Cornell University Law library. THE GIFT OF »>M C^^£r^ S h^- Jf -^~^ i -^rr^ Date,....<^^,... contract to pay taxes made before the adop- tion of the said amendment, may not be enforced, according to its terms, would be to impair the obligation of the contract. This oannot be done. The provisions of section 23 of amendment No. 3, 'that every contract hereafter made by which a debtor is obligated to pay any tax or assessment on money lent or on any mortgage or deed of trust shall, as to any Interest specified therein, and as to' such tax or assessment, be null and void,' applies only to contracts made after the- adoption of said amend- ment No> 3 and not to those made before. "If a mortgage or deed of trust was ex- ecuted prior "to the adoption of the third amendment and • ' coritained no express agreement that the mortgagor should pay the taxes on the property mortgaged then, in such a case, the mortgagee is made by amendment No. 3, primarily, 'liable for the taxes assessed against the mortgagee's in- terest in the land, and if, under such cir- cumstances, the mortgagor pays all the taxes, he may deduct from the mortgage the amount of taxes assessed against the owner of the mortgage." Cornell University Library KFM8270.J93 Treatise upon the aw and ,, practice of ta 3 1924 024 700 548 nv>r- l- 7 /fro _ (Jnntpll ICatu ^rljnnl IGibrary 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/cu31924024700548 A TKEATISE UPON THE LAW AND PEACTICE OF TAXATION IN MISSOURI BY FREDERICK K JUDSON, OF THE ST. LOUflJ^BAB. E. W. STEPHENS, PUBLISHER, COLUMBIA, MISSOUEI, 1900. Copyright 1900, By E. W. STEPHENS. Columbia, Mo. Press of E. W. STEPHENS, Columbia, Mo. PEEFACE. The study of Missouri taxation, in the course of profes- sional duty, has convinced me that the confessed failure of the system in securing equality of taxation is not only for lawyers, but for all citizens, the most serious question of our time. That conviction has suggested this work. The law of taxation can not be understood, even by law- yers, without knowledge of the recognized economic princi- ples, which are based on human experience; and citizens de- manding reform in taxation, as well as lawyers who construe and apply the law, must know what our taxation is, how it has been developed historically, how it is construed by the courts and enforced in practical administration. The law and practice of taxation should therefore be construed together. Each State, under the restrictions of the Constitution of the United States, is sovereign in taxation, and must solve for itself this problem. This work is not a general treatise on taxation, for that field is fully supplied, but the purpose has been to explain the system developed by the people of Missouri, in what is now nearly a century of experience as a self-governing people. Reference has been made, therefore, to the statutes and decisions of other States only where they are deemed to be illustrative of our own conditions. I have not undertaken to write a mere digest of our de- cisions on taxation, nor to cite all the taxation cases decided by our courts. The aim has been, however, to cite those both of the State and Federal courts which serve to explain our written law, or illustrate its development, and I trust iii that the work will not be without service to the members of my profession. In view of the radical changes made in 1877 in the col- lection of delinquent taxes, it has not been considered within the scope of the work to discuss the details of the prior sys- tem of enforcing such collection. The consideration there- fore has been limited to the law and practice of taxation as now existing, with its historic development and proposed amendment. I am under obligations to many gentlemen, for informa- tion and suggestions, in the preparation of the work. Among them I may name Hon. James M. Seibert, State Auditor, Hon. E. C. Crow, Attorney-General, Hon. Isaac H. Stur- geon, city comptroller of St. Louis, and his deputy, Mr. Fred Goebel; also to President Arthur T. Hadley and Professor J". C. Schwab of Yale University, Professor Frank "W. Taus- sig of Harvard University; Professor E. E. A. Seligman of Columbia University; Professor H. C. Adams, of University of Michigan, and Professor Plehm of University of Califor- nia. I must also acknowledge the assistance of Mr. John F. Green, of the St. Louis bar, particularly in the chapter re- lating to delinquent taxes, of Mr. J. Clarence Taussig of the St. Louis bar, in the collection of citations, and general re- vision, and of my efficient office assistant, Mr. Lee M. Edgar; and I also acknowledge the uniform patience and courtesy of Mr. E. W. Stephens, the publisher. FEEDEEICK K JUDSON. St. Louis, October 6, 1900. TABLE OF CONTENTS. INTRODUCTORY. FART I. HISTORICAL. CHAPTER I. TAXATION UNDER TERRITORIAL GOVERNMENT 11 Louisiana Purchase. Pirst Revenue Act, Government by Indiana Territory. Taxation of Bachelors. License Taxation. Territory of Missouri Organized. Tax on Attorneys and Physicians. Road Taxes. CHAPTER II. TAXATION UNDER CONSTITUTION OP 1820 18 The Constitution on Taxation. Pirst Bank Tax. Loan Certificates. County Taxation. School Taxation. Road Taxation. Taxation of Money and Notes. Pirst General Corporation Tax. Taxation of Lawyers, Doctors and Incomes. Taxation for Salaries of St. Louis Judges. Assessments for Local Improvements. Civil War Taxation. V VI TABLE OF CONTENTS. CHAPTER III. THE SUCCESSFUL RESISTANCE OF MERCHANTS TO DIS- CRIMINATING TAXATION 40 License Taxation. Discriminating Class Taxation Against Merchants. State v. Crow. Discriminations in favor of State products. State v. North. CHAPTER IV. TAXATION UNDER CONSTITUTION OF 1865 51 General Property Tax Established. Construction of Constitution by Supreme Court. Missouri Taxation in U. S. Supreme Court. Railroad Contract Exemption. Washington University Case. Wiggins Ferry Case. National Bank Tax Case. Income Tax Sustained. Statutory Changes — Gov. Gratz Brown's Administration. Radical Change in Local School Taxation. CHAPTER V. TAXATION UNDER CONSTITUTION OF 1875 71 Circumstances of Adoption — Reaction from Speculation. Constitutional Limitation of Tax Rate. Recommendations of Gov. Phelps. Conflict between State and Federal Courts. The Cottey Law. Message of Gov. Stone on Imprisonment of County Judges. Recommendations of Gov. Francis. Message of Governor Stone as to Railroad and Farm Taxation. Public Purpose of Taxation declared, University Endowment Tax held void. Class Taxation Unconstitutional, Anti-Department Store License held void. Attempts to increase Local Tax Rate by Constitutional Amend- ment. .TABLE OF CONTENTS. Vll PART II. MISSOURI TAXATION IN 1900. CHAPTER I. PROPERTY EXEMPT FROM TAXATION 88 Constitutional Exemptions. Federal Exemptions. Contractual Exemptions. CHAPTER II. THE STATE BOARD OF EQUALIZATION 96 Organization of the Board Under Constitution. Powers of the Board. Equalization of County Assessments. Act of 1899 Enlarging Powers of Board. Equalization of Assessments of Banks, Trust Companies, etc., in 1899 and 1900. Ineffective Act of 1899. CHAPTER III. ASSESSMENTS BY STATE BOARD OF EQUALIZATION 100 Powers of the Board in Assessing Railroad and other Property. Assessment of Railroad "Local" Property. Apportionment of Railroad Valuations. Valuation of Railroad Property. The Mileage Rule in Interstate Systems. Comparison of Railroad Valuations with Other Property. #> Message of Gov. Stone on Railroad Valuations. Street Railroad Assessment Under Act of 1897. Assessment of Railroad Cars. Act for the Assessment of held Unconstitutional. U. S. Supreme Court on Taxation of Rolling Stock. Bridge and Telegraph Companies. Tax on Gross Earnings of Express Companies Sustained. viii TABLE OF CONTENTS. CHAPTER IV. TAXATION OF BANKS, TRUST COMPANIES AND INSURANCE COMPANIES 121 No Concealment or Evasion in the Taxation of Banks. Want of Uniformity in Local Assessments. Equalization by State Board in 1899 and 1900. Prima Facie Basis of Valuation. Taxation of National Banks. Tax on Premiums of Foreign Insurance Companies. CHAPTER V. LICENSE TAXATION 128 Uniformity required. The Peddlers' License Tax Litigation. Anti-Department Store Case. License of Employments. License of Lawyers, Doctors, et al. Local License Taxation of Lawyers, etc., Prohibited. CHAPTER VI. TAXATION OF MERCHANTS AND MANUFACTURERS 138 Property Tax, not a License Tax. Double Taxation. Repeal of One Year Exemption. Taxation of Merchants and Manufacturers by Counties. . Taxation of Merchants and Manufacturers in St. Louis. School Taxation of Merchants and Manufacturers in St. Louis. Senate Investigating Com. Report on Taxation of Merchants and Manufacturers in St. Louis. Distinction between Rate of Valuation and Rate of Tax. TABLE OF CONTENTS. IX CHAPTER VII. INHERITANCE TAXATION IN MISSOURI 149 Acts of 1895 and 1897 held void. Act of 1899. U. S. Supreme Court on Inheritance Taxation. Missouri and U. S. Inheritance Taxes Compared. Double Taxation Under Inheritance Taxes of Different States. CHAPTER VIII. LOCAL TAXATION UNDER THE CONSTITUTION 157 Constitutional Restrictions construed. State Control of County Revenues. Limitations on Tax Rates. CHAPTER IX. COUNTY TAXATION 162 Classification of Counties for Tax Rates. The Cottey Law. Embarrassment of County Finances. County Warrants on Tax Payments. License Taxation. Road Taxes. CHAPTER X. TAXATION BY SCHOOL DISTRICTS 169 The District School Meeting. General Increase of Tax Rate. School Taxation in St. Louis. X TABLE OP CONTENTS. CHAPTER XI. TAXATION IN MUNICIPALITIES 174 Constitutional Classification. No County Tax in St. Louis. St. Louis Charter Discriminations. License Taxation. Municipal License Taxation in Supreme Court. Arbitrary Classifications Unconstitutional. St. Louis Revenues and Tax Rate. Expenditures for Permanent Public Improvements from Proceeds of Taxation in St. Louis. No Charter Provision for Increase of Tax in St. Louis. Taxation in Kansas City. Control of Municipalities over Public Streets distinguished from Taxing Power. CHAPTER XII. LOCAL ASSESSMENTS FOR PUBLIC IMPROVEMENTS 192 Decisions of Supreme Court. Local Assessment Under St. Louis Charter. The "Frontal" Rule and the "Area" Rule. Fay vs. Springfield and Norwood vs. Baker. . CHAPTER XIII. GENERAL ASSESSMENT AND COLLECTION OF THE GEN- ERAL PROPERTY TAX 201 State and City Assessments. The Annual Listing and Taxpayer's Oath. Practice in St. Louis Assessor's Office as to Taxpayer's Valuations. Assessments by Assessors. County Boards of Equalization. Boards of Equalization in City of St. Louis. Jurisdiction of County Boards. Penalties for Fraudulent Return. Franchise Rights, etc. Notes, Bonds, etc., in Other States. No Deductions for Debt. Curators and Trustees. Date and Place of Assessment. County Court and St. Louis City Comptroller. Collection of Taxes. TABLE OF CONTENTS. XI CHAPTER XIV. THE COLLECTION OF DELINQUENT TAXES 224 System prior to 1877. The Change of 1877. The Tax Suit. Redemption. Limitation of Action. Collection of Delinquent Municipal Taxes. Collection of Delinquent Personal Taxes. CHAPTER XV. THE REMEDIES OF THE TAXPAYER AGAINST ILLEGAL TAXATION 237 Defenses in Tax Suits. Certiorari. Injunction. Uncertainty in Remedial Procedure. Remedy Against Collector or Municipality. Payment of Taxes on Wrong Land. CHAPTER XVI. FAILURE OF GENERAL PROPERTY TAX IN SECURING UNI- FORMITY OF ASSESSMENT 245 Effect of Limitation of Tax Rate. Report of Commissioner of Labor Statistics. Comparative Table of Rate of County Valuations. State Conference of Assessors. Assessment 'of Different Classes of Property. Assessments in St. Louis — Report of Investigating Committee. Xii TABLE OP CONTENTS. CHAPTER XVII. FAILURE OF GENERAL PROPERTY TAX IN TAXATION OF PERSONAL PROPERTY 259 Tangible Personalty. Mr. Shearman on discrimination against farmers. Urban and Rural Assessments. Intangible Personalty. Results in Missouri. Assessment of Estates in Probate. A Confiscating Income Tax. Valuation of Money and Securities by St. Louis Assessor. Evasion by Changing Investment. Experience of other States. The Economic Tendencies of the Time as to Investment Securities. Ex-President Harrison on Tax Evasion. TABLE OF CONTENTS. XHl PART III. TAXATION OF THE FUTURE. CHAPTER I. PROPOSED AMENDMENTS 277 The Slate Bill. Auditor Seibert's Recommendations. CHAPTER II. THE TAXATION OF MORTGAGES 282 The Present Law. The Constitutional Amendment. The California Experience. Proposed Mortgage Tax in New York. Mortgages on Property out of State. CHAPTER III. TAXATION OF FRANCHISES 293 Taxation of Franchises Under Existing Law. House Bill 408 of 1899. What is a Taxable Franchise. The New York Franchise Tax Law. Taxation of Gross Earnings. The Valuation of Franchises. Double Taxation. Taxation and Public Control of Streets. CHAPTER IV. THE SINGLE TAXERS 307 Taxation Theories of Single Taxers. Their Efforts for Tax Reform. The McCann Case, and License Taxation. XIV TABLE OF CONTENTS. CHAPTER V. CONCLUSION 310 Effective Features of our Taxing System. Inadequacy of Judicial Remedy for Inequalities of Assessment. Separate Sources of State and Local Revenue Required. The Limitation of the Tax Rate Should be Adjusted to Modern Con- ditions. Abolition of all Personal Inquisitions and Returns. Effective Taxation Substituted for Ineffective Personal Property Tax. Efficiency and Equality in Taxation. Income Tax and Property Tax. Taxation of Merchants and Manufacturers. Constitutional and Practical Limitations upon the Taxing Power. MISSOUEI TAXATION. INTRODUCTORY. The development of taxation in the growth of a self- governing people is an interesting study. The exaction of tribute, simple enough in rude communities, becomes a diffi- cult problem in our highly organized industrial life, and the wise solution of this problem, through a system at once just and efficient, is one of the surest evidences of advanced civili- zation. Upon the wisdom of that solution depends the se- curity of property and the happiness of the people. In the States of the American Union two sovereign- ties, National and State, exercise the taxing power over the individual citizen. No State is better illustrative of these peculiar and conflicting conditions of the questions of taxation than the State of Missouri. The central State of the Union, it is geographically and historically the typical American State, and is neither distinctively Northern, South- ern, Eastern or "Western. No State presents a greater va- riety of resources, agricultural, mineral and commercial, and none is more closely allied by the great interstate railroad systems and waterways with the interstate and foreign com- merce of the Union. It thus presents in a peculiar degree the conditions of modern industrial life, which render so diffi- cult, under our dual form of government, the adjustment of an equitable system of State taxation. We naturally find therefore that many of the most im- 1 2 MISSOUEI TAXATION. portant judicial precedents on the subject of taxation are found in Missouri cases in the State and Federal courts. In 1890 Missouri was the fifth State in population, sur- passed only by New York, Pennsylvania, Illinois and Ohio, and this position will doubtless be retained in the census of 1900. With an area of over 69,000 square miles, it is third in the number of farms and in the number of acres of im- proved land. Though perhaps excelling any other State in the variety of its agricultural products, it is not distinctively an agricultural State. It ranks first in zinc and lead pro- duction. Coal is found in thirty-six counties, the estimated coal area being about 23,000 square miles; and immediately opposite the metropolis of St Louis, on the banks of the Mis- sissippi, are the enormous coal beds of Illinois. In 1890 Missouri ranked seventh as a manufacturing State, the value of its manufactured product being $354,561,933. St. Louis now claims to be the third manu- facturing city in the Union, and Kansas City the second live stock market; and both cities, St. Louis on its eastern border, and Kansas City on its western, are separated only by State lines from rapidly growing industrial cities, which though separated from Missouri in the census reports, are in a business sense really part of the Missouri cities, their in- dustries being conducted by Missouri capital. In 1890, out of an enumerated population of 2,669,184, over 800,000, that is, nearly one-third, resided in cities and towns of over four thousand inhabitants, and the census of 1900 will doubtless show a very large increase in the propor- tion of urban population.* Missouri is even more interesting in its history than in its position and resources. Admitted to the Union as a slave *The advance census reports of 1900 show that St. Joseph has in- creased in population from 52,324 in 1890, to 102,979; a gain of nearly 97 per cent. The three cities of St. Louis, Kansas City and St. Joseph show an increase of 209,559. INTRODUCTORY. 3 state, after a contest which marked the beginning of the slavery agitation, its early growth was largely from Ken- tucky, Tennessee and Virginia, and that influence was at first dominant in the direction of the fiscal policies of the State. Thus it will be seen that the privilege tax, or the taxation of occupations, as a means of revenue, which seems to have been more frequently employed in the Southern states than elsewhere, has been continuously adopted and enforced in the State, not only directly, but also through the municipalities ; and such a tax has always been sustained by the courts, though never directly authorized by the Consti- tution. The burden of State taxation in Missouri is light. The State property tax is now limited by the Constitution to fif- teen cents on the hundred dollars, exclusive of state Tax. the tax necessary to "pay the bonded debt of the State," which is known as the State inter- est tax, now ten cents, making a total State property tax of twenty-five cents on the one hundred dollars. At the close of the Civil "War, the bonded debt of the State, nearly all incurred in State aid to railroads, was about $25,000,000. This has been reduced until on The state January 1, 1900, the amount of bonds out- standing was $2,847,000 and it is probable that this amount will be retired by an early date. The statement of the State debt should also include the State certificates of indebtedness, aggregating January, 1900, $4,393,839.42, representing the amounts of the State University and Public School funds, 1 which state certificates have been invested in State bonds subse- ts. 6 quently cancelled, and moneys belonging to those funds which have been paid into the sinking fund, and applied to the retirement of State bonds. 'Art. Ill, Chap. 171, R. S. 1899. 4 MISSOURI TAXATION. These funds, thus invested, included not only the State school fund, but also certain funds of the University and the schools, such as the Civil War direct tax, refunded by the United States to the State, and granted as an endowment by the State to the University. These certificates are payable at different times; some at the pleasure of the State, and are all declared to be secured by the faith and credit of the State. The annual interest upon the certificates has been regularly paid from the proceeds of the State interest tax in the sinking fund. The annua* interest is at the rate of five and six per cent, aggregating $187,000, and requires a tax of about two cents on the hundred dollars. Under the Constitution the only investment permitted for the State school fund is in bonds of the State, or of the United States. The investment of the funds in these certificates has been treated as in ef- Constitution on investment of f ect an investment m bonds of the State, that school Fund. ^ in obligationg of tte Statej resting on the same security, the faith and credit of the State. So much of the principal of the bonded debt as has not been paid from the proceeds of the State's lien upon the rail- roads, primarily chargeable with the debt, and from the in- vestment of the funds above stated, has been paid from the proceeds of the State interest tax; the Consti- Fund" mg tution requiring that at least $250,000 should be appropriated for that purpose, after pay- ment of annual interest. 2 County Organization. The county, as in the Southern States, was, until after the close of the Civil War, the administrative unit, there 2 The constitutional amendment to be voted on at the general elec- tion in November, 1900, authorizes the appropriation of $1,000,000 from the sinking fund in aid of the celebration of the Louisiana Purchase Centennial in St. Louis in 1903. INTRODUCTORY. 5 being no township organization. But after the close of the Civil War, the increase of population, largely Township from the Eastern and Middle States, created organization. ^ some sections of the State, a demand for township organization. In 1872, the privi- lege of adopting township organization was given to the voters of any county, 3 each township being made a body cor- porate for governmental purposes, with a township assessor and collector, the latter accounting with the county treas- urer, who is the ex officio collector of the county. The sys- tem, however, has not proved very popular, for at the pres- ent time (1900) only seventeen out of the one hundred and fourteen counties of the State are under township organiza- tion, thirteen of these being contiguous counties in the northwestern part of the State, and four being south of the Missouri river on the Kansas border. Townships. The townships existing in counties having township or- ganization, and which are thus the unit in public adminis- tration, must be distinguished from the mu- Municipai nicipal townships. 4 The county court is au- Townships. thorized to divide the county into convenient townships; and each of these municipal town- ships, in counties which have not voted for township organ- ization, is declared under the general road law, Article 1 1 1, to be a body corporate for road purposes only. These mu- nicipal townships are authorized to levy taxes for road pur- poses, but such taxes added to the other property taxes for county purposes can not exceed the constitutional limit for county taxation, whether there is township organization in the county or not. "Chapter 168, R. S. 1899. 'Chapter 167, R. S. 1899. 6 MISSOUEI TAXATION. These townships must also be distinguished from what are called congressional townships, that is, the townships based upon the land surveys of the United congressional States government. Owing to the fact that Townships. ihg sixteenth section in each of these congres- sional townships was set apart by the United States government for the inhabitants "for the use of schools," these townships were for many years made the administrative unit of public school administration. But the system was finally abolished in 1874, and since that time, the school districts, into which these congressional town- ships were subdivided, have been the administrative units of the school system. The Constitution, however, requires one-fourth of the revenue from the State revenue tax to be appropriated for schools, leaving only three-fourths for the ex- penses of the State. But in fact, for a num- Appropriation of b er f y ears p as t the General Assembly has State Revenue . . to Schools. appropriated one-third of the current revenue for the use of the schools; and the amount of this appropriation, with the annual interest upon the State school fund represented by the certificates above referred to, is appropriated to the different counties according to school population. The purpose and effect of this application of State revenue, which has been in force for many years past, is to compel the wealthier sections of the State, including the large cities, which have the bulk of the taxable wealth, to contribute to the support of schools in the other and poorer sections. Assuming that this policy of appropriating one-third of the annual revenue to the school districts is continued, the State revenue tax available for current expenses of State administration will be ten cents on the hundred dollars. INTBODUCIOR?. 7 The State has other sources of revenue than the general tax — about one-fourth of the total revenue being derived from dramshop and other licenses, taxes on earnings of ex- press and insurance companies, and corporation fees, with certain miscellaneous sources. The total taxable wealth of the State as returned by the assessors for the taxes of 1900 and corrected by the State Board of Equalization, assuming that the val- „ ,_ ,_ uations of railroad and other properties as- Taxable Wealth. r * sessed by the State board remain unchanged, will make an aggregate assessment for the current year of $1,092,465,864. The aggregate taxes col- lected for State purposes for the year 1898 was $2,429,857.57. But this forms but a small part of the aggregate taxation paid by the people of the State. Thus the aggregate of county, city and school taxes collected for the year, including railroad taxes and dramshop licenses, amounted to over $13,500,000, making the taxation for State and local purposes over $16,000,000. This amount, however, does not include, what is in the aggregate, a very large sum in the way of license taxation levied by the cities of the State, nor does it include the amount, very large in the aggregate, paid by the owners of property under special assessments for what are called special benefits. The aggregate bonded debt of the subdivisions of the State, as reported by the State Auditor July 1, 1898, was as follows: Counties $ 9,530,507 Cities 25,601,478 School Districts 643,517 $35,775,502 Seventy-six of the one hundred and fourteen counties have no bonded indebtedness, and the bonded debt of three eounties is now in litigation; and of the city bonded debt, $19,732,278 was of the city of St. Louis. 8 MISSOURI TAXATION. School Funds. In addition to the State school funds, held for the bene- fit of the State University and the public schools, represented bj the State certificates of indebtedness above referred to, the permanent county school funds aggregated in 1899 $4,296,035.23. This is increased annually by the proceeds of fines, penalties, forfeitures, strays and the sale of swamp lands. The permanent township public school funds, being the proceeds of the sixteenth section in each congressional township, reserved under the grant of the United States for the use of the inhabitants of each town- ship for schools, aggregated $3,678,254.07, and the special school district funds secured by grant, gift or devise was $878,859.11, making a total of local school funds of $8,052,248.41. The State also holds $3,058,973.40 of cer- tificates of indebtedness, representing as before explained, the school funds heretofore applied to the retirement of State bonds. To the payment of these certificates the faith and credit of the State is pledged. This makes a total of public school funds — only the income of which is used for the sup- port of schools — $11,111,221.81. This is exclusive of the similar certificates of indebtedness aggregating $1,334,865.91 held by the State for the State University and its depart- ments. As will be hereafter seen, the existence of these public school funds has been a material factor in the slow development of local taxation for the support of schools. Federal Taxation. It is interesting in this connection to compare the amount of taxes collected in the State of Missouri by the United States government, reported as follows from the Internal Eevenue offices of the State, and is exclusive of Custom House taxation: Year ending June 30, 1898 $9,040,790.31 Year ending June 30, 1899 (War Revenue) $16,369,075.34 Year ending June 30, 1900 (War Revenue) 16,694,236.88 INTRODUCTORY. 9 Historical Periods. The territory now included in the State of. Missouri has been under the Spanish government, the French govern- ment, Territorial control of Congress, and since its admission to Statehood, under three different Constitutions. The history of the development of the taxing system properly begins with the date when Missouri first became a self-governing community, that is, after the Louisiana Pur- chase in 1803. We have, therefore, the periods, first, of Territorial government, from 1804 to 1820; second, under the Constitution of 1820, from 1820 to 1865; third, under the Constitution of 1865, from 1865 to 1875; and, fourth, the period of the present Constitution, adopted in 1875. It will be seen, however, from a careful analysis of the legislation of the State during these successive periods, that three distinct stages in the development of our taxing system may be outlined as follows : 1st. From 1804 to the Constitution of 1865, there was a specification by the General Assembly of the subjects of taxation, real and personal, distinct rates stages of being fixed upon each subject in the discretion Development. f the General Assembly, subject only to the requirement in the Constitution of 1820, that all property subject to taxation should be taxed in propor- tion to value. This system was gradually extended with the increase of population and wealth until, with the close of the period in 1865, nearly all descriptions of property were included. 2d. The general property tax was adopted under the Constitution of 1865 and continued under the Constitution of 1875, whereby all the property in the State, real and per- sonal, was made subject to taxation, exemptions being pro- hibited, this general property tax being enforced by the com- pulsory listing of property for taxation by the individual 10 MISSOURI TAXATION. citizen. The legislation during this period was in ihe lias of perfecting the procedure for the enforcement of this gen- eral property tax. 3d. This period is marked by the growing recognition of the inadequacy of the general property tax to meet the complexities of modern business and property. There is a distinct tendency to adopt special forms of taxation for spe- cial classes of subjects, such as inheritance taxes and fran- chise taxes, to remedy the admitted defects of the general property tax. While the successive stages of development may be out- lined, it will be convenient to consider the subject under the historical periods stated. PART I. HISTORICAL. CHAPTER I. TAXATION tTJSTDEE TEBBITOBIAL GOVERNMENT. The history of taxation by a self -governing people in Missouri properly begins "with the purchase of Louisiana by the United States from France in 1803. Under colonial government, French or Spanish, the inhabitants had no voice in their own taxation. 1 Louisiana Purchase. The people inhabiting the territory now included in Missouri did not acquire the right of levying their own taxes immediately upon the ratification of the Louisiana Purchase in 1803. On October 31, 1803, the President was author- ized by Congress to take possession of the territory acquired by the treaty, and until the expiration of that session the military, civil and judicial powers of the government were declared vested in such person or persons, and "to be exer- cised in such manner as the President of the United States may direct, for maintaining and protecting the inhabitants of Louisiana in the free enjoyment of their liberty and re- ligion." A few months later, 2 the territory acquired from 'Under the later years of Spanish rule, there was a tax on salaries and legacies, and a license ior the sale of liquors, and in addition a duty of six per cent on imports and exports. It seems that this revenue was inadequate, and annual deficits were paid from the royal treasury. Carr's History of Missouri, page 41. "Act of March 16, 1804. 11 12 MISSOUEI TAXATION. France was divided into the Territory of Orleans and the District of Louisiana, the latter including the present terri- tory of Missouri, and the Governor and Judges of the Indiana Territory, then adbjoining on the East, were author- ized "to establish Judges and Courts for the District of Louisiana, and to make all laws which they may deem con- ducive to the good of the government and the inhabitants thereof." * * * "The Governor shall publish throughout the said District all the laws which may be made as afore- said, and shall from time to time report the same to the President of the United States to be laid before Congress, which, if disapproved by Congress, shall cease, and be of no effect." The first taxation in Missouri, therefore, under United States rule was not imposed by the inhabitants themselves, but was levied under the authority of Congress at Vin- cennes, then the capital of Indiana Territory, by the Gov- ernor and Judges of that Territory, 3 the Governor being "William Henry Harrison, afterwards President of the United States. This act declared certain specific subjects of taxation and levied specific rates. Houses in town, town lots, outlots and mansion houses in the country valued at First Revenue two hundred dollars and upwards, and water Act - and wind mills valued by the appraisers, were taxed at a rate not exceeding thirty cents on the one hundred dollars; and live stock, a specific rate for the different animals. Bond servants and slaves were taxed not exceeding one dollar. Farm lands, it seems, were not included. Bachelors, who did not have taxable property to the amount of four hundred dollars, were taxed two and one- s Aot of October 1, 1804, 1st Territorial Laws, page 34. TEERITORIAL GOVERNMENT. 13 half dollars each. This last tax was made Bachelors Taxed, effective by requiring every householder to give the names of all bachelors taxable under the law who lodged in their respective houses, and if the bachelor failed to pay the tax, he was committed to the district jail to remain until the tax was paid, "unless some person responsible in the opinion of the sheriff shall be forthcoming therefor." There was also a ferry license not exceeding ten dollars for one ferry a year, and a retail merchant's license required of every merchant who dealt in merchandise Licenses. "other than the product or manufacture of the district," not exceeding fifteen dollars per annum. This is the beginning of a discrimination which proved a fertile source of litigation in subsequent years. This first revenue act required the taxpayer to make a sworn return to the sheriff of the several species of property owned by him that were subject to taxation, and on his fail- ure to make such return, authorized the sheriff to list such property "agreeably to the best information he could pro- cure," the property so ascertained being subject to a triple tax. The acquisition of the territory by the United States had resulted in a large immigration; and the subjection to the government of the Indiana Governor and Judges raised great opposition, resulting in a memorial to Congress de- manding self-government. In the following year, there- fore, the District of Louisiana was made the Territory of Louisiana. A Territorial government was authorized and the legislative power vested in a Governor and three Judges, the Governor being authorized to divide the Territory into districts and to appoint Magistrates for the same. A new revenue act was passed in 1806, not differing, however, in general features from that enacted by the 14 MISSOUEI TAXATION. Indiana Governor and Judges. Finally, on June 4, 1812, the Territory of Missouri was organized, being the territory theretofore called Louisiana, and the legislative power was then vested in Territory of tne General Assembly, consisting of a Gov- Missouri. ernor, General Council and House of Kepre- sentatives. In this organizing act it was pro- vided, that no tax should ever be imposed on land the prop- erty of the United States-, and that lands of nonresident pro- prietors should never be taxed higher than those of residents. The revenue system established by the act of 1804 was modified from time to time under these different forms of Territorial government. Thus in 1806 public billiard tables were added to the subjects of taxation and the tax on bache- lors was reduced to one dollar. Taverns were licensed and regulated, the tax fee to be not less than one hundred dol- lars, according to the discretion of the Court of Quarter Sessions, who were required to "take into .consideration the stand, and the business which would probably be done therein." By the act of November 11, 1808, 4 material changes were made in the revenue system, and carriages of pleasure appear for the first time among the subjects of taxation; and it was declared (Section 10), to be the duty of the asses- sor "to value property to the best of his ability and judgment of what he thinks it may bona fide sell for in ready money." This act shows an effort to provide a separate fund for the general Territorial government as distinct from local governments, in that it required the payment into the Terri- torial Treasury by the sheriffs, of all moneys arising from licenses. Under this act the merchant's license is made ten dollars for each six months or twenty dollars per year, the discrimination in favor of merchandise which was the manu- 4 I Territorial Laws, Ch. 71, p. 226. TERRITORIAL GOVERNMENT. 15 f acture or produce of the Territory being continued. By the act of January 19, 1814, 5 a Territorial tax was levied on all lands in the Territory at the rate of fifty cents for every 100 arpents, and on houses and town lots at the rate of thirty cents on each one hundred dollars of valuation "as the assessor shall believe that the lot with the improve- ments thereon are worth in ready money." The tax on stores for retailing merchandise in the Territory was fixed at fifteen dollars for each six months, the discrimination against foreign merchandise being omitted. Parties trading with the Indians were required to pay one per cent of the amount of the invoice of their equipment. Original writs and executions of the courts were taxed seventy-five cents, and on all convictions by verdict, a tax of one dollar was assessed. The act of January 21, 1815, 6 increased the tax on land to sixty cents per 100 arpents, taxed all slaves above the age of ten years and not exempt for sickness sixty-two and one- half cents, and levied a tax of $1.50 for every $100 of value of wheel carriages kept for pleasure. In this act we find the first Missouri tax on attorneys- at-law, which was fixed at the sum of ten dollars, and on each practicing physician the sum of ten dollars Tax on Attorneys P er animm j each original writ and execution and physicians. was taxed one dollar, and each deed and mort- gage fifty cents. A separate county tax was levied on live stock and on slaves, and more detailed pro- cedure was provided for the enforcement of the tax against lands. An explanatory act passed the same day provided that it should not be construed as requiring an attorney to pay the Territorial tax in more than one county. By the act of January 24, 1816, 7 private or unauthor- B I Territorial Laws, p. 329. "I Territorial Laws, p. 382. 'I Territorial Laws, p 482. , 16 MISSOURI TAXATION. ized lotteries were taxed fifty per cent of the Lotteries. money or property proposed to be disposed of as stated in the scheme of lottery. At the time of the Territorial organization Congress made liberal endowments for public education. The six- teenth section in each township for the use schools. of the inhabitants of the township, and the common lands in cities and towns was set apart for the use of schools. Nothing was done, however, under Territorial organization in the way of establishing a school system. Public roads, however, received attention, and the sys- tem was established, which in its main feat- PubHc Roads. ures has been continued to the present time. All male persons, and their male slaves — at first of full age and subsequently between sixteen and forty-five years of age — were subject to assessment for cer- tain number of days' labor on the public roads. The assess- ment was made as near as possible in proportion to the prop- erty owned; and the justices of the peace were required to apportion the persons to the work, regarding "as far as pos- sible the convenience of the people, and the situation of the road." ISTonattendance of any person, or his slave, son or ward, was punishable by fine, which was applied to hiring laborers, and the supervisors were authorized to commute labor for teams. This Territorial revenue system was reasonably adapted to the conditions then existing, and therein is in singular con- trast to the system of the present day. The summary. bulk of the personal property consisted of personal chattels, live stock or slaves, which could not be concealed. The subjects of taxation were selected by the General Assembly and specific rates fixed; and, moreover, there was a distinct and apparently success- TERRITORIAL GOVERNMENT. 17 ful effort to separate the local from the Territorial reve- nues. 8 8 See paper read before the Missouri Historical Society by Prof. Hicks, late Professor of Political Economy in the Missouri State Uni- versity. Encyclopedia of St. Louis, vol. 4, p. 243. MO. TAX. — 2 CHAPTEK II. TAXATION UNDEB THE CONSTITUTION OF 1820. The enabling act of Congress, authorizing the establish- ment of a State government in Missouri, was approved March 6, 1820. 1 The Constitution adopted by the conven- tion of 1820, whereunder Missouri was admitted to the Union in the same year, continued in force, until the adop- tion of the Constitution of 1865, after the close of the Civil "War. It is not necessary to further refer to the exciting controversy connected with the admission of the State, mark- ing the beginning of the antislavery agitation. The State was admitted as a slave State, and slaves continued as sub- jects of taxation until the Civil War. Some amendments to the Constitution were adopted dur- ing this period of forty-five years, but none related to the subject of taxation. The only constitutional constitution of provision, therefore, in force during this pe- l82 °- riod, other than the provisions required by Act of Congress (supra, p. 14), against taxation of United States property and discrimination against nonresi- dents, was the following in the declaration of rights in the Constitution of 1820: Article XIII. That the general grant and essential principles of liberty and free government may be recognized and established, we declare: * * Sec. 19. That all property subject to taxation in this State shall be taxed in proportion to its value. The first revenue act of the State, adopted December l l Territorial Laws, p. 628. 18 UNDER THE CONSTITUTION OP 1820. 19 12, 1820, 2 contained no material change from the system in force under the Territorial government, First Tax on except that it included the first tax on banks, Banks. r , which was also the first corporation tax in the State of Missouri. Every incorporated F tion Tax""*" banking company was taxed at the rate of one quarter of one per cent on the whole amount of its capital stock. The subjects of taxation were specifically declared in the statute as under the Territorial government. The rate of taxation was one quarter of one per cent. The tax on bachelors adopted by the Territo- Tax on Bachelors . 1 ., , . - , continued. rial government was continued, each bachelor between twenty-one and fifty years being taxed one dollar. The principle of taxing the different subjects of taxation at different rates, in vogue un- der the Territorial government, was continued. The increase in the standard of living is noticeable, as we find pleasure carriages, watches and chains named in the subjects of taxa- tion. The period from 1804 to 1820 had been marked by a large increase in population, from ten thousand three hun- dred in 1804 to sixty-six thousand in 1820. But the period succeeding the admission as a Loan Certificates. . btate was one ol nnancial depression, and scarcity of currency. In 1821 the General Assembly passed the famous Loan Certificate act, authoriz- ing the officers of the treasury to issue certificates to the amount of two hundred thousand dollars, of denominations from ten dollars to fifty cents, which were receivable at the treasury in payment of taxes and moneys due the State, and were payable to the officers of the State for salaries, and were also loaned to the citizens on mortgages or on personal se- 2 1 Territorial Laws, p. 730. 20 MISSOUBI TAXATION. curity. These certificates were held by the United States Supreme Court to be bills of credit, and therefore prohibited by the Constitution of the United States. 3 One-tenth of the certificates were redeemed each year by the terms of the act, so that when the case was finally decided in the Supreme Court of the United States, all of them had been redeemed. That court held, reversing the Supreme Court of Missouri, that the invalidity of the certificates was a good defense to a note given in consideration of a loan of the same. It was urged that they were not made a legal tender, but the court held that that was not an essential quality of bills of credit, although it might be their most pernicious quality. Counties were authorized to collect taxes on all property made taxable by law for State purposes, provided that the county tax should not exceed fifty per cent of county Taxa- the amount imposed by law for State purposes tl0n ' on the same subjects in any one year. Later 4 this county levy was authorized to be in- creased to pay off outstanding debts, providing that the county tax so raised should at no time be so high as to exceed the ratio of taxation in the said county for State purposes. In 1822 5 the tax on bachelors was abolished and does not appear again in the State. But in its place a poll tax was levied on each free white male inhabitant, the Tax on Bache- tax var yi n g from time to time from twenty- lors; Poll Tax. g ye centg t(J one dollar (Ju^g j^g eri tire period; being fixed at the latter sum in 1861 at the outbreak of the Civil War. The first revised revenue act of 1825 6 declares the sub- jects of property taxation as follows: Lands and improve- ments, slaves above three years of age, live stock, pleasure "Craig v. Missouri, 4 Peters, p. 410. '2 Territorial Laws of Missouri, p. 259. "lTerritorial Laws of Missouri, p. 1013. "8 Laws of 1825, p. 663. UNDEB THE CONSTITUTION OP 1820. 21 carriages kept for use, household furniture above five hun- dred dollars in value, watches and chains, mills, tanyards and breweries, all at the rate of twenty-five cents on the one hundred dollars in value. The day of assessment was Janu- ary 1 of each year, the taxpayer listing property owned by him on that date. Taxation for Schools, 1820 to 1839. The Constitution provided 7 that schools and the means of education should forever be encouraged in the State, and that the General Assembly should "take measures to pre- serve from waste or damage such lands, as have been, or hereafter may be granted by the United States for the use of schools within each township in this State, and shall apply the funds which may arise from such lands in strict con- formity to the object of the grant; one school or more, shall be established in each township as soon as practicable and necessary, where the poor shall be taught gratis." In 1825 the first school law was enacted. Each con- gressional township was made a school district, and the pro- ceeds of the sale of the sixteenth sections, set First school apart by the general government for the use Law- of schools, was made a school fund for the benefit of the township, administered by the county court. The act provided, that whenever the expenses of any school in any precinct exceeded the amount appro- priated to such precinct, the board of trustees could provide on the petition of two-thirds of the householders, for levying and collecting taxes to supply the deficiency, which tax was to be levied proportionally on the property of all those in the district having scholars to send to such schools, agreeably to the number each should send. In 1835 8 it was provided that if the annual income from 'Article VI, sec. 1. 8 E. S. of 1834-35, p. 561. 22 MISSOURI TAXATION. the school fund was not sufficient 1 to defray the expenses of keeping up the schools for six months of the year, the trus- tees should apportion the deficit among those who should send scholars to the school, in proportion to the number they should send; and that at the ensuing August election the people should vote on levying a tax of three and one third cents on every one hundred dollars on all the property tax- able by law, and "if two thirds of the voters of the county voted in the affirmative, the tax should annually thereafter be levied by the county court with other taxes." It does not appear how many (if any) counties voted for this tax, and the law was repealed in 1839. Road Taxes. No material change was made in the system of assess- ment of compulsory service on the public roads, established under Territorial government. In 1822 a fine of two dollars was imposed for every day a person, or his son, ward, ap- prentice or slave, failed to labor with due exertion on the roads, and all fines went to the county. The overseer was empowered to require any person to bring with him his wagon and team, and the owner failing so to do, was to pay the sum of five dollars for every day of failure. By subse- quent act all fines were turned over to the overseer for ex- penditure on the roads. By the act of 1835, all able-bodied male inhabitants over eighteen and under forty-five years of age, who had resided in the State three months and in the district one month, were required to work on the public roads, and nonresidents, in- cluding the owners of any real estate, were required to pay a road tax not exceeding one half of the State tax, and a road tax not exceeding ten per cent was levied on all licenses. But all such persons were allowed to discharge such road tax by working on the roads at the rate of seventy-five cents a day. UNDER THE CONSTITUTION OE 1820. 23 The general system thus established continued through- out this period. By the act of 1855 every person subject to work on the roads paid a poll tax of two dollars each year, and a road tax not exceeding thirty per cent of the amount of the State tax, and any person owning a slave or slaves subject to pay a poll tax was required to furnish the overseer with his name, and such person was charged with the poll tax of his slave, to be paid as other taxes, if the slave had not been charged to the person for work on the road. Extension of Taxation— Corporations, Money, Notes, etc. The first general corporation tax appears in the act of February 11, 1833. 9 Railroads were introduced in the State during this period, the first charters being First General granted in 1837; but no railroads were built Corporation « ... - Tax. until 1850, and no general system oi railroad taxation appears to have been inaugurated, un- til after the adoption of the Constitution of 1865, that is, in 1871. Prior to this date, railroads were taxed like other in- corporated companies, except where the general charter of the railroad prescribed a different method. In some cases these special charters provided exemption from taxation for a term of years. The growth of wealth and the change in social condi- tions are indicated by the gradual extension of the subjects declared to be taxable by law. In the act of 1835, 10 there is a general levy of one-eighth of one per cent on houses and improvements and "all the other property, real and personal, subject to taxation, including stocks in banks and other in- corporated companies;" as also an extension of the system of license taxation, which in this act was imposed upon auction- eers, billiard tables, ferries, merchants and inn and tavern keepers, while each conviction in the criminal courts was °2 Territorial Laws of Missouri, p. 377. 10 R. S. of 1834-35, p. 528. 24 MISSOURI TAXATION. taxed sixty-two and one-half cents. The messages of the Governors to the General Assem- bly during this period, contain frequent references to the irregularities of the assessments. Thus Gov- Messagesof ernor Boggs in 1836 says: "In some cases, Governors. j^^ ^.^ ^^ ^ ^ ^ fojfejg per acre, are valued at one dollar and a half to two dollars per acre." Governor Dunklin in his message in 1834 recommended that bank notes be made taxable. The depression resulting from, the financial convulsion in 1837 resulted in a strong de- mand for the including of money and notes, as well as other personal property, in the list of taxable subjects. This was finally effected in 1841. 11 The date of assessment was changed in 1839 to February 1st, and so remained till 1863. An advalorem tax was then imposed, in addition to the tax on licenses, on all money brokers and exchange dealers, on all bills of exchange, notes, bonds and Tax on Money, other securities, and on all money on hand, Notes, etc. taken, kept or negotiated in their business as such, "other than such which is the property of citizens of the State except themselves." And a like tax was levied upon all other persons, citizens of the State, on money loaned at interest to citizens of the State, and on bills of exchange, notes, bonds and other securities. Money brokers were also made to pay a graduated li- cense tax, but citizens of the State were also taxed upon their money loaned at interest to citizens of the State, and on bills of exchange, notes, bonds and other securities. This seems to have been the first attempt in the State to tax that class of property, that is, money and securities, but it was there- after included, through the successive revisions of the reve- nue law, in the enumeration of the subjects of taxation. "Acts of 1841, p. 125. UNDER THE CONSTITUTION OF 1820. 25 This act of 1841 also adopted a system in regard to tax- ation of corporations which, in its main features, is still re- tained in the taxation of stock in banks, trust Tax on corporate companies and insurance companies. A tax stock. wag levied upon all property owned by the corporation "over and above their capital stock," and it was made the duty of the president or other chief officer of any incorporated company, the shares of stock of which were taxable, to deliver to the assessor a list of all shares of stock in the company. The tax assessed on the shares was paid by the corporations, which were entitled to recover from the owner of the shares the tax thus paid, and the tax was made a lien on the shares, to be paid before any transfer of the stock could be made. The collector was given power to sell the stock in case the corporation failed to pay the tax. It was subsequently enacted in 1843, that this act should not be construed to require any tax to be assessed on notes and bonds "not taken in consideration of money loaned at interest, and of which the obligor or obligors were insolvent in the opinion of the obligee." In 1842, after money and notes had been made taxable, Governor Reynolds in his message to the General Assembly said: "From the influences of interested counsels or a mis- taken sense of duty, the assessors of forty-three counties (out of seventy in all) fail to execute the act, imposing a tax upon money loaned at interest and money invested in bonds and notes, passed in 1841." These important changes were set forth in the revision of 1845. 12 In this enumeration of taxable subjects, we find not only bills of exchange, bonds, notes, money, but house- hold furniture, " to include silver and gold plate kept for use or ornament, used by any one family, above the value of "It. S. 1845, p. 927. 26 MISSOURI TAXATION. two hundred dollars." The rate of taxation was fixed at one-sixth of one per cent and the poll tax at twenty-five cents. The advalorem tax was reduced, as more revenue was col-; lected from the extension of the system of license taxation. The agricultural interests of the State seem to have been as potent in the legislature then as now, and the at- tempted discriminations, not only in favor of Legislation for the growth and products of the State, but in Farmers.. .£ avor Q £ ^ agr i cu itural class as against the mercantile class, resulted in continued litiga- tion. In 1841, farmers were authorized to sell at their places of residence, free of taxation, the products of their farms in exchange for iron, sugar, coffee, tea, leather or cot- ton, "provided that not less than a sack of salt shall be sold to any one person, nor less than fifty pounds of sugar, twenty-five pounds of coffee nor one bundle of cotton." This act seems to have been repealed by omission from the revis- ion of 1845, but subsequently, in- 1847, 13 an act was passed which still remains on the statute books, having been con- tinued through successive revisions, providing that any farmer who shall sell the products of his farm for iron, salt, sugar, coffee, tea, spun cotton, nails or leather, can retail such articles at his place of residence free from taxation or license. Merchants at first were taxed through uniform license charges, then subsequently were subjected to an advalorem tax on their goods, discriminating, however r Taxation of in favor of the growth and manufacture of Merchants. ^ g^ . ^ g^^ ^ -^g were sub j ected to hoih a graduated license tax and an adval- orem tax on their goods. Both of these discriminations, that is, the discrimination through double taxation, and that in favor of home products and manufacturers, were finally ad- "Acts 1847, p. 96. UNDEB THE CONSTITUTION OF 1820. 27 judged unconstitutional. The importance of the questions involved in this litigation justifies separate consideration, infra, p. 40. A discrimination of a different kind appears in the act of February 7, 1847, 14 entitled "An act to encourage the diffusion of useful knowledge," which pro- Exemption of vides that "no tax of any kind shall be imposed upon the sale of books, maps or charts in this State, nor shall any license of any kind be nec- essary to authorize the sale of such articles." This exemp- tion was continued in the revision of 1855, and seems to have continued in force until the adoption of the Constitution of 1865. Act of 1847, Taxing Professions and Incomes. In 1847 the State seems to have been in financial straits, and an act was passed entitled "An act to sustain the credit of the State." 15 Lawyers, doctors and ped- Licensmgof dlers of pills and patent medicines were all Lawyers and x x Doctors. required to take out licenses annually. Law- yers and doctors were fined not less than fifty nor more than five hundred dollars for doing business with- out a license, and the amount of license was fixed at the sum of $2.50 when the business for the preceding twelve months was less than five hundred dollars, $5.00 when it was be- tween five hundred and one thousand dollars, and $7.50 if over one thousand dollars and not exceeding two thousand dollars, and so on in that proportion, the tax being increased $2.50 for each additional sum of one thousand dollars of business. Each person or co-partnership of persons follow- ing the practice of law or practice of medicine for a Hveli- hood was declared to be a lawyer or physician, as the case might be. "Acta of 1847, p. 117. M Acts of 1847, p. 123. Income Tax. 28 MISSOURI TAXATION. The same act levied, in addition to the ordinary poll tax, an income tax of one per cent upon the amount of salaries of all persons, who receive a salary in the capac- ity of public officials or private individuals, and this was made applicable to county and State officers who received compensation in fees, and members of the legislature. These taxes were de- clared to be levied for State purposes only, and the county courts were prohibited from levying any such tax for county purposes. In this act again there was a discrimination in favor of the farmers, as it was provided that it should not be con- strued so as to impose a tax upon the wages or salaries of persons employed on a farm, unless such persons were em- ployed as overseers or managers of such farm. The tax upon lawyers was contested. Mr. C. C. Sim- mons of St. Louis refused to take out a license and was in- dicted by the Grand Jury for practicing law Simmons v. without a license, was convicted and fined in state - the criminal court and the judgment on appeal was affirmed by the Supreme Court at the October term, 1848. 16 The act was claimed to be unconstitutional on the ground that it was retrospective in its operation and, there- fore, in violation of the seventeenth section Tax on Lawyers f ^g d ec l ara ti n of rights, which declared HeldConsti- ... tutionai. that no law retrospective in its operation should be passed. The Supreme Court held that the act was not retrospective, that the only object of referring to the business of the preceding year was to regu- late or fix the tax for the following year; that the granting of a license was a mere naked grant of a privilege without consideration, and that the State could revoke the privilege "Simmons v. State, 12 Mo. 268. UNDER THE CONSTITUTION OF 1820. 29 or impose such conditions as it deemed proper where de- manded by the public good. The court said further: The power of the General Assembly of this State to levy taxes for the purpose of revenue is a general primitive power, coeval with the Constitution and is inseparable from the exercise of sovereignty. The only restrictions on this power contained in the Constitution of this State are, that "all property subject to taxation in this State shall be taxed in proportion to its value," and that no tax shall be imposed on lands the property of the United States, nor shall lands belonging to persons residing out of the limits of this State ever be taxed higher than the lands belonging to persons residing within this State. Aside from the foregoing limitations and those contained in the seventh sec- tion of the first article of the Constitution of the United States, the General Assembly of this State have an unlimited power over the sub- ject of taxation. This decision is notable as the earliest discussion in our reports of the principles of taxation. This assessment on the salaries of private individuals was repealed at the session of 1849, 17 and in 1851 18 all the provisions of the act of 1847 in regard to the Tax on Lawyers taxation of lawyers and doctors, and the tax and Doctors J ' Repealed. on salaries, were repealed. It should be noted that this is the only time in the history of the State, since its admission to the Union, that a tax on lawyers and doctors has been imposed by the State itself. 19 Salaries of St. Louis Judges. The act of March 3, 1851, required the county court of St. Louis county to pay out of the county treasury $1,000 additional to the judges of the circuit court and the court of common pleas and criminal court, making a total com- pensation of $3,000. The county court refused to allow the accounts on the ground that the act "Acts of 1849, p. 112. I8 Acts of 1851, p. 251. M In 1879 the act was passed which is still in the statute books, pro- hibiting any municipality from taxing lawyers, doctors, preachers or teachers; R. S. 1889, sec. 980. 30 MISSOURI TAXATION. was unconstitutional, and Judges Alexander Hamilton of the circuit court and Samuel Treat of the H st?L t ouis V ' court of common pleas sued out writs of county. mandamus to compel the payment. It was claimed that increased taxation would be required, and this would be in violation of the nineteenth section of the Declaration of Eights, that all property should be taxed in proportion to its value, and that any act, which increased the county tax in any one county, was in violation of this provision. The Supreme Court held that this was untenable, saying: When in the exercise of their judgment the General Assembly de- termine that the benefit is so exclusively local, as to require that the expense should be borne by the treasury of a county, rather than by the State treasury, the clause of the Constitution requiring property to be taxed in proportion to its value is not violated. But the court said that the provision of the Constitu- tion was mandatory, saying: What property should be subjected to taxation is left to their discre- tion, but when they have selected the subjects, the rule for assessing the tax, is, in proportion to the value of the property. It is not nec- essary in this ease to decide, whether a different rate of taxation can be imposed upon different descriptions of property, all being taxed by an advalorem tax. The idea of equality in taxation, is certainly not the prominent idea conveyed by this clause; nor can we suppose that it was designed to be conveyed, when we consider that so many Constitu- tions of other States previously adopted contain clauses expressly en- joining equality in taxation, and when the insertion of a word or two in the clause would have expressed the idea clearly. It may be further observed, that if equality in taxation is required by this section, then the provision in the first section of the tenth article, that the lands of nonresidents shall never be taxed higher than the lands of our citizens, is entirely superfluous. 10 Assessments for Local Improvements. The construction of this constitutional requirement, that all property subjected to taxation shall be taxed in propor- tion to value, was again construed in a series of cases, estab- 2 °Hamilton v. St. Louis County Court, 15 Mo. 1 (1851). UNDER THE CONSTITUTION OF 1820. 3.1 lishing the principle of special assessments on property bene- fited by local improvements. (See infra, p. 192.) Thus in one of the leading cases on this subject, 21 the court, in a learned opinion by Judge Leonard, overrules the objection that these local assessments are in violation of the Constitu- tion, and discussing the constitutional provision, says: This was the subject of a good deal of discussion in the case of Crow v. State, 14 Mo. 237. Whether the effect of the provision be to require the Legislature in laying a general property tax to tax all property in the State subject to State taxation without omitting any, or whether it only requires them to tax without discrimination all the objects of property that they may select for taxation, or whether the clause is satisfied by taxation levied according to the value of the taxed property, and not arbitrarily at specific sums fixed by the legislature, as the judges in the case referred to seem to have respectively thought we need not stop to inquire — the question before us being, whether an assessment of this character is a property tax within the meaning of this constitutional provision. The court said that the whole problem of taxation was to distribute the burdens of government in proportion to the benefits, and this was not practicable in the case of the gen- eral expenditures of government, and therefore general tax- ation was adopted, but in local taxation it was practicable, and adds: Our State revenue is assessed against persons in respect to such other property as the Legislature selects for taxation and in proportion to the value of it, while formerly under the Territorial government it was levied arbitrarily on property at specific sums fixed by the Legis- lature, and certainly one effect of the constitutional provisions under con- sideration is to forbid the ancient mode of assessment and to require the Legislature, in the imposition of taxes on persons in respect to their property, to assess them according to the value of the property selected as the objects of taxation, and not at arbitrary fixed rates prescribed by the Legislature. In the early fifties, railroad building began in the State "Newby v. Platte Co., 25 Mo. 258. 32 MISSOURI TAXATION. and the credit of the State and municipalities was loaned to state Aid to a number of railroad enterprises. This was Railroads. ^ beginning of the State bonded debt. In 185Y 22 was passed an act entitled "An act to establish and maintain the public credit of the State of Missouri," ex- empting from taxation for State, county and other purposes: First, all bonds issued by the Exemptions of State and loaned to any railroad company in State and J . 3 ■, county Bonds, the State. Second, all bonds issued by any railroad company under the law of the State, which were guaranteed by the State. Third, all bonds issued by any county, city or other municipal corporation for stock in any railroad company chartered by the State. Fourth, all bonds issued by any railroad company under the laws of this State. The same session of the General Assembly passed an act entitled "to exempt certain widows from taxation," 23 and providing that thereafter no widow whose property did not exceed two hundred dollars in value shall be taxed for State, county or other purposes. These exemptions seem to have been repealed by the revenue act of 1861. 24 This latter act included among the subjects of taxes, not only county and State Repeal of bonds, other than those of this State, but also Exemptions. ^ g tate an( j county bon( J g and Q fa eI p^c stocks of this State. This repeal, however, did not affect the exemption of the bonds, which had been issued while the exemption was in force, and this included the railroad bonds issued by the State. M Acts of 1857, p. 177. M Acte of 1857, p. 180. "Acts of 1861, p. 61. UNDEB THE CONSTITUTION OF 1820. 33 This seems to have been the only exemption by the State of her own securities from taxation. 25 The specific enumeration of the subjects of taxation was continued in the successive revenue acts. The specification of the subjects of taxation was extended, and an interesting contrast illustrative of the growth of wealth of the State is afforded in the comparison between the act of 1820 and the act of 1861. The revenue act of 1861 included not only the enumer- ation of different classes of personal property, but also all in- comes derived from public stocks, stocks of chartered companies, or other property real or Actofl86l. r ' , . i o mi personal, that were not taxed in the State, lne subjects specifically exempted from taxation, included all property of the United States and of the State, counties, cities, all school houses and educational property and furniture and equipments, all hospitals and public poor houses, all churches and other public buildings for religious worship, with their furniture and equipments, cemeteries and graveyards, and all real estate and other property belonging to any agricultural society, "and none other." The Civil "War. The period of Civil "War from 1861 to 1865, which con- vulsed Missouri more than any other State, brought impor- tant changes in the revenue system. Payment of interest on the State bonds (except those is- sued to the Hannibal and St. Joseph Railroad) was suspended from July 1, 1861, until January 1, 1868. ^In 1879 when the State was refunding its then maturing bonds at a lower rate of interest, Gov. Phelps reported to the General Assembly that he had been urged to recommend the exemption of the bonds from taxation. He refused to do so, saying that apart from the constitutional objection, he deemed it against public policy thus to encourage invest- ments in such securities, thereby discriminating against other invest- ments. See Journal of 1879, Appendix. MO. TAX. — 3 34 MISSOUKI. TAXATION. Slaves which had been subjects of taxation since 1804, there being 114,931 in the State, according to the census of 1860, valued for taxation at over $40,000,000, slavery ceased to be subjects of taxation on July 1, - Abolished. 1863, in accordance with an ordinance of the State convention; though slavery in the State was not finally abolished until January 1, 1865. The total taxable wealth of the State was reduced from $296,552,806 in 1860 to $198,602,216 in 1863. The war brought a heavy increase of taxation. In 1860 the State revenue tax was twenty cents, the interest tax ten cents and the poll tax thirty-seven and one-half cents. In 1864 the revenue tax was thirty-two cents, the military tax twenty cents, the revenue poll tax one dollar and the military poll tax two dollars. This military tax did not disappear un- til 1866. In 1863 and 1864, there was a special commu- tation-tax paid in consideration of exemption from mili- tary duty of thirty dollars, in addition to a one per cent tax upon property. There was also an additional property tax of one-fifth of one per cent for military purposes. In 1864, the date of assessment, which theretofore had been February 1, for the taxes of the same year, was changed to September 1 of the preceding year. Persons wounded in military serv- ice were exempted from paying poll taxes. At the close of this period, during the years 1865 and 1866, an incowve tax of three per cent was levied on the sal- aries of all officers who were exempt from military duties in consequence of such offices, War Income Tax. " x and of two per cent on the salaries and income of all persons, including military officers. It was provided that the tax on income should be on the ex- cess only over six hundred dollars, a double penalty being imposed in case of false statement or refusal to make return, the income in that case to be ascertained by the assessor from the best obtainable evidence. This act was held constitu- TJNDEK THE CONSTITUTION OP 1820. 