggested remedies so that they may un- derstand and act intelligently. It shall be the further duty of the Commission to prepare and submit to the next General Assembly, for their consideration, a comprehensive revenue bill based upon their investigation, so that the members may have before them in concrete, legal, finished form the result of the Commission's work. 2. The Commission. Upon authority invested in them as above shown, President Samuel L. Olive named Senators H. R. DeJarnette, of Eatonton, and E. A. Denny, of Rome. Speaker J. N. Holder named Representatives L. R. Akin, of Brunswick; E. Z. Arnold, of Fort Gaines, and Seaborn Wright, of Rome. Governor Hugh M. Dorsey who is named in the bill as ex-officio chair- man of the Commission, appointed from the State at large Dr. E. H. Johnson, of Emory University, Oxford; Judge E. H. Callaway, of Augusta, and Hon. Toombs Dubose, of Athens. These with Judge John C. Hart, State Tax Commissioner, made up the original Commission. Hon. Toombs Dubose having resigned on account of ill health. Dr. J. H. T. McPherson, of the State University, Athens, was appointed in his stead, and the vacancy caused by Judge Hart's death was filled by H. J. FuUbright, his successor in office. 3. Oeganization and Meetings. The Commission held its first meeting in Atlanta 5 on September 18, 1918, and elected E. H. Callaway, vice-chairman, and later elected J. W. LeOraw, Sec- retary. It then immediately began its work by assigning to each member certain phases of the system of revenue and taxation in Georgia as well as of the system of other states, with instructions to prepare papers on their respective subjects and submit them at the next meeting. These papers were very com- prehensive, evidencing the fact that the commission- ers had consulted the highest authorities on both the theory of the laws touching taxation and the modern methods of administering them. At subsequent meetings, after careful considera- tions of the view presented in these reports, tenta- tive recommendations embodying such changes in the present system as the Commission deemed wise were drafted and presented to the public through the newspapers, as well as at a series of public meetings held in various parts of the State. The Commission sought thus to acquaint the citizens generally with existing conditions and their suggested remedies, and frankly asked for candid criticism and help in their difficult work. The meetings were very helpful both in dissemi- nating information and securing the support of those in attendance for the revision of the existing system. Any citizen present was free to ask any question, and all the light possible was given both by the Com- mission and by the public. It was an open, demo- cratic discussion of the most vital, perhaps, of all State questions, viz., how to equitably raise and dis- tribute the State's revenue. After these meetings the Commission formulated its final report, which is herewith submitted. I THE PRESENT SYSTEM 1. The Law. Georgia's present system is based upon what is known as the general property tax, which requires all property to be taxed ad valorem (according to value) and at the same r£|,te. This prin- ciple of taxation was first made a part of our funda- mental law by the Constitutional convention of 1867, which was held under the military rule that ushered in the Bulloch regime, and is therefore, so far as Georgia is concerned, the child of carpet-bag- gerism. It is thus set out in Section 27, Article 1, of that Constitution of 1867: ' ' And taxation on property shall be ad valorem only, and uniform on all species of property. ' ' The Constitution of 1877 contains different phraseology on this subject. It reads thus, in para- graph 1, Section 2, Article 7: "All taxation shall be uniform upon the same class of subjects, and ad valorem on all property subject to be taxed within the terri- torial limits of the authority levying the tax. ' ' Our Supreme Court has held, in substance, that the legal effect is the same in both instruments and we are therefore required to tax all property at the same rate^ whether it returns much, little or no in- come, so long as the constitution remains as it is. 2. Administrative Machinery. The framework of the machinery for administering our tax laws dates back to 1804,* and has been changed very little ' since that time. The most important change was that made in 1913, when a State Tax Commissioner and County Boards of Assessors were added to it. This was certainly a step in the right direction, and *C. M. Candler, in Proceedings of Nati,onal Tax Association, Volume 3. if properly followed up with other feasible changes the system can be made a fine one, in keeping with modern business methods. Under the present law there cannot be any sys- tematic organization and proper supervision, which is so essential to the success of great business estab- lishments. Both the Comptroller-General and the State Tax Commissioner are necessarily executive men and must remain in charge of their offices. The Tax Commissioner is provided with no help except a stenographer and a clerk. Having no field agent to inspect the work of and advise with the local tax officials, many of whom are inexperienced, organ- ized team work is impossible. Consequently satis- factory results cannot be expected so long as this condition remains. No successful business concern would attempt to operate under it, and yet Georgia, collecting and spending between seven and eight million dollars per year, still clings to it. 3. Peesent System a Failure. The Commission, after its investigation, believes that the system now in use is a failure because : 1st — It does not get on the tax list a reasonable part of the actual value of property in the State. According to estimates of the U. S. Census Bureau only 36 per cent of the actual value of the property in the State was listed for taxation in 1912. Thi Commission's statistician, basing his estimate upon' the Census Bureau's ^goires for 1904 and 1912', computing the average gain for those years and ap- plying it to the total property valuation for the years 1912 to 1918, reached the conclusion that only 25 per cent of the total value appeared on the re- turns for 1918. Making due allowance for such property as is under the law exempt from taxation (a very small part of the whole) we think our con- clusion is amply justified. 2nd — The property returned is not equitably ap- portioned between the various classes of property. It appears to us, from a study of the Census Bu- reau's reports as described above, that the classes of property mentioned below returned for taxation in 1918 approximately the following percentage of their real values: Banks 70^a Real Estate 35% Live Stock 30% Farming Implenients and Mchy__28% Public Service Corporations 22% The last item, "public service corporations," in- cludes railroads, street railways, shipping, water works, telephone companies, express companies, etc., this figure, 22 per cent, being obtained by taking the figures for this entire class of public service corpo- rations from the U. S. Census reports and from the Comptroller-General's reports. With reference to the railroads alone, a separate calculation has been made for us by the railroad commission, which indi- cates that the total railroad property in Georgia is worth approximately $275,000,000, and by subtract- ing the value of the railroads which are exempt from ad valorem taxation and comparing the result with the assessed value of the railroads as contained in the Comptroller-General's report we reached the conclusion that the railroads as a whole are paying on approximately 42^/2 per cent of their total value We have no data upon which to base a similar esti- mate of merchandise. We do know, however, that 9 only about $53,000,000 was placed upon the tax roll in 1918, and we have good reason, we think, for be- lieving that there is that much in one Georgia city. Again, we are unable to form any well grounded conclusion as to the value of money, notes and ac- counts, bonds and taxable stocks in the State. It appears, however, that there was $322,000.00 on de- posit in the Banks of the State in September, 1918, according to the Bankers ' Enclyclopaedia. We know from the tax digests that there was returned last year, in round numbers, in money, notes, mortgages, accounts, bonds and taxable stocks, $65,000,000. This condition would be ludicrous if it was not abso- lutely distressing to all fair-minded citizens. We submit that the above figures demonstrate that the system not only fails to secure a reasonably fair return of intangibles, but of real estate and tangible personal property as well. It also demon- strates that at least a majority of the owners of every class of property fail to comply with the law and that the suggested remedies should be such as will seek to correct the evil in each class. Of course, the correction should be applied first and most streneously where the greater wrong is being done the State and the honest taxpayer. To do otherwise would be to accentuate the wrongs already existing, and this the Commission has kept in mind in prepar- ing its recommendations. 3rd — It does not provide adqeuate revenue for the proper maintenance, on a reasonable basis, of the State's various departments. In support of this statement we call attention to the fact that within the past few years the State has accumulated a de- ficit of about $3,000,000. 10 Even should the annual expenditures of the State not increase any, which we can scarcely expect under existing conditions, isn't it true that we are justified in our assumption that failing in the past as, an ade- quate revenue producer it will do likewise in the future? 4. Why the System Has Fah.ed. There are several localities in Georgia where the combined State and local taxes amount to forty-five dollars per thousand, and quite a number where they run from thirty to forty, with a still larger number ranging from twenty to thirty dollars. In all such, money in savings banks, which earns only three and a half or four per cent, brings its owner only enough to pay his taxes. Even when the in- come from secured debts is five to eight per cent, the percentage taken for taxes under our present law is so great that owners almost without exception refuse to admit having such property. They frankly say that such a law is so unfair that they propose to evade it if possible, and it is usually possible. This condition is the most difficult one to reach and remedy. Again, our system fails where no such difficulty as this is found. To illustrate: In four counties in Georgia a special agent employed by the State has just collected $381.96, $1321.34, $1579.23, and $1800, as business license taxes, which the regular tax of- ficials had failed to collect. If the system was prop- erly organized, as any successful private business would be, this would not have happened. But our law provides for no such organization. Georgia collects and spends between seven and eight million dollars for State purposes alone, not 11 to mention what is due her and she fails to get, as above set out. Isn't it about time to "recreate" the entire system, both as to its basic law and adminis- trative machinery? II. SUGGESTED REMEDIES 1 — Changes in Law. Recognizing the pressing need of an increase in the State's income, the Com- mission believes that this is not the m.ost importan' feature of present conditions which it must attempt to improve. A careful investigation has so impressed us with the inequitable distribution of the tax burden, not only among the various classes of property, and among the various localities, but even among the various items of the same class in the same locality, that the injustice of the present system, even more than its inadequacy, seems to us to demand redress. We deem it our chief duty to try to remedy this con- dition first of all, and have so formulated our recom- mendations. The question which we have been called upon to consider is so important, so vital, in- deed, to the future welfare of the State, that we "have not thought it wise to advocate measures which, while they might bring some temporary relief through an increase in income, would be of no ma- terial permanent benefit because of their failure to remove the real cause of the most serious fault in the present system. Indeed, the Commission is so impressed with the greater benefit which will come to the State and its citizens through permanent im- provement rather than mere temporary relief that we are submitting a plan which cannot be perfected under several years, but which, when perfected, either by the enactment into law of the recommenda- 12 PROPORTIONATE ASSESSMENT OF REAL ESTATE, PERSONAL PROPERTY, AND MONEY AND CREDITS IN GEORGIA 1918 Keal Estate t $569,394,457 53% of Total Assessment of Property Personal Property $349,588,021 32% Money and Credits $65,613,596 6% TABLE SHOWING DECREASE IN PROPORTIONATE ASSESSMENT OF MONEY SINCE 1875 Assessed Value of all Property in Georgia Assessed Value of Money and Credits Pero't'ge of Money & Credits To Total 1875 $261,755,844 37,138,943 i4y5% 1880 261,424,651 29,333,736 11%% 1890 415,828,945 38,933,258 9%% 1900 433,323,691 84,730,595 8 % 1910 766,787,139 48,242,841 6 1/7% 1918 1,079,261,333 65,613,596 6 1/14% Chart No. 2 tions herewith submitted, or such others along the same general line, as the legislature may deem wise to substitute for them, will result in permanent bet- terment, not only through increased revenue for the state but also through a far more equitable distribu- tion of taxes and a much lower rate than we now have. This we confidently believe will be the out- come if our general plan is approved by the Legisla- ture and the people. 