LOUISIANA. TAX COMMISSION, 1906, REPORT . 793? REPORT OF THE Cornell University Library KFL 470.A88 Report of the Tax commission of Louisian 3 1924 024 679 791 TAX COMMISSION OF LOUISIANA Appointed Under Act No. 191 of 1906. BATON ROUGH: Tub Daily Stath, Official Jocbnal of Louisiana. 1008. Law Library Cornell Law School THE GIFT OF Date .(J(stJLffi<**irf ...'% !j.3j REPORT OF THE TAX COMMISSION OF LOUISIANA Appointed Under Act No. 191 of 1906. BATON ROUGE: The Daily Stath, Official Journal of Louisiana. 1908. Cornell University Library 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/cu31924024679791 REPORT OF THE TAX COMMISSION OF LOUISIANA. Appointed Under Act No. 191 of 1906. Hon. Edgar H. Farrar, Chairman, New Orleans, La. Hon. John A. Mcllhenny, Avery Island, La. Hon. M. H. Carv-" Natchitoches, La. Hon. W. O. Hart, Nev Orleans, La. Hon. Ovide Lacour, Lacour, La. Hon. Pearl Wight New Orleans, La. Hon. James O'Connor, -lev Orleans, La. Hon. Hampden Story, Crowley, La. Hon. Don Caffery, Jr., Franklin, La. Hon. Solomon Wolff, New Orleans, La. Hon. Philip Werlein, New Orleans, La. Hon. Charles Farwell, New Orleans, La. Hon. L. E. Bentley, Donaldsonville, La. Prof. A. T. Prescott, Baton Rouge, La. Hon. W. W. Wall, New Orleans, La. David Blackshear, Secretary, New Orleans, La. New Orleans, May 8, 1908. To His Excellency, Newton C. Blanch- ard, Governor of Louisiana. The Commission appointed by your Excellency under Act No. 191, adopted by the General Assembly of the State, at its session in the year 1906, "for the purpose of investigating the system and taxation and their execution in the State of Louisiana and other States of the Union," has the honor to report as follows: The Commission has examined the tax and assessment system of this State. An elaborate series of questions was propounded to all the assessors in the State. These questions were an- swered generally in detail and with frankness that we commend. We have also examined the assess- ment and tax laws of other States, and the reports "of the various tax commissions similar to our own which have been appointed in fourteen States of the Union. These tax commissions have had almost the same problems to deal with that presented themselves to us, as the system of taxation now in vogue in Louisiana is that generally operative in most of the other States of the Union. The conclusions that we have reached conform generally to the con- clusions reached by all these bodies, the main one being that a general property tjax system based on a con- stitutional requirement of e quality and uniformity is vicious, and leads to the I grossest inequality and injustice in I the distribution of the rurden of tax- ation. The extent of this injustice and in- equality in Louisiana is startling. In the volume "Wealth, Debt and Taxation" published by the Govern- ment of the United States in 1907, the estimated real T 'alue of real estate and its improvements is given, in one column and the value, as given by the assessment rolls for purposes of tax- ation is given in another column. In the table below, we put the figures side by side. In a third column we give the per cent that assessment values bear to estimated true values — calculated by the Commission — and, in still another column, we put the per cent of assessment value to esti- mated true value, as given by the asessors throughout the State for all classes of property for the year 1907. Exempt property is always excluded. PARISH. Estimated True Value. yalue for ssessment. Acadia $5,985,302 $2,992,651 Ascension 4,533,748 1,689,165 Assumption 5,952,6±6 2,168,410 Avoyelles 5,067,420 2,033,710 Bienville 1,685,410 842,705 Bossier 3,696,200 1,348,100 Caddo 16,235,9:0 4,817,460 Calcasieu 16,727,025 6,690,810 Caldwell 1,768,489 512,326 Cameron 1,641,700 656,680 Catahoula 2,342,930 ' 1,171,465 Claiborne 2,685,975 1,034,955 Concordia 3,317,640 829,410 DeSoto 3,247,165 1,763,805 East Baton Rouge. 5,651,065 3,100,710 East Carroll 2,411,288 964,515 East Feliciana 2,707,065 902,355 Franklin 1,643,412 657,365 Grant 2,260,174 1,130,087 Iberia 7,527,028 3,027,841 Iberville 7,120,840 2,060,420 Jackson 958,288 479,144 Jefferson 4,974,220 2,437,110 Lafayette 5,031,490 1,363,178 Lafourche 6,775,488 1,910,195 Lincoln 1,520,790 760,395 Livingston 1,101,710 550,855 Madison 2,319,820 1,009,910 Morehouse 2,868,9:8 1,434,464 Natchitoches 5,171,520 2,585,760 Orleans -..135,550,454 101,917,635 Ouachita 5,007,620 2,503,810 Plaquemines 2,954,280 1,477,140 Pointe- Coupee 5,844,031 1,159,300 Rapides 6,162,170 3,081,085 Red River 1,586,970 793,485 Richland 1,699,986 841,993 Sabine 1,854,800 927,445 St. Bernard 2,719,746 906,582 St. Charles 2,135,790 1,067,895 St. Helena 1,061,960 530,980 St. James 3,145,980 1,422,990 St. John the Baptist 3,269,902 1,634,951 St. Landry 6,603,080 3,315,040 St. Martin . 3,226,400 1,613,200 St. Mary 10,798,775 4,319,510 St. Tammany 2,343,016 1,171,508 Tangipahoa 2,452,860 1,226,430 Tensas 4,090,538 1,126,200 Terrebonne 4,462,874 2,231,427 Union 1,690,387 149,950 Vermillion 4,459,878 2,229,739 Vernon 4,265,172 2,132,586 Washington 1,434,130 717,065 Webster 1,776,916 888,458 West Baton F.o-ige. '.',014,787 843,620 West Carroll ... .". . 997,818 439,955 West' Feliciana 2,279;1C; 759 731 Winn 1,988,274 994437 *No report. **Claims to assess according to law. Per Cent of As- sess- ment to Es- timated True Value. 50.0% 37.2% i6.4% 40.1% 50.0% 36.4% 28.4% 40.0% 28.9% 40.0% 50.0 V., ?8.6% 25.0% 54.3% 55.0% 40.0% 33.3% 40.0% 50.0% 40.8% 28.9% 50.0% 48.9% 27.07c 28.1% 50.0% 50.0% 43.1% 50.0% 50.0% 75.1% 50.0% 50.0% 19.6% 50.0% 50.0% 49.5% 50.0% 33.3% 50.0% 50.0% 45.2% 5o;o% 50.0% 50.0% 40.0% 50.0% 50.0% 27.5% 50.0% 44.3% 50.0% 50.0% 50.0% 50.0% 27.9% 44.0% 33.3% 50.0% Per Cent of Assessed to Est. True Val. as reported by the As- sessors for All Property in 1907. 50% 21 1-3% 50% 33 1-3% 50% 50% 50% 33 1-3% 50% to 60% 50% 50% 50% 50% 50% 60% 50% 60% 50% 50% 50% 40% ' 40% 66 2-3% 50% 33 1-3% to 40% * 60% 50% 50% 65% ** 50% 70% 50% 33 1- 60% 60% 60% 65% 60% 60% 60% 70% 33 1-3% 50% 50% 65% 55% 50% 60% 40% 33 1-394 to 50% 33 1-3% 65% 60% 50% 65% ' 70% 50% -3% A comparison of Column "3" with Column "4" is difficult to make, be- cause Column "3" is only for Real Es- tate and improvements, while Column "t" includes all personal property. Be- sides that, Column "3" is compiled from statistics of 1900, while Column "4" gives the rule for 1907. It will be seen that for most parishes the per cent in Column "4" is higher than In Column "3"; in some it is the same, in others, it is lower. The greatest discrepancies between the two col- umns are found in Caddo, where they are, respectively 28.4 and 50 per cent; Caldwell, 28.9 and 50 to 60 per cent; Concordia, 25 and 50 per cent; East Feliciana, 33.3 and 60 per cent; St. Bernard, 33.3 and 65 per cent; Tensas, ' 27.5 and 50 per cent; West Baton Rouge, 27.9 and 50 per cent; West Feliciana, 33.3 end 70 per cent, and Pointe Coupee, ^9.6 and 50 per cent. It matters but little which column is correct, both tell a disheartening story. Before we leave this, let me quote some expressions used by the Asses- sors in their replies to the Commis- sion: • In Caldwell the assessment varies from 50 to 60 per cent; in Vernon, 33 1-3 to 50 per cent; in Livingston, the Assessor has no fixed rule); in Bos- sier, the Assessor holds that Act 215 of 1906 exempts mortgages; in Caddo, the Assessor would be willing to as- sess mortgages, if some intelligent plan to obtain reliable data could be devised; in Madison, the Assessor does not assess mortgages, because "it is double assessment of the same property and can't be collected"; in St. Helena, the Assessor writes "No mortgages in the parish .except real estate, and it is considered dual as- sessment to assess both." In St. Mar- tin, the Assessor says: "Most of the mortgages are taken by banks and their capital stock being assessed, it would be assessing them twice." From West Baton Rouge, the Assessor writes: "Impossible to assess mort- gages correctly, as a good many are just for convenience." Several par- ishes, however, report mortgages on the assessment rolls. The returns of the Assessors as to the assessment' of money is of the same character as the assessments of mortgages. The Assessors of Acadia. Assump- tion Avoyelles, Caddo, Caldwell, Con- cordia, DeSoto, East Baton Rouge, Franklin, Iberville. Livingston, Pla- quemines, Pointe Coupee, Rapides, Richland, St. Bernard, St. Charles, St. James, tot. Landry, St. Tammany, Tangipahoa. Tensas, Terrebonne, Ver- non, West Baton Rouge, West Carroll and West Feliciana do not assess mone- or hav~ not found any to as- sess. In the parishes of Ascension, East Caroll, Grant Iberia, Lafayette, La- fourche, Ouachita, St. Helena, St. John, St. Martin St. Mary and Wash- ington no money is assessed except the value of bank shares. The other narishes claim to assess money with the following results for 1907: Bienville $ 4,250 00 Bossier . '. 41,500 00 Calcasieu 622,500 00 Cameron 2,000 00 Catahoula (amt. not given) Claiborne 3,100' 00 East Feliciana 49,780 00 Jackson 7,400 00 Jefferson 11,000 Ou Lincoln 1,500 00 Madison (amt. not given) Morehouse 4,000 00 Natchitoches 17,800 00 Orleans, First District 2,823,330 00 Orleans. Second District.." 465,725 00 Orleans, 'Third District... 19,000 00 Orleans, Fourth District. . 24,510 Ou Orleans, Fifth District... 1,000 00 Orleans, Sixth District... 23,160' 00 Orleans. Seventh District. 6,200 00 Red River 8,350 00 Sabine 200 00 Union (amt. not given) Vermillion (amt. not given) Webster 5,000 00 Winn 10,960 00 Total amount exclusive of bank stocks $4,124,265 00 The amount of money on deposit in the banks of New Orleans alone on May 8, 1908, was over sixty-five mil- lion dollars. The Assessor of Sabine has found one individual in his parish who has $20.0.00 in money, and he is' the only preson in that parish who is assessed on money. Some of these parishes assess money at 50 per cent, some at 60 per cent ana some at 100 per cent of the amount. In many of the parishes the same proportion of value is not applied to real and personal property, personal property being usually assessed at a larger percentage than real property. In Avoyelles, all property is assessed at 33 1-3 per cent, except bank stbcfe, which is assessed at 50 per cent. Bienville applies the same rule to all property except money. Claiborne assesses personal prop- erty from 10 to 20 per cent higher than real estate. Madison applied to real estate a 50 per cent ratio and to personalty a 75 per cent ratio. St. Landry assesses country prop erty at 33 1-3 per cent and city lots, Stock in trade and personal properly at 50 per cent. • Tensas assesses all property at 50 per cent, except merchandise, which is assessed at from 60 to 66 2-3 per cent. One cannot doubt the honesty of the assessors, the candor with which they report all this relieves them from 'any charge of deception, and still what a picture of injustice they pre- sent. In one parish 33 1-3 per cent is the rule, in another 50 per cent; in an other 70 per cent; in still another (Orleans) it is claimed the law l s complied with and that means actual value. In some parishes mortgages and money are deliberately omitted. in others they are taxed. In still an- other the officer does not assess them because he thinks it is dual assess ment. Even in the same parish onu rule is applied to one kind of prop erty, another rule to a different kind of property. Pretermitting for the present, con elderation of other defects in our present system, we are already in a position to say, that the provisions of the Constitution requiring uniformity and equality in taxation are a delu sion; that the most solemn declara tion that property shall be assessed and taxed at its full value is not en forced, that the greatest inequality prevails, that some parishes pay two and others three times as' high a rate of taxes for State purposes as other parishes, and it must be manifest that this open and flagrant violation of law must have a most pernicious effect in many ways, and no self-respecting people can permit conditions of that kind to exist — after it has knowledge of them. It would be far more honest to strike from the Constitution the pro- Vision that taxation shall be equal " and uniform and provide instead, that State taxes in one parish shall be five mills, in others ten mills, and in still others fifteen and in some twenty mills on the dollar of assessed value. The injustice and inequality of BUch a provision would b^ no greater than that which obtains, and we would ftt least avoid' the hypocrisy of de- claring for equality and uniformity 'and actually perpetrating inequality and injustice. > That the evil is in the system itself and not merely in its administration is shown by the fact, that Louisiana's experience in this regard is identical with that of the civilized world. Mr. David A. Wells says that every civil- ,zed county has tried the sytem ana found the same evils and that every European country has abandoned it r except Holland and Switzerland. It has been tried in every State in the Union. Those whose constitutions permit such course have abandoned, or are abandoning it. Three are sub- mitiing constitutional amendments in. order to permit abandonment, and many others are agitating for aban- donment. The system is condemned bv political economists writmg from a theoretical standpoint, by practical tax officials, speaking from actual ex- perience, and by dozens of select tax commissions appointed to investigate its workings. Indeed, its failure is shown b" testi- mony overwhelming in quantity, un- impeachable in quality, and, so far as we have read, without a dissenting voice. As typical, we quote from two au- thorities, both eminent on questions of taxation. I PROF. EDWIN R. A. SELIGMAN. Professor in Columbia University, in his work on "The General Property Tax," page 52, says: "Practically the general property tax, as actually administered today, is be- yond all peradventure the worst tax known in the civilized world * * * It puts a premium on dishonesty and debauches the public conscience. It reduces deception to a system and makes a science of knavery; it presses hardest on those least able to pay. It imposes double taxation on one and grants entire immunity to the next. In short, the general property tax is so flagrantly inequitable that its retention can be explained only through ingnor- ance or inertia." PROF. RICHARD T. ELY, some time Professor of Political Econ- omy at various universities, and a noted authority on taxation, says: The one uniform tax on all prop- erty as an exclusive source of revenue, 6r J the chief source, the main feature in direct taxation, never has worked well in any' ' 'modern community- or State in the civilized world, though it has been tried thousands of times, and »•'- though all the mental resources of able men have been employed to make it work well. I have read diligently the literature of finance to And an example, but in vain; and lest this should not be sufficiently trustworthy, I have made it my business, in my capacity as tax commissioner, to visit typical States and cities and to make inquiries in person of citizens as well as of offi- cials trusted with the administration of the laws. I have visited Charleston, S. C, Savannah, Atlanta and Augusta, Ga v Columbus, Ohio; Madison, "Wis., and Montreal and Quebec, Canada And the result has been abundantly tr. confirm all that I have said about the Impracticability of the one uniform tax upon real an.e from these designated sources, and that if these sources shall not be found to yield to the State a sufficient revenue, then that the deficiency be apportioned among all the parishes and municipalities in the State in the .ratio of their own ta^es for general purposes. All the other property in the State, except ' that specifically exempted in the Constitution, should be left as the sources of revenue to be used by the parishes and municipal corporations, Inclusive of the license system, giving each taxing body under safeguarding constitutional and legislative proviso Ions, as large a measure of local homie rule and regulation as if consistent with the public welfare. , • The separation system would permit the principle of local option to be ap- plied in the domain of taxation — sub- ject, of course, to proper legislative re- strictions — a measure of Home Rule could be granted to the parishes and municipalities, which would greatly aid in their upbuilding. If power to- exempt by popular vote certain classes of property from taxation were given to the localities each could develop along the line most suited to its natural conditions. Parishes with large cities or grow- ing towns or manufacturing or mining interests would probably find it desir- able to exempt one kind of property, and agricultural communities a differ- ent kind. At present a discreditable competi- tion exists between the parishes, the purrose of each being to escape its fair share of State taxes. Under sep- aration with Home Rule, a more worthy emulation would be promoted, each community striving to attain the sys- tem of taxation best in tself or best suited to its peculiar needs. As a bet- ter expression of our views on the sub- ject we adopt and recommend the res- olutions and conclusions adopted by the National Conference on State and Local Taxation held at Columbus, Ohio, in November, 1907, which read as fol- lows: "Whereas, The reliance by State Government for revenue