nu 
 
 2342 
 M4D16 
 
 
 
 
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 BOUGHT WITH THE INCOME 
 FROM THE- 
 
 SAGE ENDOWMENT FUND 
 
 THE GIFT OF 
 
 Henrg W. Sage 
 
 1891 
 
 4.imy m/^f£.... 
 
Double TAXATioisr 
 
 -IN- 
 
 MASSACHUSETTS 
 
 \fiill exposition of the injustice and inexpediency of parts 
 I of the Taxation System in Massachusetts 
 
 -BY- 
 
 Richard H. Dana 
 
 published under the auspices of 
 T H E 
 
 MMsaclusetts Anti-Double-Taxation League 
 
 BOSTON 
 D J|!i. M K E; Ivlv & U P H A M: 
 
 ,;,,' The Old Corner Bookstore 
 
 pRiicias cTs. 
 
Declaration of Principles 
 
 -®- 
 
 Double Taxation is essentially unjust and -% 
 injurious to the best interests of the Commonwealth. 
 The object of The League is the abolition of double 
 taxation, whether this taxation falls upon 
 
 Property protected elsewhere and already 
 
 taxed, or upon 
 Both Borrower and Lender in respect of the 
 
 same property, or upon 
 Income derived from property already taxed. 
 
 Also the abolition of the taxation of obligations 
 of the State or municipalities of Massachusetts, of 
 which the interest is already a product of taxation, 
 and the principle must be raised by taxation. 
 
 IVe are, therefore, associated for the purpose 
 of urging upon our fellow-citizens, especially upon 
 the Legislature, such amendments in jthe laws as 
 will "correct the system in these particulars ; and 
 ^ also strenuously to. oppose any of those changes 
 in the laws, now advocated, which would tend to 
 aggravate the evils of Double Taxation. 
 
Double Taxation 
 
 -IN- 
 
 ill/ 
 
 MASSACHUSETTS 
 
 A full exposition of the injustice and inexpediency of parts 
 of the Taxation System in Massachusetts 
 
 -BY- 
 
 Richard H. Dana 
 
 Published under the auspices of 
 THE 
 
 Massachusetts Anti-Double-Taxation League 
 
 BOSTON 
 DAM.RELL & UPHAISd 
 
 The Old Corner Bookstore 
 PRICE 25 CTS. 
 
 3 
 
f , ) 
 
 ^■'s^^^ 
 
 Copyright 1895, by R. H. Dana 
 
 The Spareell Print, Boston 
 
Preface 
 
 "T^HE following pamphlet treats of the more 
 im.portani taxation problems that have been 
 before the Massachusetts Legislature during the 
 past five or ten years. 
 
 Every calculation and reference has been scruti- 
 nized by a trained statistician, Mr. Jos. E. Woods, 
 the Secretary of the Anti- Double- Taxation League, 
 to whom. I am indebted for many a valuable sugges- 
 tion. The data have been subjected to the minute 
 criticism, of opponents. 
 
 The pamphlet is the result of three years' hard 
 work before tax committees of the legislature and 
 the joint special committee on taxation of i8gj, and 
 it meets every argument raised by the double-taxa- 
 tionists before those committees or in the legislature. 
 
 R. H. DANA. 
 Boston, May i, jSgs- 
 
TABLE OF CONTENTS. 
 
 DouBi.E Taxation of Shares, 
 
 Doomage Laws, 
 
 Municipal Bonds, 
 
 Double Taxation of Incomes, 
 
 Double Taxation of Mortgages, 
 
 pp. 5 to 45, and App. A 
 
 pp. 46 to 57 
 
 59 to 69 
 
 " 70 to 71 
 
 pp. 72 to 86, and App. B 
 
 Illustrative Diagram, Interest Rates on Mort- 
 gages AND Bonds ..... p. 75 
 
 Appendix A, Law Points, Taxation of Both Corpora- 
 tion AND Shareholders, . . . . " I to XI 
 
 Appendix B, Census Statistics Regarding Mortgages, " XII 
 
 Table of Authorities Cited, . . . . " XIII to XVI 
 
 Table of Cases Cited, " XVII to XIX 
 
 Index, " XX to XXIV 
 
Double Taxation 
 
 UNJUST AND INBXPEDIKNT. 
 
 The shares of corporations should not be taxed when the 
 corporations themselves are also taxed. 
 
 STATEMENT OF THE CASE. 
 
 As far as Massachusetts corporations go, this principle 
 is recognized and enforced by the courts and legislature of 
 this state. Massachusetts corporations are taxed on their 
 real estate, machinery, and franchise, but there is no further 
 tax to the owner of the shares. Corporations of other states 
 however, are also taxed where situated on their real estate, 
 machinery and franchise, and in addition to that, we tax the 
 owners of the shares, who happen to reside in this State, on 
 the full value of their interest in the same property, under 
 the guise of taxing their certificates of stock. 
 
 The tax in this state on stock in corporations of other 
 states, is unjust in principle, and not for the best interests 
 of the State. 
 
 THE PRESENT SYSTEJI IS UNJUST. 
 
 Taxing shares of corporations already taxed is a clear 
 case of double taxation. The tax on a corporation falls 
 immediately on its shareholders, who collectively are the 
 corporation * and own it. The tax comes out of the earn- 
 ings, and diminishes the dividends. We might as well first 
 
 * The usual form of incorporation reads, " A., B., C, D., E., their associates and 
 successors, are hereby made a corporation." "A., B., C, D , E., their associates and 
 successors" are the Shareholders. See also Appendix A. 
 
6 DOUBLE-TAXATION OF SHARES. 
 
 tax real estate to its owners, and then tax the deeds over 
 again to the same owners for the full value of the property 
 of which the deeds are the certificates of title. Corporations, 
 indeed, are nothing more than partnerships managed by a 
 few of the partners chosen by the rest, usually with limited 
 liability and under certain statutory regulations. Would it 
 be right to tax partnership property, and then tax each 
 partner over, again on his partnership agreement, assessed 
 at the full value of the same partnership property ? Indeed, 
 the case would be very clear, were the whole of the United 
 States one great Massachusetts. Then the taxing power 
 would not think of taxing the Eastern owner of shares of a 
 Western corporation for the value of those shares in addition 
 to taxing all the real and personal property and the franchise 
 of the corporation ; but our great country, for purposes of 
 local self government, being divided up into various States, 
 each with the power to establish corporations, we undertake 
 in Massachusetts to tax the shares of an Illinois corporation, 
 though we pay nothing for the protection of that company's 
 property, and though the State, which is at the expense of 
 guarding that property, and whose society, roads, etc., give 
 it value, has taxed it fully already. Such double taxation is 
 indeed unjust, and has judicially been declared " extremely 
 hard and unjust" by the highest courts of the largest States. 
 (Commonwealth z;. Standard Oil, loi Pa. St. 119; People 
 V. Home Ins. Co., 92 N. Y. 328.) 
 
 It has been called " an imposition " by the Supreme 
 Court of the United States and " never to be presumed" 
 unless clearly the intent of the legislature. (Tennessee v. 
 Whitworth, 117 U. S. 136, and New Orleans v. Houston 
 119 U. S. ,278.) The same ground is taken by the Massa- 
 chusetts Supreme Court. (See 4 Met. 181,9 Met. 199, 8 
 Allen 330, 125 Mass. 567.) 
 
 So unjust are our laws that' tax dodging has become 
 almost respectable. Between the years 1869 and 1874, 
 seventeen millions of taxed personal property are known to 
 
THE EFFECT OF THE BILL. 7 
 
 have left Boston to escape taxation.* Large estates have 
 left Massachusetts. Beside the Weld Estate which went to 
 Philadelphia, there are several estates which would naturally 
 be taxed in Boston, whose owners reside in Newport, R. I., 
 to avoid this double tax which Rhode Island laws do not 
 exact. It is submitted that the reason tax dodging is not 
 more condernned is because a part of the tax is an unjust 
 and unfair double tax. Let us take away every just excuse 
 for evading taxes. 
 
 THE PROPOSED BILL. 
 
 Be it enacted, etc. 
 
 Sect. i. Section four of chapter 11 of the Public 
 Statutes is hereby amended by adding to the end thereof 
 the following words : and provided that no taxes shall be 
 assessed on personal property situated and taxed without 
 the Commonwealth, or on shares of corporations, which are 
 organized under the laws of other States, and taxed within 
 or without the Commonwealth. But this shall not be con- 
 strued to prevent including in taxable personal property, 
 income, or dividends, on such property or shares. 
 
 Sect. 2. In cities in which taxation is limited by law, 
 the amount which for the next five years, can legally be 
 raised by taxation, or borrowed, shall not be deemed to be 
 less than it would be by taking the assessors valuation of 
 personal property, for the year eighteen hundred and ninety 
 four, for its proportionate part of the basis for estimating 
 the same. 
 
 Sect. 3. This act shall take effect upon its passage. 
 
 THE effect of THIS BILL. 
 
 The effect of this bill is only to relieve the shares of 
 such corporations and such personal property as are actually 
 taxed where situated. The shares of any corporation re- 
 lieved from assessment, as is the case with some Maine 
 corporations, for example, to encourage their locating in 
 
 * An Exposition of Double-Taxation by Hon. George G. Crocker, p. lo. 
 
8 DOUBLE-TAXATION OF SHARES. 
 
 that State, would not, by this bill, be free from taxation 
 here. Personal property sent out of Massachusetts to avoid 
 taxation would not by this bill relieve Its owner here from 
 taxation. He is only relieved in case his property is actu- 
 ally assessed where situated. 
 
 Neither will the bill relieve the owner living here from 
 contributing his share to the expenses of this State. He 
 will be taxed here for his poll tax and on his income, pre- 
 cisely the same as a professional man, say a lawyer or a 
 doctor with the same income, is taxed. That is, he will pay 
 for the protection of his person where his person is, and 
 of his property where that property is. This is as it should 
 be. The Massachusetts Constitution, Part First, Declaration 
 of Rights, Art. X., says : " Each individual of the society 
 has a right to be protected by it in the enjoyment of his 
 life, liberty and property, according to standing laws. He 
 is obliged, consequently, to contribute his share to the expense 
 of this protection;" (italics my own). Though Massachu- 
 setts is at no expense for protecting railway property in 
 Illinois, for which Illinois is at great expense and collects its 
 share of its expense, Massachusetts taxes the owner here, not 
 on the basis of his income, which would be about one and 
 one-half per cent of it, but on the basis of his property which 
 takes about thirty per cent of the income. The judges of 
 the U. S. Supreme Court, and on this point the majority 
 and minority are in accord, say, in the case of Pullman Car 
 Co. V. Penn, 141 U. S. 19, at p. 31, "The rule would un- 
 doubtedly be more just if it made the property (personal 
 property) taxable, like lands and real estate, only in the 
 place (referring specially to property being in one State and 
 -the ownei: in another), where it is permanently situated," 
 and suggest that the remedy against this " double taxation" 
 lies in " a sense of equity and justice in the legislatures of 
 the several States." 
 