2 — Constitutionaij Amendment As stated above, we believe the chief cause of our tax troubles lies in the unsound theory found in the antiquated general property tax principle as now written in our constitution, as interpreted by our supreme court. In order to properly adjust this law to conditions as we see them, we find that it will be necessary to amend the constitution, and we therefore embody in this report (see appendix) three bills providing for this. We submit the three, so that the Legislature, always busy, may be relieved of the necessity of drawing them and may take its choice, should it approve the Commission's views. The proposed amendments embodied in these bills are as follows : 1. ' ' All taxes shall be levied and collected under general laws and for public purposes only. The General Assembly shall have the power to classify property for taxation and to adopt different rates and methods for different classes of property and to segregate different classes of property for State and local taxation. But all taxation shall be uniform upon the same class of subjects' within the territo- rial limits of the authority levying the tax. Taxes may be levied ad valorem upon any given class of property without regard to the method used in levying taxes on any other class of property." 2. ' ' Taxes may also be imposed upon incomes, inheritances, privi- leges! and occupations, yvhieh classes of taxes may be graduated, and when levied may contain provisions for reasonable exemptions. ' ' 14 III. REASONS FOR PROPOSED AMENDMENT. We have reached the above conclusion because we find that the provision of our law requiring property of every kind and character to be taxed at the same rate is condemned by : (1) Practically all students of the science of taxa- tion. (2) Practically all of the heads o.f federal and state tax departments. (3) Practically all of the more than one hundred special tax commissions. (5) The United States Supreme Court. (4) The International Tax Association. (6) The experience of Europe, England and our own States, all of whom have tried it and about half of whom have so modified it as to adapt it to modern conditions. We base this conclusion upon the statement of facts and opinions set out below : 1 — European Opinion Since the general property tax system came to us during our Colonial period as a direct heritage from England, who in turn received it from Continental Europe let us first hear, briefly, from the foreign commentators. In Volume 3, National Tax Associ- ation, preceedings, page 77, we find this comment on the "uniform ad valorem system" in a diplomatic report to the British Secretary of Foreign Affairs : "Strange anomalies and sig^ar abuses result partly from the vioiousness of the tax law — stich objects of taxation as are so easily concealed or disposed of. ' ' 15 Also . this from LeKoy Beaulieu, an eminent French writer on the Science of Finances : ' ' We have examined the property tax in the United States. Modern taxation has seldom invented a more stupid instrument." 2 — Amebican Scientific Opinions. Coming now to our own distinguished scholars, let us hear Prof. Chas. J. Bullock of Harvard, the , present President of the National Tax Association, through the above mentioned authority, as he says : "Everywhere the story is the same: existing laws are either un- enforced, or, if enforced, prove destructive to industry and highly unjust in their operation upon individual taxpayers. "The outcome usually is that personal property evades assessment to an increasing extent so that the burden of taxation falls more and more heavily upon real estate. The system as a whole is inade- quate and was long ago discarded by most other countries, so that in the United States we have the proud distinction of possessing about the worst method of local taxation to be found in any part of the civilized world. ' ' Prof. Richard T. Ely, a noted authority on taxa- tion, says : ' ' The one uniform tax on all property in direct taxation never has worked well in any modern community or state in the civilized world, tho ' it has been tried thousands of times, and although all the mental resources of able men have been employed to make it work well. I have read diligently the literature of finance to find an example' but in vain; and lest this' should not be sufficiently trustworthy, I have made it my business in my capacity as a tax commissioner to visit typical states and cities and to make inquiries in person of citizens as well as officials trusted with the administration of the laws. I have visited Charleston, S. G. ; Savannah, Ga. ; Atlanta, Ga. ; Augusta, Ga.; Columbus, Ohio; Madison, Wis., and Montreal and Quebec, Canada. And the result has been abundantly to confirm all that 1 have said about the impracticability of one uniform tax upon real and personal property." Prof. Edwin R. Seligman, of Columbia Univer- sity, adds his testimony thus: ' ' Practically the general property tax, as actually administered today, is beyond all peradventure, the worst tax known in the civilized IC world. It puts a premium on dishonesty and debauches the public conscience. It reduces deception to a system and makes a science of knavery; it presses hardest on those least able to pay. It im- poses double taxation on one and grants entire immunity to the next. In short, the general property tax is so flagrantly inequitable that its retention can be explained only through ignorance or inertia. ' ' Prof. Adams, of Cornell, Fairchilds of Yale, Mc- Pherson of Georgia and Johnson of Emory and others are equally emphatic. Turning now from the theorists, who must work out and submit the plans for all progressive move- ments, to the practical men who must try them out in the crucible of experience, let us hear their testi- mony through the several state Tax Commissions as set forth in their reports and found in the author- ity above cited. First comes the 3 — Louisiana State Tax Commission. Saying : ' ' The United States Industrial Commission recommends that the States abandon the general property tax for State revenue. All \ opinions and reports tell, with variation only of detail and verbiage, the same sickening story — the impossibility of fairly reaching personal property, and especially intangible personality ; the gross inequality ; the discrimination in favor of the cunning and against the honest, especially against the weak and helpless, the frajid and trickery, and even perjury, resorted to in evasion of the law; the hindrance to industrial development; in short, the utter breakdown of the general property tax system everywhere. This is not the experience of Louisiana alone; it is universal experience of the civilized world. ' ' 4 — Massachusetts State Tax Commission "Since 1798, no further attempt has been made in England to levy a general property tax. In most of the other countries in Europe the result has been the same — now almost obsolete. Modern tax systems are based upon the principle that it is necessary to discriminate between various classes of property and business, and to employ different methods and rates of taxation in dealing with them. ' ' -17 f " , 5 — Ohio State Tax Commission. "The widespread concealment of intangible property, increasing in amount year by year, is the most convincing proof of the failure of the general property tax. It shows that after more than fifty years' of experience, with all conceivable methods in the way of in- quisition laws, severe penalties, and criminal statistics, designed to force the owners of moneys and credits, stocks and bonds, to put their holdings upon the tax duplicate, not only is the percentage of such property less than ever before, but public sentiment seems to be more and more approving an evasion of the law. Such a condition of affairs is so manifestly wrong and so inimical to good government that its longer continuance is a grave injury to the state. ' ' 6 — Nebraska Special Tax Commission Impressed by these views of the students and administrators, and desiring to understand the real situation as it stood related to their own localities, quite a number of State General Assemblies have created special tax commissions, similar to this one, to inves- tigate and report upon the same. Let a few of them be heard. Thus Nebraska, on page 41, State Tax Commission, 1914, report: "Under primitive industrial conditions, the ad valorem system was a fairly equitable method of supporting the tax burden. But with the economic development of the country, the rise of corporations with their issues of vast amounts of securities, the growth of the credit system, the multiplication of ways of securing an income with little or no use of property, and with the expansion of state functions and the demand for increased public revenue, the general property tax has become wholly inadequate. Scarcely a tax commissioner or writer of repute on tax matters within the last quarter century has discussed the general property tax without condemning it, under present conditions, as wrong in theory and pernicious in practice. ' ' 7 — Mississippi Special Tax Commission. In order to get the viewpoint of the South, as well as that of the North, the East and the West, let Mississippi bring to ns this extract from her message delivered to her General Assembly in Jan- nary 1918. "We have occasion to examine the reports of many special Com- missions appointed by various state legislatures during the past few years for the purpose of investigating the question of taxation and revenue and without exception, such commissions have reported that 18 the general property tax is a failure. Hundreds of commissions, after exliaustive investigation, have reported that the principle that all property, irrespective of its kind or class, should be taxed' equally and uniformly, is unjust, unsound inadequate and inefficient. The experience of Mississippi * is not peculiar. All other states vrhere this tax prevails, report that its operation is unsuccessful. ' ' "All the countries in Europe, with the exception of a few cantons in Switzerland, abandoned it years ago. Already many states of the Union have repudiated and abolished it. It has sinned away its day of grace, if it ever had one. It has been the subject of investigation for more than forty years. The day is not far distant when a Constitu- tional provision requiring the general property tax, will be an excep- tion rather than the rule. No self-respecting people ought to permit the present inequality and inequity to exist after they have fuUy un- derstood the matter. The fault is not so much in the administration of the law as it is' inherent in the law itself. ' ' 8 — ^Wisconsin. In Wisconsin, N. P. Hongen,- longtime State Tax Commissioner says: "We had in Wisconsin and have had ever since the organization of the State, the general property tax, so called, and we have had the same experience with that tax every other State has had — it has broken down and been an absolute failure. (We have six counties where not a dollar of moneys and credits was assessed). That is true not only as to money and credits, but it is true as to a large part of the tangible property of the State." 9 — CoxjET Opinion .Supreme Court of Pennsylvania (Durack's Ap- peal, 62. P.494) Mr. Justice Shardwood (spoken of in the report of this case as "certainly as strict a constructionist as ever sat on this bench") said, referring to the question as to requiring "all the subjects of taxation to be assessed, and an equal rate laid on ad valorem," — "practically no more unequal system could be contrived. ' ' 19 United States Supreme Court, case of Pacific Ex- press Company vs. Seibert, (142 U. S. 351), Mr. Justice Lamar delivering the opinion, said: "A system which imposes the same tax upon every species of property, irrespective of its nature, con- ditions or class, will be destructive of the principle of uniformity and equality in taxation and of a just adaptation of property to its burden." Adding: "this court has repeatedly laid down this doctrine." WHAT SEPARATE LISTING OF MONEY AND CREDITS DID FOR MINNESOTA 6,200, Number of Taxpayers Listing Money and Credits, 1910. 98,502, Number of Taxpayers Listing Money and Credits, 1918. $ 13,913,806, Assessed Value of Intangibles, in 1910. $330,300,219, Assessed Value of Intangibles, in 1918. $371,954, Eevenue from Intangibles at 28 Mills in 1910. 0,900, Eevenae from Intangibles at 3 Mills in 1918. Chart No. 3 10— National Tax Association Before appealing from the Court of law to that of experience let us give you a resolution bearing directly on the question from the highest authority in this country. Speaking of a report submitted at its Fourth An- nual Meeting and found on page 25, Vol. IV, the National Tax Association as a body. 20 EESOLVED, That this conference indorses the conclusions of the said Committee and finds that the general property tax, under the higher rates of taxation caused by the increase of public expenditures in the United States has broken down in so far as it applies to per- sonal property; and EESOLVED, That this conference finds that the taxation of per- sonal property has not been more successful under trict adminis- tration than under law: that States which have modified or aban- doned the general property tax show no intention of returning to it; and that in States where the general property tax is required by constitutional provision, there is a growing demand for the repeal of such provisions; and ^ RESOLVED, That the failure of the general property tax, in its application to personal property, is due to the inherent defects of its theory; that even reasonably fair and effective administration is un attainable; and that attempts to strengthen such administration simply accentuate the inequalities and unjust operation of the system. 