35 tional by the Supreme Court. 26 But the tax was, by the terms of the act, levied only for two years. Taxation of Corporations. Reference has been made to the taxation of corpora- tions, 27 by the taxing of their stock against the shareholders and also the taxation of the property of corpo- corporation rations "over and above their capital stock." A change was made in 1855 which made an exception of manufacturing companies, which were declared taxable on their property only, that is ( , the companies were taxed on their property, as individuals, and they were not taxed on the articles manufactured during the year in which the sale was made. This exemption continued till 1893. (Infra, p. 92.) This method of taxing corporations, including railroads, was continued down to the adoption of the Constitution of 1865. The meaning of the language in the revenue law that corporations should be taxed on their property "over and above their capital stock" was discussed by the Supreme Court in 1860 and again in 1866, 28 and it was intimated that the framer of the act did not have in his mind a very clear idea of the subject, as the capital stock stood for the property of the company, and that it was not easy to see how a cor- poration could have any other property than that, which would be represented by the stock in the hands of the share- holders. It may be suggested that what the framer did have in mind, was the not infrequent case of the corporation accu- mulating a surplus over and above its capital stock, though, of course, if the capital stock was taxed to the holders at its 28 See infra, p. 58. "See supra, p. 25. M Kailroad Co. v. Schacklett, 30 Mo. 550; State v. Eailroad Co., 37 Mo. 265. See, also, State v. St. L., K. C. & N. R. R. Co., 77 Mo. 203. 36 MISSOURI TAXATION. true value, the surplus would be taxed as much as any other property of the corporation. School Taxation, 1839-1865. The Constitution, as already seen, provided for the ap- plication of the funds from the United States grants for pur- poses of education, and that one school should be held in each district where necessary, at which school "the poor should be taught gratis." 29 These funds were administered upon the theory, that they would be sufficient for the maintenance of schools for those who were unable to pay, and consequently local taxation for the schools was slowly developed. The State school fund was established in 1839, consisting of the moneys deposited with the State under the act of Congress of 1836, and the proceeds of the saline lands, and of escheats and forfeitures. Each congressional township was made a school district, as provided in the original act of 1825, and the sixteenth section fund was administered by the county court of the county, in which the township, or the greater part was located, for the benefit of the schools in the town- ship. A county school fund was also established, consisting of fines, penalties and forfeitures. These funds thus estab- lished have continued to the present time. This act also empowered the organization of subdistricts and authorized a tax on the taxable inhabitants, not exceed- ing fifty per cent of the amount of the State taxes, for the purpose of "purchasing sites, erecting school buildings and furnishing the same." The apportionment of State school moneys, which was provided by the same act, being the be- ginning of the system which has continued to the present time, was conditioned upon the school in each district being kept open at least three months in each year, in charge of a qualified teacher. 30 See supra, p. 21. UNDEB THE CONSTITUTION OF 1820. 37 In 1853 the system of appropriating twenty-five per cent of the State revenues was established, this amount being added to the income of the State school fund and apportioned to the districts. No person was entitled to vote at the school township meeting for directors except free white males over twenty- one years of age, who were freeholders or householders there- in, or taxpayers, or were the parents or guardians of a white child, or master of an apprentice under twenty-one years of age. The report of the State Superintendent for 1860 says that $184,000 was raised in the preceding year by taxes for school buildings, and $250,000 from rate bills or voluntary contributions. The first district tax for the support of schools author- ized in the State was in 1864, 30 when the trustees of school districts were given power to levy a tax for the payment of teachers and the support of First Local Tax schools, provided that the amount of the tax school" should never exceed the sum of one hundred and fifty dollars in any one district during the same year. The trustees were to determine the amount required and were to raise that amount with five per cent added for the collector's fees. This did not apply to St. Louis county. This was the beginning of the system of local taxation for school purposes, which has since as- sumed great proportions. School Taxation in St. Louis. Although the St. Louis School Board was organized in 1833, there was no school tax levied in St. Louis until 1849. The schools were supported from the proceeds of the school fund, consisting of the government land grants, and a tuition fee of ten dollars which was collected between 1842 and 1847. ""Acts 1864, p. 104. 38 Missouri taxation: In 1849 31 authority was given to levy a tax not exceeding one-tenth of one per cent for school purposes, the sum so col- lected to be paid to the St. Louis School Board; but this tax' was made contingent upon the approval of the qualified voters of the city; only those who were twenty-one years of age and were the owners of real or personal property subject to taxation being qualified to vote. The tax was voted by a majority of about five to one, and realized the first year' about eighteen thousand dollars. 32 An effort was made to increase the tax to one-fourth of one per cent in 1851, contingent upon popular vote, which seems to have been adverse, as the tax continued at the same rate, that is, one-tenth of one per cent, until 1864. By' the act of 1864 the rate was authorized to be increased to four mills. The St. Joseph Board of Public Schools school Taxation was incorporated in 1860 by special act and m st. Joseph. wag authored to levy a tax not exceeding one-fifth of one per cent. Rate of Taxation Under Constitution of 1820. Under the Territorial system, specific subjects were taxed at specific rates and there was no general tax rate. The first levy under the State organization was twenty-five cents on every one hundred dollars, and counties were authorized to levy fifty per cent of this rate. In 1831 the rate was reduced to sixteen and two-thirds cents, and in 1837 to twelve and One-half cents. At this time, however, the county tax was limited to the same rate as the State tax. In 1844 the rate was increased again to sixteen and two-thirds cents, and the county tax was limited 31 Acts of 1849, p. 397. 82 The adoption of school taxation in St. Louis was the result of move- ment inaugurated by Rev. W. G. Eliot, then the president of the St. Louis School Board. UNDER THE CONSTITUTION OF 1820. 39 to double this rate, that is, to thirty-three and one-third cents. The county court of St. Louis county, however, was empowered to impose an additional tax of one-twentieth of one per cent in order to pay jurors summoned in the several courts of the county. In 1855 the rate of State taxation was twenty cents on the hundred dollars and the county tax remained unchanged, that is, at forty cents on the one hun- dred dollars, except in St. Louis county. These rates con- tinued throughout the period except when increased during the Civil "War. Taxation in the City of St. Louis. In the charter of 1822 the tax rate for city purposes was one-half of one per cent. In this connection it may be stated, that under this charter and down to 1841 the voters in the city were "all free white males who had paid a city tax." This rate continued until 1843, when it was made not exceed- ing one per cent upon all property and continued at this rate until 1865. Union Military Bonds. The State issued, during the Civil War, Union Military bonds, for the expenses of the militia, 33 $3,000,000 being au- thorized in 1863 and $3,400,000 additional subsequently. These bonds were made receivable for all military taxes. These bonds were all redeemed from the proceeds of the mili- tary taxes, and also from the funds received from the United States government after the close of the war for reimburse- ment of the State for militia expenses, these funds having been pledged for the redemption of the bonds. The sum of $6,475,851.01 was thus allowed by the general government to the State for" war expenses. ^State ex rel. v. Bishop, 36 Mo. 49; State ex rel. v. Bishop, 36 Mo. 58. CHAPTEB III. THE SUCCESSFUL BESISTANCE OF MEBCHANTS TO DISCRIMINATING TAXATION. The most important litigation, during this period from 1820 to 1865 concerning the revenue laws of the State, and the construction of the constitutional provision, that all prop- erty subject to taxation shall be taxed in proportion to its value, related to the taxation of merchants and resulted from two classes of attempted discrimination, both of which were finally pronounced unconstitutional: First, the at- tempted discrimination in favor of the growth, produce and manufactures of the State as against those of other States; second, the (hscrimrnation against the merchants, as com- pared with the agricultural class, so as to relieve the latter at the expense of the former from the burden of taxation — in other words, class legislation. The taxation of occupations, or license taxation, or as it is sometimes called, the taxation of privileges, was enforced in the State under the Territorial government, and continued under the State government. The early revenue cases in the Supreme Court reports relate to this form of taxation. At first, merchants were taxed through licenses only. In 1825, under the first revision of the Statutes, merchants and peddlers were required to take out licenses, and mer- chants were subject to pay the sum of fifteen dollars for each six months, and the further sum of twenty-five cents for each one hundred dollars of the value of all the goods received at the store during the preceding six months, except such as were the growth, produce or manufacture of this State or of the United States. 40 DISCRIMINATING TAXATION OF MERCHANTS. 41 This attempted discrimination in favor of the goods of the State was the source of long-continued litigation, and was finally declared unconstitutional by the Supreme Court of the State, and, as to peddlers, by the Supreme Court of the Uni- ted States. In 1829, the statute was amended, so as to require mer- chants to pay on their whole stock in trade the same per cent that they paid on foreign goods, and all laws exempting goods that were the growth, produce or manufacture within this State were repealed. 1 Subsequently, in 1833, the tax rate was reduced; and finally, in 1835, the advalorem tax was repealed, leaving merchants subject only to the license tax of fifteen dollars for every six months. In 1837, a State tax of one-twelfth of one per cent on merchants and grocers, and upon property made taxable by law, was enacted. Changes having been made from time to time in the in- terim, the act of 1845 imposed a graduated license fee and an advalorem tax the same as paid upon real estate, continuing the discrimination in favor of the goods "which were the growth, product and manufacture of the State." In 1849 this was amended by graduating the license tax so that it would increase at the rate of twenty cents for every addi- tional one hundred dollars' worth of merchandise, but keep- ing unchanged the advalorem tax levied upon the merchan- dise, as upon other property of the State, which had been fixed by the act of 1845. This double taxation, in connec- 'This act of 1829 was held constitutional in Tracy v. Missouri, 3 Mo. p. 3, on the ground that it did not appear that the goods were sold in the original packages, the goods appearing to have been sold at retail and not in the original packages, and therefore not within the decision of U. S. Supreme Court in Brown v. Maryland, 12 Wheaton, 49. 42 ; MISSOURI TAXATION j tion with the discrimination in favor of the agricultural in- terests by the acts of 1841 and 1847, aroused' the opposition of the merchants-, and a test case was made, resulting in one of the most important and interesting cases in our courts. 2 Prior to this, in 1847, the Supreme Court 3 had sus- tained the constitutionality of a statute regulating the grant- ing of dramshop licenses. This act restricted the granting of such licenses to persons, who had resided two years in the State and three months in the county, and the court held that this was within the constitutional power of the General As- sembly. Judge ISTapton said in his opinion, that it was within the power of the State, unless restrained by some provision of the Constitution, to restrain or prohibit the exercise- of any trade or business within the State. Wayman Crow, with others, refusing to take out li- censes under this act of 1849, were indicted by the grand' jury, and upon conviction appealed to the Su- preme Court! The validity of the act was attacked on these grounds: Mrst, that- the discrimination against the goods 1 "not the growth, produet or manufacture of the State" was unconsti- tutional as an attempted regulation of commerce ; and, sec- ond, that the tax by way of licenses on the merchants and graduated by the amount of goods sold, was a tax indirectly on the goods; and, therefore, the imposition of the advalorem tax, levied upon all the property in addition to this gradu- ated license tax constituted double taxation, and a discrimina- tion against the merchants, and was violative of the Consti- tution of the State, which provided that all property subject to taxation should be taxed in proportion to its value. Two of the judges, Birch and Kyland, concurring, held that the proviso to the act' of 1849, continuing the advalorem 2 Ciw v. State, 14 Mo. 237. 'Austin v. State, 10 Mo. 591. DISCRIMINATING TAXATION OF'MfeECHANTS. 43 tax with the graduated license tax, was a violation of the Constitution of the State; but that the General Assembly had the right to tax merchants by the graduated license sys- tem; and that while it could license the occupation of a mer- chant in addition to taxing his property, it could not impose a double tax on property by imposing a tax directly on the property, and also in the form of a license, graduated ac- cording to the amount of property. In other words, that the Constitution of the State, in requiring that all property shall be taxed in proportion to its value, required equal taxation. The opinions of the judges are very exhaustive and cov- ered a very wide range. Judge Birch in his opinion took the further ground, that the Legislature under judge Birch's the State Constitution was bound to tax all Opinion. property on the same basis, and that any ex- emption or discrimination was forbidden, and that the constitutional provision could not be evaded either by taxing the privilege or occupation to do business, and that the right to do business as a merchant was in no sense a privi- lege. Thus he says (page 260): What, for instance, would restrain an interested and unchecked majority from enacting, that no citizen should purchase, or sell or hire, or even own a slave, without obtaining therefor an annual, or ( as in the case before us) a semiannual license— paying for it (and not for the property, as the fallacy runs) such sum as the legislative wisdom or virtue may enact? What would prevent an enactment that no man should work a mine, cultivate more than a given quantity of land in hemp or tobacco, or keep more than a certain number or description of horses or cattle, without "a license therefor," to be taxed and paid for, in either ease or in all, according to the predominating interest of the coalesced and combined interests and prejudices of an accidental and unchecked majority of the Legislature? He insisted that a tax on the sale of an article acquired or purchased expressly for sale, was a tax on the article itself, and denied the power of the Legislature to classify any spe- cies of gainful occupation, "as a privilege," the exercise of which could be taxed, and he called attention to the fact that 44 MISSOUBI TAXATION. in the State of Arkansas this right was expressly given to the General Assembly by the Constitution. Judge Eyland, in his concurring opinion, took the ground that the act in its discrimination against foreign goods was in violation of the Federal Constitu- judge Ryiand-s tion, taking strong ground against State dis- View - criminations in interstate commerce, which view was subsequently adopted by the Su- preme Court of the State and also of the United States. This point was not discussed or decided by Judge Birch. Judge Eyland, however, concurred with Judge Birch in hold- ing that the State Constitution required the General Assem- bly to impose equal taxation. He admitted the power to license an occupation, but he denied the power to tax prop- erty in the form of a graduated license, and thus impose double taxation. Judge Eyland did not concur with Judge Birch, however, in holding that the Constitution required the Legislature to tax all property in the State alike. Judge Napton dissented on both grounds. He main- tained, that a license tax upon the occupation was in no wise inconsistent with the tax upon property; and judge Napton's upheld the strong State's Eights view of the Dissent. power of the State in regard to interstate com- merce, to which he adhered consistently throughout his judicial career. 4 This case excited great interest in the State, and it seems to have been held for some time under advisement by the court. It was during the time it was so Gov. King on held under advisement, that Governor King in License Taxation. igs^ m ms message to the General Assembly said, that it had been intimated that the de- cision would be against the power of the State, and that •State v. North, 27 Mo. 464. DISCRIMINATING TAXATION OP MERCHANTS. 45 while he did not concur in that view of the law, he ad- mitted the oppressive character of the license, and said it ought to be amended, if it was permitted by the court to stand. It seems that at this time something less than one- third of the revenue of the State was collected under this system. About the same time in 1851 the Chamber of Commerce of St. Louis memorialized the General Assembly, com- plaining of the oppressive character of the . . .„ merchants' license, saying that merchants were Memorial of St. ' •> ° Louis chamber taxed in amounts greatly in disproportion of the taxes paid by other citizens of greater wealth, saying: "It not only exacts from them in the shape of a license tax a revenue greatly in excess of the amount upon other property of equal value, but the same property is subject to this onerous burden every time it changes hands." See Senate Journal 1851, p. 222. After the decision was announced, Governor King recommended to the General Assembly a thorough revision of the law in reference to merchants' licenses, "so that branch of trade would be relieved from the very heavy bur- dens, which are now imposed upon them." The effect of the decision in the Crow case, was to annul the graduated license tax, and thereafter there seems to have been no further effort to impose double taxa- subsequent tion upon the merchants. ISTo attention, how- Legisiation. ever, was paid to the view of Judge Birch, that all property in the State should be taxed alike, as the General Assembly continued to declare specific subjects of taxation. Neither was any attention paid to the opinion of Judge Eyland that the discrimination in favor of home products was an attempted regulation of commerce, as that was continued as before. 46 MISSOURI TAXATION. The act of 1853 5 provided for the payment of an advalorem tax by merchants and grocers upon all the goods, wares and merchandise, except such, as may be the growth, produce or manufacture of this State ; but it was provided that goods received for sale should not be construed to include manufactured articles, which were the growth, pro- duce or manufacture of other States. This discrimination was continued in the revenue act of 1855, and that act also provided a definition of "merchant," which was declared to include all merchants, commission merchants, grocers and dealers in dry goods and medicines, except physicians where medicines were used in their practice, whether trading as wholesale or retail dealers. This definition has continued in successive revisions to the present time. This act of 1855 entitled "An act to tax and license mer- chants," adopted the system substantially in the form in which it has since continued upon the statute books, where- under merchants pay an advalorem tax upon their merchan- dise in the form of a license. Subsequently, in 1858, the validity of this (Hscrimina- tion in favor of goods "the growth, produce and manufacture of the State," came directly before the Su- „ ... preme Court in the case of State v. Worth, 27 State v. North. x ' Ho. 464. The personnel of the court had in the meantime changed from that which de- cided the case of Crow v. State, only Judge Eapton remain- ing — Judges Scott and Richardson having succeeded Judges Birch and Eyland. At this time, the Supreme Court of the United States had not taken the position against State discriminations in the matter of interstate commerce, which it has since repeatedly declared. It had been decided in Brown v. Maryland, 6 that "Acts of 1853, p. in. "12 Wheaton, 419. DISCRIMINATING TAXATION OF MERCHANTS. 47 a State could not require an importer from foreign countries to take out a license for selling goods in the original pack- ages imported. The court had said in that case, that it was not meant to give an opinion upon a tax discriminating between foreign and domestic articles. In the subsequent license tax cases, 7 wherein the liquor license laws of Massa- chusetts, Rhode Island and New Hampshire had been ad- judged constitutional, separate opinions being filed by the different Judges, it was clear that there was a division in the United States Supreme Court on the question of the relation of the controlling power of Congress to the State in the regu- lation of commerce, that is, as to the State taxation and li- cense laws. It was therefore strongly urged in support of the Missouri discrimination, that it was consistent with the then recently declared views of the Supreme Court of the United States. In the light of these circumstances, this case of State v. North, is one of the most interesting in our reports. Politi- cal feeling was then running high in the State on the question of State Eights, and the State was soon to be a battlefield of civil war, which had even then commenced on the Kansas border. Two of the judges concurring, the court held that the discrimination was unconstitutional as being an at- tempted regulation of commerce, in violation of the Federal Constitution. The opinion of the court delivered by Judge Scott, in its advanced ground against discriminating State taxation, is a notable contribution to. the judicial literature on that subject, and is one of the strongest opinions of that able jurist. Thus he said: From the view we have taken of this subject, it will be seen that it is not deemed a matter of any importance, whether the power of laying '5 Howard, 504. 48 MISSOURI TAXATION. a discriminating tax is exercised on the original pack- age ox bale in which the merchandise was imported, or Opinion of whether it is exercised on the goods themselves, after Judge Scott. they have been incorporated into the mass of the prop- erty of the State. It is obvious that if the laying of a discriminating tax is unconstitutional, the time at which the power is exerted, or the condition of the goods at the time of its exercise, can not change the nature of the act. * * * * The foregoing intimations of opinion on this question will be suffi- cient, we trust, to defend us from the imputation of introducing any novelty into our constitutional law. We have not sought this task; it hasjbeen forced upon us, and we have entered upon its discharge with a, due sense of the responsibility under which we labor. If we have erred, we feel confident we have erred on the "side of safety and in a desire to cherish peace and good will among the States of the Union. We do not conceive that the opinion, that we entertain, in the least injuriously affects the power of taxation of the State. On the contrary, by requiring the same tax to be levied on like articles produced or man- ufactured in this State, we rather increase the revenue. Nothing is to be gained by the exercise of the power of laying a discriminating tax. If it is lawful for one State to do it, it is equally so to the others. Laws will be passed in retaliation of those we may enact, and so we may be losers in the end. Situated as the State of Missouri is, she should be one of the last to enter on such a course of legislation. With- out a sea-board, far in the interior, cut off from all outlets to foreign commerce, she would be one of the greatest sufferers in a contest of such a. nature. If we have erred in applying to the law under consideration the principle that a tax discriminating between foreign and domestic articles can not be imposed, we feel confident, nevertheless, that the principle is a correct one. No one can rise from reading the history of the events out of which our present Constitution has its existence, without a conviction that the power of laying a discriminating tax on the importations from other States and Nations was never designed to be left with the several States. That is a power only to be exercised by a single body, and that body has been created with ample power for the protection of the interests of all the States. The nineteenth section of the Bill of Rights, which declares that all property subject to taxation in this State shall be taxed in proportion to its value, has been repeatedly construed by this court to mean, not that all the property in the State must be taxed, but that when any article of property is selected for taxation, it shall be taxed in propor- tion to its value and not specifically; and the General Assembly may, therefore, not only levy an advalorem tax on the goods of merchants, but may also impose a. tax on their occupation, to be collected in the form of license. DISCRIMINATING TAXATION OF MERCHANTS. 49 The learned and exhaustive opinion of Judge Napton is equally notable as illustrating the opposing view on this great question. He strongly contended that Dissent of the doctrine of Brown v. Maryland had no judge Napton. a ppii ca ti n to the case where foreign merchan- dise had passed into the general mass of the property of the State, and was no longer in the original pack- ages, and he contended that his view was supported by the decisions of the Supreme Court of the United States in the license cases. The decision in this case ended the discriminating li- cense taxation upon merchants. A discrimination ia the license of peddlers remained until 1874, when it was adjudged constitutional by the State Supreme Court, there being an entire change of membership in the court, except that Judge Napton was again a member. He delivered the opinion of the court, and referring to this ISTorth case and the case of State v. Crow, said: "If these cases were applicable, I should certainly ad- here to the opinion which I gave in those cases, because the opinions there expressed are in conformity with my present views and with the views of my present associates." 8 After the decision of the Worth case, the merchants' license tax was reenacted in 1859, 9 substantially in the form which has ever since been retained, the merchants being required to pay an advalorem tax equal to that levied upon real estate, on the highest amount of goods in their posses- sion or under their control, at any time between the first Monday of March and the first Monday in June of each year. Manufacturers, who are now taxed in the same manner as merchants, whether doing business as individuals or as "State v. Welton, 55 Mo. 288; The opinion of the court in this case, however, as will be hereafter seen, was reversed by the Supreme Court of the United States, and all discriminations of this character adjudged unconstitutional. See infra, p. 130. 'Acts of 1859, p. 53. 50 MISSOURI TAXATION. corporations, were not included in this at- Taxationof tempted discrimination. During this period anu acturers. ^ere was n0 special method of taxing manu- facturers. If individuals, they paid taxes on their taxable property, real and personal as other individuals, and if corporations, they were taxed as other corporations, through their shares of stock, that is, this was the method of taxing manufacturing companies prior to 1855. As to change made in that year, see supra, p. 35. CHAPTEK IV. TAXATION UNDER THE CONSTITUTION OP 1865. The Constitution of 1865 went into effect July 4, 1865, and its adoption marked a new era in the history of the State. The Civil War over and slavery abolished, Missouri ceased to hold the anomalous position of the prior forty-five years; it was no longer a slave State surrounded by free States. Its territory had been devastated by civil war ; over four hun- dred battles and skirmishes had been fought on its soil, and it had contributed over a hundred thousand men to the Fed- eral army and thirty thousand to the Confederate army. But even before the close of the war the State had com- menced its recovery. The assessed taxable wealth of the State in 1865 was $262,354,932, still over thirty millions less than in 1860. But a vast tide of immigration had already begun to pour in, and the prosperity of the State then ad- vanced by leaps and bounds. The Constitution of 1865 made a radical change in the revenue system of the State. It contained not only the pro- visions of the Constitution of 1820 "that all constitution of property subject to taxation shall be taxed in 1865. proportion to its value," substituting, how- ever, the word "ought" for "shall," making it read that all property subject to taxation "ought to be taxed in proportion to its value," but there was a further provi- sion, section 27 of article IV, prohibiting the General Assem- bly from exempting the property of any named person or corporation from taxation; and in addition, section 16 of article XI provided as follows : 51 52 MISSOURI TAXATION. No property, real or personal, shall be exempt from taxation, ex- cept such as may be used exclusively for public schools and such as may belong to the United States, to this State, to countries or to mu- nicipal corporations within this State. In the language of the Supreme Court: 1 The revenue laws prior to 1865 specifically named kinds of the property to be taxed, while the Constitution of 1865, by prohibiting any exemptions from taxation, requires that taxes shall be levied on all property, real and personal. This system has continued to the present time, as the Constitution of 1875 made no change in this respect. The last revenue act under the Constitution of 1820 contained a minute specification of the subjects of taxation. But the revenue act of 1866 2 levied taxes on all male per- sons over the age of twenty-one and under fifty years, and on all property real and personal, excepting public property specifically exempted from taxation. This poll tax was con- tinued until 1872. The same method in taxing corporations, that is, by the president returning the list of shares to the assessor, was continued. It was held by the Supreme Court that the substitution of the word "ought" for "shall" in the declaration of rights, as to the taxation of property according to construction of val wag not mate rial, and that it was no Constitution by ' ' supreme court, longer discretionary with the General Assem- t bly as to what property should be taxed, as they were forbidden to exempt any property from taxation. 3 In a later case, the court said it was not what an individual or corporation might be worth over and above debts, which was taxed, but it was the property owned by them on which the tax was levied. "In levying taxes on property it can not be avoided that some value will sometimes be twice taxed. But this does not make the tax levied void." 4 'Henry, J., in State v. Railroad Co., 77 Mo. 202. 'I Revised Statutes of 1866, p. 95. "Life Association of America v. Assessors, 49 Mo. 513. 'Mutual Life Ins. Co. v. Assessors, 56 Mo. 503. UNDER CONSTITUTION OP 1865. 53 Missouri Taxation in United States Supreme Court. Important litigation followed the adoption of the Con- stitution. The first in order is that concerning the ordi- nance, submitted with the Constitution, for the taxation of certain State aided railroads, the Pacific Kailroad and the North Missouri Kailroad. This ordinance levied a tax of ten per cent on the gross receipts for two years, and fifteen per cent thereafter, and declared that the tax should be applied to the payment of the debt of the State, contracted to build the roads, and which the railroad companies were primarily bound to pay. The ordinance imposed the same tax upon the Hannibal & St. Joseph Railroad Company whenever it should default on its bonds, but as it did not make default, the ordinance upon this road did not become effective. The ordinance was submitted to popular vote in this form sepa- rate from the Constitution, the ballots in favor of it reading, as directed by the Constitutional Convention: "Shall the Eailroads pay their bonds ? YES." And those opposed: "Shall the railroads pay their bonds ? WO." Under this form of submission the ordinance was natur- ally adopted. The payment of the tax was resisted by the railroad companies. The Supreme Court of the State held the ordinance valid as to both companies, 5 and both cases were carried to the Supreme Court of the United States. The latter court held the ordinance void as to the Missouri Pacific Railroad, 6 on the ground that it was an impairment of an obligation of a contract made in 1852, when it was enaeted, that the road then in process of construction should be exempt from taxation until it was completed and in opera- "North Missouri Railroad Co. v. Maguire, 49 Mo. 490; Pacific Rail- road Co. v. Maguire, 51 Mo. 142. "Pacific Railroad Co. v. Maguire, 20 Wallace, 36. 54 MISSOURI TAXATION. tion, and paid a dividend. But the judgment of the State court in the case of the North Missouri Eailroad was affirmed by the Supreme Court of the United States, the court holding that in this case there was no contract of exemption. 7 The State Supreme Court subsequently applied the law as thus declared by the United States Supreme Court in the case of the South Pacific Eailroad, and held that this prop- erty was exempt from taxation. 8 A very important question came up as to the effect of the adoption of the new Constitution upon prior charters to educational and charitable institutions, ex- Prior Educational empting them from taxation. The collector and charitable of the cit of g t Louis ms i ste d that the new Exemptions ^ Enforced. Constitution repealed those exemptions, and he attempted to enforce tax bills against prop- erty of the "Washington University and the Home of the Friendless, both of these institutions having been chartered under the former Constitution with exemptions of their prop- erty from taxation, there being then no Constitutional pro- hibition of such exemption. The Supreme Court of the State sustained the levy, holding the property taxable. 9 Judge Wagner in the University case, said: When the charter of the University was granted, the Legislature might have considered it reasonable to foster and encourage it in its infancy and confer upon it privileges and immunities _,. „ while struggling into existence. But no provision is Court of Mis- made in express terms, or by reasonable intendment, souri in Wash- that those immunities should be perpetual and have ington Umver- the effect of withdrawing millions of subsequently ac- ,y "' quired property from taxation. In 1853 taxes were light and the State debt was small, and exemption could be made without great detriment. After that date the State embarked 'North Missouri Railroad Co. v. Maguire, 20 Wallace, 46. 8 South Pacific Railroad Co. v. Laclede County, 57 Mo. 147. "Washington University v. Rowse, 42 Mo. 308. UNDER CONSTITUTION OF 1865. 55 into a false and ruinous system of loaning its credit to corporations, by which it incurred an immense debt; then followed the Civil War, which increased its already burdensome obligations, and taxation became ex- ceedingly onerous. In this condition of things it was deemed the part of wisdom to make all property within the jurisdiction of the State, receiving the benefit of her laws and protection, contribute its proper proportion and share the common burdens. This was entirely a, matter resting in the sound discretion of the legislative branch of the government, and we have been unable to find any objection to their exercise of the power. Both of these cases were taken to the Supreme Court of the United States and in both cases, the decisions were re- versed. 10 The court held (Chief Justice Chase, Justice TVTiller and Justice Meld dissenting) that both of these exemptions were contracts, irrepealable by the State, whether The Supreme . . court of u. s. in by legislation or by the adoption of a new Con- uraveraftycase. stitution. The court said it was true that the present Constitution of Missouri prohibited such exemptions, but there were none such when the charters in question were passed, and that it was unnecessary that there should be a consideration stated in the act. It was sufficient that the Legislature deemed the objects of the grant to be beneficial to the community. To the argument made in the University case, that the exemption involved a dangerous power which might be abused by the University, the court replied: It is urged that the corporation, as there is no limit to its right of acquisition, may acquire property beyond its legitimate wants, and in this way abuse the favor of the Legislature, and in the end become dangerous, on account of its wealth and influence. It would seem that this apprehension is more imaginary than real, for the security against this course of action is to be found in the nature of the object for which the corporation was created. It was created specially to promote the endowment of a seminary of learning, and it is not to be presumed that it will ever act in a manner as to jeopardize its corporate rights; nor can there be any well-grounded fear that it will absorb, in its ef- 10 Home of the Friendless case, 8 Wallace, 430, and Washington Uni- versity case, 8 Wallace, 439. 56 MISSOURI TAXATION. forts to establish a literary institution of high order of merit, in the city of St. Louis, any more property than is necessary to accomplish that object. Should a state of case in the future arise showing that the corporation has pursued a different line of conduct, it will be time enough then to determine the rights of the parties to this contract, under this altered condition of things. The present record presents no such question, and we have no right to anticipate that it will ever oc- cur. It is enough for the purposes of this suit to say, that so long as the corporation uses its property to support the educational establish- ments for which it was organized, it does not forfeit its right not to be taxed under the contract, whieh the State made with it. Justice Miller, in a strong dissenting opinion, denied the power of any legislative body sitting under a State Constitu- tion of the usual character, to sell, bargain or give away the taxing power of the State. In view of the fact that many such exemptions from taxation had been granted to educational and charitable institutions in the country, the importance of these decisions can hardly be overestimated. They are peculiarly interest- ing at the present time to citizens of St. Louis, in view of the recent noble benefactions invested in St, Louis property, which have placed the endowments of Washington Univer- sity upon a sure foundation for all time to come. Another very important decision of this period, ren- dered by the Supreme Court and affirmed by the Supreme Court of the United States on appeal from the Supreme Court of Missouri, had reference to Taxation of r ' National BankB the taxation of national banks, then recently organized. The act of Congress provided that the shares of such banks should be included in the assessment of taxes under State authority at the place where the bank was located, but not at a greater rate than was assessed upon other moneyed capital in the hands of individual citizens of the State or upon the shares of the State banks of that State, and that their real estate should be taxed as other real estate. It seems that in 18 57 the State UNDEK THE CONSTITUTION OF 1865. 57 had incorporated a number of banking institutions and in their charters provided that each should pay the State annu- ally one per cent of the amount of the capital stock paid in by the stockholders other than the State, which was to be in full of all taxes to be paid to the State. This having been construed to apply only to State taxation, it was amended so as to make this one per cent a full compensation of all taxes of every kind, county, State and municipal. Two of the banks thus chartered, the Exchange Bank and the National Bank, decided not to avail themselves of the privilege of re-organization as national banks, and continued as State banks. It was claimed that this exemption of these banks from taxation of their shares, which was conceded to be valid under the recent decisions of the United States Supreme Court above referred to, made illegal the taxation of the shares of the national banks, as it was at a greater rate than these State banks were taxed. The Missouri Supreme Court held that this position was untenable, 11 that these banks thus exempted under contract were exceptional cases and not within the intention of the act of Congress, and that because two banking institutions chose to avail themselves of this special privilege, Congress never intended that the whole moneyed capital of the State should be secured a like exemp- tion. This opinion was affirmed by the Supreme Court of the United States, 12 the court saying: "This case has re- ceived the careful consideration of the court, as well on account of the principle involved as of the large amount of money dependent upon the decision of the suit." The court said there was no way to compel the banks of the State of Missouri to relinquish their charters, nor had the State the power to tax their stockholders on their shares of stock. Having contracted with these banks to accept from them "Lionberger v. Rowse, 43 Mo. 67. ^9 Wallace, 468. 58 MISSOURI TAXATION. annually in lieu of all taxes one per cent on their paid-up capital stock, it can not turn around and assess a tax on the shareholders. It was therefore held that the State had done all it could to conform its legislation to the requirements of the law, and had the right to tax the shares of the national banks. The court also held in this case that this form of taxation which had been in force in Missouri for many years, that is, by assessing the shares of stock and requiring the tax to be paid by the corporation instead of the shareholders, was in conformity with the act of Congress organizing the national banks. The opinion of the United States Supreme Court in this case is one of the leading cases on the taxation of national banks, and has been very recently quoted and approved by the court. 13 During this period the Supreme Court of the State was reversed by the Supreme Court of the United States in two important tax cases. Thus the Supreme Court of Missouri held 14 that the boats of the Wiggins Ferry Company, an Illinois corporation, which laid up on the Illinois shore when not in use, were taxable in St. Louis, and this was reversed by the Supreme Court of the United States, 15 which held that they were not within the taxing jurisdiction of St. Louis. The Supreme Court of the United States also reversed the Supreme Court of Missouri in the peddlers' license tax, declaring the same unconstitutional on account of the dis- crimination against foreign goods. Taxation Decisions by Missouri Supreme Court. In 1869 the income tax law of February 20, 1865, en- acted before the Constitution of 1865, and by its terms only "Aberdeen Bank v. Chehalis County, 166 U. S. 449. "St. Louis v. Wiggins Ferry Co., 40 Mo. 580. »ins Ferry Co. v. St. Louis, 11 Wallace, 423. UNDEB THE CONSTITUTION OP 1865. 59 to continue for two years, was decided by The income tax the Missouri Supreme Court to be constitu- heid vahd. tional. 16 It was claimed that the act was un- constitutional, in that it did not conform to the requirements of the Constitution of 1820 and 1865, that taxation on property should be "in proportion to its value." The decision in this case is the leading case in the State upon the plenary powers of the General Assembly in the matter of taxation, and as to the construction of this constitutional provision, contained in each of our successive Constitutions; the court saying: In reference to taxation, the Constitution is not so much to be re- garded a grant of power, as a restriction or limitation of power. That taxes should be uniform, and levied in proportion to the value of the property to be taxed, is so manifestly just, that it commends itself to universal assent. But, notwithstanding the constitutional provision, there are some kinds of taxes that are not usually assessed according to the value of property, and some which could not be thus assessed; and there is perhaps not a State in the Union, though many of them have in substance the same constitutional provision which does not levy other taxes than those imposed on property. And after illustrating by license taxes and stamp duties, etc., proceeds: It therefore seems plain that the constitutional requirement that "taxation upon property shall be in proportion to its value" does not include every species of taxation; nor, indeed, would it be possible to place such an interpretation upon it without doing the grossest in- justice. * * * There are three general classes of direct taxes: capitation, having effect solely upon persons; advalorem, having effect solely upon prop- erty; and income, having a mixed effect upon persons and property. The argument of plaintiff's counsel proceeds on the hypothesis that every species of tax comes within the constitutional prohibition. This is -a. mistake. The whole practice of the State has been different, and it has never been challenged, nor could it be, on legal principles. The statutes provide for a. poll tax, which is in violation of the advalorem rule, and is unequal, yet it is clearly within the Constitu- 18 61asgow v. Rowse, 43 Mo. 479. 60 MISSOURI TAXATION. tion. A license is imposed on shows, peddlers, auctioneers, dramshops, and billiard tables, all of which taxes are in violation of the advalorem principle, but not therefore unconstitutional. The taxes imposed are uniform as to the particular classes, but not in proportion to the taxes assessed on other property. "The Constitution enjoins a uniform rule as to the imposition of taxes on all property, but does not abridge the power of the Legislature to provide for a revenue from other sources. It was intended to make the burdens of the government rest upon all property alike, to forbid favoritism and prevent inequality. Outside of the constitutional re- striction, the Legislature must be the sole judge of the propriety of taxation, and define the sources of revenue as the exigency of the occa- sion may require. The income tax was uniform and equal as to the classes upon whom it operated; it did not come within the meaning of the term "property" as used and designated in the Constitution, and I think it was not in conflict with any provision of that instrument. An important case was decided by the Supreme Court in 1871. 17 Deceased was at the time of his death a resident of the State of Illinois, but he owned bonds in the Masonic Hall Association in St. Louis, Situs pfperso- which were listed for taxation at his home in for taxat i n. Illinois. Ancillary administration upon his estate was taken out in St. Louis, and it was held that these bonds were taxable in Mis- souri, though only in the possession of the ancillary adminis- trator for the purposes of administration. The court said that the personal property had a situs apart from its owner for purposes of taxation, and that it made no difference that these bonds had been theretofore taxed in Illinois ; that under the Constitution it was not necessary there should be any special law for such securities; that the bonds were taxable like all other property, when they could be reached, the only provision of the statute being that they should be "taxed in the county of his residence if he lived in the State, and that it made no difference that the property was held in trust — that this fact did not change its status. "Taylor v. St. Louis County Court, 47 Mo. 594. UNDEK THE CONSTITUTION OF 1865. 61 Legislation 1865 to 1875. The Constitution of 1865 had prohibited the loaning of the State credit, thus putting a stop to the system of State aid to railroads, and it also provided that the General Assembly should not authorize any Authorized . 11 ' county, city or town to become a stockholder in or loan its credits to any corporation, unless two-thirds of the qualified voters assented thereto. The General Assembly in 186-8 18 passed an act entitled "To facilitate the construction of railroads in the State of Missouri," which was popularly known as the "Township aid act." It authorized municipal townships 19 to subscribe to the capital stock of any railroad, when author- ized by a two-thirds vote of the qualified voters of the town- ship voting at any election, and also authorized the issue of bonds in payment of such subscription, and the levy of a special tax on the real estate 20 in the township to pay the principal and interest of the bonds. It was further provided, that the parties paying the tax should receive certificates, convertible into stock of the railroad company, and that the taxes levied upon the railroad, built in whole or in part in the township by such subscription, should be applied to the township, city or county so subscribing, until the whole amount of their subscription was refunded; and after pay- ment of the bonds the balance was to be applied to the credit of the school fund in such city or township. Large amounts of bonds were issued under this act, which proved thereafter a fruitful source of litigation, and of conflict between the State and Federal courts. 21 "Acts of 1868, p. 92. M TMs authority was subsequently given to portions of townships. Act of 1870, p. 92. ^Afterwards extended to personal property. Acts of 1871, p. 55. n See infra, p. 73. 62 MISSOUEI TAXATION. In 1868 the method of taxing manufacturing companies, that is, by paying taxes on their property as individuals, and not on the value of their shares of stock, was extended to all manufacturing and business companies, that is, companies or- ganized as such. Very important statutory changes were made in 1871 and 1872, under the administration of Governor B. Gratz Brown. In his annual message he recom- Gov. Gratz mended the revision of the general revenue Brown's Ad- ministration. law, and the adoption of a uniform system lor the taxation of railroads. Attention was di- rected to the reports of tax commissioners of other States, and to the desirability of finding some method of reaching the personal property, which was inadequately taxed under the existing system. In 1871 the general system of assessing and collecting taxes upon railroads through the State Board of Equaliza- tion was adopted. 22 This act has been amended from time to time, but the system thus established has continued to be the law of the State. See infra, p. 100. In 1872, the general revenue law was carefully revised and re-enacted. 23 For the first time in the history of the State the poll tax was omitted, and thereafter Revised Revenue disappears from our taxing system. The as- Lawofi873. sessment date was fixed on August 1 for the taxes of the ensuing year. This revision con- tained certain statutory definitions from which the following is quoted, which the still retained: The term personal property wherever used in this act shall be held to mean and include bonds, stocks, moneys, credits, the capital stock, undivided profits, and all other means not forming part of the capital stock of every company, whether incorporated or unincorporated, and every share, portion or interest in such stock, profits, or means, by 22 Acts of 1871, p. 56. 2S Acts of 1872, p. 80. UNDER THE CONSTITUTION OF 1865. 63 whatsoever names they may be designated; * » * and every tan- gible thing, being the subject of ownership, whether animate or inani- mate, and not forming any part or any parcel of real property, as here- inbefore defined. In the same year a certificate of indebtedness dated July 1, 1872, was issued to the Board of Education for the public school fund for the sum of $900,000, with interest at six per cent, this representing the proceeds of the sale in 1866 of the stock in the State Bank, which had belonged to the school fund, these proceeds having been paid in by the purchaser in bonds of the State, which had been canceled.* School Taxation. The new regime, inaugurated by the adoption of the Constitution of 1865, made a radical change in the matter of local taxation for school purposes. This was in a measure necessitated by the demoralization and destruction of the Civil War. Not only had the distribution of the State school moneys been suspended, but many school houses had been destroyed, and school, county and township funds had been lost or impaired. During the two years succeeding the close of the Civil War fifteen hundred school buildings were erected at a cost of nearly one million five hundred thou- sand dollars, this sum being one-half greater than the esti- mated value of the school property at the close of the war. The Constitution had provided, that no township or school district should receive any portion of the public school fund, unless a free school should have been constitution on kept therein for not less than three months Hon. during the year, and that in case the public school fund was insufficient to sustain a free school for at least four months in every year, the General Assembly could provide by law for the raising of the defi- ciency, by levying a tax on all the taxable property in each county or school district, as they deemed proper. *State v. Bank of the State of Missouri, 45 Mo. 528; Acts of 1871, p. 42. 6 4' MISSOURI TAXATION. The act of 1866 24 — made the congressional township the unit of school administration, and authorized the board of education in each township to levy a tax for the amount necessary, in addition to the public fundsy to erect school houses and support the schools), for the period of four months, and to continue for six months, if voted for by a majority of the resident voters of the township. In 1868 boards of local directors in each subdistrict were established, and were authorized to levy a tax for building purposes, not to exceed two per cent, and a greater per cent, if ordered by a majority of the voters of the subdistrict. In 1870 the limit of the tax for current expenses was fixed at one per cent of the taxable property of the district. In 1874 25 the township boards were abolished, and the system, which has ever since continued was established, whereby the school subdistricts were made The school D»s- bodies corporate and the units of the system; trict system the directors were authorized' to keep the school open for not less than four or more than six months, and to keep them open longer if authorized by a vote of the people. The tax for current expenses was limited to one cent on the dollar, and an addi- tional tax for buildings was also limited to one cent on the dollar. State Tax Rate, Revenue and Interest. The State tax during this period was first forty cents on the' $100 in addition to the special military tax for the re- demption of the military bonds. The ordinance of the con- stitutional convention authorizing the tax upon railroads for payment of the State debt, also provided for the sale of the railroads, and authorized a tax of one-fourth of one per cent for the payment of the debt. In 1867 the General Assembly levied this tax, and also directed the application of the mon- M Acts of 1866, p. 170. "Acta of 1874, p. 147. UNDER THE CONSTITUTION OF 1865. 65 eys received from the United States in reimbursement of war expenses, after deducting $1,500,000 for the school fund, and for the payment of the outstanding military bonds, to be applied in paying overdue coupons on the State bonds, the coupons not provided for being refunded in new bonds. The amount realized from the sale of the railroads under the State's lien was also applied in payment of ( the debt, the bonds of the State being received in payment for the rail- roads. Interest payments were resumed on January 1, 1868, having been suspended since July 1, 1861. The amount of the debt on January 1, 1868, was $23,941,000. The amount paid into the State debt funds from the government reim- bursement fund was $3,070,682.63. On January 1, 1869, the debt was reduced to $18,654,000. The annual interest paid in 1868 was over $1,400,000. The tax rate thereafter was a revenue tax of twenty-five cents, reduced in 1872 to twenty cents, and an interest tax of twenty-five cents. The county tax being limited to twice the State revenue tax, was eighty cents in 1865, fifty cents in 1870 and forty cents in 1872. The rate in St. Louis in 1865 was limited to $1. Under the charter of 1870 it was increased to $1.50, and in 1875 to $2. The tax then in the new limits of the Rate in st. Louis, city was limited in 1865 to three-fourths of the rate, and under the charter of 1870 to one-half the rate. Under the charter of 1870 and the amendment of 1875, the amount allowed to be expended for the different departments was limited. Thus under the law of 1875, the rate for general revenue was fixed at $1.50, and for interest at $1, for police purposes twenty- five cents, sewers ten cents, harbor improvements ten cents, water pipes ten cents and for streets fifty cents. Although these different limits aggregated $3.55, it was provided that the aggregate percentage of taxes for all purposes should not exceed $2. MO. TAX. — 5 CHAPTEK Y. TAXATION UNDEB THE CONSTITUTION OF 1875. The Constitution of 1865 was adopted at a time of intense political feeling growing out of the Civil War, but the years succeeding its adoption were of abundant pros- perity. Thus the taxable wealth increased from $262,354,- 932 in 1865 to $595,814,840 in 1873. But the years imme- diately following 1873 were marked by financial and indus- trial depression. Taxable values declined in 1875 to $556,444,456, and the high water mark of 1873 was not reached again until 1882. A strong public opinion had also been developed in opposition to the issue of bonds by muni- cipalities in aid of railroads, the natural reaction from the speculative period having been intensified by gross abuses in the issue of such bonds by the local authorities, and by the political hostilities, incident to the disfranchisement of the southern sympathizers from 1865 till 1870. Two of the largest railroad systems of the State were in the hands of receivers. The public opinion created by these influences was reflected in the new Constitution. The giving away or loaning of the credit of the State had been prohibited by the Constitution of 1865, and this prohibition was continued in emphatic terms, and extended to the counties and municipal- ities of the State. The State debt on January 1, 1875, including the $900,000 certificate of indebtedness issued in 1872, was $17,735,000 and the annual interest $1,074,590. The aggre- gate county, township and city indebtedness was reported as over $41,000,000. Constitution of 1875 on Taxation. The Constitution in section 4 of article X restored the language of the Constitution of 1820, that "all property sub- 66 UNDER THE CONSTITUTION OF 1875. 67 jeet to taxation shall be taxed in proportion to its value." Exemptions were prohibited and the following new provi- sion was added (section 3) : Taxes may be levied and collected for public purposes only. They shall be uniform upon the same class of subjects within the territorial limits of the authority levying the tax, and all taxes shall be levied and collected by general laws. The prevailing popular feeling in regard to railroads was indicated by the provision as to railroad taxes (see page 104, infra). The distrust of corporate influences was indicated by the following (section 2) : The power to tax corporations and corporate property shall not be surrendered or suspended by act of the General Assembly. The municipalities were also protected against any im- position of taxes by the State for local purposes, and on the other hand it was provided, that municipalities and counties should not be released from their proportionate share of taxes for State purposes (sections 9 and 10 of article X). Under the Constitution of 1865 the school fund could only be invested in United States bonds. It was now pro- vided by section 9 of article XI that it should ^ „ v , _ be invested in bonds of the State of Missouri The School Fund. or of the United States, and investment in the stock or bonds of any other State or of any town, city or corporation was prohibited. Constitutional Limitations upon Tax Bates. The Constitution of 1875 introduced for the first time specific limitations upon the rate of taxation. The State revenue tax, that is, other than for the payment of interest on, or retirement of, the then existing debt, was twenty cents on the hundred dollars, and was to be reduced to fifteen cents on the hundred dollars, whenever the taxable property should amount to nine hundred million dollars. This amount of taxable property was reached for the first time in 1894, and the consequent self -enforcing reduction of the State rev- 68 MISSOUBI TAXATION. enue tax rate to fifteen cents caused a material loss in the State revenues, which has proven at times a source of finan- cial embarrassment in the administration of the State fi- nances. 1 The Constitution also contained specific limitations upon the tax rate of cities, towns and counties. Thus in counties of six million dollars valuation or less, the rate was fifty cents on the hundred dollars; those between six million dol- lars and ten million dollars, forty cents on the hundred dol- lars; between ten million dollars and thirty million dollars, fifty cents on the hundred dollars, and thirty million dollars or over, thirty-five cents on the hundred dollars. In cities and towns having a population of 30,000 or over, the maximum rate was fixed at one hundred cents oa the hundred dollars; between 10,000 and 30,000, sixty cents; between 10,000 and 1,000, fifty cents, and under 1,000 thirty-five cents. For school purposes, the maximum rate is forty cents on the hundred dollars, irrespective of population. Provision is made for increasing the rate for school pur- poses in cities and towns up to one dollar, and in other dis- tricts to sixty-five cents on the one hundred dollars, on the vote of a majority of the voters who are taxpayers; and for erecting public buildings, whether in counties, cities or school districts, the rate may be increased by a vote of two-thirds of the qualified voters. There is no provision for increasing tax rate for current expenses, except for support of schools. These restrictions as to rates have no application to the pay- ment of indebtedness existing at the time of the adoption of the Constitution, or to any renewal thereof or interest thereon. Provision is also made (section 12 of article X) for the issue of bonds with the assent of two-thirds of the voters; "See reports of State Auditor and messages of Governors since 1893. UNDER THE CONSTITUTION OP 1875. 69 but this is subject to a further condition that issue of Bonds. the amount of the bonds issued shall not in the aggregate exceed five per cent of the value of the taxable property in the county, city or school district. Section 21 of article X provides for filing fees for incor- porations, and for increase of corporate stock, with a proviso that nothing contained therein shall be construed as prohibit- ing the General Assembly from levying a "further tax upon franchises of corporations." The Constitution also provides (section 11 of article X) that taxes for county, city, town and school purposes may be levied on all subjects and objects of taxation, valuation for state but that the valuation of property therefor and Local Tax. ^^ not excee( j ^he valuation of the same property in such city, town or school district for county and State purposes. As the counties and municipalities of the State are thus limited to a fixed maximum rate, the only method of increas- ing their revenue is to increase assessments, Effect of consti- and as the same assessment is thus required to tions. he used for local and for State purposes, the result has been that counties and municipali- ties, which were forced to raise their assessments for local purposes, are compelled to pay a disproportionate share of State taxes. The Constitution went into effect November 30, 1875. It was held by the Supreme Court* that these provisions lim- iting the rate of taxation in counties, munici- construction of palities and school districts of the State constitution. were self-enforcing, but that the provisions allowing the rates to be increased for public buildings and for school purposes by popular vote required legislation, before the rates could be increased. Accordingly legislation was enacted authorizing the increase of the rate of *St. Joseph Public Schools v. Patton, 62 Mo. 444. 70 MISSOUBI TAXATION. taxation in school districts for the support of schools, and for the erection of school houses and other public buildings. In the St. Louis charter, however, which was framed under authority of the Constitution, there was no provision made for increasing the rate of taxation for public buildings, and consequently the rate can not be increased in St. Louis for public buildings without a charter amendment. 2 In 1877 the General Assembly 3 authorized the counties to make a levy not exceeding one per cent per annum to pay the outstanding floating debt existing at the time the new Constitution went into effect, November 30, 1875. The general property tax, that is, the attempted taxa- tion of all property real and personal in the State, excepting only the exemptions provided in the Constitution, which had been established by the Constitution of 1865 and embodied in the general revenue acts of 1872 and the railroad tax leg- islation of 1871, was continued substantially unchanged under the new Constitution. The taxable wealth of the State soon recovered from the depression of 1874-5 and rapidly increased, reaching in 1890 over $805,000,000, and in 1900 over "weweaith"*" $989,000,000, this being exclusive of mer- chants' and manufacturers' statements and railroad property assessed by the State Board of Equaliza- tion. Frequent reference is made in the messages of the Gov- ernors to the unsatisfactory assessments, particularly to the lack of uniformity in the different counties, and to the fail- ure to reach personal property. In 1877 Governor Phelps recommended the levy of a poll tax, which had been abolished since 1872, for the sup- 2 See infra, p. 188. =Acts of 1877, p. 200. UNDER THE CONSTITUTION OF 1875. 71 port of schools and institutions of learning, so Recommendation as to Te ii eve fa e State finances. A bill to that ofGov. l*helps. end passed the State Senate, but failed in the House. He renewed the recommendation in 1879, a poll tax of one dollar to each male adult, but it again failed of passage. In 1879 Governor Phelps in his message to the General Assembly also called attention to the evasion of taxes by money lenders, and to the small amount of money returned for taxation, as compared -with the amount of loans shown by the county records. He recommended the passage of an act, taxing all money loaned by citizens of the State; and said, that perhaps it would be advisable, that no judgment be rendered on a note or bond for the payment of money, unless plaintiff should show that it had been assessed for taxation, that the judgment be rendered in favor of the State for any taxes and penalties unpaid, .and that such judgments should have priority of payment, and when paid to be cred- ited on the note. Conflict Between State and Federal Courts. The original railroad charters granted in the State had authorized the county courts and municipal councils to make subscriptions to the capital stock, and to issue bonds in pay- ment thereof without vote of the people. The Constitution of 1865 prohibited counties from becoming stockholders in railroads or loaning their credit without consent by two-thirds vote of the people, but this was construed by the Supreme Court, as a limitation on future legislation only, and not as operating to repeal enabling acts in existence, when the Constitution took effect. The Constitution of 1875 prohibited all such subscrip- tions by counties and municipalities. But in the meantime, large amounts of bonds had been issued by counties in pay- 72 MISSOURI TAXATION. ment of railroad subscriptions, many of them without vote of the people. The inevitable reaction from the speculative period of railroad enterprises was intensified by the fact that large amounts of these bonds had been issued prior to 1870, when the Southern sympathizers were still disfranchised. Large amounts of township bonds were also issued by muni- cipal townships under an enabling act passed in 1868. In some cases the railroads were not built, though the bonds were negotiated and passed into the hands of innocent holders. The result was an extended movement of repudia- tion. The Supreme Court of the State, overruling its early opinions, held that an act passed in 1861, 4 prohibiting sub- scriptions without a vote of the people, operated to prevent such subscriptions, although made by county courts under authority of the original railroad charters. 5 The United States Supreme Court, however, declined to follow these later rulings, holding that the rights of the parties were to be determined by the law as construed, when the bonds were first put upon the market. 6 The result was that numerous suits were instituted in the Federal courts upon such bonds, and judgments recovered, and mandamus writs issued compelling the county judges to levy taxes in payment. Thus the county officials were compelled to levy taxes in payment of bonds which the State Supreme Court had adjudged were invalid. Another ground of conflict arose out of the charter of the Missouri and Mississippi Railroad, which authorized the corporate authorities of any city, town or charter conflict. coun ty ° n the line of the road, to subscribe to the capital stock and to issue bonds, and to 'Act of March 23, 1861. "State ex rel. v. Garroutte, 67 Mo. 445. "Rails County v. U. S., 105 U. S. 733. UNDER THE CONSTITUTION OF 1875. 