A SYSTEM OF GUESSING. 
 
 THE PRESENT SYSTEM UNWISE. 
 
 • Equality, certainty, and economy in collection are three 
 fundamental principles of sound taxation.* Taxing the 
 shares of corporations whose property is already fully taxed, 
 is certainly not equal. It is an open, palpable, and direct 
 double tax. 
 
 Besides being unequal, it is uncertain. So little is 
 reached that, it does not affect the market value of the 
 shares. They sell for the same price here where they are 
 taxable, as in New York where they are not. The assess- 
 ors of the city of Boston found only $8,473,200 in 1893. 
 (Annual Report Assessing Department of Boston, Doc. 3, 
 1894, p. 15). Fully one third of this was got from trust 
 estates whose records were in the Probate Court. Less 
 than one fifth of the personal property assessed is spe- 
 cifically ascertained. Four fifths are got at by guess- 
 work under the dooming process. Of this " guessed at " 
 amount of personal property, the assessors further guess 
 that $35,763,346 are for shares in corporations not chart- 
 ered by Massachusetts, or "foreign corporations," as they 
 are commonly called. 
 
 A director of a large Western railroad told the taxation 
 committee that more than half the stock of the road was 
 owned in Boston. That amount alone is more than all the 
 estimated amount of foreign corporation stock, according 
 to the assessors. One hundred men together in Boston are 
 known to own more than this estimated amount of foreign 
 stock. (An Exposition of Double Taxation, by George G. 
 Crocker, p. 9.) Good authorities have put the total value 
 of shares of foreign corporations owned in Massachusetts at 
 six hundred million dollars. The total assessed value of the 
 same, including both that actually found and that estimated, 
 was, in 1889, $70,000,000. The total actually found was 
 
 * Principles of Political Economy, J. S. Mill, Book V., Chap. I., § i, and Wealth 
 of Nations, Adam Smith, Book V., Chap. II. 
 
10 DOUBLE-TAXATION OF SHARES. 
 
 probably $15,000,000. (Aggregates of Polls, Property, 
 and Taxes, compiled by Secretary of Commonwealth, 1889, 
 p. 59.) These " estimates " are so unreliable that they have 
 not been published in the reports for the State since 1889. 
 
 DIFFICULTY OF REACHING ALL INTANGIBLE PROPERTY. 
 
 It has always been very difficult to find intangible per- 
 sonal property or evidences of ownership for purposes of 
 taxation. The Romans used to resort to torture. (Prof. 
 Seligman, General Property Tax, p. 46 ; Report Commis- 
 sioners, David A. Wells and others. New York, 1871, p. 53, 
 p. 30, in Harper's Ed.) The greater the business activity 
 of a community, the greater is the variety in the form of 
 evidences of ownership of real and personal property. It 
 is easy for the assessors to find the property itself. It is 
 difficult for them to find the evidences of ownership of that 
 property, especially when their object is to impose a double 
 tax. The difficulty becomes so great that the effort is given 
 up in most countries, and a return is made to taxing real 
 estate and tangible property for the most part, or incomes 
 from the same. The United States is the only civilized 
 country in the world that is still trying to tax both the 
 property itself and its shadow. (Cooley on Taxation, 2d 
 Ed. p. 35 ; Seligman, General Property Tax, pp. 43-56, 
 1890; Ely, Taxation in American States, 1888, and David 
 A. Wells, Report, 1871.; 
 
 THE PENNSYLVANIA SYSTEM. 
 
 Pennsylvania has abandoned double taxation for town, 
 city and county purposes. For those purposes the taxation 
 is limited to real estate, horses, and cattle. For purposes 
 of State taxation alone, carriages to hire, and mortgages, 
 shares of foreign corporations, bonds, and other evidences 
 of ownership are assessed. The rate for the State tax is 
 $4.00 on a thousand, and the chief class of evidences of 
 ownership actually reached is mortgages on real estate. 
 As to shares of foreign corporations, the returns are not 
 
THE DOOMING PROCESS. ii 
 
 made so as to separate them, but the assessor of Phila- 
 delphia says that not much of this class of property is got 
 at. Many business men are under the impression that it is 
 not taxable. Pennsylvania has not suffered from the system 
 of putting the chief burden of taxation on real estate. Its as- 
 sessed real estate rose in value from $1,540,007,957 in 1880, 
 to $2,035,571,641 in 1890; an increase of $495,563,684, or 
 very nearly one third. (U. S. Census Bulletin No. 192, 
 p. 4.) Her total wealth increased from $4,942,000,000, in 
 1880, to $6,190,746,550 in 1890, an increase of over 25 
 per cent. She is next to New York the richest State in the 
 Union. (U. S. Census Bulletin No. 379, p. 5.) According 
 to the same authority the wealth of Massachusetts in the 
 same period increased only about one seventh as much in 
 amount and, as compared to its own wealth in 1880, only 
 seven per cent instead of twenty-five. Nor does the relief 
 of personal property from taxation put any excessive tax 
 burden on real estate. The tax rate on real estate in the 
 city of Philadelphia is $18.50 on a thousand.* The average 
 tax rate for the State of Massachusetts, on both real and per- 
 sonal was $15.30 on a thousand in 1893, ^.nd it was $17 on a 
 thousand in Boston in 1884. Again, the laboring classes in 
 Philadelphia are the best housed of those of any large city 
 in the world. 
 
 THE EXPERIENCE IN MASSACHUSETTS. 
 
 In Massachusetts we have employed the dooming 
 process longer than in any State. It has been ably admin- 
 istered by those who thoroughly believed in its efificacy, 
 and when it was first put in operation we reached a larger 
 percentage of personal property than has ever been reached, 
 it is believed, in any other State.f By the dooming pro- 
 cess, whoever fails to make sworn returns of taxable property 
 has his property estimated or guessed at by the assessors, 
 
 * City Comptroller Ann. Rep. for Phila. for 1893, p. 193. 
 
 t In 1869 the assessed personal property of Massachusetts was 60 per cent, of the 
 real. Including personalty assessed to corporations it was 71 per cent. 
 
12 DOUBLE TAXATION OF SHARES. 
 
 and he cannot get any abatement except of what is in excess 
 of 50 per cent above his proper tax. The system is to keep 
 on increasing the estimated assessment till the victim 
 " squeals," as the assessors call it, that is, makes a return, 
 or else goes to some town where the assessors are more 
 lenient, or leaves the State altogether. 
 
 What have been- the results in Massachusetts? In 
 order to understand the situation, it must be remembered 
 that the value of real estate depends upon the amount of 
 personal property on and about it. The richest farm would 
 be of very little value but for the horses, ploughs, cattle, 
 etc., on it ; and its products would have but little value if 
 there were not money or other valuables offered in exchange 
 for them. The most barren and rocky ground which hap- 
 pens to be in the midst of vast accumulations of wealth is 
 valued at hundreds of dollars a square foot. A building in 
 Wall Street, New York, where there is the most money and 
 securities collected together of any one place in this coun- 
 try, has a great value. The same building on art Indian 
 agency would have a value very little above a few wigwams. 
 If placed in the most crowded parts of China, its value 
 would still be far less than in Wall Street, though the 
 number of people about it might be greater than in New 
 York. The reason is that the people in China have less 
 personal property than .those in New York. What the 
 proportion of the value of personal is to that of real estate 
 it is hard to say exactly. If we consider tangible personal 
 property, it is probably about equal in value to the real 
 estate near it. (Report of David A. Wells, New York, 
 1871, p. 34; Address on Taxation, by Mr. Thomas Hills, 
 Chairman of the Assessors of Boston, Jan. 20, 1890, pp. 2- 
 4. See Dudley Baxter, an English economist; Ely on 
 Taxation in American States, p. 143 ; Report on Taxation, 
 Boston Executive Business Association, by Jonathan A. Lane 
 and others, 1889.) Of course the apparent amount of prop- 
 erty is largely increased by any system of taxation which 
 
THOMAS HILLS' GREAT TRIUMPH. 13 
 
 taxes the shadows of things as well as the things themselves. 
 
 In Massachusetts, in 1861, the personalty was assessed 
 at $309,000,000,* to $552,000,000 of assessed real estate, 
 or 56 per cent of the latter. In 1893 the personalty was 
 $589,000,000,* to $1,840,000,000 of real estate, or 32 per 
 cent. That is, in 32 years the personal property assessed 
 for taxes has increased only $280,000,000, while the real 
 estate has increased $1,288,000,000, or nearly five times as 
 much in the same time. This simply means that more and 
 more personal property escapes. The real estate cannot 
 have increased in value without an increase in personal 
 wealth with which to increase the demand for it. Real 
 estate does not make a demand for itself. The very rents 
 of real estate come from personal property, in the last resort. 
 Even the rent a farmer pays comes from the personal 
 property he raises on the farm. 
 
 In 1868, Mr. Thomas Hills was made chairman of the 
 Boston Board of Assessors. He executed the dooming 
 law with a vigor never seen before, and the other assessors 
 followed his example. In 1869 the value of the assessed 
 personal estate rose to $503,000,000, from $469,800,000 
 the year before. (Aggregates of Polls, etc., 1893, p. 60.) 
 This was a veritable triumph. A like triumph has followed 
 the first year or so of dooming laws in other States. But 
 what is the result of 2 i years of this vigorous policy ? In 
 1893 the value of the assessed personal property has in- 
 creased only one sixth, though it has been a period of 
 enormous increase of wealth of this very kind in the State. 
 On the other hand, real estate has very much more than 
 doubled in value in the same time, although real estate has 
 gone through the greatest depression and for the longest 
 period (1874-1882) ever known in modern history, and 
 we have had the great fires in Boston and Lynn in the in- 
 terval. The increase in the assessed value of real estate 
 has been nearly 12 times that of personal. 
 
 * Including resident bank stock. 
 
14 DOUBLE TAXATION OF SHARES. 
 
 COMMONWEALTH OF MASSACHUSETTS. 
 
 Value of assessed Value of assessed 
 
 personal estate. real estate. 
 
 1869 ^503,000,000* .... $838,000,000* 
 
 1893 589,000,000 .... $1,840,000,000 
 
 Increase from 1869 . . $86,ooo,ooot .... $1,002,000,000 
 THE EXPERIENCE IN BOSTON. 
 
 The experience in Boston is equally startling and in- 
 structive. Here Mr. Hills' policy has had full sway. No 
 one doubts Mr. Hills' integrity, energy, industry, and 
 courage in pursuing his policy. The dooming law under 
 him has done all it is capable of doing. 
 