11 — Classification used in Geobgia. While considering our present consfitutional re- strictions it may be interesting to the Senators and Representatives to know that General A. K. Lawton and John N. Guerard, of Savannah, who were both members of the 1877 Constitutional convention, and were, we are informed by Judge S. B. Adams, also of Savannah, directly connected with the drafting of this section, are on record in court affidavits to the effect that they understood it was the purpose and intention of that convention to provide for the classification of property so that it might be taxed at different rates; that they studied the Pennsyl- vania law, and meant to give and thought they had given Georgia the same privilege in this particular which Pennsylvania had written into her constitu- tion and which had been construed by her supreme court as permitting classification and which is now in force under such construction. So. sure were they that this construction was cor- rect that the city government of Savannah, their 21 home town, actually levied its taxes on this plan of classification by placing different rates upon dif- ferent classes, until the Supreme Court held that our constitution was not subject to such construc- tion and did not permit classification. Recognizing, of course, that this ruling of our Supreme Court is the law, we are at least pleased to know that the doctrine we now advocate is no new doctrine, even in Georgia. And in the light of this information from Judge Adams, who feels that this proposed constitutional amendment "ought to be passed as soon as possible," it is some consolation to know that through the advocacy of such dis- tinguished Georgians as these our State almost ob- tained in 1877 (read the phraseology used in the Constitution of 1877) what we hope and believe she will obtain in the near future. 12 — Addeess by Murphey Candlee. It may be interesting to know that in 1909 Hon. C. Murphey Candler, one of Georgia 's most prominent men and one who had been closely identified with her financial affairs while a leading nember of both SeAate and House, in a paper read before the In- ternational Tax Association, said, in reference to Georgia 's system of taxation : , "We have no real, logical system. We need in Georgia not what our legislators so often declaim about, reform — we need re-creation. "First of all we need to repeal our constitutional requirement that all property subject to be taxed shall be taxed ad valorem. "Second, the subjects of state and local taxation should be segregated." 13 — Experience op Wisconsin. Let us turn now to experience and ask its judg- ment. In Vol. 6, Pages 331 & 338 of the National Tax Association Proceedings, we find that Wiscon- sin, after changing her constitution so as to get away from the general property tax, chose an in- come tax as a partial substitute for her personal property tax and that at the end of the first year her increase in revenue from this limited source was One Million Dollars. In Vol. 9, page 213, Mr. W. H. Lyon, one of the Tax Commissioners, says in sub- stance, if Wisconsin's income rate was transposed to a mill's basis, "I, believe it is a reascnably safe surmise that most of the taxation of the securities in Wisconsin comes nearer the % mill figure than the 3 mill rate" used by Minnesota. If he is cor- rect, think of an increase in revenue of $2,000,000 on a % mill rate from one class of property. 14f — Minnesota's Expeeience In Vol. 6, page 239, National Tax Association Pro- ceedings, we find that in 1911, the Minnesota Legis- lature enacted a law providing for the separate listing of money and credits and imposed a flat tax rate for State purposes of 3 mills or 30c per hun- dred thereon, in lieu of all other taxes. In the Minnesota Tax Commission's report for 1918 we find this table as a result of that law: No. Tax Inta gables Year Payers Assessed Rate Eeveuues 1910 6,200 $ 13,919,8.06.00 28 $371,754 1911 41,439 115,481,807.00 3 346,445 1912 50,564 ] 35,369,314.00 3 406,107 1913 57,068 156,969,892.00 3 470,909 1914 72,266 196,548,307.00 3. 589,644 1915 73,063 2] 2,134,901.00 3 636,404 ]916 74,219 234,196,268.00 3 702,588 1917 87,688 284,968,875.00 3 854,907 1918 98,502 330,300,219.00 , 23 3 ■ 990,900 Here is shown a progressive increase in revenue, after the first year, under the new system till the fifth year when the increase reached $289,859.00. The property on which the 3 mills tax was levied consisted of money, bank accounts, notes, bonds, rents, annuities and mortgages upon which the mortgage registry tax of % or 1 percent (you pay this or the 3 mills) had not been paid. Thus we see that in 1918 the State Treasury was $619,146 better off than in 1910 and the heroes who listed the $14,000,000 in 1910 to be taxed at 28 mills had saved 25 mills or $350,000.00 each year, and together the State and the 6,200 citizens indic- cated above saved $969,146 in 1918 from the opera- tors of the new law. 15 — Maryland Maryland seeking the same end, pursued a slight- ly different course. She placed in one class, inter- est paying bonds and certificates of indebtedness issued by corporations and stock of foreign corpora- tions and imposed on these a fixed maximum rate of 3 mills or 30c per hundred for local purposes, to which was added the State rate, limited in 1915 to 15c, or a total of 45c per hundred. On page 7 of Bulletin by A. C Girdwood, Secre- tary of the State Tax Commission of Maryland, we find the following table of property listed for assess- ment in Baltimore City from 1896 to 1915. The first year (1896) was under the old high tax regime and the others under the new system of classified property : 24 1896 $ 6,000,000.00 1906 $120,423,814.00 1897 58,703,795.00 1907 150,947,733.00 1898 60,699,686.00 1908 146,688,857.00 1899 61,890,764.00 1909 ■ 148,234,116.00 1900 65,789,903.00 1910 158,666,848:00 1901 68,879,484.00 1911 165,834,235.00 1902 89,880,484.00 1912 179,412,675.00 1903 94,336,562.00 1913 177,385,419.00 1904 85,971,333.00 1914 191,970,999.00 1905 104,221,227.00 1915 208,431,713.00 The last year under the old system (1896) $6,000,- 000 was listed and taxed $2.00 per hundred for local purposes plus 17%c for state purposes, yielding $130,000.00 for both. Twenty years thereafter $208,431,713 a net gain of $206,431,712 was listed and taxed at 45c per hundred dollars, yielding in 1915 $937,942.00 or a net gain in revenue of $807,- 292.00 for 1915 over 1896 from the intangibles men- tioned above. Lest this remarkable showing be attributed to an era of prosperity, let us understand that for fifteen years covering a part of this same period Mississippi money and credits listed for taxation under the old system declined from, in round numbers, $8,000,- 000.00 to $3,000,000.00, while in Ohio under the most stringent administration intangibles listed in 1909 were $13,000,000.00 less than 28 years before and in both instances this happened during a period of admitted unusual general prosperity in each of these States. 16 — Virginia. Virginia went under method of equitable laws better admiaistered in 1915. In her State Tax board's report for 1916, page 5, we have this state- ment: "The State's revenue from intangible prop- erty in 1915 over 1914 increased from $511,791, to 25 $1,259,546, or a gain in one year of $747,755,, or whicli is 145 per cent. From this Board's report issued January 9, 1918, it appears that "the total increase of values in real estates,' personal property, money and income actually taxed in 1917 over 1914, was $276,000,000. On intangible personal property, money and credits it is approximately $160,000,000, including income— or $90,000,000 excluding income. (Georgia's Comptroller-General's report for year ending Dec. 31, 1917, shows on page 13 that Georgia's increase in the value of all property listed for taxa- tion in 1917 over 1914 is $38,118,793, as against $276,000,000 for Virginia. From a statement made out by the Comptroller-General and forwarded on Sept. 6, 1918,- we find that Georgia had $2,664,- 266 less intangibles returned in 1917 than in 1914 as against Virginia's increase of $160,000,000, in- cluding income or 90,000,000 excluding income, for same years. The one works under modern methods, the other antiquated ones.) From the above authorities we also learn that Virginia has reduced her combined local and state rate of taxation on practically everything she taxes, except railroad, about %, and yet estimated that she would have $1,000,000 balance in her Treasury on October 1, 1918. She levies only 18 cents per $100 on her real estate for State pur- poses and her tax officials recommended that no state tax at all be levied on live stock, farming im- plements or mechanics tools, household furniture and personal effects of every kind, and a further re- duction of 15 cents per $100 on bonds, notes and other evidences of debt, and 20 cents on capital not otherwise taxed. (See Va. Tax Board's 1918 re- 26 port, pages 23 and 24.) Let Georgia citizens, es- pecially her farmers, understand this situation, and does anybody believe that they will be content to be bound by their present shackles just because it is the system handed down by their forefathers. 17 — Kentucky. Kentucky, following the report of a Special Tax Commission, had enacted by her General Assembly a Constitutional Amendment providing for classi- fication which was overwhelmingly ratified by the people because they had been informed, though the work of the Commission, of the real situation. So important was this suggested legislation that the Governor called a special session of General Assem- bly in February, 1917, to consider the taxation pro- blem. It adopted a new system based upon the report of the investigations of the Commission and it is now in operation. On page 11 of its 1917 report the State Tax Com- mission says: ' ' The annual deficit for the past few years will average about $600,000.00, until, as Mr. Huffaker, Chairman of the Kentucky Special Tax Comroission says on Page 176, Volume 11, National T^x Association Proceedings: 'The State at that time had a floating debt of about $3,500,- 000.00 resulting from conditions under the old law.' Verily a con- crete example of much property not taxed at all, more taxed too heavily and a state rich in natural sources of wealth rapidly pro- gressing toward bankruptcy." On June 4th, Hon. M. M. Logan, Chairman State Tax Commission, writes: "Our new tax laws have proved wonderfully successful. The county assessors last year (1917) turned in a total assessment of $922,000,000.00, including bank deposits. This year the assessment turned in by the County Assessors under direction of the State Tax 27 Commission, will reach $1,400,000,000.00, or a total of $1,579,000,- 000.00, whloh fehowB a net gain in one year of $657,000,000.00 in total property listed for assessment. (Georgia's gain for this year is in round numbers, $87,000,000.00). Exclusive of bank deposits, our total intangibles last year were only about $67,000,000.00. This year exclusive of bank deposits, intangibles will probably reach $260,000.00." Kentucky's bank deposits listed for taxation in 1917, amounted to $11,000,000.00, whereas, in 1918, under the new law, they amounted to $179,000,000.00, an increase in one year of $168,000,000.00. Add the $193,000,000 increase from general intangibles listed, to $168,000,000.00 increase from bank deposits and we get a total increase in one year for intangibles listed of $361,000,000.00. TAX BURDENED? 1916 Average per Capita State Taxjn U. S $5.09 Average per Capita State Tax in So. Atlantic States, 3.26 Per Capita State Tax in Georgia 2.55 ONLY FIVE STATES PAY LESS Chart No. 4 Again Mr. Logan says : "I think the best feature of our law is the small rate on intan- gibles as well as the small rates on manufacturing machinery and raw materials. I believe we have gone a long way towards solving the different and perplexing questions of taxation. Notwithsatnding our tax rate was reduced 15c on the hundred dollars of assessed valuations for state purposes, wh'.ch was equivalent to a reduction of two million dollars, we will collect a good deal more money this year under the ' new law than we collected last year. It appears now that including license taxes imposed at the special session in 1917, we will have about two million dollars more revenue than we did last year." Now just one detail, please. On page 6, of tlu' State Tax Commission's report covering 19 17- IS 28 appears this remarkable statement ; ' ' The tax to the state on deposits assessed last year (1917) at a tax rate of fifty-five cents was $62,024.59, while the tax to the state this year on a 10 cent rate is $179,147.21 - or a net increase of $117,122.72. But that's not all. The citizens who listed their 11,000,000 to be taxed at 55c saved $4.50 per $1,000 and will continue to do so as long as the law remains as it is now. ' ' "With the state rate reduced from 55c to 40 per $100 in all classes of property save these, iviz: money in bank, stock in building and loan associa- tions and live stock,'which are taxed at 10c per $100, and at the same time an increase in revenue for the state of, according to Mr. Logan, $2,000,000, surely Kentucky and Kentuckians must be "happy on the way. ' ' From our Tax Commissioner's and Comptroller- General's report we find that Georgia's total in- crease from all property listed for taxation in 1918 over 1917, is, in round numbers, $87,000,000 as against Kentucky's $657,000,000. We find that Georgia's increase in money, notes, and accounts listed for taxation in 1918 over 1917, is $11,891,579 as against Kentucky's increase in bank deposits alone for the same period of $168,- 000,000.00. We find that Georgia's increase in revenue from money, notes, and accounts in 1918 over 1917 at a five mill rate is in round numbers $59,000, while Kentucky's increase in revenue from bank deposits alone for the same period at a one -mill rate is $117,- 000.00 We find that Georgia's increase in revenue from all sources for 1918 over 1917 is $476,571.54 with no decrease in rate anywhere, as against Ken- 29 tucky's increase in revenue for the same period of, according to Mr. Logan, $2,000,000.00 after a de- crease in rate on every class of property subject to taxation, except on some license taxes. With such, to us, amazing results coming through a partial "get away" from the general property tax, coupled with improved administration all along, the line, the present conditions, while not yet per- fect anywhere, appear to be far more satisfactory, to the taxing authorities of these progressive states than those formerly existing and should be highly encouraging to those of us still abiding neath this shadow of "ignorance or inertia." 