upon the taxes ordinarily imposed on property as assessed by local officials has pro- duced sectional injustice and jealousy and local inequality; and, "Whereas, the general property tax as a source of State revenue enforces a rigid unifor'mitv which can take no account of actual conditions; be it "Resolved, That State and local rev- enue systems should be so far divorced that by general laws the appropriate local governing bodies may, if deemed expedient, be granted certain limited and carefully prescribed powers over the licensing of occupations and the selection of subjects of local taxation and the rate of assessment upon such subjects." THIRD. That the existing State Board of Appraisers of railroad and other prop- erty, and the existing State Board of Equalization be abolished and in lieu thereof there be established a perma- nent.: tax -commission, composed of three. ;persotis,.fone to be selected from each of the existing Railroad' Commis- sion Districts. The commission is divided as to how these commissioners should be selected. Some of the members believe they should be appointed by the Governor, with the advice and consent of the Senate, and some that the-" should be be elected by the people in such a way that a new member should be elected every two years. This commission ehould be charged with the duty of assessing and valu- ing all the property taxed by the State as the sources of its revenue, and of studying the operation of the tax- ing systems of this State and the other States, and of reporting to the Legislature the results of its study, to- gether with its recommendations for the improvements of the State's laws on that subject. The persons selected to fill these po- sitions, should be such as are known to possess knowledge of and training in the subject of taxation. FOURTH. That mortgage loans, loans by life insurance companies on policies issued by them and credits due for merchan- dise or other property sold, whether upon open account or by note or bill, be exempt from all taxation. The com- mission believes in the exemption also of monies, whether loaned or in pos- session and all other forms of credit whatever. But if the exemption if: caried this far it might under Sec- tion 5219, United States Revised Stat- utes, make it illegal to tax shares of stock in national banks. The exemp- tions above recommended would not have this effect. Under local option any parish or municipality could ex- empt monies, general credits and bank Shares by popular vote or tax them as deemed best. It is in regard to monies, mortgages and other credits that the greatest dis- criminations exist. According to the assessors' reports mortgages are not assessed at all in fifty -two parishes and five New Orleans districts. In six parishes" outside of New Orleans, they are assessed, the amounts on the roll 1907 being as follows: Cameron $15,000 Claibtrne 18,815 East Feliciana 83,755 Jackson 1,015 Livingston 20,620 Vermillion 35,165 if ■■! nui In the two New Orleanse . dictstets where they are assessed, --ithe amounts for'-1807"-are n6t given separately fron> other credits. But the Auditor's report of 1906 shows that the total assessment for that year of all monies loaned or in possession, mortgages, Judgments, bonds and other credits w: ..s follows: In 25 country parishes Nothing In the other 33 .$1,891,233 Of this Calcasie'u has more than half, namely, $1,066,150. Bast Feliciana, Rapides, Unlsn and Caddo range from $90,565 to $154 040. Fourteen parishes ranga from $11,000 to $41,0.65. Fourteen range from $1,000 to $3,740. The total for Orleans parish Is $12,- 206,533, as follows: First District $10.606,!/6C Second District 1,305,300 Third District 51,900 Fourth District 95,635 Fifth District 800 Sixth District 135,538 Seventh District 1 1,300 Total for city 412.206,533 Total for country 1,891,233 Total for State 14,097,686 The Assessor of the First District, Hon. C. Taylor Gauche, President of the Board of Assessors, informs u=-- that as far as he knows, none of the $10,- 606,060 of the above assessment in his district includes mortgages, as no mortgages were returned to him. Speaking generally this tax is only paid by three classes: Its. Corporations, like insurance companies, who have to make sworn reports to public officials as a con- dition of doing business. The for- eign companies by whom most of the insurance business is done take pains, though, to keep in' this State as little as possible of this kind of property. 2nd. The estate of widows, orphans and interdicts whose holdings are shown by public inventories and ac- counts of trustees. It is a shame that this helpless class should be singled out for discriminatory taxation. 3rd. Persons who tell the assessors of their holdihgs — or rather, such propor- tion of them as they deem fair in view of their knowledge of the tax that all others who can are. also dodging. As to this class it is not really a tax, but rather a voluntary contribution. The discrimination shown by these figures jumps to the eye. Comment would but : weaken the argument. If other States did or have ever done any better, it might be plausibly contended that our' assessors were to blame and that by -replacing them with others, equality could be attained: 'But such is 10 not the case. The universal experi- ence of mankind shows that the tax on this kind of property cannot be laid with fairness and impartiality. Every conceivable plan has been at- tempted. Some States have required the taxpayer to answer as many as 100 catagorical questions ingeniously framed so as to prevent evasion. Others have employed spies and detectives to search out concealed property of this kind. Indeed, during the Middle Ages the rack, the thumb-screw and other forms of physical torture were freely used to extort disclosures of concealed wealth, but to no purpose. If any- thing can be demonstrated by human experience, the impossibility of fairly reaching such property must be re- garded as settled. The opinions of political economists, taxing officials and tax commissions are absolutely unanimous on this question. It will "be unfortunate, we think, if, following the error of those who mav think a thing tried and failing to succeed a million times might still succeed on an- other trial. Louisiana, standing on the threshold of an era of wonderful de- velopment, should hinder and delay this development by continuing In force this part of our antiquated and unjust system. Inasmuch as this kind of property cannot be put on an equal footing by taxation, we are of the opinion that it all ought to be equally exempt from taxation, certainly so far as it can without exempting national banks, The promotion of equality is perhaps a sufficient reason for this exemption. But there are also other strong reasons for it. 1st. The tax and indeed the jnere fear of a tax, 1 on this kind of property increases interest to the borrower and thus the tax does not fall on the party intended to be reached. 2nd. Capital is driven out of the State by the fear of taxation and kept from coming in by the same fear. Laws recently passed in New York require the big insurance companies to dis- pose of their holdings of stock in cor- porations and they are doing this as fast as they can without sacrificing the property. This brings them in large quantities of cash for which they are seeking re-investments. Some of them are anxious to loan money upon mort gages, in this State at 5 per cent in terest, but the tax rate of 2.8 per cent is an absolute bar. We believe that if the tax on mortgages were repealed several millions 6f dollars would imme- diately be offered for loan at low rates of interest. Our State is a borowing and not a lending State. The whole community, and particularly the agri- cultural portion of it, is now suffering for the want of cheap money. 3rd. Inasmuch as the law requires the taxation of this form of property, its present escape is accomplished by eva- sion of the law. This evasion of course may be of different kinds. The asses- sor may not require returns. If re- quired the returns may not be sworn to. Sometimes they are sworn to and perjury is invited and encouraged, forc- ing the man who makes honest returns to pay a larger tax than is paid by rim who makes dishonest ones, a pre- mium is placed upon dishonest- and a penalty upon integrity. As a further discussion of this sub- ject we refer to the a'oove-mentioned paper prepared by Mr. ^earl Wight and made a part, of this report. FIFTH. That a true inheritance tax should be levied for State purposes only. This tax should be less for direct inherit- ance and the inheritance of the spouse than it is for collateral inheritance. It should be reasonably progressive and should exempt, in direct inheritance and those of spouses a fixed sum reason- able in amount in each estate. It should also affect donations inter- vivos. This last provision is necessary to prevent one from giving away all or the bulk of one's property so as to escape the tax. The present inheritance tax in the existing Constitution is not a true in- heritance tax. It exempts from its Operation property that has borne its fair share of taxation. In other words, it is levied only on property that has been concealed from taxation. Such a limitation does not exist in any of the inheritance tax laws of any of the States of the Union, and these laws do exist in thirty-six of the States. It is a premium on the hiding of property from taxation, because it is more prof- itable to hide property from a 2 per cent tax levied annually for years and then to pay a small inheritance tax, than to return it for taxation and e»* cape the inheritance tax. If the tax were apportioned to the theory OB which it is levied it ought to be the sum of the taxes' for all the years the property has escaped taxation. If we are going to exempt money, credits, mortgages and bills receivable from 'taxation, because of the impos- siblity of deVlsirig any "faiF and re»» sonable system by which such prop* 11 erty can be reached, then it becomes all the more necessary to levy a true inheritance tax, because such a tax is the only effective way to reach prop- erty that cannot be fairly reached by any devisable taxing system. Such a tax effectually reaches the rich tax dodger. The experience in New York shows that the estates of persons who, during their lives, were assessed at $17,000,000.00, paid inheritance tax on $247,000,000.00. This tax properly administered is a great revenue pro- ducer. In England it averages about $100,000,000.00 per annum. In the State of New York for the year 1906 it pro- duced $4,713,311.33. In Louisiana for 1907, our existing defective and badly administered tax produced $156,075.94. SIXTH. . That some special method be adopted cf taxing mines. "We have in this State, mines of salt, sulphur, petroleum and gas. These properties by being worked become less and less valuable every year. There is no reasonable way under the pres- ent system of arriving at their value, because it is imposslole to fortell how long they will continue to produce. We recommend that they be assessed on some percentage of the gross value at tlae mine mouth of the annual pro- duct, and that some special method be adopted for the collection of these taxes, such as the filing with the as- sessor of a monthly statement of out- put and its value, and the payment of the tax each month on such produc- tion. Under the present system the as- sessment of all these properties is much less than it should be, except perhaps, the Union Sulphur property, which is contesting its assessment in the courts. All of the immense oil interests in the Parish of Acadia for the year 1907, inclusive of lands, pipe lines and other property are assessed for $557,495.00. The, output alone of these oil lands for that year was undoubtedly worth five times that sum. SEVENTH. That the valuation of lands be placed in one column on the assess- ment roll and the valuation of the lands with the improvements added be placed in another column, so that it may appear on the face of the rolls what relative valuations have been placed by the assessor on the lands and on the improvements. The plan would tend to prevent a kind of discrimination which is so com- mon as to amount to a public policy and one, too, the reverse of sound. The owner of unimproved land held for speculation urges the specious plea that his property yields no revenue and ought, therefore, to be lightly as- sessed. The plea is more often false than true. Land values in a growing community steadily rise, sometimes rapidly and enormously. A large in- crement goes to the owner which is not earned by him, but is produced by the growth of the community. Mean- while, though, his plea avails. His assessment is low while his enterpris- ing neighbor is punished by a higher assessment for making improvements which benefit the community generally and the speculator especially. This would be bad policy if the difference in assessment corresponded to that in improvements. But often it is greater. Abstractly we denounce land monopoly. In practice our system rewards and therefore encourages it. Under the separate assessment plan advised the owner who improved his property would of course still be assessed higher than the speculator who did not. But the difference would only be the im- provement value. On the land value they would be assessed the same. A juster complaint of this could be made Dy the enterprising man who aids de- velopment than by the speculator who hinders it. If unearned increment is placed on the same footing as individ- ual earnings and no higher rate of as- sessment or taxation is placed on the one than on the other, the speculator is liberally treated. Sound policy might uemand that improvements be encouraged by a lower tax than the 0:ie placed on land held idle for specu- lation. But we recognized that this re- 'form is' too radical to gain adoptiou at present, and we do not ;'econimendl going so far. We insist, though, that the discriminations in favor of the- speculator ought to be stopped and we believe that the separate assessment t>f land and improvements wouhI rend to. do this. EIGHTH. That all assessments .shall be geo- graphical and not alphabetical. The assessment of all cities and towns should be ■in plat* of evsry square showing the dimensions of each lot, the character of the improvements on it, the name of the owner and the annual revenue produced. The assessment of every parish should be by section, township and range, commencing with the northeast quarter of the northeast quarter of the township in the northeast corner of the 12 parish and proceeding thence back and forth over the whole parish to the soiuhVvest corner of the parlsn. NINTH. That the assessment roils of every city and town and of every parish be puolished in sections in pampniet iorin ana sold for a small sum so as to en- courage tneir .vide distribution among -the taxpayers. Tue reasons for these last two recom- mendations are: lsv. That by this system no prop- erty can escape assessment. We know that under the present system a lar?e amount of property escapes taxation because the assessor does not find it or because it is not returned by its owner or oecause Dy error, or inad- vertence, it is lost from the rolls. 2nd. That by this system the asses- sor will be compelled to assess ad prop- erty in relation to and in regard to the adjoining property, thus prevent- ing inequalities in assesment, or if they occur, making them conspicuous and public and easy of correction. TENTH. That all' provisions of the tax Jaws shall be so drawn if possible so as to av^.c explicate taxation. We mean by duplicate taxation, the levy and assessment of taxes on the same property or values in differen' forms. For instance, an inheritance law of this State and of another State may be so phrased as to require a levy of inheritance taxes Dy both States on the identical inheritance. This ca.i be avoided by limiting our inhertance taxes to successions opened and ad- ministered in this State. Another vicious form of duplicate taxation is where- all the property and franchise of a corporation are assessed to the cor- poration, and' the stock of the corpora- tion is assessed as a separate asset in the hands of the stockholders. In such ■a case it is clear that the same value is assessed twice. Although the existing law, if inter- preted technically, might require such duplicate taxation in this State, except as to banks, yet the assessors have, we believe, almost universally inter- preted it the other way. It is necessary for us to say some- thing as to certain taxes we have recommended as sources of State rev- enue. SPECIAL, FRANCHISE TAXES. We have recommended a franchise tax on corporations, domestic and for- eign, except banks and insurance com- panies. The reason of the exception as to banks is that no State can tax the trancnise of a national bank, and therefore it would be wrong to handi- cap the State banks with a tax which their powerful rivals would be free from. The reason as to insurance com- panies is that if a round tax is levied as we have suggested on their gross receipts tor State purposes, the value of their franchises is practically in- cluded in such a tax. We asree with the Tax Commission of California that "tnere is no doubt whatever that there is an element in the value of corporate property wnich is over and above the value of the tangible and visible property." This value arises from the use of the prop- erty of the corporation in the perform- ance of its functions as a creature brought into existence by the grant of the State. As' regards public servi -e corpora- tions which exercise the power of em- inent domain, and which have specially granted rights over, aiong or across public highways, lands, rivers, bays and streams, with the right to collect tolls,, which rights are in many cases either legally or practically exclusive there can be no doubt that these fran- chises have a value apart and distinct trom the mere value of eir corporeal property. These particular franchises have in a limited sense been assessed in some of our cities in respect to street railroads, and gai and water companies. For the same reason that these franchises in these particular instances have been assesses, so also ought the franchises of telephone, tele- graph, sleeping car, express, canal and steam railroads be assessed. Other SIX — TAX Commission Slover States have found efficient methods of assessing and taxing these intangible values. The general public demands this form of assessment and taxation under the belief ■hai immense values escape a proper share of the burden of taxation. The justice of this tax cannot be dis- puted when we reflect. 