 In 1869, the first year Mr. Hills' work was in full opera- 
 tion, the value of Boston's assessed personal estate was 
 $217,500,000. (Aggregates of Polls, etc., 1869, p. 20.) 
 In 1893, ^^ S'fter 24 years' trial, the assessed personal is 
 only $216,331,476, or has fallen off by $1,500,000. (Re- 
 port Assessing Department, Boston, Pub. Doc. 3, 1894, 
 p. 35.) During the same period the value of real estate, 
 as assessed, rose from $332,000,000 to $707,762,275, or 
 more than doubled. 
 
 It may be urged in explanation that in consequence of 
 the law of 1881 exempting mortgages on real estate, the 
 value of personal property was reduced. It was reduced, 
 
 * The values in 1869 are taken on a currency basis, but as both personal and real 
 estate are on the same basis the comparison between the growth of the two holds good. 
 
 t These figures are taken from the official reports of the Secretary of the Common- 
 wealth, which reports do not include personalty assessed to Massachusetts corporations 
 by the tax commissioner. The latter was not added in the above tables, as it cannot 
 escape taxation on account of the method of assessing home corporations. It is inter- 
 esting to observe that personalty assessed to corporations falls off very little in comparison 
 to corporation real estate. In 1869 corporation personalty was ^95,200,000, and in 
 1893, J243, 600,000: corporation real estate in 1869, ^100,800,000, in 1893, ^3H75°o.oo°- 
 (See Tax Commissioner's reports for 1869 and 1893.) 
 
 If corporation personalty in 1869 and 1893 be added in the above table, it would 
 make the total increase of personalty $234,000,000. or less by ;866,ooo,ooo than one 
 quarter of the increase in real estate. In 1869 the total personalty was 71 per cent of 
 the real, in 1893 it was only 45 per cent. From i86g to 1893 the gain in personal 
 property assessed by assessors and tax commissioners is 39 per cent (from 598 millions 
 to 833) while in the same period the real estate gained 120 per cent. 
 
COMPARISON OF GAINS. 15 
 
 but by how much ? In the State at large (Including Boston) 
 by $3,500,000 (Aggregates of Polls, etc., 1893, p. 60), and 
 in the city of Boston it was reduced by nearly $5,500,000. 
 Mr. Hills thinks the loss was really greater, "as large gains 
 were made on other items of personal estate " (Report 
 Assessing Department, 1891, p. 21), but it must be noted 
 that these "large gains" show in no other years, for both 
 before and since 188 1-2 there is a continuous falling-off in 
 ^he value of assessed personal estate in Boston, and but 
 I'ery slight gains in the State, while on the other hand it 
 must be remembered that between 1869 and 1891, viz., in 
 1874, Charlestown, West Roxbury, and Brighton had, by 
 their annexation the year before, added $17,751,883 to the 
 assessed personal property of Boston ! ! (Report Assessing 
 Department, Boston, Pub. Doc. 3, 1894, p. 35, note 2.) 
 From 1872 to 1891 the taxed personal estate fell in value 
 $35,000,000 in Boston, notwithstanding these annexation 
 gains, while real estate increased $207,000,000. Nor can 
 Mr. Hills point to any specific or detail "large gains." It 
 is only his own estimate based on no data. He had pub- 
 licly prophesied that the loss would be about $60,000,000, 
 and the experience showed it to be about one-twentieth of 
 that, and the above is his explanation. To eliminate, how- 
 ever, all questions of annexation and exemption of real- 
 estate mortgages, let us compare the twelve years from 
 1882 to 1893 inclusive. In the State the value of assessed 
 personal property increased $94,000,000 and the real estate 
 $650,000,000, or nearly seven times as much. In the city 
 of Boston personal estate has remained nearly stationary 
 ($204,700,000 in 1882, $204,365,192 in 1894), while the 
 real estate valuation has increased $256,000,000. It is 
 evident that intangible personal property has been success- 
 fully concealed or its owners driven away, or both. 
 
1 6 DOUBLE TAXATION OF SHARES. 
 
 CITY OF BOSTON. 
 
 Assessed real Assessed personal 
 
 estate. =^'^'=- 
 
 ^869 ^332,000,000 j!2 1 7,500,000 
 
 1881 455,400,000* 210,200,000* 
 
 1882 467,700,000 204,700,000 
 
 1894 . ■ . • 723,743,850 204,365,192 
 
 EXPERIENCE OF THE WHOLE UNITED STATES. 
 
 The situation in the whole United States is as follows ; 
 
 Assessed real Assessed personal 
 
 estate. 
 
 estate. 
 
 i860 .... ^6,973,000,000 $5,112,000,000 
 
 1890 .... 18,933,000,000 5,719,000,000 
 
 Increase in 30 years, ^11,960,000,000 or 172%. $607,000,000 or 12% 
 
 It is no wonder that Cooley, Seligman, Ely, and Wells, 
 the chief American authorities on local taxation, agree that 
 every method of reaching intangible personal property is a 
 failure in America now, as it has proved to be elsewhere in 
 past history. 
 
 If intangible personal property so largely escapes taxa- 
 iion, how much more must that portion of it escape, on which 
 the taxation is considered so unjust as is the double tax on 
 the stock of foreign corporations ! 
 
 UNCERTAINTY OF THE TAX. 
 
 When so much of the stock of foreign corporations 
 escapes taxation, it is a mere chance if the owner of it has 
 to pay a tax or not. It is a matter of great uncertainty. 
 He pays for this property at a price based on its practically 
 escaping taxation. If he is taxed on it, he feels mulct like 
 the farmers in the Middle Ages on whom some baron has 
 happened to descend. To be just and fair, a tax should be 
 certain, so that the market value of the property may be 
 settled on the basis of taxation. Otherwise, one man 
 makes more out of the investment than he ought, and 
 
 * In 1873, Charlestown, West Roxbury, and Brighton vsere annexed, adding 
 ^17,751,883 personal and ^54,234,900 real estate as valued for assessment. 
 
UNCONSTITUTIONAL ! 1 7 
 
 another man less, while the temptation to perjury in the 
 sworn statements is greatly increased.* About one hun- 
 dred years ago, Adam Smith said, "The certainty of what 
 each individual ought to pay is, in taxation, a matter of so 
 great importance, that a very considerable degree of in- 
 equality, it appears, I believe, from the experience of all 
 nations, is not near so great an evil as a very small degree 
 of uncertainty." This opinion has been quoted with ap- 
 proval by the political economists ever since, and is simple 
 common sense. "f 
 
 UNCONSTITUTIONALITY OF THE TAX. 
 
 The taxation here of shares in corporations of other 
 states is in violation of the spirit of our Constitution for 
 two, and perhaps three, reasons. 
 
 First, because it is not " proportional and reasonable" 
 nor "equal," as required by the Constitution. (Constitu- 
 tion of Massachusetts, Part Second, Chap, i. Sect, i. Art. 
 IV. N.B. This paragraph of the Constitution is construed 
 as restrictive. See 118 Mass. 386, and cases there cited.) 
 
 Second, because by the same part of the Constitution, 
 the taxes can be levied only upon " the inhabitants of, and 
 persons resident, and estates lying, within the said Common- 
 wealth" and " duties and excises upon any produce, goods, 
 wares, merchandise, and commodities, whatsoever, brought 
 into, produced, tnanufactured, or being witJiin the same." 1^ 
 
 The only argument by which shares in foreign cor- 
 porations can be said to be within the State is in accordance 
 with the legal fiction that personal property follows the 
 owner ; mobilia sequuntur personam. That is a convenient 
 fiction for certain purposes, but for other purposes it has 
 
 * ' ' The system as it is actually administered results in debauching the moral sense. 
 It is a school of perjury," Report Tax Commission ot Ohio, 1893, p. 22, and in General 
 Property Tax by Pres. E. A. R. Sehgnian (1890;, pp. 30-31, where he quotes from tax 
 commissions of New York, New Hampshire, Illinois, Connecticut, West Virginia and 
 California as to the tendency to perjury, and ends by saying " And almost every annual 
 report of the State comptrollers and assessors complains bitterly that the assessment of 
 personalty is nothing but an incentive to perjury." 
 
 t J. S. Mill's Principles of P. E., Prof. Laughlin's Edi., p. 538. 
 ' t The statutes on taxation in existence when the Constitution was adopted and that 
 were passed soon after, show that " estate " meant real and personal, and that " lying 
 within," as applied to personal, means having an actu'il situs within. 
 
i8 DOUBLE TAXATION OF SHARES. 
 
 been repudiated by the Supreme Judicial Court of Massa- 
 chusetts and by the Supreme Court of the United States. 
 (See Lawrence v. Batcheller, 131 Mass. 504; Cunningham 
 z/.'Butler, 142 Mass. 47 ; Proctor v. Bank of Republic, 152 
 Mass. 223 ; Green v. Van Buskirk, 7 Wall. 139, and 5 Wall. 
 307 ; Cole V. Cunningham, 133 U. S. 107.) 
 
 As applied to taxation, it has been held by the highest 
 court of New York that the situs of personal property is 
 where it actually is (Hoyt v. Commissioners, 23 N. Y. 224) ; 
 and as to shares in foreign corporations the cases of Trow- 
 bridge V. Commissioners, 4 Hun, 595, affirmed in 62 N. Y. 
 630, and People v. Campbell, 138 N. Y. 543 (1893), decide 
 that ''stock certificates are not themselves property, but are 
 evidences of the rights " in property, and that the property 
 of foreign corporations is not "within the State" of New 
 York even when the owner of the shares is within the 
 State, with the shares in his possession. By the law of 
 New York only property " within the State " is taxable, 
 and these cases decided that the shares of foreign corpora- 
 tions were not taxable. This view of the law seems to be 
 sustained in the recent case of Pullman v. Penn. in the 
 Supreme Court of the United States, 141 U. S. 18, at p. 22. 
 Our present Massachusetts statutes are inconsistent. They 
 declare that personal property follows the owner when the 
 owner is in the State, but that it does not follow the owner 
 when he is out of the State. The owner of a share in a 
 Western railroad, or of a cow on a Western farm, is taxed 
 on them, if he lives here, on the theory that the property 
 follows him here; but the New York owner of a share in 
 a Massachusetts railroad, or of a cow on a Massachusetts 
 farm, still has his interest in the road or in the cow taxed 
 in Massachusetts, on the theory that they do not follow him. 
 Both theories cannot be correct. 
 