73 levy a tax in payment of the same, not to exceed one- twentieth of one per cent of the assessed value of the property in each year. The counties making de- fault, this tax proved inadequate to pay the interest on the bonds. The Supreme Court of the State held 7 that the county court had no authority to levy a greater amount than this, that the bondholder was limited to the proceeds of this tax, and the county court would not be com- pelled to issue a warrant on the common fund of the county. The Supreme Court of the United States 8 took a directly opposite view, holding that that amount of tax was distinctly pledged to the payment of the bonds, but that the bond- holder was entitled to a warrant on the general fund of the county to pay his judgment, and mandamus was therefore issued compelling the county court to issue such warrant. There was also a direct conflict between the State and Township Bond. Federal courts in the matter of township Litigation. bonds, issued under the act of 1868. 9 Soon after the adoption of this act, a proceeding of mandamus was brought to compel the issuance of bonds under the act, for the purpose of testing its constitutionality, and the act was adjudged constitutional by the Supreme Court of the State, and the county court ordered to issue the bonds. 30 Then followed an extraordinary legal history. After a large amount of these bonds had been issued and had passed into the hands of investors, the Supreme Court of the 'State ex rel. v. Shortridge, 56 Mo. 126; State ex rel. Watkins v. Macon County, 68 Mo. 29. •United States v. County of Clark, 96 U. S. 211; Knox County Court v. United States, 109 U. S. 229; Harshman v. Knox County, 122 U. S. 306. "See supra, p. 61. "State ex rel. v. Linn County Court, 44 Mo. 504. 74 M1SS0UEI TAXATION. United States, in 1877, declared the act of 1868 unconstitu- tional, in that the provision authorizing "two-thirds vote of those voting at the election" was not in conformity with the Constitution, which required two-thirds of the qualified voters. 11 But this view was claimed to he inconsistent with the prior decisions of the Supreme Court of Missouri, and in the following year, the United States Supreme Court did the very unusual thing of overruling its own opinion of the year before, and held the act constitutional and the bonds valid. 12 A few months later in the same year, 1878, the question came again before the Supreme Court of Missouri, and that court also changed its ruling, the membership Each court Over- °^ "the court having in the meantime changed rules itself. ^his was not the case with the United States Supreme Court), and held the township aid act of 1868 unconstitutional, not only on the ground taken by the United States Supreme Court in its first opinion, but also on the ground that municipal townships were not towns or corporate bodies in any sense within the meaning of the Constitution of 1865, but were mere "geographical divisions" • of the county, and on the further ground that the act of 1868 devoted all the railroad taxes, on property in the town- ship, both State and county, to the benefit of the township, and this was in effect making the State and county "give their aid" to the railroad in violation of the Constitution. 18 Soon after this, these township bonds issued under this act came again before the Supreme Court of the United States, and that court was asked to follow this last decision of the Supreme Court of Missouri, holding the bonds void. But it refused to do so, and reaffirmed its ruling that the bonds were valid, saying that a change of decision is to all intents "Harshman v. Bates County, 92 U. S. 569. "County of Cass v. Johnston, 95 U. S. 360. "State ex rel. Woodson v. Brassfield, 6,7 Mo. 331 ; and Webb v. La- fayette County, 67 Mo. 353. UNDER THE CONSTITUTION OF 1875. 75 and purposes the same in its effect upon contracts, as an amendment to the law by means of a legislative enactment, and that as the bonds were held valid by the Supreme Court of Missouri when first issued, the United States court would not follow the State eourt in its change of opinion. 14 The result of these conflicting Result of judicial rulings, both as to county and township bonds, conflict. an( j ag to ^ rate Q £ t axa ti on f 0J the class of county bonds above stated, was confusion, and in some cases demoralization in county admin- istration. The Eedexal courts rendered judgment upon the bonds and issued writs of mandamus to the judges of the county courts, compelling them to levy taxes for their pay- ment. Failure to obey these writs subjected the officials to attachment for contempt. As the result of this conflict, the General Assembly of 1879 passed what was known as the Cottey bill. 15 It pro- vided that no tax, other than the State tax for The cottey revenue and interest and the tax for current county expenditures and for schools, should be levied, except under order of the circuit court, which should not only be satisfied of the necessity of the tax, but also that the assessment and collection would not be in conflict with the Constitution and laws of the State, before making such order. The order when granted was a contin- uous order, and in f oree until set aside by the court granting it. It was made a penal offense for any county judge or other county officer to assess, levy or collect a tax without such an order. This act was held inoperative by the United States courts, as to judgments recovered in that court upon bonds issued prior to its enactment, 16 on the ground that it "Douglas v. Pike County, 101 U. S. 677. "Acts of 1879, p. 185; R. S. 1899, sec. 9273-8. 16 U. S. v. Linn County Court, 5 Dillon Cir. Ct. 184; U. S. v. Johnson, County, 5 Dillon, 107; Ralls County Court v. U. S., 105 U. S. 733. 76 MISSOURI TAXATION. impaired the obligation of contract, in taking away the rem- edy. The State Supreme Court again differed, and held the law valid as to bonds issued before, as well as after its enact- ment, and enjoined county judges from levying tax, though ordered by the United States courts. 17 The Federal courts proceeded upon the theory that the judgment creditor of a county was entitled to avail himself of the same common-law remedies for the Position of enforcement of a judgment, as would be given courts. CTa by the common or statute law in the State courts to a judgment creditor of a county. There is no specific statute in Missouri authorizing the levy- ing of taxes to pay county judgments, although there is as to a city; 19 but as mandamus was recognized at common law as the proper remedy to compel a county court or other mu- nicipal corporation to levy taxes to pay a judgment, the Fed- eral courts held, that the Cottey law was no defense for the county judges, who were served with mandamus. The fail- ure or refusal of the judges to levy the tax was held to be contempt of court, for which they were punishable by fine or imprisonment. On the other hand, the State Supreme Court held that the judges were bound to obey the State law, that they could not levy a tax without an order of the circuit position of court, that the Cottey law was applicable to all state courts. bonds, and an injunction was granted restrain- ing the county judges from levying a tax, and that it was immaterial that the county judges were acting "State ex rel. Cramer v. Hager, 91 Mo. 452. 19 Sec. 3233, E. S. 1899. UNDER THE CONSTITUTION OF 1875. 77 under orders of the Federal court. 20 On still another point the Supreme Court of the State and of the United States differed, and that was on the con- struction of the constitutional restriction of Further judicial the rate of county taxation. In cases arising conflict. under the charter of the Missouri and Mississ- ippi Eailroad above referred to, where the bondholder was limited to a special tax of one-twentieth of one per cent, the Federal and State courts differed on his right in addition to a warrant on the general fund of the county. It appeared that in Macon county thirty cents had been levied for county purposes, but in addition the township under township organization had levied twenty cents, fifty cents being the constitutional limit of county taxation in that county. The Supreme Court of the State at that time not having considered the effect of this township organization upon the constitutional limitation Tax Rate and | tne c01ln ty tax rate, the question came be- Township Or- J ' x ganization. fore the United States Supreme Court, and it was held 21 that the township was a separate organization from that of a county, with au- thority to purchase and hold real estate and make contracts and control its separate property, and that its taxes levied for these purposes could in no sense be termed county taxes, and were therefore not included in the county tax rate. The court, therefore, directed a mandamus to issue compelling the levy of an additional tax of twenty cents in payment of the bondholders' judgment. A few years later this question came before the State Supreme Court, and it took a directly contrary view, 22 holding that the township taxes under town- ship organization were essentially county taxes, and included "'State ex rel. Cramer v. Hager, 91 Mo. 452. ^Macon County v. Huidekoper, 134 U. S. 332. M State ex rel. v. Missouri Pac. E. Co., see infra, p. 160. 78 MISSOURI TAXATION. in the constitutional limitation. An interesting case was decided by the United States Supreme Court, illustrating the complications growing out of this judicial conflict. The plaintiff having conspiracies to recovered judgment on county bond coupons prevent Pay- ^ t ^ United States court, secured the levy of ment of Taxes ' . , illegal. a special tax for the payment of the judgment by mandamus against the county judges of Scotland county. The defendants organized a taxpayers' association for the purpose of resisting the collection of the special taxes, by inducing taxpayers to refuse to pay their taxes. "When the collector attempted to enforce payment by levy, a mob assembled under instigation of the association, and prevented parties from bidding at the sales of the chat- tels levied upon, and so prevented the collection of any money to pay the judgment. The plaintiff sued for the amount of his judgment and interest, and also for exemplary damages. The United States Circuit Court sustained a de<- murrer to the petition, on the ground that plaintiff had no legal property interest in the taxes and had sustained no damages. But this was reversed by the United States Su- preme Court. The court said the plaintiff could not sue the collector, for he had done his duty, and that it would be con- trary to common law and right and justice, that an organiza- tion of conspirators could obstruct and defeat the purposes of the court without rendering themselves liable. The court, therefore, reversed the case and directed the lower court to try it upon its merits. 23 Before the case was tried, however, the bonds and this case at the same time were compromised and settled. In 1881 the General Assembly 24 passed an act providing ^Findlay v. McAllister, 118 U. S. 104; of. State ex rel. v. Winter- bottom, 123 U. S. 215. "Acts of 1881, p. 189. UNDER TKB ©ONSTITTTTION OF 1875. 79 for the reimbursement to the townships of any of the pro- ceeds of railroad taxes, paid by the railroad running through such township, and which had been paid over to the State treasury, but should under' the act of 1868 have been paid to the townshipi 25 The money thus repaid was to be applied in the payment of the principal and interest of the bonds, issued by the county for the township subscribing the stock. But this act was held by the Supreme Court to be unconstitu- tional, on the same ground that the original act of 1868 was so held, in that a diversion of the State funds for township purposes was in violation of the Constitution. 26 But these township bonds, though thus adjudged in- valid, were held not to be "nullities," and the court declined to order them to be given up for cancella- compromise tion. 27 The court at the same time made the Legislation sustained. important ruling, that they were the "proper subjects of compromise," and sustained the constitutionality of the compromise act of 1877, authorizing counties and townships and cities to compromise their in- debtedness. 28 This compromise act authorized the court rendering the judgment on the compromise bonds, to appoint an assessor and collector to assess and collect the tax on the property liable for the same. This latter provision, however,, was subsequently re- pealed, but the Cottey law was amended, and the bonded or funded debt of the county (which is construed to include township bonds), was embraced in the objects for which taxes were authorized to be levied by the county court, without an order of the circuit court; so that the statute now expressly authorizes the taxes, which it was enacted to prevent. "Supra, p. 61. "■State ex rel. v. Walker, 85 Mo. 41. "Dallas County v. Merrill, 77 Mo. 573. ^Acts of 1877, p. 197 ; State ex rel. v. Halliday, 72 Mo. 409. 80 MISSOURI TAXATION. Fortunately, the grave complications, resulting from this conflict of rulings between the State and Federal courts found a solution in compromises of these bonds and the issue of compromise bonds under the enabling act above referred to. The interest upon these compromise bonds has been paid without question. At the present writing, all of the town- ship bonds have been compromised, and only three counties are still resisting payment of their indebtedness. 29 It was developed in this conflict, that while the remedy of mandamus against the county officials to levy taxes was theoretically perfect, it practically was very far from adequate, when the payment of taxes st ciair county wag res i s t ec l \)j a united local public opinion. Resistance to ^ x x Tax Levies. Thus in one of the counties (St. Clair) even the levy of taxes for payment of bond judg- ments has been resisted for twenty-eight years, and during this time a new generation has grown up. Judges of the county court have been elected on the platform of refusal to levy the tax, have persistently refused to make the levy, holding court "in the brush," and, evading the serv- ice of process of the Federal court, have in the last extreme suffered imprisonment in jail rather than com- "impxia^aed^ ply- The judges having been attached for contempt, were punished by imprisonment, and habeas corpus proceedings for their release was denied. 30 In 1895, Governor Stone sent a special message to the Legislature calling attention to the imprisonment of the 29 For an interesting history of this municipal bond litigation in Mis- souri, see paper by Mr. Thomas K. Skinner, of the St. Louis bar, read before the Missouri Bar Association in 1891. 80 In re Copenhaver, 54 Fed. Rep., p. 660. UNDER THE CONSTITUTION OF 1875. 81 county judges of St. Clair county in Kansas Message of City under the orders of the United States gov. stone. court f Qr the -^3^^ Di str i c t of Missouri, for refusal to levy a tax to pay judgments on the county bonds. He said they could not obey this mandamus, "without subjecting themselves to indictments and penalties under the law of the State. He also said that the judges of Cass county had been recently imprisoned for a similar cause. He recommended the General Assembly, to memo- rialize Congress, to prohibit the Federal courts from perform- ing any act arising under or authorized to be done by the laws of the State, and also to provide by law that the Gov- ernor be authorized to appoint a special judge, when the ma- jority of the county court were unable to discharge their du- ties, so that the public business could be carried on pending such disability. These recommendations were not adopted at this ses- sion, but in 1897 a law was passed 31 authorizing the probate judge to hold county court, whenever the judges of the county court were prevented from holding court by reason of absence from the county, or other preventing cause. It was provided in this act, however, that he should not have power to levy any taxes, except those necessary for ordinary expenditures. 32 Recommendations of Governor Francis. In 1893 Governor Francis, in his annual message on re- tiring from office, in discussing the needs of increased reve- nues for the State said that so much personal property es- caped taxation, that it would be inequitable to increase the tax on real estate, although he estimated that the real estate "Sec. 1759, E. S. 1899. "This act in 1898 was adjudged unconstitutional in the circuit court of St. Clair county by Judge Jos. H. Lay. The case was not appealed. MO. TAX. — 6 82 MISSOURI TAXATION. in this State was not assessed at more than forty per cent of its true yalue. He thought that under the circumstances it was better to place the additional tax on the "luxuries," and recommended an increase of the State tax on dramshops. Special Message of Governor Stone in 1895 as to Railroad Taxation. In 1895 the House of Eepresentatives, being controlled by the party opposed to the then State administration, passed a resolution of inquiry, asking the Governor for information in regard to the alleged increase of assessments of farm lands, and the reduction of railroad assessments by the State Board of Equalization for the preceding year." Governor Stone, in his special message in reply, 33 denied that thereiad been any discrimination; and said that the increase in the assessment of farm property over the preceding year was 4.17 per cent, and in railroad property 7.58 per cent. He compared the assessments upon railroads per mile with those in neighboring States, with the following result: Railroads were assessed at an average per mile: In Iowa at $5,392.00 In Kansas at 6,626.00 In Illinois at 8,542.00 In Missouri at 11,157.00 He also cited the case of the Chicago & Alton railroad, which was taxed in Missouri on a valuation of $17,590 per mile and in Illinois $10,545 per mile, although in the latter State in Chicago it had its valuable terminal property. He further set out that in the year 1894, $3,037,537 had been paid into the State treasury, about thirty-four per cent from farm property, real and personal, forty per cent from city and town property, and twenty-six per cent from corpora- tion and license taxes and miscellaneous sources of revenue. He showed that the total assessment on city ahd town lots for the preceding year was $387,700,609, and that on farms aa Journal of 1895, Appendix. UNDEB THE CONSTITUTION OF 1875. 83 $306,920,048. He concluded by saying: "I believe it is true that large amounts of property escape taxation alto- gether, and one or two classes are assessed too low." Revenue Legislation under Constitution of 1875. The legislation under the new Constitution was directed to perfecting the details of the system and the machinery for collecting and assessing the general property tax, particu- larly with reference to certain classes of subjects. Thus in 1877, manufacturers were made taxable in the same manner as merchants. In the same year an act was passed for the as- sessment and collection of taxes upon the property and fran- chises of bridges, telegraph and express companies (this be- ing the first and only reference to franchise taxation eo nomine in the statutes). A radical change was made in the collection of delinquent taxes. (See infra, p. 224.) In 1895, provision was made for the separate taxation of railway cars which were not the property of railway com- panies. It was subsequently adjudged unconstitutional. (See infra, p. 116.) In 1881 the personal property of residents held in any other State was made taxable under the laws of this State. (Infra, p. 215.) The powers of the State Board of Equali- zation were enlarged, both in original assessment and in the review of the local assessments (see infra, p. 97). In the same year the date of assessment was again changed, this time from August 1 to June 1, so that prop- erty is listed on June 1, for the taxes of the succeeding year. 34 These legislative changes can be best considered in a re- view of the different features of the taxing system as now "This change, it is said, was urged by the rural districts, so that it would precede the time of the annual harvest. There seems to be no sound reason why the date of assessment should so far precede the pay- ment of taxes, for which the assessment is made. 84 MISSOURI TAXATION. established in this State. The collateral inheritance acts of 1895 and 1897 having been declared unconstitutional, a new act was passed in 1899, which is now in litigation (see infra, p. 152). What is known as the Beer Inspection Act was enacted in 1899, 35 requiring all beer manufactured in the State to be inspected before sale, one cent a gallon being Beer inspection the inspection fee, with two cents for labeling Tax - each package, exported beer being inspected free of cost to the manufacturer. The fees after payment of the salaries of the inspectors are to be paid into the State treasury to the credit of the general revenue fund. The constitutionality of this act is now in litigation. The General Assembly in 1899 also submitted to the people to be voted upon at the general election of 1900, an amendment to the Constitution, adopting what is known as the California system of taxing mortgages (infra, p. 283). Attempts have been made in recent years to enact legis- lation, requiring notes and choses in action to be listed by the assessor as a condition to negotiability, and also to assess franchises for taxation (infra, p. 293), but no such legisla- tion has as yet been enacted. University Endowment Tax Held "Void. The new provisions of the Constitution declaring that taxes shall be levied only for "public purposes," which might be said to be only declaratory of the existing law, and the specific requirement that taxes should be uniform upon the same classes of subjects within the territorial limits of the authority levying the tax (section 3, art. X), construed and enforced by the Supreme Court, have proved effective in checking any tendency to use the power of taxation for class purposes. a5 Acts of 1899, p. 228. UNDER THE CONSTITUTION OP 1875. 85 Thus the public purpose of taxation was effectively de- clared in an important decision in 1897, holding unconstitu- tional the collateral inheritance tax enacted by the General Assembly of 1895 for the endowment of the State Univer- sity. This act levied a tax upon collateral inheritance, as well as upon certain other subjects, which tax was applied partly through the State treasury and partly through local treasuries in the support of poor students in the State Uni- versity; that is, the funds were applied in the endowment of scholarships awarded on competitive examinations to such students. 36 Although it was urged that this endowment of scholar- ships was a recognized historic incident of University man- agement, and was within the discretion of the General As- sembly in enforcing the constitutional direction to support the University, the court held that this support of students was not a public purpose, for which the power of taxation could be exercised; that the purpose was essentially private, and that a distinction was to be made between the support of the University, and the support of the students in the Uni- versity, the court saying: Paternalism, whether State or Federal, as the derivation of the term implies, is an assumption by the government of a quasi fatherly rela- te the citizen and his family, involving excessive governmental regula- tion of the private affairs and business methods and interests of the people, upon the theory that the people are incapable of managing their own affairs, and is pernicious in its tendencies. * * * Paternalism is a plant which should receive no nourishment upon the soil of Mis- souri. In the same case, the court made a very important rul- ing, in holding that the constitutional requirement of uni- formity prevents any discrimination in the rate of an inheri- tance or succession tax between parties bearing the same re- lation to the deceased. In other words, it prevents any '"State ex rel. v. Switzler, 143 Mo. 287. 86 MISSOURI TAXATION. progressive tax (see infra, p. 150). Department Store License Tax Held Void. The requirement of uniformity has been enforced by the court in numerous cases involving the exercise by munici- palities of the power to levy license taxes which will be noticed hereafter in the general subject of license taxation. A recent very important case decided by the court declared unconstitutional and void the so-called Anti-Department Store law passed by the General Assembly of 1899. 37 This is probably the most notable illustration of attempted class leg- islation under the guise of license taxation in this or any other State. It was entitled "An act to regulate business and trade in cities having a population of fifty thousand and over/' and made it unlawful for any merchant in cities of over fifty thousand inhabitants to sell merchandise of more than one of the classifications made in the act without sep- arate licenses therefor, the act being made applicable only to retail merchants, employing over fifteen employes in cities of fifty thousand inhabitants, all others being exempted. The court held that the license was in effect a tax, and that the classification was an unwarranted classification, without rea- son or necessity, and was "simply classification run wild," and that such discriminating taxation was not only violative of the uniformity required by the Constitution, but of the rights secured by the Federal Constitution. The Ineffectual Attempts to Amend Constitutional County Tax Rate. Several ineffectual attempts have been made to amend the Constitution in regard to the limitation upon the county tax rate. Thus at the general election of 1884 the people voted down an amendment authorizing the counties to levy for road and bridge purposes, and the city of St. Louis for street purposes, an additional tax not to exceed fifteen cents "State ex rel. Wyatt v. AsKbrook et al., 154 Mo. 375. UNDER THE CONSTITUTION OF 1875. 87 on each one hundred dollars of valuation. The vote was: Aye, 128,296; no, 148,762. Again the same amendment was submitted at the gen- eral election of 1886, and was again defeated, aye, 115,485; no, 194,338. At the general election of 1894 the same amendment was submitted, but was limited to those counties having less than one hundred thousand inhabitants. This also was de- feated, aye, 91,252; no, 123,746. At the election in 1896 an amendment was submitted authorizing the tax rate to be increased, by a majority vote, not only for the purpose of erecting public buildings, as pro- vided in the Constitution, but also for the purpose- of pur- chasing waterworks or electric light or other plants in cities containing thirty thousand inhabitants or less, when such cities elected to own the same, and to provide proper sewer- age for such cities. This also was defeated, aye, 153,700; no, 227,037. The General Assembly of 1899 submitted for popular vote, not only an amendment adopting the California plan for taxing mortgages, but also made another trial of the amendment authorizing a special tax for road purposes. It provides that the county courts in the counties not under township organization, and the township board of directors in the counties under township organization, may, in their discretion, levy and collect a special tax not exceeding fif- teen cents for each one hundred dollars of valuation, to be used for road and bridge purposes, but for no other purpose whatever. This power is declared to be a discretionary power, and the amendment does not apply to the cities of St. Louis, Kansas City and St. Joseph. This amendment will be voted on at the general election in November, 1900. PART II. TAXATION AS ESTABLISHED IN 1900. CHAPTEK I. PEOPEBTT EXEMPT FEOM TAXATION. Our taxing system is based upon the theory, that all property is taxable, excepting that specifically exempted by the Constitution. The consideration of the subject properly begins, therefore, with the exemptions, as everything in the State, not exempted, is assumed to be taxable. The Con- stitution, sections 6 and 1, Article X, provides: See. 6. PROPERTY EXEMPT PROM TAXATION. The property, real and personal, of the State, county and other municipal corporations and cemeteries, shall be exempt from taxation. Lots in incorporated cities or towns, or within one mile of the limits of any such city or town, to the extent of one acre, and lots one mile or more distant from such cities or towns, to the extent of five acres, with the buildings there- on, may be exempted from taxation, when the same are used exclusively for religious worship, for schools, or for purposes purely charitable; also, such property, real or personal, as may be used exclusively for agricul- tural or horticultural societies. Provided, that such exemptions shall be only by general law. Sec. 7. OTHER EXEMPTIONS VOID. All laws exempting prop- erty from taxation, other than the property enumerated, shall be void. The Constitution of 1865 exempted only public prop- erty, that is, property of the United States, of the State, of municipalities and public schools. The Con- constitutionai stitution of 1875 extends this exemption to Exemptions. cemeteries, but authorizes the General Assem- bly by general law to make further exemp- tions for the specific purposes declared. The General As- 88 PEOPEETY EXEMPT FEOM TAXATION. 89 sembly has accordingly exempted from taxation the property specifically exempted by the Constitution, and also all lands and property of the United States and of all persons belong- ing to the army of the United States, and also the following: 1 6. Lots in incorporated cities or towns, or within one mile of the limits of any such city or town, to the extent of one acre, and lots one mile distant from such city or town to the extent of five acres, with the buildings thereon, when the same are used exclusively for religious wor- ship, for schools, or for purposes purely charitable, shall be exempted from taxation for State, county, or local purposes. Eeal estate and personal property used for agricultural or horticultural societies are also specifically exempted by the statute. 2 These exemptions have been con- pareonage strued in several interesting cases. Thus, Exempt. property occupied as a residence by the bishop of a church is held to be used for purposes purely charitable. 3 Under this ruling the parsonages owned by religious societies and used by the clergymen as residences are exempted. A hospital is held to be used for purposes purely charitable, although it receives certain pay patients, any profit therefrom being applied exclusively to the charita- ble purposes of the institution. 4 The buildings, used jointly for the Academy of Science and the Missouri Historical So- ciety, were also held to be used for charitable purposes. In a very recent case the Supreme Court has pointed out the distinction between a public charity and what is meant in the Constitution by the words "used for pur- pubiic charity poses purely charitable," the latter term hav- " " ing a broader meaning. Thus the buildings of Masonic lodges are held to be used for pur- "Sec. 9119, E. S. 1899. *Sec. 9120, E. S. 1899. "Bishop's Eesidence Co. v. Hudson, 91 Mo. 671. *State ex rel. v. Powers. 74 Mo. 476. 90 MISSOURI TAXATION. poses "purely charitable" within the meaning of the Consti- tution, though not a "public charity." 5 It is sufficient, that the revenues, derived from whatever source, are applied to the payment of their current expenses, and the relief of their afflicted and needy members and their families. Although the charity is restricted to such uses, they are "charitable" institutions within the meaning of the Constitution. This same case, however, has emphasized the meaning of the constitutional requirement that the property exempted must be used exclusively for purposes purely charitable charitable. Thus a three-story building Use Must Be JO Exclusive. erected by a Masonic lodge, of which the third story only was used for lodge purposes, all the iirst and second stories being rented out and the revenues applied to the payment of the debt incurred in the erection of the building, was held not to be used exclusively for purely charitable purposes, and, therefore, was not exempt from taxation, there being no power to "parcel the building out, and assess part and exempt part." So the whole building was held taxable and the injunction against the collection of the tax was refused. This principle was further applied 6 to a case where one of the stories of a Knights of Pythias building was rented to other lodges. But the court held that it was a matter of com- mon knowledge, that there were lodges which were not chari- table institutions, and that as "taxation was the rule and ex- emption the exception," it was the duty of plaintiffs to prove that these tenants were charitable institutions, as the chari- table use must be exclusive. The constitutional exemption from taxation is further illustrated by the recent decision of the Supreme Court in "Fitterer v. Crawford, May 21, 1900, 57 S. W. Rep. 532. "Adelphia Lodge v. Crawford, 57 S. W. Rep. 1020. PKOPEBTY EXEMPT FEOM TAXATION. 91 the case of the Muiianphy Emigrant Relief Fund. Under the will of Bryan Muiianphy Muiianphy Fund a large amount of real estate was left to the Estate Not ,~ , „ _. x , - , 1 , . Exempt. Uity o± bt. Louis as trustee tor the relief of foreign immigrants, and it was sustained by the Supreme Court as a valid charitable trust. 7 It was held by the Supreme Court that this property, thus held in trust by the city, was not "property of the city" within the meaning of the Constitution, and that it could not be. exempted as charitable property, as the Constitution re- stricted the exemption of charitable property in cities to the one acre used exclusively for purposes purely charitable, and that it was not necessary that this property should be specifically subjected to taxation, because all real estate not exempt was subject to taxation. The tax bills in this case were, however, held void, as they were made out against the "Muiianphy Emigrant Eelief Fund," and it was held that this did not meet the requirements of the statute, which required that all property should be assessed against the owner. 8 There is an important distinction in these exemptions between property held for religious, school and charitable purposes, and the property of agricultural and horticultural societies. In the former case, only the real estate is exempt, while in the latter case both real and personal property are exempt, the requirement in both cases being that the prop- erty shall be used exclusively for the declared purpose. This has been applied in several cases. Thus the exemp- tion of a lot with the buildings for school purposes did not include office furniture or a chemical laboratory, 'Chambers v. St. Louis, 29 Mo. 543. "St. Louis v. Wenneeker, 145 Mo. 230. 92 MISSOUBI TAXATION. which were not fastened to the building. 9 A singular result follows: The communion Personalty of n n .. . , Churches Not service of a church and the bibles and. prayer Exempt. books in the pews, and the school books, maps and other furnishings of a private academy, and the endowments of a charity, are taxable; but the per- sonal property of a fair association, including the appurte- nances of a race track, is exempt. Acts of the General Assembly, authorizing cities to extend their limits over adjacent property used for agricultural and horticultural pur- poses, and providing that such prop- Exemption of ..... . - Annexed city erty snail be exempt from taxation, as Territory Un- J Q ag ^ wag gQ ^^ £ Qr agricultural constitutional. ° o ""■ or horticultural purposes, have been pronounced unconstitutional, the Legisla- ture having no power to extend the exemptions fixed by rhe Constitution. 10 Prior to 1893, the proceeds (notes, cash and bonds) of sales by merchants and manufacturers, whereon license had been paid, were exempted from taxation dur- ing the same year. The same exemption for Exemption in ~ _ sales of Mer- one year was extended to notes and bonds chants and taken f or sale of real estate, upon which a tax Manufacturers ' x and of Real Es- had been paid. 11 These provisions were not ex- pealed* "* emptiohs in the proper sense of the term, their obvious purpose being to prevent double taxa- tion of the same property, All these one year exemptions, however, were repealed in 1893. 12 "Kansas City v. Medical College, 111 Mo. 141. 10 Copeland v. St. Joseph, 126 Mo. 417; State ex rel. v. Wai-dell, 153 Mo. 319. "See. 7506, 1889. "Acts of 1893, p. 209. PEOPEETY EXEMPT FEOM TAXATION. 93 As to effect of the repeal upon merchants and manufac- turers, see infra, p. 140. As to exemption of manufac- turers whose raw material, machinery, etc., is less than one thousand dollars from taking out State license, see infra, p. 145. This purpose of avoiding double taxation is illustrated in the exemption to the holders of shares of stock in incor- porated domestic companies, which are taxed through the property of the company. And so merchandise is exempted from the personal property required to be returned in the taxpayers' list. There is an apparent inconsistency in the statute in the mention of "printing presses, type and machin- ery" in the property required to be listed by the taxpayer, as all machinery and personal property owned by manufactur- ers is practically construed as exempted from taxation, other than that assessed upon manufacturers' licenses. Federal Exemptions. But neither the Constitution nor the statutes enumerate all the property exempt from taxation. A very important exemption is that which grows out of the sovereignty of the United States under our dual form of government, and in- cludes not only the lands and property of the United States mentioned in the statute, but the bonds issued by the United States government. The currency issued by or under the authority of the United States would also be exempt, but for the fact that it is expressly made taxable under State author- ity by United States statute. 13 But property occupied by the National government is not exempt from taxation, unless the title and ownership is vested in the United States. This was illustrated in the case of the Gratiot Street Prison, which was occupied by the United States during the Civil "War. The Supreme Court l:eld that this did not exempt it from taxation, and that the "Acts of Congress, 1894, chap. 281. 94 MISSOURI TAXATION. owners must appeal to the justice and generosity of the Na- tional government for relief. 14 The sovereignty of the United States, and its exclusive jurisdiction over interstate commerce, exempt also from State taxation property in transit in interstate commerce, and property imported into the State which is still in the "original packages," and which has not yet mingled with the great mass of property subject to State taxation. 15 As to the exemption of the United States bonds in the hands of bankers, see infra, p. 124. Contractual Exemptions. Another important class of exemptions is in cases, where the State prior to the Constitution of 1865 had contracted to make such exemptions. This is under the authority of the doctrine announced by the Supreme Court of the United States in the "Washington University case and the Pacific Iiailroad case, supra, and these decisions have been consist- ently followed by the Supreme Court of the State. 16 A school building, exempted from taxation "as long as it is used only for purposes of education," is not made taxa- ble by renting one room thereof for other purposes, where the income is used exclusively for the benefit of schools. 17 So in the case of railroads enjoying a contractual ex- emption from taxation. It has been held, that a railroad "Speed v. St. Louis County Court, 42 Mo. 382. 15 In a very recent case the term "original package" was denned to be the box or case in which parcels of linens were packed for shipment. When the box was opened, and the parcels taken out by the importer for sale, the parcels were not "original packages," but were held to be mingled with the general property of the State, and subject to local taxation. May v. New Orleans, 20 Sup. Ct. Rep. 976. (Four judges dissenting), May 21, 1900. "State ex rel. v. St. Joseph's Convent of Mercy, 116 Mo. 575; and St. Vincent's College v. Schaefer, 104 Mo. 261. "North St. Louis Gymnastic Soc. v. Hudson, 85 Mo. 32. PEOPEETY EXEMPT PEOM TAXATION. 95 company, whose stock is exempt from taxation can not be taxed on the property owned by it, which its stock repre- sents. 18 The exemption also includes a tax levied by a county for the payment of bonds issued for stock in the road, and though the bonds could be paid only out of the proceeds of this tax. 19 On the other Contractual i j • i i i • Exemption a hand, it has been held that exemption is a per- ieg r e SOnal Privi " sonal Privilege to the corporation to which it is given, and is incapable of transfer, unless there is special statutory authority. Thus the exemption was denied, where the defendant had purchased the property through a foreclosure sale, 20 and also where two railroads were consolidated, that part of the new line, which was exempt before, continued to be exempt, and that part subject to taxation would continue to be subject; but where the consolidation was formed after the Constitution of 1865, and the Legislature had no authority to grant exemption, the prior exemption did not pass to the new company at all. 21 And where a railroad was exempt from county tax, it was not thereby exempt from a township tax, levied to pay bonds issued in aid of the railroad. 22 As will be hereafter seen, property exempt from taxa- tion is not exempt from assessment for local improvements. 23 "Scotland County v. Railroad Co., 65 Mo. 123. "State ex rel. v. Hannibal & St. Joe E. Co., 101 Mo. 136. m State ex rel. v. Eailroad Co., 89 Mo. 523. 21 State ex rel. v. Keokuk & N. W. Ey. Co., 99 Mo. 30; affirmed, 152 V. S. 301. "State ex rel. v. Eailroad Co., 113 Mo. 297. "Infra, p. 193. CHAPTEK II. STATE BOAED OF EQUALIZATION. First in importance in the administration of the revenue system of the State is the State Board of Equalization, estab- lished by the Constitution of 1875, section 18 of Article X: Sec. 18. STATE BOAED OF EQUALIZATION— MEMBERS.— There shall be a State Board of Equalization, consisting of the Governor, State Auditor, State Treasurer, Secretary of State and Attorney-General. The duty of said board shall be to adjust and equalize the valuation of real and personal property among the several counties in the State, and it shall perform such other duties as are or may be prescribed by law. Prior to 1875, there was a State Board of Equalization composed of the State Senate, such Board being created by statute, prescribing its powers and duties. By the act of •1871 (p. 87) the Board of Equalization had been invested with the power of assessing the property of the railroads of the State. It was held by the Supreme Court 1 that no legisla- tion was required to put into effect this provision of the Con- stitution of 1875, but the Board of Equalization, as estab- lished by the Constitution, was authorized to proceed at once, ii ot only with the equalization of the valuations in the coun- ties, but also to adjust and assess railroad property, under the powers theretofore conferred upon the then existing board. The board is thus vested with two classes of powers: First, the equalizing of valuation of assessments throughout the State as made by the local assessors; and Powers of second, in the original assessment of railroad state Board. property, and this has been extended by stat- ute to include bridges, railway cars, street rail- 'E. E. Co. v. State Board, 64 Mo. 294. 96 STATE BOARD OF EQUALIZATION, 97 roads and telegraphs. The powers and procedure of the Board as a board of equalization of assessments are set out in the statute, Revised Statutes 1899, sections 9125 to 9129. It meets on the last Wednesday of February of each year. 'So provision is made for the publication of its proceedings. It is empowered to send for persons and papers, to administer oaths, and take all evidence it may deem necessary to ascertain the value of property in the different counties. In 1894 it was held by the Supreme Court 2 that the State Board had no authority to adjust the values of different classes of real estate, that is, to distinguish between town lots and acre property, and that its jurisdiction was limited to equalizing the value of real and personal property among ihe counties, while the county boards dealt with individual assessments. As a result of this decision the General As- sembly in 1899 3 passed an act, expressly requiring the board to equalize the value of each class of real and personal prop- erty of each county, these classes being: First, banking corporations; second, railroad corporations; third, street rail- road corporations; fourth, all other corporations; fifth, bonds, notes and evidences of indebtedness; sixth, horses, mares and geldings; seventh, mules; eighth, asses and jennets; ninth, reat cattle; tenth, sheep; eleventh, swine; twelfth, farm implements and all other personal property. Beal estate in cities, town and villages is classified as town lots, and all other real estate as farm lands. The board is directed to equalize the value of each class of the property, real and per- sonal, of each county, by adding such per cent, where it be- lieves it is valued below its real value in money, as to increase the same to its "true value:" and also by deducting from each class, which it believes to be valued above its real value; 2 State ex rel. v. Vaile, 122 Mo. 33. s Sec. 9127, E. S. of 1899. MO. TAX. — 7 98 MISSOUBI TAXATION. in money, such per cent as will reduce the same in each case to its "true value." The assessors in the counties are required to file copies of their books, verified by affidavit, with the county clerk for the county court, and thereupon make out an abstract, show- ing the aggregate amount of the different classes of personal property and the valuations, and forward the same to the State Auditor to be laid before the State Board of Equaliza- tion. The State Board then equalizes the valuations be- tween the counties as to the different classes of property, and when the work is completed, the result is certified to the county clerks to be submitted to the county boards of equal- ization. It is the duty of the county board to adjust their tax books according to the equalization of the State Board. That is, if the valuation of any specific class of property is raised or lowered, the county board must adjust this change as between the individual taxpayers, preserving the aggre- gate valuation of each class of property as fixed by the State Board. The procedure of the State Board may be illustrated by a summary of its action for the taxes of 1900, at the annual meeting in February, 1900: CLASSES OP PROPERTY. Acres Town lots Horses Mules Asses and jennets Neat cattle Sheep Hogs All other live stock Money, bonds and notes.. Corporate companies All other personal property, Total VALUED BY ASSESSORS. $317,850,092 457,436,897 16,862,791 5,273,527 277,876 28,082,648 929,014 4,316,463 42,212 66,444,229 36,126,776 51,301,108 $984,943,633 $3,918,852 1,798,233 540,123 21,346 506,907 "1,998,830 $4,786,631 VALUE AS EQUALIZED. $321,768,944 459,235,130 17,402,914 5,294,873 277,876 28,589,555 929,014 4,316,463 42,212 66,444,229 34,127,946 51,301,108 $989,730,264 "■Decrease. STATE BOAKD OF EQUALIZATION. 99 It will be observed that there is a decrease in the as- sessment of "corporate companies" of $1,998,830. This de- crease resulted from equalizing the assessment of banks in the different counties and mainly from the consequent reduc- tion from the assessment in the City of St. Louis. (Taxa- tion of Banks, infra, p. 121.) This want of uniformity in the county assessments will be referred to later in the discus- sion of the practical workings of the general property tax. (Infra, p. 245.) In this connection should be mentioned the act of the General Assembly of 1899, 4 requiring the license commis- sioner of each city having over one hundred thousand inhabitants to file with the Board a ineffective Acts verified list of the manufacturers listed for of General Assembly. taxation, with their several returns of raw material, machinery, etc., listed for taxation, and the act required a verified list of the merchants, with their several returns of listed merchandise and other property listed for taxation. 5 These acts, however, failed to make any provision for the Board of Equalization to take any action upon these returns when they receive them, and conse- quently no action whatever was taken upon them by the Board. The acts, therefore, whatever their purpose, remain wholly ineffective. 4 Sec. 8488, E. S. 1899. B See. 8548, E. S. 1899. CHAPTEE III. ASSESSMENTS BY THE STATE BOAED OF EQUALIZATION. The State Board of Equalization is also vested with the original assessment of railroads, railroad cars, street rail- loads and the property and franchises of bridge, telegraph tnd express companies. The assessment in each of these cases, with the excep- tion of the last named, is made upon the same principle. Thus the property of each company is assessed by the State Board by sworn returns made by the officers, and the value thus assessed is apportioned, according to mileage, to the local authorities of the counties or cities along the line for taxation. The importance of this assessment may be illus- trated by the valuations for 1899 and 1900, which were as follows : 1899 1900 Railroads $76,857,661.03 $77,448,204.30 Street railroads 21,171,432.28 21,045,288.00 Bridge companies 2,915,000.00 2,865,000.00 Telegraph companies 2,002,507.71 2,002,507.71 $102,946,601.02 $103,361,000.01 .£ In making these original assessments, as well as in per- orming its duty of equalizing assessments, as set forth in the preceding section, the Board acts judici- ally, and its discretion, when acting within its "Board."" 1 jurisdiction, can not be controlled by the courts. Thus in determining from the evi- dence, what is the actual cash value, it is not obliged to preserve the evidence, and its valuations made 100 ASSESSMENTS BY BOABD OF EQUALIZATI* upon such evidence are conclusive. 1 First. The Assessment and Taxation of Railroads. The present system of railroad taxation was adopted in 1871, prior to the adoption of the present Constitution. Prior to that date, railroads had been assessed and taxed in ihe several counties with very unsatisfactory results, but the later system of State assessments thus adopted in Missouri has been followed in many other States. Railroad taxation is regulated by Article Viil, chapter 149 of Revised Statutes of 1899, and the system may be i'limmarized as follows: On or before the first of January of each year, the rail- road companies furnish the State Auditor a verified state- ment, showing their length of tracks in each county, with other property, and a duplicate of this statement is furnished to the clerk, of the county court, who is also required to fur- bish a verified statement to the auditor, of what the court believes to be the actual cash value of the property. On the third Monday of April of each year, the State Auditor kys these reports before the State Board of Equalization, which is then required to assess, adjust and equalize the cor- lected valuation of the property of each one of the railroad companies. The State Board is vested with extensive and summary powers in making the assessment. It may compel the at- tendance of witnesses and it may arrive at its finding, conclu- sion and judgment upon its knowledge of such information as may be before it, and "shall not be governed in its finding, conclusion and judgment by the testimony which may be ad- duced further than to give it such weight as the board may think it is entitled to." l In 1898 mandamus to compel the Board to assess railroad property according to the "full cash value" was refused by Gantt, C. J., on the ground that it was the province of the Board to determine from the evidence what was "full cash value," and it was to be presumed that the Board would do its duty. 102 MISSOURI TAXATION. But it is only the roadbed, including the terminals and rolling stock which is thus assessed. The local property of the company, real, personal and mixed, "including lands, machines, workshops, Local property roundhouses, warehouses, and other buildings, assessed by Local Assessors, goods and chattels, and other furniture of whatever kind owned or controlled by any railroad company not before specified, that is, excluding the roadbeds, terminal tracks and cars, is as- sessed by the local assessors as other local property." This "local property" includes land bought by the rail- road company for future use as terminals, but leased to a manufacturing company for the time being. 2 The neces- sary lands upon which the railroad sidetracks are laid are assessable by the State Board, and parts of the yards used only for coal sheds are assessed by the local assessor. 3 Railroad property, to wit, the roadbed, terminal tracks and rolling stock, is assessed as an entirety by the State Board of Equalization. That is, an average valuation per mile of track and roadbed of each company, and also each car, is fixed, and this valuation, with the total length of the roadbed and sidetracks in each county or city, is then certified by the State Auditor to the local authorities, and the taxes are levied thereon, as upon other property of ihe State, for State, local and municipal purposes. For the purpose of school taxation, a further apportion- ment is made by the local authorities, by adding together the local rates of the several school districts of the Apportionment county. The railroad companies are taxed r. r. Tax. for school purposes, at the average rate, on the proportion of the value of the railroad 2 State ex rel. v. Railroad Co., 117 Mo. 1. "State ex rel. v. Railroad Co., 135 Mo. 618. ASSESSMENTS BY BOARD OF EQUALIZATION. 103 property in the county certified by the State Auditor, this tax being apportioned among the school districts in the proportion of the enumeration of school children of such districts. 4 The buildings of a railroad company are subject to taxation like other property, at the local rates fixed in the districts where they are situated. This system of assessing railroad property as an entirety was adopted in 1871 under the Constitution of 1865, and its constitutionality was sustained, 5 the court saying that it was no objection that the rolling stock, located in St. Joseph, of a railroad company which had its shops there, was appor- tioned among all counties on the line, and that the claim, that the situs of the personal property followed the residence of chief office of a corporation, was a legal fiction and could be modified by the Legislature. In a later case 6 the court held that it was only the length of the main track of the railroad, which is to be con- sidered by the State Board in determining the length of the road for purposes of apportionment on the mileage basis of the taxes to the counties on the line. The court said that the length of the side tracks was not to be added to the length of the main track in deterrnining this total mileage for apportionment in the several counties, and that there was nothing unconstitutional in this method of apportionment. A railroad bridge owned by a railroad company is taxed as part of the railroad valuation, though part of it is used as a toll bridge. 7 •State ex rel. v. Railroad Co., 110 Mo. 265 ; State ex rel. v. Railroad Co., 135 Mo. 618. "State ex rel. v. Severance, 55 Mo. 378; in re apportionment, 78 Mo. 591. "State ex rel. Murphy v. Stone, 119 Mo. 668. 'State ex rel. v. Railroad Co., 97 Mo. 348. 104 MISSOURI TAXATION. Constitution on Railroad Taxation. The Constitution provides (section 5 of article X) : All railroad corporations in this State, or doing business therein shall be subject to taxation for State, county, school, municipal and other purposes on the real and personal property owned or used by them, and on their gross earnings, their net earnings, their franchises and their capital stock. This section has apparently been construed as provid- ing in the alternative, different methods of taxing railroad property, to be selected by the General Assembly. The real and personal property are represented by the capital stock, and gross and net earnings represent the earnings of the property and franchises together. This has been the con- struction adopted by the State Board of Equalization, which has since the Constitution of 1875 made no change in the method of taxing railroad property. Kailroads are there- fore subject to be taxed in any one of these methods au- thorized by the Constitution, but such property has not been subjected to taxation, except upon its value, as assessed by the State Board of Equalization. 8 Missouri has now nearly seven thousand miles of steam railroads. Nearly all of it belongs to great interstate rail- road systems, including the Atchison, Topeka & Santa Fe, the Chicago, Rock Island & Pacific, the Chicago, Burling- ton & Quincy, the Chicago, Milwaukee & St. Paul, the Chicago & Alton, the Missouri Pacific, the Iron Mountain & Southern, the St. Louis & San Erancisco and the Missouri, Kansas & Texas. Principles of Railroad Taxation. The principles controlling the taxation of interstate railroad systems have been thoroughly considered by the "State v. Railroad Co., 77 Mo. 202 ; Valle v. Ziegler, 84 Mo. 214. ASSESSMENTS BY BOAED OP EQUALIZATION. 105 Supreme Court of the United States, and the u. s. supreme inherent difficulty of reconciling just authority fioToVrJer* 3 " of the State over property within its jurisdic- state r. r. tion with the limitations upon State authority in the regulation of interstate commerce, is illustrated by the dissents in these cases. The following principles may be said to be definitely established by the repeated decisions of that Court: 1st. While the State can not impose any tax or bur- den upon the privilege of conducting interstate commerce within its limits, yet it has the unquestioned right of placing a property tax on the instrumentalities of such commerce within its jurisdiction; that is, on the property and fran- chises, used in the transaction of such business within its jurisdiction. 2nd. When a railroad runs into or through two or more States, its value for taxation purposes in each is fairly estimated by taking that part of the value of the entire railroad, which bears to the entire value, the same propor- tion that the mileage of the part in that State does to the mileage of the whole road. 3d. That the true value of a railroad means the value which it has as used and by reason of its use, and it is some- thing more than the aggregation of the valuations of its separate parts operated separately. 9 It therefore follows that the State Board of Equaliza- tion, in determining the true cash value of the railroad property in the State, can apply this mileage Difficulties in the rule to the aggregate total value of the road Application of .,.« ~ , -i-i-t. -, Mileage Rule. iu difterent states through which it runs. But while the right is clear, the application to the "Maine v. G. T. R. Co., 142 U. S. 217 ; Railway Co. v. Backus, 154 U. S. 421; Erie Co. v. Pennsylvania, 158 U. S. 431; Adams Ex. Co. v. Kentucky/166 U. S. 171. 106 MISSOURI TAXATION complicated conditions of railroad property is not so clear. Thus a railroad running through two or more States may have very valuable terminal properties, in one State, as in the case of railroads crossing Missouri -which terminate in Chicago. The value of a railroad's mileage in a State would also depend upon the density of the popu- lation, as a roadbed in the thinly settled and treeless plains of the far west obviously possesses far less earning power than in the densely settled regions of northern Illinois or in the rich farming lands of Central Missouri. 10 It is obvious, also, that this same difficulty in the application of the mileage rule for apportionment, would apply to the apportionment within the State among the several counties and cities, as it deprives the cities of the benefit of the very valuable terminals, which are included as ordinary roadbed. But while this mileage rule has been approved by the Supreme Court of the United States, and is in some States apparently made obligatory upon the assessing board, it is not obligatory in this State. The Mileage Rule not ' . obligatory in only reference to the mileage rule in the stat- ute is in the taxation of the rolling stock of an interstate road, wherein it is provided that the road shall be taxed on only such proportion of the roll- ing stock, as the number of miles in the State bears to the total mileage of the road. Basis of Valuation of Railroad Property for Taxation. The Board of Equalization is thus not limited to any specific method for determining what valuation they deem just and right. It is not compelled to apply the mileage rule of valuation, except in regard to rolling stock, but it is at liberty to do so if it deems proper. It must determine the "actual cash value" of the property of the company in 10 See remarks of U. S. Supreme Court in 154 U. S. 431. ASSESSMENTS BY BOABD OF EQUALIZATION. 107 the State, but in. the language of Judge Gantt upon the mandamus application referred to, "no power exists to com- pel the Board to make any specific valuation," and "no court can decide for them what their judgment as to value must be." They are not limited to any particular kind of evi- dence, nor is the evidence heard required to be preserved in their records. 11 There is no market "price" of railroads as entireties to be consulted in determining "actual cash value," but there is a market price for the securities, which represent the value of the property. Thus Justice Miller, in the Supreme Court of the United States some years ago, announced the following basis for railroad valuation, which has been re- peatedly affirmed: 12 When you have ascertained the current cash value of the whole funded debt and the current cash value of U. S. Supreme the en tire number of shares, you have, by the action of ,, , „ ,_ .. those who above all others can best estimate it, ascer- Value" of Rail- ' roads for Taxa- tained the true value of the road, all its property, its tion. capital stock, and its franchises; for these are all rep- resented by the value of its bonded debt and of the shares of its capital stock. This was a case from Illinois, where the rule had been adopted by the Eoard of Equalization as a means of ascer- taining the fair cash value of the capital stock and fran- chises. Another method approved by railroad authority is the capitalization of the net earnings of a corporation, that is, the earnings over operating expenses, avail- capitaiization of a ^ e ^ or interest payments and dividends, on Net Earnings. a b as ig f nve per cent. It is claimed that the results reached by this basis of valuation "State ex rel. v. Railroad Co., 101 Mo. 120. "State Eailroad Tax Cases, 92 U. S. 575, p. 605. 108 MISSOURI TAXATION. accord very closely with those found by the market valua- tions of the stocks and bonds. The valuation of railroads in this State in 1899 was $76,857,661.03. 13 The value is that found by the State Board, and does not include the valuation of local property by the assessors, amounting to about $5,000,000. Valuation of Railroads as Compared with "Pull Value." In 1899 a statement was submitted to the State, Board of Equalization by the Attorney-General, which was adopted in the petition for mandamus to the Supreme Court already referred to, setting forth that the stock market valuations of the railroad properties in Missouri, computed under the mileage rule of apportionment as above set out, amounted to $221,000,000. Assuming this computation to be accurate and adding to the assessment by the State Board, the valua- tion of local property by the local assessors, the total as- sessed valuation of railroad property on a mileage apportion- ment in the State would be about thirty-seven per cent of the market value of the property and franchises of the com- panies. This, of course, is the average rate, some companies being assessed above this and some below. But taking this as the average rate, it is in excess as will be hereafter seen, of the average rate of assessment of farm lands of the State, though far below the average rate of assessment in St. Louis. Message of Governor Stone on Railroad Taxation. Thus in a special message in 1895, Governor Stone "The aggregate valuation of railroads by the State Board for 1900, as reported in the public press (August, 1900), is $77,408,204.30. It is stated that the Board omitted in this assessment the item of "miscella- neous property," which was an "arbitrary sum included in the assess- ments of the two previous years'' aggregating $448,196.75, and which, it is said, the Board became satisfied would not be sustained by the Courts." ASSESSMENTS BY BOAED OF EQUALIZATION. 109 (supra, p. 82), explaining in detail the assessments of the State Board of Equalization in that year, says: The Board does not believe that railroads are assessed at their full value. According to proof submitted to the Board, however, it was made reasonably clear that most of their equipment and rolling stock is assessed at sums approximating its full value. But the superstruc- tures, buildings, etc., belonging to these corporations are not assessed at full value; neither are the lands of the farmers or the storehouses of the merchant assessed at full value. A literal compliance with the assess- ment law would require the assessment of all property at its actual full money value; but before that can be safely done, there should be some material alterations or amendments to the revenue laws. The Board has sought to place the valuation of railroad property as high relatively as that placed upon other property, and in the light of all the facts gathered from all sources by the Board, it has every reason to believe that that result has been attained. Many citizens and county officials from the different sections of the State came before the Board, and from their statements it was made to appear that the lands taken as » whole, are assessed at about one-third their actual value. After careful inquiry into the value of each separate road, the Board assessed the property thereof at what it considered even a higher per cent of the true value than that imposed upon real estate. Method of Valuation by State Board. The practice of the State Board of Equalization of Missouri is to fix the value of each mile of track of each road in the State, from all the evidence which comes before it, this mileage valuation being necessary for the apportion- ment to the counties required by the statute. In the last published proceedings of the Board (1898) we find the following valuations, which are illustrative of the practice: Locomotives were assessed at V st U rte°Board i n $ 4 > 000 each ; passenger cars at $2,250; dining, 1898. palace and parlor cars, $5,000; stock cars, $250; flat cars, $300; box cars, $250; while the valuation of mileage of tracks ranged from $6,500 for the Belmont branch (the Iron Mountain), to $14,000 for the Atchison, Topeka & Santa Ee, and $16,500 for the Missouri Pacific. These valuations of mileage included the 110 MISSOURI TAXATION. entire road bed, tracks and terminals. The valuation of terminal railroads, that is, roads having no tracks but termi- nals, was, of course, on a much higher scale per mile. Thus the St. Joseph Terminal Eailroad was valued at $210,- 000 per mile; the Union Pacific Eailroad Co. (one-half mile of track entirely in Jackson County), $350,000 per mile, and the Terminal Eailway Association of St. Louis (having 1.97 miles of tracks in St. Louis), $507,614 per mile.* *The following is the valuation per mile placed by the board upon the roadbed and superstructure of the principal lines of railroad, for taxes of 1900 as reported (Aug., 1900) in the public press: Atchison, Topeka and Santa Fe $14,000 Chicago, Rock Island and Pacific 14,000 Kansas City, St. Joseph and Council Bluffs 10,000 Chicago, Burlington and Kansas City 4",000 St. Louis, Keokuk and Northwestern 11,500 Chicago Great Western 8,000 Kansas City, St. Louis and Chicago 15,500 Louisiana and Missouri River 15,500 Louisiana and Missouri River, south division 6,000 Eureka Springs 8,000 Kansas City, Fort Scott and Memphis 12,000 Kansas City Belt 76,000 Kansas and Texas Coal Railway 1,000 Kansas City, Pittsburg and Gulf 10,000 Kansas City and Northern Connecting 7,500 Omaha, Kansas City and Eastern 5,000 Omaha and St. Louis 7,500 Kansas City Suburban Belt 50,000 Leavenworth Terminal 6,000 Manufacturers', St. Louis 100,000 Mississippi River and Bonne Terre 6,500 Missouri, Kansas and Texas 12,500 Kansas City division 6,000 St. Louis division 10,500 Missouri Pacific 16,500 St. Louis, Iron Mountain and Southern 14,000 St. Louis, Kansas City and Colorado 2,000 St. Clair, Madison and St. Louis Belt 150,000 St. Louis Southwestern 5,500 St. Louis Merchants' Terminal 65,000 St. Louis Transfer 65,000 St. Louis and San Francisco, east Pierce City 11,000 St. Louis and San Francisco, west Pierce City 5,000 Terminal Railroad Association of St. Louis 525,000 Union Pacific 300,000 Wiggins Ferry Company's tracks 65,000 Waba»h system 7,000 ASSESSMENTS BY BOABD OF EQUALIZATION. Ill Taxation of Gross Earnings. In this connection may be mentioned another method of taxing railroad companies which is in force in some States, as in Michigan, and is specifically authorized by the Constitution, to wit, the taxation of gross earnings. The proportion of gross earnings taxed by any one State is ascer- tainable by the application of the mileage rule, that pro- portion of the gross earnings being taxable by the State which bears to the total gross earnings the same ratio, as the mileage in the State bears to the total mileage. "While this method of taxation reaches all property and franchises of the company, that is, its total earning power, and is readily ascer- tainable, it is objected that it discriminates against companies which do a large business on a small margin of profit as com- pared with those who do a similar business with a larger margin of profit. It seems also that there is a difficulty in fixing the rate of taxation so as to harmonize it with the taxation of other property which is taxed on the basis of value, and not of earnings. For further discussion of this subject, see Taxa- tion of Franchises {infra, p. 302). The Collection of Railroad Taxes. The valuations as fixed by the State Board having been apportioned to the several counties and cities upon the mile- age basis, the county court takes this valuation, with the valuation made by the local assessors of the local property, it being made the duty of each city or town to certify to the county court a statement of these assessments of local prop- erty and the rate levied for municipal purposes, and the coimty court then ascertains and levies the taxes for State, county and municipal purposes at the same rate as levied upon other property, the school taxes being levied and ap- 112 MISSOURI TAXATION. portioned as above stated. 14 The clerk of the county court can not extend these taxes upon the tax book without an or- der of the county court, 15 and the county court can not levy railroad taxes on property in the city unless it receives cer- tificate from city authorities within the time fixed by law, May 10th of each year. 16 The tax bills are then delivered to the collector, who is charged with their collection as with other bills. The col- lector has the right of seizure, if the railroad company fails to pay at least one-half the taxes before the first of October, or all of them before the first of December. If they are unpaid on the first of January, he has the right to bring suit to enforce the State's lien, and a form of petition for such suit is provided by the statute. 17 These suits are conducted as other tax suits to enforce the collection of taxes (infra, p. 224) ; but it seems that in the collection of railroad taxes, the tax bills are not made prima facie evidence as is the case with other tax bills, for the reason that they are not so made by the statute. 