1st. That the franchises themselves are created and conferred bv grant of the State; and 2nd. That their vaiue is created by the community through the social and commercial activities >f the poopta. The aggregate assessment of special franchises, for the year 1907 in the State of New York was -$555,000,000.00. As to other corporations, not public service corporations and not enjoying any special privilege other than the i right to enjoy corporate life, the exist- 13 ence of a taxable value in this enjoy- ment of corporate life is not so clear, but wherever it does exist there is no reason why it should not be assessed and taxed. Foreign corporations that exercise part of their franchises in this State can be assessed on thai portion of their franchises exercised in this State. CORPORATION ORGANIZATION TAX Many, if not mosc .)f the States re- quire all corporations at the time of u.eir organization to pay the State a fee or tax for the privilege of becoming a corporation. This rax is usually based on the amouat .'if the capital stocK. We see rio reason why this (state should not levy such a tax. STOCK TRANSFER STAMP TAX. The State of New York by its stamp tax of two cents on each hundred dol- lars of the face value if stock trans- fers realized in 1906 the sum of $6,631,- 903.22. This enormous sum was due to tne existence ot the New lork Stock in.ctna.nge in that State. The tax has not been found burdensome. While we cannot hope to raise any such vast sum in this State, yet we believe that it will produce a considerable revenue. COTTON FUTURE STAMP TAXES. We recommend this tax because it is a tax on an enormous volume or' business, largely speculative in its na- ture, that pays no taxes. We believe tnat this tax ou B ht in no event to ex- ceed one cent a bale. In other words, that it ought to be strictly a revenue tax and made so small as not to create any desire to evade it, and not to ex- clude business of this kind fiom the local exchanges of the State and drive it to rival exchange in other S'ates. LICENSE TAXATION. The Commission desires to go on record as opposed l.i the principle of license or occupation taxes on ordinary pursuits as a permanent source of ■ venue. For regulating pursuits un- der the police power such taxes are proper. It may be, too, that in our State, which has so long used this form of taxation, it may not be practicable to abandon it suddenly. Under the general system recom- mended this power is not to be ex- ercised by the State except in the form of excise taxes on occupations within the domain of the police power, and it is left as one of the powers to be ex- ercised locally in the discretion of the local authorities. We hope that this will permit its eventual abandonment. An occupation tax on a praisworthy pursuit is vicious in principle. No man ought to be made to pay for the mere privilege of earning a living. A sound public policy would encourage this instead of pena.zing it. Such taxes, by increasing i.'ie cost of doing business, lessen the competi- tion, which is unsound policy. In addition to this there is w form of tax which provokes such a flood of perjury as accompanies the levy and collection of these taxes. The amount of the tax depends on the return of the taxpayer. The honest taxpayer makes an honest return. The dishonest taxpayer makes a dishonest return. Large numbers of persons make their affidavits with the same looseness of morals with which- the average respect- able citizen will atempt to defeat the customs laws on returning from a trip abroad. They regard cheating the government as venial, and not iu the category of crimes. INEQUALITIES BETWEEN INDI- VIDUALS IN ASSESSMENTS. ^ Our investigation of this evil in the tatate has been general and tnerefore we cannot speak of it in detail. Rep- utable writers who have conducted in- vestigations in other Stale.; report that sometimes individual assessments vary Irom 4 per cent to 125 per cent The Discrimination is perhaps not so great with us, but facts learned by us convince us that there is often and everywhere in the State great inequal- ity between the assessment of individ- uals, in the same locality, whose as- sessments ought to be pracUcally the tame. J This may be thought to be due to. favoritism or corruption, m ihe main though, it is because assessments are Sthe? Without much re sard to each All of A's property, wherever situat- ed, is assessed at one time, and all of Bs at another. If they own loto along- side of each other the assessor in as- sessing one does not usually turn to see at. what figure he assessed the other. The rolls, at least in the country, are .made up alphabetically according to the names of the owners, so that prop- erty adjoining on the ground is widelv separated on the roll. It is so much trouble for a taxpayer to ascertain his neighbor's assessment that few do it This evil will, we believe, be largely remedied as to real estate assessments by the recommendations above made as 14 to geographical assessments, and as to the publication of the assessment rolls. The publication will also have its proper influence on the assessments of personal property. But there ought to be lodged some- where the power and the duty to bring up to the proper and just level indi- vidual assessments wh'.-.h for any cause whatsoever are fixed below the proper standard or ratio of assessment. The existence of the right in the in- dividual citizen to sue to correct such assessments is no remedy, because the right will never be exercised. The power and duty above mentioned should be free from local influence. We therefore recommend that the State Tax Commission be tiven the power to order the institution of suits by the State to raise indlvdual assess- ments and that it shall be the duty of the District Attorney in every parish on the order of the Commission to bring and prosecute such suits to judg- ment. This oftuer should b-3 pail by- fees levied on the 'axoayer whose as- sessment is raise i by the Judgment of *he court. TAX EXEMPTIONS. We recommend that the general ex- emptions of certain classes of property remain as now fixed in [tie Constitu- tion and its amendments. As regards the special exemptions of mining, manufacturing and newly con- structed railroads, we recommend that those who are now entitled to such exemptions oe permitted to enjoy them until the time now fixed in the Con- stitution expires. We further recommend that none of these special exemptions be renewed or continued beyond the period now fixed and that the question of ex- emption of any kind of industry from taxation be left to the vote cf the property taxpayers of each locality under proper restrictions as to the time any exemptions shall last. We further recommend that by a vote of two-thirds of the Legislature such property as is liable to State tax- ation may be exempted from such tax- ation for a limited time. We have been restrained by motives of economy from expanding this report by adding to it the enormous mass of statistical and other information which the committee has gathered. Our Sec- retary has been directed to deposit this- material with the dtate .Librarian for the use of the State officials. We desire to call the special atten- tion of your Excellent:,;' and of the Legislature to the skill, fidelity, and unremitting labors jf our Secretary, Mr. David Blackshear, whose services have been invaluable to mis Commis- sion, and we hope will be to the whOie State. All of the funds neces'sari- to conduct the affairs of iho Commission have been advanced by c.ie cf ;ts numbers. It has been at no extents except for postage, books, printing, expreuiage, traveling expenses of th* country mem- bers and the salary of the S (crstary. The sum of $2,830.00 will cover the whole cost and expenses of the Coiri- niissn u, as appears by a deuili-d state- ment hertofore filed with your Excel- lency, and we ask that you request the Legislature to make an appropriation of that sum to pay Lhese costs and ex- penses. In conclusion, we beg leave to say that we have not prepared and sub- mitted specific constitutional amend- ments to be adopted nor specific acts of legislation to be passed to carry out our recommendations. Our reasons for this are ihat nochU* can be done without a AmcUr.-L .nlal .•hung.j in most of the articles of our present Consti- tution on the subjoct of taxation. Our individual opinion U thai Ilie3e funda- mental chant's ca.i be bear, brought about by 'i constitutional convention specially called for that purpose. Such a convention would not cost the State any more than an extra session of the Legislature, and even If the present session of the Legislature can find the time to formulate for submission to the people constitutional amendments revising so fundamentally our tax sys- tem as is herein recommended, still It would require an extra session of the Legislature to pass the numerous laws necessary to carry those amendments into effect. If the Legislature shall undertake the work of formulating these amend- ments, the members of the Commission tender their services and aid in the preparation of this legislation. By order of the Commission. EDGAR H. FARRAR, Chairman, 15 HOME RULE IN TAXATION By HON. SOLOMON WOLFF, Member Tax Commission of Louisiana With perhape a few exceptions, the ■constitutions of all the States of the Union contain declarations, embodying the idea that all property shall be taxed, and the tax shall be equal and uniform. Nor is this thought a thing of yesterday, for we And it in the earl- iest constitutions adopted by the vari- ous States. To make these solmen constitutional declarations effective, the legislatures of the various States have, since their ■existence, enacted numberless lengthy and complicated statutes, providing in detail for the discovery and equal and uniform valuation of all kinds of prop- erty. Severe penalties have been pro- vided for the punishment of those who fail to disclose property which they own, and which should be taxed. The ■courts of all the~' States have in in- numerable decisions interpreted these statutes, and upheld the right of the legislatures to tax everything in sight and out of sight, so long as it had any value at all, and they have upheld the right of the Legislatures to even sub- ject property to double taxation. Here and there, an act or part of an act, has been declared void as being in con- flict with the constitution of a State or of the United States, but, as a whole, the legislatures seem to have unbound- ed power to enact legislation to make effective the constitutional declara- tions. And they have made use of this power. The existing laws on the sub- ject contain many ingenious devices lor the discovery of property that un- willing owners would like to avoid having taxed. All who are suspected of being the owners of property, or of pernicious activity in accumulat- ing property in the pursuit of a pro- fessions or a trade or commerce, are required to solemnly swear to the truth of the many inquisitorial ques- tions which are put to them, and lus- tily do they swear. Notwithstanding all these acts of the legislatures, notwithstanding all the decisions of the courts, notwith- sanding all the inquisitorial interrog- atories, notwithstanding all the pen- alties, and, sad to say, notwithstanding all the solemn oaths, it is a fact, well known to all who have paid the slight- est attention to the subject, that taxes are not equal and uniform between different kinds of property, nor are they equal and uniform between differ- ent owners of the same kinds of prop- erty. The reports of many investigating commissions, appointed in different States, have shown these conditions to exist, and any doubt which we might have had has been removed by the investigations of the Federal Govern- ment. In the Census Bureau publication entitled "Wealth and Taxation," at p. 41, the true value of all the real estate, of what, since we have become a world power, is called Continental United States, is given at $62,341,472,627, while the assessed value of the same kind of property for purposes of taxation, is given at $30,089,818,672,' that is, only 48.26 ner cent of the real estate is assessed for taxation. The true value of what is classed in the publication as "personal and other property" is given •at $44,762,719,783, while the assessed value of the same kind of property, for purposes of taxation, is given at $8,873,562,448, that • is, only 19.86 per cent of that kind of property is taxed. The inequalitv is glaring; real estate is assessed nearly 50 per cent of its true value for purposes of taxation, while personal and other property escapes with an assessment of not quite 20 per cent. In other words, real estate, under the present system and at the same rate of taxation pays about two and one-half times as much taxes as other kinds of property. This inequality between real estate and other Kinds of property is not the only inequality which obtains, for there is a great inequality between dif- ferent owners of real estate. In 1892 Congress appointed a select committee to investigate tax assess- ments in the District of Columbia- After a searching inquiry, the com- mittee, among other things, said (Re- port No. 1469, 52nd Congress, 1st Ses- sion, at p. 6), in referring to several large and influential property holders: "These gentlemen, it will be seen, agree If. with all the other evidence taken by your committee, and with the facts which were stated by the Commission- ers of the District * * * in declar- ing that all assessments made in the District for years past have been viciously defective in bearing with un- due severity upon the poorer class of taxpayers and unduly favoring the rich. They hold that these defects in- here in the nature of the assessment, which in attempting to arrive at thf true cash value of all aproperty, im- poses a task manifestly impossible; t h attempt to do this necessarily results in the proportionate greater assessment of the small homestead than of the large and costly building." Other commissions have come to like oonclusions, and even slight re- flections will demonstrate the inherent truth of these conclusions. Any rea- sonably intelligent man, with a little knowledge of the subject, can estimate with some degree of correctness the value of the laborer's cottage, or of the modest dwelling costing, say $5,000, but where will you find the assessor who can tell how much it costs to erect a modern office building, a great hotel, or Other like structure. Do you think that the men who usually fill the office of assessor — and I say noth- ing against their intelligence and in- tegrity — have the capacity to value the palatial residences of the wealthy? The result is that moderately priced pieces of real estate are assessed at a greater proportion of their true value than the more expensive and valuable pieces. Still greater is the discrepancy be- tween the assessment of real estate and certain kinds of personal prop- erty.. . Under the classification, adopted in the work already mentioned, personal property includes railways, telegraph and telephone systems, privately owned waterworks and privately owned elec- tric light and power systems; it covers also merchandise, household goods, cat- tle and, last, it covers bonds, stocks, money and credits of all kinds. The term "personal property," as used here, includes everything but land and build- ings; it covers tangible and intangible property; it covers the property which the assessor can see, and it covers property he cannot see. All personal, tangible property the assessor can see. and however imperfect and unequal his valuation may be, he at least has a fair chance to get it on the roll. When, however, we come to intangible per- sonal property, like credits, stocks, bonds, notes and other like things, not only is the assessor liable to err in val- uing them, as he is with other personal property, but, more, he cannot know of the existence of most of it, unless it is voluntarily reported by the taxpayer. The taxpayer can, however, not be relied on to make a proper return. It may be because the public conscience is, to say the least, somewhat elastic or entirely wanting when it comes to reporting property for assessment, or because there is a feeling that the pre- vailing system of taxation is unjust and unequal, and that, therefore, one need not scruple to make false returns; whatever the specious reasoning, by which the individual justifies himself to his own sense of honesty, the result is the same; the assessor gets about 50 per cent of the real estate, about 25 per cent of tangible personal property and about 5 per cent of intangible per- sonal property. Do you think I underestimate the proportion of intangible property re- turned? Let- me give a fiw figure.! taken haphazard from various official reports. In 1893 the net taxable credits of twenty-seven Chicago banks— that is, loans and discounts and other assets, from which are deducted all deposits and other liabilities — were, according to returns made to auditor, over one million ($1,058,105.25) ; returns for as- sessment were $10,000. These same banks in the .same year had taxable moneys on hand $18,991,- . 