 Shares themselves are not property. They are only 
 evidences of title. In the case of Gleason v. McKay, the 
 Supreme Judicial Court of Massachusetts, speaking of 
 
SHARES HAVE NO INTRINSIC VALUE. 19 
 
 shares of a corporation in connection with taxation, say, 
 "Such shares, if ihey can be said to be property" (134 Mass. 
 424). There is no vakie in a certificate of stock apart 
 from the value of the property of which the certificate is 
 the evidence of a share of title. If the property is valu- 
 able, the certificate is valuable. If the property becomes 
 worthless, the certificate is worthless. There is no case in 
 Massachusetts where the constitutionality of this particular 
 tax has been distinctly raised.* So far as the <r/i/^ author- 
 ities go, then, this tax is unconstitutional, on the second 
 ground. 
 
 The Massachusetts statutes, however, are not content 
 to leave it that personal property "within" the State shall 
 be taxed, and then leave the courts to construe whether 
 shares of foreign corporations owned by residents here are 
 property "within" the State or not. On the contrary, by 
 Public Statutes, Chap. 11, Sect. 4, it is expressly declared 
 that " stocks in turnpikes, bridges, and moneyed corpora- 
 tions, within or without the State" are subject to taxation. 
 
 Again, a change in the fortn of ownership of the same 
 property changes its situs, and makes it taxable when be- 
 fore it was not. If a rich man in this state owns a hotel in 
 New York and can afford to hold the deed to the whole of 
 it, he is not taxed here for that hotel, but if several poorer 
 people owning the same, put the title to it into a corpora- 
 tion and own shares, they are taxed here for the full value 
 of that same hotel. 
 
 The third ground of unconstitutionality applies only to 
 shares of stock in the foreign corporations engaged in inter- 
 state commerce. A tax on the shares is a tax on the 
 corporations, and is a way often resorted to for taxing cor- 
 porations. (Commonwealth v. Hamilton, 12 Allen, 298.) 
 By the U. S. Supreme Court, cases of Pullman v. Penn., 
 141 U. S. 18, and Crutcher sv. Kentucky, 141 U.S. 47, it 
 
 * The case of Dwight -u. Boston, 12 Allen, 316, was on a construction of the 
 statutes and the constitutional question was not argued. (See below p. 21.) 
 
20 DOUBLE TAXATION OF SHARES. 
 
 seems that it is contrary to the Constitution of the United 
 States for a State to tax any corporation engaged in inter- 
 state commerce, except for tangible property of the corpo- 
 ration actually and bodily within the domain of that State. 
 
 THE PRESENT LAW IS NOT AN ANCIENT LAW. 
 ITS HISTORY IN MASSACHUSETTS. 
 
 But it may be answered, Are not the courts open to 
 test the constitutionality of this law ? The present law has 
 a peculiar history. By statute of June 6, 1639, an attempt 
 was made to tax inhabitants of the colony for estates in 
 England. That was repealed two years later, June 2, 1641, 
 By the Body of Liberties of 1641, the great constitutional 
 law of the Colonies (Colonial Laws, Ed. 1889, p. 35), it is 
 stated in Article 13 : ''No man shall be rated here for any 
 estaite or revenue he hath in England, or in any forreine 
 paries, till it be transported hither!' 
 
 That seemed to be the principle till the Revised Stat- 
 utes of Massachusetts, passed in 1836. The commissioners 
 on the revision of the statutes say (note to Chap. 7, Sects. 
 2 and 4) that there was a doubt as to whether property 
 was taxable when it was without the limits of the State. It 
 had never been decided that it was taxable, but the com- 
 mission, "with a view to removing doubts," included both real 
 and personal property lying without the State as taxable 
 a second time to its owners if they resided here, adding 
 the provision relating to shares in corporations without the 
 state just referred to above. They advised that land out of 
 the State should be considered as personal property in taxing 
 its owner here, saying : " Both descriptions of property (real 
 and personal) are alike subject to the foreign jurisdiction 
 for taxation and other purposes ; and although the land 
 itself belongs to that class of property called immovable, 
 yet the value of It is as easily transferable as the value of 
 goods or merchandise." The Legislature, In passing the 
 Revised Statutes, threw out the tax on foreign land, but 
 
THE UNJUST BURDEN IS OF RECENT DATE. 21 
 
 left it on foreign personal property and shares of corporations 
 without the state. In regard to shares in such corporations, 
 the commission on the statutes suggested in its report that 
 "if, however, considerations of public policy should induce 
 any modification of the rule, the expression in question can 
 be dispensed with." 
 
 It is submitted that in the wholesale passage of these 
 laws (812 pages at once) such questions of " public policy" 
 were not properly considered. 
 
 Even when it became a law, it was not at first partic- 
 ularly burdensome. The great increase in manufacturing 
 and railroad corporations was after 1850, but even up to 
 1 866 the law was so administered as to lessen its burden. 
 As it appears by the case of Dwight v. Boston, 12 Allen, 
 316 (1866), the assessors used to deduct from the value of 
 the shares of corporations of other states their proportional 
 part of the value of taxed real estate and machinery. 
 Under the pressure of the war debt, it is believed, the court 
 decided that this practice of the assessors was not in accord 
 with the true intent of the statutes, so from that time on, 
 these shares have been taxed at their full market value. 
 So it came to pass that the law had been thirty years on 
 the statute book before it became oppressive. The case of 
 Dwight V. Boston, supra, though decided on a construction 
 of the statutes, seems to settle the question without its con- 
 stitutionality being adequately, if at all, argued.* Long 
 acquiescence in a law, as stated in the opinion in Portland 
 Bankz'. Althorp, 12 Mass. 252, is a strong ground for hold- 
 ing it constitutional in case of doubt. So by the peculiar 
 history of this law, we are led into a disadvantageous 
 position in trying its constitutionality. 
 
 * The brief of the plaintiff states that the only point is one of construction of the 
 statutes, though at its end it has four or five lines on the constitutionality. That point 
 does not seem to have been pressed. It is not mentioned in the brief of the defendant 
 nor in the notes of the reporter (Judge Charles Allen), and not mentioned in terms in 
 the opinion, yet so prone are the courts to sustain the constitutionality of acts of the 
 legislature that the case isprobably decisive, not of the real meaning and spirit of the 
 Constitution, but of its practical application. 
 
2 2 DOUBLE TAXATION OF SHARES. 
 
 PRECEDENTS FOR CHANGING THE LAW. 
 
 In Massachusetts, while its citizens are taxable for per- 
 sonal property situated out of the State, its corporations are 
 not so taxed. Life-insurance companies, both Massachu- 
 setts and foreign, doing business here, are taxed only for 
 the policies on the lives of residents in the State (P. S., 
 Chap. 13, Sect. 25), and in taxing all other insurance 
 companies the premiums received in other States are not 
 included in the assessment of the tax when those premiums 
 are subject to a like tax in those States (Sect. 29). Rail- 
 roads having lines both in and out of the State have de- 
 ducted from their valuation an amount proportional to the 
 length of their lines lying without the Commonwealth, and 
 in general, Massachusetts corporations are exempt for their 
 real estate and machinery, subject to local taxation ''wher- 
 ever situated" (Sect. 40). One large Massachusetts cor- 
 poration is specifically e.xempted by its charter from any 
 tax on shares it may own of corporations of other states. 
 Why should not our citizens be taxed on the same basis as 
 corporations, and be relieved of this double tax ? 
 
 By the laws of New Hampshire,' Vermont," Rhode 
 Island,^ Connecticut,"* New York,^ New Jersey,^ Delaware,' 
 California,^ and for all practical purposes Pennsylvania,' 
 shares of corporations without the state are not taxed to resi- 
 dents within those States. By the laws of those States with 
 the addition of Maine, West Virginia, South Carolina, Ohio, 
 
 1. Pub. Sts. of N. H. (1891), Chap. 55, § 7, III. 
 
 2. R. L. of Vt., § 270, sulid. 2, and Smalley v. Burlington, 63 Vt. 443 and Foster 
 V. Stevens, 63 Vt. 175, also do. 185. 
 
 3. Pub. Sts. of R. I., Chap. 42, Sec. 10. 
 
 4. Gen. St. Conn., §§ 3828 and 3830 and 1889, t. 165. 
 
 5. Trowbridge v. Commissioners, 4 Hun, 595, affirmed in 62 N. Y. 630, and People 
 V, Campbell, 138 N. Y. 543. 
 
 6. Rev'n of N. J., p. 1151, § 64, and State v. Smith, 25 Atlantic Rep. 277. 
 
 7. Laws of Del., Vol. 17 (1883), Chap. 236. 
 
 8. San Francisco v. Mackay, 21 Fed. Rep. 539 and 22 Fed. Rep. 602. 
 
 9. They are not taxed in Penn. for city, town or county purposes, but only at a 
 small rate for state taxes and very little such stock is in fact taxed even at this low rate. 
 
WE FRIGHTEN A WA Y RICH MEN. 23 
 
 Illinois, Missouri, Indiana, and Kansas, all tangible per- 
 sonal property situated out of the State is free from any 
 second tax to the owner. The Tax Commission of Ohio 
 appointed by Gov. McKinley reports against taxing shares 
 of corporations of other States (pp. 65-67 and p. 70, Report 
 Tax Commission of Ohio, 1893). 
 
 Thus it appears that Massachusetts is the only State, 
 of the rich Eastern and Middle States, that has not the law 
 which we here propose. We alone insist upon this double 
 tax, which is unjust, unsound on grounds of political econ- 
 omy, and unwise for the interests of our State. 
 
 BAD EFFECT OF OUR PRESENT LAW. 
 
 By retaining our present law, we practically say that 
 no citizen of Massachusetts can have any share in the great 
 business concerns of the country out of our State, without 
 being subject to a heavy, double tax which no other large 
 State imposes on its citizens. 
 
 The result of retaining our law is, that while we do not 
 collect a large tax from this class of property, we frighten 
 away rich men who have made their money in Western 
 corporations, and are contemplating coming to Massachu- 
 setts to reside, attracted by its social, artistic, musical, 
 educational, and natural advantages. The author of this 
 pamphlet was consulted professionally by a lady owning 
 considerable foreign stock, and who was uncertain whether 
 to reside In Massachusetts or in Connecticut, in both of 
 which States she had friends. On information as to the 
 tax laws in both States, she decided to reside In Con- 
 necticut. The author of this pamphlet also knows a rich 
 man who Is contemplating moving into the State with 
 several millions of foreign stock. If he comes, he will not 
 be domiciled in Boston, but In some town where the asses- 
 sors are lenient and the tax rate small, or where he can in 
 advance make satisfactory arrangements with the assessors. 
 A few days ago, for the purposes of this inquiry, a rich 
 
24 DOUBLE TAXATION OF SHARES. 
 
 owner of stock in corporations without the state who Hved in 
 a small town in this State was asked if he was assessed on one 
 one-hundredth of his taxable personal property. He 
 answered, " On a little more than a hundredth." To the 
 next question, "What would you do if taxed on it all?" he 
 replied, " I should leave the State." The great Weld estate 
 was driven from Massachusetts to Pennsylvania by our tax 
 laws, and other specific cases of leaving the State for the 
 same reason are so frequent that there is every reason to 
 suppose we are losing a vast amount that might otherwise 
 come, and driving away a good deal that is already here, 
 by insisting upon an unjust law of double taxation. It 
 stands to reason that no person chiefly interested in shares 
 of corporations of other States will come here and pay a 
 tax that takes about one-third of his whole income when 
 his share of the property has already paid one tax. He 
 will either go to one of our surrounding States which do 
 not require any such unjust second tax, or be a tax dodger ; 
 in the latter case we get no tax from him, in the former we 
 lose both the tax and the advantage of his presence as a 
 purchaser in our. markets. 
 