18 — States Using Classification. According to the best information at hand the fol- lowing states are now using clasification and some of them segregation: Arizona Maine New York Connecticut Maryland Oregon Illinois Michigan Pennsylvania Iowa Minnesota Ehode Island Kentucky- New Mexico South Dakota Louisiana North Dakota Wisconsin Virginia Ohio ratified a constitutional amendment in 1918 but will have to do so again because of a technical defect. The Mississippi legislature in 1918 provided for the submission of a constitutional amendment per- mitting classification, as did the 1919 legislature of Kansas and North Carolina. Thus we see that the South 's greatest state is lingering among the non-progressive states of the union. 30 Therefore, in the light of the combined wisdom of the distinguished men from this and other countries who have thus spoken of the amazing results which have followed changes such as we recommend — and in the light of our own judgment after careful in- vestigation and mature deliberation, we most hearti- ly recommend the passage by the present legisla- ture of the bill or bills herewith submitted, or some other of like import, providing for an amendment to the constitution. IV. RECOMMENDATIONS AS TO ADMINIS- TRATIVE MACHINERY AND OTHER LAWS TO FOLLOW CONSTITUTIONAL AMENDMENT. Coming now to the consideration of the Commis- sion 's recommendations looking to improved admin- istration of our tax laws we submit the following plan, not as a perfect one, but as the best one, we think there is any hope of securing. It is in line with those used by the states which are adding to their tax roll millions of dollars heretofore escaping, and particularly from those classes of property, money, notes, mortgages, bonds and taxable stocks, for instance, which we have already shown you are now returned in a , distressingly insignificant amount. They first cured the defects in their law, as we are recommending shall be done, and then strengthened their administrative features, and through this combination secured wonderful results. The fairness of the laws caused many to cease try- ing to evade them and also brought to the tax of- ficials in their efforts to enforce those laws, the moral support of the public which they had not had. So far as we know, and we have sought diligently so that we might know, it is only through some such 31 combination of fairer laws better administered that any permanent good results have come to any state. So far as we know, too, every state which has at- tempted by the big stick method alone to force and keep intangible property on the list has ignominious- ly failed. Temporary relief has sometimes resulted from these efforts, but only to be followed at last by failure. The "ferret" System is the one most often used. Under it a large percentage of the taxes re- covered from omitted property, is given to a Special agent to do what the regular officials should have done, and would have done, we think, under a prop- erly organized system, this exrtra percent being paid in addition to what the regular officials re- ceive. Ohio tried it and repealed the law*. Iowa did the same. Kentucky sought relief through it but found none till she changed her constitution to permit classification. Oklahoma has it and her tax officials are doing their best to have the constitution- al restrictions removed. Alabama has it and her tax commissioner writes, as though from the depths of despair, that he expects no relief till the fundamen- tal law is modernized, and Georgia has it and got on her tax books last year a very small percentage of money and solvent debts. Again we say that we are satisfied that permanent relief will never come along that line of procedure: Now do not misunderstand us. We believe that the enactment of a law in line with the proposed amendment would of itself better matters, but that for the best results it should be coupled with a strengthened administration. We believe also that an attempt at rigid enforcement of the present law would mean practical confiscation in some classes of *The people of Ohio ratified, in 1918, an amendment permitting classification. 32 property, and would both keep and drive capital from the state and would disorganize our entire business fabric. And believing that our proposed machinery would very much help to enforce the law, we do not recommend its enactment into law until the constitution has been amended, and we have a fair law to enforce. When this has been done we recommend the adoption by appropriate legislation of the following taxation system, or one similar to it, as amendatory to the one now in use. The administration of the tax laws shall be in the hands of the following officials and shall be in ac- cordance with the regulations hereinafter men- tioned : 1st — A State Tax Commission. 2d —Deputy State Tax Commissioners. 3rd — County Boards of Review of Assessments. 4th— County Tax Eeceivers. Sth— Such other State off-cials as may incidentally 'be brought in touch with the enforcement of the laws concerning taxation. 1 — State Tax Commission. There shall be a State Tax Commission com- posed of three members, one of whom shall be the Comptroller-General of the State, and the other two appointed by the Governor, as the State Tax Com- missioner is now appointed. The ComptroUer-Generar shall be ex-officio chair- man of this State Tax Commission, and shall re- ceive as compensation as a member of said Stalte Board of Tax Commissioners the sum of $2,000 per annum in addition to the salary now received by him as Comptroller-General. The acting State Tax Commissioner shall be a member of the first commission during his unexpired term; and the third member and all succeeding ap- 33 pointive members shall be named by the Governor for a term of six years, each receiving a salary of $4,000 per annum. In this connection we also recommend that the salary of the present State Tax Commissioner, in common justice, be made $4,000 per annum. VIRGINIA SYSTEM vs. GEORGIA SYSTEM Virginia's increase in property returned in 1917 (new system) over 1914 (old system) $276,000,000 Georgia's increase, same year 38,000,000 I Virginia 's" increase in Eevenue from Money and Credits for 1915 (new system) over 1914 (old system) after large reduction in rate . 313,000 Georgia's increase from Money and Credits, same years 3,345 Georgia's total M'erchandis'e returned for Taxation 1918 52,655,422 Georgia's Eevenue' from Merchandise, 1918 263,277 Virginia's Revenue from Merchandise, 1918 717,209 Virginia's lead over Georgia, 1918 453,932 Chart No. S The Chairman shall give such time to this work as may be necessary and the two members shall give their entire time to the work ; and their neces- sary traveling expenses, as also that of their em- ployees when engaged on the State's business, shall be paid by the State upon proper vouchers. , A sufficient office force, including the Deputy Tax Commissioners, to properly perform the work 34 necessary for a business-like administration of the duties assigned them, shall be appointed by and be amenable to the Commission, which shall fix their salaries and retain or discharge them at will. The entire expense of the office shall be kept within the limit of the appropriation made- for this purpose. Efficiency, without waste, should be the end sought. Sessions. — The Commission shall have offices at the Capitol, and shall hold its sessions wherever it sees fit. Powers and Duties. — The Commission shall have full power to institute such methods as it may deem best for enforcing the laws for the assessment and return of all property subject to taxation for State and County purposes, and shall be charged with the duty of taxing all public service corporations in the state and all other corporations now required to make returns to the Comptroller-General except In- surance companies, which shall be, as now, assessed by the Comptroller-General. It shall prepare and distribute tax forms; advise and supervise Deputy Tax Commissioners and local tax receivers ; Compel witnesses to give testimony; examine books and papers of corporations, firms and individuals; in- stitute prosecution against violators of tax laws and require the solicitors of county and city courts and the solicitors-general to conduct such prosecution, with specific power to remove from office members of county boards of review and suspend local re- ceivers for failure to comply with instructions, or other neglect of duty. It shall visit the various counties when necessary and shall hold meetings of all county tax receivers and boards of review once a year, alternately at the State Capitol and in each Congressional District, re- quiring the attendance of all these officials upon the 35 meeting at the Capitol, but only those in the respec- tive districts upon the district meetings. The ex- pense of these meetings shall be borne equally by the State and counties. It shall institute better systems of book-keeping among local tax officials whenever necessary, and enforce their use by proper penalties. It shall keep in touch with the better methods developed for the assessment arid collection of ta;xes, and from time to time bring the same to the atten- tion of both the Legislature and the Public. ' It shall equalize, as best it can, between county and county, the assessments made by county tax authorities. When necessary it may order re-as- sesment on all property or any class of property in any county or counties. Should the receivers or boards of review decline to make such re-assessment it shall appoint assessors from without the county, who shall, under its direction, perform this duty and Ise paid therefor. It shall be the final arbiter as between individuals dissatisfied with the findings of the Deputy Tax Commissioners upon appeal from the" county board of review. Infoemation Confidential. — All information re- ceived by the Commission, as to the details of any business investigated by it, shall be held as confi- dential, unless it becomes necessary to make it public in order to justify the making or enforcing of any law, rule or regulation used in making investiga- tions or assessments, proper penalties for violation ■ of this provision shall be provided. Report To The Governor. — It shall report an- nually to the Governor and through him to the Legislature. (See Exhibits F, G, H and I.) 36 2 — Deputy State Tax Commissioners. The State Tax Commission shall select, by civil service rales, Deputy State Tax Commissioners, the number of which shall not exceed the number of Congressional districts in the State, and the salary of each shall not exceed $2,400. Their necessary traveling expenses shall also be paid. It shall be the duty of the Deputy Tax Commis- sioners to see that the rules and instructions of the State Tax Commission, to the local tax officials are understood and enforced. These Deputy Tax Com- missioners shall also inspect, when necessary, such properties and tax returns as the State Tax Com- mission may order investigated by them or which they may deem necessary to investigate, and report their findings to the Commission and specifically see that the correct returns are made by the local officials handling estates subject to the inheritance tax, and that the Clerks of the Superior Courts prop- erly list, preserve and report the records of trans- fers of realty and of all securities recorded as the law directs, should such laws be enacted. They shall also adjudicate such differences as may arise between the individual taxpayer and the county boards of review of assessment, appeal being permissible from their decision to the State Tax Commission, the same to be heard at the State Capitol. They shall hear appeals from the county boards of review of assessment findings at the county site of each county, and as nearly at the same time as is practicable in any particular county. (See Exhibit C.) 3 — County Boards or Review of Assessments. These boards shall be practically as at present provided for by law with some changes as to time 37 allotted for the carrying out of certain require- ments. All appeals by aggrieved parties from this Board's findings in any county shall be made to the Deputy Tax Commissioner assigned to such county to hear such appeals, insteady of to local arbitrators, as now. Either the individual or the Board of re- view may appeal from the Deputy Commissioner's decision to the State Tax Commission; but its deci- sion shall be final. 