771,67; they returned $43,925. Outside of bankers, brokers, etc., all of Cook County, 111., which includes Chicago, had but $434,244, and the credits of all the merchants, etc., were onlv $522,110. In 1884 the total valuation of credits of bank, banker, broker, etc., was $ 98,615 Credits of other than bank, banker and broker 209,466 Bonds and stocks 75,830 Shares of capital stock of cor- porations, not of the State.. 100 It would be insulting to the ordinary intelligence to comment on the absurd- ities shown by these figures. Nor must be conclude that this is true of Chicago or Illinois aline In New Jersey a commi=Mon le- ported in 1897. "It is now literally true in New Jersey as in other States that the only ones who noay hon- est taxes on persjnil property are the estates of deoerten.-.?, widows and or- phans, idiots and lunatics " In Ohio the Hon. E. A. Angell, a 17 member of the Tax Commission ap- pointed by Governor McKinley, said, in 1896, there was but $1,09 7,283 in money returned for taxation in Ham- ilton County, which includes the city of Cincinnati, with nearly half a million of inhabitants. The deposits in Cleveland were about $70,000,000; there was returned for taxation $1,741,129. In California the commission re- ported that money and credits escape taxation almost altogether. And so it is everywhere, a little better in one, a little worse in an- another State. As a whole, we may fairly say of the present system that there is an entire absence of equality between different kinds of property and between different taxpayers of the same kind of property, and it is not, humanly speaking, possible to remedy this condition of things, under th« present system. We may multiply statutes and decisions, increase fines and penalties and affidavits; there is no more probability of success in the future than we have had in the past. As property of all kinds becomes more varied in its character, as our condi- tions become more complex, as our cities become more numerous and larger, the attempt to enforce a gen- eral property tax in the manner at- tempted until now must — if that is possible — become less equal and less uniform, and the attempt to enforce it will continue the present annually recurring carnival of perjury. II. The inequalities already discussed are perhaps not susceptible of cor- rection without changes in our sys- tem of taxation far more radical than those which we are as yet preparec to adopt. There are, however, other inequalities which woi- great injus- tice, which it may be possible to remedy without any radical measures, and without abandoning the view, so widely held, that every kind of prop- erty should bear its due proportion of the necessary taxes. Most, if not all, the States derive all or a very large proportion of their revenues from taxes imposed on every kind of property; the counties and municipalities derive their incomi from the same source. That is, al' property in the States, real estate and personal property of every kind, i; assessed, or is sought, to be assessed and, upon the value so found. th< State imposes a tax of as many mill! as it may need for its purposes; ther comes the county and imposes a further tax of as many mills as it may need; sometimes the municipality imposes a tax also, though here and there the county will not tax the property in the muncipality, and sometimes it happens that, like New York, or in my own city of New Or- leans, the municipality covers the en- tire county. The assessment, which is the basis of all these property taxes, is usually made by officers in each county, and, though the State law usually provides that all property shall be assessed at, its cash value, it is almost invariably ' the fact that one county will assess the property in its limits at a much lower per cent of its true value than another county. , To those at all acquainted with the subject, demonstration of the assertion made is not necessary, yet it is well to cite some data in support of it, and to show that this obtains, not only in one or several, but in practically all the States of the Union where one as- sessment serves as the basis of value, on which State as well as local taxes are imposed. The government publication, already referred to, "Wealth, Debt and Tax- ation," in its Table No. 20, gives for each county in the United States the estimated true value of real property and improvements and the assessed value of the same kinds of property. From the figures funished by the publication, I have prepared a table of the average which obtains for each State, and the highest and lowest ratio between estimated actual and assessed value for purpose of taxation, which obtains in the respective counties. To read this table would prove wear- isome to you as well as to me, and I therefore refrain, but I have annexed it to this paper. Here, I will group the State Into six classes. There are four States in which the real property is assessed at from 15 to 23 per cent of its estimated true value; in those States, some of the counties range as low as 12, -others as high as 40 per cent of estimated true value. There are eight States where the averages for the States are from 30 to 40 per cent, and the counties in thos^ States range from 17 to 90 per cent of estimated true value. There are thirteen States where th^ averages for the States are from 41 to 50, and the counties in tl.ose States range from 26 to 87 per cent of the estimated true value. 18 There are seven States where the averages for the States are from 52 to 60 per cent, and the counties in those States range from 20 to 80 per cent of the estimated true value. There are Ave States where the averages for the States are from 62 to 69 per cent, and the counties in those States range from 41 to 88 per cent of the estimated true value. There are five States where the averages for the States are from 75 90 per cent, and the counties in those States range from 22 to 92 per cent of the estimated true value. One county in the entire United States — Suffolk County, Massachu- setts — has assessed its real property at the same amount as its estimated true value, while New York City comes within 2 per cent of it. I beg to repeat that, for the coun- ties, the book gives only the estimated true and assessed values of real prop- erty; there is", however, every reason to believe that other Kinds of prop- erty are assessed for purposes of tax- ation with like lack of equality and uniformity. What is the result? One county assesses its property at 20 pei cent of its true value, another at so per cent; both contribute to the rev- enue of the State on the basis of this unjust and unequal assessment, and it follows that one county pays four times as much to the State as the other. 1 And this condition is not peculiar to counties containing large cities, or counties in which lands are altogether or largely devoted to agriculture. The astute resident of the cities and the horny-handed farmer — all seem to be adepts at this sort of thing. Nor is the condition peculiar to any particu- lar section. It exists in the fine old commonwealth of Pennsylvania, where the ratio in the counties ranges from 20 to 77 per cent; in the great Empire State of New York, where tne range is from 54 to 98 per cent; in Indiana, where the range is from 40 to 80 per cent; in proud old Virginia, where the range is from 22 to 80 per cent. In the State from which I have come — Louisiana — the range is from 25 to 78 per cent. In far western California the range is 26 to 73 per cent. . East, North, South, West — no section has a monopoly of the injustice and in equality which this condition betokens, though the people have, in the most solemn manner, again and again declared that taxation shall be equal and uniform. As we shall see further on, in several of the States mentioned, this difference in ratio of assessed' to real value in the counties has not the pernicious effect it has in other States. For this difference in the ratio of as- sessed to real value in the counties of a State, one is the remedies suggested and tried is a board of equalization. This is a more or less expensive insti- tution, composed of a certain number of men, who meet at certain stated periods, and endeavor, honestly I do not doubt, to equalize thing::. What these boards have accom- plished may be seen from the follow- ing: Thirty-two States have such boards, among them are the States > I have mentioned, except Virginia and Louis- iana, though recently the latter has also instituted one; and, as we have seen, despite these boards, uniformity and equality are sadly lacking. So you have a board of equalization in your own State of Ohio, and yet the ratio of assessment to estimated true value of real property ranges from 27 to 70 per cent. They have a State board of equalization in Kansas, and the range is 17 to 42 per cent. But why go on with the dreary recital? It cannot and it will not be denied that there is no uniformity or equality In matters of taxation, under the pre- vailing system, where local and States taxes are derived from the same source. A remedy for this does exist, a rem- edy simple and effective, and that i the separation of sources from which the State and local taxes are drawn, Let the State obtain all the revenue it needs from the sources it may se- lect, and say to the counties and mu- nicipalities, all the rest of the prop- erty you may tax for your purposes, as you see proper. Separation of Sources of State and Lo- cal Taxation. The adoption of the principle does not carry with it the designation of the class of property or other sources of revenue which may be selected by the State. In one State it may be determined to raise all revenue from certain sources, In another State con- ditions may dictate the selection of others. WTiatever sources the State may take, the principle is not affected, and this principle, I repeat, is, let the State obtain what revenues it mav require from sources which it will select, and which it will relieve from all local taxation, and, having done this, let it say to the counties and mu- nicipalities, you may - obtain what revenue you need from the sources of 19 taxation which the State has not elected. A discussion of what sources should Toe selected by the State is therefore not within the scope of this paper nor involved in the principle here advocated. The legislature should be relied on to choose and, in the great majority of instances, would, I be- lieve, choose wisely. If it were ad- vised, it would select only such sources as are not dependent on assessment "made by the officers of the respective counties. It would select such sources -as could properly be assessed by a State Board. Lines of railway and •equipment, telegraph and telephone lines, express companies, insurance companies, all furnish sources 'for rev- enue, which can easily be assessed by a board sitting at the State capital. Properties of the kind mentioned run usually through many counties; there is nothing local about them; and they furnish ideal subjects for taxation for State purposes, while real estate, live stock, merchandise and similar classes of property, including intangible prop- erty, are local in "their character. A ■house, a farm, cattle, merchandise, are usually in one county, and should be the sources from which local taxes are drawn. Adopt the principle here advocated, and you rid yourself of the need for more or less ineffective and expensive State boards of equalization; you rid yourself of what is, in reality, a com- petition between the counties in each State, to see which can escape with the least contribution to the income of the State, and you rid yourself of the Inequality and lack of uniformity due to the present system, of having the State and counties and municipalities all taking their income from the same source. The proposed reform does not run counter to the most conservative view one may have on the subject of tax- ation. Tou may continue to attempt to tax all kinds of property . equally, or you may tax one class of property at one rate and other classes at other rates. You may exempt, or not, as you will; not a single right of any one Is violated, except the right to make the people in one county pay more than their share of State taxes, while others pay less. Wherever the subject has been ex- amined, the separation of sources has been adopted. It has been adopted partially or altogether in the States of Pennsylvania, Connecticut, New Jer- sey, New York, "Wisconsin and Oregon, and it is very seriously discussed in Borne eight or ten other States. The commission appointed in Cali- • fornia to examine the subject has re- ported in its favor. The commission appointed by Governor Folk of Mis- souri reported in its favor. Governor Folk indorsed the recommendation, and the legislature of the . State has adopted several acts which submit to the people certain changes in the con- stitution of the State necessary to put the method into practice. That the proposed method will ef- fectually eradicate the existing in- equality between the amount of taxes paid by the different counties to the , State can not be denied for the prop- ! erty in the county i. e., the houses, farms, cattle, merchandise, etc., will not contribute to State taxation at all. If the property in a county is assessed for county purposes alone, if the as- sessment does not serve as a basis for any State tax, it can not and does not matter to another county whether the assessment is 10 or 100 per cent of true value. The county needs a certain sum for its budget; if it as- sesses the property at a low valuation, the rate of taxation will be higher, - that will be the only effect of varying valuations. But I believe that the complete erad- ication of the unequal, contribution by different counties to the revenue of the State will not be the only effect, though this in itself would justify the change. I believe the adoption of the system will tend to equalize and make uniform the amount of taxes which the various kinds of property pay in each county, and I believe it will en- able each county intelligently to con- sider the incidence of taxation. The different counties in a State have varying needs. A county with a large city in it may find it advan- tageous to have a certain method of obtaining revenue. Another county de- voted largely or altogether to agricul- ture, might prefer another method. Where all tax legislation is had In the legislature of the State these vary- ing needs have no opportunity to assert themselves effectively. Very frequent- ly the interests of the cities apparent- ly clash with those of the country; what suits one does not suit the other; the majority controls, and the minor- ity suffers from the imposition of a method not suited to its needs. As long as the present system ob- tains, this can not be avoided. Th" legislature can not adopt one method for one county or class of counties and another method for another 'county 20 or class of counties. The legislature must of necessity adopt some method which, while quite satisfactory to one or more, is rarely so to all counties If, however, we separate the sources from which the State draws its sup- port, and leave to the counties and municipalities the management anci control of their own methods of taxation, we substitute f^r the rigid system, prescribed by the fatate, and to which the county must adjust itself, a flexible system whicr ' will adjust itself to the needs of the county. You establish a species ol home rule in this most important branch of government activity, ana we may be quite certain that each com- munity will sooner or later find tnr method best suited to its needs; and when it does that, it may not oifcalr a method by which all kinds of prop- erty will be taxed with perfect equal- ity and uniformity, but it will corn) much nearer to it than we ao now and each locality will in addition bf able to so direct the incidence of tax- ation as to promote the purposes i> desires to promote, and to hinder thr activities it desires to hinder. Adopt this method, and every year, when the proper authorities meet to impose taxes, the taxpayers will attend ir person because the seat of government is at home, ideas will be advanced and debated, and the freedom of debate , will result in progress and improve- ' ment in method and system. All this can be accomplished by hav- ing the constitution of a State declare that the legislature shall, at its ses- sion, determine the sources rrom whence the State shall draw its rev- enues, and the amount which shall bf obtained from these sources; that the counties and municipalities withir them shall derive their revenues fron sources not selected by the State. To give the largest measure of horn' rule, the constitution should not con- tain any declaration tending to exemp* certain classes of property, it snoui- not contain anv declaration limitin'' the tax rate, and it should not de- clare that all classes of prorjertv shall be taxed equally. The consti- tution should grant the greatest lib- erty on the subject to the counties and we may be quite sure, that, a' least in the great majoritv of cases the freedom will not be abused. The love of righteousness, the prog- ress and prosperity that will certainly follow enlightened and intelligent methods of taxation, made possible by the freedom of each community tr manage its affairs, all . will serve to prevent its abuse. Let me say, in conclusion, the adop- tion of this method will not produce perfect equality and uniformity be- tween the different kinds of property and different owners of the same kinds of property. Human fallibility and various pernicious influences will perhaps always prevent those ideal conditions, but the more intimate re- lation between the taxpayer and the taxing authorities, which will result from home rule in these matters, is certain to make for better conditions than those we have. TABLK. 