 That business may be driven away by taxation is shown 
 by the well-known case of the cloth manufacturers In the 
 Southwest of England who. In 1840, were driven away by 
 a local tax, and went to Yorkshire, where no such tax was 
 imposed. A subsequent repeal of the tax in the south- 
 western towns could not bring the business back. (Selig- 
 man. Gen. Prop. Tax, p. 55.) Another instance can be 
 furnished still nearer home. The tea trade was started 
 by the enterprise of Boston merchants. The ships used to 
 come here, and the goods were sold at auction in Boston, 
 and carried all over the country. It was thought a wise 
 thing to impose a tax on these goods, temporarily here. 
 The result was the ships were ordered to go to New York, 
 instead of Boston. The business became settled in New 
 
UlDOirS AND ORPHANS TAXED TWICE. 25 
 
 York, and though the Massachusetts tax was afterwards 
 repealed, the business never came back.* 
 
 NOT A TAX CHIEFLY ON THE RICH. 
 
 It has been argued that, though a double tax, it touches 
 the rich only, and so should be maintained. The argument 
 that the rich ought to be doubly taxed, though commu- 
 nistic, is intelligible. To double tax the rich , however, all 
 kinds of property, whether real estate, shares in home cor- 
 porations, bonds or what not, ought to be doubly taxed 
 when owned by one person in an amount over a fixed sum, 
 while all amounts under that sum ought to be taxed but once. 
 A law taxing all persons once for property up to $50,000, 
 and twice on the excess, would be at least equal on all 
 persons of equal wealth. By the present law, however, 
 the widow or orphan owning two or three thousand dollars 
 in stock outside the state is taxed twice, while a millionaire, 
 owning other kinds of property, is taxed but once. As to 
 stocks in corporations outside the state, they are usually 
 discovered when belonging to the widows and orphans 
 through the probate court records, but the rich owners of 
 them largely escape taxation. The truth is, we put a double 
 tax on a kind of property which is easily concealed from the 
 assessors, and we collect this tax chiefly from the owners 
 of small amounts.f Again, by our present laws, a man rich 
 enough to own, by deed, a mine, block of stores, hotel, or 
 the like in another state, we do not attempt to double tax, 
 but the person of moderate means, who can only invest in 
 shares in such enterprises, is the one who is doubly taxed. 
 
 RESULTS OF THE PROPOSED CHANGE. 
 
 By the proposed change there will be a diminution in 
 the amount of assessed personal property, and it is import- 
 
 * Report of Commissioners on Taxation, Mass. 1875, p. 108. 
 
 f Out of 12,890 shareholders in the C. B. & Q. Road on Dec. I, 1893, 8,035, °^ 
 over half owned 25 shares or less each, and 5,051 owned ten or less. Out of the 
 504450 shares registered in the Boston office, 219,536, or nearly half, were owned by 
 women, trustees, guardians, administrators and executors. 
 
26 DOUBLE TAXATION OF SHARES. 
 
 ant to consider how much that diminution will be. Let us 
 first suppose that the diminution will be equal to the whole 
 amount of the shares in foreign corporations as estimated 
 by the assessors, though this is nearly five times the value 
 of such shares as specifically ascertained. In Boston, in 
 1893, the estimated value of such shares was $44,000,000. 
 The total valuation of taxable property of Boston for the 
 same year, including the Massachusetts national bank and 
 corporation stock, the tax on which is turned over by the 
 State to the city, is $990,400,000 and over, or nearly twenty- 
 three times the assessed value of foreign stocks. (Report 
 of Assessing Department, Boston, Doc. 3, 1894, pp. 8, 15 
 and 35). To make up for the loss on this basis, about 63 
 cents on $1,000 would have to be added to the city's rate. 
 In 1894, the rate was $12.80. This would bring it then to 
 $13.43. In 1890 the rate was $13.30; in 1888, $13.40; 
 in 1887, $13,40 ; in 1884 the rate was $17.00, and for four 
 years pevious higher than this change would make it. The 
 average rate for the State, 1893, ^^s $15.30. So far as 
 Boston goes, however, there is no objection. It is beheved 
 that the small increase of tax will be more than made up 
 by an increase in business. The Boston Associated Board 
 of Trade, made up from every branch of business in the 
 city and representing about 5,386 active business men of 
 Boston, presents a petition signed by every living de- 
 legate, sixty-five in number, three for each of the twenty- 
 two organizations, and sends a deputation desiring this 
 change. The city of Boston appointed a special com- 
 mission, composed of Hon. George G. Crocker, Hon. 
 Jonathan A. Lane, and William Minot, Jr., and they made 
 a unanimous report favoring the proposed change. The 
 Massachusetts State Board of Trade, composed of thirty-six 
 local trade organizations from different cities and large towns 
 in the State, including Boston, and representing over 3,000 
 successful business men, passed a unanimous vote in behalf 
 of this change. There was also a petition signed by eleven 
 
THE TAX RATE IN BOSTON. 27 
 
 of the twelve members of the Boston Board of Aldermen, 
 and sixty of the seventy-five councilmen, favoring the change; 
 and the present mayor favors it. A general petition, with 
 about 1,600 names from all over the State and including 
 190 members of the Merchants' Association, 165 members 
 of the Boston Chamber of Commerce, the Boston Earthen- 
 ware Association, the N. E. Metal Association, and the 
 Master Teamsters' Association asks for it. The Citizens' 
 Association of Boston, through its president, Mr. Herbert 
 L. Harding, asks for it. Beside that, large real-estate 
 owners, some of the largest in the city, with little or no 
 interest in shares of foreign stock, have come before the 
 committees of the Legislature In 1892, '93, and '94, and 
 favored the proposed exemption as in the end advantage- 
 ous to business prosperity of the city and State. The 
 Boston Real Estate Exchange unanimously voted for it and 
 sent its president to favor it before the Legislature. 
 
 The supposition that 63 cents is be added to the rate 
 of the city of Boston by the proposed change is based on 
 the calculation that $44,000,000 of the $216,300,000 of 
 assessed personal property consists of shares in foreign 
 corporations. Of this $216,300,000, only $53,000,000 con- 
 sist of personal property which the assessors actually knew 
 about. The other $163,300,000 are guessed at in lump 
 sums under the dooming process. Of this $53,000,000 
 definitely known about, $8,500,000 consist of shares in 
 foreign corporations. Out of the $163,300,000 guessed 
 at, it is estimated that $35,763,000 are also such shares. 
 It by no means follows that the $163,300,0000! the doomed 
 assessment on personal property will be reduced by any- 
 thing like the sum of $35,763,000. The total assessment of 
 personal property is but a fraction of all that is taxable, 
 and, beyond doubt, is less than the total would be after 
 deducting the shares of foreign corporations. Prior to the 
 year mortgages on real estate were relieved from double 
 taxation, they were estimated to constitute $62,500,000 of 
 
28 DOUBLE TAXATION OF SHARES. 
 
 the assessed value of the personal property of the State 
 (Aggregates Polls, etc., 1881, p. 28), while the actual loss 
 turned out to be only $3,500,000. (Aggregates of Polls, 
 etc., 1891, p. 58.) 
 
 In all probability, therefore, if Boston next year has to 
 raise the same amount as last year, the increase in the rate 
 per thousand dollars would be, not 63 cents, but only 10 
 cents, making the rate of $12.90 instead of $12.80. The re- 
 sults of the repeal of the double mortgage tax in 1881 show 
 that the increase would be only 10 cents rather than more. 
 This rate of $12.90 would still be far below the average rate 
 for the past twenty years. The rate in 1892 was $12.90. 
 Eventhismaybe too large an allowance, because, by remov- 
 ing an unfair double tax, we remove an excuse for evading 
 taxes, and we cease to keep away rich persons, who, but 
 for our present system, would come here to live, would 
 build and occupy homes, and pay taxes on real and personal 
 property. 
 
 Ultimately, of course, the loss will be more than made 
 up. The total extra tax of 10 cents on a thousand for the 
 whole of Boston would be $100,000. If, by repealing the 
 double tax, one single person having two millions were in- 
 duced to come to this state, or refrained from going away, 
 the income he would annually spend here would make up 
 the whole extra tax. 
 
 But the whole advantage of additional income spent in 
 a community is not measured by its first expenditure. The 
 retailers purchase more of the wholesalers, the wholesalers 
 more of the manufacturers, and the manufacturers more of 
 the producers of the raw material, and each of these em- 
 ploys more labor, and, by making additional profit, becomes 
 himself an original purchaser to a larger amount than before 
 from the retailer, and so it goes on fructifying, and the 
 whole community gets the benefit. 
 
THE TAX RATE IN EARMWG TOWNS. 
 
 29 
 
 RESULTS IN OTHER CITIES AND LARGE TOWNS. 
 
 The total valuation of assessed estate, taxed at a vary- 
 ing rate in the Commonwealth in 1893, was $2,750,000,000,* 
 and of this, $76,000,000! is the estimated value of shares 
 in corporations as assessed for taxes, including that guessed 
 at by doomage. This is about ,5 on the whole. There- 
 fore, If, would have to be added to the rate. That, 
 however, is probably too high, for the same reasons as 
 stated in considering the case of Boston. The real loss to 
 the assessed personal estate would probably be nearer 
 $15,000,000, which would make a difference of Jj, or 
 /<^ of I per cent in the rate. This is equal to an addi- 
 tion of 8 cents in a rate of $15.30 on a thousand, making it 
 $15.38 instead of $15.30 on the supposition that no addi- 
 tional wealth was brought into this State by the proposed 
 new and just law. 
 
 In all these calculations, the tax on the dividends, 
 which the proposed law allows, has been left out of calcula- 
 tion. This reasonable and fair tax will doubtless bring out 
 property which, for fear of the excessive double tax, has 
 been concealed, and go far towards making up the loss of 
 the first year or two after the change. 
 
 RESULTS TO THE FARMER. 
 
 The question as to how the proposed change would 
 affect the farmer is a most important one. 
 