4 — County Tax Receiveb. Any citizen of a county who is a resident free- holder shall be eligible for election as County Tax Receiver. It shall be his duty after qualifying for the office to personally examine every piece of real estate to be assessed by him and also the buildings thereon, and enter the fair market value of each in separate columns in his digest, which shall be made with this in view. This examination and assess- ment shall be made quadrennially, and shall remain in force for four years unless there should be a very decided change in the value of either. In this case he shall report same to the Tax Commission, who may thereupon order re-assessment of that particular property, or any other, which ih their judgment, needs it. He shall determine these values from his knowledge of conditions which have a legi- timate bearing upon values, together with the in- formation received by him through the • statement of real estate transfers furnished by the Clerk of the Superior Court. When necessary for him to have deputies he shall apply to the State Tax Comraission for permission to appoint same. 38 If maps are furnished, as they should be, he shall note on them all improvements made in buildings, and shall keep in touch with all those things which affect values. He shall acquaint himself with the values of live stock of all kinds, and, indeed, all values, for we pro- pose to make it his business to fix the values now, instead of the taxpayers. Therefore, he shall at- tend the annual meetings of tax receivers herein provided for, so that such values may be there determined on some common basis which will better insure an equitable- assessment of all property throughout the State. He shall, of co4irse, distribute and receive again the tax lists sent out by the Commission and per- form all the detail work connected with his office, according to instructions from the Commission. 5 — Othee Officials. Tax Collector. — The Collectors shall make their collections under instructions from the Comptroller- General, and make remittances to him. They shall be ex-officio sheriffs, for the sole purpose of collect- ing tax fi fas, and empowered to name such deputies as they may need, who shall furnish proper bonds. Clerks of the Supreme Courts. — The Clerks of the Superior Courts shall make a synopsis of all transfers of realty which are brought to them tor recording, stating the name of the grantor and the grantee, the number of acres where acreage is the basis, location of the property, the price per acre or per lot, and the character of the instrument. A copy of this synopsis shall then be forwarded to the State Tax Commission and filed in their office for their information. The . Clerks of the Supreme 39 Courts shall be paid a reasonable compensation for this work. KENTUCKY SYSTEM vs. GEORGIA SYSTEM Kentucky's increase in Property returned for 1918 (new system) over 1917 (old system) $660,000,000 Georgia's increase, same year . 87,000,000 Kentucky's increase in Intangibles returned for 1918 (new system) over 1917 (old em) '.'- 345,000,000 Georgia's increase in Intangibles, same year 11,000,000 Kentucky 's increase in Kevenue, 1918 over 1917, after large reduction in rates; approximately 2,000,000 Georgia's increase in Eevenue, same year 436,000 Kentucky's increase in Eevenue from Bank deposits alone, at a one-mill rate, 1918 over 1917 117,000 Georgia's increase in Revenue from all In- tangibles, same year 59,000 Kentucky 's decrease in Beventie required from Real Estate from 1917 to 1918 377,911 Georgia 's' increase in Revenue from Real Estate, same years 154,571 Chart No. 6 6 — Taxpayers. The Taxpayer shall list his property upon the tax rolls furnished by the Commission at its fair market value, except the real estate, upon which he need not put any valuation. 40 All papers transferrkig real estate either in part or in full shall name therein the actual price paid instead ,of the fictitious figures sometimes used. This is very necessary in order that the Receiver may have real values upon which to base his con- clusions as .to the value of nearby properties. All papers offered for recordation or registration shall specifically name the party whose interest is protected thereby, so that there shall be no question as to who the owner is. 7 — ^Banks. All banks, banking associations and trust compan- ies shall report directly to the State Tax Commis- sion in such detail as said commission may require and be assessed as is now done. All deposits in these institutions subject to taxa- tion shall constitute a distinct class for purposes of taxation. They shall be taxed for State purposes only and at a rate of $1.00 per $1,000. (See Exhibit A," Banks.") 8 — Business License Tax. The raising of revenue by the imposition of special taxes on such professions and businesses as produce considerable incomes without the employment of much capital, or as enjoy special privileges, or are regarded as more or less harmful to the public wel- fair is now firmly established part of the taxing system in this and other counties. Since the present tax was under heated discus- sion during both sessions of the last legislature and has very considerably increased the State 's revenue from occupation and business license taxes, and has only been in operation one year, we do not recom- mend any extensive changes* in it. We have sought to improve it by a system of better indexing and have added some additional items which we think should be taxed on this basis and which appear in a separate bill prepared by this Commission. Indeed, since we now know that there are millions of dollars worth of property escaping taxation which can by our suggested methods be brought to book, without injury to the evading taxpayer and to the great good of those more conscientious, we do not believe that the State should longer content itself, as it has seemed inclined to do, with seeking to increase its revenue chiefly through the imposition of new or heavier license taxes on business enterprises as such, because they are easy to get at. 9 COKPORATIONS. Return of all corporations now required to be made to Comptroller-General except Insurance companies shall be by him, when so made, trans- mitted to the State Tax Commission, which shall have the same jurisdiction over such returns as is now exercised by the Comptroller-General. All corporations how under or which shall here- after be placed under the supervision' of the railroad commission shall make out duplicate tax rolls and forward one to the State Tax Commission shall examine the roll forwarded to them and then attach thereto such data as they may have in their posses- sion indicating the value of the holdings of said corporation, as may be desired by the State Tax Commission to aid them in assessing said property, and return the rolls and data to the tax commission as matters of information. 10. — Household Furnitube. Household and Kitchen furniture shall constitute 42 a class, by itself and shall be taxed at a very low rate. It brings in no income, and in some state is ex- empted from taxation. 11 — Income Tax. Recognizing, as we do, that an income tax is per- haps the fairest and most equitable method of rais- ing revenue, particularly from, those classes of prop- erty which are the most, difficult to assess, we are pleased to note that Congress has enacted a law which gives those states having an income tax law, upon the request of the Grovernor of the State, access to the data upon which the federal income tax is now assessed, so far as it affects corporations, and we hope that a similar provision will soon be made in that affecting the income of individuals. The only reasonable objections to taxation by this method being the difficulty and expense attending its administration, and both of these having been almost entirely eliminated by the granting of the privilege mentioned above,, we recommend that Georgia get in line by enacting, as soon as the Con- stitutional amendment hereinbefore provided for will permit, a law providing for taxation on an in- come basis, and at a very low rate. 12 — Inheritance Tax. Our present Inheritance Tax Law, as tested by the most approved modern opinion land practice, is defective in the following particulars. First : The Tax is not graduated according to the degree of relationship or to the amount inherited. Such graduation is now universally prescribed. Second: The exemption is the same for all de- grees of relationship, whereas a widow, child or 43 close relative should receive a more liberal exemp- tion than remoter kindred. Further, the present law contains no exemptions of bequests to religous, educational, charitable or public purposes. Third: It double-taxes the intangible personalty of non-resident decedents. Fourth: and perhaps the most important from the point of view of the State : The administrative machinery is defective in that no provision is made for State supervision of the county officials having charge of the assessment and collection of the tax. These shortcomings are remedied in the Com- mission's plan, which provides for an amendment to the present law which we think is better and will largely increase the State's revenue from this source. This we recommend for immediate passage. 13 — Merchants. "We suggest that every person, firm, company or corporation engaged in the business of merchandiz- ing shall pay a state license tax, which shall be in lieii of all other taxes for state purposes on their mercantile business, except taxes on their real estate or the corporation's occupation taxes else- where provided for, and income tax when such a tax shall be ordered. This license tax shall be regulated by the amount of purchases made during the period for which such license is granted. Every merchant shall file his invoices covering every purchase and keep a record of same with ink, which record shall be subject to inspection by the tax officials of the State. His report to the Tax Receiver of the total monthly pur- chases shall be taken from that record and shall, be sworn to by him or his agent. 44 All goods, wares and mercandise offered for sale or kept for distribution by either domestic or foreign manufacturers at any place within this State used as a store or distributing warehouse, other than the place of manufacture, shall come within this provi- sion and be taxed as purchases. This is meant to be a substitute for the ad-valorem tax now levied on the amount of goods on hand and all money, solvent bonds, demands and claims made and contracted during the preceding year, but not the real estate owned by said merchant. This is to be returned and taxed as other real estate. It is further provided that any merchant, by satis- factorily proving any indebtedness due on the pur- chase price of said- merchandise may deduct the amount of indebtedness from the amount of pur- chases before paying the tax. Should any merchandise not belonging to him be offered for sale by any merchant or by another per- son at said merchant's regularly licensed place of business, then said merchant shall be deemed a Com- mission merchant also, and shall therefore be re- quired to take out the license of a Commission merchant provided for elsewhere. The tax on merchants shall be levied as follows : On all purchases by retail merchants ' - 12y2C per $1U0 On all purchases by wholesale mer- chants 10 c per $100 The Tax Eeceiver shall be authorized to verify the merchant's returns by checking this report with the record, and the invoices also if deemed neces- sary. Failure to make report as per tax roll fur- nished shall be punished by imposing proper penal- 45 ties. (Virginia fines $25.00) The amount of pur- chases shall then be fixed by the county board of review according to such information as they can obtain. Counties and municipalities shall, in lieu of the ad valorem basis now used, make their levies upon this plan, provided the rate in each case shall not exceed the State rate placed on this class of prop- erty. (See Virginia 1918 Laws, page 75.) (See Exhibit D — Merchants.) 14 — Real Estate. Since the value of real estate in Georgia is 53 per cent of the total property value its assessment plays a large part in our system. In Georgia as else- where, it is usually returned for taxation at a value more nearly approaching its real value than almost any other class of property. In fairness to it, then, those classes which are so much further short of their value should first be brought up, if possible, to something like a similar percentage. This we have had in mind, and think that under our general plan it can be done. In order to bring about a fairer return as between both individuals and counties we are recommending a plan of assessment as shown under the sections dealing with Tax Receivers and Clerks of the Court, under which we have sought to protect the interests of individuals as well as the State. It has already been charged, and doubtless will be again, that since real estate is paying an undue pro- portion on the taxes now levied, any method which will improve its assessment will also impose heavier taxes upon it. Fortunately we are able to prove by the actual experience of Kentucky and Virginia, 46 whose general method of assessment we are recom- mending, that this has not been true yith them, and therefore need not be with us. On the contrary the result has been just the opposite. Kentucky — ' ' Under the old system the complaint was generally made that real estate was compelled to bear more than its just share of the burden of taxation. The complaint was probably well found- ed. An effort has been made by certain taxpayers to deceive the people into believing that the opera- tion of the new law has increased the burden of real estate owners. This is palpably untrue, and on the other hand the amount of taxes paid on real estate for 1918 (under the new system) was $377,911.71 less than in 1917 (old system) " In contrast to this the revenue from intangibles, the class of property almost impossible to locate and tax under the old system, for 1918 was $724,933 more than in 1917." (See Kentucky State Tax Commission's report for 1918, pages 6 and 7.) Virginia — We find like satisfactory results touch- ing real estate in Virginia's new system which went into effect in 1915. The increase in the assessment on real estate for 1918 (present system) over 1914 (old system) was $128,258,774 as against $167,102,- 578 for intangibles. The increase in real estate as- sessment for 1918 over 1917 was $9,967,253, as against $54,800,604 for intangibles. Thi^ shows that the present system is more and more bringing to book the class of property which escaped almost entirely under the old system and therefore reliev- ing reaLestate from a part of its over-burden. Contrast these results with the following in Geor- gia: Georgia real estate was assessed at $30,914,- 280 more in 1918 than in 1917, making the revenue 47 from this class of property $154,791 more. For the same years the increase in assessment of intangibles was ■ only $11,891,579, which made a revenue in- crease from intangibles of $59,457. In other words, while the revenue raised from real estate decreased in Kentucky under the new system, ^ and while the increase in revenue from real estate in Virginia was only one-sixth as great as the in- crease in revenue from intangibles ; Georgia, on the other hand, exacted an increase in revenue from real estate amounting to almost three times as much as the increase in revenue from intangibles. So the experience of both Kentucky and Virginia, agricultural states of ' the South like Georgia, demonstrates that classification coupled with modern methods of assessment results.in uniformity as between classes of property", which is the chief object sought, and a lowering of rates on all classes and at the same time large increases in the State's revenue. Why should Georgia hesitate? 