18 Second. Assessment and Taxation of Street Railroads. Since 1897, the street railroads of the State have been assessed by the State Board of Equalization. 19 The presi- dent of each company furnishes annually on or about the first day of June of each year a statement of all the property of the company. The property so returned is declared subject to taxation, to the same extent as the real and per- sonal property of private persons, the taxes to be assessed and collected at the time and in the manner provided by law for "Sees. 9362 and 9363, R. S. 1899; State ex rel. v. Bridge Co., 134 Mo. 321 ; Railroad Co. v. Apperson, 97 Mo. 300. 15 State ex rel. v. Railroad Co., 135 Mo. 618. "State ex rel. v. Railroad Co., 135 Mo. 77. "Sees. 9372, 9373, 9374, R. S. 1899. "State ex rel. v. Davis, 131 Mo. 457. 16 Secs. 9353, to 9355, R. S. 1899. ASSESSMENTS BY BOARD OE EQUALIZATION. 113 the assessment and taxation of other railroad property. As construed by the State Board, this act authorizes the assessment by the Board of the entire property of the street railroads; that is, its real estate and personal property, as well as its tracks and rolling stock. The assessment is thus entirely taken out of the jurisdiction of the local assessors, therein differing from the assessment of steam railroads, where property other than the roadbed, terminals and rolling stock is assessed by the local assessors. Street railroads have usually been organized under the provisions of the manufacturing and business company act, which includes among its purposes, "to con- struct and operate horse railroads," but the organization of statute also authorizes every such company, street Railroads, authorized to use horse power, to use any other motive power authorized by the ordi- nances of the city (section 1355). Some street railroad companies have been organized under the general railroad law. The General Assembly of 1899 enacted a law for the incorporation of street railway companies as such, so that now we have a separate article in the general corpora- tion law for the incorporation of such companies. 20 As to the payments exacted by municipalities from the street railroad companies, as conditions for the grants oi local franchises for use of the streets, see infra, p. 190. The street railroads of St. Louis, as assessed by the local assessors #nd Board of Equalization for 1898, the last year in which such assessment was made by valuation of them, aggregated $6,154,450. The Supreme Street R. R. by _. . . ..... state Board Court having decided that the assessment should be made by the State Board for that. ^Article III, Chap. 12 E. S. 1899. MO. TAX. — 8 114 MISSOURI TAXATION. year, this assessment was increased by the State Board to $6,951,830, and for the year 1899 this assessment was increased by the State Board to $16,665,917.72. The total assessments of street railroads in the State for the year 1898 was $9,507,174.06, and for the year 1899 it was $21,172,432.28, and for 1900 (reported) $21,045,288.00. 21 The majority report of the "St. Lonis Investigating Committee" appointed by the State Senate in 1899, found that the then "cash value" of the St. Louis valuation of st. railroads was $43,515,249.00. This was said Louis street t k e based upon the "admission of the officers compared with of the companies," and the "admission of ex- vIiue" aSh perts." The railroads were assessed by the State Board the same year in the aggregate sum of $16,665,917, about thirty-eight per cent of the "full value" as found by the committee. This "full value" of the committee obviously included the "franchises," as well as the taxable property, of the rail- road companies, as the "cash market value" of street railroad 21 The valuations per mile (as reported) for the different lines of street railroads for 1900, are as follows: Baden and St. Louis $75,843 Chillicothe Street 500 Central Electric 5,664 Hannibal Railway 1,000 Kansas City Elevated 56,119 Keytesville Street 700 Metropolitan Street 19,273 Southwest Missouri Electric 3,000 St. Louis and Suburban 48,369 St. Louis and Meramec River 18,702 St. Louis and Kirkwood 10,000 Sedalia Electric and Railway Company 4,117 St. Louis and East St. Louis Electric 4 291,949 St. Louis Traction Company 32,240 Southwestern 74,904 Springfield Traction Company 3,500 St. Louis 68,519 St. Joseph Railway, Light, Heat and Power Company 7,500 United Railways 41,749 ASSESSMENTS BY BOAED OE EQUALIZATION. 115 securities necessarily includes all the elements of earning power. The ratio of assessed value to "true value" thus ascer- tained, it will be seen, is about the same as that ascertained in similar manner in case of the steam railroads. Thus both classes of properties are on this basis taxed on their tangible and intangible property at a greater rate than the average farm lands, though very much less than the assessment rate in the city of St. Louis. 22 Third. Taxation of Cars Not the Property of Railroad Companies. In the original railroad tax law of 1871, railroad com- panies returned for taxation only the cars owned by them. This was amended in 1873 so as to include all Pullman palace cars owned, run, hired or leased by them. Under the act of 1871, the cars of the Pullman Company, leased to the rail- roads in the State, were held taxable against the Pullman Company in St. Louis county, where the Pullman Company had its chief office in this State. 23 The statute gave any rail- road company, paying taxes on sleeping cars, or other ears not owned by it, a right of action against the owner of the cars for the taxes paid. But this system proved inadequate, as many cars, such as stock cars, tank cars, as well as sleeping cars, were operated by the railroad companies, though not owned by them, and where owned out of the State, such cars escaped taxation in the State. This resulted in the act of 1895. 24 This act required the president or other chief officer of '"'This estimate of valuation of the St. Louis street railroads was in spring of 1899, before the-' consummation of the consolidation and re- capitalization of most of the properties. M State ex rel. v. St. Louis County, 84 Mo. 234, affirming 13 Mo. App. 53. M Secs. 9345 to 9352, E. S. 1899. 116 MISSOTTKI TAXATION. the company, owning any such cars, to make a full statement before the first of January of each year to the State Auditor, showing the aggregate number of miles made by their cars over the several lines of railroad during the preceding year, and a like statement was required from the railroad company operating the road, over which the cars were run. The State Board of Equalization was directed to ascertain from these statements the number of cars required to make this total mileage, and to put a valuation upon each particular class of cars; and upon the aggregate assessment of the cars of each company there was levied a State tax of two per cent in lieu of all other taxes, this tax being paid directly into the State treasury. ]STo provision, apparently, was made for local tax- ation. The Armour Packing Company, a New Jersey corpora- tion, and having its office in Kansas City, Kansas, and oper- ating cars therefrom, declined to make the re- quired statement, and when the State Board Act (i8gs) Held of Equalization proceeded to assess its cars unconstitu- under this act, the Company brought proceed- ings by certiorari in the Supreme Court, and that court in an opinion rendered December 20, 1898, quashed the assessment. 25 All of the judges con- curred in holding that the tax was a property tax, and that the assessment of two per cent, being in excess of the rate fixed by the Constitution, which was then twenty cents on the one hundred dollars, was void. Although this decision was rendered before the commencement of the session of the General Assembly of 1899, no amendment of the act -was passed to meet this defect, and the act remains, therefore, unenforcible. It was suggested, in the opinion of the court, by a ma- 2B State ex rel. v. Stephens, 146 Mo. 662. ASSESSMENTS BY BOARD OF EQUALIZATION. 117 jority of the judges, however, that although the rate of as- sessment was excessive and uncollectible, that so much of the act as provided for the assessment of the property might be valid. As a result of this opinion no tax has since been levied upon railway cars by the Board of Equalization, ex- cept upon such as were returned by the several railroad com- panies. The assessment of this class of property has been before the Supreme Court of the United States in several recent cases, and it has been definitely decided that a State may tax the average number of cars cour" onTaxa- employed as vehicles of transportation in in- tion of Roiling terstate commerce, used bv railroads within Stock. ' , . the State, when owned by a foreign corpora- tion which has no office or place of business within the State. It is not necessary that the specific and individual items of property so used and employed shall be continuously the same, and the tax may be fixed by an ap- praisement and valuation of the average amount of property that is habitually used and employed. 26 This principle has been applied by this State in the taxation of rolling stock of the railroad companies. Supra, p. 106. Fourth. Taxation of Property and Franchises of Express, Bridge and Telegraph Companies. In 1877, 2T after the completion of the Eads Bridge over the Mississippi Biver at St. Louis, an act was passed for the taxation of toll bridges over streams in this State, or over streams dividing this State from other States. This act, also, included the taxation of all property, real and personal, including the franchises, owned by telegraph and express companies, all being declared to be subject to taxation to the same extent as the property of private persons; and the taxes "Union Refrigerator Transit Co. v. Lynch, 20 Sup. Ct. Rep. 630. "Session Acts of 1877, p. 391. 118 MISSOURI TAXATION. were to be collected in the manner provided by law for the taxation of railroad property. This act is notable, as being the first statutory reference to the taxation of franchises in Missouri. If a bridge is not used as a toll bridge, but only as part of a railway track, it is only taxable as part of the railway. A railroad bridge may lawfully be segregated for taxa- tion from the railroad line in connection with which it is used, when its ownership is separate from the ownership of the railroad, 28 and the lease of a bridge in perpetuity with a clause in defeasance does not constitute the lessee the owner for the purposes of taxation. 29 The valuation of bridge and telegraph companies for 1900, as reported, is given below: 30 This act of 1877 was reenacted in 1899. 31 The property and franchises of express companies were included in this act, although their taxa- Franchisesof tion is also expressly provided for by Article panies. XII of the revenue act of 1899, by the taxa- tion of gross receipts, as appears from the following : 2a State ex rel. v. Bridge Co., 109 Mo. 253. 2B State ex rel. v. Bridge Co., 134 Mo. 321. BRIDGES. ""St. Louis Bridge $1,150,000 Merchants' Bridge 400,000 Hannibal Bridge 200,000 Quiney Bridge 200,000 Atchison Bridge 150,000 St. Joseph Bridge 125,000 Leavenworth Bridge (old) 25,000 Boonville Bridge 300,000 Louisiana Bridge 150,000 Leavenworth Bridge ( new) 125,000 Jefferson City Bridge 40,000 TELEGRAPH LINES. Pacific Mutual $148,446 Western Union 1,827,727 Missouri District 26,333 "Sees. 9387 to 9391, R. S. 1899. ASSESSMENTS BY BOAED OP EQUALIZATION. 119 Fifth. Taxation of Express Companies. In 1889, 32 an act was passed defining express companies and prescribing the mode of taxing the same and fixing the rate of taxation. Every person, association or corporation, conveying through the State money or goods hy express or by contract with any railroad or steamboat company, not in- cluding railroad companies or steamboats, was declared to be an express company. Every such express company was re- quired annually to make a statement of the business done in the State, showing its entire receipts, including its propor- tion of the gross receipts for business done by the company in connection with other companies. The amount paid to railroads or steamboats within the State for the transporta- tion of the freight was to be deducted from the receipts; and it was further provided that nothing contained in the act release the express companies from the assessment and taxation of their tangible property ra. the same manner that other tangible property was assessed and taxed. A tax of $2 on each $100 of the receipts was levied. The validity of this act was contested by the express companies, on the ground that the tax on gross receipts for business done within the State was an inter- ference with interstate commerce, and de- Express company prived the express companies of the equal pro- cfrcuit court. taction of the laws, in that it involved inequal- ity of taxation. But the United States Cir- cuit Court, in an opinion by Judge Caldwell, 33 decided against these contentions, and held that the express companies were properly taxed on their business done within the State, and that the express companies were properly classified by themselves for the purpose of taxation. ""Session Acts of 1889, p. 52. 38 44 Fed. Rep. 310. 120 MISSOURI TAXATION. On appeal this decision was affirmed by the Supreme Court of the United States. 34 The act was sustained on the ground that the tax was limited to receipts of sums earned and discharged for the business Express company done within the State. In 1893 35 the act was suprem"'c S o'urt. amended by striking out the proviso, for de- ducting the amount paid by the express com- panies to railroads or steamboats, and the amount of tax was reduced from $2 to $1.25 on each $100 of receipts. Although they are included in the statute providing for the taxation of bridges and telegraph companies, it seems that express companies are only taxed under this section upon their business and franchises, their local property being taxed by the local authorities, as in the case of railroads. In 1898, the total tax paid on the gross receipts to the State was $7,465.42. This tax on the gross receipts of express companies, which has been thus judicially sustained, is the only instance in the State of such a tax levied by State authority (except the tax upon insurance premiums, infra, p. 127), being in effect a tax upon the revenue of the franchises of this busi- ness. "Pacific Express Co. v. Seibert, 142 U. S. 339. 8B Acts of 1893, p. 220. CHAPTEE IV. TAXATION OF BANKS, INSURANCE COMPANIES AND TEUST COM- PANIES. There is now in Missouri no general system of taxing corporations; but banks, domestic insurance companies and trust companies are assessed for taxation in the manner, in which originally all corporations were assessed; that is, through the return by the president or other chief officer, of the list of the shares of stock, the cash value of the stock, and of the property belonging to the corporation. The real estate of such corporations is separately assessed as other real estate, and its assessed value is deducted from the assessed value of the stock. The tax on such real estate is assessed directly against the corporation. Shares of stock and the property of national banks are assessed in the same manner, the United States law provid- ing that they shall be taxed in the same manner as other moneyed capital employed in the State. Attention has already been called to the act of February 23, 1899, empowering the State Board of Equalization to equalize each class of property, that is, to make the rates of valuation uniform through- Equalization by out tne State. This act was passed with an state Board. emergency clause. The first use of the power thus conferred was made by the Board in the equalization of valuation of banks and trust companies, which was fixed by the Board of Equaliza- tion at sixty-three per cent of capital and surplus, this valua- tion being made in order (1) to raise certain counties in the 121 122 MISSOURI TAXATION. State where the valuation was forty per cent and lower; and (2) to lower other counties where the valuation was from ninety to one hundred per cent. There were probably thirty counties in the State where banks were assessed at one hun- dred per cent of their capital and surplus. The relatively higher valuations in St. Louis are illustrated by the fact that the banks and trust companies of St. Louis had been already assessed at sixty-eight per cent, and their valuation was really reduced by this equalization. This action of the State Board 1 was criticised in some quarters of the State, but such criticism must have been made under a misapprehension. At this uniform rate of sixty-three per cent, the capital in- vested in banks and trust companies paid far more than its proportionate share, as this rate was upon all of their capital and surplus, there being no possibility of concealment; and, as will be hereafter seen, this rate of sixty-three per cent was far higher than the average rate paid upon other real and personal property throughout the State, which is not over forty per cent. Notwithstanding this action of the State Board of Equalization in 1899, the same want of uniformity appeared in the assessments of this class of property Local Assess- sen * U P ^y * ne local assessors in 1900, the ments in 1899. rates varying from thirty-eight cents to one hundred cents. The assessments of a few of the counties on banks and trust companies are given as illus- trations : Pike county 100c Taney county 100c Wright county 100c Sullivan county 92c St. Louis city 68c St. Louis county 66c Buchanan county (city of St. Joseph) 50c Pettis county (city of Sedalia) 44c Jackson county (Kansas City) 38c 1 Supra, p. 98. TAXATION OF BANKS, ETC. 123 The State Board again fixed the "equalized" rate at 63c. These assessments appear in the returns under the gen- eral head of "Corporate Companies," and include banks, trust companies and domestic insurance companies, the only corporations which are assessed through the valuation of their shares of stock. The shares in building and loan associations "on which no loan has been obtained from such association," are re- turned by the holder as other personal property. 2 The property of all other corporations (not assessed by the State Board as set forth in the preceding chapter) is assessed in the same manner as the property of individuals. As the aggregate of assessment of banks, trust compa- nies and domestic insurance companies in St. Louis is over sixty per cent of the entire assessment in the State of this class of corporations, this equalization by the State Board, reducing the city assessment in the city from 68 per cent to 63 per cent resulted in a heavy decrease of the assessments in the city — nearly two million dollars. In 1891, 3 the statute authorizing the taxation of banks, or insurance companies was amended by providing that a statement of reserve funds, undivided profits, Prima Facie Basis premiums, earnings and other values, so deliv- of valuation. ere( j to or furnished the assessor, shall, for the purposes of taxation, be treated "as that amount of money," less the taxable value of the real es- tate and fixtures, subject to the rights of the parties in inter- est to show the impairment of such shares of stock before the Board of Equalization. The constitutionality of this statute was contested on the ground that it made a discrimination between banking property and other classes of property in fixing a prima facie 2 E. S. 1899, sec. 9154. 'Acts of 1891, p. 195. 124 MISSOURI TAXATION. value, which was not done with other property. But the Supreme Court held 4 that this provision fixing a prima facie value was not unconstitutional: that the legislature had the power to provide the means for arriving at the value of all taxable property, and the only check upon that power was in the responsibility of the Legislature to its constituents. In 1895 however, and before the decision of this case, this act was repealed, 5 and it was enacted in lieu of the above provision, that such shares, reserve funds, undivided profits, premiums or earnings, and all other values so listed to the assessor, should be valued and assessed as other property "at their true money value," less the value of real estate, if any, represented by such shares of stock. This amended pro- vision appears in the revision of 1899. 6 Another change was made in 1895, by omitting the re- quirement for the return to the assessor of a list of the names of the holders of the stock. 7 This require- Listing of stock- men t to give the list of names had been in the holders. statute since its first enactment in 1840, the object being, as stated by the Supreme Court, 8 that the assessment should be properly made against the in- dividual shareholders. As the shares are taxed to the hold- ers, and not the property to the corporation, there is no de- duction because of investment of the corporation in United States bonds or other securities exempt from taxation. 9 But a private banker, though declared by the statute to be assessed and taxed in like manner as banking companies, is entitled to an exemption of so much of his capital as is in- 4 W irrespective of what they owe. Indeed other property, this taxation of net values is inconsistent with the theory of the general property tax, that every one is taxed upon what he owns, irre- spective of his debts. But it will be seen from the decision of Judge Dillon, above cited, that taxation of national banks upon the theory of taxing the bank's assets without deducting liabilities, would clearly violate the Act of Congress. It may be added that it would be impossible for a bank to do business, if taxed on the entire assets, in which its deposits, as well as its capital and surplus, are invested. But the taxable property of a bank, trust company, or domestic insurance company, i. e., its actual property, its cap- ital and surplus, is taxed higher proportionally than any other class of property in the State (except estates in pro- 127 bate), whether corporate or individual. The reason is ob- vious. These corporations are compelled to make public re- turns of their business and assets. There can be no conceal- ment or evasion. Their entire property, their capital and surplus, is assessed at the rate of valuation adopted by the assessors; and their real estate is assessed as other real es- tate. Foreign Insurance Companies. Foreign insurance companies are taxed in a different manner and upon the same principle adopted with reference to express companies. Since 1895 every foreign insurance company's business is taxed upon the premiums received in this State on account of business done in this State, at the rate of two per cent per annum, in lieu of all other taxes. This money is paid into the State treasury, and one-half thereof goes to the general revenue fund, and the other half to the credit of a fund called the county insurance tax fund, which is apportioned to the counties on the basis of the school enumeration. This statute was brought before the Supreme Court by an attempt of the State Superintendent of Insurance to en- force the tax against assessment companies. One of these companies obtained an injunc- rranTcom- tion against the Superintendent, which was panies not affirmed by the Supreme Court. It was held Included. " x that the statute applied only to the old line insurance companies, and not to companies doing business on the assessment plan; and in answer to the objection that this discrimination would be in violation of the requirement of uniformity, the court held that the class- ification was proper and natural, and one which the General Assembly could make in imposing a license or occupation tax, the old line companies constituting a distinct class. 13 ^Northwestern Masonic Aid Ass'n v. Waddill, 138 Mo. 628. CHAPTEE V. LICENSE TAXATION. From the earliest period of Territorial organization in Missouri, license taxation, as distinguished from property taxation, has been recognized. The taxation of merchants and manufacturers, though in form license taxation, is in fact property taxation, and will be separately considered. The license of occupations, as is well known, includes not merely the exercise of the taxing power, but also the po- lice powers of regulation, both sovereign powers of the State. There are numerous instances of such licenses under the Territorial government, some imposed for regulation only, and some for both regulation and revenue. See p. 13-15, supra. The power of the Legislature in this regard, to li- cense and tax directly, or to delegate the authority to munic- ipalities and counties, has been repeatedly affirmed by the Supreme Court. In 1847, Judge Napton, in a dramshop license case, said that it was within the power of the State Legislature, unless restrained by some provision of the State judge Napton on Constitution, to restrain or prohibit the exer- License Taxa- . - n _ . . tion. cise of any business or trade withm the State. But in view of subsequent opinions of the court, this general statement must be limited to the dramshop business and other occupations, clearly subject to prohibition in the exercise of the police power of the State. In so far as the power to license involves the exercise of the police power of the State, it is not within the purpose of this work, and it is proposed to consider it only as a method of taxation. 128 LICENSE TAXATION. 129 The power to license has never, under any of the Con- stitutions of Missouri, been specifically given to the General Assembly. But under each of our successive Constitutions, it has been declared by the Supreme Court to be within the sovereign power vested in the General Assembly, subject only to the restrictions of the Constitution. This grows out of the sovereign power of taxation vested in the General Assembly, the Constitution being a limitation and not a grant of power. Therefore the requirement that all prop- erty shall be taxed in proportion to its value, which has been contained in each of our Constitutions, does not prevent the General Assembly from selecting other forms of taxation, not upon property, to which this requirement has no applica- tion. In the absence of a constitutional restriction, it is no legal objection to a license tax on a calling or business, that the property used in that calling or business so licensed is also subjected to an advalorem tax. It will be remembered that Judge Birch, in his concurring opinion in State v. Crow, 14 Mo. 260, supra, doubted whether license or privilege taxation as to ordinary avocations was permissible under our Constitution; but the other judges did not agree in this view, and the principle of such license taxation has been estab- lished by a long series of decisions. Thus in a recent case an ordinance of a city imposing a license of two dollars on mer- chants with a stock of less than one thousand dollars, and three dollars on merchants with a greater stock, was held valid, and it was held immaterial that the property was also subject to an advalorem tax. 1 An ordinance of the city of Springfield, imposing a license upon a street railway, was 'City of Aurora v. MoGannon, 138 Mo. 38. As this was a graduated license tax in addition to a property tax, it would seem that this de- cision overruled State v. Crow, supra. MO. TAX. — 9 130 MISSOURI TAXATION. held valid, although this was in addition to the tax on the railroad property. The peddlers license tax, enacted by the General Assem- bly, had been upon the statute books for many years, and contained a discrimination in favor of the Discriminating manufacturers of this State, the license being Ltamae'Tax on ^ required of those who dealt in articles which were not the growth and produce of this State. This discrimination was claimed to be in violation of the Constitution of the United States. The same discrimination in the merchants' law had been adjudged unconstitutional by the Supreme Court in 1858 in State v. North, 27 Mo. 464. But Judge Naptoit had dis- sented from the opinion of the court in this case. See p. 49, supra. When the peddlers' license came before the Supreme Court in 1874, Judge ]STapton was again a member of the court, and delivered the opinion, concurred in sustained by mo. by a ^ °^ the judges, holding that the peddlers' supreme court. ]i ce nse was not in conflict with the Constitu- tion of the United States, because it created a tax upon an occupation,and not in any manner upon property. He referred to his dissenting opinion in 1858, and said he still adhered to the views there expressed and that they were in harmony with those of his present associates Hew void by i n the court. But this case was carried to the u. s. supreme Supreme Court of the United States and the Court. # r judgment of the Supreme Court of Missouri was reversed, 2 the court holding that the discrimination was in conflict with the power vested in Congress to regulate commerce, and that so far as this question was concerned, a tax upon the occupation was a tax upon the property itself. 2 Welton v. Missouri, 91 U. S. 275. LICENSE TAXATION. 131 The court says: "As the main object of commerce is the sale and exchange of commodities, the policy thus estab- lished (that interstate commerce shall be free and untram- melled) would be defeated by discriminating legislation like that of Missouri." Immediately after this decision the law was amended, repealing this discrimination. This amended license law was also contested. An agent for the Singer Sewing Machines, engaged in peddling machines for the Singer Company, a New Jersey corporation, was prosecuted for transacting such business without a license. He defended on the ground that the business was interstate commerce, and relied upon the decision of the Supreme Court of the United States in the "Welton case, and also later decisions holding that drummers soliciting sales by sample were engaged in interstate com- merce, and could not be subjected to a license Amended Ped- tax in the States wherein they did business. sustained"" -^ u * ^he license law was sustained both by the Supreme Court of Missouri, 3 and also, on ap- peal, by the Supreme Court of the United States, 4 the latter court holding, that the business of peddlers who travel around the country with their goods was distinguishable from that of drummers, who only solicit sales; that peddlers were properly regulated, and had been from early times in England and America, in order to prevent frauds, and that the Missouri law enacting a license was a valid exercise of the power of the State over persons and business within its borders. Uniformity in License Taxation. But while it is thus established that the State has the power to impose a license tax, whether such license is im- 3 State v. Emert, 103 Mo. 241. 'Emert v. Missouri, 156 U. S. 296. 132 MISSOURI TAXATION. posed directly by the State or by municipalities duly author- ized by the State to impose the same, and that such licenses may be required of any business or calling, though the prop- erty employed therein is taxed like other property, and fur- ther that such license is not subject to the constitutional re- qiiirement that all property shall be taxed in proportion to its value — yet it is also well established that such license, and any form of taxation, whether levied directly by the State or indirectly through municipalities, is subject to the constitutional requirement of uniformity. In other words, it must be uniform "upon the same class of subjects within the territorial limits of the authority levying the tax." The cases illustrative of this enforcement of uniformity have been in relation to licenses imposed under municipal ordi- nances. See infra, chapter XI. Anti-Department Store Act Held Void. The most notable illustration, however, in this or per- haps any other State, of attempted class legislation under the guise of license taxation was the so-called anti-department store law passed by the General Assembly of 1899. 5 (See supra, p. 86.) The court held that such a license was in effect a tax based on arbitrary classification, and the act was there- fore declared unconstitutional. Judge Marshall, in a con- curring opinion, agreed that the act was clearly class legisla- tion, void and unconstitutional, but did not agree that what is commonly called an "occupation tax," which properly ex- pressed means a license to do business, is in any proper sense a tax, saying: "Such license fees have always been held constitutional in Missouri and elsewhere, provided they apply to all persons similarly situated." 5 Art. 18, Chap. 9, R. S. 1899. LICENSE TAXATION. 133 License as Regulation and as Taxation. Where the amount of the license is greater than re- quired for the mere purpose of regulation, it is an exercise of the taxing power. Yet, so far as the constitutional pro- tection against arbitrary class legislation of this character is concerned, the distinction is not important, as such arbitrary classification is equally illegitimate, whether an exercise of the taxing power or of the police power. In the former view it violates the constitutional canon of uniformity, and in the latter denies the equal protection of the laws. Apart from licenses of dramshops, the field of license taxation has been mainly left by the State to municipalities. The only State licenses (counties being limited state and county *° a * ax °^ one hundred per cent upon licenses License. required by the State) are those required of auctioneers, billiard tables, brokers, ferries and peddlers, the merchants' and manufacturers' licenses be- ing essentially taxes upon property. License of Employment. This form of taxation, to wit, the taxing of the privi- lege of following a particular employment, Judge Cooley says has been usually confined to those occupa- cooiey on License tions which in some particular are exceptional, Taxation. either because they are supposed to be excep- tionally profitable, or because they require special regulations, or because the privilege is in the nature of a franchise, or because they supply a general demand, so that the burden imposed will be generally distributed. But he adds that these considerations go to the policy of such taxation, and not to the question of power, and that no em- ployment is absolutely exempt from the liability to be taxed. 6 In other words, there is no natural right to follow any em- "Cooley on Taxation, p. 385. 134 MISSOURI TAXATION. ployment, which prevents the taxation of that occupation, if deemed expedient by the taxing power. This was declared in a recent notable case in our Supreme Court, where the right to levy a license tax was contested on the constitutional ground that it was an interference with the natural right to follow a lawful employment. 7 The Supreme Court of the United States said in a re- cent case: Regulations respecting the pursuit of a lawful TT „ „ trade or business are of very frequent occurrence in the U. S. Supreme " ^ Court on Li- various states of the country, and what such regula- cense Taxa- tions should be and to what particular trade, business tlon - or occupation they should apply, are questions for the State to determine, and the determination comes within the proper exercise of the police power of the State, and unless the regu- lations are so utterly unreasonable and extravagant in their nature and purpose, that the property and personal rights of the citizen are unne- cessarily and in a manner wholly arbitrary, interfered with or destroyed without due process of law, they do not extend beyond the power of the State to pass, and they form no subject for Federal interference. And the court says also: It is not a valid objection to the ordinance, that it partakes of both the character of a regulation and also of that of an exercise or privilege tax. 8 Licensing of Lawyers and Doctors. The licensing of the professions of lawyers and doctors has had a curious history in Missouri. The first attempt to exact license fees from lawyers was under the Territorial Law- Territorial organization. Under the act of yers License. 1815^ lawyers were required to pay a license fee of ten dollars per annum, and each practic- ing physician ten dollars, but an explanatory act passed the same day provided that the lawyers' licenses should not be 'See infra, pp. 183, 308. "Gundling v. Chicago, 177 U. S. 183. LICENSE TAXATION. 135 construed as requiring the lawyers to pay the Territorial tax in more than one county. But this license tax seems to have disappeared with the Territorial organization, as it does not appear in the first revenue act passed by the State of Mis- souri, December 12, 1820, nor does it appear again until 1847, when the act of that year, entitled "An act to sustain the credit of the State," was passed. By Lawyers License that law "lawyers, doctors and peddlers of of i8 47 . pills and patent medicines" were all required to take out licenses annually. 9 The licenses were fixed on a graduated scale. Each person or partnership following the practice of law or medicine was declared to be respectively a lawyer or physician. The validity of this tax was contested, but it was sustained by the Supreme Court at the Simmons v. state. October term, 1848. 10 The court held that the act was not retrospective; that the only object of referring to the business of the preceding year was to regulate or fix the tax for the following year. In reply to the argument that the license having been once granted could not be revoked, the court held that the license was a mere question of granting a privilege without consideration, and that the State could revoke the privilege and impose such conditions as it deemed proper, when demanded by the public good. The court also declared in emphatic terms the sovereign power of the General Assembly in respect to taxa- tion. But this act, though thus held valid, did not remain long on the statute books. It was repealed so far as the tax on lawyers and doctors was concerned, in 1851, and no at- tempt has since been made to tax these professions by act of the General Assembly. "Supra, 27. "Simmons v. State, 12 Mo. 268. 136 MISSOURI TAXATION. In 1872, before the adoption of the scheme and charter, the ordinance of the city of St. Louis imposing a license tax upon lawyers was declared invalid by the Su- st. Louis v. preme Court. 11 The court approved the doc- Laughiin. trine of the Simmons case and said that the power of the State to tax all professions was unquestioned, and that the State might delegate the author- ity, but that this authority had not been delegated to St. Louis in the general power in the charter of 1870 "to tax all other business, trades, avocations or professions," the law- yers not being included in the specific enumeration, preced- ing these general terms. Subsequently, in the charter of 1877, adopted under the Constitution of 1875, the city was given the power in ex- press terms to license, tax and regulate law- st. Louis v. yers." An ordinance was passed thereunder Sternberg. imposing a license of fifty dollars a year upon lawyers, and a conviction under this ordinance was sustained, St. Louis v. Sternberg, 4 Mo. App. 453, wherein the Court of Appeals held that the license was law- fully required, but that the ordinance making the nonpay- ment a criminal offense punishable by fine and imprison- ment was void. But the Supreme Court on appeal not only held that the city had the power to impose a tax on lawyers, saying that it had been beyond question ever since the de- cision in the Simmons case, and if all were taxed alike, the taxation was uniform, but the court went further and re- versed the court of appeals, saying that the General As- sembly had the right to make the nonpayment an offense, punishable by fine and imprisonment. As a cense Taxation result of this decision, however, the lawyers prohTiteT and doctor s applied to the General Assem- bly, and promptly thereafter the act of 1879 "City of St. Louis v. Laughlin, 49 Mo. 559; 69 Mo. 289. LICENSE TAXATION. 137 was passed, prohibiting the taxing of lawyers, doctors, preachers or teachers by municipalities. 12 This enactment has ever since continued on the statute books, 13 and is as follows: Sec. 5260. NO AUTHORITY TO TAX PROFESSIONS. Hereafter, no person following for a livelihood the profession or calling of minister of the gospel, teacher, professor in college, priest, lawyer or doctor of medicine in this State, shall be taxed or made liable to pay any munic- ipal or other corporation tax or license fee of any description whatever, for the privilege of following or carrying on such profession or calling, any law, ordinance or charter to the contrary notwithstanding. Since this enactment, therefore, not only lawyers and doctors, but teachers, professors and clergymen all have been exempt from' municipal license taxation, and in the absence of any State licenses, they are not subject to any license taxation in Missouri. "Acta of 1879, p. 45. M Sec. 5260, R. S. 1899. OHAPTEE VI. TAXATION OF MERCHANTS AND MANUFACTURERS. Merchants and manufacturers are now taxed in the same manner, whether conducting business as corporations or as individuals. They pay what is in form a license tax, but in fact a property tax, the same advalorem rate levied on real estate being levied on the highest amount of goods, wares and merchandise, which the merchant may have on hand between the first Monday in March and the first Mon- day in June; and the manufacturer in like manner pays on the greatest amount of raw material and finished products he may have on hand between the dates mentioned, and on the tools, machinery and appliances he has on hand on the first of June. 1 The real estate of both merchants and manufacturers is taxed as other real estate. This system has been in force as to merchants since 1859, after the discrimination in favor of the manufacturers and products of this State had been declared void by the Supreme Court. (Supra, p. 49.) It is settled by repeated decisions of the Supreme Court, 2 that this is not a license tax, but a property tax, and that the law adopts the method of taking the largest amount on hand between given dates as the basis and best means of arriving at the value of the stock in trade. It is also settled in the later cited case, that this prop- erty license tax does not prevent the munici- P T«u!ation P a ltoy> under its delegated power of taxation, from levying a privilege tax, that is, requiring J State ex rel. v. Tracy, 94 Mo. 217 ; Aurora v. McGannon, 138 Mo. 38. "Chapters 126, 129, E. S. 1899. 138 TAXATION OF MERCHANTS, ETC 139 a license for the privilege of carrying on the business, al- though at the same time the merchant and manufacturer is taxed upon his property, the same as all other citizens. Prior to 1868, manufacturing companies were ex- cepted from the general corporation law and allowed to be taxed as individuals, though other corpora- Taxation of Man- tions were assessed on their shares of stock, ufacturers. ^h e p re sent system of taxation of manufac- turers was adopted in 1877. Under this act, 3 however, manufacturers whose raw material, finished pro- ducts, tools and appliances in the aggregate were less than one thousand dollars, were exempt from making returns, and it is expressly provided that no greater amount of tax, either State or local, can be assessed upon manufacturers' raw material, finished products, tools, machinery and ap- pliances, than upon merchandise under merchants' licenses. It would seem that merchants and manufacturers alike may be subjected to double taxation, in the sense that they may be compelled to pay a license for the priv- „ ... „ . ilege of doing business, as well as the general Double Taxation. ° . property tax on their stock of merchandise as merchants, and on their raw material, fin- ished products and machinery as manufacturers. Whether they are really subjected to such double taxation (double in the practical though not in the legal sense), depends upon the local authorities, which may or may not impose a license or occupation tax. Such double taxation is imposed upon merchants in some of the cities of the State, and as shown above has been sustained in the Supreme Court. It does not appear that a manufacturers' license tax, in addition to property tax has ever been imposed. "See. 8486, R. S. 1899. 140 MISSOUEI TAXATION. Reference has been made, under the subject of "Exemp- tions" to the repeal in 1893, 4 of the statute, exempting from taxation, in the year in which sales were The Repeal of ma de, of the proceeds of sales by merchants one Year Ex- ' r J emptions. and manufacturers of articles, whereon license had been paid. As the license — property tax, paid by merchants and manufacturers, is construed by the tax officials (certainly in St. Louis), to be in lieu of all taxes upon their business (except as to real estate), the one year exemption was really inoperative — and the repeal of the law added nothing to their taxation. Local Taxation of Merchants. The statements of merchants and manufacturers are subject to county, school and city taxation, as other prop- erty. The general railroad law of 1855 in authorizing sub- scriptions by county courts and cities to railroads, autho- rized a special tax upon all property and taxables made taxable by law for State and county purposes and upon the actual capital that all merchants and grocers may have in- vested in business." 5 This was reenacted in the revision of 1866. 6 The city of Cape Girardeau, under its charter granted in 1863 and amended in 1869, was authorized in payment of railroad subscriptions to levy a tax upon all prop- erty in the city made taxable by the general law for State purposes. Judge Napton in giving the opinion of the court said that if there was any inconsistency, the charter of the city should govern, as it was passed later than the general statute, but that in his opinion there was nothing materially 'Supra, p. 92. "R S. 1855, p. 427. "R. S. 1866, Chap. 63, sec. 18. 141 different between the statute and the charter, as to the tax upon the merchants' license, and that no mode was pointed out by which the actual capital invested by the merchant could be accurately ascertained, saying : We regard the law on merchants' licenses as an indirect taxation. Indeed, the third section so declares it, for it says that merchants shall pay an advalorem tax equal to that levied on real estate on the highest amount of goods in their possession be- Actual Capital tween certain periods named in the law. That this soug o e ^^ wag collected through the medium of a license did not make it less a tax. It was not an arbitrary charge for the exercise of a privilege, but an advalorem tax varying with the amount of business done by each merchant. It is not easy to see how the actual capital of a merchant, which is necessarily constantly changed by sales and purchases, could be ascertained unless by some such plan as is adopted in the license law. However that may be, it is the goods upon which the tax is levied, and not the person who may have them in charge. 7 It will be observed that in the opinion of the court, it is the "actual capital" of the merchant which is sought to be taxed by the license system. But in fact the stock of goods of a merchant may be, and usually is, much more than his capital, being all that his credit will enable him to carry. In this same case the court adjudged unreasonable the provision of the ordinance taxing an attorney's fee in favor of the city, saying that the defense was not a frivolous one and that it was unreasonable to impose such a penalty for un- successful litigation, and that the effect would be to allow the "most oppressive and unjust taxation to be carried out without question, as the original taxes were mostly small sums, and would hardly justify their contesting them at the risk of paying two or three times their amount if unsucess- ful." Prior to this the court had held 8 the general authority 'Cape Girardeau v. Riley, 72 Mo. 220. "State v. Kinney, 48 Mo. 373. 142 MISSOURI TAXATION. to school districts to levy and collect taxes upon all property within the district, included merchants' statements, the court saying: "No exception is made or exemption provided for in favor of merchandise, either in the case under consideration or in the general revenue law, nor can any be implied from the peculiar mode of ascertaining the taxable value of such merchandise," and that the same rule applied to boards of education in towns and villages. Taxation of Merchants and Manufacturers in St. Louis. The merchants and manufacturers in the city of St. Louis are taxed on a different basis for local taxation, than those of the rest of the State. After the adoption of the St. Louis Scheme and Charter in 1877, it was found that the higher rate of valuation of taxable property necessitated by the municipal wants of the city would make the burden of taxation on merchants and manufacturers extremely oner- ous, and at their instance and for their relief an act was passed in 1879, 9 classifying for taxation purposes the mer- chandise held by the merchants and the raw material of man- f acturers. The act provided that all cities having over three hundred thousand inhabitants could levy a less advalorem rate on merchants' and manufacturers' statements than they levied on other property; and at the same time it was pro- vided, that such cities could levy a tax on sales, by graduating the amount of annual licenses in proportion to the amount of sales made during the year preceding. This system has ever since prevailed in St. Louis. This system is administered in St. Louis through the office of the license commissioner. This official receives the sworn statements of the merchants and manu- Lo™ m " facturers as to the greatest amount of stock on hand between the first Monday in March and •Acts, 1879, p. 141. TAXATION OF MERCHANTS, ETC. 143 the first Monday in June, and also as to the annual sales. But these statements, the ordinance provides, shall not be public, but are only open to the mayor, comp- Pubiic. " troller and the board of license revision — "three discreet and experienced real estate owners" of the city appointed by the council in the month of May annually, whose business it is to review and adjust and correct the list of persons who pay licenses and license taxes. The collection of these licenses, however, is made by the city collector. The importance of this statute regulating merchants' and manufacturers' licenses in St. Louis will be appreciated when it is remembered that the advalorem tax for city Tax. levied by the city under this scheme is only one-fifth of one per cent, or twenty cents on the one hundred dollars, whereas, but for this statute, the rate would now be six and one-half times that, or $1.30 on the hundred dollars, being the amount of city tax now levied on other property. The tax on sales is one dollar for each thousand uollars. It will be seen that the theory of this act is that it does not violate the constitutional requirement of uniformity, because it makes a separate class of subjects, and that the tax, therefore, is uniform upon the same class of sxibjects as to the municipal tax, the full state tax being levied as in other parts of the State. School Tax on Merchants and Manufacturers in St. Louis. Prior to 1888, no levy for a school tax was made upon merchants' and manufacturers' statements of St. Louis, al- though such tax seems 'to have been levied in other parts of the State. Various unsuccessful attempts were made by the St. Louis School Board to enforce the collection of the tax. Finally a writ of mandamus was issued by the Supreme Court, at relation of a merchant who had tendered the city 144 MISSOURI TAXATOIN. register his statement to compel such register Test case in to enter thereon the four mill tax assessed Supreme Court. by ^ gchool boardj ^ gchool ^^ ^ ing made a regular levy of this tax as authorized by law, upon all property in the city. The Su- preme Court held 10 that the school board of St. Louis was a part of the general school system of the State, and that it was the duty of the register to receive the statement ten- dered and enter thereon the school tax, as the merchants' license tax was a personal property tax, and not a license tax, and that the school board had full authority to levy it. The opinion concludes as follows: "The conclusion is, as it must be, that the school board has a right to levy the tax in question upon the merchants. The law is too plain to admit of doubt." In the meantime, before this decision was rendered, the General Assembly in 1887, 11 had amended the law so that the school tax levied in cities of three hun- Reduced school dred thousand inhabitants upon merchants' Rate - and manufacturers' statements, must, when- ever the municipal tax was reduced, be pro- portionately reduced in the same degree. In other words, if only one-seventh of the full municipal value was levied, then only one-seventh of the school tax could be levied. Under this law, when the school tax was declared ap- plicable to merchants' statements, instead of forty cents (the amount of tax upon other property then being levied), there was levied about one-seventh of that amount, that being the proportion of the full city tax Full Rate Re- which was levied upon that class of prop- stored. erty# j n 1893, 12 after this reduced rate had been paid for about five years, the act of "State ex rel. v. Tracy, 94 Mo. 217. "Acts of 1887, p. 240. "Acta, 1893, p. 219. TAXATION OP MEECHANTS, ETC. 145 1887 was repealed, and the effect of this repeal was to levy upon merchants' and manufacturers' statements in St. Louis, the full school tax of forty cents on the one hundred dollars. These statements of merchants and manufacturers, there- fore, are now subject to taxation as follows: The full State tax, now twenty-five cents; the school tax, now forty cents, and the city tax of twenty cents, making a total of eighty- five cents on the one hundred dollars. The city tax of twenty cents is in place of the $1.30 levied on other property. In addition to this, however, St. Louis merchants and manufacturers pay in lieu of the city tax thus reduced, one dollar on every thousand dollars of sales made by them. Legislative Investigating Committee Report on Taxation of St. Louis Merchants and Manufacturers. The investigating committee appointed by the State Senate in 1899, to investigate State and municipal officials in St. Louis, reported that there were "great irregularities in the administration of the law by the license commissioner; that a large amount of property escaped taxation through undervaluation in the returns; that licenses were not col- lected in some cases by reason of political pulls, and also, that about nine hundred out of the twenty-five hundred manufacturers of the city did not pay any State or school tax, although they did pay a city tax." This failure, however, to pay the State and school tax was probably due to reason already noted (p. 139, supra) that manufacturers whose raw material, finished products, etc., do not exceed a thousand dollars, are, under the State law, not required to take out licenses. The city of St. Louis does require all, irrespective of the amount, to take out a license, and hence they pay a city tax and not a State tax. As to the reported undervaluation, the committee said that they had examined a great number of merchants and manufacfavrers; and that "twenty-four testified to the cash MO. TAX. — 10 146 MISSOURI TAXATION. value of their stock and material, manufactured products, tools, machinery, and annual sales for year 1898," and com- paring them with the returns filed, the committee says that the department has "permitted returns" to be made for only "about one-half" what the actual returns should have been. In this connection, however, it should be said that upon the statements rendered, the merchants and manufacturers in St. Louis are taxed at one hundred per cent, that is the full value reported, and not at the rate adopted by the assessors for other classes of property, so that apparently the law is administered upon the theory of leaving the merchant or manufacturer to de- Defects of Law. termine for hi mse lf a nd to report the "tax- able" value of his stock or plant, or his "actual capital" invested, so that he will be taxed as the law contemplates, equally with others. That such a system is open to grave abuses is clear, as any system must be which leaves the taxpayer to disclose and value his property for taxation, especially when this disclosure and valuation is by secret return. The scrupulous merchant or manufacturer must compete with the unscrupulous. But our whole taxing system, in so far as it rests upon personal disclosure by the taxpayer, is open to this objection, and it will be considered later. {Infra, p. 259.) This consideration is also apart from the objections which lie against the system of taxing the stock of merchants and the plant of manufacturers, as other property. (Infra, p. 326.) The same committee reported that there were six thou- sand merchants and twenty-five hundred manufacturers do- ing business within the city limits, and recommended that the General Assembly pass a law, requiring the license com- missioner to return to the State Board of Equalization and to the Governor annually a statement, showing in separate columns the number of merchants and manufacturers and TAXATION OP MERCHANTS, ETC. 147 their respective individual returns. As to the adoption of this recommendation, see supra, p. 99. Bate of Valuation and Rate of Tax, It may be said in reference to the taxation of mer- chants and manufacturers, as well as to the taxation of other classes, that comparison of the rate of taxation with that of other cities is misleading, unless the per cent recog- nized as the actual basis of the assessment is also considered. The rate of taxation is fixed by the law, but the rate of assess- ment is apparently fixed by the arbitrary discretion of the assessors. The actual amount of taxation can not be de- termined in comparison with other places, unless both factors of the problem are considered. Thus in Chicago, the rate of general taxation was re- ported in a recent comparative statement as $9.39 per $100, but the property was assessed at only St. Louis and ' ,. J Chicago Mer- about ten per cent of its actual value, so that compared"" ^ ne a °tual tax was very considerably less than that' paid in St. Louis, where the merchants, and manufacturers' statements are assessed on the full amount reported in their statements, that is one hundred per cent on the $100, there being no allowance such as is made by the St. Louis assessor in the assessment generally of real and personal property of seventy per cent as the standard. As the merchant and manufacturer in St. Louis pays the same State tax and school tax as is paid upon other classes of property, it will be seen that he really pays much more than his proportionate share (assuming, of course, that his stock is returned at full value). In st. Louis and Kansas City, merchants and manufacturers compared. pay the same rate for city taxes as upon real estate, there being no deduction as in St. Louis from the State rate. But this with all other prop- erty is reported to be assessed at about forty per cent of its 148 MISSOURI TAXATION. real value, and there is no tax on sales as in St. Louis. The real burden of taxation upon merchants and manu- facturers in our cities, as well as upon all classes, is not from State taxation, but from city and school taxation. Thus even with the reduced rate in St. Louis, the license collections from merchants and manufacturers in the city for the year ending September 1, 1899, were as follows : For the State $ 81,078 50 For the Schools 129,725 60 For the city 313,700 25 Total $524,504 35 OHAPTEE VII. INHERITANCE TAXATION. The comprehensive power of the General Assembly in taxation is further illustrated in the matter of inheritance or succession taxation. This form of taxation was first adopted in 1895 and the act of that year, as amended in 1897, was declared unconstitutional. Another act passed in 1899 is still in litigation, so that it can not yet be de- termined whether this power has been effectively exercised. The first inheritance tax imposed in the State, enacted by the General Assembly of 1895, was included with other taxes in an act for the endowment of the State University. It was declared unconstitutional on the ground that the purpose of the tax was not public, 1 and also on the further ground that the tax was levied upon the appraised value of a whole estate left by the deceased, and was to be paid, not by the legatee, but by his personal representative, whether the estate was solvent or insolvent. The Supreme Court held, that such a tax was not an inheritance or succession tax, which is properly levied upon the right of a person to re- ceive property by devise or inheritance, but was in effect a tax upon the property of the deceased, and was therefore a property tax and unconstitutional, because it subjected the estate to a property tax in addition to that levied upon other like property, and therefore the property was not taxed in proportion to its value. 2 l 8upra, p. 84. 2 State ex rel. v. Switzler, 143 Mo. 287. 149 I 150 MISSOURI TAXATION. In the same case the court decided another very im- portant principle in regard to succession or inheritance taxes, in holding that the progressive feature of the Progressive tax was unconstitutional, in that it was not TaxatioTun- uniform upon the same class of subjects, and constitutional, that uniformity was only attainable by levy- ing the same per cent upon all property be- longing to beneficiaries bearing the same relation to the decedent. The law in this case, as originally enacted, im- posed a tax of five per cent upon legacies of ten thousand dollars, and seven and one-half per cent additional upon the excess of ten thousand dollars. The court held that this was "arbitrary classification without rhyme or reason," say- ing: The constitutional guarantee of uniformity upon the same class of subjects would avail but little, if the legislature can arbitrarily vary the class, as often as the amount of property devised or transmitted by inheritance shall differ. on Progressive ^ suc ^ a ru ' e obtained, the classes would be innumer- inheritance *We and the Constitution a dead letter. Where the Tax. amount of property received is made the basis of a tax, uniformity can only be attained by levying the same per cent upon the property of each beneficiary under the will or by inheritance. The court intimates, however, that the uniformity might be preserved, when the difference in rate is based upon the different degrees of relationship, and not upon the amount received. But while the court thus declared that the constitu- tional requirement of uniformity applied to this method of taxation, the power of the General Assembly to impose such tax in accordance with such requirement was affirmed in emphatic terms . Thus the court said, p. 316: That the State of Missouri for public purposes may assess and levy taxes upon the succession or devolution of property under our inher- INHERITANCE TAXATION. 151 itance laws or statute of wills, subject only to the prohibitions of the Con- stitution of the State or the Constitution of the United States, we have no doubt whatever. And the court said further: As already remarked, no doubt longer exists that it is com- petent for the Legislature to levy a tax upon the successions of es- tates. It is quite universally held that such a tax is not a tax upon the property in the ordinary sense, but is in the nature of an excise or bonus exacted by the State upon the privilege or right to inherit or suc- ceed to an estate. But -while the progressive inheritance tax is thus held unconstitutional in Missouri, the Supreme Court of the United States has recently decided that the Progressive in- progressive features of the Illinois inherit- heritance Tax- , . , t -,. ... -, ation not viola- anee tax, which made discrimination by pro- «ve of united gr r essive rates, both as to the degrees of rela- States Consti- a ' . . , tution. tionship and as to the amounts inherited, were not violative of the Constitution of the United States. 3 Very recently the same court held, that the progressive features of the inheritance or succession tax imposed by the United States war revenue act of 1898, which discriminated in rate, both as to degrees of relationship and as to amounts inherited, were not in violation of the Consti- tution of the United States, which requires that all duties, imposts and excises shall be uniform throughout the United States, the court holding that this requirement was satisfied by geographical uniformity. 4 Inheritance Tax of 1890. After the act of 1895, as amended by the act of 1897, had been declared unconstitutional, another inheritance tax was enacted by the General Assembly of 1899. 5 This avoids the features condemned by the Supreme Court, including the "Magoon v. Illinois Savings & Trust Co., 170 U. S. 283. •Knowlton v. Moore, 20 Sup. Ct. Rep. 747, May 14, 1900. 'Chapter I, Article 16, R. S. 1899. 152 MISSOURI TAXATION. progressive rate, and subjects the inheritance, not the estate of the deceased as before, to the payment of a collateral in- heritance tax of five dollars on each one hundred dollars of value, every inheritance being subjected to the tax, except that of the father, mother, husband or wife, descendant or adopted child of the deceased, and property conveyed for some educational, charitable or religious purpose. The pro- ceeds of the tax are paid into the State treasury to the credit of the fund known as the "State Seminary Moneys" for the benefit of the State University, to an amount not exceeding in any year the equivalent of one tenth of one mill upon every dollar of assessed valuation of property for the year. If the tax does not realize the net amount, the deficiency is to be supplied by the State treasury from the first money received from the tax in the succeeding year. The pro- > ceeds of the tax over this limited amount are deposited in the State treasury in a fund to be known as the "Educational Fund," wherefrom appropriations are to be made by the General Assembly for public educational purposes. The amount deposited for the State University, it is declared, shall be disbursed in pursuance of regular appropriations by the General Assembly made in accordance with the statute 6 regulating the payment of such appropriations. The validity of this statute is now involved in litigation pending in the Supreme Court on a writ of certiorari to the judge of the probate court of St. Louis. 7 The power of the State to pass an inheritance upon the a" tax i s admitted, but it is claimed that the at- of 1899. tempted application of the proceeds of the tax to the State University is in conflict with the constitutional requirement ' that all public moneys, the proceeds of taxation, must be paid into the State treasury 'See: 5691, R. S. 1889. 'State ex rel. Fath v. Henderson. INHEBITANCE TAXATION. 153 and be subject to appropriation by the General Assembly in the order of appropriations specifically provided by the Constitution, 8 in other words, that the attempted control of the discretion of the General Assembly in the disbursement of the proceeds of the tax, invalidates the tax. Whatever may be the ruling of the court as to the validity of this act, it seems clear that inheritance taxation in some form will be a permanent feature of our taxation system. It has not only been adopted in many States, but is now enforced in all the States, as part of the revenue sys- tem of the United States adopted in the war revenue act of 1898. The Missouri statute of 1899 applies to collateral in- heritances only, but includes such inheritances of both real and personal property, while the Federal law T . ... . . applies to inheritances both direct and col- The Missouri and 1 -l united states lateral, but only to inheritances of personal Inheritance Tax _ . ln . nn -,.-,. compared. property. It follows that collateral inherit- ances of personal property in Missouri, if the act of 1899 is sustained, are subject to taxes imposed by the Federal 9 and the State law, to wit, five dollars on each one hundred dollars under the Missouri law, irrespective of "Article IV, see. 43 of the Constitution. "Under the Federal law the tax is graded as follows: An inher- itance between $10,000 and $25,000, for the lineal issue or lineal ances- tor, brother and sister, the tax is at the rate of seventy-five cents for each $100, and the descendant of a brother or sister, $1.50 for each $100; a brother or sister of a father or mother or other descendants, $3 for each $100; the brother or sister of grandfather or grandmother, or their descendants, $4.00 for each $100, and those related in a further degree, or strangers or corporations, at the rate of $5 for each and every $100; legacies to husband and wife being exempted. These rates are further progressive according to amounts as follows: They are increased one and one-half times when the estates are between $25,000 and $100,000; between $100,000 and $500,000 they are multi- plied by two; between $500,000 and $1,000,000, by two and one-half, and over $1,000,000, by three. 154 MISSOURI TAXATION. the degree or amount of inheritance, while under the Fed- eral law the tax is graded both according to the relation of the legatee and the amount of the legacy. It will be ob- served that in this last respect, to wit, the discrimination as to the amount inherited, the tax could not be levied as a State tax under the Constitution of 'Missouri. It has also been recently held by the United States Supreme Court, 10 that a legacy of United States bonds is not exempt from inheritance tax laws of the u. s. Bonds not State, though such bonds have been declared Exempt from by ac t f Congress to be exempt from any State Inheri- " . in i ■ tanceTax, form oi taxation under fetate authority, since the inheritance tax is not imposed on the bonds, but on the privilege of acquiring the bonds by will or inheritance, which is a privilege created and regu- lated by the State. On the same day, in another opinion, the court de- cided that United States bonds included in a legacy or dis- tributive share of a decedent's estate were Nor from Federal not exempted from the United States war Inheritance - - Tax. revenue tax tor the same reason, to wit, that the tax was not upon the bonds, but upon the right of transfer by will or under the intestate law. Double Taxation Under Inheritance Tax Laws. The double taxation resulting from both Federal and State taxation of inheritance is a necessary result of the exercise of the taxing power upon the same subject by the two sovereignties which have jurisdiction. There is another form of double taxation in inheritance taxes however, in cases where the decedent owns personal property in other States which is subject to the tax laws of such States. 10 Plummer v. Coler, 20 Sup. Ct. Rep. 829, decided May 14, 1900. INHERITANCE TAXATION. 155 Thus the Missouri act of 1899 subjects to the tax, not only property which passes by will or by the intestate laws of the State from any resident of the State, but also property or any part thereof within the State, which so passes, when the decedent was not a resident of the State at the time of his death. As the State has jurisdiction over all persons and property within its limits, it is recognized that the maxim mdbilia personam sequuntur does not apply in cases of taxa- tion. That is to say, the personal property has a situs apart from the person of its owner for the purposes of taxation, in the place where it is located. 11 This rests on the principle that personal property in the State as well as real estate, re- ceives the protection of the State, and should therefore pay tribute to the State. As will be hereafter seen, this same principle is encountered in the attempted direct taxation of personal property; but there double taxation is practically prevented by the impossibility of ascertaining the existence of such personal property in other States. But in inheri- tance or succession taxation there is no such practical diffi- culty, as property must pass through the probate court, un- less disposed of by an antemortem disposition, and such dis- position is also made subject to the tax under the act. Thus the decedent may reside in one State, the personal property may be located in another State and in a foreign country, while the heir or legatee may live in a third jurisdiction. The difficulty does not arise in cases of real estate, where the right of succession is determined by the laws of the State where it is located. In the State of New York the courts have enforced the inheritance tax of that State against money on deposit in a New York bank belonging to a citizen "State v. St. Louis County Court, 47 Mo. 594. 