1. In Alabama the average asess- m'ent of real estate for the State is about 45 per cent, the coun- ties range from 37 to 60 per ' cent. 2. In Arizona the average is 34, the counties range from 17 to 50. 3. In Arkansas the average is 40, the counties range from 20 to 90. 4. In California the average is 50, the counties range from 26 to 73. 5. In Colorado the average is 40, the counties range from 21 to 67. 6. In Connecticut the average is 80. the counties range from 64 to 87 7. In Delaware the average is 57, the three counties are, respectively, 52. 55 and 68. 8. In California the average is 35, the counties range from 29 to 49. 9. In Georgia the average is 52. the counties range from 37 to 5 s. 10. In Idaho the average is 42, the counties range from 30 to 60. 11. In Illinois the average is 15, in the counties the average is about maintained. 12. In Indiana the average is 60, the counties range from 40 to 80. 13. In Iowa the average is 20, the counties range from 18 to 25. 14. In Kansas the average is 23, the counties range from 17 to 42. 15. In Kentucky the average is 62, the counties range from 41 to 76. 16. In Louisiana the average is 50, the counties range from 25 to 78. 17. In Maine the average is 75, the counties range from 66 to 80. 18. In Maryland the average is 65, tho counties range from 46 to 70. 19. In Massachusetts the average is 90, the counties range, from 75 to 100 in Suffolk. 20. In Michigan the average is 62, the counties range from 45 to 75. 21. In Minnesota the average is 38. the counties range from 22 to 55. 22. In Mississippi the average is 53,. the counties range from 34 to 80 23. In Missouri the average is 41, the counties range from 25 to 59. 24. In Montana the average is 44, the counties range from 21 to 10. 25. In Nebraska the average is 16, the counties range from 12 to 30. 26. In New Hampshire the average is 66, the counties range from 55 to 70. 27. In New York the average is 90 the counties range from 54 to 98 in New York City. 28. In North Carolina the average if 60, the counties range from 20 to 85. 29. In North Dakota the average is 30 the counties range from 20 to 35 30. In Ohio the average is 46, the counties range from 27 to 70. 31. In Oregon the average is 30, the counties range from 20 to 40. 82; In 'Pennsylvania the average is 58, the counties range from 20 to 77. 33. In Rhode Island the average is 75. the counties show very little variation. 34. In South Carolina the average is 47, the counties range from 30 to 67. 35. In South Dakota the average is 46. the counties range from 36 to 67 36. In Tennessee the average is 69. the counties range from 32 to 88 37. In Texas the average is 49, the counties range from 23 to 74. 38. In Utah the average is 44. the counties range from 25 to 50. 39. In Vermont the average is 77, th» counties range from 50 to 80. 40. In Virginia the average is 55, the counties range from 22 to 80. 41. In Washington the average is 46. the counties range from 22 to 50. 42. In West Virginia the average is 50 the counties range from 30 to 70 43. In Wisconsin the average is 76, the counties range'-from- 54 to 96. 44. In Wyoming the average is 32, the counties range from 29 to 50. 22 THE TAXATION OF MORTGAGES IN LOUISIANA By HON. PEARL WIGHT, Member Tax Commission of Louisiana The taxation of all mortgages in the United States may be divided into three parts or classes: Class 1. States which have the mortgage recording tax. In these States a tax is paid once for all upon the mortgage when it is recorded, and the mortgage is thereafter exempt from annual taxation. The States which have the mortgage recording tax are New York, Alabama, "Virginia and Minnesota. Class 2. States which do not tax mortgages. These States are Idaho, Washington, Colorado, New Jersey, Connecticut, Massachusetts, Wiscon- sin, Arizona, Alaska, Hawaii and Maryland. The exemption of mort- gages from taxation in these States is brought about by laws which provide that mortgages shall not be taxed, as is provided in Idaho and Washington, or by taxation of the property and the mortgage as a unit in some of the many ways which in practice relieve the mortgage and mortgagee from tax- ation. Class 3. States which attempt to tax the mortgagor for the full value of the property mortgaged, ana tne mortgagee for the full value of his mortgage on the property. The States in this class are Louisiana and all the other States in the Union not men- tioned in Classes 1 and 2. Suppose a man owns a piece of property in Louisiana, or any one of the States in this class, worth $50,- 000, and borrows $25,000 on it, giving his note for the same, secured by mortgage on the property. In such a case the mortgagor would still have to continue to pay taxes on the full value of his property, viz., $50,000 — ■ and the mortgagee, under the : ' law, would have to pay on his $25,000 promissory note. Before the transac- tion there was but fifty thousand dol- lars' worth of property in existence, but as soon as the note and mortgage are signed there are, fqr the purpose of taxation, seventy-five thousand dol- lars' worth of property in existence. Thus does the Louisiana system of taxing mortgages work its magical results, disproving the heretofore ac- cepted law of physics that something cannot be made out of nothing. To tax both lender and borrower is double taxation. The remedy, how- ever, might be declared to consist of exempting, not the lender, but the bor- rower; not the credit of the mort- gagee, but the liability of the mort- gagor. Tax the lender on the amount n t the mortgage, and the borrower on the value of the property minus the mortgage. This would seem to be the true and just solution of the problem. This was the plan that was adopted ! n California; but the experience of that Staite has shown that all efforts to tax the lender really result in tax- : ng the borrower. The Tax Commission of California, in the repoTt made :n 1906, used the "ollowing language, on page 275: "Our experience with the taxation of mortgages has demonstrated be- yond a peradventure of a doubt that the holder of the property pays the entire tax. He pays taxes not only on that part of the property assessed to him, but upon the mortgage as well, the latter in the form of a higher rate of interest than he would other- wise have to pay. If our tax laws "ould be enforced in regard to the 'axation of credits, approximately the same result would occur. The rate of interest on all loans would be enough higher to enable the lender 'o pay the tax, and also to compensate him for any additional risk which this •method of taxation involved, and for any additional trouble to which he might be put by being compelled to ^ay the tax." Prof. Carl C. Plehn, in an article n the Independent, in February, 1898, .says: "The shifting of the tax, which en- tirely defeats the framers of the meas- ure, can be seen from the following facts. The average rate of taxation throughout California, for State ana local purposes together, is about 1.75 per cent of the assessed valuation. It varies this year from 1.03 per cent in Santa Clara County to 3.21 per cent 23 in Sierra County. In San Francisco it is 1.6954 per cent. The average rate of interest upon mortgages in Cali- fornia for the decade 1880-1889, ac- cording to the eleventh census, was 8.9 per cent, or exactly two per cent more than the average throughout the United States, which was 6.9. At present the rate of interest has fallen nere, as well as elsewhere in tin United States; but the best evidence shows that it is still, for mortgages at least two per cent higher than the general average. * * * It Is further true that the rate of interest chargec on mortgage loans of the same de- gree of safety is greater in counties where the tax rate is regularly hig than in counties where it is usuall. low." It does not seem necessarv to sub- mit further proof of the self-evidem fact that the tax upon mortgages if paid by the borrower, for even the courts have repeatedly so decided. In the case of Savings and Loan Society vs. Austin, 46 Cal., 486 (October, 1878). the court said: "I come now to the point whether a tax on land at its full value , a tax on a debt for money loaned se- cured by a mortgage on the land, Is in substance and legal effect, a tax or the same property. We all know, as a matter of general notoriety, that al- most universally, by a stipulation be- tween parties, the mortgagor is obliged to pay the tax both on the land and on the mortgage. Practical- ly he is twice taxed on the same value if he has still in his possession the borrowed money to secure which the mortgage was made. The law taxes in his hands both money and lands, and by his stipulation he is required to pay tax on the mortgagi debt; and, also, if the money has passed out of his hands into the pos- session of some other taxpayer, It i taxed in the hands of the latter, so that the money bears its share of tax- ation and the land its share in the hands of whomsoverer it may ha to be. It is very true that a volun- tary agreement on the part of the mortgagor to pay the tax on the mort- gage debt can not improve its status The State was no party to the con- tract, and is not bound by stipulations inter alios. The burdens of taxation cannot be shifted from those on whom the law imposes them by stip- ulation between private persons; but, in the absence of such a stipulation an inexorable law of political econom* would impose upon the mortgagor the burden in a different form of-payinp the tax on the mortgage debt. Interest on money loaned is paid as a com- pensation for the use of the money, and a rate of interest as agreed on, is the amount which the parties stip- ulate will be the just equivalent to the lender. If, however, by the imposition of a tax on the debt the Government, diminishes the profit which the lender would otherwise receive, the rate of interest will be sufficiently increased to cover the tax, which in this way will be ultimately paid by the bor- rower. The transaction would be governed by the same immutable, in- flexible law of trade by reason of which import duties on articles for consumption are ultimately paid by the consumer, and not by the import- ers. The rate of interest On money- loaned is regulated by supply and de- mand, which govern all articles of commerce; and the burdens impose^ by law in the form of a tax on the- transaction, which would thereby di- minish the profits of the lender if paid by him, will prompt him to com- pensate for the loss by increasing to that extent the rate of interest de- manded. If his morey would com- mand a given rate of interest with- out the burden, he will be vigiiai.t to see that the borrower assumes the- burden, either by express stipulation or in the form of increased interest This is a law of human nature which statute laws are powerless to suppress, and which pervades the whom u r trade governed by laws of supply and demand; nor would the enactment of the most stringent usury law produce- a different practical result. Human in- genuity Has hitherto proved inad >- quate to the task of devising usury laws which were incapable of easy evasion: and, wherever they exist they are, and will continue to be, subordi- nate to that higher law of trade which ordains that money, like other articles, of commercial value, will command just what it is worth on the market — no more and no less. Assuming these premises to be correct (and 1 am convinced they are), it results that it is the borrower, and not the Ienaer, who pays the tax on borrowed money, whether secured by a mortgage or not; but, if secured by a mortgage, he is taxed not only on the mortgage and property, but on the debt which the property represents, and which is held as security for the debt." In commenting on this case, Mr. David A. Wells, in the Popular Science- Monthly (March, 1898), said: "Of the soundness of this decision, there could prohablv ho n« n>^ r e con— 24 vincing illustration than the statement that, upon its announcement, the sav- ings hanks of San Francisco gave n ,- tice that they would immediately re- duce the rate of interest on their loans secured by mortgage by the amount of the tax of the mortgage.' If further proof is needed to show that it is the borrower who pays tho tax, I respectfully call attention to the following statistics, which were prepared by Hon. Lawson _ Purdy, president of the Department of Taxes and Assessments of the City of New- York. Says Mr. Purdy: "In 1905 a law was passed (in New York) designed to correct the gross inequality and injustice of the inclu- sion of mortgages as ordinary tax- able property. By this law all morc- gages recorded on and after July 1, 1905, were made taxable, without any deduction for debt, and without regard to the residence of the owner, at the rate of one-half of one p^r oent per annum. "This law was opposed by thosi) who predicted that a uniform tax on all mortgages would raise the rate of interest, and the tax would thus fall wholly on the borrower. It ^vi5 pre- dicted, also, that the amount of money offered for loans secured by mortgage would be reduced. This is exactly what happened, as will morn fu'ly ap- pear in the following table: Average Rate of Interest, July 1 to De cember 1. 1904. New York county 5.20 Kings county 5.29 Duchess county 5.21 Columbia county 5.37 Rensselaer county 5.24 Massachusetts. 1904. Berkshire county 5.05 Boston 5.09 New York Loans. Prom — July 1 to Dec. 31, 1904. .$174,915,0: " Jan. 30 to June 30, 1905.. 459,896,187 July 1 to Dec. 31, 1905... 101,159,6,53 "It will be observed that the rate 't interest did not rise in New York by quite a full half per cent. T i!'= was because the interest rate in New York prior to the 1905 law was some- what increased by the liability of mortgages to taxation as persona] property. The falling off in the amount of money loaned was very great in the county of New York." In Massachusetts mortgages were exempted from taxation in 1881 There is certainly no reason for the rate of interest being lower in Massa- 1905. 