15 — Secubed Debts. All debts secured by mortgage or other paper of record, and which are subject to taxation, shall be placed in a separate class and taxed at a lower rate through a mortgage recording or registration tax. Let all secured debts taken by the owner to the Clerk of the Superior Court for recordation where a mortgage is given' or for registration where no mortgage is given, be exempted from all other taxa- tion, State or local, except as hereinafter provided, by the payment, as a tax, of cents on each $100 face value for each year or fractional part thereof covered by the life of such debt. This tax, which is a tax imposed on the privilege of recording and registering, shall be paid by both 48 resident and nonresident owners, and this tax shall be divided " equally between the State and county where the instrument is registered or recorded, and this tax shall be paid to the official recording the same, at the time such instrument is recorded. Each municipality shall have the right to levy an additional tax not exceeding cents per $100 on such secured debts where the property covered by such instrument is located within such municipality. All renewals and extensions of such debts or fractional parts thereof shall be subject to the same tax and same penalties as the original, which penal- ties are hereinafter set out. Upon the passage of legislation adopting the above recommendations ot the Commission, the owners of then existing mortages or secured debts shall have the privilege of presenting the securities representing said indebtedness to the Clerks of the Superior Court in the county where the same may be recorded, for registration and upon such regis- stration shall receive all of the benefits and relief from other taxation as is provided above on such securities. Provided, however, that the informa- tion so obtained by the registration of such indebt- edness shall not be used by any public taxing author- ities for the purpose of collecting back taxes on such securities so registered. Provided, further, that such papers shall be filed with the Clerk within six months after the passage of this law in order to secure said benefits. We suggest a low rate on secured debts because in Georgia the income from such loans is limited by law to 8 per cent, and is frequently much less than that. Again, under our proposition, they are to be 49 taxed at their face value, when nothing else except money is really so taxed. If thus taxed under our present system in some counties more tha-n half of the income and in quite a number a third would be required to pay the taxes': When real estate and other properties are taxed at full value, then money and secured debts should be, but not Until then. Isn't that fair and just ? Peomissoey Notes and Stocks in NoN-EEsmENT COEPOEATIONS. The owner of promissory notes, stocks in non- resident corporations, bonds, and mortgages on property outside of this State, shall be required to list the same Avith the tax receiver at the time he makes his tax receiver at the time he makes his tax return, and such notes and stocks, etc., so listed shall be taxed at the same annual rates as are placed upon secured debts. Promissory notes and stocks in non- resident corporations not so listed shall when dis- covered by the taxing authorities be taxed at the highest property tax prevailing in the state, county and municipality in which the owner resides, and shall be subject to the penalties hereafter suggested for secured debts. FaIluee to List Choses in Action a Bab to Collection. In addition to the penalties now provided by law for the omission of property from the tax roll, failure to list on the tax roll evidence of any debt subject to taxation and which has not paid th6 re- cording or degistration tax provided above shall cause such debt to be inadmissible as evidence in any court, until all taxes at the highest prevailing rates of the state, county and municipality where 50 the paper should have been recorded or entered for taxation shall have been paid; provided that this shall not apply to open accounts. Furthermore, such omitted debt shall, as an additional penalty, be required to pay an inheritance tax of 5 percent extra, upon its passage to the legatees of its owner at his or her death. 16— Tax Maps. We consider tax maps as a very essential part of the Tax Eeceiver's equipment, if he is to do ef- ficient "work, and recommend that they be supplied, unless the cost is prohibitive. This expense should be borne jointly by the State and county. "We recommend that in order to encourage the counties to have these maps made the State make an open proposition to pay one-half of the cost of making a tax map for any county, provided the plans and cost for making same are first submitted to the State Tax Commission and approved by them. 17 — Budget System. We recommend that the present Budget and In- vestigating Committee, authorized by the last legis- lature, be made permanent, or that a 'similar com- mittee with similar powers be appointed each year, under a permanent system. In our opinion, no recommendation of the Budget committee should be increased except by a vote of two-thirds of the mem- bers of each house of the legislature voting, and pro- vided that said two-thirds shall constitute a majori- ty of the members of the two branches respectively, we recommend that a Constitutional amendment be, provided for by the incoming legislature, establish- ing a budget system on this plan in Georgia. 51 18 — Insueance. The State loses annually $25,000 by the provision in our Insurance laws which reduces the one-percent tax upon gross premiums received to one-tenth of one percent when certain proportion of the capital of Insurance companies is loaned in Georgia. This provision should be repealed, and we provide an amendment for that purpose, in the bill submitted by this commission amendatory to the revenue bill of 1918.. 19 — ^WiLD Lands. It is the opinion of this commission that we should not longer assume that there are any lands in Geor- gia that should be deemed or called "wild lands." Except for lands that are uncultivated by reason of being in swamp areas, or for other physical reasons, there should be no such classification of lands as would induce or permit such a low scale of valuation as is encouraged by mid land tax laws. In accor- dance with this, it is recommended that the Wild Land tax digest be abolished. EXHIBIT "A"— BANKS. This recommendation is made because money "wlien found is taxed at its face value, which is not true of any other class of property. The interest earned by money on deposit is exceedingly small, and any attempt make to tax it at the ordinary rate taxes so much of the income thai the owner as a rule never has, does not, and in our opinion never will list any appreciable amount of it for taxation. There was on deposit in Georgia banks in Septem- ber, 1918, $322,000,000, some of which brings its owner an income of 3% or 4 per cent per annum, but most of it nothing at all. Under existing laws it would have been taxed 50 cents per $100 by the State and as much more by the counties and cities as they saw fit. In some places in Georgia this would have amounted to $45 per thousand, and in a number of places from $30 to . $40 per thousand. Such taxation is confiscation, and rather than pay it most men will not admit having it. The unfair- ness of the law causes resentment and the citizen decides to retaliate by evading the tax, and public opinion backs him up in it. Consequently the citi- zen is injured morally, and both the State and the conscientious taxpayers financially. Why not, like Kentucky, have a fair tax, and get similar results. The following table shows some of the places in Georgia where the combined tax is more than 3% per cent of the total value, and where are many other places where the combined tax is more than 3 per cent. The following figures are in mills : 53 City Tax County Tax State Tax Total Alamo, Ga. 16 2a 5 46 Abbeville , 15 25 5 45 Fairburn • 20 15 5 40 Blue Eidge 24 10 5 39 Sylvania 12.5 20 5 37.5 Claxton 10 22.5 5 37.5 CochTan 17 15 5 '37 Ashburu 17 15 5 37 Tifton 17 15 5 37 SandersviUe 16 15 5 36 Hawkinsville 16 15 5 36 Hartwell 17.5 13.5 5 36 Douglas 16 15 5 36 Augusta 17.5 13.2 5 35.7 Conyers 17.5 13 5 35.5 We Georgians returned, under this regime, for 1918 tax roll, $65,613,596 in money, notes mortgages, stocks, bonds and accounts, wMcli was an increase of $11,891,579 over 1917. Kentucky, operating under a system such as we here suggest for Geor- gia had $179,000,000 on deposit subject to taxation, all of which was listed and taxed. This was an in- crease of $168,000,000 over 1916 under the old plan when it was taxed at 55 cents per $100. Her income from this source at 10 cents- per $100 was $117,000 more than at 55 cents. Virginia taxes money at 20 cents per $100, for State purposes and permits no local tax. on it. EXHIBIT "B"— INCOME TAX. Wisconsin and Massachusetts are perhaps the only states which have secured any particularly sat- isfactory results from a state income tax, though quite a number have tried it. To their splendid administrative features may be attributed their suc- cess. Four states, viz. — Connecticut, New York, Mas- sachusetts and West Virginia, are already availing 54 themselves of the opportunity of access to the Corporation income data to the tax officials of such states as have income tax laws, upon application of their Governors. (National Tax Association Bul- letion, December 1918, page 85.) EXHIBIT "C"— INHERITANCE TAX. In this connection we would like to say that a properly administered inheritance tax is one of the best means we have of reaching property which has, perhaps, for years escaped its prorata part of the burden of taxation. This being true, why should not the rate be sufficient to reimburse the commonwealth for at least a small portion of its losses 1 On page 53 of the report of the 1914 Virginia Revision commission we find this statement, viz. — "In the case of thirteen decedents all of whose in- tangible property combined was assessed in the last years of their lives at only $14,000, the examiner of records showed that they owned at death $1,340,000 worth of it. . . . One examiner of records secured and put upon the rolls twenty-one other cases of omitted assessments amounting to $10,182,000." The same examiner writes us : "In an examination of some five hundred cases (of estate of more than $25,000) few were found where there is listed any intangible property, and whenever listed it was a mere bagatelle in comparison with their actual holdings. From the State tax board's report to the Vir- ginia 1918 General Assembly we find that during the years 1916-17 the examiners of records found and put upon the Virginia tax rolls $151,245,812 of property which but for them would never have paid any taxes at all. Will not our Deputy Tax Com- 55 missioners do likewise for us I When we have written into our statutory laws fair and equitable provisions for the taxation of our tangible and intangible wealth, and have provided adequate mea- sures for their enforcement, a,s we are now seeking to do, we may reasonably expect and A\dll probably get similar results — ^not, however, till we have done both. EXHIBIT "D"— MERCHANTS. Virginia 's revision committee 's 1914 report says : "As compared with the tax on capital levied in those states that do not use our method the more thought- ful merchants are unanimous in preferring our tax on purchases." Mr. C. Lee Moore, Virginia's State Aulitor, writes on December 31, 1918: "Replying to your letter of the 20th, I beg to say that the present mode of taxing merchants by this State has been in force for many, many years and has proven so satisfac- tory that a number of the cities of the State have adopted the same system at the suggestion of the Merchants Association. ' ' That the tax on purchases has proven highly sat- isfactory and has the endorsement and support of the merchants themselves in Virginia, is shown by a letter which this Commission has received from W. A. Clarke, Jr., secretary of the Retail Merchants Association of Virginia. This letter, in part, reads as follows: "In 1912 we prepared and sent ou tto the merchants throughout the State (very largely to our members), a questionaire in which we a^ked them to state their preference of three forme of taxation on merchants, to-wit: the taxation of sales, the taxation of purchases, and the taxation of capital, giving a brief explanation of each. A great many replies were received, and te concensus of opinion was that the tax on purchases was favored. The tax on capital had some 56 advocates, but not many. A flat tax on capital, especially on large business corporations, imposed regardless of the business done, is a most inequitable system of license taxation." The letter goes on to describe the working of the law in Virginia, and says: "It is easily under- stood and applied, nothing complicated about it; simply keep a record of purchases; the merchandise account shows it, and pay the tax on the amount purchased. I have known of a few cases where some men were mean enough to try to beat it, and were caught and penalized as they deserved. ' ' Following is the comparative revenue from mer- chants of Georgia and Virginia: Virginia Georgia Va. 