156 MISSOUEI TAXATION. of Pennsylvania. The Court said: 12 The ease is one of some hardship, for the reason that the whole estate of the deceased is taxable in Pennsylvania, and if the property is taxable here, the right of succession to it will cost ten per cent of its value. It is unfortunate that the laws of the different States re- lating to succession taxes are not uniform, and framed to prevent dou- ble taxation. "In re Barr's Estate, 38 N. Y. Supp. 811; and see cases cited in the opinion. See, also, Whiting's Estate, 150 N. Y. 27; 34 L. E. A. 232; Hondayre's Estate, 150 N. Y. 37; 34 L. E. A. 235; Brouson's Estate, 150 N. Y. 1; 34 L. E. A. 238. A different rule seems to be followed in Pennsylvania, see In re. Orcutt's Appeal, 97 Pa. 179. See, also, Dos Passos on Inheritance Tax Laws (2d Ed.), sec. 47. CHAPTEK Vni. LOCAL TAXATION UNDER THE CONSTITUTION. The taxing power is exercised directly by the General Assembly for State purposes, and by counties, school districts and municipalities through the power of taxation delegated by the State. Indeed the great burden of taxation is not that levied by the State directly, but that levied by the coun- ties, towns and school districts under this delegated power of taxation. In the city of St. Louis the total direct State taxa- tion is a little over one-eighth the total taxation levied under State authority. The Constitution expressly provides that the taxing power may be exercised by the General Assembly for State purposes, and by counties and other corpora- constitu«onai tions under authority granted to them by the provisions. General Assembly for county and other cor- porate purposes. 1 The General Assembly is prohibited from releasing or discharging any county or city or the inhabitants or property thereof from their proportion- ate share of State taxation; and on the other hand, the Gen- eral Assembly is prohibited from imposing taxes upon coun- ties and municipalities or their in habitants or property for county or municipal purposes; but it may by general laws vest in these corporate authorities power to assess and collect taxes for such purposes. 2 These provisions, however, have been construed as not affecting the primary power of the General Assembly for State purposes, and the court said that 'Section 10 of Article X of Constitution. 2 Sees. 9 and 10, Article 10 of Constitution. 157 158 MISSOURI TAXATION. it does not undertake to define what are State purposes and what are not, "but leaves us to find the boundary line be- tween them in right reason, the legislation of the State and the adjudication of its courts, as developed in the history of the State at the time of its adoption." 3 Thus the State can adopt a registration system of election or a metropolitan police system for cities or a public school system, and compel the support of the same by local taxation, or require the payment of court expenses from local funds, 4 because these are all held to be State purposes. 6 The State also retains its sovereign control over the rev- enues of counties and municipalties raised from taxation. , „ The principle is firmly established in this State Control of county and State, as elsewhere,that the Legislature has as R^veTuM. much control over the revenues of the coun- ties, as it has over those of the State, unless restrained by some provision of the Constitution. 6 It was claimed that the above provision of the Consti- tution was violated by the high license act of 1883 (still in force), which made a minimum license for the High License county of two hundred and fifty dollars for six Law - months. But the court said 7 that the license fee was not a tax, but a price paid for the privilege of carrying on a business, which was detrimental to public morals. But this principle of the sovereignty of the State over local revenues must be considered with reference to another Constitutional provision. For example, in "State ex rel. v. Owsley, 122 Mo. 68; see, also, St. Louis v. Seifoert, 123 Mo. 424. 'State ex rel. v. Field, 119 Mo. 593. 6 State ex rel. v. Mason, 54 S. W. Rep. 524. 'State ex rel. v. Pike Co., 144 Mo. 275; also State ex rel. v. St. Louis County Court, 34 Mo. 546, decided under Constitution of 1820. 'State ex rel. v. Hudson, 78 Mo. 302. LOCAL TAXATION UNDER CONSTITUTION. 159 1897, the General Assembly passed an act, 8 authorizing the county court of any county Limitation upon , , . , . Legislative where there were incorporated municipalities, Locai'Reve^'e's anc ^ money had been collected as county taxes upon property within the limits of such mu- nicipalities, to pay over to the authorities of a municipality seventy-five per cent of an amount bearing such proportion to the entire amount of the year's taxes so col- lected within the cities, as the amount in that year appro- priated for road and bridge purposes bore to the total county tax, such sums to be expended by the municipal authorities upon their own streets. The Supreme Court held 9 in a case coming from the town of Kirkwood, St. Louis county, that this act was unconstitutional. That when county taxes were collected and the money paid into the county treasury, it be- came public money, and that the act was in conflict with arti- cle IV, section 46 of the State Constitution, which prohibited the General Assembly from making any grant or authorizing the making of any grant of public money to any individual, association of individuals, municipal or other corporations whatsoever. The court distinguished this case from the former case where it sustained an act authorizing the State to pay fifty thousand dollars annually to St. Louis out of the public revenue towards the support of the St. Louis Insane Asylum. They said that was based upon the duty of the State to take care of its indigent insane wherever they were. Another decision 10 where the city of Hannibal was held entitled to recover from the county of Marion under a some- what similar act, was in effect overruled, as it was said in the Kirkwood case that this case was not construed with refer- ence to this section of the Constitution. "Acts 1897, p. 218. "State ex rel. v. County Court, 142 Mo. 575. "City of Hannibal v. County of Marion, 69 Mo. 571. 160 MISSOUEI TAXATION. Constitutional Limitations of the Tax Rate. The Constitution provides that taxes for county, city, town and school purposes, may be levied on all the subjects and objects of taxation, but the valuation of property there- for shall not exceed the valuation of the same property in such town, city or school district for State and county pur- poses. 11 But the most important and novel feature of the constitutional regulation of taxation is the fixing for the first time in the Constitution the limits of taxation for county, school and municipal purposes. These limitations have proved of far reaching importance, and have been strictly enforced by the Supreme Court. Thus in a notable case decided in 1894 12 it was decided that the adoption of the township organization in a county did not affect this constitu- tional limitation and that the township tax levied for town- ship expenses and for roads and bridges could not be levied in addition to the maximum county tax, but must be included within it, and that the township tax was for county purposes within the meaning of the Constitution. The court said: Prior to the Constitution of 1875, the power of the Legislature to impose taxes was practically unlimited. It is unnecessary to recall the history of the times which led to call of the con- vention which framed it, to impress the mind with the Supreme Court fae t ^at one of the great purposes for which it was °f T^jTr' 3 *"" 1 assembled was to put a check upon that power. It stands out upon the face of the instrument as the most novel and signficant fact in it, and the purpose to limit that power, whether exercised immediately for State purposes, or mediately for local purposes, is alike apparent. "Section 11 of Art. X, State Constitution. "State ex rel. v. Mo. Pac. Ry. Co., 123 Mo. 72, three judges dissenting. The prevailing opinion of Judge Brace and the dissenting opinion of Judge Barclay contain interesting discussions of constitutional limita- tions upon the rates of taxation and are peculiarly interesting in view of the opinion of the U. S. Supreme Court in Macon County v. Huide- koper, 134 U. S. 332, supra, p. 77. The later decision of the State court is of course controlling as to the constitutional construction in this State. LOCAL TAXATION UNDER CONSTITUTION. 161 In this connection may also be noted important decisions of the Supreme Court in regard to the constitutional limita- tion of taxation. Though these decisions were made with reference to cities, they are clearly supreme court on applicable to counties as well. It was at first TaxVimitatron. ne ld *h at the limitation of the tax rate applied to every tax, including a tax levied to pay the interest on bonds authorized under section 12 of article X of the Constitution, that is, voted by two-thirds of the voters. But in a later case this was overruled, 12 and it was established that the limitation did not apply to the payment of interest on bonds so authorized under the con- stitution. It was also held that this limitation did not apply to a contract by a city to pay a fixed price annually for fur- nishing water, the amount payable annually not exceeding the limit. 13 The delegated power of taxation, thus granted and re- stricted by the Constitution, is exercised by counties, school districts, and municipalities, and, with reference to each of these, will be separately considered. 13 Lamar W. and El. Light Co. v. City of Lamar, 128 Mo. 188, over- ruling 111 Mo. 365. 13 Saleno v. City of Neosho, 127 Mo. 627. MO. TAX. — 11 CHAPTEE IX. COUNTY TAXATION. These constitutional limitations of the county tax rate, thus strictly enforced by the Supreme Court, have proven, like the constitutional limit of the tax rate in St. Louis, veri- table strait-jackets in the administration of the county finances, and the source of embarrassment and litigation. Merchants' and manufacturers' statements, though sub- jected to a property tax in the form of a license tax, were held not to be included in the taxable wealth of the county, within the meaning of the constitutional provision, making the county tax rate depend upon the valuation. 1 From the Auditor's report for 1898, it appears that the county tax for that year in the different counties was as fol- lows: Seventy-five counties having six mil- Tax Rate in li° n or l ess valuation, were authorized to levy counties. jgj^y cerr t s on ^he one hundred dollars; twenty- eight counties having between six million and ten million valuation, were authorized to levy forty cents; ten counties having over ten million and under thirty million valuation, were authorized to levy fifty cents, while Jackson county alone, having over thirty million valuation, was au- thorized to levy thirty-five cents. The city of St. Louis, as will hereafter be seen, has no county tax, being the only part of the State exempt therefrom. The Cottey Law. Eeference has already been made {supra, p. 75) to the stringent legislation enacted in connection with the 'State ex rel. v. Railway Co., 116 Mo. 15. 162 COUNTY TAXATION. 163 conflict between the State and Federal courts in the munici- pal bond litigation, requiring the taxing power to be exer- cised by counties in a specific manner and under the orders of the circuit court, except for certain specific county ex- penditures, and also to the legislation dividing the county revenue into distinct funds. These provisions have been strictly enforced. A failure to comply with these provisions, not only renders the county officials liable to punishment for misdemeanor, but such failure can be set up as a defense against any attempt to enforce a tax levied without compli- ance with these provisions of the statute. The Supreme Court speaking of these provisions said: 2 The only taxes that can be levied by counties are such as are pro- vided for by the statute. The power of taxation is a sovereign right which belongs alone to the State, and -which can only be exercised in pursuance of laws passed by the Legislature for the purpose. There can be no such thing as an implied power in a county court to levy a tax. The power must be clearly and expressly given by the statute. If the county court can only exercise the power to levy a tax as it may be conferred by the lawmaking power, the Legislature, in conferring it may impose the conditions on which it may be exercised, and when such conditions are made essential to the exercise of the power, they must be observed before the power can be lawfully exercised. And in another case the court said: 3 It may be that this law is a piece of useless machinery, but with that question we are not concerned. It applies beyond all doubt to the tax in question. The power of the county court to levy the tax is made dependant upon the order of the circuit court, and without such order the tax has no sanction or authority to support it, and it is therefore void. In this case the court held that an order of the circuit court made in 1882 gave the county court no power to go back and levy a tax for 1880. 2 State ex rel. v. Railroad Co., 97 Mo. 296. s State ex rel. v. Railway Co., 87 Mo. 236. 164 MISSOURI TAXATION. These decisions were in railroad cases. The law, which was enacted to prevent taxation for railway aid-bonds has been successfully invoked by the railroad companies in re- sisting taxation. Embarrassment of County Finances. Reference has already been made to the want of uni- formity in the assessments of different counties. The limita- tion of the tax rate has compelled counties which wished to increase their revenues to raise the assessments. But a num- ber assess on so low a basis, as to be unable to pay current expenses, and not infrequently assessors run for office on the platform of promising not to increase assessments. Thus if a county has a little over six million dollars val- uation, it has only the right to levy a forty cent rate, while if its valuation is reduced to six million it can increase its tax rate to fifty cents. The State Auditor reports 4 that the members of the State Board of Equalization are besieged by county officials asking for a decrease of the total valuation, so as to bring their counties into a lower class and give them power to levy a higher rate for county purposes. As a result of these assessments, inadequate to pay cur- rent expenses, warrants are issued in excess of revenue, which are circulated at a discount. Such a warrant payable out of any money in the County Warrants . nr-ii i , , • in Excess of treasury, was issued tor books and stationery Revenue furnished the county. At the time of the Invalid. J issue, the court had made a full levy of fifty cents, the constitutional limit in that county, and the warrant had been issued in excess of that revenue. The Supreme Court held, 6 in a suit brought upon the war- rant, that it was issued in violation of the Constitution; that Hnfra, page 281. "Barnard v. Knox County, 105 Mo. 382. COUNTY TAXATION. 165 the purpose of the Constitution was to bring the administra- tion of county affairs to a cash basis and was a limitation upon the power of the county to contract any and all indebt- edness, it being immaterial that the stationery was necessary for carrying on the county business. The court said: "So- liciting agents, contractors and others who deal with county officials must see to it that the limit of county indebtedness is not reached, and if they fail to do this, they must suffer the consequences. * * If this scheme of county finances built up by the Constitution is a mistake, or if it produces great hardship in some counties, the remedy is with the peo- ple and not with the courts." The court in this case apparently overruled the earlier case where the plaintiff recovered for services performed as jailor. 6 But it was said, in the former case, that it did not appear that the revenue had been all expended when the in- debtedness was incurred. The statute authorizes collectors to receive county war- rants in the payment of taxes, and the practice had grown up warrants in °^ receiving f or the taxes of one year warrants Excess of Rev- which had been issued for previous years. enues not , t Receivable This practice had apparently been ap- for Taxes. proved by decisions of the Supreme Court. But in a recent case, the whole subject was carefully consid- ered by the court in banc. 7 It was again declared that it was the purpose of the Constitution that the business of the counties should be done on a cash basis; that the current ex- penses were limited to the current revenues, and that current county expenditures did not mean expenditures for years other than the years, for which the tax was levied. The rev- Totter v. Douglas County, 87 Mo. 240; compare Book v. Earl, 87 Mo. 246. 'State ex rel. Eggers v. Payne, 151 Mo. 663, overruling Reynolds v. Norman, 114 Mo. 559. 166 MISSOURI TAXATION. enues raised in any one year could not be applied to the pay- ment of warrants issued for other years, unless the revenues of the year were more than sufficient to pay the current county expenses, and a collector could not receive a county warrant issued for the payment of county expenses for any one year in payment of the taxes of the holder for any other year, unless the revenues for the year in which the warrant is presented exceeded the county expenses. It was said that otherwise it would be possible for the holders of warrants to absorb a large part of the revenues for current expenses, and thus leave the county without funds to conduct its business as a political subdivision of the State. This was reaffirmed by the court still more emphatically at the following term, when the court 8 was asked to review the previous decision on the ground that it was in conflict with the prior decisions of the court. It seems that the sec- tion of the statute authorizing the receipt of county warrants for taxes 9 had been upon the statute books since 1835. But the court said that when enacted it was not in conflict with the Constitution, but that it must now be considered under the Constitution of 1875. The court laid down this rule: The revenues for any one year must be applied to the payment of the current expenses of the county for that year, and only the surplus after these have been paid can be used to pay the warrants issued in some other year. Nor can the county warrants issued to meet county expenses for one year be received by the collector in payment of taxes for any other year. This, it was declared, was the meaning of the Constitution, the intended effect of which was to abolish the credit system and establish a cash system in public business. The court added that if this rule resulted in any county not having money enough to pay as it goes or to run its s Railroad Co. v. Thornton, 152 Mo. 570. "Sec. 3205, R. S. 1889; see amendment to conform to decision of Supreme Court in see. 6810, R. S. 1899. COUNTY TAXATION. 167 county affairs, the remedy was not with the courts; that the plain intent of the Constitution was to put counties and citie9 upon a cash basis. The effect of these decisions, it would seem, will be far reaching in forcing the limitation of county expenses to county revenues. 10 License Taxation in Counties. The power to tax, exercised by the counties as a political subdivision of the State, is far less extensive than that dele- gated to municipalities, and the procedure is strictly regu- lated by the statute. 11 It has no general power to levy license taxes, but on all licenses made taxable by law it is provided that the county tax shall not exceed the State revenue tax more than one hundred per centum for the same time. 12 The license of dramshops is specifically regulated by statute. Under the local option act, the counties can refuse to give any license. 13 But if any are given, the tax must be levied at not less than $250 nor more than $400 for county purposes for every pe- riod of six months, the amount of the tax to be determined by the court granting the license. The statute provides the specific application of this dramshop license money in certain cases. 14 This forms a very important part of the revenues "A high judicial officer of the State, who has carefully studied the subject, says that the present condition in many counties of the State in not being able to pay running governmental expenses for more than eight months of the year, and having outstanding warrants and scrip, and annoying litigation all the time to collect the same, was intolerable; and writes: "You can not force the assessors to raise the valuations of property, and as the rate is fixed by the Constitution, there is only my remedy (the separation of State and county finances through constitu- tional amendment or convention) or the consolidation of the smaller counties." "Sees. 9274, 9275, R. S. 1899. 12 See. 9279, R. S. 1899. 18 Sec. 3027, R. S. 1899. "Sec. 2996, R. S. 1899. 168 MISSOUKI TAXATION. of the counties, which grant licenses. As has been stated, the dramshop license is held not to be a tax, but a price paid for the privilege of conducting the business. Road Taxes. For road purposes the county courts are authorized, not only to levy a tax specifically for road purposes, but also to deduct from the general county levy not less than five nor more than twenty cents on the hundred dollars valuation to be used for the same purpose. In addition, county courts are authorized to levy a poll tax upon every male inhabitant in the several road districts in the county, over twenty-one and under sixty years of age, of not less than one dollar and a half nor more than three dollars, except upon persons resid- ing in incorporated cities, towns and villages. 15 It is also provided, however, 18 that any taxpayer may pay the amount of his poll tax in money or labor, and if in labor it must be performed when required by the county commissioners. This poll tax is enforced in the same manner as other county taxes, that is, by suit, and no property is exempt from seizure and sale in the enforcement of such tax. These provisions also apply in the counties having the township organization. ls See. 9436, R. S. 1899. 15 Sec. 9441, E. S. 1899. CHAPTEK X. TAXATION BY SCHOOL DISTEICTS. The most interesting development of local taxation in the State is that for the support of schools. Until 1865 the only tax in the rural districts was for school buildings and furnishings, and this was limited to one-half the State tax. Under the Constitution of 1865 a radical change was made, and at the close of the period, in 1875, when the Constitu- tion of 1875 was adopted, the township board could levy a tax up to one per cent for school purposes and one per cent for buildings, making an aggregate of two per cent allowed for local school purposes. The restriction of the rate of forty cents on the hundred dollars in the Constitution of 1875 in all school districts, whether country or city, com- pelled an immediate resort to the methods provided in the Constitution for the increase of the rate, as in the great ma- jority of the districts the rate of forty cents was inadequate for the support of schools for six months, the time necessary to hold school in order to share in the apportionment of the State school money. The Supreme Court having decided that these limita- tions upon the tax rate were self-enforcing, but that the pro- visions for increasing the rate required legislation to carry them into effect, the Legislature was at once appealed to, and in 1877 statutory provision was made for voting the increase of rate to one dollar in districts formed of cities and towns and to sixty-five cents in other districts. Such an increase of rate required a majority vote of the voters who were tax- payers. An additional tax could be levied for the erection 169 170 MISSOUEI TAXATION. of school buildings on the vote of two-thirds of the voters of the district, the same provision applying for public build- ings in counties and municipalities. These two methods of increasing the tax rate are the only increased rates allowed by the Constitution. In the rural districts this increase may be voted at the annual meeting, where the voters determine the length of the school year and the rate of the annual tax. This question may also be determined at a special election. In cities and towns the increase may be voted at the municipal election or at a special election. 1 These annual school meetings are held on the first Tuesday in April, where the qualified voters determine the tax rate, the length of the school year and the The District other questions of school administration; and these are veritable democracies, being the only survival in our political system of the ancient town meeting. There are nearly 10,000 school districts in the State (9,816 by the last report), and the tax limit of forty cents, though increased by the annual apportionment of State school money and county school funds, has proven inade- quate in many cases, in fact in the majority of cases, to maintain even primary education. As a result, there has been a very general increase of the school tax rate, both for maintaining schools and for erecting school houses. In this connection it should be remembered that the school board of each district is required to continue the public schools for a period of six months in each year, provided that the tax rate of forty cents (with the money received from the public funds), is sufficient therefor, and if the board refuses or neg- lects to comply with this provision, it is deprived of any part of the State public school funds for the current year. 'Sees. 9750, 9777, E. S. 1899. TAXATION BY SCHOOL DISTRICTS. 171 This annual apportionment made by the State Superin- tendent, being the income of the State school fund and the State revenue appropriated to schools, Apportionment amounts, for the current year (1900), to the of State School ' •> v •" Money. sum of one dollar to each child of school age enumerated in the district. The aggregate of the county, township and district school funds (supra, p. 8), was in the year 1899, $8,052,248.41. The total amount expended for school purposes in the State for the year ending June 30, 1899, was $7,048,826.27, of which $4,425,812.16 was derived from taxation in school districts. It seems from the report of the State Superintendent that so general is the increase of the tax rate, that the in- crease is the rule and the non-increase the ex- Generai increase ception. The average levy reported from the school Tax. different counties during the past two years was about forty-seven cents on the hundred dollars, being an average increase of seven cents. Some dis- tricts have a much larger revenue than others from the county and township funds, and from this or other causes some districts levy less than the lawful rate but nevertheless succeed in maintaining the six months school, thus securing the State apportionment. The highest rate, apparently, is in the smaller towns of the State, where schools of high grade are maintained on a low valuation of taxable property. This raising of the tax rate for school purposes, it seems, is almost universal in the cities and towns of the State. Thus in the year ending June 30, 1899 (according to the report of the State Superintendent), out of two hundred and sixteen cities, towns and villages, only eight levied the forty- cent rate, all the others having increased the annual rate by vote of the taxpayers, or levied a special rate for school buildings as the result of a two-thirds vote; and out of the schools in the larger cities and towns, that is, cities and towns 172 MISSOURI TAXATION. having more than sixteen teachers in their schools, only one (St. Louis) levies the forty cent rate, all of the others having an increase. In cities between fifty thousand and three hundred thousand inhabitants, the statute authorizes the increase of the annual rate of taxation for the purpose of erecting school buildings, or a public library building containing offices of the school board, and for an increase of the annual levy on the vote of the taxpayers. These increases can be voted either at the biennial election for school directors, or at a special election ordered by the board of directors. 2 The act of 1897 reorganizing the St. Louis Board of Ed- ucation gives that board the power to levy and collect all taxes authorized to be levied for school pur- schooi Taxation poses, and also provides that any election in st. Louis. called by the board of education to increase the rate of taxation shall be held at such times as the board may direct, under the general election law gov- erning such city. The effect of the adoption of the Constitution of 1875 was to limit the school tax rate in the city of St. Louis, to forty cents. The old rate (fifty cents) was continued for a few years, under the authority of the Constitution, to pay off the bonded debt existing at the time of the adoption of the Constitution. But that was paid off a number of years ago, and since then only forty cents has been levied. The St. Louis Board of Education has been sorely pressed for funds, like all the other districts and municipalities in the State, and the question of increasing the rate has been agitated from time to time, but no election has been called; appar- ently for the reason that there are practical difficulties in the way of having an election by the taxpayers, no list of a Chap. 154, Art. Ill, E. S. 1899. TAXATION BY SCHOOL DISTRICTS. 173 taxpayers having been made out, and no provision is in force for making any. 3 In view of the fact that this provision for increasing the tax rate by the vote of the taxpayers has been in force in the State for over twenty years, it is a notable indication of general public acquiescence in school taxation, that no case has been brbught into the appellate courts, involving any question raised at a school election, as to the vote by taxpay- ers for increase of tax, although there is no provision of the statute regulating such elections. It is not expressly pro- vided either in the Constitution or the statutes, whether at one election, that is, an annual meeting or a special election, an increase can be voted for more than one year, and the question seems never to have been tested. In the recent elec- tions in St. Louis for increasing the tax rate for erecting a public library building, a vote was taken on the proposition to increase the annual rate for five years. There were grave doubts as to the validity of such an increase for more than one year; but as the vote was adverse, the question was not determined. The practice in the school districts, universal as far as can be ascertained, is to determine at the annual meeting each year the rate to be levied for that year, and if the tax is not for school buildings, but for the current expenses of the schools, it is determined by the vote of the taxpayers, who alone vote on that question at the annual meeting. It has been decided by the court of appeals, that the powers con- ferred on the voters at this meeting have relation only to the then existing school year. 4 8 At a recent (1900) election in St. Joseph, an additional school tax of twenty cents was voted, separate poll books being kept, and instruc- tions given judges that only voters who were tax payers were allowed to vote on the question. At the same election a bond issue was voted by "qualified electors." 4 Matney v. Boydston, 27 Mo. App. 36. CHAPTEE XI. TAXATION IN MUNICIPALITIES. In the cities and towns of the State, the power of taxa- tion is conferred by the State in the broadest possible terms. Prior to the Constitution of 1875, the cities of the State, including St. Louis, were organized under special charters. Under the Constitution and statutes, cities of 100,000 inhabitants or more are in the first constitutional class, those between 30,000 and 100,000 in c't"es fi an a d i0n ° f the second; between 3,000 and 30,000 in the Towns. third; and between 500 and 3,000 in the fourth. Towns organized under special law, and having less than 500 inhabitants are per- mitted to become cities of the fourth class. All other towns having less than 500 inhabitants are declared to be villages. Any city organized under special charter, was author- ized to incorporate in the appropriate class under the general law. The only cities having the requisite population for cities of the first class are St. Louis, Kansas City, and St. Joseph and the two former have what are known as constitutional charters, that is, charters framed under the express authority of the Constitution by "Boards of Freeholders."* These charters have many features in common, but are distin- guished in a very important matter which has a direct bear- ing upon the question of taxation. No County Tax in St. Louis. The charter of the city of St. Louis was framed under the provisions of sections 20 to 25 of article IX of the Con- *St. Joseph is now (October, 1900) taking steps to secure a con- stitutional charter, to which it is entitled under recent census. 174 TAXATION IN MUNICIPALITIES. 175 stitution. It is not only a city with the ordinary municipal powers, but it is independent of a county organization, and collects the State revenue, and performs all other functions in relation to the State "as if it were a county." In the lan- guage of the Constitution, "in consideration of the city be- coming the proprietor of the county buildings and property within its enlarged limits, it shall assume the whole of the existing debt, and thereafter the city and county of St. Louis shall be independent of each other. The city shall be ex- empt from all county taxation." It follows that the only property tax, which can be levied by the city of St. Louis is the city tax, which is limited by the Constitution to one cent on the dollar for revenue pur- poses, and in addition, to the interest tax for the payment of the bonded debt existing at the time of the adoption of the Constitution. On the other hand, the charter of Kansas City was framed under section 16 of article IX of the Constitution, authorizing any city having a population of more than one hundred thousand inhabitants st. Louis and to frame and adopt a charter for its own gov- compared. y eminent. But although thus organized under its own charter, it is still a part of Jackson county, and the county levies its county tax of thirty-five cents on the hundred dollars, which is paid by the taxpayers of Kansas City, in addition to the city tax levied by Kansas City. The constitutional limit of the taxing rate for revenue purposes is the same in Kansas City and St. Louis, that is, one dollar on the hundred dollars. It is practically reduced, however, to ninety-eight cents in St. Louis by the levy of a special tax of two cents on the hundred dollars for library 176 MISSOUBI TAXATION. purposes. This was authorized by vote under the act of 1895. 1 But the constitutional limit of taxa- Library Tax tion having already been reached, this library in st. Louis. ^. ax Q £ ^ w0 ceri t s necessarily was deducted from the municipal revenue tax of one dollar, reducing the city revenue tax to ninety-eight cents. This tax for the support of the library is not, therefore, an in- crease of taxation, but operates as a reduction of the tax available for municipal expenses. The proposed tax for erecting a new library building, which was twice submitted to the voters and defeated, was under the provisions of the Constitution authorizing an increase of taxation for public buildings. This proposed library building tax involved an increase of taxation of one mill on the hundred dollars per annum for five years. 2 Comparing the position of St. Louis with that of Kansas City, the latter has the same limitation of taxation rate of one dollar for revenue purposes, but the county expenses are paid out of the county tax of thirty-five cents, making a total tax rate of one dollar and thirty-five cents wherewith to pay all expenses while St. Louis is compelled to pay expenses out of a tax of ninety-eight cents. It is stated by the city comp- . troller of St. Louis that since the adoption of the Scheme and Charter in 1877, the net amount expended for county purposes as distinct from city purposes proper is over $16,000,000. St. Louis Charter Discrimination in Valuation for Taxation Held Void. The Constitution, in authorizing the scheme of separa- tion for St. Louis city and county, expressly provided "for the graduation of the rate of taxation for city purposes in '■See Acts of 1895, p. 219. 2 8upra, p. 173. TAXATION IN MUNICIPALITIES. 177 the portions of the city, which are added thereto by the pro- posed enlargements of its boundaries." 3 Under the authority of this provision, the framers of the city charter 4 provided that lands which had not been laid off into lots or blocks should be assessed or taxed by the acre, as agricultural land, and should continue to be so assessed and taxed until laid off in lots or blocks. But the Supreme Court held 5 that the charter provision was in conflict with st Louis Dis *^ e Constitution, which required that all prop- cnmination in erty should be taxed according to its value, and that the rate of taxation and the valuation for taxation were two distinct things. The city could dis- criminate and levy a lower rate for city purposes, but that it could not discriminate in the valuation. It was bound to value all property alike. But it will be seen that the city has authority to make a different rate of taxation between the old and new limits for city purposes, and a lower city tax rate as provided by the charter was therefore levied on all property within the ex- tended limits. As the "new limits" became built up, the reason for the discrimination no longer existed, and finally, in February, 1888, the city charter was amended so as to authorize the municipal assembly to increase the tax rate "from time to time" over so much of the new limits as it deemed advisable. At the present time (1900), the reduced city rate of sixty cents, instead of ninety-eight cents, the full city tax (less the library tax), is levied only in the ex- treme northern and southern portions of the original new limits. License Taxation in Municipalities. The taxing power, including the power to license, tax "See. 23, Art. IX of the Constitution. 'See. 22, of Art. V, of the City Charter. B State ex rel. Griswold v. O'Brien, 89 Mo. 631. MO. TAX. — 12 178 MISSOTJEI TAXATION. and regulate all classes of occupations, is declared in the most comprehensive terms in the constitutional charters of St. Louis and Kansas City, as well as in the general statutes authorizing the organization of municipalities in different In the existing St. Louis charter (section 5 of article III) the power is given to "license, tax and regulate:" Undertakers, dentists, auctioneers, grocers, merchants, retailers, hotels, boarding houses, tenement houses, office buildings, public build- ings, public halls, public grounds, concerts, photo- graphists, artists, agents, porters, runners, drummers, on License public lecturers, public meetings and shows, real es- Taxation. tate agents and brokers, financial agents and brokers, horse and cattle dealers, patent right dealers, inspec- tors and gaugers, stock-yard proprietors, examiners, of title, conveyancers, mercantile agents, insurance companies and insur- ance agents, bankers, banking or other corporations or institutions, tel- egraph companies or corporations, street railroad cars, livery and sale stables, hackney carriages, private carriages, barouches, buggies, wagons, omnibuses, oarts, drays, and other vehicles, and all other businesses, trades and avocations, or professions whatever. The Municipal Assembly is also given power to license, regulate, tax or suppress certain other occupations, such as pawnbrokers, money changers, shows, museums, etc., and to "suppress" certain others, to wit, bawdy houses and disor- derly houses, houses of ill-fame and assignation houses, and finally, "to license, tax, regulate or suppress all occupations, professions and trades not heretofore enumerated of what- ever name and character." This language is substantially adopted, so far as the taxing power is concerned, in the gen- eral statute authorizing the incorporation of cities of the dif- ferent classes. 6 The general statutes, however, provide: 7 "II E. S. 1899, pp. 1365, 1278 and 1401. 'Sec. 6256, E. S. 1899. TAXATION IN MUNICIPALITIES. 179 No municipal corporation in this State shall have the power to im- pose a license tax upon any business, avocation, pursuit or calling, un- less such business, avocation, pursuit or calling is specially named as taxable in the charter of such municipal corporation, or unless such power be conferred by statute. Municipal License Taxation in the Supreme Court. These delegated powers to municipalities have been very broadly construed by the Supreme Court. It has been held that in exercising this power, the municipality may adopt any method of taxation which the Legislature might have adopted, and, therefore, a tax levied by the city of St. Jo- seph, chartered as a city of the second class, on the gross earnings of an express company, which was in effect an in- come tax, was held valid. 8 In the case of another ordinance of the same city, it was held that the general law conferred the power to collect a revenue tax by way of license, and also a tax on the incomes of the business of foreign insurance companies, and that such taxation was not double taxation. 9 But while license taxation is not subject to the constitu- tional requirement that all property shall be taxed in propor- tion to its value, yet it has been repeatedly License Taxation declared by the Supreme Court that license form be Unl " taxation, or any form of taxation levied by the municipalities, is subject to the constitutional requirement of uniformity, that is to say, it must be uni- form upon the same class of subjects within the territorial limits of the authority levying the tax. Indeed, nearly all the decisions enforcing this principle relate to municipal li- cense taxation. Two meat shop ordinances of St. Louis, discriminating between the old and the new city limits were held invalid, 10 "Express Co. v. City of St. Joseph, 66 Mo. 675. "St. Joseph v. Ernst, 95 Mo. 360. 10 St. Louis v. Spiegel, 75 Mo. 145, and same, 90 Mo. 587. 180 MISSOURI TAXATION. while such an ordinance without discrimination was held valid. 11 An ordinance of the city of St. Louis exacting a license tax on docks and barges, and authorizing a reduction of forty per cent from the regular rates in favor of vessels owned by citizens of St. Louis and returned for taxation during the year, was held to be constitutional so far as the license tax was concerned, but that the discrimination was invalid, and that a foreign corporation paying the tax was entitled to the same reduction. The court said that the rule requiring uni- formity of taxation extended to all property within the ter- ritorial limits of the authority levying the tax without regard to the residence of the owner. 12 On the other hand, in numerous cases, municipal li- censes have been held valid. Thus a license upon all sewing machine agents in St. Louis, 13 and licenses upon bankers, 14 and upon vehicles, 15 were held valid. In this last case, re- versing the court of appeals, it was held by the Supreme Court that the city of St. Louis had the power under its charter to impose, and by criminal prosecutions enforce, penalties for violations of ordinances exacting licenses. So municipal licenses upon architects, hotel keepers, etc., have been sustained. For the refusal of Supreme Court to en- force the collection of a fifty-dollar attorney's fee and costs under municipal ordinance for the refusal to pay merchants' taxes, see supra, p. 141. Abritrary Classifications Unconstitutional. The Supreme Court, however, has been firm in con- demning any attempt to secure discriminating taxation by arbitrary classification. Thus poll tax levied in Kansas City "St. Louis v. Freivogel, 95 Mo. 533. "St. Louis v. Consolidated Coal Co., 113 Mo. 83. "St. Louis v. Bowler, 94 Mo. 630. "St. Louis v. Mfg's Savings Bank, 49 Mo. 574. 1B St. Louis v. Green, 70 Mo. 562. TAXATION IN MUNICIPALITIES. 181 under authority of the city charter exempting the persons who had voted at the last election, was held 16 to be an unrea- sonable classification, and the tax was held invalid. Another ordinance of Kansas City levying an occupation license tax of fifty dollars on commission merchants and produce dealers was held to be invalid, the court holding that one merchant should not be subject to any more burdens than another, and that the city had no power to make such a classification. 17 Poll Taxes. In connection with this delegation of the taxing power to municipalities, it should be noted that not only have the counties of the State the power specifically given to levy a poll tax for road purposes, but the different classes of cities, that is to say, cities of the second, third and fourth class (there being no cities of the first class other than St. Louis and Kansas City, both having constitutional charters*) are also authorized to levy poll taxes. Cities of the second class can levy a poll tax not exceeding one dollar and fifty cents for each year on all male persons over twenty-one and under sixty, the tax being appropriated to the improvement of the streets within the limits of the city, and for no other purpose. In cities of the third class a poll tax not exceeding two dollars is authorized upon each able-bodied male between twenty-one and fifty who has been a resident of the city for thirty days next preceding the levy of said tax, to be collected as other personal taxes, there being apparently no restriction to road purposes as in other cases. In cities of the fourth class all able-bodied persons between twenty-one and fifty residing in the limits for thirty days next preceding the levy of said tax, are liable to work on the streets and alleys for three days, or to pay such sum in lieu thereof as provided by ordinance, not to exceed two dollars. "Kansas City v. Whipple, 136 Mo. 475. "Kansas City v. Grush, 151 Mo. 128. *And now under census of 1900, St. Joseph. 182 MISSOURI TAXATION. The Supreme Court in the case of Kansas City v. Whip- ple, cited above, held that Kansas City was authorized by its charter to levy a poll tax, the tax being held invalid only by reason of the arbitrary classification contained in the proviso relating to voting. In the city of St. Louis, on the other No Poii Tax in hand, no poll tax can be levied, as no power st. Louis. ^ i ev y S11 ch tax was given to the municipal assembly by the city charter. St. Louis Revenues. In connection with the power to license, tax and regu- late, vested in the municipal assembly of St. Louis under its constitutional charter, we may note the sources of the munic- ipal revenue under this comprehensive taxing power. Thus for the year ending April 9, 1900, the receipts of the city were: ST. LOUIS KEVENUE 1899. From general • property taxes, including delinquents $3,604,400 92 Dramshops 974,071 70 Manufacturers 139,555 18 Merchants 185,990 79 License tax on street railway cars 22,251 00 From licenses upon occupations, vehicles, etc. 140,264 23 From foreign insurance companies 3T>,685 72 Collections from franchises of street railroads, telephone, electric light and refrigerating companies 113,100 89 Building permits and inspections 22,868 50 Fees and fines 145,076 28 Miscellaneous sources 173,136 29 $5,557,401 50 There is a rebate under the provisions of the city char- ter on city taxes paid on or before October 1, at the rate of eight per cent from the date of such payment to the thirty- first of December following. As this is taken advantage of as a rule by heavy taxpay- TAXATION IN MUNICIPALITIES. 183 ers, it involves in the aggregate a very serious loss in the city- revenues. It "will be seen that a very large revenue is derived from dramshops under the operation of 'the State high license law already noticed with reference to counties. As is well known, other considerations than that of revenue enter into this feat- ure of the revenue system. Dramshops in St. Louis pay $500 annual license to the city and $100 to the State. Under the general statute, the authorities of incor- porated towns and cities are authorized to impose a tax on licenses to dramshop-keepers within their limits. This is in addition to the county license. In a recent notable case, contested as a matter of prin- ciple by a real estate agent of St. Louis, the license tax upon the occupation of a real estate agent was assailed upon the broad ground that it was a violation of the natural right of a man to earn one's living. 18 But the court reviews the de- cisions in this State upholding the license system and con- cludes : The right of defendant to enjoy the gains of his own industry, de- rived from conducting a real estate business in the city, was subordinate to the power of the city to require all persona thus engaged to pay a license tax; and it makes no difference, in principle, that the tax was against the occupation, and not against the property. It was no viola- tion of the Constitution. Tax Rate in St. Louis. The tax rate in St. Louis is now (1900) $1.95 on the $100, that is, assuming the city interest tax of thirty cents to continue. It has been gradually reduced for several years past through the reduction of interest on the bonded debt. It is made up as follows: 18 City of St. Louis v. MeOann, 57 S. W. Rep. 1016. 184 MISSOUBI TAXATION. State revenue tax $ .15 State interest tax 10 Total State tax $ .25 School tax $ .40 City revenue tax $ .98 Public library tax 02 Total city revenue tax $ 1.00 City interest tax 30 Total city tax $ 1.30 Total tax $ 1.95 The city of St. Louis, in common with the State, coun- ties and school districts, is suffering from the constitu- tional limitation of the tax rate. The embar- Embarrassment rassment growing out of the normal increase of St. Louis ~ ° Finances. of municipal expenses is aggravated by the absence of a county tax and the inability to find relief in bond issues. St. Louis is confronted, for the fiscal year just opening (1900), with a deficit of over one million dollars. As estimated by the city comptroller in his annual report for the fiscal year 1899-1900, the estimated receipts and requirements for current revenue are as follows : Estimated receipts (substantially same as preceding year) $5,594,029 88 Estimated requirements $6,609,979 44 These estimated requirements may be classified as fol- lows: General expenses incidental to the exercising of the func- tions of a county in its relations to the State, as in the administration of justice, eleemosynary institutions, and so on $1,253,093 48 The police 1,628,624 15 TAXATION IN MUNICIPALITIES. 185 General Municipal Expenses: Fire department $784,546 85 Health department 310,975 68 City lighting of streets, public buildings, and so on 553,464 47 Municipal courts 113,981 11 Streets and sewers 844,132 94 Miscellaneous 574,428 36 Making a total for these municipal functions of $3,181,529 41 Hospital fund and overdraft 177,682 40 New public work 369^050 00 $6,609,979 44 The increase in the police expenditures over that of the previous year was about $600,000, so it will be seen that, irrespective of the increase of the police force required by the act of the last General Assembly, there will be a de- ficit in the city finances. The new limits of the city, made available for settle- ment and improvement by the rapid transit railway system, enormously complicated the economic problems involved in city government, which assume a compact population within a closely built area. Apart from this, the whole tendency in recent years has been to increase the expenditures of municipal administration. Thus the expenses of the health department alone have increased over three hundred per cent in past twenty years, this being necessitated by the de- mand for improved sanitary measures. The other expendi- tures, as for street cleaning and charities, have increased out of all proportion to the increase of the revenues. Other cities in this country have been confronted with the same problems of municipal expenditures increasing more rapidly than the revenues, and also with permanent *" tne embarrassment growing out of the disper- PubHc improve- ^on of the population over enlarged municipal ments. _ , , ,. , . areas. But they have found relief in the favorable market for municipal bonds, which has enabled 186 MISSOUBI TAXATION. them to charge the expenses of these permanent public im- provements upon succeeding generations, at a very low rate of interest, three per cent and even lower. But this remedy has been barred to St. Louis by the express limitations of the Constitution, which provides that no bonds shall be issued by a city or any other issue of Bonds subdivision of the State without the assent of Prohibited in st. Louis. two-thirds of the voters voting at an election, but even such assent is of no avail, if the out- standing indebtedness exceeds five per cent on the value of the taxable property ascertained by the assessment next be- fore the last assessment prior to the incurring of the indebt- edness. The outstanding bonded indebtedness of St. Louis is now (1900) $18,916,278.30. To this should be added the sum of $189,106.31 of bonds redeemed in anticipation of the revenues of the present year. The city has, therefore, a total bonded indebtedness of $19,105,384.61. At the adop- tion of the Scheme and Charter in 1877, the total city debt and county debt, which was assumed by the city, aggregated $23,814,302.04. As the assessment before the last aggre- gated about $373,000,000, it will be seen that the city's bonded indebtedness is still in excess of the constitutional limit, and can not without of course, a constitutional amend- ment, issue bonds, even with the vote of the people. The average interest on this debt is now about 4.36 per cent aggregating less than $800,000 annually. The municipal assembly under the charter is obliged to appropriate at least $1,200,000 per annum in payment of the principal and interest, the amount not necessary for interest being applied to the sinking fund for the redemption of the prin- cipal. At the present rate of payment, the city debt will be retired in 1927, assuming that the debt as it matures will TAXATION IN MUNICIPALITIES. 187 be renewed at the rate of four per cent. 19 The serious consequences of this disability to issue bonds, in view of the present embarrassments in the city finances, are obvious when the expenditure by the city for permanent public improvements since the adoption of the Scheme and Charter is considered. This, according to the statement furnished by Mr. Sturgeon, the city comptroller, is as follows: Construction and reconstruction of main sewers paid for by the city $1,688,968 07 Streets, bridges across the Mill Creek Valley, including new grading and exeess payments in the reconstruction and assessments against the city, and street openings . . ..2,799,107 09 New City Hall, erection and furnishing 1,673,209 32 Construction and reconstruction of engine houses, etc. . . 333,637 39 Erection of hospital buildings 202,405 02 Other public buildings and building sites 696,196 37 Total $7,393,523 26 This represents the aggregate expenditure for perma- nent public improvements sinee 1877 out of current revenue and does not include the recent extension of the city water works, the expense of which since 1880 has been paid out of the revenues of the water department. Prior to 1880 the entire expense of construction of city water works was paid out of the issue of bonds which are now included in the general city debt. Increased Taxation in St. Louis. The city has levied the maximum tax permitted by the Constitution (one dollar for current revenues) since the ls The pending constitutional amendment to be voted upon in No- vember, 1900, authorizes the issuance of $5,000,000 of bonds to aid the World's Fair in 1903. It is provided that if a majority of the citizens in St. Louis vote for the amendment, that such vote will authorize the municipal authorities to issue the bonds. The amendment as originally drafted included the authorization of $5,000,000 additional for permanent public improvements in the city. Unfortunately this was stricken out before submission to the General Assembly. 188 MISSOURI TAXATION. adoption of the present Scheme and Charter. As before pointed out, it now really only levies ninety-eight cents on the hundred dollars, the two cents for library purposes being deducted from the regular city levy. This rate can not be increased, as no provision is made in the Constitution for increasing the rate for city purposes by vote of the tax- payers, as is the case for school purposes. There is, how- ever, provision in the Constitution for increasing the rate of taxation for erecting public buildings in cities as well as in counties and school districts, the rate of increase to be approved by two-thirds vote of the qualified voters. So that, so far as the Constitution is concerned, the city could levy an increased taxation by vote of two-thirds of the voters for the erection of specific public N °isk,n r for Pr °" buildings, such as the city hall or hospital. increase of ;g u t even this remedv is unavailing, because Taxation. , ,.".,, . the city charter, which is the organic law of the city, makes no provision for levying such a tax. This obstacle, however, could be removed by an amendment of the city charter through the vote of the people. In view, however, of the very high rate of assessment now enforced in the city, and assuming that our present revenue system is continued, it seems very improbable that any proposition for increasing taxation would be favorably considered. There seems no way, therefore, for relief of the city from its financial embarrassment, except in a consti- tutional amendment which would authorize the city to issue bonds for the purpose, not only of completing public build- ings, but also for other necessary public improvements of a permanent^ character. Taxation in Kansas City. Kansas City has a lower rate of valuation than St. Louis, but a higher tax rate. Its valuation in 1899 for city taxa- tion, there being a separate assessment for city taxation, TAXATION IN MUNICIPALITIES. 189 which under the Constitution can not be any higher than the valuation for State taxation, was $66,419,445. The total city debt was $3,727,900. The rate of taxation was as follows : City Revenue $1.00 Interest tax 20 County tax 35 State tax 25 School tax 1.02 Total $2.82 There is no license commissioner and the merchants' returns are not secret as in St. Louis, the merchants' licenses being issued by the city auditor. The estimated revenue in 1899 was as follows: From taxes for current revenue $710,000 Miscellaneous licenses ( including dramshops ) 200,000 Miscellaneous sources 88,500 Total $998,500 Less cash rebates 53,500 Leaving net revenue of $945,000 Eights of Municipalities in Public Streets and Places. The power of taxation must be distinguished from the right of the city to exact compensation for the use of its streets and public places. This was illus- courton city's trated in a recent decision of the Supreme Right in Court of the United States. 20 An ordinance Streets. of the city of St. Louis, exacting the sum of five dollars per annum for each telegraph pole on the streets of the city, had been held invalid by the United States circuit court, on the ground that it was an addition to the tax regularly assessed on the property of the company, and was in effect a privilege or license tax for the privilege of carrying on its business in St. Louis, and therefore involved M St. Louis v. W. U. Tel. Co., 148 U. S. 92. 190 MISSOUEl TAXATION. an attempted regulation of interstate commerce. But the Supreme Court held that it was not a privilege or license tax, but was in the nature of a charge for the use of the property belonging to the city, and could properly be called a rental; that "a tax is a demand of sovereignty; a toll is a demand of proprietorship." The judgment was reversed and the case remanded for trial on the issue of whether the charge of five dollars proposed was reasonable. On retrial in the circuit court on this issue, it was held that the charge was unreasonable and excessive. ~No appeal was taken from this decision and no attempt has since been made to impose such a tax or rental from the telegraph companies. Prob- ably the removal of the wires underground in the business section removed the occasion for such a charge. The Constitution provides (section 20 of Article XII) that no law shall be passed by the General Assembly granting the right to construct and operate a street railroad within a city, town or village, or in any public highway, without first acquiring the consent of the local authorities having control of the street or highway proposed to be occupied by such street railroad, and the franchises so granted shall not be transferred without the same assent first obtained. The charters of St. Louis and Kansas City, as well as the general statutes for the classification of cities, vest in the municipalities very full and comprehensive powers in regard to street railroads upon the streets, and the control of the streets of the city and the right to exact compensation for the use of the streets. Thus in the city of St. Louis, some companies using the streets are required to pay a tax upon their gross receipts. Others make fixed annual payments. Street railways in St. Louis are required also to pay a license tax of twenty-five dollars per annum upon street cars. This latter requirement would seem to be the exercise of the power of taxation, except where it is re- TAXATION IN MUNICIPALITIES. 191 served as a condition to the grant of the franchise. Street railway companies are also required to pare the tracks and the space between the tracks. While these payments exacted as compensation for the grant rest upon the right of proprietorship, and are not an exercise of the delegated power of taxation, they are none the less in effect charges upon the earnings of the company, and in the franchise tax recently enacted in New York it was provided that such payments should be deducted from the amount of franchise tax. See infra, p. 300. CHAPTEE XII. LOCAL ASSESSMENTS FOE PUBLIC IMPROVEMENTS. The principle of assessing the cost of public improve- ments upon the property immediately benefited, was early established in the State. Thus it was said in 1856 in a learned opinion by Judge Leonard, in Lockwood v. St. Louis, supra, p. 30: These special assessments are found in the English law and have prevailed, it is believed, in most, if not all, of our American States, and their validity, when assessed as in this instance, can not be ques- tioned under our Constitution. Their intrinsic justice strikes every one. If an improvement is to be made, the benefit of which is local, it is but just that the property benefited should bear the burden. While the few ought not to be taxed for the benefit of the whole, the whole ought not to be taxed for the few. In the following year, in a notable decision, the whole subject was carefully considered in connection with another and distinct governmental power, the condemnation of prop- erty for public use. 1 This form of taxation was distinguished from general taxation on the one hand and the taking of pri- vate property under the right of eminent domain on the other. The right to tax the property benefited was placed upon the broad ground that whatever receives the benefit should bear the burden; that it was impracticable to ap- ply this principle in general taxation, but that it was prac- ticable in local taxation in connection with public improve- ments. The principle was applied in the following year 2 to a tax *Newby v. Platte County, 25 Mo. 258. "Egyptian Levee Co. v. Hardin, 27 Mo. 495. 192 LOCAL ASSESSMENTS — PUBLIC IMPKOVEMENTS. 193 levied upon the holders of land in a certain district by a com- pany authorized to construct levees and dig canals therein. The principle is so clearly established in the jurispru- dence of the State that it is unnecessary to cite the numerous cases in which it has been applied. Such taxation does not violate the constitutional requirement that all property shall be taxed in proportion to its value. Property exempt from local and State taxation is still subject to these special taxes for local improvements. Thus St. George's Church in St. Louis was advertised for sale 8 for the payment of a special tax for the construction of a sewer in the district in which the church was located, and the Supreme Court refused to enjoin the sale, holding that the property was liable to special assessment, although exempt from State and county taxes. The same principle has been applied to all property exempt from general taxation, and even public schools. 4 Other cases have applied the same principle, the most notable hold- ing that a county court house is not exempt from paying for local improvements, but that there is no way of enforcing such a tax by sale of the property. 5 The principle of local assessments has been applied in Missouri in maMng county roads, reclaiming swamp lands and in numerous cases from St. Louis for opening streets, building sewers and making other public improvements. In the charter of the city of St. Louis the power was granted to the city government in very elaborate and care- fully framed provisions. The grading of new Local Assess- streets and alleys, making of cross-walks and meats under repairs and cleaning the streets and alleys are St. Louis r ° , , . charter. paid out of the general revenue of the city, but the street construction and reconstruction, "Lockwood v. St. Louis, 24 Mo. 20. *St. Louis Public Schools v. St. Louis, 26 Mo. 468. "City of Clinton v. Henry County, 115 Mo. 557. MO. TAX. — 13 194 MISSOURI TAXATION. guttering, sidewalks and repairs of alleys and sidewalks are charged upon the adjoining property as a special tax on the basis of what is known as the frontal rule, that is, each foot of property paying its pro rata u e. g k are _ ]j. - g proyide,^ however, that when the special taxes shall amount in the aggregate to more than twenty-five per cent of the market value of the property calculated to a depth of one hundred and fifty feet, the excess shall be paid out of the general revenue. In 1893 this twenty-five per cent limitation was repealed by an act of the General Assembly, which act (known as the "Stone law") by its terms was applicable to cities of over 300,000 inhabitants. But this repealing act was adjudged unconstitutional by the Supreme Court 6 on the ground that it was an attempt to amend the city charter in a matter of strictly municipal concern, which only could be stone Act Held reached by charter amendment. The cost of "^° nstitu " sprinkling the streets of St. Louis is also de- frayed by a special tax assessed upon the ad- joining property, in the proportion which the linear feet of each street bears to the total number of linear feet charged with the tax in the territory included in the con- tract under which the sprinkling is done. Sewers in St. Louis are constructed under a different rule. The public or main sewers are paid for out of the gen- eral city revenues, but the cost of district sew- ers is assessed as a special tax upon the prop- The Area Rule. eH y -^j^ fa e district prescribed by the or- dinance establishing the same and approved by the board of public improvements. Such assessments are made upon the area rule in the proportion which the area "Murnane v. St. Louis, 123 Mo. 479. LOCAL ASSESSMENTS — PUBLIC IMPROVEMENTS. 195 of each lot bears to the whole district, exclusive of the public highways. Eepairs of the district sewers, however, are paid out of the general revenue. The city charter of St. Louis also provides 7 that where public improvements require a taking of any private prop- erty in the opening, widening or altering of any street or public place or route for a sewer, Taking or Dam- or wa t e r pipe, proceedings for the condemna- aging Private . a j. / ± o Property. tion of such property shall be had in the cir- cuit court. Commissioners are appointed who shall assess the damages sustained by the own- ers of the property taken, and then assess against the city the amount of benefit to the general public, and the bal- ance against the owners of the property specially benefited, the commissioners determining what lots are benefited and the amount of the benefit of each. Where property is "damaged" for public use, by any public improvement, as in change of grade in a street, the general statute 8 makes provision for the same procedure in determining the "just compensation" required by the Con- stitution. After the adoption of the St. Louis charter, when a gen- eral repaving of the streets in the business section with gran- ite was ordered, resistance was made to the enforcement of the "frontal rule," but it proved unsuccessful. 9 The court in an exhaustive opinion reviewing the au- thorities, held that the provision was constitutional and that the words "taxation" and "taxes" in the Constitution of 1875 did not include special assessments and that there was no valid objection to the frontal rule in the case of the recon- 'Art. VI, Charter of St. Louis. "See. 6109-6114, R. S. 1899. "Farrar v. St. Louis, 80 Mo. 379. 196 MISSOURI TAXATION. struction of a street. Special tax bills issued for sewer con- struction have also been sustained. The general statutes of the State for the incorporation of cities of different classes, Chapter 91, make substantially the same provision for the construction of General statutes streets and sewers, applying respectively the for classified frontal and the area rule. But in cases of cities' under the first class, that is, under one hundred thousand inhabitants, provision is made for the payment of these special tax bills in five annual install- ments, and the city council is given discretionary powers in paying for the grading of the streets and. for improvement out of the general revenue, or by special taxation. Street, improvement and reconstruction in St. Louis under the city charter must be initiated by the Board of Public Improve- ments and if more than fifty per cent of the property owners upon the street at a public hearing protest, the ordinance calling for such improvement can be submitted to the mu- nicipal assembly only upon the unanimous vote of the Board of Public Improvements. There being no provision under the St. Louis charter for paying these special tax bills in install- ments, the burden of street improvements with the weight of general taxation is found very oppressive, especially, by the small property owners, and as a result, strong opposition has been developed to street improvements. In 1898 charter amendments were submitted by the municipal assembly to the voters of the city embodying rad- ical changes providing for the cost of public st Louis charter improvements. The limitation of twenty-five Amendments per cent was abolished and the system of pay- ing assessments in installments was provided. The entire cost of grading and cleaning the streets, which theretofore had been paid out of the general revenue, was taxed against the property owner. A more LOCAL ASSESSMENTS — PUBLIC IMPROVEMENTS. 197 equitable system was also incorporated for paying the cost of improving cross streets, which under the present system are taxed wholly against the owners of the corner lots for the full depth as a frontage. Notwithstanding the admittedly desirable features of some of these amendments, particularly the in- stallment plan for paying the assessments, the proposed in- crease of the special charge upon the taxpayers including grading and cleaning, theretofore paid out of the general revenues, proved very unpopular and the amendments were overwhelmingly defeated. The system of paying for local improvements, both by the frontal rule and the area rule, seemed clearly established in the State, when the whole legal controversy u.s. supreme was re °pened in 1899 by a decision of court in Nor- the United States circuit court in the western wood v. Baker. ,. . /.