 In the majority of the strictly farming towns there are 
 no assessed shares in foreign corporations, or else only 
 a nominal amount of them. There are several farming 
 towns, however, which have become summer resorts, where 
 
 * Aggregates of Polls, etc., for 1893, p. 62, and Tax Commissioner's Report, 
 Dec. 31, 1893, p. 13. 
 
 t Aggregates of Polls, etc., for 1889, p. 63, gives the latest official estimate for the 
 State at 570,274,863. Since then, assessed personal property has increased l^. At the 
 same ratio of increase the assessed shares of foreign corporations would be a little over 
 JJ76,ooo,ooo. 
 
30 DOUBLE TAXATION OF SHARES. 
 
 a great deal of this foreign stock is assessed. In such 
 towns the farmers have an unfair advantage over the farm- 
 ers in the neighboring towns. They have less tax to pay, 
 and so can undersell the others. For example, let us take 
 two towns both originally farming towns. One has become 
 a favorite resort, where several rich men from the city 
 reside on the first of May. Water is introduced. The 
 assessed personal property is nearly double the assessed 
 real estate in value, so the tax rate is only $7.00 in a thou- 
 sand. The other town has no stock in corporations of other 
 states, and only about one-fifth as much assessed personal as 
 real estate, and the rate is $16.00. This is not fair. If such a 
 tax is insisted upon, the proceeds of it ought to be divided 
 proportionally among the cities and towns of the State, so 
 as to produce equality of conditions. 
 
 In many towns where there is even a considerable 
 amount of stock in corporations of other states, as returned 
 by the assessors, there would be no reduction in the total 
 assessment. The few rich men to whom this stock is 
 accredited are assessed in bulk under the dooming process, 
 and for far less than they are really liable. If the stock of 
 corporations of other states were relieved from taxation, the 
 same amount of assessment could, in many instances, be 
 made against these rich men as before, without being in 
 excess of the real amount for which they would be liable, or 
 without driving them out of the town. Anyone acquainted 
 with the practical experience of the small towns of this 
 State, with one, two, or three rich men from the city, will 
 recognize the picture at once and acknowledge the strength 
 of the argument. 
 
 What would be the result in the strictly farming town 
 where there is no stock of corporations of other states ? At 
 first glance the change would appear to make no difference 
 in such a town. That would be true as applied to the tax 
 raised for local purposes, but part of the tax is for State 
 purposes, and is paid to the State treasurer by the town. 
 
THE FARMER'S ADVANTAGE. 31 
 
 On the average it is I* of the taxes that have to be raised in 
 the cities and towns. As to this l^ it would have to be larger 
 to make up for the general loss in the State. The general 
 loss in the State is, as we have seen, leaving out of account 
 the tax on dividends (p. 28, ante), ^^ at the outside, and 
 probably not more than J^ of the whole. The effect, there- 
 fore, on the tax in the town would be to add 35 of 14=50^, or 
 less than 5 of one per cent at the most, and very likely only 
 14 of 183=2562- or 2^5 of one per cent. That is, a farmer, who 
 now pays five dollars as his tax, would have to pay one 
 cent more, or $5,01 at the most, and very likely less than 
 4 of a cent more. Let us take, for example, the town of 
 Brimfield, Hampden County. Its population in 1885 was 
 1,137. From the number of cows it is apparently a farm- 
 ing town. There are no shares of foreign corporations as 
 returned by the ^assessors in the last State report. The 
 valuation in 1893 '^^^ $416,555. The total tax for all pur- 
 poses was $8,260, and the rate $18.50 on a thousand. The 
 tax paid to the State was $500. Of this, that which would 
 have to be added to make up the deficiency would be 
 $16.52 in all at the most, and more probably $3.30. Before 
 long the State tax collected from the towns and cities may 
 cease altogether, and in this case the change of the law here 
 proposed would make absolutely no difference at all. Let 
 us suppose, however, that the difference would be the largest 
 estimate or $16.52, to such a town as Brimfield. One 
 summer boarder for two weeks would make up the whole 
 difference to the town, and if by the change a single wealthy 
 man could be brought into the neighborhood, who would 
 not otherwise have come, the difference would be made up 
 many times over. This additional tax of $3.30 for the 
 ■whole town of Brimfield, or one cent apiece for the 312 
 persons assessed on property, is an Investment well worth 
 
 * Whole tax in the Commonwealth for State, county, city, and town purposes was 
 in 1893, ^36,397,292. (Aggregate of Polls, etc., for 1893, P- 62.) The amount of 
 State tax is ^2,489,425. (State Auditor's Report, 1893, p. 28.) This is about ^'^ of the 
 whole. 
 
32 DOUBLE TAXATION OF SHARES. 
 
 making considering the ultimate reduction of tax and gain 
 to business. 
 
 If no rich man happen to come to Brimfield, yet if one 
 single owner of a million dollar's worth of shares in western 
 investments were induced to come to any part of the state, 
 he could spend his income of fifty thousand dollars. That 
 would be at the rate of twelve cents apiece for each of the 
 405,848 persons assessed in this state on property. If, in- 
 stead of dividing the extra tax and the extra expenditure 
 among the tax payers, they were divided among the in- 
 habitants the extra tax would come to 3 of a cent for each 
 inhabitant of Brimfield, while the 5^50,000 divided, as spent, 
 among the 2,238,943 inhabitants of the state, would give 
 2\ cents each, or seven times each one's share of the extra 
 tax in Brimfield. But that is not all. As was shown in the 
 case of Boston (p. 28, ante), the benefit is multiplied many 
 times over, and the extra expenditure ultimately reaches 
 nearly every person in the state. Therefore, as has been 
 so well said, if we see a property owner headed for Massa- 
 chusetts we ought to go out to meet him with a band of 
 music, and yet there are people who wish to drive him away 
 by the threat of a huge double tax, which none of our 
 neighboring states exact. 
 
 Farming in Massachusetts has changed. The soil of 
 the State is poor in comparison to that of New York, Ohio, 
 Illinois, and the states farther west. The farmer in this 
 State can no longer raise corn and wheat in competition 
 with the West. His only chance of a living is supplying 
 summer residents or neighboring cities with milk and fresh 
 vegetables and the like, or in raising hay, which is expen- 
 sive to bring from a distance. Every rich man, therefore, 
 who is induced to come to this State is just so much gain 
 to the farmer, and every such man who is kept away or 
 driven away is the farmer's loss. • It is to the advantage of 
 the farmer that the capitalists in the State .should be able 
 to make good investments and spend the additional income 
 
MASSACHUSETTS' DEVELOPMENT. 33 
 
 here. It is only additional personal property in the neigh- 
 borhood that can increase the value of farms, as of other 
 real estate. 
 
 IN GENERAL. 
 
 There are no mines of coal, oil, or metals in this State. 
 Its great increase in wealth has come almost wholly from 
 large investments out of the State, and from the business 
 that this has brought to those who are here. This has 
 been the history of our development from the time of the 
 cod fisheries, through the days of East India trade, to the 
 more recent development of the Western cities and rail- 
 roads of the United States. The great Exchange Building 
 and the Ames Building in Boston were both built from the 
 earnings of investments in corporations of other states. We 
 are behind many of the other States in natural resources, and 
 it is only by the thrift, good sense, education, and profit- 
 able investments of our inhabitants that we can keep up 
 with the others. In respect to our law on the taxation of 
 stock in corporations of other states, we are behind the 
 European countries and most of the other capitalist States of 
 the Union. The States of Rhode Island, Connecticut, New 
 York, New Jersey, Pennsylvania, etc., which do not tax stock 
 in corporations of other states, have not suffered, but have 
 gained wonderfully and are our competitors.* Shall we 
 keep behind the times, like the British Provinces, or shall we 
 keep abreast of the other States and countries of the world ? 
 
 There is one principle of taxation recognized by all 
 authorities, but perhaps never better stated than by Mr. 
 Enoch Ensley, of Tennessee, who said, "Never tax any- 
 thing thai would be of value to your State that could and 
 would run away or that could and would come to you." On 
 
 * Massachusetts has increased in wealth from 1880 to 1890 6 8-10 per cent. The 
 following States, which do not double tax shares of corporations of other States have in 
 the same period increased in wealth as follows, Rhode Island, 26 per cent. Conn., 7 per 
 cent, New York, 36 per cent, New Jersey, 11 per cent, and Penn,, 25 per cent. (See 
 U. S. Census Bulletin, 379, p. 5.) The States of New Hampshire and Vermont are 
 omitted as during the same period they have adopted double and quadruple doomage 
 laws, with very bad results. (See p. 47.) 
 
34 DOUBLE TAXATION OF SHARES. 
 
 March 19, 1892, Mr. M. E. Ingalls, a leading business 
 lawyer of Cincinnati, in an address before the Commercial 
 Club of that city, said (p. 14 of the addressj : " New York, 
 which practically does not tax personal property, shows a 
 gain of 55 per cent in her (general) valuation* (from 
 1880 to 1890) ; Philadelphia, where all personal property 
 is absolutely exempt from city tax, shows a gain of 67 per 
 cent ; Chicago and St. Louis, which practically exempt 
 personal property, show gains of 86 per cent and 49 per 
 cent ; while Boston, which has a system of assessing per- 
 sonal property and ' dooming ' tax-payers until in despair 
 they make returns, shows a gain of only 34 per cent ; and 
 your own city (Cincinnati), which attempts to tax and 
 double tax everything, the paltry increase in ten years of 5 
 per cent." 
 
 EFFORTS TO ENFORCE OUR PRESENT LAW. 
 
 A petition has often been before the Legislature to 
 compel corporations of other states doing business in the 
 State to file with the Tax Commissioner lists of shareholders. 
 The motive is to ascertain those shareholders who are resi- 
 dents within the State, with the object of assessing them 
 for taxation. The argument in favor of this is that our law 
 makes such shares taxable, that the great bulk of resident 
 shareholders escape taxation, that the tax laws ought to be 
 enforced, and that this is a way of enforcing a part of them. 
 
 ALL METHODS OF ENFORCING TAXES NOT EXPEDIENT. 
 
 Admitting that the law taxing stock in corporations of 
 other states is not enforced, and that as long as such a law 
 exists it ought to be carried out, it must first be remarked 
 that all ways of enforcing even the best laws are not ju- 
 dicious. What methods of enforcing laws are best to be 
 adopted is a question largely of expediency. For example, 
 by law and by reason, men ought to pay their just debts ; 
 
 * This apparently means valuation for purposes of taxation. 
 
DRIVING AWAY CAPITALISTS. 35 
 
 in order to enforce the payment of debts, debtors who did 
 not pay used to be imprisoned without any poor debtor law 
 or bankrupt law for their relief. This method of enforcing 
 the law was no doubt effective, but all civilized nations have 
 agreed in abandoning such a method as inexpedient and 
 unwise. 
 