's Lead Over Ga. 1913 $414,261.46 $205,164.52 $208,096.94 1914 448,314.27 194,902.92 253,411.35 1915 434,807.23 201,395.45 223,401.78 •1916 489,849.15 201,913.18 287,925.97 1917 596,008.80 221,234.35 374,783.45 1918 717,209.41 263,277.11 453,932.30 The folloAving figures show the Merchandise re- turned for taxation in Georgia : 1913 $41,032,904 rate 5 mills 1915 41,957,386 rate 4.8 mills 1916 40,382,636 rate 3 mUls 1917 44,246,871 rate 5 mills 1918 52,655,422 rate 5 mills' Pennsylvania levies her merchant's tax on a gross receipts basis and makes it in lieu of all per- sonal property tax from them. This does not apply to goods manufactured and sold by Pennsylvania manufacturers. The rate is $1.00 per $1,000 of gross sales for retail ferchants, 50 cents for whole- salers, and 25 cents for sales made on the exchanges. Montreal, Manitoba and "Winnipeg, Canada, use a rental basis and this basis is also advocated by a committee from the National Tax Association. (Volume 5, page 339.) 57 EXHIBIT "E"— SECURED DEBTS. The report of the Committee on substitutes for personal property tax, volume 5, page 337, National Tax Association, says : "The objection has been made to the law now in force in some of the States that the tax is paid once for all and the amount is fixed without regard to the period of exemption. . . . We believe in the ma- jority of States the recording and registry tax should not be payable once for all but should be ad- justed either as now is done in Connecticut to some limited period of exemption or through the imposi- tion of a higher rate during the life of the security. ' ' "In Minnesota, where a mortgage recording tax displaced the general property tax in April of this year (1907). there has been reduction in interest rates of from nearly % of 1 per cent in the cities to approximately 2 percent in the smaller towns." New, York's secured debts law has just been superseded by a tax on investments which exempts them from the personal property tax by the payment of 20 cents per $100 face value for each year they run. Investment securities include bonds of rail- road companies, public "utility corporations and in- dustrial corporations whose properties are located outside the state, equipment bonds, debentures, and bonds of other states and municipalities in other states, and of foreign governments. In both Kentucky and New York, where these mortgages, bonds, etc., are not presented for recor- dation and registration they are required to pay the full personal property tax without any deduc- tion for "just debts." In Kentucky, failure to pay this tax can be pleaded as a complete bar to any 58 court action looking to recovery. In New York failure to pay it renders a decedent's estate liable to an additional inheritance tax of five mills, unless it is proven that the personal property tax has been paid. Connecticut, Tennessee, and perhaps other states, have silimar laws, while Pennsylvania, Ehode Isand, Maryland,, Minnesota, Iowa, Michigan, Oklahoma, North Daliota, and others, prefer the flat tax with a low rate. (See also Exhibit "N.") EXHIBIT "F"— STATE TAX COMMISSIONS. 34 States have State Tax Commissions. ^ In 25 States the Grovernor appoints all Commis- sioners. In one state they are elected. In two they are ex-officio. In one they are appointed by the Supreme Court. In five they are partly appointive and partly ex- officio. 23 States have 3 members. 3 States have 5 members. 1 State has 6 members. 7 States have 1 member . In 2 States the term is 2 years. In 1 States the term is 3 years. In 12 States the term is 4 years. In 1 State the term is 5 years. In 18 States the term is 6 years. In 1 State the term is 8 years. Ir. 1 State the salary is $2,000 In 2 States the salary is $2,400 In 10 States the salary is $3,000 In 9 States the salary is $2,500 59 In 3 States the salary is $3,600 In 1 State the salary is $4,000, (Missouri) In 1 State the salary is $4,500, (Minnesota) In 3 States the salary is $5,000, (Wisconsin, Ohio and Massachusetts) In 1 State the salary is $6,000, (New York) . EXHIBIT "G"— SOUTH DAKOTA COMMISSION. The Legislature of 1913 created a State Tax Com- mission and gave the Commission, among other privileges, that of calling the local authorities to- gether in convention in the capitol. One meeting was held there, and then followed up by visits to the various counties by the individual members of the Commission. As a result the tax roll, exclusive of public utilities corporations, was raised from $320,050,481, in 1912, to $1,063,007,640 in 1913, or an increase in one year of $742,957,159. As a further result the tax rate was reduced from 4 mills to one mill. (Volume 9, page 401, National Tax Association Proceedings.) EXHIBIT "H"— KENTUCKY COMMISSION. In 1917 the Kentucky legislature created a State Tax Commission with large powers over the asses- sors, and it was also required to call the local asses- sors together in convention once a year to study the tax laws and tax levies generally. As a result the tax roll was increased from $922,000,000 in 1916 to $1,583,887,997 in 1917. As a further result the State tax rate was reduced on every class of property, and yet, together with some additional business licenses the state's income was increased about $2,000,000. (Chairman M. M. 60 Logan, Kentucky Tax Commission.) There were, of course, other changes n the laws affecting taxa- tion but they would have been largely inoperative under the old administration. EXHIBIT "I"— ADVANCE OF TAX COMMISSIONS. In 1907 only 9 states had State Tax Commissions. (Volume 1, page 519, National Tax Association. Pro- ceedings.) Today 34 states are operating under them, and by far the best results are obtained where good salaries and wise Governors secured good business men for the work. Independent vs. Ex-Officio Tax Commission. — "Up to and including 1910, the public utilities in the State (Ohio) were assessed by a state board composed of state officials, and the work of as- sessing these properties was considered a side issue with their other work. The result was that. . . .a large part o f their property escaped taxation." In 1911 the above properties were placed under a State Tax Commission appointed by the Gover- nor and all of whose time was devoted to this work. The following table speaks for itself: Puplic Service ^Utilities assessed in 1910 1 . $ 263,191,480 Public Service Utilities assessed in 1917 $1,218,914,130 1917 increases over 1912' $ 955,722,650 (or 363 per cent) (The above is taken from the Ohio State Tax Commission's report for 1917, pages 13 and 14,) Let us compare this with Georgia : 61 Publice Service Utilities assessed 1910 (Ga.) $124,237,017 Public Service Utilities assessed 1917 (Ga.) $157,699,606 1917 increase over 1912 $ 33,462,589 (or 26 percent increase) EXHIBIT "J"— RESULTS IN WISCONSIN Wisconsin, in 1911, after changing her constitu- tion so as to get away from the general property tax, chose an income tax as a partial substitute for her general property tax, and at the end of the first year her increase in revenue from this limited source was 1,000,000. From a National Tax As- sociation bulletin it appears that the second year's increase was $2,000,000. W. H. lyon, one ofthe Wisconsin Tax Commissioners, says in substance: "If Wisconsin's income rate was transferred to a mills basis I believe it is a reasonably safe surmise that most of the taxation of the securities in Wis- consin comes nearer the 1-2 mill figure than the 3- mill rate used by Minnesota." EXHIBIT "K"— RESULTS IN NORTH DAKOTA. Remarkable results in the assessment of money and credits within the first year of classification are shown by the 1919 report of the North Dakota Tax Commission, which we have just received. After the constitution was amended to allow classi- fication, t he legislature passed an act assessing money and credits at a flat rate of 3 mills on each dollar of actual value, which law went into opera- tion in 1918. The startling results are shown in the following table, published in the North Dakota Tax 62 Commission's, report, showing the assessment of mone}' and credits for the years named below: 1913 -__$ 780,344 1914 992,588 1915 - 533,163 1916 1,257,904 1917 -' 1,228,751 1918 100,162,308 With reference to North Dakota's abandonment, of the general property tax, the report says : "When North Dakota adopted its constitution it provided that 'Laws shall be passed taxing by uniform rule all property according to its true value in money." This was the rule in practically all of te states at that time and it was but natural that a new state should adopt it. When such provisions were first written nearly all property was tangible. It was a mistake for North Dakota to adopt such a constitutional provision; the economic world was already in the midst of a period of transition; business and commerce were no longer car- ried on by money, but by a system of credit. / So, too, the corporate life of the nation was assuming la,rge proportions and new kinds of property were being created, principal among which were the various kinds of corporate stocks' and bonds and franchises. The above constitutional enactment was not suited for the taxation of intang- ibles. It is not intended here to enter into an academic discussion of the taxation of intangibles. The subject is too well known among students of taxation to take up any space in this report. On one thing all are agreed ; a heavy tax on intangibles will drive most of them into hiding. This is true as to money and credits. ' ' The report then tells of the passage of the con- stitutional amendment permitting classification, and the subsequent enactment of the law taxing money and credits separately an at a lower rate, with the results shown above. EXHIBIT "L"— RESULTS IN KENTUCKY. Kentucky, following the report of a special tax commission, had enacted by her legislature a con- stitutional amendment providing for classification, which was overwhelmingly ratified by the people. 63 So important was this suggested legislation that the Governor called a special session of the legislature in Feburary 1917, to consider the taxation problem. It adopted a new system based upon the report of ' the commission, and it went into operation at once. For five or six years the State had spent an average of $600,000 more than her income until she had a floating debt of $3,500,000. In 1916 the county assessors listed for taxation $922,000,000, whereas in 1917, under the State tax commission, there was listed $1,403,978,050, exclu- sive or bank deposits which amounted to $179,000,- 000, making a total of $1,583,887,997, showing a gain in one year of $661,887,997 from all sources. In 1917 Ken. intangibles exclusive of bank deposits were - $ 68,650,880 In 1918 Ken. intangibles- exclusive of bank deposits were 246,348,379 In 1917 Ken. bank deposits listed for ' tax-ation were 11,000,000 In 1918 Ken. bank deposits listed for taxation were 1— 179,000,000 This is an increase of $168,000,000, in bank de- posits alone, and which added to the $177,697,499, (or 258.8 percent) from general intangibles gives a total increase of $345,697,499 from all intangibles: The tax to the State on deposits in 1916, at 55 per cents, was $62,024.59, while the same tax for 1917, at 10 cents, was $179,000, or an increase of $117,000. Nor is that all. The citizens who listed their $11,- 000,000 to be taxed at 55 cents saved $4.50 per thou- sand and will continue to do so as long as the law remains as it is. With the State rate reduced from 55 cents to 40 cents per $100, on all classes of property save these, 64 viz. — ^money in bank, stock in building and loan as- sociations and live stock, which are taxed at 10 cents per $1000, and at the same time an increase in revenue for the State of $2,000,000, surely Kentucky and Kentuckians must be happy on the way. (Huf- faker-Logan and Kentucky Tax Commission have kindly furnished the above data. EXHIBIT "M"— KENTUCKY AND GEORGIA COMPARED. Georgia's increased assessment from all property listed for taxation in 1918 over 1917 is, in round numbers $87,000,000, as against Kentucky's $660,- 664,750, (or 71.6 percent) exclusive of any increase from corporation assessment. Georgia's increase in money, notes and accounts for 1918 over 1917 was $11,891,579, as against Ken- tucky's increase in bank deposits alone for the same period $168,000,000. Georgia's increase in revenue from money, notes and accounts in 1918 over 1917, at a 5-mill rate, is ii: round numbers $59,000, while Kentucky's in- crease in revenue from bank deposits alone for the same period at a 1-mill rate is $117,000. Georgia's increase in revenue from all sources for 1918 over 1917 — as taken from the Comptroller- General's report of the State's actual income for those two years — is $476,571.54, with no decrease in rate, as against Kentucky's increase in revenue for the same period of $2,000,000, (according to Mr. Logan.) after a decrease in rate on every class of property subject to taxation, except a few license taxes. 