-««-. • 1 n -r- district of Missouri. 10 It was there held that the general statute authorizing the incorpora- tion of cities of the third class, whereunder Springfield was incorporated, apportioning the cost of repaving a street ac- cording to the frontal rule against the adjoining property, without affording the property-owner the opportunity to question the existence of benefit, was in violation of the Fourteenth amendment of the Federal Constitution, that "no State should deprive any person of life, liberty or property without due process of law." In other words, that the stat- ute was invalid, because it was based on the arbitrary as- sumption that the abutting property was benefited, without affording a hearing as to the question of fact whether or not the benefit was equal to the burden imposed. The court held that under the decisions of the Supreme Court of the State there was no opportunity for the property-owner to test this question of benefit, and therefore it enjoined the collec- 10 Pay v. City of Springfield, 94 Fed. Rep. 409. 198 MISSOURI TAXATION. tion of the tax. The importance of the principle involved in this decision will be realized when it is understood that the frontal rule, that is, that the property fronting on a street was benefited by an improvement of that street, was recog- nized in the St. Louis charter as well as in all the general municipal incorporation statutes of the State. If the prin- ciple was invalid in Springfield, it was invalid everywhere in the State. This decision was based upon a recent decision of the Supreme Court of the United States, 11 in a case from Ohio ; wherein it was held that "due process of law" un- der the Federal Constitution required compensation to be made to the owner of property taken for streets, and that the exaction from the owner of abutting property of the cost of a public improvement, in substantial excess of the special ben- fit received by him, is to the extent of such excess a taking of private property without compensation. In the case before the court the street had been opened through the land of an owner and the damages allowed her for the land taken were assessed against her alone, as benefits from the opening of the street through her property, and she was also taxed with the cost of the proceeding, this assessment being made by ordi- nance without any hearing on the question of benefits. The court held this to be a taking of private property for public use without compensation. The announcement of the decision in this Springfield case caused a serious interruption to public improvements in St. Louis and in other parts of the State, and AreaBuieSus- the payment of special tax bills, issued for tamed in su- district sewers assessed under the area rule, as preme Court of Missouri. well as those issued for street reconstruction under the frontage rule, were resisted. In a very recent case 12 the Supreme Court of Missouri has reas- "Norwood v. Baker, 172 U. S. 269. "Heman v. Allen, June 4, 1900, 57 S. W. Rep. 559. LOCAL ASSESSMENTS — PUBLIC IMPROVEMENTS. 199 serted the validity of the area rule in a district sewer case from St. Louis, holding that the case of Norwood v. Baker did not apply, and declined to follow the decision in the Springfield case. The subject was also considered by the court in the opinion handed down about the same time in a case from Kansas City, involving the assessment of benefits against territory established by ordinance as a park district. 13 The charter provided that the jury should ascertain the amount of benefit to the city at large, inclusive of any benefit to the property of the city, and then estimate the benefit to indi- viduals. The jury assessed the benefit to the city at one dol- lar and the balance against the property-owners in varying amounts. The procedure was sustained. The Norwood case was invoked, but the court held it to be inapplicable and that it was not necessary that substantial benefits should be taxed against the city, although the park was established presum- ably for the public benefit. In neither of these cases was the frontage rule directly involved. But it is involved in another case pending in the court, a street paving case, which has been submitted for de- cision. 14 It is obvious from the above statement of the case of Norwood v. Baker, that it involved two distinct governmental powers which are often associated, but which are clearly to be distinguished — the power of eminent domain: the taking of private property for public use; and the power of special taxation: that is, assessing upon the property benefited the cost of public improvements. The charter of St. Louis and "Kansas City v. Bacon, June 19, 1900, 57 S. W. Eep. 1045. "As to Taxing District, see Kansas City v. Morton, 117 Mo. 446 ; Kansas City Grading Co. v. Holden, 107 Mo. 305 ; Johnson v. Duer, 115 Mo. 366. 200 MISSODBI TAXATION. the statutes of Missouri clearly distinguish these govern- mental powers, and no man is taxed with benefits in the open- ing of streets, or whenever property is taken for public use, without a hearing on the question of his benefit. In other words, he has due process of law. In the case of the improve- ment of a street in front of his property, the charter and stat- utes proceed upon the assumption that he is equally benefited in proportion to his frontage with other abutting owners in having the street improved. So in the construction of a dis- trict sewer, each owner within the district drained by the sewer is conclusively presumed to be benefited in the propor- tion that the area of his property bears to the total area in the district. In other words, there is no occasion for a hearing on the question of benefit, because both the frontal rule and the area rule are based upon a conclusive assumption of ben- efit in accordance therewith, 15 The principle of eminent domain,, under the provision of the Constitution of 1875 that private property shall not be taken or damaged for public use without just compensation, is often applied with this princi- Emin.ent Domain, pie of special assessment on property benefited by public improvements, but it is based upon a distinct governmental power and is not prop- erly included in a discussion of the subject of taxation. "This distinction is clearly stated in a recent opinion by Judge H. D. Wood of the St. Louis Circuit Court in the case of Hayes v. St. Louis et al., April 2, 1900, analyzing the case of Norwood v. Baker. CHAPTEE X3.II. THE GENERAL ASSESSMENT AND COLLECTION OF THE GENERAL PEOPEETT TAX. The general property tax established in Missouri by the Constitution of 1865 is the basis of our taxing system. Our general revenue law begins with the following provision, which has been upon the statute books since 1872: Sec. 9118. For the support of the government of the State, the payment of the public deht and the advancement of the public interest, taxes shall be levied on all property, real and personal, except as stated in the next section. Then follow the statutory enumerations of exemptions from taxation. See supra, p. 88. All the property in the State, individual and corporate, is thus subjected to the general property tax, but all is not assessed through the general property assessment by the local assessors. The property of railroads (other than local real estate), street railroads, bridges and telegraph com- panies, is valued by the State Board, and these valuations are apportioned to the counties and cities for the levy of the general property tax, state and local. Banks, trust com- panies, and domestic insurance companies, are subjected to the same tax, through the assessment of their shares of stock, and the stock in trade of merchants, and the ma- chinery and plant of manufacturers is taxed at the same rate through the tax collected upon their respective licenses. Express companies and foreign insurance companies are not taxed upon property, but upon the earnings of their business in the State. 201 202 MISSOURI TAXATION. But excepting the property belonging to the classes above mentioned all the property in the State, real and per- sonal, whether individual or corporate, is valued and as- sessed for the general property tax, through the general assessment, made for State, and county taxes on the first day of June of each year, for the taxes of the succeeding year. 1 The State and county assessment is made by assessors who are elected for a term of four years, and in the counties this assessment is the basis of state, county Assessment in -, -, -, . . . T 1 . . counties. aiia - school taxation. In counties having town- ship organization, the township clerk is ex- oTganiTation. officio assessor, and the assessment made by him is the basis of all taxation. In the city of St. Louis the assessment, under the pro- visions of the city charter 2 is made by a board of assessors, consisting of a president of the board, elected Assessment in for a term of four years, with one deputy city of st. Loms. agsessor f or gggjj district, appointed by the mayor and confirmed by the city council, the city being divided by the municipal assembly into convenient assembly districts. This assessment is the basis of all taxa- tion in St. Louis, State, school and city. The Constitution provides (section 11, of Art. X) that the valuation of property for city, town and school pur- poses, shall not exceed the valuation of the state and city same property in such city or town for State Assessment. or couat y. p Ur p 0ses . This does not prevent a separate assessment for city purposes by a city assessor, provided it is not less than the assessment for State taxation. The general statutes for the organization of cities of 'Arts. I and II, chap. 149, E. S. 1899. 2 City Charter, Art. V, Sec. 15-34. THE GENERAL ASSESSMENT. 203 the different classes provide for the office of assessor for making the assessment for city taxation. The assessment for the State, county and school taxation is made by the county assessor. In the case of cities of the third and fourth classes, those under thirty thousand inhabitants (sec- tion 5811, Eevised Statutes of 1899) the assessment is made by the city assessor acting jointly with the county assessor, so that one assessment is provided for. Thus in St. Joseph, a city of the second class, an assess- ment is made by the county assessor in June of each year for State, county and school taxation, and one made by the city assessor in January of each year, for city taxation. The same system prevails in Kansas City. In a case from St. Joseph the Supreme Court* held that in view of the constitutional requirement that the local as- sessment should not be higher than the State assessment, the value of real estate could not be increased by the assess- ment of improvements erected after the State assessment and before the city assessment for the taxes of the same year. At this time the State assessment was made biennially, and the taxes for 1888 and 1889 were collected upon the assess- ment made June 1, 1887. The city assessment for 1889 was made January 1, 1889. The court said that the value of improvements made in the interim could not be added to the city assessment, as that would make the assessment for city taxes of 1889 higher than for the State. The court added that this constitutional restriction applies to the property of each individual owner and was intended for his protection. The Annual Listing. For several years Missouri has had an annual assess- ment of both real and personal property. Formerly real estate was assessed biennially. The assessment begins with the individual taxpayer rendering a list of property, both real and personal, specify- *Center Building Co. v. St. Joseph, 108 Mo. 304. 204 MISSOURI TAXATION. ing the different parcels of real estate with the value of each parcel; and also different classes of personalty, live stock, household furniture, jewelry and ornaments; money on hand and in bank, notes secured by deed of trust; bonds, whether State, county, town, city, township or incorporated or unincorporated companies; and all other property, ex- cept merchandise (taxes thereon being paid through mer- chants' licenses) "and every other species of property not exempt by law from taxation." Formerly the taxpayer was not required to return his real estate and its value, but only a list of his personal property. Now, as seen, he is required to return a list of the values of both. The oath required of the taxpayer set out in the statute is as follows: Taxpayers' Oath. I, , do solemnly swear, or affirm, that the foregoing list contains » true and correct statement of all the property made taxable by the laws of the State of Missouri, including therein the number of horses, number of neat cattle, number of sheep, number of hogs, num- ber of asses and jennets, number of mules, all other live stock, all farm machinery, and implements, household property, musical instruments, clocks, watches,, chains and appendages, sewing machines, gold and silver plate, jewelry, household and kitchen furniture, money on hand, money deposited, notes unsecured by mortgages or deeds of trust, notes secured by mortgages or deeds of trust, all bonds, whether State, county, city, town, township or of incorporated or unincorporated companies, and all other property, and its value, which I owned on the first day of June, 19 — , or wMoh I had under my charge or management, or any money or property due me on said day from solvent persons or compa- nies, on notes, accounts or otherwise, as fully and as specifically as I am required to make a return thereof under section 9144; and I do further •solemnly swear, or affirm, that I have not sent or taken, or caused, to be sent or taken, any property, money or bills, bonds or notes, or other securities or evidences of debt, out of this State to avoid taxation. So help me God. The assessor is required to make this assessment be- tween the first day of June and the first day of January of each year. It was held by the Supreme Court, that he had no power to administer the taxpayer's oath to his tax list THE GENERAL ASSESSMENT. 205 after that date, and that if the oath was administered after that date it did not, if false, constitute perjury; and that it made no difference that the assessor was authorized to finish his work after January 1, as the statute expressly provided that the assessment was not invali- indictment for dated by not being made and completed within sessment oath, the time required by law, but the statute did not give the assessor authority to admin- ister an oath after January l. 3 It is not necessary, how- ever, that the board of equalization must find a man guilty of false return, before an indictment will lie for perjury. The court held that there was no necessary connection be- tween the action and nonaction of the board of equaliza- tion, and the prosecution for perjury for making a false oath. The assessment proceedings begin with the assessor leaving a list in the form prescribed by the statute at the office or place of residence of each taxpayer. The statute provides that this list and oath shall be filed with the county clerk after the assessments are made up and shall be open to the inspection of the grand jury, but there is no direct statement as to the effect of these valuations of the taxpayer. The statute provides 4 that the assessor shall value and assess all the property on the assessor's books according to its "true value in money at the time of the assessment," and all other personal property shall, be valued at the Right of Assessor ,/ ■. n j? i i. j_ xl x" J to Assess as cash value of such property at the time and construed by place of listing the same for taxation." It Courts. r ° has been held, however, by the Supreme Court, and also by the court of appeals, 5 that the right of the "State v. Cannon, 79 Mo. 343. For indictment for false oath see State v. Foulks, 57 Mo. 461. 4 Sec. 9180, E. S. 1899. 'State ex rel. v. Spencer, 114 Mo. 574. 206 MISSOURI TAXATION. assessor to make an assessment is dependent upon the default of the taxpayer, and that the taxpayer is not in default if notice is not served. Practical Construction in St. Louis. The statute makes no distinction between real and per- sonal property as to the duty of the taxpayer to list and make valuations, nor was any distinction in terms made by the courts in cases referred to construing the statute, and limiting the right of the assessor to make assessments to the cases of the default of the taxpayer, although all the cases, it seems, were in regard to the assessment of personal prop- erty. But in practice a very great distinction is made be- tween the two classes of property. The assessors in St. Louis pay no attention to the tax- payer's valuation of his real estate, and the statute requiring such valuations from the taxpayer is practically a dead letter, many taxpayers failing to make any valuation at all, and apparently no attempt being made to enforce the require- ment. It would be impracticable to enforce any uniform sys- tem of valuation of real estate, if notice was served upon the individual taxpayer in case of any change in the valuation returned by him. As to personal property, the practice is to accept the taxpayer's listing and valuation, and for the obvious reason, that the assessor can in general know nothing about the mat- ter, except as disclosed by the taxpayer. If he has reason to believe that the assessment is erroneous or defective, the taxpayer is sent for, and given an opportunity to correct his return, and if he refuses to do so, the matter is referred by the assessor to the board of equalization. Assessments by the Assessor. The taxpayer having failed to avail himself of the opportunity to make 'his own valuation, the duty then de- THE GENERAL ASSESSMENT. 207 volves upon the assessor. Before the assessor can act, how- ever, he must give a notice to the person to render a state- ment, 6 the date of the notice and the name of the person being carefully noted by the assessor. On failure of the party to respond within the time fixed, not less than ten nor more than twenty days from the date of the notice, the assessor must then make out the assessment "on his own view and on the best information he can obtain, and for that purpose he shall have lawful right to enter into any lands and make any examination and search which may be necessary, and may examine any person upon oath touching the same." 7 The assessor is required in such cases to assess the property at double its value, but he may omit the penalty in cases where he is satisfied that the neglect was unavoidable and not willful. Where the assessor makes such an assessment "in the absence of the head of the family," a duplicate list must be left with some member of the family of not less than fifteen years of age, and a copy of the assessment must be delivered to the owner at the time of making the assess- ment if demanded by the owner. 8 It has been held by the Supreme Court that as the right and power of the assessor to make the assessment depends upon the due performance of his duties in re- service of Notice gard to notice, that the duplicate list and no- on Taxpayer. tations thereon which are retained in his office, and his subsequent assessment, are to be taken "in the absence of fraud or actual malfeasance," in a pro- ceeding to enforce the collection of the taxes, as at least prima facie evidence of the existence of the power of the 'Sec. 9145, R. S. 1899. 'Sec. 9148, R. S. 1899. "Sec. 9183, R. S. 1899. 208 MISSOURI TAXATION. assessor to make the assessment. 9 It has been held that it is immaterial whether the notices of the assessor are dated, as they run from the day after their delivery. The notice required to he left at the residence or place of business of an absent taxpayer informing such taxpayer that unless the statement of his property is re- turned to the assessor, the assessor will make the assessment has no application to the section which authorizes the as- sessor in the absence of sickness of the head of the family to make out a list of the property, and leave' a duplicate with some one of the family. In the former case no duplicate is required to be left. 10 The statute also makes it the duty of the judge of the probate court in each county to certify to the county assessor on the first Monday in June of each year, a probate court. written list of every administrator, executor and guardian, and every other person legally in charge or control of any estate in the probate court; and thereupon it is made the duty of the assessor to take from such officer a list of the personal estate and to assess the same according to law. 11 As will be hereafter seen, this forms a very important branch of the assessment of per- sonal property in the city of St. Louis. See infra, p. 266. County Board of Equalization. The statute provides that a copy of the assessor's book or books, verified by his affidavit, shall be returned to the county court on or before the twentieth day of January in each year, and that an abstract of such book or books shall be forwarded by the clerk to the State Board of Equaliza- tion. 12 •State ex rel. v. Hoyt, 123 Mo. 348. "State ex rel. v. Seahorn, 139 Mo. 582. "See. 9151, E. S. 1899. "Sec. 9188, R. S. 1899. THE GENERAL ASSESSMENT. 209 This verification by the assessor must be made during his term of office, as the assessor's book thus verified becomes the foundation record of all future proceedings for the equalization, levy and collection of taxes. 13 Having been corrected and equalized in the aggregate by the State Board of Equalization, 14 the assessments are then submitted to the local board of equalization for the hearing of individual appeals and the adjustment, as between individuals, of the valuation as equalized and assessed by the State Board. The local board in each county 15 consists of the county clerk, as secretary of the board without vote, the county surveyor, the judges of the county court and the county assessor; and in counties having township organization, the sheriff is also a member. In the city of St. Louis, the board, under the pro- visions of the city charter, consists of "four discreet and ex- perienced real estate owners of a prior resi- Board of Equal- dence in St. Louis of ten years," who are ap- izatioQ in City of st. Louis. pointed by the judges of the circuit court on the second Monday in March annually. The board in the counties meets on the first Monday of April of each year, and in the counties having a popula- tion of more than seventy thousand and less than one hun- dred thousand inhabitants, on the first Monday in March, and in the city of St. Louis, on the third Monday in March, their session in St. Louis being limited to four weeks. Jurisdiction of County Boards. The Board has power to hear complaints, that is, appeals by individuals who object to the valuations of their property, and they are also authorized to equalize the valuation of all taxable property in the city; however, the board can not re- state ex rel. v. Phillips, 102 Mo. 664. "See supra, p. 100. "Sees. 9130 to 9136, R. S. 1899. MO. TAX. — 14 210 MISSOUEI TAXATION. duce the aggregate valuation of any class of property below the valuation as fixed by the State Board of Equalization, such valuations of the state board certified to them. As the taxpayer has the right of appeal to this board from the valuations of the assessor, he is bound to do so, if he complains of any error of judgment or mere irregularity, and if the assessor had jurisdiction, this statutory remedy of appeal is the only remedy. Thus where the individual had the opportunity to value his property and after receiving requisite notice failed to do so, the assessor assessed the personal property at a "lump sum," and not in the separate classes directed by the statute, and it was held that the tax- payer having failed to appeal to the board of equalization for correction, was bound thereby and could make no defense to a suit on the tax bill. 16 The court in this case said the word "jurisdiction" was used for want of a more correct expression; "strictly speaking tax proceedings are only quasi- judicial, but, as they have the effect of judgments, the word 'jurisdiction' can readily be made applicable to them." The board is empowered to raise the values of land and personal property, which in their opinion have been returned below their "real value," but after the board has raised the value of real estate, it must give notice of the fact to the owner, by personal notice through the mail or by advertise- ment, that the board will meet on a day named in the notice later in the session, to hear reasons why the increase should not be made; and is also empowered to reduce the valua- ■ tion of any land or personal property, which in their opinion has been returned "above its true value compared with the average valuation of all the real estate and personal prop- erty of the county." 17 County boards of equalization can raise the assessed "State ex rel. v. Cummings, 151 Mo. 49. 17 Sec. 9132, E. S. 1899. THE GENERAL ASSESSMENT. 211 value of real estate in the townships by a single order on a per cent basis for each township, when in their judgment the assessed value was that per cent below the true value, and if the board makes a mistake in giving the notice required by- statute as to when it will meet to hear reasons why an in- crease should not be made, it may on discovering the mis- take adjourn a sufficient length of time to have a correct notice published. 18 While the powers thus vested in the assessor and the board of equalization in making and correcting assessments where jurisdiction has attached by serving notice, have been liberally construed as involving the exercise of quasi-judi- cial powers, their action being considered conclusive as to irregularities or errors in judgment, neverthe- Tax Bui Not l ess J ^ n severa l recent cases the assessor and conclusive. the board of equalization have been held strictly within the limits of their jurisdiction. Thus in a very recent case 19 it was held in a suit on a per- sonal tax bill, that the bill, while prima facie evidence, is not conclusive, and that the defendants can show that it was not based on a valid assessment. The board no Power to Add of equalization could revalue property, but it witho'ut Notice could not add an y new property to the list re- from Assessor, turned, except in the special case provided in the statute, on written notice from the assess- or. In this case the defendant attempted to show that the board had added to the list other property, and then con- cealed their real act, by making it appear that they revalued the property returned. The court held that he had the right to make this defense, saying: "Black v. McGonigle, 103 Mo. 192. "State ex rel. Morris v. Cunningham, 153 Mo. 642. Decided February 5, 1900. 212 MISSOURI TAXATION. The law first appeals to the conscience of the property-owner to furnish an honest list and valuation of his property, then it im- poses a severe penalty on him if he fails to do so, and No Power in authorizes and requires the assessor under a penalty, Board to Add ^ ma ije the assessment under the best information Kxcept on Notice ^ e can °^ & ^ Ji - If these provisions of the statute are from Assessor, not sufficient to accomplish their purposes, it is for the Legislature, and not for the courts to authorize some other method of obtaining a correct list of the taxable property in the county. The court said also that the ordinary duties of the board pertained only to equalizing the values of the prop- erty, thus bringing the different parts of the taxing district to the same relative standard. The board is also empowered to determine in a summary way, all appeals from the valuations of property made by the assessor, and has power to send for persons and papers and compel the attendance of witnesses. A majority constitutes a quorum, and a majority present determines all matters of appeal or revision. It will be observed that the statute in providing for in- creasing the valuations, provides for notice in the case of real estate, but not in the case of personal property. Under the St. Louis city charter notice is provided for and required in both cases. 20 It was held by the Supreme Court in 1891, 21 that notice was intended to be given in this section as to personal prop- erty as well as to real estate, and that what the . law would imply was as much the legislative Notice in Proceed- * J ° # ings of Board of enactment as though set forth therein, but Equaization. ^^ ^ e e immaterial whether property in one county quarn'ofTaxa-" was assesse( l on a higher bases for county tion. taxation than property in another county. But within the territory wherein the tax is levied, inequality of taxation results just as surely from inequality of assessment as from inequality in the tax rate. It is the failure to recognize this fundamental principle which oftentimes makes the illustration of the taxing rates of other communities misleading, as it is impossible to com- pare the burden of taxation in different communities, unless we know both factors of the problem — the rate of assess- ment and the rate of taxation. The root of the difficulty lies in this : the Constitution limits the rate of taxation in the counties, cities and school districts, and also provides that assessment for local taxation shall not exceed that for State Effect ofthe taxation. The cities which are required to Limitation of L the Tax Rate, have a large municipal income to meet press- ing municipal wants, being thus limited by the Constitution in the rate which they can levy (one cent on the dollar in St. Louis for municipal purposes), find their only recourse in making their assessments as high as the taxpayers will stand. Thus taxation is increased without an increase of the tax rate. In St. Louis the assessor says that he undertakes to make about seventy per cent of the full selling value the standard of assessment. In fact, as many taxpayers know, it very often exceeds that. In Kansas City, where there is a county tax in addition to the State tax, the urgency for a high assessment is not so great, and property is assessed, according to the city officials, at about forty per cent of its real value. In St. Joseph the standard is so represented to be about fifty per cent. In the counties the discrepancy is much greater. In GENERAL PROPERTY TAX. 247 some counties which are content with a small income, the rate of assessment is as low as thirty and even twenty per cent. There seems to be a consensus of opinion on the part of those most competent to judge, that the average assess- ment of farm lands in the State is not over one-third of the selling value. Some counties assess at so low a rate as to be unable to pay current expenses from current revenues, and assessors not infrequently run for office on promises to lower, or not to raise, assessments. The demoralizing effect upon county revenues has been considered in connection with county taxation. Governor Francis said in his message, on retiring from office in 1893, that the taxable property in Missouri was not assessed at over forty per cent of its true Estimate of value, and as this estimate included the high Governor ' ° Francis. assessments of St. Louis, the average assess- ments in the counties must have been very much below forty per cent. Governor Stephens in his message in 1897 vetoing the so-called Slate bill said that the farms of the State were assessed at about one-third of their value. Estimates of Gov. Governor Stone's estimate in the message Stephens' 1 G ° V already referred to concerning railroad valua- tions, was to the same effect. Report of Commissioner of Labor Statistics. A very thorough investigation of this subject of assess- ments was made by Mr. Lee Meriwether, Commissioner of the Bureau of Labor Statistics, and the results are set forth in his report of 1896. After review of the actual sales and assessments of each county, he finds, not only that the average assessments of farm lands in the State was not over thirty-five per cent of the selling value, but also that there 248 MISSOURI TAXATION. was a very wide range of difference as between the counties. He also reports over-assessments on the one hand and under-assessments on the other in the same counties and towns: "that one assessor would assess the property of one man as high as one hundred per cent of its value, while assessing his neighbor's property at only one-fifth of its value." This investigation, according to the report, con- sisted of examining the records of each county, and ascer- taining the purchase price paid in five thousand eight hun- dred and twelve real estate sales, in each case the assessed value of the property being compared with the selling price. In St. Louis, four hundred and ninety-two sales; in Kansas City, one hundred and thirteen, and in the State outside of these cities, five thousand two hundred and seven sales were so examined. The report says: Not only are the assessments unequal in different towns and be- tween counties, but in the same town and in the same county next door neighbors are often obliged to pay different amounts of taxes on property of exactly the same value. The average of these cases examined in St. Louis showed that the assessed value was 50.40 per cent of the selling value. But he found that if this average was confined to resi- dences, it would be much higher, the sales examined show- ing assessments at from sixty-six to eighty-eight per cent, while in business property it was much lower, showing it was from twenty-four to forty-two per cent. In Kansas City the average of all property examined was 92.63 per cent, and in St. Joseph the average was 43.39 per cent. As between the different counties of the State, the variations were from twenty to eighty per cent. The report contains the tabular statement of the results of this comparison of sales and assessments of each county, giving the average for each county of both farm lands and GENERAL PROPERTY TAX. 249 town lots (except in a few cases where the average of town lots was not returned), which is here inserted: Adair 31.85 Andrew 31.66 Atchison 36.70 Audrain 32.54 Barry 30.46 Barton 34.38 Bates 34.60 Benton 38.20 Bollinger 64.33 Boone 46.22 Buchanan 41.37 Butler 39.46 Caldwell 31.02 Callaway 37.18 Camden 30.48 Cape Girardeau 33.74 Carroll 31.34 Carter 67.44 Cass 33.46 Cedar 52.55 Chariton 21.85 Christian 33.80 Clark 26.92 Clay 31.02 Clinton 38.95 Cole 48.03 Cooper 28.41 Crawford 38.50 Dade 35.40 Dallas 43.70 Daviess 29.15 De Kalb 36.27 Dent 66.80 Douglas 44.48 Dunklin 54.46 Franklin 39.17 Gasconade 40.39 Gentry 33.68 Greene 39.19 Grundy 41.70 Harrison .39.48 Henry 27.10 Hickory 49.90 Holt 36.77 Howard 36.72 Howell 29.82 Iron 34.05 Jackson 30.12 Jasper 32.99 Jefferson 35.51 Johnson 38.27 Knox 28.96 Laclede 35.06 Lafayette 32.04 Lawrence 24.34 Lewis 29.17 Lincoln 38.52 Linn 35.29 Livingston 37.15 McDonald 36.69 Macon 35.31 Madison 38.77 Maries 38.65 Marion 40.73 Mercer 43.47 Miller 43.60 Mississippi 44.51 Moniteau 24.80 Monroe 35.53 Montgomery 28.72 Morgan 33.40 New Madrid 40.37 Newton 35.5D Nodaway , 32.84 Oregon 44.73 Osage 36.02 Ozark 50.84 Pemiscot 72.60 Perry 36.44 Pettis 38.75 Phelps 24.80 Pike 37.21 250 MISSOURI TAXATION. Matte 38.15 Scotland 29.28 Polk 33.10 Scott 43.18 Pulaski 35.50 Shannon 60.60 Putnam 37.05 Shelby 34.38 Ralls 32.75 Stoddard 57.79 Randolph 25.19 Stone 43.19 Ray 41.85 Sullivan 38.01 Reynolds 80.86 Taney 51.60 Ripley 73.69 Texas 37.78 St. Charles 35.71 Vernon 36.15 St. Clair 35.58 Warren 31.21 St. Francois 34.49 Washington 43.36 Ste. Genevieve 47.55 Wayne 72.38 St. Louis (city) 48.35 Webster 43.90 St. Louis (county) 34.51 Worth 39.78 Saline 35.30 Wright 47.47 Schuyler 30.57 He reported further, page 125, that an examination of the records showed that town lots were assessed higher than farms; that "on every one hundred dollars , . worth of real estate in towns, the assessors' Town Lots and J Farm Lands valuation was $46.47, while on every one hundred dollars worth of farms, the assessors' valuation was only $35.01." Thus in Greene county, wherein is the city of Springfield, farm lands are assessed at about thirty-one per cent of the full value, and town lots at about fifty-eight per cent. In Buchanan county, wherein is the city of St. Joseph, farm lands are assessed at about thirty-five per cent, and town lots at forty-four per cent, while Jackson county, wherein is Kansas City, seems to be an exception to the rule, farm lands being assessed at thirty-seven per cent, while town lots are assessed at less than thirty per cent. 2 2 These figures correspond closely with the results of an investiga- tion made aJbout the same time by Col. Wells H. Blodgett, the General solicitor of the Wabash Railway Company, from an examination of the actual sales of farm lands, on the line of that road as compared with the assessed values of the same property and submitted to the State Board of Equalization. This investigation made the average rate of assessed value to selling value about thirty-two per cent. GENERAL PROPERTY TAX. 251 This demonstration by comparison of assessments with the actual sales of the same property substantially coincides with the estimates of the officials above referred to. As the general State tax is levied upon these unequal assessments, it follows that the citizens of the State are unequally taxed. Thus the taxpayer of a city or county, who is assessed at the rate of seventy per cent, is taxed at twice the rate which is paid by a citizen, who is only assessed at the rate of thirty- five per cent of the actual value. The effect is precisely the same as if the tax rate was doubled. The law has attempted to provide a remedy for this want of uniformity between the different counties in the powers vested in the State Board of Equaliza- state Board of ti° n *° equalize the assessments of the counties unable t ti0D ^ the classes of property throughout the Remedy. State. The Board has exercised this power during the last few years in fixing the uniform rate of assessing bank stock at sixty-three per cent. 3 But the Board has found itself powerless to remedy this general want of uniformity growing out of the controll- ing fact that some counties and cities assess at a high rate because they need the revenue for local purposes, and others assess at a low rate because they do not need it. State Conference of Assessors. During Governor Stone's administration a circular letter was issued calling a convention of assessors at Jefferson City to consider this very subject. The result of the con- ference thus held is thus reported by the State Auditor: 4 Some sixty or seventy officers were in attendance at the meeting. The purpose was to discuss the conditions existing and the assessment of s See supra, p. 121. 'Letter to Richmond Conservator, Feb. 3, t898, published in pamphlet form. 252 MISSOURI TAXATION. the different kinds of property throughout the State _ , xnd arrive at some intelligent understanding and agree- Assessors. ment whereby there would be uniformity in valua- tions. The result was a complete failure, and it is useless to discuss the reasons. A few, not more than sixteen of the assessors present at the meet- ing, had assessed the property of their counties for that year at some- thing like its true value in money, thus placing all classes of the taxpay- ers in their counties practically on an even footing. When these re- turns were certified and laid before the State Board, a condition con- fronted it which forced it to reduce the assessment made in these sixteen counties, rather than increase that made in the ninety-eight counties, for the reason that if the State Board had applied such per cent to the ninety-eight counties, as would have been necessary to bring them up to a uniformity with the sixteen counties at the present levy, it would have been excessive and burdensome taxation. The people could not have paid the taxes without serious embarrassment. The proposition of the State Board at the Assessors' Convention was that this should be done, but with the understanding that a recommendation would be made to the following General Assembly to pass a law reducing the rate of taxation in proportion to the increase of valuation, thus protecting the taxpayers against excessive taxation. But the Legislature failed to pass such a law." It is thus admitted that the State Board is powerless to enforce eqxial taxation on the basis of the "true value" of property, and that it was compelled to reduce assessments in those counties, which had so assessed at "something like the full value." It is clear, therefore, that as long as this state of things continues, the requirement of the Constitution is violated, as inequality in assessments as certainly produces in- equality of taxation as inequality in the tax rate. The State Auditor, who had been unceasing in his efforts to solve this perplexing problem, apparently despairing of any other solution, recommended to the last General Assembly that "This proposed legislative limitation of the county tax rate would have been subject to legislative control and limited by the constitutional rate. Prior to the Constitution of 1875 the only limit of county and other local taxation was by legislative act. GENERAL PROPERTY TAX. 253 the State should authorize a rate of valuation of fifty per cent upon all property all over the State; in other words, making that the statutory basis of "actual cash value." 6 No attention, however, was paid by the General Assembly to this recommendation. Inequality of Assessments of Different Classes of Property. The want of uniformity resulting in unequal taxation not alone exists between different counties, but between different classes of property in the same counties. Thus the State Auditor says in the letter already referred to: It is in evidence before the State Board of Equalization, that the custom in Missouri is to assess real estate and personal property at any- where from thirty to forty per cent of its true value in money, and that money, notes and bonds and bank stocks are assessed at from forty to one hundred cents on the dollar. We maintain that this is a great injustice. There is no reason known to us why any distinction or discrimination should be made in the valuation and assessment of the different classes of property for taxation. 7 From data furnished by the official and quasi-official publications referred to, we may summarize the rate of valuation wherein different classes of property are taxed: Farm lands, average in the State 35 per cent Town and city lots 46 per cent. Bank and trust company stock, as equalized by the State Board 8 63 per cent. Business real estate in St. Louis 24 to 42 per cent. Residence real estate in St. Louis" 66 to 88 per cent. Average St. Louis assessment, according to assessor's estimate 70 per cent. "See infra, p. 280. 'As to the assessment of different classes of property in St. Louis, see infra, p. 269. Tor county valuations, bank stocks, etc., see supra, p. 122. "Report of Labor Statistics, 1896, p. 188. 254 MISSOUKI TAXATION. Railroads on mileage basis of reported market value of securities in '1898 10 37 per cent. Street railroads of St. Louis in April, 1899, according to report of Senate Investigating Committee 11 38% per cent. Money and securities in St. Louia 100 per cent. Money and securities in the counties 40 to 100 per cent. Thus the heaviest taxation in the State falls upon the unfortunate holders of money and cash securities in the city of St. Louis, and some of the counties, and they pay from two to three times as much as railroads, street railroads and farms. The holder of real estate in St. Louis, if assessed according to the assessors' estimate, is taxed at double the rate of the average farmer, railroads and street railroads. This inequality in taxation resulting from unequal assessments in several cases in other States and in the Federal Courts has been invoked as a ground ... r for judicial interference. In Missouri, as has Inequality of . J 7 Assessments been shown, there seems to be no judicial in the Courts. j j. ,i . » j. , . -, remedy for this form o± tax oppression, the judgment of the assessing board being final as to the "true value" for taxation. An illustrative case was recently decided in Tennessee by the United States Circuit Court of Appeals. It was held that where the uniform practice in the various counties of the State was to assess property at not exceeding seventy-five per cent of its true value, an assessment upon railroad property at its "full value" violated the uniformity of taxation required by the Constitution, and that this inequality justified equitable re- lief, although the State statute required all property to be as- sessed at its "full value." It seems that in Tennessee the same "See supra, p. 108. "See supra, p. 114. GENERAL PEOPEBTY TAX. 255 rule as to certiorari prevails, as in this State, and the court held that certiorari was not an adequate remedy, where the facts upon which the claim was hased could only he made to appear dehors the record. The court said : An intentional undervaluation of a large class of property when the law enjoins assessment at true value, is necessarily designed to operate unequally upon other classes of property to be assessed by other taxing tribunals who, it may be presumed, will conform to the law." The court following the Supreme Court of Connecticut lays down the rule that the "i idl value" required by a statute is the means of securing the equality and uniformity of taxation, of the Constitution, and that where either the "uniformity required by law or the prescribed means of attaining it must be departed from, the court will choose the "lesser evil." The want of uniformity, however, it was said, must not be sporadic or occasional, but intentional and habitual, though it need not appear that the discrimina- tion was made with intent to injure the complaining party. Assessments in St. Louis. The difficulty of assessing real estate is obviously greater in a large city than in rural communities, and especially is this the case in a city like St. Louis, where the shifting of business or the caprice of fashion has radically changed the character of localities, and large amounts of property have a speculative value, which is really based upon the discounting of the probabilities of the future. This may account in a measure for the discrepancy noticed by the Commissioner of Labor Statistics in comparing the assessment of business and residence property, the former being assessed below the 13 Taylor v. L. & N. R. Co., 31 C. C. A. 537, citing Cummings v. Bank, 101 U. S. 153. A number of cases, illustrating the difficulty the courts have had with the recognized practice of assessing property at less than its value, are cited by Judge Taft in his able opinion in this case. 256 MISSOURI TAXATION. selling value, and the latter in many cases above it. It is well known that the expansion of the urban territory in St. Louis, and the opening up of new residence districts, have caused a very material decline of salable values in the older residence sections, which the assessors are sometimes slow to discover. The report of the Investigating Committee of the last General Assembly says that the valuable holdings in the business district are assessed too low, but that the "ordinary real estate" in St. Louis is prop- committee 8 er ty assessed, the report saying that "the Report, 1899. moderate homes and holdings of real estate in St. Louis are assessed as high as they are in the State at large." It would be more accurate to say that they are assessed from one to three times higher than the average in the State. There is another difficulty in the way of assessing real estate which really grows out of the requirement of the statute that it is the salable value which is- taken as the standard. It would be thought Value for Sale .... . and value for that this is the only practical standard, but there is an obvious distinction between the valvtA for use, and the value for sale, which necessarily discriminates against the more expensive and in favor of the less expensive properties, particularly in the case of residences. Thus a house costing five thousand dol- lars as a rule will much more readily sell for its cost than a house costing two hundred thousand dollars, because there is a much larger number of possible purchasers. The declared rate of assessment in St. Louis is from sixty-six and two-thirds to seventy per cent; that is, this is the rate which the assessor admitted to the investigating com- mittee was the standard adopted by the office. Whether this average is too high or not, there can be no doubt that real GENERAL PROPERTY TAX. 257 estate in St. Louis is assessed higher than it is in any other part of the State, in fact nearly twice as high as the average farm lands. There certainly can be no complaint on the part of the State against the city of St. Louis on this ground, and the recommendations of the committee that the State should name a part of the district assessors of St. Louis "who shall be real estate experts and required to assess the property in the business districts," was, under these circum- stances, unwarranted. "Why should the State appoint asses- sors in St. Louis and not in the rural districts ? The only effective remedy for this want of uniformity between different cities and counties of the State is in the separation entirely of the sources of State and municipal revenues, so that the city or county separation of content with a low rate of assessment will not state and Muni- thereby cause inequality of taxation with the cipal Revenues. , . . , - other sections in the payment of a common State tax. It is believed that this reform will also, in great measure, remedy the deplorable lack of uniformity in the assessment of different classes of property. For further discussion of this subject, see infra, p. 311. To a certain extent such inequalities are incident to the administration of any system of assessment. In some States, assessors are appointed, and in others the assessments are made for a term of years, and "Between'nai- no * annually as in Missouri. But no reform viduais. j n taxation legislation can wholly remedy the differences caused by the incompetence or dis- honesty in office. The remedy for that must be found in good government and in a public opinion strong enough to secure it. The people must see that the assessors are com- petent and honest men, and the taxpayer has his opportunity of complaint as to his assessment before the board of equali- MO. TAX. — 17 '258 MISSOURI TAXATION. zation, and to compare his own assessment with that of other property of the city or county. But as will be hereafter shown, there is a defect in our procedure which should be remedied by giving a judicial remedy for inequality in taxa- tion. See infra, p. 310. CHAPTER XVII. FAILURE OF THE GENERAL PEOPEETT TAX IN THE TAXATION OF PEESONAL PEOPEETT. The general property tax, as administered in this State, thus fails in the first requisite of an equal and just system of taxation, the taxation of all property upon the same basis of valuation. This applies to real and personal property alike. But real estate can not be concealed, and the assessor is not dependent upon the owners' listing and valuation, as in the case of personal property. In attempting to reach personal property, intangible as well as tangible, the law is a confessed failure, not only in Missouri, but wherever the system is in force. The theory of the general property tax in Missouri has been already explained. All kinds of personal property, tangible and intangible (excepting renewed Theory of the stock in domestic corporations otherwise Law - taxed), including money, notes, whether se- cured by mortgage or not, bonds, whether is- sued in the State or elsewhere, the public securities of the State, as well as of other States, the bonds of the counties and cities, are all alike required to be listed for taxation. The State taxes not only all property in the State, but all notes and bonds, whether secured by property in the State, or located in the State or not due to parties in the State. The law imposes double taxation, that is, undertakes to tax values that do not exist. Thus A. holding real estate worth twenty thousand dollars borrows ten thousand dollars of B. secured by mortgage on that property, and spends the money or invests it in other 259 260 MISSOURI TAXATION. taxable property. Clearly he has only ten thousand dollars in the property left; that is to say, he has ten thousand dol- lars of value, and B. has ten thousand dollars of value in the same property. But the law taxes A. on his original twenty thousand dollars, and also taxes B. on his ten thousand dol- lars loaned on that property, being an aggregate of thirty thousand dollars, or ten thousand dollars more than the actual value. The system is a failure, because in the very nature of things it must be a failure. As to real estate and certain kinds of tangible property, the system measureably succeeds because the assessor can see and value that which can not be concealed. In a primitive state of society, such as existed under Territorial government in Missouri, when property largely consisted of real estate and visible chattels, taxation is comparatively an easy matter. Men can not avoid taxa- tion when the tax gatherer can see their possessions. Blackstone says that the personal estates of our ances- tors were so trivial, that they entertained a very low opinion of them, and that ancient law books did not even deign to recognize that species of prop- personai property ertv. But under modern conditions the value in Ancient and ...-., Modern Times. o± personal property m a civilized community exceeds that of real estate. It does not in- clude mere movable possessions or chattels, but includes money, public and private obligations and a vast amount of intangible property represented by securities of corporations of which only small portions represent real es- tate. It includes the entire annual products of agricultural, mining and manufacturing industries and the infinite forms of modern wealth. Beal estate and personal property alike may be represented by paper evidences of title, which pass from hand to hand, and from State to State, so that the mo- FAILUKE OF PERSONAL PBOPEETY TAX. 261 bility of property, which is the essential feature of our mod- ern industrial civilization, complicated with our dual sover- eignty and our interstate relations, effectually paralyzes the efforts of the tax gatherer. As to Tangible Personal Property. Even as to tangible personal property a system which is fairly adequate in the rural districts, where every one knows about every one else, necessarily fails in the crowded confines of our cities. Thus it is easy enough for the assessor to assess the value of farm chattels, the plows, the sheep and oxen of a farm. These the farmer can not conceal, and their average value can be determined as readily as real estate. But who can assess the contents of a richly furnished city house, with its costly furniture, bric-a-brac and works of art? An expert k would be required to make an intelligent estimate. The difficulty lies not merely in the facility of concealment, as in the case of jewelry and articles of personal adornment, but in the practical impossibility of re-valuing in the assessor's office the personal property returned by the taxpayer, assum- ing that he makes a full return. This difficulty necessarily increases with the increase of population and wealth. This unavoidable discrimination in the nature of things against the rural districts in the assessment of chattels is forcibly il- lustrated by Mr. Shearman. 1 He says: Farmers have a certain average quality of furniture; the value of which can be ascertained far more nearly than that of well-to-do city residents. In proportion to the wealth of the taxpayer Mr Shearman on would ^ * ne failure of the most honest assessor to es- Discrimination timate the true value of his property. Anybody can Against estimate the value of a two dollar chair, but few indeed Farmers. can ^jj ^ e a ;g €rence between a chair costing fifty dol- lars and a chair costing one hundred and fifty dollars. 'Natural Taxation, p. 64. 262 MISSOURI TAXATION. To many assessors there would be no apparent difference in the value. To none would this difference seem to be more than twenty dollars, or thereabouts. In many household articles, such as bedding, for example a difference of two hundred per cent of cost is attended with no outside indications. Many honest assessors would reckon the value of a fifteen thousand dollar set of furniture, as no greater than that of a set cost- ing less than half the price. This discrimination against the rural districts is also il- lustrated in the assessment returns, as shown in the report of the State Auditor for 1897 and 1898. Thus the total valuation in St. Louis for general urban and Rural property taxes is about thirty-six per cent of Assessments in 1 Missouri. the entire State, while its valuation of per- sonal property of all kinds is only about twenty-four per cent of that of the State. The cities of St. Louis, Kansas City and St. Joseph, with St. Louis county, Jackson county and Buchanan county, contain the greater part of the urban and suburban population of the State. These cities and counties pay just about one-half of the total tax of the State, while they pay only about one- third of the total tax on personal property. In the city of St. Louis, the aggregate assessment upon personal property is about one-seventh of the total assessment. In Jackson county, including Kansas City, it is less than one-sixth, and in the State outside of St. Louis and Kansas City, the ratio is nearly one-fourth. The State outside of St. Louis pays upon real estate about fifty per cent more than St. Louis, but on personal property it pays over three hundred per cent more than St. Louis. This disproportion is not peculiar to St. Louis and Kan- sas City. We find it wherever we turn from an urban or suburban to a rural population. "The more personal prop- erty increases, the less it pays." The difficulty inheres in the very nature of things. Live stock and the visible chat- tels of a rural population can not be concealed, and as they FAILURE OF PERSONAL PROPERTY TAX. 263 are of a uniform average valuation, they can be seen and val- ued. The innumerable forms in which personal property exists in our cities can easily be concealed, and even if they are seen, can not be valued, so that when taxed at all, they are taxed at the owner's valuation. That such a system in- evitably discriminates against the rural population seems too plain for argument. Intangible Personalty. In respect to intangible personal property, money, bonds, notes secured by mortgages or otherwise, stock in non- resident companies, which are required to be listed by the taxpayer for taxation as other personal property, the experi- ence of Missouri is in line with other States. The tax is a confessed failure, admitted to be so by all. In fact, the fail- ure is so complete that it may be said the tax is practically repudiated by the community. It is not that the assessor has any difficulty in valuing this class of property. On the contrary, in St. Louis if the securities have a market value of par, they are promptly assessed at one hundred per cent. Thus if the city of St. Louis' three and one-half per cent bonds are discovered by the assessor through inventories of an estate, filed by an administrator in the probate court, they are assessed at their par value ,thus subjecting them to a tax of more than one-half the income. The tax is a failure be- cause such property is not returned for taxation and the as- sessor has no means of discovering it, outside of the probate court. The last twenty-five years have witnessed a tremendous increase in wealth in the State. But there is no sign of this in the assessment returns of this class of prop- st Louis Per- er ty- This is clearly illustrated in the expe- sonai property rience of St. Louis. The new charter which 1877 and 1897' extended the city limits was adopted in 1877. compared. Tne real estate assessments of the city then aggregated $148,012,750, while the personal 264: MISSOURI TAXATION. property assessment was $33,232,810. In 1897, the real es- tate assessment aggregated $283,978,320, an increase of nearly one hundred per cent, while the personalty assessment aggregated $45,110,465, an apparent increase of only about forty-five per cent. Deducting the assessments of personal property, bonds, street car companies, and insurance compa- nies, we find in the assessments for "other personal prop- erty," that is, individual and corporate other than the cor- porations named (some $23,600,000 in 1877 as against $17,600,000 in 1897), a decrease in twenty years of $4,000,000. To appreciate the significance of this comparison it must be remembered that the twenty years between 1877 and 1897 witnessed a greater growth in population and wealth than any period in the history of the city. Bank deposits in- creased from twenty-seven millions to eighty millions', and the number of individual taxpayers from forty thousand to eighty thousand. Allowance should doubtless be made for the fact, that during this period a vast amount of wealth had been invested in the stocks of corporations, which were not required to be returned by the individual shareholders, as in the case of manufacturing and mercantile companies and street railroad companies, as well as banks and insurance companies. Probably at no period in our history has so much individual wealth been transferred into corporate forms. But at the same time there has been a vast increase in the wealth, invested in securities, which are declared taxable by our law — as in mortgages whether upon property in the city or elsewhere, bonds of domestic companies, and both stock and bonds of foreign companies, and the State and mu- nicipal bonds of this and other States. The last three years have been of exceptional prosper- ity. The pressure for revenue to meet the expenses of the city government, has compelled the assessor to use every pos- sible effort to increase the valuation; and to reach personal FAILURE OF PERSONAL PROPERTY TAX. 265 property, which has hitherto escaped taxation, but without effect. It seems that the amount of assessment of individuals does not materially vary from year to year, but the aggregate fluctuates according to the wealth of the estates which go into the probate court. This assessment of personal property for 1900 is divided as follows: Banks, insurance and trust companies $19,964,290 Other corporations 2,542,550 Individuals, through voluntary returns or assessments by assessor $11,792,490 Assessments of estates in probate 9,066,780 Total individual assessments 20,859,270 $43,366,110 It seems that less than fifty per cent of our taxpayers in St. Louis make any return of personal property, and the greater part of it is collected from living tax- "Doomage." P aYers > through what in the Eastern States is called the power of "doomage" exercised by the assessor. That is, the power of assessing property "on his own view or on the best information he can obtain." The law gives the assessor the lawful right to enter into any lands, and make any examination and search which may be necessary, and he may examine any person upon oath touch- ing the same. It does not appear, however, that the assessor has ever attempted to make domiciliary visits or searches under this authority, so that the extent of the authority con- ferred by the statute has never been judicially considered. The practice seems to be this: The deputy in charge of the district, when no return is made by the taxpayer, esti- mates as best he can upon such information Practice in as ^ e can obtain* now much personal property st. Louis. the citizen has. The assessor doubles this es- timate and makes the assessment accordingly. 