 SUCH A METHOD WILL FAIL OF ITS OBJECT. 
 
 Even supposing, for the moment, that the law taxing 
 sha;res of corporations of other states owned by the inhabi- 
 tants of this State is just, let us see whether the proposed 
 method of enforcing it is wise and expedient. 
 
 The proposed plan will not be effective. Nothing is 
 easier than to evade such a law. Corporations having offices 
 in this State might all file lists of shareholders as appears 
 by their registers, and yet the assessors may be as far 
 as ever from knowing who the resident shareholders 
 really are. Registration of shares is not necessary in 
 order to secure the legal title to them. A transfer, either 
 in person or in blank, though unregistered, gives a perfect 
 title to the proper holder. Indeed, in the ordinary course 
 of business, a great many shares pass from person to person, 
 and remain long times without being registered in the 
 names of their real owners. The registration offices are 
 closed for long periods each year, and yet the stock is 
 continually changing hands. Indeed, the registration books 
 of many large corporations give no indication of all the 
 shareholders at any one time. All that is needed then for 
 Massachusetts shareholders to escape identification is, that 
 they hold their shares with the transfer executed on the back, 
 but remaining registered in the name of some former holder, 
 or registered in the name of a non-resident stock broker, for 
 example. By holding a power to collect dividends, to secure 
 all rights of subscriptions of stock, and to vote at meetings, 
 all the advantages of registered stockholders will be se- 
 cured. If the law should be altered, so as to require. 
 
36 DOUBLE TAXATION OF SHARES. 
 
 registration, in order to give title, which, by the way, would 
 be an intolerable hindrance to business, citizens of this 
 State could have their stock held for them by non-resident 
 agents or attorneys. Again, by registering in their own 
 name, with an address different from their legal domicile, 
 many could escape the assessors. For example, it would be 
 very easy to give one's address as care of a New York 
 banker, who would gladly receive all dividends on deposit 
 or forward them to order. In these and other simple ways 
 would the shareholders still escape taxation. 
 
 It may be that a few of the shares, held in small lots by 
 persons inexperienced in business ways, will be got at ; but 
 the holders of large amounts, the shrewd business men, will 
 escape, and thus the law will work practical inequality of 
 the most galling kind. Those whom It is most Intended to 
 reach will not be touched, while it will fall most heavily on the 
 .conscientious and the inexperienced and the small holders. 
 
 Four, three, and two years ago, and In 1 894, some of the 
 tax assessors came before the legislative committees asking 
 for the passage of such a law. The arguments against them 
 were so convincing that they have been defeated by larger 
 majorities each year. 
 
 SUCH A PLAN IS UNCCiXSTTTUTIONAI. AS APPLIED TO INTER-STATE 
 
 RAILROADS, ETC. 
 
 In the case of Crutcher v. Kentucky 141 U. S. 47, the 
 United States Supreme Court, in 1891, decided such a plan 
 to be unconstitutional as applied to corporations engaged in 
 inter-state commerce. An Act of Kentucky to regulate 
 agencies of foreign express companies requiring a license 
 for which no money, except a fee of $ ^.00, had to be paid, 
 but only a statement filed showing assets, liabilities, capital 
 stock, etc., and a penalty of from $100 to $500 for doing 
 business without a license, was held unconstitutional as an 
 interference with inter-state commerce. The opinion of 
 the court Is very strong. The cases cited distinguish be- 
 
VALUE OF FOREIGN CORPORATIONS. 37 
 
 tween a direct interference and an indirect. The two pre- 
 ceding cases (141 U. S. pp. 18 and 40) distinguish between 
 this and a tax on a corporation for exercising its franchise 
 or owning property in another state. 
 
 Still more important is the recent case of Erie R. R. v. 
 Penn. 153 U. S. 628 (1893), in which the U. S. Supreme 
 Court held that the State of Pennsylvania could not make 
 the Erie R. R., though doing business in Pennsylvania, pay 
 out of the interest due Pennsylvania bondholders, and on 
 their account, the Pennsylvania state tax, deciding the case 
 on the broad ground that one state could not make " a cor- 
 poration of another state an assessor or collector of taxes." 
 
 IF EFFECTIVE, IT WOULD DRIVE SOME STOCKHOLDERS OUT OF 
 THE STATE, AND PREVENT OTHERS FROM COMING IN. 
 
 If such a law could be made effective, it would be injuri- 
 ous. Under our present law, enforced as little as it is, stock- 
 holders in corporations of other states have actually left the 
 State on account of the tax, and others, thinking of coming 
 here, have been prevented from doing so by the chance of 
 being doubly taxed. (See pp. 23 to 25, ante.) How 
 much more would this be the case if the chance were 
 made a certainty! 
 
 so WITH SOME OF THE LARGEST CORPORATIONS. 
 
 If the law could be made effective, so far as those 
 corporations of other states go Avhich have ofifices in 
 Massachusetts, it would only be necessary for such a 
 corporation to leave the State in order that the law would 
 have no effect on its shareholders. Those corporations 
 of other states, whose business interest kept them here, 
 would probably still remain, even if the law would 
 thereby reach their shareholders ; but many of the richest 
 corporations of other states have no business reason 
 for staying here. Their offices are here largely as a 
 matter of sentiment and local pride. The great Western 
 railroads, like the Chicago, Burlington & Quincy, the 
 Atchison, Topeka & Sante Fe, the Union Pacific, etc., 
 
38 DOUBLE TAXATION OF SHARES. 
 
 have no business reason for being in Boston. These roads 
 are all situated and managed out West. The great traffic 
 arrangements are made mostly in New York, and New 
 York is the great money centre at which money has to be 
 borrowed. The Boston directors have to go to New York 
 and out West frequently as it is, and some of the directors 
 are now in New York and have to come to Boston to the 
 meetings. It would be very little more trouble for the 
 Boston directors to go to New York on business or to 
 reside there a large part of the year. The Chicago, Burling- 
 ton & Quincy R.R. already has ofifices in New York & Chi- 
 cago for the transfer of stock, as well as in Boston. It would 
 only be necessary for them to close their Boston offices* 
 Indeed, there are many reasons for moving to New York, 
 at any rate. For example, the Baltimore & Ohio Railroad, 
 owned mostly in Baltimore, is seriously considering moving 
 its offices to New York, not for any reasons connected with 
 taxation, but merely for business convenience. The presi- 
 dent of the Amoskeag Mills, with a capital of $4,000,000, 
 tells the Committee on Mercantile Affairs that ninety per cent 
 of the sales are made in New York City, and the mills are 
 situated in New Hampshire. The president of the Tam- 
 arack and other mining companies, representing several 
 millions, tells the same committee that all the sales of 
 copper from his mines are made in New York, and all the 
 rest of the business is in Michigan. The attorney for the 
 Calumet & Hecla Copper Company makes a somewhat 
 similar statement. 
 
 If, by the proposed law, the shareholders of such cor- 
 porations of other states are made to pay a second tax in 
 Massachusetts, equal to one-third the net dividend, they 
 may well ask their directors why they do not move their 
 offices to other States with fairer laws. What answer could the 
 directors give ? What reason could they assign for staying ? 
 
 If they did leave the State, as they say they should 
 have to do, they would thereby lessen the demand for 
 
BUS/JVESS INTERESTS THREATENED. 39 
 
 many of the most valuable offices in Boston, rents would 
 go down, many clerks would be out of employment here 
 or would leave the State and vacate their present houses, 
 and enormous deposits would be withdrawn from the Boston 
 banks. The Amoskeag Mills alone deposits in the Boston 
 banks about $8,000,000 a year. Of these deposits only 
 about one-twentieth is made up of dividends which would 
 come to Boston, whether or no. The other nineteen twen- 
 tieths would go to the banks in the city to which the offices 
 were moved. The Tamarack set of mining companies 
 alone deposits $8,000,000 a year, of which less than one 
 quarter would be in the Boston banks if the offices were 
 not here. Add to these the deposits of the Calumet & 
 Hecla, and the great Western railroads, with their offices in 
 Boston, and the other 2479 * corporations of other states, 
 with places of business in the State, and it is no wonder that 
 the Association of Boston Bank Presidents voted against 
 the proposed method of enforcing the tax, and presented 
 its vote to the committee having the bill in charge. 
 
 THE THREAT TO PASS SUCH A LAW HAS ALREADY DRIVEN 
 CORPORATIONS FROM THIS STATE. 
 
 Mr. Charles Francis Adams has publicly stated there 
 were several companies in which he was interested as an 
 officer or director, whose business was in the West, which 
 were owned chiefly in Boston, and which would naturally 
 have had their home offices in this State. One of these 
 companies had a capital of $20,000,000, and an income of 
 $3,000,000 a year. Not one of them has its office in Massa- 
 chusetts, having fled from our tax (present and others with 
 which we have been threatened) laws. Many other similar 
 cases can be named by other gentlemen, and, altogether, 
 about $100,000,000 of such capital has been testified to. 
 We, as a community, thus lose not only the unjust tax we 
 A^ainly wish to enforce, but also the commissions, so to 
 speak, on the business we drive away. 
 
 * Rep. Tax Com. 1893, ?■ I4- 
 
40 DOUBLE TAXATION OF SHARES. 
 
 ANSWERS TO ARGUMENTS OF OPPONENTS. 
 
 THAT IT TS NOT DOUBLE TAXATION. 
 
 It has been argued that it is not double taxation to tax 
 first the corporation, and then the shareholders, both of 
 them to the full value of the same property and franchise. 
 The argument has been based first on theory, and then on 
 law. 
 
 THEORETICALLY. 
 
 It has been argued that it is not double taxation, be- 
 cause the shareholder buys his share with reference to its 
 probable future net yield in dividends, which dividends are 
 declared only after the corporation pays its taxes, as well as 
 other expenses, which are deducted from the gross profits, 
 and that, therefore, the owner of the shares ought to be 
 taxed over again. 
 
 It is equally true that real estate is bought with refer- 
 ence to its probable future net yield after taxes, as well as 
 insurance, repairs, etc., have been paid out of the gross 
 profits. Therefore, if the reasoning as to shares is correct, 
 the owner of real estate is not taxed, and, consequently, he 
 ought to be taxed over again on his deed. 
 
 Putting it in another way it has been argued that it 
 makes no difference, to the purchaser of shares of corpo- 
 rations, otherwise equally good, whether the corporations 
 are taxed or not taxed. If, by reason of tax exemption, a 
 larger dividend can be expected, a larger price is paid. For 
 example, on a four per cent, basis, the shares of an untaxed 
 corporation paying six per cent, dividends Avill sell at $150, 
 and the shares of a taxed corporation paying four per 
 cent, will sell at |ioo, and for $30,000, a man may buy 200 
 shares of the untaxed corporation, or 300 shares of the taxed 
 and he would receive the same return for his investment. 
 Therefore, the shareholder of the taxed corporation ought 
 to be taxed on his certificates of stock. 
 