65 EXHIBIT "N"— SECURED DEBTS, NEW YORK. In 1915 New York lifted mortgages secured by real estate within the State from the personal prop- erty class into a distinct class and levied a uniform flat rate of 5 mills upon it, in lieu of all other taxes, and divided the net revenue equally between the state and the county of registration. The next year the law was changed to a mortgage recording tax at the same rate (50 cents per $100) paid once for all at the time of registration. The following table shows the result : 1916, the last y^ar under the old system, gross revenue from this property, taxed as personal property was es- timated - $ 900,000 1908, actual gross revenue 3,399,998 1909, actual gross revenue 3,755,649 1911, actual gross revenue 3,630,092 1913, actual gross revenue 3,728,544 In 1911 it was extended to foreign mortgages and other "secured debts", to serial bonds, notes and debentures, secured by mortgages, and to bonds of other states and municipalities. All such property not presented for registration is taxed as personal property, and is also subject to an additional 5 per cent inheritance tax. (Nebraska Com. report, page 49.) The above has been superseded by a law requir- ing a registration tax of 20 cents per $100 for each year the security runs these securities include bonds of railroad companies, public utility corporations, and industrial corporations whose properties are out-side the State, equipment bonds, debentures and bonds of other states and municipalities in other 66 states, and of foreign governments. (National Tax Association proceedings, page 390.) EXHIBIT "0"— PENNSYLVANIA INTANGI- BLE TAX. For many years Pennsylvania has lieved a flat tax rate of four mills, or 40 cents per $100, upon certain forms of intangible property in lieu of all other taxes. Three-fourths of this has gone to the county and the other been retained by the State, till 1914, when all of it has been given to local treasuries. 1885 $159,304,729 1907 $1,014,757,783 1888 429,751,583 1908 1,104,513,428 1891 575,295,999 1909 1,141,899,627 1894 613,927,285 1910 1,184,398,749 1897 673,669,421 1911 1,198,641,401 1900 722,864,569 1912 1,266,095,982 1903 882,310,195 1913 1,402,511,272 1906 932,688,853 This was an increase the 28th year of $1,243,207,943. EXHIBIT "P"— TAX MAPS. "We consider Tax Maps a very essential part of the assessor's equipment if he is to do efficient work. Maps are already in use in the following State : Alabama, Throughout State. District of Columbia. Mississippi, Throughout State. Maryland, Throughout State. ' Ohio, Throughout State. County supplies. Nevada, Throughout State. County supplies. California, Throughout State, County supplies. Iowa, Throughout State, County supplies. Oregon, Throughout State. Utah, Throughout State. Washington, Throughout State. Arizona, used in more prosperous counties. Colorado, general use. 67 Connecticut, some cities. Kansas, larger Cities and towns. Kentucky, Louisville. Maine, some cities. Maryland, large cities. Massachusetts, larger cities and towns. Michigan, some cities. Minnesota, larger cities. New Jersey, general use in cities. New York, some cities. Oklahoma, some assessors. Pennsylvania, few cities. Rhode Island, some cities. South Carolina, Columbia and Charleston. Wisconsin, some places. ^ Wyoming, general use. Suggested form of Act will be found in Vol. 4, N. T. A., page 332.) EXHIBIT "Q"— GEORGIA DEFICIT. The following table throws some light on the ques- tion of deficit in Georgia. The third column is obtained by subtracting the balance in the Treasury on January 1st each year from the "undrawn bal- ances" as shown in the first column. NBJ^fe'^ '£■■,:. - Deficit, or "Undrawn Bal- Amount not on ance" 01* Ap- Balance in Hand Necessa- propriations for Treasury to ry to Complete Previous Year Help Pay Payment of Unpaid on Jan. ' ' TJndrawn ' ' Undrawn 1, of each Year Balance ' ' Balance" Jan. 1, 1913— $2,092,794.79 $1,113,517.31 $ 979,277.48 Jan. 1, 1914... 1,607,431.30 739,625.75 867,805.64 Jan. 1, 1915__- 1,901,702.07 787,455.88 1,114,240.19 Jan. 1, 1916--- 2^259,361.73 842,799.09 1,414,562.42 Jaii. 1, 1917-.- 2,627,631.43 1,386,135.42 1,241,496.01 Jaii. ], 191S-- 2,812,640.43 1,459,331.18 1,353,309.25 Jan. 1, 1919- - 2,926,671.06 813,139.66 2,113,531.40 68 EXHIBIT "R"— EATIO OF INTANGIBLE PROPERTY AND PERSONAL PROP- ERTY TO TOTAL. The following table shows that the percentage of Intangible property to the total assessed value of property in Geogia has been steadily decreasing, having dropped from 14 1-2 per cent in 1875 to 6 1-14 per cent in 1918 — and also that the percentage of Personal property to the total assessed value of ' property has decreased from 42 2-5 per cent in 1875 to 32 2-5 per cent in 1918 : Assessed Percentage Assessed iValue of Money Assessed Percentage Value of of M'oney and Solvent Value of of Personal all Property and Solvent Debts Personal Property In Ga. Debts to Total Property to Total 1875 $261,755,844 $37,138,943 i4y5% ^111,056,490 42%% 1880 261,424,651 29,333,736 11%% 99,276,876 39%% 1885 321,695,616 33,796,735 ioy2% 119,200,739 37 % 1890 415,828,945 38,933,258 9%% 152,311,869 36%% 1895 410,692,093 31,056,175 7%% 133,555,811 32y2% 1900 433,323,691 34,730,595 8 % 150,606,530 34%% 1905 577,840,282 41,172,177 778% 203,979,464 35y2% 1910 766,787,139 48,242,841 6 1/7% 253,156,250 33 % 1915 951,763,472 53,559,002 5%% 276,794,323 29 1/7% 1918 1,079,261,333 65,613,596 6 1/14% 349,588,021 32%% The remarkable situation shown by the above table is not unique for Georgia, but has been found to exist in many other states where the ad valorem general property tax was still used in personal property. Following is an extract from the Minne- sota Tax Commission report for 1910 : "Under the existing system personal property tends to form a constantly decreasing proportion of the total property assessed for taxation. It is generally admitted that under modern conditions the amount of personal property in existence always equals and fre- quently exceeds' the amount of real property. In a state like Massa- chusetts or New York some would have it that the amount of personal property is two or three times as large as the amount of real prop- erty: whatever the exact proportion may be, it is certain that it cannot be less than, and probably greatly exceeds the amount of real property. During the nineteenth century it is certain that the in- erease of personal property was particularly rapid; yet te statistics covering this period show that this class of property has usually formed a decreasing proportion of the total assessment." (Page 173^) See also "Eeport of State Board of Tax Com- missioners" of New York, for 1914, page 49, which shows that the percentage of personal property to total assessment in that state has decreased from 18.9 per cent in 1840 to 10.04 per cent in 1905. 70 APPENDIX. BILLS INCORPORATING PROPOSED CON- STITUTIONAL AMENDMENTS. No 1.— A Bill To be entitled An Act to Axaend paragraph one (1) section two (2) of article seven (7) of the Con- stitution of the State of Georgia, so as to authorize the General Assembly to classify property for taxa- tion, and to adopt different rates and methods for different classes of property and to segregate dif- ferent classes of property for State and local taxa- tion, and to authorize taxes to be imposed up in- comes, inheritances, privileges and occupations, which latter classes of taxes may be graduated and when levied, may contain provisions for reasonable exemptions. Section 1. Be it enacted by the General Assem- bly of the State of Georgia, and it is hereby enacted by authority of the same. That paragraph one (1) of section two (2) of article seven (7) of the Constitu- tion of the State of Georgia be and the same is here- by amended by striking all of said paragraph and in- serting in lieu thereof as paragraph one (1) of sec- tion two (2) article seven (7) of ^aid Constitution, the following words to-wit : ' ' All taxes shall be levied and collected under general laws and for publ.'c purposes only. The General Assembly shall have the power to classify property for taxation and to adopt different rates and methods for different classes of property, and to segregate different classes of property for State and local taxation. But all taxation shall be uniform upon the same class of sub.^eets within the territorial limits of the authority levying the tax. Taxes may be levied ad valorem upon any given class- of property without regard to the method used in levying taxes on any other class of property'. Taxes may also be imposed upon incomes, inheritances, privileges and occu- pations, which latter classes of taxes may be graduated, and when levied may contain provisions for reasonable exemptions. ' ' 71 Section, 2. Be it further enacted by the authority aforesaid, That when said Amendment shall be agreed to by a two-thirds vote of the members elect- ed to each House, it shall be entered upon the Jour- nal of each House with the "yeas" and "nays" thereon and published in one or more newspapers in each congressional district in said State for two (2) months previous to the time for holding the next general election and shall, at the next general elec- tion, be subniitted to the people for ratification. All persons yoting at said election in favor of adopting said proposed Amendment to the Constitu- tion shall have written or printed on their ballots the words: "For ratifi(?ation of Amendment to paragraph one (1) section two (2) article seven (7) of the Constitution authorizing the classification of property for taxation and the adoption of different rates and methods for different classes of property and the segregation of different classes of property for State and local taxation, and authorizing impos- ing taxes upon incomes, inheritances, privileges and occupations"; and all persons opposed to the adop- tion of said Amendment shall have written or printed on their ballots the words: "Against ratifi- cation of Amendment to Pargraph one (1) section two (2) article seven (7) of the Constitution au- thorizing the classification of property for taxation and the adoption of different rates and methods for different classes of property and the segregation of different classes of property for State and local taxation, and authorizing imposing taxes upon in- comes, inheritances, privileges an occupations"; and if the majority of the electors qualified to vote for the members of the General Assembly voting thereon shall vote for ratification thereof, when the returns shall be consolidated, as now required by 72 law in elections for members of the General Assem- bly and return thereof made to the Governor, then he shall declare said amendment adopted and make proclamation of the result by publication of the re- sults of said election by one insertion in one of the daily papers of this State, declaring the Amend- ment ratified. Section 3. Be it further enacted- that all laws and parts of laws in conflict with this Act be and the same are hereby repealed. No. 2— A Bill To be entitled An Act to Amend paragraph one (1) section two (2) of article seven (7) of the Con- stitutipn of the State of Georgia so as to authorize the General Assembly to classify property for taxa- tion and to adopt different rates and methods for different classes of property, and to segregate dif- ferent classes of property for State and local taxa- tion. Section 1. Be it enacted by the General Assem- bly of the State of Georgia, and it is hereby enacted by authority of the same, that paragraph one (1) of section two (2) of article seven (7) of the Con- stitution of the State of Georgia be and the same is hereby amended by striking all of said paragraph and inserting in lieu thereof as paragraph one (1) section two (2). of article seven (7) of said Constitu- tion, the following words to wit : "All taxes shall be levied and collected under general laws and for public purposes only. The General Assembly shall have the povrer to classify property for taxation and to adopt different rates and methods for different classes of property and to segregate dif- ferent classes of property for State and local taxation. But all tax- ation shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax. Taxes may be levied ad valorem upon any given class of property without regard to the method used in levying taxes on any other class of property." 73 Section 2. Be it further enacted by the authority aforesaid, that when said Amendment shall be agreed to by a two-thirds vote of the members elected to each House, it shall be entered upon the Journal of each house with the "yeas" and "nays" thereon and published in one or more newspapers in each congressional district in said State for two (2) months previous to the time for holding the next general election and shall, at the next general election, be submitted to the people for ratification. All persons voting at said elction in favor of adopt- ing said proposed Amendment to the Constitution shall have written or printed on their ballots the words: "For ratification of Amendment to para- graph one (1) section two (2) article seven (7) of the Constitution, authorizing the classification of property for taxation and the adoption of different rates and methods for different classes of property, and the segregation of different classes of property for State and local taxation"; and all persons op- posed to the adoption of said Amendment shall have written or printed on their ballots the words : "Against ratification of amendment to paragraph one (1) section two (2) articles seven (7) of the constitution authorizing the classification of prop- erty for taxation and the adoption of different rates and methods for different classes of property for State and local taxation"; and if the majority of the electors qualified to vote for the members of the General Assembly voting thereon shall vote for rati- fication thereof, when the returns shall be consoli- dated as now required by law in elections for mem- bers of the General Assembly, and return thereof made to the Governor, then he shall declare said Amendment adopted and mal