5.54 5. iO 5.51 5.70 5 54 1905 5.03 5.07 chusetts than in New York, other than the liability to taxation in New York. Other influences being equal, money is always attracted to the larger city in greater volume than to the smaller, and the rate of interest should actual- ly be lower in New York City than in Boston if it were not for the liabil- ity to taxation in New York, and yet statistics showed that interest on mortgages was higher in New York counties than in Boston by one and one-half mills in New York, seven mills in Erie County (in which Buf-, falo is situated), and over six millH in Monroe County, containing the City of Rochester. I think that this shows as plainly as human power is capable of show- ing that it is the borrower, not the lender, who pays the tax on mort- gages. The interest rate on mort- gages is increased on account of the fact that the mortgagee is liable to a tax. If all mortgages were taxed in Lou- isiana there would be a certain equal- ity in the iniquity; but I will show in this paper that, under the present mortgage law of this State, only a fev mortgagees in only a few parishes pay any tax on mortgages, while the great majority of mortgagees pay no la whatever, and, therefore, profit Dy a higher interest rate than they would otherwise receive, which all mortgag- ors must pay. There are only a few mortgagees in Louisiana or in any other State in this group who pay a tax on thei" mortgages. As an instance where mortgages are taxed, take the cas^ cited by Hon. Frederick N. Judson of St. Louis, in his paper on the Taxa- tion of Mortgages, read before tn National Conference on Taxation al Buffalo in 1901. Mr. Judson says: "This practical working of a tax upon mortgages was forcibly • illus- trated by an instance which came to my knowledge in St. Louis. A boy. i.iTio a helpless criiple in a railroad accident, and receiving damages ef five thousand dollars, was fortunatp in having an exceptionally efficient trustee, who succeeded in loaning this fur.ci upon a mortgage at six per cent. yieUMn-r three hundred dollars per year. The vigilance cf the assessor discovered the cripple's fund, and it i now paying a tax of two per cent or the full amount, making an income tax of 33 1-3 per cent. But this six per cent is exceptional, and is con- tinued at the risk of hazarding th» principal. When reduced to five per cent interest, the tax will be forty per 25 cent, and, when reduced to four per cent it will be fifty per cent of the in- come." Suppose a corporation wanted to loan money in New Orleans at five per ''ent. Under the present law tha. corporation would have to pay a tax of nearly three per cent as mortgagee. Its interest would, therefore, only b two per cent. If our mortgage la^ were strictly enforced, Is there -iy corporation in the world which would come here and loan money at five per cent when it would only realize after paying its mortgage taxes two per cent on its money? I believe that the taxation of mort- gages as it is practiced today in Lou- isiana is an unfortunate kind of double taxation, for it singles out the man who is in debt (and imposes upon him a special burden with no resulting benefit. The most unfortunate part, however, of the taxation of mortgages in Lou- isiana is that, while it is not enforced to any great extent, and the State reaps very little result from it, it pre- vents foreign capital from coming in and taking mortgages on improve- ments, and for the construction of new buildings, and other improve- ments very much needed by this com- munity. In fact, I know in the last two years of at least three million dol- lars that was offered here at reason- able rates — say five per cent — if parties carrying on the improvement' were willing to guarantee that if the mortgages were taxed they would as sume the taxation. The taxation of mortgages in Lou- isiana as it is at present practiced is also grossly unequal and unjust. The assessors of fifty-two parishes of this State and of five districts in the City of New Orleans frankly ad- mit that they do not assess mort- gages. The assessors of six parishes of this State and of two districts of the City of New Orleans say that the do assess mortgages. Not long ago the Tax Commission of Louisiana addressed a letter to each of the tax assessors in this State, and one of the questions which the Com- mission asked the assessors was: "Do you assess mortgages in your par- ish? If yea. what is the aggregate as- sessment of such mortgages on the rolls for the year 1907?" In answer to that question the as- sessors of the following parishes wrote the Commission that they do not. as- sess mortgages in their parishes: Acadia, Ascension, Assumption, Avo- yelles, Bienville, Bossier (assessor says Act 215 of 1906 exempts mortgages) Caddo (assessor says mortgages will be assessed if some intelligent plan for securing reliable data can be de - vised), Calcasieu, Caldwell, Catahoula, Concordia, De Soto, East Baton Rouge, East Carroll, Franklin, G'ant, Iberia, Iberville, Jefferson, Larayeite. Lafourche, Lincoln, Madison (assessor says, "I do not, because it is douo'e assessment of the same property, and cannot be collected"), Morehouse, Natchitoches, Orleans, Second district (assessor says, "Haven't founa any"), Orleans Third district, Orleans Jrourtr district (assessor says, "Have located none"), Orleans Fifth district (asses- sor says, "Assess mortgages when found; have none"), Orleans Seventh district, Ouachita, Plaquemines (asses- sor says, "Mortgagees claim that note? have been negotiated and held by third parties in parts unknown"), Pointe Coupee, Rapides, Red River (assessor says, "None can be got"), Richland, Sabine, St. Bernard, St. Charles, St. Helena (assessor says, "No mortgager in the parish, except real estate, and it is considered dual assessment to as- sess both"), St. James, St. John, St. Landry, St. Martin • (assessor- says. "Most mortgages are taken by banks and, their capital stock being assesses, it would be assessing them twice"). St. Mary, St. Tammany, Tangipanoa, Tensas (assessor says, "Mortgages have never been assessed in this par- ish; this species of property is sc 3lusive and in such a shape that itb real owners cannot be found"), Terre- bonne, Union (assessor says, "Cannot find any mortgages"), Vernon, Wash- ington, Webster, West Baton Rouge (assessor says, "Impossible to assess mortgages correctly, as a good many are just for convenience"), West Car- roll (assessor says "District Attorney John R. Mcintosh advises mortgages are not assessable"), West Feliciana and Winn. Assessors who do assess mortgages and the total amount of such mort gages on the assessment rolls for 1907: , Cameron ($15,000), Claiborne ($18,- 815), East Feliciana ($88,755), Jackson ($1,015), Livingston ($20,620), Orleans First district ($7,900,430; this amount includes money loaned on interest an all bills receivable for money loan, or advanced, and for goods sold, and all credits of any any every descrip- tion), Orleans Sixth district ($114,500, including same items as Orleans First district), Vermilion ($35,165). Total on rolls for 1907, $8,198,300. 26 History shows that no law can b( made operative except by physlca force, which fails to have the mora support of the community to which i applies, and especially is this principle true in a republic like ours. Any lav. believed to be unjust is in effect re- pealed by popular sentiment, which re- fuses to obey it. In fifty-two parishes out of the fifty-nine parishes in this State public sentiment has said tha. the present system of mortgage taxa- tion in Louisiana is bad, and the as sessors of those parishes, in failing t' comply with the written law, did com- ply with the law of public opinion. From the foregoing reasons it seems that the present laws on our statute books are absurd, for the reason tha: only a small amount of money is re- ceived from the taxation of mort- gages, and that a few , parishes bear all the burdens of that taxation ; and, even in the parishes where mortgages are taxed, the law is only enforced to a very small extent. Therefore the tax, not being general all over the State, is unjust to those who pay it. This report should In no way re- flect on the assessors of the State o' Louisiana or the City of New Orleans. as they have no doubt tried, under existing laws and existing conditions- to be fair to the property-holders and at the same time represent justly the State and the City. But the fact that the law authorized them to assess mortgages, and the further fact tha the owners of the property had already paid taxes on the same property, really made it seem an unjust assess- ment, and the assessors use their ow judgment, and, in most cases, do not assess mortgages, as they believe it would be double taxation. This would all be obviated by the adoption of the recommendation to establish a tax to be paid on the ra- cordation of mortgages, as the mort- gages could not be recorded without paying the taxes, and would leave cap- ital free to make its investments-- without extra taxation. I would suggest, in place of the present svstem of taxation mortgages in Louisiana, the recording tax law, which is. as I have pointed out, now in force in New York, Alabama, Vir- ginia and Minnesota. Let the mort- gage pay -one-half of one per cent the day it is recorded, as It has to pay- in New York and Minnesota, and be- thereafter exempt from taxation. I believe that the passage of a mort- gage recording tax law in Louisiana similar to that now in force in New York and Minnesota would be bene- ficial for four reasons: First. It would reduce the interest rates to borrowers in this State. Second. It would attract millions- of dollars of foreign capital to Louisi- ana. Third. It would abolish the great inequality and injustice of the present mortgage law in Louisiana. Fourth. It would bring to the State (if the whole tax on mortgages went to the State, as I believe it should) at least ten times as much revenue from mortgages as it now receives. I will briefly discuss the above rea- sons separately: First. The adoption of the recording law, similar to that in New York and Minnesota, would reduce interest. Hon. A. C. Pleydell, secretary of the New York Tax Reform Association, con- cerning the recording tax in New York, recently issued the following statement: "The records of mortgage loans in this city (New York City) show that, as predicted, the recording tax law has attracted money to the mortgage market and reduced interest rates. For eight months from July 1, 1906, when the law went into effect, to March 1, 1907, the average rate of interest stated on mortgages recorded in New- York County was 5.15 per cent. For the corresponding period under the an- nual mortgage tax law the average rate was 5.54 per cent, or about four- tenths of one per cent higher. "Considering the state of the money market and the increased demand for capital in other lines, this decrease in the mortgage interest rate is an excellent showing for the new law. Anr) the amount of money loaned was nearly twice as large as under the annual tax law. The following table gives the figures for corresponding periods under the recording tax, the annual tax and the previous year, when mortgages were liable to taxa tion as personal property: New York County (Manhattan and Bronx). Amount Total in which Eight months. July-Feb., amount of mort- interest rate Average inclusive. gages recorded, was stated. rate. 1904-5, (old law) $265,801,499 $229,318,157 5.12 1905-6, (annual tax) : 160,944,878 138,637,021 5 54 1906-7, (recording tax) 306,874,021 257,068 670 615 27 "The effect of the new law on the Tate and on the amount of money loaned in Brooklyn has also been gratifying. 'Because of the confusior of the records in Kings County for July, 1905, it has been impracticable to •compute the average interest rate for -the time immediately after the annual tax law went into effect. Therefore, the period beginning October 1 has been taken, so that exact comparisons can be made. The rate has been two and one-half mills lower under the recording tax, and the amount of money loaned was increased, being nearly half as much again. Five months, Oct. -Feb., inclusive. ISO 1-5, (old law): 1905-06, (annual tax) . . . 1906-7, (recording tax) . Kings County (Brooklyn),. Amount Total in which amount of mort- interest rate Average gages recorded, was stated. rate. $65,021,630 $53,481,692 5.24 50,082,483 40,600,275 5.69 .' 73,442,995 .70,029,026 5.43 "Not only was the average rate of interest higher under last year's an- nual tax, but the amount of money loaned at rates over five per cent was* •much larger, especiall- in Brooklyn as will appear from the following com- parison. Amounts Over Five Per Cent. County ;— New York. Kings. 8 Months. 5 Months. 1904-5 .-. 33 per cent 26percen1 1905-6 68 per cent 88 percen) 1906-7 33 per cent 59 per cent "All these calculations have beer. the Record and Guide, and are a sum- ma y of detailed tables similar to those in a pamphlet issued by the New York Tax Reform Association a year ago, which showed that the annual mort- gage tax law of 1905 had increased in- terest rates and diminished loans. "It is gratifying to be able to show that the recording tax law has lowered the average rate of interest; that It has increased the amount of money loaned at five per cent or less, and that it has brought more money Into the mortgage market, and this despito the admittedly adverse conditions oi •from the weekly tables published by the money market." * The figures for this period do not include the $100,300,000 mortgage of the Hudson and Manhattan Railway Co.. 4^ per cent. Second. It would attract millions of ■foreign capital to Louisiana. Mr. Pleydell has very clearly shown that the adoption of the mortgage rec- ording tax in New York caused to be invested in mortgages tnere nearly twice as much money as there was under the Old law. The passage of such a law would "bring about the same results in Lou- isiana, because there would be a large influx of capital from abroad, which would be willing to take rea- •sonahle rates of interest; provided, the ■mortgages were taxed as in New York. Third. It would abolish the gross Inequality and injustice of the present mortgage law in Louisiana. As I have above pointed out, mort- gagees do not pay taxes in fifty-two parishes of Louisiana and five districts •of the City of New Orleans. A few mortgagees do pay taxes in six par- ishes and two districts of- the City of New Orleans. If we follow the law,, of New York, there can pe, n no „ escape from a re- cording tax on a~ mortgage, because •the mortgage is bound to be recorded to be good against third persons, and the minute it is recorded it has to pay the tax. In sales of property per- sons sometimes give fictitious values, and say that the property was sold for less than it really was, in order to get low assessment; but this scheme would "not be worked to escape taxation on mortgages. The mort-, gagee would never consent to say that the mortgage was for less than it really was in order to escape taxation, because if he did, and the borrower made a second mortgage, the first mortgage would prime the second mortgage, in case of foreclosure, only for the amount expressed on the face of the mortgage.* If the recording tax law were adopt- ed, everv mortgage in Louisiana would be taxed alike. Fourth. It would bring to the State (if the whole tax on mortgages went to the State, as I believe it should) over ten times as muph revenue from mortgage taxation as it now receives. A compilation of the figures given by the , assessors of the six country parishes in thjs Sta,te, Wiho- assess mortgages will show that, outside th» 28 Parish of Orleans, the total assess- ment of mortgages for 1907 was $174,- 370. At five mills on the dollar, the State tr.x received on all mortgages outside of the Parish of Orleans was the pitiful sum of $871.85. In the Parish of Orleans money loaned on interest, and all bills receiv- able for money loaned or advanced, and for goods sold and all credits of any and every description, were as- sessed in a lump, and amounted, in the First and Second districts, to $8,- 023,930. It, would not be fair to say that there are $8,023,930 worth of mortgages assessed in New Orleans because this amount includes not only money lent on* mortgage, but all money loaned on interest, and all bills receivable for money loaned or ad- vanced, and for goods sold and all credits of any and every description. I estimate that, of the $8,023,930 total assessment against credits in the Par- ish of Orleans, only $3,O0C,0OO could be properly chargeable to the assess- ment of mortgages proper. In the Parish of Orleans, then, I estimate that the State received in 1907 a tax of $15,000 on mortgages. In the coun- try parishes the State received $871.85 The total amount of the taxes, tnere- fore, received by the State of Louisi- ana o n mortgages for 1907 was about $15,871.85. This is what the State receives un- der the present law, where, say, only $3,174,370 worth of mortgages are as- sessed and under which mortgages are not assessed in fifty-two parishes. If the mortgage recording tax law were adopted, and if the whole tax went to the State, the State, I esti- mate, would receive at least $150,000 per annum in taxes from this source. Hon. S. N. D. North, in a letter to the secretary of this Commission of date February 7, 1908, said: "The only census report relating to the amount of mortgages placed on record was compiled by the Bureau Of Census for the years .1880 to 1889, In these years the mSnber of real estate mortgages annually recorded in Louisiana varied from 4,629 In 1880 to 8,281 in 1889, and the amount varied from $10,230,717 in 1880 to $14,510,02 in 1889. The mortgage debt in force In 1890 was $28,513,909. "The only data at hand on which to predicate an estimate of tlv amount of mortgage debt at the pres- ent time are the census estimates or the total wealth in the State. Tha' wealth in 1890 was estimated to be $495,301 597. and in 1904, $1,032,229,- 006. If the mortgage debt has in- creased proportionately, the existing m^Ltgage debt in Louisiana is not far from sixty million dollars, and the annual amount placed on record will vary from twenty to thirty million cllars." There con be no doubt that, on ac- count of the rapid progress Louisiana. h-.- * made in the past few years in an industrial, manufacturing and com- mercial way, and In the building of railways and the erection of buildings, there is now at least thirty million dollars' worth of mortgages recorded annually in this State, as is estimated by the director of the United States census. If Louisiana adopts the same recording tax rate as that adopted by New York and Minnesota — one-half of one per cent. — the State will realize annually $150,000, as against $15,- 871.85 which it realizes under the ex- isting law. Personally, I believe that the adop- tion of this law would bring so much foreign mcnev into the market tnat it would not be long before we would have at least $60,000,000 Worth of mortgages recorded annually in this State. In the State of New York dur- ing the year 1906-07 there were re- corded $976,807,200 worth of mort- gages, and that State realized under its mortgage recording tax for the year 1906-07 the sum of $4,884,036. Hon. A. C. Pleydell, Secretary of the »New York Tax Reform Association,, has written the following in a letter to the Tax Commission of Louisiana: "Prior to the annual mortgage tax- law of 1905, mortgages were not tax- able as such, but only as a part of anyone's personal property. They were, therefore, in some cases, offset by debts of the owner; and, in many cases, were held by institutions that were exempt from taxation on their personal property, such as charitable organizations; also a part of the amount due policyholders by insur- ance companies. It is impossible to say how many mortgages were exempt legally,^ or how many that were tax- able escaped. The following table, showing personal property assessment" in 1905, gives also the receipts for the recording tax for the first year of Its operation. You will see that the value of the mortgages recorded in the State and in this city,, and in the countier with other large cities, was much more than the entire personal property as- sessment of the year before. And yet in no case has that personal property assessment been reduced because of the exemption which mortgages now have It is fair to infer that very few 29 mortgages were taxed by the personal property assessment m comparison 1 ■with the total number. (One year.) 1905. 