26& MISSOURI TAXATION. In some cases, the assessor has taken this as a basis of doubling the next year, finally forcing the taxpayer by this process to make a return. It has been his practice in 1 such cases', nOt to itemize the statement of the different clafeses of • property prescribed by the statute, but to make a "lump ag- gregation" of personal property. The right of the assessor to do this in such cases was recently sustained by the Su- preme Court, 3 which held that the omission of the items was only an irregularity, that the taxpayer was estopped from, contesting it if he had not availed himself of his opportunity to appeal to the local board of equalization. Assessment of Estate in Probate. But the most remarkable feature of the present system is disclosed in the percentage of the assessment of individual personal property made from the probate court. It seems that forty-five per cent of the amount assessed for personal property against the estates of individuals is made up from the assets of the estates in probate, which can not escape. So important is this department of the assessor's office that a special deputy is in charge at the probate court. How- ever successfully the citizen may evade taxation during his life, unless he succeeds in distributing his estate by an ante mortem disposition, sooner or later the estate passes through the machinery of the probate court. There the deputy tax assessor is in waiting, and promptly assesses the estate at the full value of the assets disclosed by the inventory. The amount of the assessment thus realized was about $7,500,000 in 1897, and was increased to $9,066,780 in the assessment for 1900, the increase being due to the fact that the estates of some wealthy men had gone into the probate court during the year. Thus while there is no succession tax on our statute "State ex rel. v. Cummingg, 151 Mo. 49. FAILURE OP PERSONAL PROPERTY TAX. 267 books, other than the collateral inheritance tax for the bene- fit of the State University (now in litigation), there is prac- tically a succession tax in the administration of our probate system. It is true that this system results in forcing the pay- ment of taxes by wealthy estates, which were successfully evaded during life. But on the other hand, the result is to force many estates of widows and orphans to pay a tax, which the wealth and intelligence of the community suc- ceeds, for the most part, in escaping. The hardships of the present system fall with peculiar force upon trust estates, and thus upon the most helpless classes in the Discrimination community. It would be hard to devise a weak. worse system of taxation than one which dis- criminates in the very nature of things in favor of the unscrupulous, and against the scrupulous, in favor of the strong and against the weak. "We are thus realizing in the practical working of our taxing system, what Adam Smith says was characteristic of Feudalism, that only those are taxed, who are too weak to resist. A Confiscating Income Tax. The difficulty inherent in enforcing a tax, based upon individual disclosure of invisible property, is increased by the decline in the rate of interest on investment securities. The holder of real estate expects his rentals to be sufficient to earn a normal return after deducting taxes. In the case of income from other securities, where five per cent is now diffi- cult to obtain, this is impossible. To pay a tax of two per cent would take two-fifths of the entire income, while in the case of a three per cent bond, two-thirds of the income would be required for the taxes. In other words, that is equivalent to an income tax of from forty to sixty-five per cent of the income ! It is safe to say that no government could ever en- 268 MISSOUEI TAXATION. force such tax. The worst taxation of the most oppressive despotisms of history have never equaled it. It is true that the failure to reach personal property and the absence of any substitute for the tax, which has thus proven to be unenforcible, necessarily throws a heavy burden upon real estate, and in cities comparison with like St. Louis, where municipal wants require Taxation 3 ' heavy expenditures, the limitation of the tax rate forces a high rate of assessments upon real estate, as compared with that of other parts of the State, and taxes amount to from twelve to twenty or even twenty-five per cent of the rentals. But the holder of real estate expects to receive a normal income, say five per cent, net on his property after paying taxes; but the unfortunate holder of personal securities, who is caught by the assessor in the probate court or elsewhere, is compelled to pay his taxes out of his four or five per cent of income; that is, as above shown, an income tax of from forty to sixty- five per cent. 3 * The report that taxation to the extent of forty per cent of the income was levied in Cuba under the Spanish rule aroused the just indignation of the American Spanish income people, yet a tax equal to if not exceeding that Tax m Cuba. ^ co ii ec t e d under our present system from the helpless estates in the probate court. It was s *This may be illustrated by a St. Louis instance. A boy was made a helpless cripple by having both his legs cut off in a railway accident, and being without means, he was compelled to employ a lawyer on a con- tingent fee to recover damages, and from $7,500 recovered he received $5,000. This was placed in the hands of an exceptionally efficient trus- tee and was loaned at six per cent, yielding an income of three hundred dollars. The vigilance of the assessor discovered the cripple's fund and it is now paying a tax of two per cent on the full amount or one hun- dred dollars, thus making an income tax of thirty-three and one-third per cent. But the six per cent interest was exceptional and can only be continued at the risk of hazarding the principal. When it is reduced to five per cent, the taxes will be forty per cent of the income, and when reduced to four per cent, it will be fifty per cent. FAILURE OF PERSONAL PROPERTY TAX. 269 said that such a tax in Cuba justified revolution, yet that tax was levied upon all, at least it did not select the helpless classes of the community. Our confiscating income tax with a refinement of cruelty, is collected from trustees and wid- ows and orphans and the helpless estates in the probate court, and apparently from very few others. Valuation of Securities by St. Louis Assessor. But it is asked, does the assessor assess such property at one hundred per cent, when it is well known that real ^estate in St. Louis is only assessed at from st. Louis Rule sixty-six and two-thirds to seventy per cent of " "" " J its value, while in the counties it varies from twenty per cent to forty per cent? The law requires the assessor to assess all property at what he believes is its actual cash value. There is doubtless a wide margin for individual opinion as to the actual cash value of real estate or personal chattels, which have no cash market, that is to say, as to what they will sell for at forced sale, for the reason that there is no cash market. A purchaser must be found for real estate. But there is an obvious difficulty in recognizing such a margin in the case of securities for which there is a cash market. Therefore the assessor in St. Louis takes the position, and it has been sustained by the successive local boards of equalization, that he is not justified in extend- ing this principle to securities which have a cash market value, and certainly not to the case of money returned as on hand or on deposit. Therefore the assessor in St. Louis, whatever may be the practice in other parts of the State, as- sesses money and securities, which are valued at par, at one hundred cents, and all such securities which are listed or found and assessed in St. Louis must pay two per cent on the 270 MISSOURI, TAXATION. face value, that is, the aggregate for city, State and school taxation. It can not be denied that there is plausible ground for this distinction made by the assessor and the St. Louis board. But the basis of taxation is uniformity of valuation, and the statute contemplates that all property real and what is "Fun personal shall be assessed on the same, basis of '""'" VaIuc ' value, and it is for the purpose of securing this uniformity, that the State Board is vested with its comprehensive powers. As declared by Judge G-antt, in refusing the mandamus against the State Board (see supra, p. 101), that is the. "full cash value," which the State board determines is such, there being no power to re- view their decisions, and the board has reduced valuations made at the "full value" in order to secure this uniformity, see supra, p. 252. It is declared by the State Auditor (see supra, p. 253), that in the opinion of the board there is no basis for a distinction between the valuation Equality of of money and securities and other property, valuation. rj^g p rac ^ ce f assessing property at a per- centage of its value was recognized by the Auditor as so clearly established in the State, that he recom- mended to the General Assembly to establish a uniform rate of fifty per cent on the assessment of all property, real and personal. A conclusive recognition of the judgment of the General Assembly in this matter is the pending constitutional amendment for the taxation of mortgages, which will be hereafter considered. This directs that the equity of the mortgage, and the interests of the mortgagee shall be taxed "on the same basis," although one is real estate and the other is in law personalty, that is, the debt secured by a lien on the property. It would follow, therefore, that the position of the as- sessor and board of equalization of St. Louis in distinguishing FAILURE OF PERSONAL PROPERTY TAX. 271 between different classes of property in the rate of assessment is directly violative of the prin- St. Louis Rule . . J r in conflict with ciple of uniformity, and of the construction Bo'ard"**" § iven the law b 7 the Supreme Court, through- out, in assessments by the State Board of Equalization. Investigating Committee of 1899. The committee of investigation appointed by the State Senate in 1899 to investigate the State and city departments of the city of St. Louis, referred in their report to what they termed the proportion of the personal property which was escaping taxation, and concluded that the amount of personal property which was escaping taxation in St. Louis was $175,885,260. This amount was estimated from a compari- son of the inventories of certain estates with the returns made by the deceased in the year prior to the death. !N"o remedy is suggested by the committee, however, in their re- port for this failure to reach personal property. Evasion by Changing Investments. But it does not follow that all of the wealth which is invested in personal property on the date of the annual as- sessment is subject to taxation. It is not unnecessary for the holders to conceal their possessions, as they can law- fully change their investments to United States bonds, which are exempt from taxation. It is well known that there is a largely increased demand for United States bonds prior to June first in each year. But in this very matter it is seen how clearly the law discriminates against the weak and helpless and in favor of the strong. This remedy which re- lieves the man from the necessity of concealing his posses- sions, is open to the alert business man, but it is not to be supposed that the average trustee will trouble himself to make a change of investment, which perhaps would be in excess of his authority as trustee, and it is certainly not a 272 MISSOURI TAXATION. remedy available to the helpless estates in probate court. Experience of Other States. But this experience is not peculiar to St. Louis. It applies in other cities of Missouri as well, and in other parts of the country. In fact, wherever the taxation of this class of property is attempted, the result is a failure. A recent report of the Tax Commission of Mas- sachusetts of which Professor E. "W. Taussig, formerly of St. Louis and now of Harvard University, was a member, says "that the great bulk of intangible property taxable by law is not reached is admitted on all hands. It is proved beyond doubt by the sensitive records of the stock and bond market. * * * As a matter of fact securities of Tax commission the same solid character and yielding the setts. same income are sold side by side with no ma- terial difference, whether they are taxable or nontaxable. Taxable securities are bought and sold every day, not on the basis of paying taxes in fact, but only on the basis of some incalculable and remote possibility of their being reached for taxation." The New York Taxation Commission said in a recent report, "instead of putting a tax upon personal property it has in fact become a tax upon ignorance T ofNewYor'k° n and honesty. That is to say, its restric- tions are confined to those who do not know the means of evasion, or knowing, are restricted by a sense of honor." Illinois Tax The Illinois Tax Commission said that commission. u^ system j B debauching the public con- science and the public morals." The commission of West Virginia said ^Tax commission tn at " tne V Si J meni °^ taxes on personalty is almost voluntary, and it is considered pretty much in the same light as donations to the neighborhood FAILUBE OF PERSONAL PEOPEBTY. TAX. 273 church or Sunday school." Professor Seligman, who is an authority on this sub- ject, sums up the whole matter in this forcible language: "The failure to reach personal property is so „ , . .. patent that it has become a mere by-word Prof. Seligman. r ■' throughout the land. Personal property no- where bears its just proportion of the burdens, and it is pre- cisely in those localities where its accumulation is the great- est that its assessment is the least. The taxation of per- sonal property is in inverse relation to its quantity — the more it increases the less it pays." Professor Ely,* after a careful review of the subject, says: The system never has worked well in any modern community or State in the entire civilized world, although it has been tried thousands of times and although all the resources of able men have been employed to make it work well. I have read dil- Prof. Ely on igently the literature of finance to find one example, Personal Prop- but in vain. And unless this should not be sufficiently erty Tax. trustworthy, I have made it my business in my capacity as tax commissioner to visit typical States and cities, and make inquiries among citizens as well as officials entrusted with the administration of the laws. I have visited Charleston, South Carolina, Savannah, Atlanta and Augusta, Georgia; Columbus, Ohio; Madison, Wisconsin ; and the result has been to abundantly confirm all that I have said about the impracticability of one uniform tax on real and personal property. Thus we have this anomalous situation: A tax origin- ally imposed upon a theory of equality and uniformity, has become, through the complex conditions of modern civili- zation and economic changes, inoperative; and so widespread is the popular repudiation of the tax that it necessarily be- comes as to those who do pay, such as the widows and orphans who can not escape, essentially an unequal and 'Taxation in American States and Cities. MO. TAX. — 18 274 MISSOUBI TAXATION. unjust tax. Under despotic governments, whole classes were exempt from taxation. In our time and country, some classes in fact a majority, are exempt by the inevitable work- ing of the law. The average man will certainly determine his moral obligation in the matter of taxation by the pre- vailing standard of 'his neighbors. If his fellow citizens of standing and influence escape taxation, the tax as to him be- comes an oppressive tax, and he regards its enforcement as extortion, which he is justified in resisting. Men can not be blamed for thus feeling, because it is responsive to that demand for equality in the distribution of public burdens, which has been the struggle of humanity in all ages. It must be remembered that it is not the wealthy or well-to-do alone, who make up the enormous class in every civilized country, which depends upon the in- Economic come from investments. The widows and Tendencies. orphans of the community, and many among those who are dependent through sickness and old age or other disabilities, are in this class. The whole economic tendencies of the time are in favor of the men who work as against those who live upon accumulations of capital, produced by their own work or the work of others. Every bread earner who has a family dependent upon him must contemplate the time when in the order of nature that family will be dependent upon the proceeds of the investments which his accumulations and savings can secure them. A very large part of the aggregate wealth of the country invested in personal securities and mortgages are the proceeds of life insurance on the lives of the workers of the country secured for their families. Yet this is the class compelled to bear the burden of the tax, which the in- telligence of the community repudiates. It is a misconcep- tion of this fact and its underlying causes, which induces such comments as the following from so eminent an author- PAILUKE OP PEKSONAL PROPERTY TAX. 275 ity as ex-President Harrison. 5 Thus lie says : It is easy to see how this offense (tax evasion) against morality and patriotism has grown to such proportions. The very sense that inequal- ity is injustice has promoted it. One man sees that his neighbor is not making a conscientious tax return, and Ex-President that if he returns his property honestly, he will pay Harrison on disproportionately. The result is that his conscience finds a salve in saying "everybody does it." It is prob- ably also true that under the tax laws of many of our States, double taxation results, and taxpayers take it upon themselves to remedy this defect in the law, not by the methods prescribed by the Constitution, but by leaving out of their tax return such stocks and se- curities, as they suppose to be taxed in other states. * * The sense of inequality breeds a fierce and unreasoning anger, — creates classes, in- tensifies social differences and tends to make men willing to pay their debts in half dollars. The just sacredness of these money obligations, the right of the holders to be paid in money of full value, will be clearer to these angry men if they see that these securities are paying their law- ful taxes. It is true that such a condition is necessarily demoraliz- ing and corrupting, and that the attempted evasion of tax- paying by wealthy men, in a country where Failure of Law wealth owes no public duties, and govern- E^asion. 3 * ment is controlled by popular will, must, in the nature of things, intensify popular dis- content with the unequal conditions of life. Tet the root of the difficulty lies, not in any natural disposition of men to be dishonest or to evade their just obligations, but in the failure through changed conditions, of a law intended to be fair and just, which inevitably makes its application uneven and unjust. Under our present system the listing of in- vestment securities for taxation is essentially confiscation and confiscation on a scale surpassing anything ever at- tempted by the worst despotisms of history. It is useless to 'Before Union League Club of Chicago, Feb. 22, 1898, on "Obliga- tions of Wealth." 276 MISSOUEI TAXATION. ask men to submit to confiscation. Those who can evade it, will do so and those who from their circumstances can not help themselves are compelled to submit. PART III. TAXATION OF THE FUTURE. CHAPTEE I. PROPOSED AMENDMENTS. To assume that our people would rest content under a system of taxation which admittedly fails in the essentials of justice and equality which inevitably discriminates against the weak and honest, and in favor of the strong and unscru- pulous, would bode ill for the perpetuity of our free institu- tions. People are dissatisfied, as in the nature of things they must be dissatisfied, and they are demanding remedies for a situation which is becoming intolerable. Other States of the Union, indeed all the cities which continue the general prop- erty tax, are having the same experience. So far as the failure to reach personal property is concerned, our ex- perience is in common with nearly all the States, as the general property tax has been all but the universal system throughout the country. In other countries it is almost unknown. 1 The general property tax, as shown by its practically uniformity of adoption in this country, was the natural out- growth of political conditions. The taxation of everything equally seemed the natural system for a Democracy, which •Switzerland is the only European State where the general property tax still plays an important role. "It has been materially modified, however, by introduction of other features." Seligman, Essays on Tax- ation, p. 384. 277 278 MISSOURI TAXATION. abhors privilege and class distinctions. In a primative state of society, as in the Territorial period in Missouri, the system worked fairly well, as personal property consisted mainly of personal chattels which the taxgatherer could see. The system has failed in Missouri, not through the fault of our officials, but for the same reason that it has failed every- where else. In the complexity of modern industrial civiliza- tion, it is impossible to tax everything, and the attempt necessarily results in discrimination and evasion, and in the grossest kind of inequality. It is argued here as elsewhere, that if all personal prop- erty could be reached for taxation, the admitted inequalities would disappear, and the tax list would be so increased that the tax rate could be diminished. Hence drastic measures have been proposed to effect this end. The same difficulty has been encountered by the taxgatherer in all stages of history, where it is sought to compel the disclosure of per- sonal property. The Eomans under the Empire resorted to torture. 2 Proposed Remedies. 1. The so-called Slate Bill was the result of this feeling that the remedy for these recognized evils was the enforce- ment of the listing of personal property. This Bin measure provided that all notes and mortgages should be filed with the assessor, and unless so filed and stamped, should be neither nego- tiable nor collectible. This bill passed both branches of General Assembly in 1897 and was prevented from becom- ing a law only through the veto of Governor Stephens. The Governor said in his veto message: As for preventing property from escaping taxation, this bill will have little or no effect. -For those who intend to evade taxation will in- 2 See 2 Gibbon's History of Rome, p. 150, quoted in Wells, Theory and Treatise of Taxation, p. 430. PROPOSED AMENDMENTS. 279 vent more certain methods than they have now. The law will injure the good men, and catch very few of the Veto of Gov. bad Itg effeet win ^ to drive capital out of the State. Farms are assessed at about one-third of their value. If capital is driven out of the State, it will be necessary to increase the assessment of farm lands, and will result in great decline of values. The Governor said further, that many who voted for the hill did so under a misapprehension and without a clear understanding of the bill, and were now apologizing for their votes and urging him to veto it. The message con- cluded: The result of such a law will be to flood the country with litiga- tion, encourage dishonesty, restrain the free negotiation of negotiable paper, if not to rob it of its negotiability entirely, hamper business, ren- der it especially hard for the borrower to obtain a loan, and drive capi- tal from the State to seek other and better fields for investment. Substantially the same bill, somewhat modified, was introduced in the General Assembly of 1899, but failed of passage. 2. The general discontent with our tax system also found expression in the submission to the last General As- sembly of a constitutional amendment, to be California Mort- voted on in 1900, making a radical change in gage system. ^he taxation of mortgaged real estate, in fact adopting what is known as the California sys- tem, making the interests of mortgagor and mortgagee sep- arate estates for taxation. This proposed change is so radical and important as to require separate consideration. See infra, p. 282. 3. Dissatisfaction with our present tax Taxation of system is also illustrated by the growing de- Franchises. mand for the taxation of franchises. See infra, p. 293. 4. Mr. Seibert, the present Auditor of the State, has 280 MISSOURI TAXATION. given careful study to the defects of our tax system, especially in its administrative features and in the lack of uniformity in local assessments. of state Auditor 8 -"- n ^ s re P or t of 1897, 1898, he recommends that all property should be assessed on a uni- form rate of fifty per cent of value, and that the interests of the mortgagor and mortgagee should be separately assessed at that rate. He also, with other recom- mendations, proposed that the law should be changed so as to require owners to swear only to the descriptions of their property, leaving the assessor to determine its value. As to this latter, he said that this would relieve the assessor from the responsibility of disregarding his neighbors' oaths. He also reeomended that all household property to the amount of $100 should be exempt. 3 None of these recommenda- tions were enacted into laws. 5. The only legislation enacted by the General Assem- bly for remedying the existing defects in the administrative features of our tax system, are the measures Enlarged Powers already referred to, enlarging the powers of of state Board. fa 6 g tate Board of Equalization, that is, in restoring the powers originally exercised of "The auditor, in a recent letter, says: "In my recommendation to the legislature, I suggested the uniform valuation of fifty per cent of the market value, not that it was any better or any nearer than forty per cent or seventy per cent, but because that was somewhat near the average at which property is now assessed in the counties and the city of St. Louis. It has been demonstrated that assessors can not be forced to obey the present law and assess the property at its actual value. The change proposed by me would probably secure uniformity in valuation.'' Mr. Frederick, the President of the St. Louis Board of Assessors says that the change would have been disastrous in the city of St. Louis, as it would involve a heavy loss in city revenues, — the existing basis of assessment being about seventy per cent. Thus the city lost a considerable sum in the equalization of bank assessments at sixty-three per cent. PROPOSED AMENDMENTS. 281 adjusting the values of different classes of property, in vesting in the Board the original assessment of street rail- roads throughout the State,, and in the legislation concerning the manufacturers and merchants statements in St. Louis. To what extent this legislation will be effective is yet to be seen, but from past experience not much can be expected for relief in the way of securing uniformity of assessment throughout the State. In the language of the State Auditor The members of the State Board are besieged by county officials asking for a decrease of total valuation so as to bring their counties into a lower class/ and give' them power to levy a higher rate for county purposes, or begging for a larger increase in order that sufficient reve- nue may be raised to meet the expenditures of their counties. The lest the board can do is to correct the most glaring inequalities. This refers to the constitutional classification of counties based upon the valuation of property, and limiting the maximum rate of taxation according to the class. See page 162, supra. CHAPTER n. TAXATION OF MOETGAGES. Under the law of Missouri, mortgages of real estate, and notes secured by deeds of trust upon real estate, are personal property and are required to be listed Present Law on ^y *^e holder f or taxation at bis domicile, like Taxation of other personal property. The statute provides that the term "credits" shall be held to include "all money loaned or invested and all indebt- edness secured by deed, contract, mortgage or pledge of prop- erty of whatsoever kind." It is therefore immaterial where the property upon which the mortgage or deed of trust is a lien is located, whether in this State or elsewhere. As already shown, the statute also makes taxable at the domicile of the owner in this State, all notes, bonds or other evidences of debt, which are held in any other State or Territory. 1 The State has therefore exercised its utmost power in the taxation of this class of property. It taxes all the land in the State to its full value without deduction for mortgage, and also taxes all the mortgages on the property in other jurisdictions belonging to the citizens of this State, whether the bonds and notes or other evidences of debt are in this State or not. The effect of this system, as already shown, is to tax both the property, and the credit whose value rests upon the property. Failure of the Tax on Mortgages. The system fails, not from any lack of exercise of the lawful power of the State, but because it has proven prac- iSupra, p. 215. 282 TAXATION OF MOETGAGES. 283 tically impossible to compel the listing of the mortgage notes for taxation, and with the exception of the comparatively small amount secured from administrators and trustees, and indirectly through the taxation of banks and trust com- panies, mortgages have practically gone untaxed. The sense of injustice, therefore, that the owner of the property feels in being required to pay a tax on the full assessed value, when its value to him is reduced by the amount of the mort- gage, is increased by the recognized fact, that the mortgage as a rule escapes taxation. Two remedies have been applied to this admitted failure of the law. First, the exemption of mortgages and reach- ing that class of property through other forms Massachusetts of taxation. This is the system adopted in system. Massachusetts and other States, where mort- gages are virtually exempt from taxation, with a resulting tendency to lower rates of interest on mortgage loans by the attraction of foreign capital. 2 Second, the other remedy suggested is what is known as California the California system of taxing separately the system. mortgaged interest and the equity in the mort- gaged property, both interests being treated as interests in the real estate for the purposes of taxation. This system was adopted in California in 1879, and, is still the law of that State. This method of taxing mortgage interests in land was adopted in Oregon by statute, and it was held by the Supreme Court of the United States as applied California system to mortgages, owned by citizens of other u's'constitu- 1 States and in their possession outside of the tion - State, not to contravene the Constitution of the United States, the court saying: The State may tax real estate mortgages as it may all other prop- 2 See report of Massachusetts; Tax Commission of 1897, pp. 36-40. 284 MISSOURI TAXATION. erty within its jurisdiction, at its full value. It may do this, either taxing the whole to the mortgagor, or taxing to the mortgagee the in- terest therein represented by the mortgage, and to the mortgagor the remaining interest in the land. And it may for the purposes of taxation, either treat the mortgage debt as personal property, to be taxed like other choses in action, to the creditor at his domicile, or treat the mortgagee's interest in the land as real estate, to be taxed to him like other real property at its situs* The Constitutional Amendment Submitted in 1900. The General Assembly of Missouri in 1899 submitted the California system as a constitutional amendment, to be voted upon by the people of Missouri at the general election in November, 1900. That the substantial identity of our proposed constitutional amendment with the constitutional provision of California may be clearly seen, they are here- with submitted in parallel columns : PROPOSED AMENDMENT TO MISSOURI CONSTITUTION. Art. X. Section 22. A mort- gage deed of trust, contract or other obligation by which a debt is secured, shall, for the purposes of assessment and taxation, be deemed and treated as an interest in the property affected thereby; f except as to railroad and other quasi public corporations, for which provision has already been made by law; in case of debts so secured, the value of the property affected by such mortgagej deed of trust, contract or obligation, less the value of such security, shall be assessed and taxed to the owner of the property, in the manner hereinafter to be provided by law, and the value of such security shall be assessed and taxed to the owner CALIFORNIA CONSTITUTION. Article XII. Section 4. A mort- gage deed of trust, contract or other obligation by which » debt is secured, shall, for purposes of assessment and taxation, be deem- ed and treated as an interest in the property affected thereby; ex- cept as to railroad and other quasi public corporations; in the case of debt so secured, the value of the property affected by such mort- gage, deed of trust, contract, or ob- ligation, less the value of such security, shall be assessed and taxed to the owner of the prop- erty, and the value of such secur- ity shall be assessed and taxed to the owner thereof, in the county, city, or district in which the prop- erty affected thereby is situate. The taxes so levied shall be a lien 'Savings Society v. Multnomah County, 168 U. S. 421. TAXATION OF MORTGAGES. 285 thereof, in the county, city or other local subdivision in which the prop- erty affected thereby is situate. The tax so levied shall be a lien upon the property and security, and may be paid by either party to such security if paid by the owner of the security the tax so levied upon the property affected thereby shall become a part of the debt so secured; if the owner of the prop- erty shall pay the tax so levied on such security, it shall constitute a payment thereon, and to the ex- tent of such payment a full dis- charge thereof. Provided, that in all such cases the interest of the owner of the security, as well as that of the owners of the property affected by such mortgage, deed of trust, contract or obliga- tion, shall be assessed on terms equally fair and just. If the note or other obligation secured, is entitled to a credit by payment made on the principal thereof, the assessable value of the owner of the sucur- ity, upon the fact being made known to the assessor prior to the assessment, shall be diminished by the amount of such payment, and the assessable value of the owner of the land or other property, cor- respondingly increased, the intent hereof being to place those inter- ested in any way in such land or other property on the same plane of absolute equality as to taxa- tion. Section 23. Every contract here- after made, by which a debtor is obligated to pay any tax or assess- ment on money loaned, or on any mortgage, deed of trust, or other lien, shall, as to any interest specified therein and as to such tax or assessment, be null and void. upon the property and security, and may be paid by either party to such security; if paid by the owner of such security the tax so levied upon the property affected thereby shall become a part of the debt so secured,,' if the owner of the property shall pay the tax so levied on such security, it shall constitute a payment thereon, and, to tEe extent of such payment, a full dis- charge thereof. Provided, that if any such security or indebtedness shall be paid by any such debtor or debtors, after assessment and before the tax levy, the amount of such levy may likewise be retained by such debtor or debtors, and shall be computed according to the tax levy for the preceding year. Section 5. Every contract here- after made, by which a, debtor is obliged to pay any tax or assess- ment of money loaned, or any mort- gage, deed of trust, or other lien, shall, a« to any interest specified therein, and as to such tax or as- sessment, be null and void. 286 MISSOURI TAXATION. It will be seen that the Missouri amendment, in the proviso to section 22, incorporates as an addition to the California section, the provision, that the interest of the owner of the security, as well as that of the owner of the property, "shall be assessed on terms equally fair and just," and in the following words at the close thereof, "the intent hereof being to place those interested in any way in such land or property ivpon the same plane of absolute equality as to taxation." The language of this provision was doubtless adopted in recognition of the well known practice of assessing prop- erty at a fraction of its true value. Assum- Equaiity of ing then that property worth ten thousand Taxation be- dollars is mortgaged for five thousand dollars tween Mort- a ° gagor and Mort- and the same property under the present sys- gagce ' tern is assessed on the basis of thirty-three per cent, the average valuation of farm lands ac- cording to Governor Stephens, the mortgage under the pro- posed system would be assessed at $1,650 to the mortgagee and the equity at $1,650 to the mortgagor. This provision for equality of taxation is based upon a principle of fairness, and does away with the anomaly of double taxation under the present system, whereunder the ignorant and helpless are compelled to pay a tax, from which others are practically exempt. Shifting of the Tax on the Mortgagee to the Mortgagor. The proposed Missouri amendment adopts word for word the language of the California law, in providing against the shifting of the tax on the mortgage interest in the land from the mortgagee to the mortgagor by contract between them. It is obvious that if the tax can be so shifted, the only effect of the proposed amendment would be to prevent the double taxation of the present system — that is, the taxa- TAXATION OF MORTGAGES. 287 tion of the land without deduction to the mortgagor, and the mortgage at the same time as personal property to the mort- gagee. The mortgagor under this shifting of the tax would continue to pay the tax on the full assessed value of the land as before, as he would pay the tax both on his own equity in the land, on the interest of the mortgagee. The effect of the shifting of the tax, therefore, would be to exempt the mortgagee; or more accurately, to legalize the existing practical exemption. Failure of the System in California. As we are now asked to adopt a system which has been in force in California for over twenty years, it is important to study the experience of California with reference to this very matter. This subject has been carefully investigated by Prof. Carl C. Plehm, professor of History and Political Science in the University of California, in a recent article. 4 As a result qf an exhaustive investigation, he finds that the provision against the shifting of the tax back to the mortgagor has proved wholly ineffective. So Prof, piehm on successful have been the devices to shift the California Ex- n n _ 1 .. perience. burden of the tax upon the mortgagor, that they have come into practically universal use, and printed blanks are used embodying agreements, which have been sustained by the Supreme Court of the State. 5 Prof. Plehm says: "Possibly the oldest, and cer- tainly the most widely used of the successful devices invented for this purpose, is that of a contract separate and distinct from the mortgage, in which the creditor agrees to reduce the interest, in case the debtor pays the taxes. The method is so common in the South that all stationers carry regular "'Taxation of Mortgages in California," Yale Review, May 1899; "General Property Tax in California," Publication of American Economic Association, Vol. II, No. 3, June, 1897. "Hewitt t. Dean, 91 Cal. 5; Bank v. Bandman, 120 Cal. 221. 288 MISSOURI TAXATION.. blank forms of these contracts." And he adds: The feeling that the provision of the Constitution which requires the mortgagee to pay the taxes accomplishes no good and really in- creases the burden of debt, and that its evasion affords the debtor a genuine relief, while working no injustice to the creditor, probably ac- counts for this far-reaching opinion rendered in the recent case of the London and San Francisco Bank v. Bandman, 120 Cal. 221 (decided March 31, 1898,). In this case, it was held that a. valid agreement, not simultaneous with or directly a part of the mortgage, providing for the payment of taxes by the mortgagor does not violate the con- stitutional provision. This sweeping d«cision makes the constitutional provision entirely devoid of meaning and brings the California system of taxing mortgages into practical conformity with that of Massa- chusetts. That is, the two parties to the mortgage can make any agree- ment they please as to the payment of the tax. Thus it is that this famous "experiment in taxation" has come to an end. As we are now asked to adopt a constitutional provision of another State, which has been construed by the Supreme Court of that State, will we not adopt this construction with the amendment? It is also clearly demonstrated by Professor Plehm, and his testimony in this regard seems to be confirmed by all authorities, that in so far as this shifting of the tax was not effective, the rate of interest upon mortgage loans was increased, and foreign capital diverted from the State. Indeed, this fact seems to be so universally conceded in California that it is recognized by the Supreme Court of California in its opinions above cited. Michigan has had a somewhat similar experience in at- tempting to tax mortgages. It was enacted that the mort- gagor might pay the tax upon the full value E Michi i gan. 0f of tte land > but that the mortgagee should receive in lieu of interest, tax receipts repre- senting that portion of the total tax that the mortgage repre- sented of the total value. "This law had the effect, first, TAXATION OF MOETGAGES. 289 in causing the banks to raise the rate of interest one per cent on this species of loans, and second, a new form of mortgage ■was prepared wherein the borrower contracted not to pay interest in tax certificates." 6 Similar Conditions in California and Missouri. The conclusions of Professor Plehm as to the relation of the mortgage tax to the general property tax are equally applicable to our condition in Missouri, as our systems of taxation are substantially the same. It seems reasonable, that a man, whose interest in his property is diminished by a mortgage, should be taxed only upon the value of his interest in the property. But is not that consideration equally ap- plicable to the holder of personal property, who under our present system pays taxes, not upon what he is worth less his debts, but upon his holding irrespective of his debts. Some States, as New York, allow debts owed by the person to be deducted from the personal property returned by him. But our taxing system is based on a radically different system. La the language of Professor Plehm, it taxes "things and not persons." Our Supreme Court says: "It is not what an individual or corporation is worth over and above what they may be indebted which is taxed, but is the property owned by either on which the tax is levied." 7 Effect on Credit of State, It is clear that even if the law can be successfully evaded in this respect, and the burden of the tax shifted from the lender to the borrower, that the very fact of being compelled to resort to such evasions will prove in so far a burden to the people of the State, in preventing the securing the lowest "Professor Adams, of Ann Arbor, in stating the facts as above, says that "every one in Michigan regarded the law as an absolute failure." It has been repealed. Insurance Co. v. Board of Assessors, 56 Mo. 516. MO. TAX. — 19 290 MISSOURI TAXATION. rate of interest for the use of capital in the development of the State. 8 Proposed Mortgage Tax in New York. This subject of the taxation of mortgages has recently been thoroughly discussed in New York with reference to the proposed levy of a small tax upon mortgages, a much lower rate being proposed than that levied upon real estate, there being in New York no constitutional difficulty in the way of this difference in the tax rate on different classes of property. It was strenuously urged, however, that the tax would operate to the prejudice of the borrowing class, as well as of the Savings Banks, which in New York invest very heavily in this class of securities, and the proposed tax was defeated. It would therefore follow that the adoption of the pro- posed amendment would be ineffective in so far as ,any relief to the holders of mortgaged property is con- ineffective, cerned, and would be injurious to our people and industries in discouraging the investment 8 A former citizen of Missouri, now a citizen of California, who has been, and is, a large borrower in extensive development undertakings in that State and in Oregon, writes concerning the conclusions of Pro- fessor Plehm, as above, and says: "Without benefiting the State, I believe the mortgage tax law is a disadvantage to the borrower, and compels him to pay more interest than with the law not upon the statute books. This is occasioned by the uncertainty that always surrounds the tax levy, which of necessity compels the lender to guess upon the amount likely to be levied, and ha naturally guesses from one-half to one per cent more than the amount levied. * * Many borrowers, myself among the number, ar- rive at a secret understanding with the lender, by which the land is as- sessed with incumbrances the borrower thus being enabled to pay the full tax ,upon the property, and then receiving the actual reduction from his tax rate from his interest. * * "Another objection to the mortgage tax law, is that it discourages the investment of money from other States and from foreign countries, upon the theory that it puts a restriction upon money. * * It is difficult to explain to nonresidents that this is a tax that does not tax." TAXATION OF MOBTGAGES. 291 of foreign capital in the State. On the other hand, it may be said that the amendment is an improvement on our present system, in that it would abolish the anomaly of an attempted double taxation, effect- ive only against the scrupulously honest and helpless. But even in this respect, it would be illogical and inconsistent with our taxing system, in that it would tax holders of real estate upon the net value of their lands, less the amounts borrowed thereon, while taxing or attempting to tax the holders of personal property for their full value, irrespective of what they owed thereon. The submission of this amendment, however, indicates that public attention is being awakened to the anomalies and absurdities of our present taxing system, and gives ground for hope that whatever the resiilt of the pending vote upon this amendment, a just and comprehensive system of taxation may yet, through continued agitation, be realized. The only effective and logical method, consistent with the theory of our taxing system is to tax the value of all the real estate in the State once, and once only, only Effective leaving mortgagor and mortgagee to make Method. their own agreements as to taxation. With the vast possibilities of material development in Missouri, our people and our industries need the very best f acilities for commanding capital, and we can ill afford to adopt a measure, which has proven so distinctive a failure in the State, from which it is copied. Mortgages on Property Out of the State. In this connection, it is proper to consider the taxation of mortgages held in the State secured by property in other States or counties. Such mortgages are not included in this pending amendment, but they are sought to be made taxable under our law. It is a fact that the attempt to subject them to State taxation is not only in the nature of things 292 MISSOURI TAXATION. impracticable, but it is inconsistent with the principles of comity, which should control in interstate relations in taxa- tion. It is double taxation, in fact, if the property repre- sented by the security is taxed again in any jurisdiction. It is assumed that the property in another jurisdiction rep- resented by securities in the hands of a resident is taxed by that jurisdiction from which it receives protection, just as we tax all the property in this State regardless of the residence of its owner, and also regardless of where the securities representing the property or secured by it are held. It is only by the recognition of this principle in every form of taxation of any property, that justice can be secured and double taxation avoided in our system of dual sovereign- ties and intimate interstate property and business relations. CHAPTEE in. TAXATION OF FRANCHISES. There is a strong popular demand for the taxation of franchises. This springs, not only from the sense of justice which requires that the public burdens should be shared bv all in proportion to their ability, and that all of the wealth protected by the State should assist in the support of the State, but it is doubtless intensified by the popular discontent with the confessed failure of our present taxing system to reach the wealth, invested in public and private securities. The greatly increased expense of city government, on account of the dispersing of city population over expanded territory, has compelled the raising of the rate _, of assessment to secure the necessary muni- Causes of Demand J for Franchise cipal revenue, it being impossible under the constitutional restraint to increase the rate of taxation above the maximum of one dolla? on. the hundred for current expenses. Taxes, therefore, in cities bear very heavily upon the real estate holders, who are compelled also to carry the burden of special taxes for local improvements. Taxes in St. Louis, range from twelve to twenty or even twenty-five per cent of the income from rentals, and sometimes much higher. The result is a strong public opinion against the public improvements, which the growth of the city demands, and an intensifying of the feeling for some relief through changes in our taxing system, which will reach the property, which, it is believed now escapes taxation. Another cause has doubtless operated to intensify the popular demand for the taxation of the franchise and that 293 294 MISSOURI TAXATION. is the public realization of the recklessness- and improvident jobbery, which has attended the granting of Municipal''' franchises for the use of streets in our muni- Franchises, cipalities. Although the city charter of St. Louis, as well as the statutory charters for the different classes of cities, authorize the application of the rule of public competition in the granting of franchises, this authorization has been all but universally ignored, and private favor instead of public competition has been the rule. The result is that our cities find themselves, in their financial straits, deprived of the means of revenue which they might have secured by exacting conditions for the grant- ing of these franchises, when they were in eager demand. While cities have the right to impose conditions in the grant- ing of such franchises for the use of their streets, when once granted and vested rights are based thereon, such vested rights can not be divested without compensation. Such vested rights are subject however, as other property, to the taxing power of the State. Franchise Taxation Under Existing Statutes. All these circumstances and conditions contribute to the popular demand for the franchise tax. The same conditions exist in other States, and it is safe to say that the franchise tax in some form is bound to become a part of our taxing system. As already suggested, the opinion is held, among others by the present Attorney-General, that the franchise rights held by corporations or individuals are "property" included within the comprehensive language of the .statute, which subjects to taxation, with the enumerated classes of property, also "every other species of property not exempt from taxa- tion." Thus it has been strenuously contended by the single taxers and others before the St. Louis Board of Equalization, TAXATION OF FRANCHISES. 295 and State Board of Equalization, that the franchise values should be included in the valuation. While these boards declined to tax franchises specifically as such, it is clear from the valuations made by the State Board Assessment of st. that the earning power of the properties, that Louis Street . c mt i • Railroads. is, tne value in use o± the tangible and in- tangible property of both railroads and street railroads, must have been considered. This is only another name for the taxation of franchises. Thus in 1897, before the change was made removing the assessment of street railroads to the State Board, the street railroads of St. Louis were assessed by the St. Louis Board to the amount of $5,503,700, and this was increased to $23,821,750 on the theory that the franchises were taxable; but the Board, coming to the conclusion that the franchises were not taxable, reduced the assessment $6,115,570. In the following year, 1898, the assessment was vested in the State Board at Jefferson City and the assessment was fixed at $8,080,818. The following year, however, 1899, there being no material increase in the tangible property of the companies, the assessment was increased to over $16,000,- 000. While the Board refused in this valuation to make any separate assessment on franchise values, this increase was only explainable on the theory that the Board considered the earning power of the property as an entirety, that is the value in use, and therefore must have included more than the tangible property of the company, and in so far must have included the franchises. A tax upon the gross earnings is necessarily a tax upon the earning power and that necessarily includes both the tangible and intangible property of the com- Express and Life p any- Thus the tax now collected from ex- Insurance. x ./ Companies. press companies in this State and the tax upon the premiums of foreign life insurance 296 MISSOUBI TAXATION. companies are taxes upon franchises, that is, the earning power of the companies. It therefore follows that franchises, that is, the intangi- ble property, are taxed to some extent(whether adequately or not is another question), whenever we tax gross earnings or consider the earning power of the property of a company as an entirety in determining its value for taxation. But while franchise values may be thus included in the valuations made by the State Board, they are not in- cluded in the assessments made by the local of Ruling" y assessors, and these latter include all the man- ufacturing and business companies which hold grants from municipalities. In the absence of any statu- tory rule, it can not be said there is any uniformity of practice throughout the State. Political Demand ^ e political convention of the dominant for Franchise party in the State included the following reso- lution on the subject in its recent platform (June, 1900): "We believe all corporations doing business in this State should bear the just proportion of taxation; we, there- fore, demand the taxation of all corporate franchises, both domestic and foreign, doing business in the State." Proposed Franchise Taxation Act. A strong effort was made to pass a franchise tax law in the last General Assembly, and from its terms may be gathered the probable scope of the bill which will be urged upon the General Assembly. This bill, known as House Bill No. 408, which was favorably reported in the House and passed the House, con- tained a definition of a franchise in the following words: Section 1. Franchises taxed — State Board of Equalization to de- termine where taxes shall be paid. Every incorporated bank, trnst com- pany, guarantee or security company, gas company, wa- House Bill 408, ^gj. company, ferry company, bridge or transfer com- pany, street railway company, conduit company, electric TAXATION OF FRANCHISES. 297 light company, electric power company, telegraph company, express or press dispatch company, telephone company, toll- gate company, turn-pike company, railway or transportation company, belt line, terminal railroad association or union depot company, palace or parlor ear company, dining car company, sleeping car company, chair car company, and every like company, cor- poration or association, also every other corporation, company, asso- ociation or person having or exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing any public or quasi public service, shall, in addition to the other taxes impos- ed on it by law, annually pay a tax on the true value of its franchise and local taxes thereon to the county, incorporated city, town or taxing district where its franchise or franchises may be exercised. The State Board of Equalization shall fix the value of said franchises and the place or places where such local taxes are to be paid by corporations on their franchises, and how the same shall be apportioned where more than one jurisdiction is entitled to a share of such taxes." The bill also provided for annual reports by the cor- poration, including among other things the "highest price at which the stock was sold at a bona fide sale within the twelve months preceding," with full statement of the com- pany's business, and in the case of a company whose lines extended beyond the State, the gross and net income re- ceived on business done in this State, as well as the entire gross receipts, were also required; and the rule was laid down, that in this last class of corporations, the value of the franchise should be determined from the proportion which such gross receipts of business, done in this State, had to the entire gross receipts less the amount of the tangible property. This method of determining the taxable value differs materially from the mileage rule of apportionment considered in railroad taxation. 1 It is not easy how the rule could be enforced in case of receipts by an interstate rail- road from interstate commerce, that is how the receipts "from business done in the State" could be determined. ^Bupra, p. 105. 298 MISSOUBI TAXATION. What is a Taxable Franchise? It will be observed that the bill would apply to any corporation or person "having or exercising any exclusive privilege or franchise not allowed by law to natural persons, or performing any public or quasi-public service." This is the only definition of a franchise contained in the bill. It is difficult to see in what sense a bank or trust company, a guarantee or security company Definition of or a press dispatch company enjoys any franchise. franchise not allowed by law to natural per- sons, except that which is shared in common with all corporations organized under the general law, and for which the State exacts payment when the charter is granted. The value of the stock in such company may rest entirely upon public confidence in the ability of the manage- ment. There is no special or exclusive privilege enjoyed, because the privilege of incorporation to transact the same business is open to all, who choose to avail themselves of it. In the broad sense of the term, every corporation has a franchise. Blackstone has defined a franchise as "a royal privi- lege, a branch of the king's prerogative subsisting in the hands of a subject." 2 In the language of the Supreme Court of the United States, 3 "the franchise is a right, privi- lege or power of public concern, which ought not to be exercised by private individuals at their mere will and pleasure." Every corporation enjoys a franchise, as cor- porate capacity is itself a franchise. The right to conduct a banking business may require a franchise, but the franchise is in itself of no taxable value, as it may be had for the asking. The statutes may require a license for the conducting 2 2d Blaekstone's Commentaries, 37. California v. Pao. R. Co., 127 U. S. 481. TAXATION OF FRANCHISES. 2\)\) of certain classes of business and this is in one sense a franchise. The lawyer's right to practice his profession is a franchise. The New York Franchise Tax Law. The New York franchise law passed at the instance of Governor Roosevelt, and which is now being enforced in New York State, recognized these distinctions which are inherent in the conception of a franchise, and made no at- tempt to include the franchise to be a corporation, which is open to all under our general corporation laws, or to act under such a corporate charter, but only included the right of using public streets and public places. Thus the New York statute prescribes that in estimating the value of real estate, there shall be included the value of all franchise rights, authority or permission to construct, maintain or operate, in, under, above, upon or through any streets, highways or public places, any mains, pipes, con- duits or wires with the appurtenances for conducting water, steam, light, heat, power, telegraph, telephone or other pur- poses; also all bridges, telegraph lines, all surface, under- ground or elevated railroads, including the value of all the franchises to maintain or operate the same in, under or over the streets and public places. This New York statute is framed on the theory of making these franchise values additions to the values of real estate, the purpose being to avoid the effect of the New York law, which allows debts to be deducted from the valua- tion of the personal property. If the franchise had been assessed as personal property, the corporation could have deducted therefrom the amount of its outstanding bonded indebtedness. Another important feature of the New York law should be noted : It recognizes that some corporations pay a share 300 MISSOUEI TAXATION. of their earnings to the municipalities wherein special Franchise *k«y are located under the requirements of Payments De- their special charters, or ordinances, giving them rights to use the streets. The law pro- vides, that any amount so paid for special franchise to the municipality (not including assessments for local improvements) shall be deducted from the new fran- chise tax levied by the State. The theory of this deduction was to equalize corpora- tions of the same class, so that those, who had secured "favor- able" franchises from municipalities, should not be given an advantage under the law over corporations who had agreed in their franchise grants to make compensation there- for. These special franchises under the New York law are assessed by the State Board of Tax Commissioners. The ob- ject of the law as declared by Governor Roosevelt, is not to tax certain corporations more than others, or corporate prop- erty in general more than other property, but to tax every one and all property alike. In connection with this New York law, a legislative committee was appointed to sit during the recess and prepare a general plan of reform for the taxing system. The feature above noted, for allowance of the deduction of the amounts paid the municipalities was added as an amendment of the act at a special session, called by the Governor for that purpose. It is too early yet to determine the practical working of the New York law. Its constitutionality has not yet been passed upon by the court of last resort. The Practical wprk- valuations made by the State Board at first LfJ fNeWY ° rk were claimed to be grossly excessive. Thus the Manhattan Elevated Svstem of New York City was assessed at over fif tv-flve million dol- lars, and the Metropolitan System, or surface railway system, TAXATION OF FKANCHISES. 301 at sixty-two millions, the latter an increase of fifty-seven millions, when the gross earnings of the system are about fourteen million dollars annually. These and other valua- tions have been so largely reduced, as to warrant the inference, that if they are now reasonable, they must at first have been grossly excessive. The defect of the New York law, it would seem, is the absence of a definite rule for ascer- taining the value of franchises. The dockets of the New York courts are now crowded with proceedings in certiorari for the review of the franchise valuations claimed to be excessive. The jurisdiction of the courts of New York in these proceedings, is much more extensive than with us in Missouri; as it includes the right to examine the equality, as well as the legality of the assess- ment. Standard of Valuations. The bill proposed in the last General Assembly of Mis- souri above referred to, provided that the Board of Equali- zation should fix the vakis of the capital stock of the company from the reports of the company, and from "any other evi- dence that could be procured," and from the amount thus fixed deduct the assessed value of all the tangible property assessed in this State in the counties where situated, and that the remainder of this fund should be the value of the corpor- ate franchise. That is, this was the rule, except in case of in- terstate lines. There is no definite basis stated for fixing the value of the capital stock. The statement required from the company included the highest price, at which the stock of the company was sold at a bona fide sale within the year next before the fifteenth of January of each year, in which the statement was made. But it is obvious that the highest price during the year of a stock, which may fluctuate enor- mously during the year, would be a very unsafe and unjust criterion of value. The standard of valuation under the proposed bill was 302 MISSOURI TAXATION. obviously defective, in that it failed to include the amount of the bonded or mortgaged indebtedness, consti- . tuting a lien upon the corporation's property, Defective. and franchises^ as a factor in determining the valuation. Thus a railroad corporation with a capital stock of fifty million dollars, and mortgage bonds of fifty million dollars whose stock is quoted at twenty cents on the dollar, and bonds at par, would have a market value of sixty million dollars, of which only ten million would be considered for taxation under the basis proposed by the bill. The basis recognized by the Supreme Court of the United States as equitable and just in the taxation of rail- roads (swpro,p. 107) includes the market value of both stocks and bonds, as constituting the value placed upon the prop- erty, tangible and intangible "by those most competent to judge." Taxation of Gross Earnings. But the practical difficulties inherent in the ascertain- ment of the value of the tangible property of a corporation, as a franchise right to use the public streets or condemn property, has induced some States, as New Jersey, to adopt a plan of taxing the gross receipts of such corporations, essentially a corporation income tax. This is done on the theory that the real value of such a franchise will be surely represented in such receipts, and that this is a rule capable of exact ascertainment and in no wise dependent upon mar- ket fluctuations or speculative manipulation. Thus in the State of New Jersey, the public franchise' tax passed by the last session of the Legislature, taking effect January 1, 1901, provides for an assessment of two per cent of the gross receipts of the business done by the corporations or persons having acquired authority or permission to use or occupy the streets, highways, roads, lanes or public places. Where TAXATION OF FRANCHISES. 303 the companies no wpay by contract or under ordinances of the municipalities for the use of the streets, the amounts so paid are deducted from the franchise tax. Eut if this method of taxation is adopted, in connection with the tax upon values of other classes of property, there may he diffi- culty in fixing the rate of tax upon gross earnings, so as to secure equality of taxation. This may account for the dis- satisfaction with the taxation of gross earnings in some of the States, as in the State of Michigan, where it is enforced in the taxation of railroads. The Avoidance of Double Taxation. The proposed Missouri Act provided that as long as the corporation paid taxes on all its property of every kind, the individual stockholders should not be required to list their shares in such corporations. This is obviously just. To tax the corporation on its property, tangible and intangible, and the stockholder on his stock at the same time, would be clearly double taxation. But does not the same principle in effect apply in the taxation of our citizens on holdings of corporate stocks in corporations of other States ? It is to be presumed that such corporations are taxed on all their property and franchises in the States where they do business. When the system of taxing corporate franchises is generally established in the different States as it certainly will be, it would seem that an equitable reciprocity of exemption of stockholders in for- eign corporations from State taxation should follow. But the principle of avoidance of double taxation should also be considered with reference to corporate bond-holders. The property owned by them is necessarily Holders Taxed included in the valuation for taxation of the Through cor- corporate property and franchises. The poration. * bond-holder has a paramount lien, but he pays for it in reduced and fixed income, and he indirectly pays his 304 MISSOUBI TAXATION. part of the corporation tax in the reduced rate of interest. To avoid double taxation therefore in this taxation of corporate franchises, we must exempt not only the stock- holders, but the bond-holders, and not only stock-holders and bond-holders in corporations doing business in the State, and taxable under our laws, but the domestic security holders in corporations of other States taxable under the laws of such States. 4 By thus taxing the property, tangible and intan- gible, upon a basis including the bond and stock value, we tax all the values invested in the holding of the individual stock and bond-holders, and such a tax can not be evaded. Franchise Taxation and Compensation to Municipality Distinguished. Reference has been made to the improvident and even corrupt granting of municipal franchises as a potent factor in the demand for franchise taxation. While this is a natural result, it must be borne in mind that taxation can not take the place of the conditions which might have been exacted by the municipalities in granting the fran- chises. Other cities, as Baltimore and Toronto, may derive a large municipal revenue from municipal franchises under conditions reserved in the grants; but when we fail to avail ourselves of such opportunities, and public opinion permits our streets to be occupied by poles, rails, pipes and conduits, for the asking, under railroad, gas, electric, water and other franchises, -and vested private rights are created thereon, these are rightfully subject to taxation 5 as other property, *In Connecticut, shares in foreign companies are taxable unless the shares, or what they represent, are taxed in the foreign state to the same extent, as other like property owned by citizens. In the la,tter case they are not taxable in Connecticut. The courts have held that such stock prima facie is deemed to be taxed in the foreign state, so that the as- sessor in order to tax it, must prove that it is not taxed elsewhere ; and the result is that such shares are practically exempt. TAXATION OF FRANCHISES. 305 but, as other property, are protected during the term of such franchises against confiscation or spoliation. It has been seen that in New York, the amount paid by any franchise holder to the municipality under the condition of his franchise was deducted from the tax under the new law, this being done in order to equalize the tax as between those who were charged with such payments, and those who were not. Whether this deduction would be permissible un- der our Constitution is questionable, as the municipal reser- vation is not an exercise of the taxing power, but of the right of proprietorship in the public street, 6 and whatever the exac- tion as a consideration of the grant, the holder of the fran- chise takes the same subject to the exercise of the taxing power. Summary- It therefore follows: 1. Whatever in a public grant, whether from United States, state or city (unless exempt from taxation), ma- terially increases the earning power of tangible property, has a taxable value, and is rightfully subject to taxation, either on basis of market value of the securities representing such intangible and tangible property, or on the earnings of such entire property. 2. But such taxation, including all the value of the corporate property and franchise, necessarily, to avoid double taxation, requires the exemption of the securities, representing such value thus taxed, whether stock or bond. 3. Justice also requires, in order that any of our citi- zens should not bear the burden of double taxation, that the resident holders of corporate securities, representing prop- 5 See 18 th Annual Report of Missouri Bureau of Labor Statistics, 1896, Street Railroad Franchises. 'Supra, p. 189. MO. TAX. — 20 306 MISSOURI TAXATION. erties and franchises, similarly taxed in other States, should be exempt here, as we would tax the property and fran- chises of corporations doing business in the State, irres- pective of the residence of the security holders. 4. The taxing power is distinct from the right of pro- prietorship or control of a municipality over the public streets, and the taxing of the intangible as well as the tan- gible property of a corporation must be "uniform with the taxation of other property in the jurisdiction of the au- thority levying the tax." CHAPTER IV. THE SINGLE TAXEBS. The discussion of the Missouri system of taxation would be incomplete without reference to the position of the Single Taxers and their efforts in the reformation, or what might be called, the revolution of our taxing system. As is well known they advocate the single tax, that is, a tax on land values, exclusive of improvements, and including on the theory of the New York franchise law, all franchises which involve the use of streets and public lands, and special privilege or natural monopoly from the public. They unite in opposing the tax on personal property and on improve- ments on real estate, and all license or privilege taxation. They denounce the latter, as a violation of the natural right of all men to earn their living by any honest gainful em- ployments. The basis of their theory of taxation is their social theory which denies the rightfulness of private property in land, and claims that the "unearned incre- Theoriesof ment," the increase in land values from in- singie Taxers, creased population, of right belongs to the public, and not to the individual. They are not socialists, but on the contrary strongly assert the rights of private property, except in land and franchises involving the use of land. But this is not the place to discuss the merits or de- merits of this social theory. In taxation, we deal with property rights, as they exist, and are not concerned with 307 308 MISSOUEI TAXATION. speculations as to their origin, or ethical basis. But as tax reformers, the single taxers have rendered great public service in exposing the injustice and inequalities of our "general property tax." The most trenchant ex- posure of the absurdity of our personal property taxation is by one of the eminent single taxers, the late Thomas Gr. Shearman of New York. 1 They have strongly advocated the taxation of franchise values, claiming that they are included in the "property" taxable under the existing law. They have also been active in exposing the inequalities in assess- ments, and in demanding the assessment of all property at its full value, not only because they believe in placing all taxation upon land and franchises, but also on the ground, not without reason, that the best way to get rid of a bad system is through its strict enforcement. Public attention has recently been called to the earnest- ness of their convictions. One of their leaders 2 made a test case of the constitutionality of the real TheMcCann estate license tax imposed by the city of St. case. Louis, unsuccessfully contending before the local court and in the Supreme Court, that the license payment exacted as a condition of his earning his livelihood by an honest employment was violative of the natural right guaranteed by the Constitution. His resist- ance did not stop with the adverse decision of the Supreme Court, but refusing to pay the fine imposed for doing busi- ness without a license, he submitted to imprisonment, the penalty imposed in lieu of paying the fine. The license system as enforced in St. Louis and other cities of Missouri, though firmly entrenched in our revenue system and sustained by our Supreme Court, is open to objection as a system of taxation, in that it necessarily dis- criminates in favor of the financially strong and against the "'Natural Taxation," 1895. 2 Mr. John J. McCann, of St. Louis. THE SINGLE TAXEKS. 309 weak. Thus a license tax of one hundred dollars a year may be a trifle to the large and prosperous concern, but a crushing burden to the small business. Eut this objection applies to every form of fixed license as a means of revenue. In the financial pressure upon our cities, real estate is bur- dened so heavily by increased assessments, that necessity compels the use of every means of revenue. But this submission to imprisonment by the gentleman referred to illustrates the intensity of conviction as to the essential injustice of our taxing system, and may well arrest public attention. While the theories of the "Single-taxers" as to certain property rights may prejudice public opinion and cause a distrust which may tend to make tax reform more difficult, their services in exposing the abuses and defects of our taxing system are entitled to recognition and honor. It is simple justice to say that their organization has been the only one which has labored for tax reform with disinter- ested public spirit, and not for the advancement or protection of any person or class interest. It is right and proper that those who are threatened with unequal or unjust taxation should resist, but an enlightened public opinion is also de- manded which will demand justice in taxation for all because it is justice, and not because of any personal or class interest, or because of any social theory as to rights of property. There is no doubt also, that the tendencies of tax reform are along the lines indicated by the single taxers. That is shown in the popular demand for taxation of franchises and in the increased opposition to the reckless granting of mu- nicipal franchises. Land and taxable franchises will be taxed, because they are natural subjects of taxation, but it will not be a "single tax," as there is no probability that these will be the only subjects of taxation. CONCLUSION. The effective and ineffective features of our taxing sys- tem have been indicated in the foregoing discussion. The valuations of railroad and other properties by the State Board of Equalization are based upon a system which is clearly sound in principle, whatever diffi- Effective Features culties may be f ound in practical application. °ll aXmS SyS " -^ ^ s plain that these properties, particularly those which are parts of interstate systems, could not be fairly valued by any but a central State au- thority. The system of assessing the shares of stock of banks, trust companies and domestic insurance companies is also effective. There is here no possibility of evasion or con- cealment, and the absence of uniformity in the local assess- ments is cured by the equalization of the State Board It also appears that our taxation system avoids double taxation, except in the taxation of mortgages, and where it is brought about by the complications incident to our citizens owning personalty located in other jurisdictions. A novel and exceptionally efficient feature of our. sys- tem is in the collection of delinquent taxes. This is not only efficient, but just, in that every taxpayer has his day in court before his property can be sold for taxes. The elements of weakness and inefficiency are equally apparent. First. Judicial Remedies for Inequality of Taxation. On the important question, whether the assessor in- cludes proper and legal elements in his valuations, or 310 CONCLUSION. 