1906-07. 1906-07. 1907. Total Value Probable Per. Pr. Mortgage mortages mortgage assessment. tax paid. recorded. debt in force. New York City $690,561,926 $4,090,325 $818,067,000 $2,800,000,000 State (outside N. Y. City) 125,638,008 793,711 158,742,200 800,000,000 $816,399,934 $4,884,036 $976,807,200 $3,600,000,000 County — Erie (Buffalo) 8,757.428 114-.590 22,918,000 Monroe (Rochester) 7,884,449 53,595 10,718,000 Onondaga (Syracuse) . . . 6,383,855 48,422 9,684,400 "Receipts from the recording tax shown above are unusually large. This is due partly to the fact that in, antici- pation of the repealing of the! annual tax, many mortgage loans wr-ve hpid up and recorded immediately after the new law went into effect. I do not think the ordinary receipts for this city will be more than $3,000,000, and perhaps $500,000 for the rest of the State. Of course, we have had a tre- mendous decreat-c in mortgage loans in the last three or fouv months, in consequence of the financial ■iiua'.ion, and this will still further reduce the revenue. Unless things change the re- ceipts for this city will fall below $3,- 000,000. "One of the strong arguments in favor of the recording tax is that the tax is certain. When mortgages are supposed to be taxed under the gen- eral property tax, a great many of them escape. But the fact that they are liable to taxation enables the lend- ers to charge for the risk in the in- terest rate, and the amount they get from the borrower is far in excess of any tax received by the State. This subject is discussed in our mortgage tax pamphlet, which I am sending you. "On the other hand, we know of" a good many cases in which a mort- gage bearing five or six per cent in- terest was suddenly discovered by the assessors and placed on the rolls for the full value, which made a tax of one and one-half to even three per cent. This usually happens when prop- erty is passed by reason of death, and the assessors found it in the nana.? of executors or widows, through their inspection of the court records. Of course, if every mortgage was going to be taxed at two or three per cent the lenders would take care of the tax in the interest rate, but', when' so many escape, there is not enough add- ed to the interest to cover the full tax, and, when some unfortunates are caught, they lose a quarter or half of their inconte." In view of what I have said,, I therefore suggest to this Commission that we recommend to the next ses- sion of the Legislature the adoption of a mortgage recording tax law simi- lar to that now in force in New York or Minnesota. The Secretary of this Commission' has copies of the New York and Min- nesota laws for the perusal of th* members of the Commission; I 30 NECESSITY OF A TAX AMENDMENT TO THE CONSTITUTION By HON. M. H. CARVER, Member Tax Commission of Louisiana The Constitution of 1898 declares as ;a principle that "taxation shall be equal and uniform." It further provides,' as a method of -carrying- out the principles, that "all property shall be taxed in proportion :to its value." This is what is known as the general property tax system. Provisions substantially the same •were contained in the Constitutions of 1864, 1868 and 1879. If the system were a good one. that would not justify embedding it in the 'Constitution. The System Not a Good One. But it is not a good one. It may have worked fairly well when first -adopted. Conditions were primitive and agricultural property was owned chief- ly by individuals, and consisted mainlv •of immovables and a few simple forms .of personality. like animals and mer- -chandise, which were tangible, visible ■and not easily removed or concealed. But, as civilization advanced, new and •more complex industries developed, producing important changes in the •forms of wealth. Property now belongs largely to corporations. It consists to a great extent of things that can be concealed or removed easily, like moneys, stocks, bonds, mortgages and other credits. Under the changed conditions the system has broken completely down. Its practical workings prove It sub- ject to the following fatal defects: First. Instead of promoting equality and uniformity according to promise, tt produces gross inequality and utter lack of uniformity of three kinds — (a) As between the different par- ishes. (b) As between different kinds of property. (c) As between different owners of the same kind of property. Second. It places a premium on eva- sion of the law by trickery, often ac- companied with perjury, thus debauch- ing the public morals and breeding ■co-^emot for all law. Third. It drives away capital, In- crease 1 ?, interest and hinders industrial 4eyelopmen ; ti, These defects are abundantly proven by data gathered by this Commission. According to reports of the assessors property is assessed in some parishes at 33 1-3 per cent of its value, and in others at 100 per cent. A property owner in one of the lat- ter parishes pays three times as much taxes to the State as an owner in one of the former parishes on property of the same value. The result is the same as though the State made one pay all of his own tax and one-half of the other owner's tax. Mortgages, according to the asses- sors' reports, are not assessed at all In fifty-two parishes and five New Or- leans districts. Inability to ascertain the owners is the reason given. In six parishes outside of New Or- leans they are assessed, the amounts on the roll of 1907 being as follows: Cameron $ 15,000 Claiborne 18,815 Bast Feliciana 83,755 Jackson 1,015 Livingston 20,620 Vermilion 35,165 $174,370 In the two New Orleans districts where they are assessed, the amounts for 1907 are not given separately from other credits. From the Auditor's report for 1906 I have made a table showing totals of moneys loaned or in possession and all mortgages, bonds, judgments, notes and other credits assessed for 1906. No one can analyze this table and believe for a moment that it is any- thing like a correct index of the man- ner in which this kind of property is really distributed among the citizens of the State. Taking up the country parishes we find that twenty-five of them are not assessed with anything on this score. The total assessment of the other thirty-three aggregates $1,891,238. Of this Calcasieu Parish has more than one-half — namely, $l,0 , 66-,159.—._ » "K^t Feliciana. Raoidoo Union and Caddo range from $90,565 to $154,040 each. I ..■•■ ..-* ■ .>_:,.. i, ,,m>(je from $1,000 to $9,740 each. The total- for Orleans Parish is $12,- 206,533, or about seven times the total (or the country^. This $12,206,533 is distributed as fol- lows: First District $10,606,060 Second District 1,305,300 Third District 51,900 Fourth District 95,635 Fifth District 800 Sixth District 135,538 Seventh District . . . 11,300 Total for th> city. .$12,206,533 Total for country. 1,891,233 Total for the State.$14,097,66e The entire assessment of all prop- erty for the State was $459,273,821 in 1906. Of this the First District of Orleans Parish had $101,823,556, or, roughly speaking, two-ninths. But of the moneys and credits it had, as shown by the above figures, about five-sevenths. No comment can emphasize the dis- crimination shown by these figures. Let us not mistake the point. It is not that moneys, mortgages, bonds, notes and other credits cannot sometimes ue reached; tre point is, that when they are reached the owners who are. caugnt suffer just the gross discrimination shown. Who Is to Blame? Are the assess o ■« to blame for this? I do not think so. As a class they are honest and cot. «i .atious and try to no their duty. But for such things as moneys, mortgagi i etc., they must in the last analysit .ike the word of the taxpayer. If one, in a burst of zeal, -rakes a special effort to reach this kind of property, he njt ">nly arouses hostil- ity (which many have the moral cour- age to stand if .lutv requires it), but he soon sees th it so many still escape that, in increasing the assessment, he has also increased the injustice. Most of them, therefore, quietly accent th,' inevitable and simply lalie what the taxpayers choose to give in. Speakine broadb, it then ceases to be a tax and becomes a voluntary contribution. Is the Taxpayer to Blame? Yes, but the system makes it to his Interest to evade making returns or to make false returns. " The cunning and dishonest, yield to the temptation. ' This kind of property, ^cannot be falrlv and impartially reached bv the general property tax method Every effort to do so has resulted in failure. Every expedient has been vainly tried. The . despotic kings , and barons of medieval Europe found physical tor- ture ineffectual to compel disclosures- of concealable wealth. Our modern oaths and penalties avail nQ better. Spies and inquisitors are baffled. Some of our cities and towns have a tax rate of three per cent. On a mortgage bearing six per cent interest, this amounts to one-half the income. No sane person will pay this long, if caught one year he will manage to escape the next by making a real or fictitious transfer of the mortgage, by making false returns, by sending it out of the State; if necessary, by re- moving from the State himself. All' these methods are used, "n money in hand the tax is more than the income, because as long as it is in hand it produces no income at all. If the tax on mortgages and moneys was generally enforced, millions of rapital would be withdrawn from the State. Some, doubtless, is withdrawn on account of the slight extent to- which it is enforced. It is certain that much is deterred from coming in by the mere fear that it will be taxed. I am reliably informed that one of th© big insurance companies desired to lend $10,000,000 on mortgages in this- State, but abandoned the project for fear it would' be taxed. I am aisc reliably informed that one of them did make a loan of nearly half a million dollars in this State, but one of the' stipulations of the mortgage was tnat, in case anv tax was levied on the mortgage, the mortgagor should pay- it in addition tn the agreed interest. These Objections Universal. This is not the experience of Louisi- ana alone; it is the universal experi- ence of the civilized -world. The gen- eral property tax svstem has been tried, says David A. Wells, bv all na- tions and abandoned by f>'I the Euro- pean countries except Holland ana Switzerland. It is the experience of every State in the Union and almost every county in every State. The Census Bureau report on "Wealth, Debt and Taxation" gives for the vear 1902 an estimate of the pro- portion of assessed to real value «i real estate for every county in the United States. Mr. Solomon Wolff, a member of this Commission, has pre- pared a table showing the disparity be- tween the respective counties in each State. The greatest disparity with us for 1907,. as shown above, is three! to opp. j»r>cordi.r"»> to Mr. Wolff's table, in some States it was greater ' In "1902; 32 namely, in one, four and a half to one; in one, four and a quarter to one; in one, three and three-fourths to one; in one, three and a half to one. "While less than this in other States, it is great in nearly all of them. Professor Edwin R. A.Seligman, .Professor in Columbia University, in his work on "The General Property •Tax," page 52, says: "Practically the general property tax, .as actually administered today, is be- yond all peradventure the worst tax known in the civilized world. * * * It puts a premium on dishonesty and debauches the public conscience. It •reduces deception to a system and makes a science of knavery, it presses hardest on those least able to pay. It imposes double taxation on one and grants entire immunity to the next. -In short, the general, property .tax is so flagrantly inequitable that its re- tention can be explained only through ignorance or inertia." Professo.r Richard T. Ely says: "The one uniform tax on all property as an exclusive source c f revenue, or the chief source, the main feature in direct taxation, never has worked well in any modern community or State in the civilized world, though it has been tried thousands of times, and although all the mental resources of able men have been employed to make it work well. I have read diligently the liter- ature of finance to find an example, ■ but in vain; and lest this should not be sufficiently trustworthy, I have made it my business, in my capacity as tax commissioner, to visit typical States and cities and to make inquiries in person of citizens as well as of officials trusted with the administra- tion of the laws. I have visited Charleston, S. C; Savannah, Atlanta and Augusta, Ga.; Columbus, Ohio; Madison, Wis.; Toronto, Montreal and Quebec. Canada. And the result has been abundantly to confirm all that I have said about the impracticability of the one uniform tax upon real and personal property." The report of the Committee of Taxes and Assessments of the City of New York, 1872, page 9, says: "Official documents tell us that 'in- stead of being a tax upon personal -property it has, in effect, become a tax upon ignorance and honesty. That Is to say, its imposition is restricted to those who are not informed of the means of evasion, or, knowing the means, are restrained by a nice sense .of honor from resorting to them.' " This comes from practical tax of- ficials, speaking, not from theory, but from their own experience. Tax Commissions. Tax commissions have, in official re- ports, based on careful investigation, spoken thus of the system- New Hampshire: "It is corrupt and demoralizing." New York: "It puts a premium on perjury and a penalty on integrity." Ohio:, "It imposes unjust burdens on the man who is scrupulously hon- est." Illinois: "It is debauching to the conscience and subversive of the pub- lic morals. . A school for perjury pro- moted by the law." New Jersey" "It is now literally true in New Jersey, as in other States, t'->at the onlv ones who pay honesc taxes on personal property are the estates of decedent" widows and or- phans, idiots and lunatics." Massachusetts: "The taxation of 'jei-s-.-nal property in the form of se- curities and investments is thus a fail- ure." "Everywhere, without exception, the testimony is that this part of the sys- tem of the general property tax is un- equal, unsuccessful, often demoralizing to tax officers, always irritating to tax- payers. The experience of Massachu- setts is the more striking because here the difficulty does not lie mainly in the administration of the tax laws. The assessors are usually honest, com- petent, zealous. We have heard much of grave abuses, of almost corrupt laxity in other States, but in this Com- monwealth, notwithstanding occasional defections (some of which we have just referred to), the standard of public duty continues to be high, anri t' cause of failure is not to be found mainly in official dereliction. It lies in the system itself." Washington: " * * * moneys and credits and other intangible and easily concealed property almost en- tirely escapes taxation." California: "Full of inequalities which twist and distort industries and prohibit a systematical development of resources." The United States Industrial Commis- sion recommends that the States abandon the general property tax for State revenues. All these opinions and reports tell, with variation only o" detail and ver- biage, the same sickening story — tile impossibility of fairly reaching per- sonal poperty, antt especially" 'intang- ible personality; the gross inequality' 33 and want of uniformity between coun- ty and county; between property and property, and between individual and individual; the discrimination in favor of the cunning and against the hon- ■est, especially against the weak and helpless; the fraud and trickery, and ■even perjury, resorted to in evasion of the law; the hindrance to indus- tial development; in short, the utter breakdown of the general property tax -system everywhere. The Supreme Court of the United States said in Pacific Express Co. vs. Siebert, 142 U. S., 339; "A system which imposes the same tax upon every species of property, ir- respective of its nature or condition or class, will be destructive of the principle of uniformity and equality In taxation, and of a just adaptation of property to its burdens. Can These Defects Be Cured wilder the Present Constitutional Provision? The Board of Equalization can cure some of them to some extent. For instance, it can lessen the dis- parity as between . parishes on real estate. But it will meet the same difficulties that such boards have met elsewhere and will probably be as powerless as they to overcome them. The following extracts from Mr. Wolff's table show great disparity even in real estate, yet the States men- tioned have boards of equalization: Colorado: Counties range from 21 to 67 per cent. California: Counties range from 26 to 73 per cent. Kansas: Counties range from 17 to 42 per cent. Minnesota: Counties range from 22 to 55 per cent. Missouri: Counties range from 25 to 59 per cent. Nebraska: Counties range fom 12 to 30 per cent. Tennessee: Counties range from 32 to 88 per cent. Washington: Counties range from 22 to 50 per cent. An embarrassing question encoun- tered by such board is this: The high assessed counties need such assess- ment to provide sufficient local rev- enue; the low assessed counties do not. To'*ring the latter up to stand- ard wii> inflict unnecessary burden by raising too much local revenue, and will be stoutly resisted; to reduce the former will cause a deficit in loqal revenue. For this reason it is not un- common for counties and cities to pro- test -.against a reduction of their own assessment by State boards, prefer- ring to pay more than their share of State taxes rather than to cripple themselves by reducing the local rev- enue. As to personal property, the Board of Equalization can do very little; nothing at all with respect to such as escape assessment. It can order an increase here and a decrease there of such staple things as horses, mules, cattle and vehicles; but what can it do in respect to merchandise or bouse- 'p^ld furniture, even when it is on the rolls? Still less can it do any- thirg with moneys, mortgages ?nd other such things that are not put on the rolls. Inquisitorial Methods. California, Wisconsin, Ohio and oth- er States have tried inquisitorial methods, heavy penalties and strict administration of the law. but these all -proved practically barren of re- sults. California's Constitution provided that "all property - shall be taxed in proportion to its value," and that "the word 'property' shall include moneys and credits, bonds, stocks, dues, franchises and all other matters and things capable of private owner- ship." Strict laws were passed to reach moneys, credits, etc. But for 1906 moneys and credits formed only two and seven-tenths per cent of the total assessment. Between 1872 and 1904 the popula- tion trebled. But money and solvent credits shrank as follows: 1872. 1904. California $111,531,623 $79,106,590 San Francisco. 43,000,000 33,000,000 The Wisconsin Tax Commission in 1903 reported that it had made every effort to bring such property on the rolls, but the amount so brought there, including motgages, was only 5.35 .per cent of the total assessment. Ohio employed inquisitors, giving them twenty per cent of what they discovered, and giving the County Auditor and County Treasurer nine per cent. These officials worked with great vigor and industry, their pay being contingent on success. They searched the mortgage records, ex- amined bank statements and organ- ized detective bureaus to get informa- tion from more secret sources. The inquisitors would accuse and the audi- tor decide. This measure produced re- sults totally insignificant compared to the hostility it aroused and the capital it drove from the State. On its face it was vicious, A system costing twenty-nine per cent to operate was 34 Inherently bad. The Tax Commission Of 1893, after five years' operation, recommended repeal of the law. Nelson W. Evans, in his book en- titled "Taxation in Ohio," published in 1906, at page 133, -- says: "Today some counties in Ohio return as mon- eys and credits as low as one per cent of the known registered and published moneys and credits in the county, while others return the full amount and more. Hamilton County, In which Cincinnati is situated, may b. meriiioned in the first-clcss, and Preble in the second. Others yary all the way frcm one to one hundred per cent. It has become the grossest injustice to enforce the law taxing moneys and credits, because, where one citizen is caught and taxed, one hundred escape.'' Hon. E. A. Angell, member of the Ohio Tax Commission, stated that, in 1896, Hamilton County, containing Cincinnati, returned as moneys only $ 1 097,283; Cleveland had bank depos- its of "70,000.000, but returned for tax- ation only $1,741,129. Mr. Angell further says: "The indirect results of the opera- tion of this 'aw have been to drive away large musses of capital from the State. It is estimated that at least $200,000,000 has been lost to Cleveland alone, and as much more to Cincin- nati." Taxation of Mortgages, Bonds, Notes, and Other Credits and Shares of Stock in Corporations. A difference of opinion exists as to the wisdom and justice of taxing sucn property as this at all. It is urged on the one hand that it ought to be taxed because — First. It enioys government protec- tion and therefore ought to contribute to government expense. Second. It is held mostlv by the rich — who are the better able to pay taxes. On the other hand, it is urged that it ought not to be taxed because — First. It is double taxation. While these things are property in a legal sense, in an economic sense they are not. They are mere evidences, repre- sentatives, and counters of property. The property itself being taxed, to tax these things also is double taxa- tion, as much so as to tax land anS also the deed to the land. Second. No effort to reach ■. such property has ever been or can be suc- cessful to any great extent. It is easilv concealed, and this is ordinarily sufficient to insure its escape, it is also easily removed, and this is done, if necessary. Third. Most property of this kind escaping, injustice is perpetrated to- the extent that the remainder is reached. This injustice falls on the- most 'helpless class — to wit, widows and .orphans, wJiose_ estates are »««- ters of public record and are man- aged by trustees without the incentive of personal interest to evade the law. Fourth. If any scheme could be de- vised to reach such property general- ly, it would drive capital away, in- crease interest, strangle industry an* hinder development. Whichever side of this controversy is correct, the Constitution ought to- be changed. If such property ought to be taxed, it ought to be changed so as to per- mit the adoption of a method which will reach it impartially. If it is not to be taxed the Constitution ought to be amended so that its exemption may be in pursuance of law, instead of by evasion and violation of law. Reforms Blocked. Connecticut, New York/ New Jersey, Pennsylvania, Delaware, Wisconsin, Vermont, Oregon and perhaps other States, have separated, some wholly and some partly, the sources of State and local revenue. Usually the State takes as its subjects for taxation rail- road, telegraph, telephone and express companies, leaving to the counties and municipalities the more local kinds of property, such as land, merchandise, cattle, etc., to supply their revenues. The plan has worked well, and organ- ized effort is being made for its adop- tion in Missouri, California, onto, Michigan, Minnesota, Colorado, Ken- tucky, Massachusetts, Illinois, Texas and other States. Where separation is complete, it is :pf no interest to any county if other counties have lower rates of assess- ment or permit taxable poperty to go untaxed. This dispenses with the necessity for a Board of Equalization. The cost of collecting State revenue under this plan is very little. Assessment can be made by a State Board and taxes collected by the State Treasurer, thus caving the i.ees now paid local as- sessors and tax collectors, which are quite a considerable sum. This plao is mnre convenient also for the cor- porations than the present plan or making separate settlements with the collector of each parish, city and town in which the companies do business. If this plan were adopted here it would put an end to the competition now existing between the parishes to sec which can make the -lowest assess- 35 merit and thereby escape with th3 lefEt a:nount of State taxes. In case local option were granted it would produce a different and more worthy emulation. The taxpayers would cou- sidei the incidence of taxation. Each parish woalcl try to adopt the sys- tem best suited to its own needs. They would find that, taxation being a bur- den, there is much in proper adjust- ment. A horse can carry a big load comfortably if placed on its back. The same load tied to its feet would pre- vent its taking a step. Each parish could encourage, by exemption, the particular form of industry deened most desirable. Some parishes might want factories, and exempt these. Some might suffer from scarcity of money and exempt all loans. Others might exempt all' credits, in recognition of the claim that to tax these is dou- ble taxation, or of the claim that they cannot be reached fairly and impar- tially. Others might adopt the mort- gage registry tax l|aw in force in New York by which no attempt is made to accomplish the impossible task of collecting an annual tax on mortgages, but one tax is collected at the time of. and as a condition to, registry. Other parishes might still believe in the fairness, justness and practicability of taxing mortgages and all other credits in the present way and continue the effort to do so. In short, each could develop a system of its own, changing and improving it as experience should show its im- perfections. Classification of Subjects of Taxation. The separation of sources would not, as between individuals, correct the evil of taxing some and letting otners go untaxed on their moneys, credits, etc. In case it was determined by the lawmaker that it was right to tax these at all, it might be done more effectually by classifying the subjects of taxation and adopting different rules for different kinds of property. The constitutional requirement of a uniform rule for all kinds of property ignores the essential difference which nature herself has made, and is im- possible of enforcement. Nature's laws yield not to human enactments. No imperial decree or constitutional provision can make fluids eatable or solids drinkable. Vain are the thun- derings of Canute. The rising tide comes unchecked. An assessor can see a plantation and can, therefore, assess it. He cannot see moneys, cred- its, etc., and, therefore, cannot assess or know of them unless the owner chooses to tell him. A rule to reach the other is not needed to reach the plantation. Mortgages must, of course, be recorded. A small tax, payable as a condition to registry, would reach all mortgages, and would yield more revenue than the present larger tax, which is ordered by the Constitution and Legislature, but evaded by the taxpayer. Shares of stock in corporations are legally property in the hands of the shareholders, and the Constitution seems to design their taxation as such. But the Legislature, as decided by the Supreme Court in the Chassa- noil case a few weeks ago, does not provide for their assessment; hence they go untaxed. The Court calls this legislative omission. This omission might have been intentional, because of the claim that it would be double taxation, or the claim that they could not be generally reached, or both. But, whatever the reason, the situation is unfortunate. Either the Constitution ought not to require it, or else the Legislature ought to do it. Under the 'niform rule it cannot be done, and the Legislature cannot adopt any oth- er. Were it free and thought it wise and just to tax such shares, a rule might be adopted to reach them im- partially; but it would have to be a different rule from the one used for tangible property. If, on the other hand, it was thought just not to tax tr em, their exemption would be a proper exercise of discretion, and not an omission of constitutional duty. Apportionment of State Taxes Accord- ing to Local Revenue. The Tax Reform Association of New York and Ohio have suggested that State taxes be apportioned among the counties, according to the entire rev- enue raised for local purposes, the counties to exercise local option in se- lecting the subjects of taxation. The proposition is recommended by some eminent authorities on taxation, and the reasons given are apparently strong. The plan has been partially adopted by the State of Oregon. If it proves satisfactory, as seems likely, other States will doubtles adopt it. But neither separation of sources of revenue, nor local option in taxation, nor the proper classification of the subjects of taxation, nor, indeed, any other substantial reform can be adopt- ed under the restrictions of the pres- ent Constitution. ' Maine, Massachusetts, Connecticut, New York, Pennsylvania, New Jersey, Vermont and Delaware are free rrom hampering constitutional provisions. 36 and are solving their tax problems faster than we are. Most of the other States navo re- strictions on the law-making power, many being similar to ours. In such States tax commissions, when ap- pointed, almost invariably report amendment of the Constitution as ue- ing the first thing and necessary step to reform. The people of Minnesota in 1906 adopted an amendment to their Con- stitution in order to get rid of the general property tax system, this hav- ing been advised by the special Tax Commission of 1902 and submitted to the people by the Legislature in 1906. The Tax Commissions of Missouri and Washington advised a constitu- tional amendment to get rid of the system, and the Legislatures of these States have submitted the question to the people to be voted on in No- vember, 1908. The California Tax Commission in 1906 recommended a change in the Constitution for the same purpose in that State. Only a few weeks ago the Ohio Tax Commission recommended the same thing. West Virginia is just holding, or has just held a special session of the Legislature to consider the submission of an amendment to the people per- mitting the classification of subjects and separation of sources. The removal of constitutional re- strictions in order to permit proper solution of tax problems is also urged by the folllowing influential organ- izations: Ohio State Board of Com- merce, Kentucky State Development Association, Civic Federation of Chi- cago, New York Tax Reform Associa- tion. Finally, the National Conference on Taxation, held at Columbus,' Ohio, in November, 1907, unanimously adopted a resolution favoring the repeal or all constitutional restrictions on the law- maker over the power of taxation which require the equal taxation of all property or which prevent the classification of property. Summary. Summarizing the foregoing, it seems to me from our own experience and that of nearly all the world: That the general property tax sys- tem is a failure. That our present Constitution per- mits no other. That many of our sister States are fast evolving more satisfactory plans. That such plans usually take shape along general lines of separation of sources, local option, and classifica- tion of subjects of taxation, with dif- ferent rules to reach different classes according to their respective natures, That the restrictions of our Con- stitution bar us from entering any of these avenues of reform, and that we ought therefore, to amend the Constitution so as to give the. law r maker a free, or, at any rate, a freer hand. Necessary Constitutional Provisions. There is little necessity for putting anything at all in the Constitution about taxation, and some distinguished authorities hold that everything on the subiect in a Constitution is dang- erous. To meet the decision of the Supreme Court of the United States, though, in the Dartmouth College I case, 4 Wheaton, 518, it is perhaps well to provide: "That the power of taxation shall never be suspended, surrendered or contracted away." It would be well also to provide: "That taxation shall be equal and uniform on subjects of the same class throughout the territorial limits of the authority levying the tax, and shall be levied for public purposes only." These provisions, together with the guarantees of the Federal Constitu- tion, would doubtless amply safeguard fundamental rights and protect all taxpayers from unjust discrimination. Certainly we ought not to embed any tax system in the Constitution. Con- . ditions change and needs change with them. Here, as in all things else, evo- lution obtains. The best plans are not created; they grow. The need arises first, then the provision to meet it. Freedom to develop is the essen- tial thing. Binding the lawmaker rig- idly, even to a good system, will, of course, prevent his adopting a worse \ one, which he is not h.^ely to no any- way. It is just as sure to pevent his adopting a better one, and is pow- erless to force the one adopted to continue good in the face of changed conditions. Besides, the generations grow in wisdom. We may, without undue van- ity, claim more knowledge than our ancestors, and, without undue humil- ity, concede still more to our des- cendants. We need not, therefore, ! trouble ourselves to anticipate the wants of posterity, and fasten even a good system on it. We may rest calm- ly confident that wisdom will not per- ish with us ; that our descendants will discover their own needs, and that to the satisfaction of these they will bring whatever zeal and energy may be necessary and a knowledge en- riched by their own experience as well as ours.