311 whether one's property is assessed equally with other prop- erty of the same class, the judgment of the assessor and local board of equalization on appeal is final. 2 The assessor may include in his valuation, elements which the law does not authorize; yet there is no possible way of remedying the wrong, if the assessor does not distinguish in his assessment, or set out in the record the different elements whereon his valuation is based. 8 Unequal taxation, that is, the taxation of any property at a higher valuation than other property taxed by the same authority is unjust taxation. There seems no reason why the courts should not be open to remedy this, as any other wrong. If the proposed franchise taxation is adopted, giv- ing very enlarged powers to the State Board, the necessity of providing a judicial remedy to correct errors in the ad- ministration of such tremendous power will be manifest. There is no practical difficulty in giving the courts such jurisdiction, as it is constantly exercised in other States, notably in the State of New York. All that is required is a statute regulating and enlarging the jurisdiction of the courts in writs of certiorari. 3 Second. Separation of the Sources of State and Local Revenue. Unequal taxation as between individuals may be reme- died by an adequate amendment to our judicial procedure, but this can not bring about an inequality of the assessments between the different counties. The want of uniformity and consequent inequality in State taxation has been shown. It has been seen that all efforts to remedy sources of this condition proved unavailing. There is Revenue the ^ fa nature f things but one effective only Remedy, D remedy, and that is the separation of the 2 Supra, p. 239. 'Supra, p. 240. 312 MISSOURI TAXATION. sources of State and municipal revenue. It is no exaggeration to say that the State officials charged with the duty of equalizing the assessments have practically given up the task as impossible, state Auditor on an( j a g re e that the remedy here urged is the ation. only one possible. In the language of the State Auditor: "The best the Board can do is to correct the most glaring inequalities. If the real and personal property was not taxed for State purposes, the county boards of equalization, who are elected by the people, could equalize the values, increase or decrease the values, without fear of compelling other people to pay more than their proportionate share of State taxes. In those counties where there is a strong sentiment among the people for raising heavy sums for constructing wagon roads, the county boards would raise the values to one hundred per cent of their true value in money and get all of the revenue that might be needed for that purpose. In other counties, where taxpayers demand a reduction, the county board could be elected on that issue and the values would be reduced." There will be no practical difficulty in effecting this separation. Its details would of course depend upon the general system providing for the sources of separation of revenue. But this is clear, that the State Practicable. should have nothing to do with the assessment of either real or personal property, nor should it derive its revenues in any wise from what is known as the general property tax, assuming that tax to be retained in any of its features. By this means all of the absurd anomalies and inequalities of the present system of assessment as be- tween the different counties and cities of the State would be removed. That is, it would be wholly immaterial whether the assessment of a county was higher or lower than the other counties, if only the local taxes peculiar to that county CONCLUSION. 313 were levied upon that assessment. The State therefore should derive its revenues from sources wholly independent of the revenues of the counties or cities. The State now collects a tax through State offi- cials upon the earnings of express companies and foreign insurance companies, and, though part of the latter is sub- ject to apportionment to the counties, there is no reason why it may not all be paid into the State revenues, nor why this system should not be extended to revenues from other sources of taxation. The total tax, State and local, now assessed upon railroad properties as valued by the State Board of Equalization, aggregates over $1,500,000. Other sources of revenue could be added, such as dramshop and other licenses, and even new sources of revenue, such as in- heritances taxes, could be supplied. The constitutional dec- laration that taxes for "county, city, town and school pur- poses should be levied upon all subjects and objects of taxa- tion," seems to have been practically construed, as applying to the general property tax levied upon the real and per- sonal property, and not to the other forms of taxation which the State has power to levy. But if deemed advisable, a constitutional amendment would be fully justified by the vast importance of this change. But this separation of the sources of revenue does not mean any increase of taxation upon any class of property. The important and essential feature is the any increase of payment of the entire expense of the State Taxation upon interest, as well as revenue, without resort- any Class. ing to any levy upon local assessments. The States which have this separation of sources of revenue (as the State of Pennsylvania) are free from the inequali- ties of our system. The adoption of this reform would result in an enormous simplification of our revenue system, and it seems clear that it is the only possible remedy for 314 MISSOURI TAXATION. the unequal taxation in the different sections of the State. 6 Third. Extension of Local Control of Tax Bate and Bond Issues. This separation of the sources of State, municipal and county revenue would leave the counties and municipalities free to fix their own rate of valuations. It would seem that this should carry with it the extension of the right to fix the tax rate, as well as a larger control over the matter of bond issues for nmnicipal purposes. Thus the experience of St. Louis has shown that the limitation of the tax rate alone does not protect the citizen against an increase of taxation, as such increase is affected through an increase of the rate of valuation as well as through an increase in the rate of the tax. It is doubtless wise to have some constitutional limita- tion upon the possible abuse of the taxing power by local majorities, but such limitation of the taxing rate, as well as upon the bond issues, should be adapted to existing condi- tions. The embarrassments in municipal and county fi- nances which have been pointed out, are owing to the fact, that these constitutional limitations in the tax rate are not adapted as they should be. Thus it would seem that the same extension of local control of the tax rate could be made in the matter of taxation for current revenue, as in the mat- ter of school taxation. In view of the decline Decline in i* 1 tne rate °^ interest upon approved munici- mterest Rate. p a l securities, since the Constitution was adopted in 1875, the restrictions of the Con- stitution as to local bond issues are unreasonable. 6 The universal recognition of this reform is illustrated in the plat- form of the dominant party of the State in 1900, which in referring to the prospective payment of the State debt, says, that it will make it pos- sible "at the end of that time to raise all State taxes from corpora- tions, leaving the personal and real property in the counties and cities to be taxed only for local purposes, thus solving the vexed question of equalization without increasing the burden upon any interest." CONCLUSION. 315 It would seem, therefore, that this separation of the sources of State and municipal revenue should properly carry with it an extension of the right of local self-govern- ment in the exercise of the power of taxation for local purposes, and also in the selection of the modes of taxation, subject to the constitutional requirement of uniformity. Assessment of Real Estate. It is believed that this separation of the sources of revenue with an adequate judicial remedy for inequalities in taxation, will in great measure remove the inequalities of the present system, both as to classes of property and individual taxation. If the sources of the State and local revenue are separated, as above suggested, real estate would be the main dependence for local revenues, as it would be relieved from the present burden of State taxation. The present system of annual assessments of real estate is objectionable, in that it imposes a penalty upon the im- provement of property, the improvement objection to thereby becoming immediately subject to taxa- ment. tion. Public policy favors the improvement of real estate, rather than the holding it idle for speculative purposes. In many States the assess- ment of real estate is made at long intervals, varying from two to five years. There might also be some definite standard established by statute as to the basis of valuation of land and improve- ments so that less should be left to the arbitrary discretion of the assessors. Thus in the matter of improvement, a certain percentage of cost, varying according to the age of the build- ing, might be made the basis of valuation. 316 MISSOUEI TAXATION. Fourth. Abolition of Personal Inquisition and Listing by- Taxpayer. The failure to reach personal property by the general property tax and the listing of the property by the taxpayer is admitted. That this failure results in discrimination against the weak and the scrupulous, and in favor of the strong and unscrupulous, is also admitted. If a system of taxation was enacted with the declared purpose of making such discriminations, it would shock the public conscience, yet such is the inevitable working of the present system. This failure to reach personal property can not be remedied by drastic penalties. The only result would be to drive capital from the State and increase the burdens upon those who now pay the taxes. The remedy in this case as in the preceding, is the ob- vious one suggested by the nature of the difficulty. It is in the abolition of all personal inquisition and personal returns. IsTo one should pay taxes upon his own declaration of the amount or value of his property. This may be illustrated by the practical working of the system in St. Louis. The taxpayer makes a return of his real estate Practical work- and his personal property, valuing each. The inlst. Louis™ assessor pays no attention to the valuation of the real estate, because he can use his own judgment in valuing that which he can see, but he is com- pelled to take the taxpayer's return and valuation of his personal property, as he has ordinarily no possible means of disputing it. Practically every one (trust estates and es- tates in probate excepted), as to personal property, is his own tax assessor, and does that "which is right in his own eyes." The assessor, therefore, should only tax what he can see and value. Our taxing system should be based upon this fundamental principle. CONCLUSION. 317 Tangible Personal Property. It may be said that the principle invoked does not apply to such property as live stock and farming implements. It is true that certain classes of tangible personal Discrimination property can be seen by the assessor, and Rural Districts, valued. But this constitutes but a small part of the wealth invested in personal property, and as a rule it is only the chattels in the rural districts which can be seen and valued. The retention of this much of the personal property tax, therefore, would operate to discriminate against those of moderate means, whose chattels are easily valued, and in favor of the wealthy whose per- sonal holdings can usually not be seen, and when they are seen can not be valued by the average assessor. Substitution of Effective Taxation for Ineffective. The taxation of personal property, it is said, might be retained without the inquisitorial features. Thus in ISTew York, there is no return by the taxpayer of personal prop- erty, but the tax commissioners make their own assessment, and give the party assessed notice, so that he may appear and show that the assessment is incorrect. In New York a taxpayer may deduct his debts from the val- System in New uation of his personal property (not from the York - valuation of his real estate), and he may show, when assessed for personal property, that his debts have not been deducted. It is said, however, in ISTew York that this system is not satisfactory; that the power vested in the tax commissioners is exercised arbi- trarily, and often recklessly; that the bulk of the tax col- lected is paid by estates in probate and trust estates. In other words, the result is substantially the same as under our system. It is, therefore, necessary to abolish the direct tax upon personal property. This does not mean, however, exemption 318 MISSOURI TAXATION. of the wealth invested in personal property. Abolition of Direct Such a tax should not be given up without Personal Tax. something to take its place. The wealth there invested should bear its portion of the burden of taxation, and the only possible way of making it bear its own part is by substituting an effective for an ineffective method. This effective method can be in a great degree supplied by a just and effective system of taxing the tangible and intangible property of corporations. A very large portion of the individual wealth invested in personal Taxation Through property is represented by corporate securi- corporation. ^ies. S U ch personal property will, therefore, be taxed through an effective corporation tax, whether tbat tax is upon the value of the corporate property and taxable franchises, or upon the earnings of the corporate property and franchises, as an income tax. As was shown in the discussion of the franchise tax the stock and bonds in both domestic and foreign corporations could not be taxed in the hands of the holder, when the property and franchises are taxed to the corporation anywhere, whether in the State or elsewhere, without subjecting the holder to double taxa- tion. The basis of a fair and just taxation system is the taxa- tion of all the property in the State once and once only. In this sense, that proportion of the property Avoidance of f an interstate railroad corporation which Double Taxa. . . tion. is represented by its mileage m the State, is treated as property in the State. That portion of the value of the corporate property covered by mortgage liens is thus included in the valuation just as the value represented by the mortgage lien in real estate is included r CONCLUSION. 319 in the valuation of real estate. The tax in each case is paid primarily out of the income of the mortgagor or the stock- holder, but in each case the mortgagee and the bondholder pays his proportion of the tax in the reduction of his rate of interest, which thus enures to the benefit of the party primarily paying the tax. The separation of the estates of mortgagor or mortgagee for taxation, as proposed by the California system, would certainly result in increasing the rate of interest on the mortgage to the real estate owner, and on bonds of the corporation to the stockholders. Inheritance Taxation. Another effective method of reaching personal property for taxation is in the inheritance tax. So effective is this tax, that it has been adopted by the United States Government in its war taxation revenue scheme; so that at present the right of inheritance in the State, which imposes such a tax, is subject to double taxation, in that it is taxed by both sovereignties. It is uncertain whether this Federal tax will be permanently retained; and in any event it is clear that the tax is growing in public favor, and seems destined to become a permanent part of our taxing system, whether or not in its present form. It is certainly an efficient tax, easily col- lected, and, if fairly adjiisted in the rate, is not burdensome to the taxpayer. It has been suggested by eminent authority that this inheritance tax presents a means of reaching intangible per- sonal property, and, therefore, an inherit- Money and Secur- ance tax upon money and securities should be inheritanceTax. adopted as a substitute for all other taxation upon that class of property. 9 The tax cer- "Bupra, p. 287. "Prof. Prank W. Taussig, Professor of Political Economy in Har- vard, Harvard Journal of Economies, March, 1900. 320 MISSOURI TAXATION. tainly is valuable as supplementary to other forms of taxa- tion. Other considerations suggest themselves, as the un- certainty of the proceeds of this tax in any one year and the consequent difficulty of reliance upon it for current revenue; but this difficulty can be surmounted, by providing for an accumulation of a certain amount of revenue from this source, and retaining a certain reserve before disbursement. The double taxation arising from the operation of the inheritance tax laws of different States was pointed out in the discussion of the inheritance tax law of Double Taxation this State now in litigation. 10 The only pro- in Inheritance . . " Tax. tection against this form of double taxation apparently, is in the sense of justice of our legislators, which will recognize, in the exercise of the power of taxation, the exercise of the same power bv other sov- ereignties. It would seem right and just to provide, that an inheritance tax should not be imposed upon inheritance of personalty located in the jurisdiction, when that same right of inheritance is taxed in the jurisdiction where the estate is primarily administered. Incidence of Taxation. These forms of taxation, tax upon real estate and tax upon corporate property and franchises (without deduction for mortgage liens), supplemented by an inheritance tax, would, it is believed, make efficient substitutes for the pres- ent inefficient system of reaching personal property. The forms of personal property which are not reached by the first two, would certainly be reached by the latter. In this connection it may be noted briefly the theory of the Incidence of Taxation. Thus it was the contention la Supra, p. 154. CONCLUSION. 321 of an eminent authority on taxation, Mr. David A. Wells, quoting his language: 11 "That all taxes equate and diffuse themselves, and that if levied with certainty and uniformity upon tangible prop- erty, and fixed signs of property, they will, M Theor' " ^y a diffusion and repercussion, reach and bur- den all invisible and intangible property with unerring certainty and equality." This theory has not been accepted by all economists, cer- tainly not to the extent of this broad statement. It is said on the other hand, that direct taxes do not tend to diffuse themselves, but to stay where they are placed. That there is in many cases a tendency to shift the burden of taxation is clear. It may be assumed that all will shift such a burden whenever they can. This is illustrated in the futile attempt in the California mortgage system 12 to prevent the shifting of the tax by the mortgagee to the mortgagor. So in real estate leases of city business property, the tax is usually shifted to the tenant. But this tendency, is controlled by the economic law of supply and demand, as most land owners are compelled to accept rents regardless of the tax rate, upon the basis of what other land owners in the vicinity are will- ing to receive. The first consideration, however, in adjusting a tax system must be collectibility and efficiency. As was said by the Supreme Court of the United States in a recent case: 13 Taxation is eminently practical, and is in fact brought to every man's door, and for the purpose of deciding upon its validity, the tax should be regarded in its actual practical results, rather than with refer- ence to those theoretical or abstract ideas, whose correctness is the sub- u In New York Tax Commission Report, 1872, p. 47. n 8upra, p. 287. M Niooll v. Ames, 173 U. S. 509. MO. TAX. — 21 322 MISSODBI TAXATION. jeet of dispute and contradiction among those who are experts in the science of political economy. In the language of Professor Seligman, "the theory of the shifting of taxation is an aid, but not a substitute for the study of economic justice." 14 Efficiency and Equality. The general property tax, as heretofore pointed out, is the natural outgrowth of our political conditions, and responds to the demand for equality in bearing public burdens. But in seeking equality by an ineffective system, we produce inequality of the grossest and most shocking character. It is in order, therefore, to secure equality of taxation that an effective system should be substituted for our ineffective one in reaching personal property. This distinction has been forcibly expressed by an eminent authority: A tax law, which aims to be equal, but which is ineffective, pro- duces the worst kind of inequality, which tends to increase as time goes on. A tax which aims to be effective, even in apparent disregard of equality, tends by a constant process of economic adjustment to be more and more equal over the whole community. Effectiveness rather than equality should therefore be the primary object of the tax legislator. The other can be trusted to follow. Unfortunately this sequence is not well understood. In seeking to apply an illusory theory of equal treat- ment of all persons, law-makers really put double burdens on the hon- est. 10 Property Tax and Income Tax. An income tax is within the power of the State. 16 This form of taxation is popular and is favored by many econo- mists, based as it is, not upon the possession of property, which may be unproductive or burdened with debt, but "For thorough study of this complicated subject, see Seligman's "In- cidence of Taxation," McMillan, 1899. "President Arthur T. Hadley, of Yale University, Johnson's Ency- clopedia "Taxation." "Glasgow v. Rowse, 43 Mo. supra. CONCLUSION. 323 upon individual ability to pay. An income tax would also reach the large class, which is increasing in our cities, who receive incomes from personal services and now pay no taxes if not owning property, and would thus tend to impress them with their interest in good government. It is now a feasible method of State taxation, as the recent decisions of the United States Supreme Court, holding that the tax upon the income of land, or personal property, is a direct tax under the Constitution, which can be levied only by apportionment among the States, has rendered this tax impracticable as a means of revenue to the Federal Government. A general income tax, however, although it does reach men according to their present ability to pay, unjustly dis- criminates against the men who derive their Discrimination . _ - . - . -, Against Pro- income from personal services, as proiessional fessionai in- m en, and those who derive their income from comes. ' invested capital. In the former case, a man must provide from his income for old age and disability, and for the support of his family after his death, whether by the cost of life insurance, or by savings during his earning period. It is also obvious that an income tax levied according to the personal returns of the taxpayer, disclosing the details of his income, would be open to the same ob- incomeTax jection as the present general property tax — inquisitorial. j t would be evaded by the unscrupulous and dishonest, at the expense of the scrupulous and honest. It is even more inquisitorial than our present per- sonal property tax, and would, therefore, be ineffective, and unequal. This latter objection has been recognized, and wher- ever the income tax is successful, as in European countries, it is based upon one of two methods, the first in the stoppage of income at the source, and the second, estimating income 324 MISSOURI TAXATION. according to the visible signs of income. The first of these is the basis of the income tax system of Great Britain. Three-fourths of the income tax there, it is said, is collected by an automatic process, stoppage at ^'ith. no question of or demand upon the indi- Source of In- r come. vidual taxpayer. Thus the landlord's tax is paid by the tenant out of his rent, the cor- porate stockholders' and bondholders' by the corporation out of their dividends and interest. This method is thus relieved from, the defects of an inquisitorial system based on personal returns. The incidental discrimination against pro- fessional men is met by a comprehensive succession or in- heritance tax. The principle of stoppage of income at the source, is es- sentially the same in principle as that involved in the taxation of the stock and bonds of a corporation through the prop- erty of the corporation, which they represent. The other form of income tax is the taxation of income through the visible signs of income. The theory is that a man's income may in the average be fairly visible signs of indicated by certain signs, such as the rental income. value of the premises occupied by him, whether owned by him or not. Thus the man who moves from a five hundred dollar rented house to one of a thousand dollars rental, proclaims his ability to pay double the amount of rent, while the opposite inference would be drawn by his moving into a house having a rental value of two hundred and fifty dollars. This principle has been recognized for many years in some of the taxing sys- tems of European countries. It was proposed in this country many years ago by the late David A. Wells, 17 as a "Building Occupancy Tax," and was substantially indorsed in the re- "New York Tax Commission Report, 1872, "Theory and Practice of Taxation," p. 616 et seq. CONCLUSION. 325 cent report of the Tax Com mission of Massachusetts. It involves no personal return, there is no opportunity for per- jury or evasion, and it is reasonably certain and uniform in its operation. Under the law proposed by the Massachu- setts Commission, there was an exemption of rentals below four hundred dollars per annum, while a tax of ten per cent was levied upon the excess of the rental value above that sum. It would be immaterial under this system whether a taxpayer owned his residence or lives in a rented house, apartments or a boarding house. In any case he would pay taxes on his income according to the rental value of the premises occupied. It is true that the assumption that the rental paid bears an average relation to a man's income would fail in certain cases. Thus some men are miserly and live below their means; but on the other hand, other men, from a desire for social ostentation, live above them. The eases of misers would be measurably reached by an inheritance tax, which would be a useful supplemental tax in such a case in adjusting the inevitable discrimination of an income tax against professional men, who live by earnings from personal services, as compared with those who live on the income of invested capital. But the income tax has not been adopted in any of the United States as the main basis of a tax system, that is, as a substitute for all property taxes. It rests on a radically different principle, it is personal and subjective, while the property tax is objective, dealing in things and not with persons. It would be impracticable to dispense with the property tax on real estate, and therefore the income tax, where adopted in any of the United States, is in a modified form, merely supplemental to property taxation. 326 MISSOURI TAXATION. Double Taxation Where Income Tax is Levied with Prop- erty Tax. Where an income tax in any form is levied with any property tax, justice requires that the income from property already taxed, should not be subjected to the income tax. Thus if a property tax is levied upon real estate, income from the rentals should be exempted, as a tax upon the income of land is in effect a tax upon land. 18 So if a property tax or income tax is levied upon corporations, the income from stock and bonds in such corporations should be exempted. All that would be left for such a tax to reach, where real estate and corporations are so taxed, would be the income from services or profits from busi- Massachusetta ness. This principle seems to have been income Tax. recognized wherever the income tax has been adopted in American States. 19 Thus in Massa- chusetts the tax is upon income from services, the income from property taxed being exempt. Virginia has had for many years such a tax upon income from interest or profits. It would therefore follow that the only place for the j\ist operation of an income tax in this State, with the taxa- tion of real estate and corporations, would be upon the in- come from services and business profits, and any form of income taxation, as by a house occupancy tax, apparently the most practicable and efficient form, should provide for the exemption of all incomes from property already taxed. Taxation of Merchants and Manufacturers. The present taxation of merchants upon the returns of their stock of merchandise, and of manufacturers upon their manufacturing plant and manufactured goods is ineffective for the same reason that the personal property tax is ineffect- ive. It is based upon individual returns and valuations (in "United States Supreme Court in Income Tax Cases. "But not in the Civil War Income Tax in Missouri, supra, p. 34. CONCLUSION. 327 St. Loiiis on secret returns), and such a system, necessarily discriminates against the scrupulous and in favor of the un- scrupulous. It practically leaves every merchant and manu- facturer to be taxed on his own private estimate of the tax- able value of his property, and he is told at the same time, in the decisions of our Supreme Court, that the purpose is to tax him "equally" with other people, and "on the actual capital invested in his business." The contrast between an ineffective and an effective sys- tem of taxation is afforded by a comparison of the taxation of merchants and manufacturers with that of banks and trust companies. The former are required to return for taxation the value of their stocks of merchandise, machinery and manufactured goods, which may be and usually are much more than their capital, while the latter are taxed upon the actual net capital and surplus. The result is that while the aggregate of merchandise in the State is many times greater than the aggregate capital and surplus of banks and other corporations named, yet their valuations for taxation are not far apart. Moreover, this method of taxing merchants and manu- facturers is not only ineffective, in that it fails to reach even the capital invested, but because it is ineffect- The Merchants- i ye > ** i s unequal and unjust. Kbt only does Tax unjust. ^ discriminate against the scrupulous and in favor of the unscrupulous, as such a system of taxation always must, but it discriminates also against the merchant who is compelled to carry a large stock of goods with frequent sales, and also against the manufacturer who is obliged to constantly renew his machinery. But apart from these considerations, such a method of taxation is as unwise as it is inefficient and unjust. Our merchants and manufacturers are compelled Merchant's Tax to compete with those of other States and unwise. countries, and oppressive and unjust taxation 328 MISSOURI TAXATION. hampers them in the intense competition which they are com- pelled to meet and is injurious to the interests of the State, as our mercantile and manufacturing interests give value to real estate. What would the real estate of the State be worth without our mercantile and manufacturing interests ? Here we can substitute an effective for an ineffective tax, by applying the principle of the rental or occupancy tax above explained. The rental value of the store or factory can be readily valued. The merchant who pays a rental of one thousand dollars a year may be assumed to be able to pay ten times the tax of one who pays a rental of one hundred dollars a year. Real estate where owned by tbe occupant would be taxed separately as it is now. This sys- tem would be effective and has worked satisfactorily in other countries. It is true, that in some classes of business the premises occupied would not indicate the extent or the profit- able character of the business, but such taxation is necessarily approximate, and profits of the business invested in other property would become at once taxable. Here again the inheritance tax would be a useful supplemental tax. Limitations Upon the Taxing Power. Incidental mention has been made of the limitations upon the taxing power of the State, growing out of the dual character of our government. The citizen of Missouri is a citizen of the United States, is subject to two sovereignities, and must pay tribute to both. Neither sovereignty can tax the instrumentalities or properties of the other. These questions have been considered in connection with interstate railroad taxation. Thus in several notable cases, taxes levied by the State of Missouri have been annulled by the Supreme Court of the United States, as in the attempted taxation of educational, charitable and railroad property, theretofore ex- empted by charter contracts, the attempted taxation of prop- CONCLUSION. 329 erty out of the State's jurisdiction, and in the discrimination in favor of domestic goods in the peddlers' license tax case. So as to the restraints of our State Constitution. The Legislature of Missouri, however, has had frequent warnings of the necessity of observing constitutional requirements in exercising the taxing power. Thus the discriminations against merchants and department stores, the collateral in- heritance and other taxes for the State University, the taxa- tion of railroad cars and the act for the sale of public fran- chises, have all been declared void. Practical Limitation of the Taxing Power. But limitations in the Constitution may be removed by amendment, and Mr. Lowell has wisely said that Constitu- tions obstruct the whim, and not the will of the people. It has been shown also that the exercise of the lawful power of the State, as in the character of property located or secured in other jurisdictions, may involve double taxation, and that there are other forms of injustice and oppression in taxation, that no constitutional limitations can wholly remedy. While the State is theoretically sovereign in taxa- tion, there are certain practical limitations upon the taxing power, which inevitably, in the nature of things, tend to enforce prudence and justice in the exercise of this power. Under our dual form of government, the wealthy citizen has a protection against oppressive taxation which no other country affords. He can move his residence and establish his domicile at his seaside cottage or at his home in the mountains, instead of at his city dwelling place. This escape from oppressive taxation in cities does not require removal from the State, and has been frequently resorted to by those wishing to escape the oppressive taxation of eastern cities. The citizen can also remove his city residence to New York or some other eastern city, as was done by a number of citizens of California and Ohio in recent years for the very 330 MISSOUEI TAXATION. reason of oppressive taxes. The latter State 20 resorted to the drastic Experience of plan of farming out the collection of its Ohio. revenue, as under the Eoman Empire, in order to reach the taxpayers who refused to submit to confiscation by taxing their personal holdings. The result was to drive a number of cases out of the State. It is said that there are a number of such cases, citizens of Ohio, who removed to New York in the last few years. There are indications that we shall have States inviting through liberal tax laws, wealthy men to reside therein, just as we now have corporation-inviting States, competition for as New Jersey and Delaware, which are said to Through Tax succeed in paying the expenses of their State Laws - governments, from the fees paid by the great corporations which are induced to organize under their laws. In like manner, States may offer liberal inducements to wealthy men to make their domiciles there throtigh tax laws which do not require concealment or evasion or perjury to escape confiscation. We had an interesting illustration of this in the recent message of the Governor of Vermont to the Legislature of that State, recommending that the towns of Recommendation tne State, which has many attractions for in Vermont. summer homes, should be allowed to contract with citizens coming from other States for a certain amount of personal taxes to be paid for a period of years in lieu of all returns for taxation. The State of Connecticut a few years since adopted a system whereby holders of bonds could register them with the Secretary of State and pay a tax of two Connecticut dollars for every thousand dollars of bonds, of Bonds. this rate being fixed for a term of years; while if the bonds were not so registered they were M Tax: Inquisitor System in Ohio," Yale Review, Feb. 1897. CONCLUSION. 331 subject if discovered by the assessor to the general local taxes, which was about ten times greater. This change of residence will naturally be a remedy open to that increasing class of wealthy men which is not bound to any locality by business or social ties. But the average man who is so bound, and certainly the trust estates and the dependent classes, must remain. This is the ine- vitable result of drastic legislation, attempting the impos- sible. The very class against which it is aimed can escape; others can not. The same condition applies with even greater force to the case of non-resident business competition for cap it a l. States will find it to their advantage Manufacturing r ~ investment. to compete in the fairness and justice of their taxation laws. In the economic tendency of the time to concentration, not the least important considera- tion for the location of great manufacturing plants will be the fairness of the taxation laws of the State and locality. It is well known that many communities of the country have competed for the location of such plants, by contracts for exemption from municipal taxation for term of years. Citizens of St. Louis will recall an illustration of this very near home, as manufacturing plants have been moved from St. Louis across the river to East St. Louis under such con- tracts of exemption from local taxation. Governor Stephens has well said in his message already quoted, supra, p. 279, vetoing the Slate Bill for the listing of notes : If -capital is driven out of the state, it will be necessary to in- crease the assessments of farm lands, and will result in a great decline in values. This practical consideration of the dependence of real estate upon property, which can be readily removed from State to State, was forcibly expressed some years since, with 332 MISSOURI TAXATION. reference to the taxing system of another State in the follow- ing maxim: "Never tax anything that will be of value to your State, that could and would run away, or that could and would come to you." 21 Such considerations are not reasons for relieving any property of its just share of public burdens. But they fur- nish conclusive evidence of the Imitations existing in the very nature of things, which render futile the attempt to enforce oppressive or unjust taxation upon movable prop- erty, even when within the constitutional power of the State. Thus the dictates of policy enforce the demands of jus- tice. 21 Enoch Ensley, Memphis Tenn., in pamphlet "What shall be taxed and how shall it be taxed," quoted at length in Wells' "Theory and Practice of Taxation/' p. 556. TABLE OF CASES. SUPREME COURT OF MISSOURI. PAGE. Adelphia Lodge v. Crawford, 57 S. W. Rep. 1020 90 Austin v. State, 10 Mo. 591 42 Barnard v. Knox County, 105 Mo. 382 164 Bishop's Residence Co. v. Hudson, 91 Mo. 671 89 Black v. MeGonigle, 103 Mo. 192 211 Blevins v. Smith, 104 Mo. 583 227-230 Boatmen's Bank v. Grewe, 101 Mo. 625 231 Book v. Earl, 87 Mo. 246 165 Cape Girardeau v. Buehrmann, 148 Mo. 198 218 Cape Girardeau v. Riley, 72 Mo. 220 141 Chambers v. St. Louis, 29 Mo. 543 91 Center Building Co. v. St. Joseph, 108 Mo. 304 203 City of Aurora v. McGannon, 138 Mo. 38 129-138 CHy of Carthage v. First National Bank, 71 Mo. 508 125 City of Clinton v. Henry County, 115 Mo. 557 193 City of Jefferson v. Curry, 71 Mo. 85 233 City of Jefferson v. Whipple, 71 Mo. 519 227-231 City of Hannibal v. County of Marion, 69 Mo. 571 160 City of St. Louis v. Laughlin, 69 Mo. 289 136 Copeland v. St. Joseph, 126 Mo. 417 92 Dallas County v. Merrell, 77 Mo. 573 79 Dameron et al. v. Jamison, 143 Mo. 483 229 De Armond v. Williams, 93 Mo. 158 219-222 Express Company v. St. Joseph, 66 Mo. 675 179 Farrar v. St. Louis, 80 Mo. 379 195 Fitterer v. Crawford, 57 S. W. Rep. 532 90 Fleekenstein v. Baxter, 114 Mo. 493 228 Getchell v. Messmer, 87 Mo. 131 227 Glasgow v. Rowse, 43 Mo. 479 59-322 333 334 TABLE or CASES. Graves v. Ewart, 99 Mo. 13 228 Hamilton v. St. Louis County Court, 15 Mo. 1 30 Harrison v. Cravens, 126 Mo. 233 228 Heman v. Allen, 57 S. W. Rep. 559 198 Hoskinson v. Helferstine, 80 Mo. 140 244 Insurance Co. v. Assessors, 56 Mo. 503 52-289 Johnson v. Duer, 115 Mo. 366 199 Kansas City v. Bacon, 57 S. W. Rep. 1045 199 Kansas City v. Grush, 151 Mo. 126 181 Kansas City v. Medical College, 111 Mo. 141 92 Kansas City v. Morton, 117 Mo. 446 199 Kansas City Grading Co. v. Holden, 107 Mo. 305 199 Kansas City v. Whipple, 136 Mo. 474 181 Lamar v. City of Lamar, 128 Mo. 188 161 Laughlin v. City of St. Louis, 69 Mo. 289 136 Levee Co. v. Hardin, 27 Mo. 495 192 Life Association v. Assessor, 49 Mo. 513 52 Lionberger v. Rowse, 47 Mo. 67 57 Lockwood v. St. Louis, 24 Mo. 20 193 Maguire v. Savings Association, 62 Mo. 344 243 Matthews v. Kansas City, 80 Mo. 231 243 Michel v. St. Louis, 112 Mo. 610 241 Mowrer v. Half erstine, 80 Mo. 23 243 Mosley v. Riley, 126 Mo. 124 228 Murnane v. St. Louis, 123 Mo. 479 194 Myers v. Bassett, 84 Mo. 419 227-230 Newby v. Platte County, 25 Mo. 258 31-192 North St. Louis Gymnastic Soc. v. Hudson, 85 Mo. 32 94 North Mo. R. R. Co. v. Maguire, 49 Mo. 490 53 Northwestern Masonic Aid Ass'n v. Waddill, 138 Mo. 628 127 Overall v. Ruenzi, 67 Mo. 203 241 Pacific Railroad Co. v. Maguire, 51 Mo. 142 53 Potter v. Douglas County, 87 Mo. 240 165 Powell v. Greenstreet, 95 Mo. 13 229 Powers, In re, 62 Mo. 218 218 Railroad Co. v. Apperson, 97 Mo. 300 112-221 Railroad Co. v. Scotland County, 65 Mo. 123 95 TABLE OF CASES. 335 Railroad Co. v. Shacklett, 30 Mo. 550 35 Railroad Co. v. State Board, 64 Mo. 294 96-239 Railroad Co. v. Thornton, 152 Mo. 570 166 Raley v. Guinn, 76 Mo. 263 229 Ranney v. Bader, 67 Mo. 476 243 Ray County v. Bentley, 49 Mo. 236 233 Reynolds v. Norman, 114 Mo. 559 165 Rubey v. Shain, 54 Mo. 207 243 St. Joseph v. Ernst, 95 Mo. 260 179 St. Joseph Public Schools v. Patton, 62 Mo. 444 69. St. Louis v. Bowler, 94 Mo. 630 180 St. Louis v. Consolidated Coal Co., 113 Mo. 83 180 St. Louis v. Freivogel, 95 Mo. 533 180 St. Louis v. Green, 70 Mo. 562 180 St. Louis v. McCann, 57 S. W. Rep. 1016 183 St. Lonis v. Manufacturers' Savings Bank, 49 Mo. 513 180 St. Louis v. Seibert, 123 Mo. 424 158 St. Louis v. Spiegel, 75 Mo. 145 179 St. Louis v. Spiegel, 90 Mo. 589 179 St. Louis v. Welton, 55 Mo. 288 51 St. Louis v. Wennecker, 145 Mo. 230 91 St. Louis v. Wiggins Ferry Co., 40 Mo. 580 58 St. Louis B. & L. Ass'n v. Lightner, 42 Mo. 382 124 St. Louis B. & L. Ass'n v. Lightner, 47 Mo. 393 124 St. Louis Public Schools v. St. Louis, 26 Mo. 468 193 St. Vincents College of Cape Girardeau v. Schafer, 104 Mo. 261 ... 94 Saleno v. City of Neosho, 127 Mo. 627 161 Scotland County v. Railroad Co., 65 Mo. 123 95 Simmons v. State, 12 Mo. 268 28-135 South Pac. R. R. Co. v. Laclede County, 57 Mo. 147 54 Speed v. St. Louis County Court, 42 Mo. 382 94 Sylvester Coal Co. v. St. Louis, 130 Mo. 323 241 State v. Cannon, 79 Mo. 343 .205 State v. Catron, 118 Mo. 280 125 State v. Cummings, 151 Mo. 49 21-266 State v. Emert, 103 Mo. 241 131 State v. Foulks, 57 Mo. 461 205 336 TABLE OF CASES. State v. Green, 70 Mo. 562 180 State v. North, 27 Mo. 465 44 State v. Railroad Co., 37 Mo. 265 35 State v. Railroad Co., 77 Mo. 202 52-104 State v. St. Louis County Court, 47 Mo. 594 216 State v. Scott, 96 Mo. 72 227 State v. Thayer, 58 S. W. Rep. 12 242 State v. Welton, 55 Mo. 288 49 State to use, etc., v. Rosenblatt, 70 Mo. 441 224 State ex rel. v. Ashbrook, 154 Mo. 375 86-242 State ex rel. v. Rank of Neosho, 120 Mo. 161 214 State ex rel. v. Bishop, 36 Mo. 49, 59 38 State ex rel. v. Brassfield, 67 Mo. 331 74 State ex rel. v. Bridge Co., 109 Mo. 253 118 State ex rel. v. Bridge Co., 134 Mo. 321 112 State ex rel. v. Brown Tobacco Co., 140 Mo. 218 219 State ex rel. v. Burr, 143 Mo. 209 220 State ex rel. V. Buchanan County, 108 Mo. 235. . 212 State ex rel. V. Catron, 118 Mo. 280 125 State ex rel. v. County Court, 142 Mo. 575 159 State ex rel. v. Cunningham, 153 Mo. 642 ; . . * 211-240 State ex rel. v. Cummings, 151 Mo. 49 210 State ex rel. v. Davis, 131 Mo. 457 212 State ex rel. v. Edwards, 136 Mo. 360 219 State ex rel. v. Field, 119 Mo. 593 158 State ex rel. v. Fullerton, 143 Mo. 683 231 State ex rel. v. Heman, 70 Mo. 441 231 State ex rel. v. Garroutte, 67 Mo. 445 72 State ex rel. v. Howard County, 69 Mo. 454 215 State ex rel. v. Hager, 91 Mo. 452 76-77 State ex rel. v. Hoyt, 123 Mo. 348 208 State ex rel. v. Holliday, 72 Mo. 499 79 State ex rel. v. Hudson, 78 Mo. 302 158 State ex rel. v. Hunter, 98 Mo. 386 228 State ex rel. v. Hurt, 113 Mo. 90 227 State ex rel. v. Kinney, 48 Mo. 373 141 TABLE OF CASES. 337 State ex rel. v. Linn County Court, 44 Mo. 504 73 State ex rel. v. Lounsberry, 125 Mo. 157 238 State ex rel. v. Macon County, 68 Mo. 29 73 State ex rel. v. Mason, 54 S. W. Kep. 154 158 State ex rel. v. McCausland, 154 Mo. 185 218 State ex rel. v. Moss, 69 Mo. 495 214 State ex rel. v. O'Brien, 89 Mo. 631 177 State ex rel. v. Owlsley, 122 Mo. 68 158 State ex rel. v. Payne, 151 Mo. 663 165 State ex rel. v. Phillips, 102 Mo. 664 209 State ex rel. v. Phillips, 137 Mo. 259 238 State ex rel. v. Pike County, 144 Mo. 275 158 State ex rel. v. Powers, 74 Mo. 476 89 State ex rel. v. Railroad Co., 87 Mo. 236 163 State ex rel. v. Railroad Co., 89 Mo. 523 95 State ex rel. v. Railroad Co., 97 Mo. 296 163 State ex rel. v. Railroad Co., 97 Mo. 348 103 State ex rel. v. Railroad Co., 99 Mo. 30 95 State ex rel. v. Railroad Co., 101 Mo. 120 95-107 State ex rel. v. Railroad Co., 101 Mo. 136 95 State ex rel. v. Railroad Co., 110 Mo. 265 103 State ex rel. v. Railroad Co., 113 Mo. 297 95 State ex rel. v. Railroad Co., 114 Mo. 1 227 State ex rel. v. Railroad Co., 116 Mo. 15 162 State ex rel. v. Railroad Co., 117 Mo. 1 102 State ex rel. v. Railroad Co., 123 Mo. 72 160 State ex rel. v. Railroad Co., 135 Mo. 77 112 State ex rel. v. Railroad Co., 135 Mo. 618 102-112 State ex rel. v. Rogers, 79 Mo. 283 125 State ex rel. v. Sehooley, 84 Mo. 447 238 State ex rel. v. Scott, 96 Mo. 72 227 State ex rel. v. Seahorn, 139 Mo. 582 208 State ex rel. v. Severance, 55 Mo. 378 103 State ex rel. v. Shortridge, 56 Mo. 126 73 State ex rel. v. St. L. & K. C. R. R. Co., 77 Mo. 203 35 State ex rel. v. St. Joseph Convent, 116 Mo. 575 94 MO. TAX. — 22. 338 TABLE OF CASES. State ex rel. v. St. Louis County Court, 34 Mo. 546 158 State ex rel. v. St. Louis County, 84 Mo. 234 115 State ex rel. v. Spencer, 114 Mo. 574 205 State ex rel. v. Springer, 134 Mo. 212 213-239 State ex rel. v. Stephens, 146 Mo. 662 116 State ex rel. v. Stone, 119 Mo. 668 103 State ex rel. v. Switzler, 143 Mo. 287 85-149-242 State ex rel. v. Tittman, 103 Mo. 553 227-236 State ex rel. v. Traey, 94 Mo. 217 138-144 State ex rel. v. Vail, 122 Mo. 33 97 State ex rel. v. Walker, 85 Mo. 41 79 State ex rel. v. Wardell, 153 Mo. 319 92 State ex rel. v. Wood, 56 S. W. Rep. 474 242 Taylor v. St. Louis County Court, 47 Mo. 594 60-155 Thomas v. Chapin, 116 Mo. 396 238-244 Traey v. Missouri, 3 Mo. 3 41 Valle v. Ziegler, 84 Mo. 214 215 Verdin v. St. Louis, 131 Mo. 126 241 Ward v. Board of Equalization, 135 Mo. 309 124-239 Warrensburg v. Miller, 77 Mo. 56 243 Washington University v. Rowse, 42 Mo. 308 54 Webb v. Lafayette County, 67 Mo. 353 74 Westlake v. St. Louis, 77 Mo. 47 243 ST. LOUIS COURT OP APPEALS. Howard County v. Stile, 14 Mo. App. 584 230 Matney v. Bogdston, 27 Mo. App. 36 173 ST. LOUIS CIRCUIT COURT. Hays v. St. Louis, April 2, 1900 200 SUPREME COURT OP CALIFORNIA. Hewett v. Dean, 91 Cal. 5 287 London & S. P. Bank v. Bandmann, 120 Cal. 221 287 NEW YORK CASES. Barr's Estate, In re, 38 N. Y. Supp. 811 156 Bronson's Estate, In re, 150 N. Y. 1, & 34 L. R. A. 238 156 TABLE OF CASES. 339 Hondayre's Estate, 150 N. Y. 57, & 35 L. R. A. 235 156 Whiting's Estate, 150 N. Y. 27, & 34 L. R. A. 232 156 PENNSYLVANIA CASES. Orcutt's Appeal, In re, 97 Pa. 179 156 UNITED STATES SUPREME COURT. Aberdeen" Bank v. Chehalis County, 166 U. S. 449 58 Adams Express Co. v. Kentucky, 166 U. S. 171 105 Brown v. Maryland, 12 Wheaton, 419 41-46 California v. Pacific R. R. Co., 127 U. S. 40 298 Cummings v. Bank, 101 U. S. 153 255 County of Cass v. Johnston, 95 U. S. 360 74 Craig v. Missouri, 4 Peters, 410 20 Douglas v. Pike County, 101 U. S. 677 75 Emert v. State of Missouri, 1'56 U. S. 296 131 Erie Co. v. Pennsylvania, 158 Mo. 431 105 Findlay v. McAllister, 118 U. S. 104 78 Gundling v. Chicago, 177 U. S. 188 134 Harshman v. Knox County, 122 U. S. 306 73 Harshman v. Bates County, 92 U. S. 569 74 Home of the Friendless Case, 8 Wallace, 430 55 Income Tax Cases, 157 U. S. 429 and 158 U. S. 601 326 Keokuk & N. W. R. Co. v. Missouri, 152 U. S. 301 95 Kirtland v. Hotchkiss, 100 U. S. 491 216 Knox County Court v. United States, 109 U. S. 229 73 Knowlton v. Moore, 20 Sup. Ct. Rep. 747 151 License Tax Cases, 5 Howard, 504 47 Lionbcrger v. Rowse, 9 Wallace, 468 57 Macon County v. Huidekoper, 134 U. S. 332 77-160 Magoun v. 111. Trust & Savings Bank, 170 U. S. 283 151 Maine v. Railroad Co., 142 U. S. 217 105 May v. New Orleans, 20 Sup. Ct. Rep. 976 94 Nicoll v. Ames, 173 U. S. 509 321 New Orleans v. Stempel, 20 Sup. Ct. Rep. 110 216 North Mo. R. R. Co. v. Maguire, 20 Wallace, 46 54 Norwood v. Baker, 172 U. S. 269 198 Pacific Express Co. v. Seibert, 142 U. S. 330 120 340 TABLE OF CASES. Pacific E. R. Co. v. Maguire, 20 Wallace, 36 53 Pullman Palace Car Co. v. Penn, 41 U. S. 18-22 216 Pluramer v. Coler, 20 Sup. Ct. Rep. 829 154 Railroad Co. v. Backus, 154 U. S. 421 105 Railroad Tax Oases, 92 U.< S. 575, p. 605 107 Ralls County v. United States, 105 U. S. 733 72-76 St. Louis v. W. U. Tel. Co., 148 U. S. 92 189 St. Louis v. Wiggins Perry Co., 11 Wallace, 423 59 Savings Society v. Multonomah County, 169 U. S. 429 216-284 State ex rel. v. Winterbdttom, 123 U. S. 215 78 Union Refrigerator Co. v. Lynch, 20 Sup. Ct. Rep. 630 117 United States v. County of Clark, 96 U. S. 211 73 Washington University Case, 8 Wallace, 439 55 Welton v. Missouri, 91 U. S. 275 130 UNITED STATES CIRCUIT COURT. Pay v. City of Springfield, 94 Fed. Rep. 409 197 National Bank v. Papin, 4 Dillon, 29 125 United States v. Linn County 5 Dillon, 184 76 United States v. Johnson, 5 Dillon, 107 76 In re Oopenhaver, 54 Fed. Rep. 660 80 Pacific Express Co. v. Serbert, 44 Fed. Rep. 310 119 UNITED STATES CIRCUIT COURT OF APPEALS. Taylor v. L. & N. R. R. Co., 31 C. C. A. 537 255 INDEX. PAGE Area Rule in St. Louis Public Improvements 194 Sustained in Missouri Supreme Court 199 Assessments, The Annual 203-316 by Assessors 206 of Banks and Trust Companies 121 of Chattels 261 County and City 202 for Back Years 218 Date of 21-34-218 of Estates in Probate 266 of Domestic Insurance Companies 123 of Foreign Insurance Companies 129 in St. Louis . .% 202-255 for Local Improvements 30-192 of Local Property of Railroads 102 of Railroad Property 102 of Railroads for 1899 100 of Railroads for 1900 100-108 of Real Estate 316 of Street Railroads 112 by State Board of Equalization in 1899, 1900 100 Place of 218 no Uniformity in Counties 245 Assessments under St. Louis Charter 202 Assessors, Election of 202 State Conference of 251 Annexed City Territory not Exempt 92 Agricultural and Horticultural Societies, Exemption of 91 Arbitrary Classification void 131-179 341 342 INDEX. Anti-Department Store License Law Held Void 86-132 Abolition of Direct Personal Tax 318 Abolition of Personal Inquisition 316 Apportionment by Counties to School Districts of Railroad Taxes 103 of Railroad Taxes to Counties 102 of State School Moneys 8-36-37 Appropriation of State Revenue to Schools 6 Attorney's Pees as Costs in Tax Suits 228 Attorney-General on Franchise Taxation 294 Attorneys, Taxation of 15-27-136 Taxation of Held Constitutional 28 Auditor of State, Recommendations of 280 on State Conference of Assessors 251 on Board of Equalization 251, 253, 280, 281, 312 Bachelors, Taxation of 13, 19, 20 Basis of Valuation of Notes, etc 253, 269 of Railroad Property 106 of Real Estate 248 of Real Estate in St. Louis 255 of Street Railroads 114 Beer Inspection Law 84 Birch, Judge, in State v. Crow 43 Bridge and Telegraph Companies, Taxation of 117 Bishops' Residence Exempt 89 Board of Equalization in St. Louis 209 Bonded Debt of Counties, Cities, etc 7 of Missouri 3 in St. Louis 186 Building and Loan Associations, Taxation of Shares in 123 Building Occupancy Tax 327 California and Missouri Plans of Mortgage Taxation Compared. . 284 System of Mortgage Taxation 283 System of Mortgage Taxation, Failure of 287 Capitalization of net Earnings of Railroads for Taxation 107 Cars not the Property of Railroad Companies, Taxation of 115 Act for Held Unconstitutional 116 Cash Value, What is 252, 256, 269 INDEX. 343 Chamber of Commerce of St. Louis, Memorial of 45 "Charitable Uses" Defined 89 Use Must be Exclusive 90 Classification, Constitutional of Cities 174 of Counties for Taxation by Valuation 162 Clergymen, Local License of Prohibited 136 Certificates, State 3 Certiorari as Remedy for Illegal Taxation 239-311 Chicago, Taxation of Merchants Compared with St. Louis 147 City Comptroller of St. Louis on Assessments 220 Powers of in Assessments 220 Civil War Taxation 33-34 Collection of Taxes 220 Delinquent Taxes 224 of Delinquent Municipal Taxes 233 of Delinquent Taxes Prior to 1877 224 of Taxes in Counties 221 of Taxes in St. Louis 220 of Railroad Taxes 112 Collector, Personal Liability of 243 Summary Powers of 222 Comparison Between 1877 and 1897 in St. Louis Personal Prop- erty Assessments 263 Competition Between States in Tax Laws 330 of Localities for Manufacturing Investments 331 Conference of State Assessors 251 Connecticut, Taxation of Bonds in 330 Taxation of Corporate Stock in 304 Congressional Townships 6 Oottey Bill 75-162 Commissioner of Labor Statistics, Report of 1898 247 Confiscatory Income Tax, personal property tax a 267 Conflict Between State and Federal Courts 71 Contractual Exemptions 94 a personal Privilege 95 Conspiracies to Prevent Payment of Taxes Illegal 78 344 INDEX. Constitution of 1820 on Schools 63 Taxation Under 18 of 1865, Taxation Under 51 Construed by Supreme Court 52 of 1875, Taxation Under 66 on Investment of School Funds 4, 6, 7 on Sinking Fund 4 on Taxation 66 as to Railroad Taxation 67-104-66 Constitutional Amendment Proposed 87 as to Tax Rate Defeated 87 Exemptions 88 Limitations as to Rate of Taxation 67-160 Limitations Upon the Taxing Power 328 Costs in Tax Suits 228 Cooley, J., on License Taxation 133 Compromise Bond Legislation Held Valid 79 Compromise of Tax Suits 232 Corporate Property "Over and Above Capital Stock" 35 Corporations, Taxation of 19-23-34 Cloud Upon Title, Ground for Injunction in Tax Litigation 241 County and City Assessments 202 Board of Equalization 208 Court, Powers of in Assessments 219 Finances Demoralized 164 Judges Imprisoned 80 County License Taxation 133-167 Organization 4 Taxation 20-162 Limitation of Tax Rate 20-162 Warrants in Payment of Taxes 165 Counties, Table of Rate of Valuations 249 Church Personalty not Exempt 92 Curators and Trustees 218 Date of Assessments 21-34-83 Dramshop Licenses 158 Debts, no Deduction for 217 Department Store License Tax Held Void 86-132 INDEX. 345 Delegation of Taxation, Constitution on 157 to Municipalities 174 Defenses in Tax Suits 237 Definition of "Franchises" by Blackstone 298 in House Bill No. 408 297 by United States Supreme Court 298 Delinquent City Taxes 233 Taxes in Texas, System for Collection of 225 Taxes, See "Collection of." Discriminating Peddlers' License Tax Held Void 49-130 Napton, J., on 49 Tax on Merchants 40 Discriminations Against Foreign Goods Held Unconstitutional .... 47 Judge Scott on 48 Rural Districts in Personal Property Tax 261, 317 In Assessments Between Individuals 248-257 in St. Louis Charter in Tax Valuation Void 176 in Tax Rate in St. Louis' New Limits 177 Dower, Inchoate in Tax Suits 227 Doctors, License of 15-27 "Doomage" Process in Assessments 263 Double Taxation 318 Avoidance of 318 How to Avoid in- Franchise Taxation 303 Income Tax with Property Tax 326 in Taxation of Mortgages 259 of Merchants 142 of Merchants Held Unconstitutional 43 of Personal Property of Residents out of Jurisdiction 217 Under Inheritance Tax Laws 154-320 Enlarged Local Control in Taxation 314 Earnings, Gross, Taxation of Ill Embarrassment of County Finances 164 of St. Louis Finances 184 Evasion of Taxation by Change of Investment 271 Effect of Constitutional Limitations on Tax Rate 246 Ensley on Taxation of Movable Property 332 346 INDEX. Equalization by State Board of Banks, etc 122 Equality of Valuation 246 Effective and Ineffective Taxation of Personal Property 317 Features of Taxing System 310 Election of Assessors 202 Exemption of Annexed City Territory Unconstitutional 92 Contractual 94 Exemption in Merchants' and Manufacturers' Tax and Real Es- tate Sales Repealed 93 on Sales of Books, etc 27 of State and County Bonds 30 Expenditures for Permanent Public Improvements in St. Louis 185 Experience of Other States in Personal Property Tax 272-277 Ex-President Harrison on Personal Property Tax 275 Express Companies, Taxation of 119 Express Companies' Tax in U. S. Supreme Court 120 U. S. Circuit Court 119 Eminent Domain 200 Economic Tendencies 274 Exclusive Charitable Purpose Denned 90 Ely, Professor, on General Property Tax 273 Farm Land Assessments 250 Farmers, Legislation for 26 Failure of California Mortgage System , . 288 of General Property Tax ' 245-259 of Personal Property Tax 259 Franchises of Express Companies 118-295 Franchise Eights, etc., not Taxed by St. Louis Board 214 Franchise Taxation and Compensation to Municipality Dis- tinguished 304 in New York 293 in New Jersey 293 Demand for 293 and Special Franchise Payments 307 Under Existing Statutes 294 Fraudulent Assessments, Penalty for 213 Federal Taxation in Missouri 8 INDEX. 347 First General Corporation Tax 23 Tax on Banks 19 Tax on Corporations 19 on Money, Notes and Brokers 24 Eevenue Act by Indiana Judges 12 Foreign Insurance Companies 127 Forfeiture, None to State in Tax Sales 229 Frontal Rule for Street Improvements 194 "Full Cash Value" in St. Louis 270 in State Board 270 in Supreme Court 270 General Assessment for Property Tax 7 201 Property Tax Established 51-63 Property Tax, Failure of 245-259 Gross Earnings, Taxation of Ill Governor Brown, Message of 62 Dunklin, Message of 24 Francis, Message of 81 Francis' Estimate of Assessment Rate 247 King, Message of 44-45 King on License Taxation 44 Phelps on Exempting State Bonds 33 Phelps on Poll Tax 71 Phelps on Tax Evasion 71 Reynolds, Message of 25 Stephens' Veto Message on Slate Bill 278 Stone, Message of on Imprisonment of County Judges 82 Stone, Message on Railroad Taxation 82 Hadley, President, on Efficiency and Equality in Taxation 322 Historical Periods .' 9 Home of the Friendless, Property of Held Exempt 54 House Bill "408," 1899, for Taxation of Franchises 296 Intangible Personal Property, Taxation of 263 in St. Louis 262 Increase of Tax in School Districts 171 of Taxable Wealth 70 of Tax for Public Buildings, no Charter Authority for in St. Louis 188 348 INDEX. Ineffectual Attempts to Amend Constitution 86 Acts of the General Assembly 99 Ineffective Features of Taxing System 310 Interstate Commerce, Taxation of Property Employed in 105 Irreparable Injury in Injunction 241 Inheritance, Taxation of, Acts of 1895 and 1897 149-320 Held Unconstitutional 84-149 Act of 1899 152 of Illinois 151 of United States 151 Inequality in Assessments 245-253 of Assessments in Counties 253 Inequalities Between Individuals 258 Between Different Classes of Property 253 Investigating Committee of 1899, Iteport 114, 145, 256-271 Illinois Progressive Inheritance Tax Sustained by Supreme Court. 151 Incidence of Taxation 321 Indictment for Perjury in Assessment Oath 205 Indiana Governor and Judges, Government by 12 Income Tax, See "Taxation" 324 Discrimination Against Professional Incomes 323 Held Constitutional 58 Inquisitorial 323 Judge Wagner on 59 Merits of 323 and Property Tax 326 Introductory 1 Injunction .' 240 Issue of Bonds Prohibited in St. Louis 186 Insurance Companies, Domestic, Taxation of 121 Foreign, Taxation of 127 Judgments in Land Tax Suits 228 in Suits for Personal Taxes 235 Lien of 228 Jurisdiction of County Boards of Equalization 209 of State Boards of Equalization 100 INDEX. 349 Kansas City, Taxation in 188 Tax Rate Compared with St. Louis 175 Lawyers, Licensing of Held Constitutional 28, 134 Legislative Limitation of Tax Rate 252 Legislation for Farmers 26 Library Tax in St. Louis 176 Lien of Judgment in Tax Suits 228 License Taxation 128 License Taxation, Cooley, J., on 133 in Cities 177 in Counties 133 in Municipalities 177 in St. Louis 178 Must be Uniform 131-179 of Merchants, Judge Birch on 43 Missouri Supreme Court on 129 United States Supreme Court on 134 Licenses, Territorial 13 Licensing Lawyers and Doctors 15-134 Limitations of Actions in Tax Suits 231 as a Defense in Tax Suits 231-235 of Rate of County Tax 20 of School Tax Rate 169 Listing of Stockholders 124 Loan Certificates 19 Local Assessments 192 Under St. Louis Charter 193 License of Lawyers and Doctors Prohibited by Act of 1879. . . 136 Property of Railroads 102 Taxation of Merchants and Manufacturers 140 Taxation Under Constitution 157 Lotteries, Territorial License on 16 Louisiana Purchase 11 M. & N. R. R. Co., Charter Conflict 72 Massachusetts, Income Tax in 326 Report of Tax Commission 272 350 INDEX. Manufacturers, See "Taxation of" 35-50-83-138-326 MeCann, J., Prosecution of for License Tax 308 Merchants and Manufacturers not Affected by Repeal of One Year Exemption 140 Tax, Defects of 146-326 in St. Louis 142 Merchants, Taxation of 26 Messages of Governors 24 Message of Governor Stone on Railroad Taxation 80-108 Memorial of St. Louis Chamber of Commerce 45 Mileage Rule in Missouri 106 Miller, Justice Samuel, on Railroad Taxation 107 Michigan, Experience of in Mortgage Taxation 288 Military Commutation Tax 34 Missouri and United States Inheritance Tax Compared 153 Supreme Court on Washington University Exemption 54 Mortgages on Property in Other States 292 Proposed Taxation of 291 Proposed Taxation of in New York 290 Taxation of, California System 283 Taxation of, Massachusetts System 283 Taxation of 282 Mullanphy Fund, Estate not Exempt 91 Municipal License Taxation in Supreme Court 129 Townships 5 Napton, J., in State v. Austin 42 State v. Crow 44 State v. North 46 State v. Welton 49 on License Taxation 49-128 National Bank Stockholders, Taxation of Sustained 57 New Jersey Franchise Taxation 302 New York Franchise Taxation 299 Proposed Mortgage Tax 290 No Deductions for Debts Owing by Taxpayer 217 Non-Discriminating Peddlers' License Held Constitutional 131 Notes, Bonds, etc., Due from Nonresidents 215 INDEX. 351 Notice to Nonresidents 222 to Nonresidents in Tax Suits 225 to Taxpayers 207-212-213 to Taxpayers by Assessor 206 to Taxpayers of Board's Action, Supreme Court on 213 Organization of Street Railroads 113 "One Year Exemption" Repealed 92 Overplus at Tax Sales, Disposition of 232 Ohio, Experience of in Oppressive Taxation 330 Ordinance for Taxation of Railroads 53 Held Constitutional as to North Missouri R. Co 53 Held Unconstitutional as to Missouri Pacific R. Co 53 Place of Assessment 34 Parsonages Exempt 89 Parties in Tax Suits 226 Payment of Taxes 222 After Suit is Commenced 232 by Collector for Delinquent 222 Practical Difficulties in Franchise Taxation 305 Limitations upon Taxing Power 329 Pleadings in Tax Suits 226 Penalties in Tax Law not Unconstitutional 214 for False Returns 213 Permanent Public Improvements in St. Louis from Taxation 187 Plehn, Professor, on Failure of California Mortgage Tax 287 Peddlers' Discrimination License Law Held Void 130 License Law Constitutional 131 Peddlers of Pills and Patent Medicines, License of 27 Personal Property, Taxation of 259 in Ancient and Modern Society 261 Intangible 263 Tangible 261 Prima Facie Basis of Valuation in Banks and Bank Stocks 123 Principles of Railroad Taxation 104 Poll Tax 20-70-181 Poll Tax in Kansas City Held Void 182 Professors, Local License of Prohibited, See "Lawyers." 352 INDEX. Professor Ely on General Property Tax 273 Plehn on Mortgage Taxation in California 387 Seligman on Personal Property Tax 273 Taussig on Personal Property Tax 272 Progressive Inheritance Taxation in Missouri Unconstitutional and Constitutional in United States 150-151 Position of Federal Courts in Judicial Conflict 77 State Courts in Judicial Conflict 77 Powers of County Board of Equalization 209 State Board of Equalization 96 Proposed Franchise Tax Bill, See "House Bill 408." Property Exempt from Taxation 88 Subject to Assessment 214 Purchase by City Comptroller at Tax Sales 234 by State at Tax Sales 230 Purchaser at Tax Sales, Title of 229 Public Purpose of Taxation Declared by Supreme Court 84 Physicians, Local License of Prohibited, See "Lawyers." Rate of State Tax 38-64 of Tax in St. Louis 39-65 of Valuation and Rate of Tax 147 Railroad Systems in Missouri 104 Railroads, Taxation of 62 Ryland, J., in State v. Crow 44 Redemption from Tax Sales 230 Remedial Procedure, Uncertainty in 241-310 Remedies Proposed 277 Registration of Bonds for Taxation in Connecticut 330 Residence and Business Property in St. Louis 253-255 Report of Commissioner of Labor Statistics in 1898 247 Revenue Act of 1804 12 of 1806 13 of 1808 14 of 1814 15 of 1815 15 of 1816 15 of 1820 20 INDEX. 353 Revenue Act of 1822 20 of 1833 23 of 1835 23 of 1841 24 of 1843 25 of 1845 25 of 1847 27 of 1851 29 of 1857 32 of 1861 33 of 1866 52 of 1868 62 of 1871 62 of 1872 62 Eights of Assessors to Assess 205 Rights of Municipalities in Streets 189 Road Taxes 16-22-168 Rule of Assessment in St. Louis and in the Counties 269 Salaries of St. Louis Judges 30 Slate BUI, The 278 Vetoed by Governor Stephens 278 Slaves, Taxation of Abolished 34 Spanish Income Tax in Cuba 268 Rule, Taxation Under 11 Stages of Development in Missouri Taxation 9 State Aid to Railroads 31 Auditor Seibert's Recommendations 280 Board of Equalization 96 Board of Equalization Acts Judicially 100 Board of Equalization, Equalization of Taxes in 1900 98 Board of Equalization, Increased Powers of 97 Certificates of Indebtedness 3 Conference of Assessors 251 Control of County and Municipal Revenues 158 Debt 6 Revenue 7 Tax 3 354 INDEX. State University, Acts of 1895 and 1897 Endowing Same Held Un- constitutional 84-149 Statutory Changes, 1804-1820 11 1820-1865 18 1865-1875 61 1875-1900 83 Limitations of County Tax Rate 20 Limitations in St. Louis Tax Rate 39-65 St. Clair County Resistance to Tax Levies 80 St. Louis Assessments Personal Property 1877 and 1897 264 Assessments Personal Property 1900 265 Board of Equalization 209 Bonded Indebtedness 186 Can not Issue Bonds 186 Charter Amended 1888 177 Charter Amendments of 1898 Defeated 196 Charter Discrimination Held Void 176 Expenditures for Permanent Public Improvements 187 Finances, Embarrassments of 187 Judges, Salaries of, Tax for 30 and Kansas City Taxation Compared 175 Library Tax 176 Licenses Held Constitutional 183 Municipal Expenses 184 no County Tax 174 Power to License 178 Revenues in 1899 182 Rule of Valuation of Securities in Conflict with State Board. . 270 Taxing Power Under Charter 178 Seibert, James M. (See Auditor). Senate Investigating Committee of 1899 145-256-271 Separation of State and Municipal Revenues 257-311 Shearman, Thomas C, on Discrimination Against Farmers 261 On Taxation of Chattels 261 Sheriff's Deed in Tax Sales 229 Street Railroads, Organization of 113 Taxation of 112 INDEX. 355 Single Taxers, The 307 Situs of Personal Property for Taxation 60 Stone Act Held Unconstitutional 194 School Funds 8-16 School Taxation 21-36-63 Increase of 171 Increased in School Districts 171 in St. Joseph 38 in St. Louis 37-172 Tax, Merchants and Manufacturers in St. Louis 143 Succession Tax in St. Louis, the Personal Property Tax a 266 Supreme Court on Constitutional Limitation of Tax Rate 160 on Progressive Inheritance Tax 150 Suits Against Collector 243 Municipalities for Illegal Taxes 243 for Delinquent Taxes on Personalty 234 on Heal Estate 225 Taxable Wealth of Missouri 7 Tax Bills not Conclusive 210-237 Prima Facie Evidence 211 Tax Paid on Wrong Land, no Remedy for 244 Rate in St. Louis 183 Suits .' 226 Taxpayer's Oath 204 Tangible Personal Property 261 Taxation as Established in 1900 88 by School Districts 21-22-37-63-64-169 of Attorneys Prohibited, See "Lawyers." of Bachelors 13-19-20 of Banks as Compared with Other Property 126 of Banks, Trust Companies, etc 19-121 of Bridges and Telegraph Companies 117 of Cars not Property of Railroad Companies 115 of Clergymen Prohibited 28 of Corporate Stock 25 of Corporations 19-23 of Curators, etc 218 356 INDEX. Taxation of Estates in Probate 266 of Express Companies 119 of Franchises 293 of Franchises in New Jersey 302 of Franchises in New York 299 of Gross Earnings of Railroads Ill of Gross Earnings by Municipality Held Valid 179 of Incomes by Stoppage of Sources of Income 324 of Incomes Through Visible Signs of Income 324 of Insurance Companies 121 of Lotteries 16 of Manufacturers 35-50-83-138-326 of Merchants 26-40-138-326 of Merchants and Manufacturers in St. Louis 142 of Money and Notes 24 of Mortgages 282 in Municipalities 174 of National Banks Sustained 57-125 of Personal Property, See "Personal Property.'' of Property Employed in Interstate Commerce 105 of Professors and Clergymen Prohibited Locally 28-137 of Property of Residents Located in Other States 215 of Physicians Prohibited 28 of Railroads 62 of Residence and Business Property in St. Louis, See Same. of Street Railroads . . ._ 112 Under Constitution of 1820 18-39 Under Constitution of 1865 . . . . 51 Under Constitution of 1875 • 65 Under Territorial Government 11 Commission of Illinois on Personal Property Tax 272 Commission of Massachusetts on Personal Property Tax 272 Commission of New York on Personal Property Tax 272 Commission of W. Virginia on Personal Property Tax 272 Territory of Missouri 14 Township Bond Litigation 73 Bonds Authorized 61 INDEX. 357 Township Organization 5 Trust Companies, Taxation of, See "Banks.'' Estates, Taxation of 218-268 Urban and Rural Assessments in Missouri 262 Uncertainty of Remedial Procedure 241 University Endowment Tax Held Void 84 Uniformity in License Taxation, See "License Taxation." Union Military Bonds 38 United States Bonds not Exempt from Federal Inheritance Tax. . . . 154 Bonds not Exempt from State Inheritance Tax 154 Currency Made Taxable by Statute 93 Circuit Court in Pay v. Springfield 197 Exemptions 93 Inheritance Tax 153 Property Exempt 93 Supreme Court in Norwood v. Baker 197 Supreme Court on License Taxation 134 Supreme Court on Situs of Personal Property for Taxation. . . 216 Supreme Court on Taxation of Interstate Railroad Systems.. 105 Supreme Court on Taxation of Rolling Stock 117 Supreme Court on True Value of Railroads for Taxation. .105-107 Supreme Court on Washington University Exemption 55 Value for Sale and Value for Use 256 Valuation of Different Classes Compared 253 of Money and Securities in St. Louis 269 of Railroads as Compared with Full Value 108 Valuations of Railroads by State Board in 1898 109 of Railroads by State Board in 1900 110 of Street Railroads by State Board 113 of Street Railroads in St. Louis as Compared with Pull Cash Value 114 of Town Lots, etc 250 Vermont, Recommendation of Governor of 331 Warrants, County, in Payment of Taxes < 165 War Income Tax 33-34 Washington University Property Held Exempt 54 358 INDEX. Wiggin* Ferry Boats not Taxable in St. Louis 58 Widows and Orphans, Discrimination Against 267 Widows, Exemption of 30 World's Fair, Louisiana Purchase Proposed, Constitutional Amend- ment as to 4-187