REDUCTIO AD ABSURDUM. 41 
 
 Applying the same reasoning to real estate, it makes 
 ho difference to the purchaser of real estate, a farm for ex- 
 ample, whether the farm is taxed or not taxed. If, by reason 
 of the tax exemption, a larger net return can be expected, 
 a larger price is paid. For example, on a four per cent, 
 basis, an untaxed farm yielding $6 an acre net will sell at 
 $150 an acre ; an equally good farm of same size, but taxed, 
 and yielding after the tax only $4 an acre will sell at $100 
 an acre ; and for $30,000 a man may buy 200 acres of the 
 untaxed farm, or 300 acres of the taxed farm, and he would 
 receive the same return on his investment, and therefore 
 the owner of a taxed farm is not taxed and ought to be 
 taxed on his deed. 
 
 To see where this sort of reasoning leads us, let us 
 suppose that thg theory is true, and that the purchaser of 
 the taxed farm, which yields %\ an acre, and for which he 
 paid $100 an acre, is taxed on his deed at the rate of $2 a 
 year per acre. The net yield will then be only $2 a year per 
 acre. He can then sell only for $50 an acre, and the pur- 
 chaser of the doubly-taxed farm, not being taxed, as he has 
 bought with reference to the net return, must be taxed 
 another $2 an acre, and so the whole income value of the 
 farm is taxed away, and the farm sells for nothing. The 
 same reduction ad absurdum can readily be carried out in 
 the case of shares of corporations. 
 
 What is the trouble, then, with this reasoning? 
 
 The truth is, the tax to corporations is shifted on to the 
 consumers. If all corporations started free of tax, and then 
 a regular tax were imposed, the first effect would be to 
 diminish the dividends, but as no fresh capital would go in 
 till the net return were the same as on other equally safe 
 investments, there would be not only a failure to extend the 
 plant, but as it became worn out, it would not be fully 
 replaced till the supply decreased, or the demand increased, 
 sufficiently to raise the price of the product to a point where 
 there would be the average return on the investment, and 
 
42 DOUBLE TAXATION OF SHARES. 
 
 then the net dividends would come back to where they 
 were before the tax was imposed. This familiar process 
 would also apply to the improvements on real estate, such 
 as building's, etc. ' 
 
 Our opponents have taken the "capitalization of tax" 
 theory which is a Rttle startling to one who has not thought 
 of it before and applied it to the sole case of shares of 
 corporations of other states. 
 
 This well known theory is, that on permanent property, 
 all regularly recurring taxes which cannot be shifted tend 
 to be capitalized in a first mortgage, so to speak, to the 
 state. It applies to shares of home corporations and to 
 real estate just as much as to shares of corporations of 
 other states. Indeed, it was first established in the discus- 
 sion of land taxes. • 
 
 (See the " Shifting and Incidence of Taxation," by 
 Prof. Edwin R. A. Seligman, and Prof. E. A. Ross, in the 
 Annals of the American Academy, January, 1893, p. 52.) 
 
 LEGALLY. 
 
 It has been argued that some of the highest tribunals 
 have decided it is not "double taxation" to tax both the 
 corporations and the shareholders. It may be answered, 
 in short, that the decisions are now all opposed to this kind 
 of taxation, and that reliance by our opponents has been 
 placed on some over-ruled Tennessee cases, and some mis- 
 understood and now over-ruled obiter dicta of the U. S. 
 Supreme Court. The misunderstanding has arisen from 
 not bearing in mind the distinction Judge Cooley points 
 out, between technically duplicate taxation and what is 
 duplicate " in effect."* 
 
 The U. S. Supreme Court, and the Supreme Judicial 
 Court of Massachusetts have decided against every attempt 
 to tax both shareholders and corporation, except in the case 
 of National Banks, which submitted themselves to the 
 
 * Cooley on Taxation (2d. Ed. 1886), p. 225, also pp. 220, 228, 229, 231, 232 and 233. 
 
THE GIFT THEORY. 43 
 
 double tax by the explicit law of their charters, and, even 
 with them, any tax on the shareholders, not strictly con- 
 forming to the charter law, has been held illegal.* 
 
 THE GIFT THEORY. 
 
 It has been argued that abolishing this double tax 
 would be equivalent to making a present to the Massachu- 
 setts holders of shares of corporations of other states, by 
 making those shares just so much more valuable. Abolish- 
 ing a tax only tends to increase the value of the class of 
 thing taxed when the tax had been nearly everywhere im- 
 posed, and with substantial certainty collected, or when any 
 considerable number of would-be purchasers were formerly 
 prevented form investing in that property on account of the 
 tax. This tax on shares of corporations of other states is 
 not imposed in New Hampshire, Vermont, Rhode Island, 
 New York, New Jersey, Delaware, California, nor, for practi- 
 cal purposes, in Pennsylvania, and even in Massachusetts, 
 not much is collected. 
 
 Understanding this principle then, it is no surprise to 
 find that shares of corporations of other states, take the 
 shares of theC. B. &0., for example, an Illinois corporation, 
 sell day after day in New York, where they are not taxable, 
 at precisely the same price at which they sell in Boston, 
 where they are theoretically taxable ; so the local Massa- 
 chusetts tax makes no difference in the price. If it did, 
 shares of that corporation selling in New York at $75 
 ought to sell for only $58.12 in Massachusetts. As the 
 Massachusetts double tax law does not affect the price, 
 abolishing the double tax will not make a present to the 
 shareholders. 
 
 A SUBTLE DISTINCTION. 
 
 An aro-ument has been made that there is no inconsis- 
 tency in not taxing real estate out of Massachusetts a 
 second time, and yet taxing over again here, all personal 
 
 * See ante p- 6, and also Appendix A for full statement of law, as to double taxa- 
 tion of corporations and shareholders. 
 
44 DOUBLE TAXATION OF SHARES. 
 
 property out of the State, because, it is said, real estate is 
 itself taxed, while, for personal property, the owner of it, and 
 not the property, is taxed. This is one of those over-refined 
 distinctions of no practical import. 
 
 It makes no practical difference whether a man is 
 taxed on account of his real property, or whether the tax is 
 placed directly on the property and collected of the owner. 
 The owner pays the same tax in either case. It is a matter 
 of empty ceremony and not of substance. Whether or not 
 there is a lien for the tax in either case is a matter of statute. 
 There may be a tax directly on property and no lien, and 
 again,% tax to the owner of property may be made a lien 
 on the property ; for example, a franchise tax, held by the 
 courts to be a tax on the corporation and not on its property, 
 may be a first lien on the property none the less. 
 
 But coming down to discuss the ceremony, it is rather 
 startling to find that this distinction has been put forth by 
 two old and experienced assessors, when our laws distinctly 
 state that the tax is on personal property. Pub. Stat. Chap. 
 1 1, § 2 says " All property, real and personal, shall be sub- 
 ject to taxation. . . ." § 4 says "Personal estate shall, for 
 the purposes of taxation, include . . . ."etc. §§ 13 and 20 
 show that both real and personal estate are assessed in 
 precisely the same way, viz, the "estate" (real or personal) 
 is " assessed to the owner." 
 
 "CONFINING INVESTMENTS IN THE STATE*' THEORY. 
 
 It is argued that this double tax, if it could be enforced, 
 would keep investments within the State. Under the law, 
 as proposed by the Anti-Double-Taxation League, the in- 
 come and dividends from outside corporations would be 
 taxed ; so there would be a slight advantage to the home 
 corporation, the dividends of which are not taxed to the 
 shareholder. But, would it be wise, by an extreme prohib- 
 itive tax, such as the double tax on shares which takes thirty 
 per cent, of the net income, to force all investments to come 
 
EMPTY STORES BRING DOWN RENTS. 45 
 
 within the State ? What would be the effect ? The shares 
 of corporations of other states, owned in Massachusetts, 
 are estimated at $600,000,000 in vakie. Our opponents 
 put them at $1,000,000,000. The foreigft bonds, notes, 
 mortgages, etc., would probably amount to at least 
 $1,000,000,000. (The bonds of railroads in the United 
 States are about equal in face value to the stock.) If this 
 one billion, six hundred millions of property were forced to 
 find investment in the State, where could it be put ? The 
 present value of all our home corporations, after deducting 
 the real estate and machinery, is only a little over two hundred 
 million. (See Report of Tax Commissioner of Mass., Pub. 
 Doc. 16, 1894, p. 8.) Any considerable increase in home 
 corporations would only create over-production in our spec- 
 ialties. It is only for very short periods at a time that, 
 our present corporations can profitably employ all their 
 machinery to advantage. What would happen if we quad- 
 rupled their capacity ? Even that would use up only half 
 the amount. The improvements on our real estate amount 
 to $941,000,000. (Polls, Property, and Taxes for 1894, 
 Pub, Doc. 19, 1895, p. 61.) It would only take a very little 
 extra building to have the supply greater than the demand, 
 and a few empty stores and houses bring down the rents of 
 the rest with a rush, and so would diminish the value of real 
 estate. Where could this enormous amount of property be 
 invested with advantage in our State ? I leave that for our 
 opponents to show. Meanwhile, I don't think they can 
 show a satisfactory answer, and it seems, on the contrary, 
 plain that it is more profitable for us, as a community, to 
 build up great wealth in any part of the United States where 
 its return to the investor and to those employed in it will be 
 the greatest. Then there will be a far larger demand for our 
 products both from our own investors here, and from the 
 producers beyond our state lines, than if the same money 
 were forced into relatively unproductive, and, therefore, 
 necessarily poorly paid and over-crowded industries all 
 within our State. State lines within the United States do 
 not form commercial barriers. 
 
 The wealth of Massachusetts has been in its past his- 
 tory gained largely from out of the State. (See ante p. 33.) 
 
46 DOOMAGE LAWS. 
 
 DOOMAGE LAWS. 
 
 The present doomage law in Massachusetts has worked 
 as well as any law, assessing intangible personal property 
 in a populous and wealthy community, has ever worked, it 
 is confidently believed. By the present law, if sworn returns 
 are not made, the assessors have power to doom, and by 
 way of penalty no rebate can be had below fifty per cent, 
 in excess of the actual tax due. 
 
 Under this law in 1869, when the system was being 
 rigidly enforced under the leadership of Mr. Thomas Hills, 
 then newly elected assessor for Boston, the assessed per- 
 sonal property, exclusive of corporate personalty, was 
 %']la per cent, of the total assessed estate. Including cor- 
 porate personalty (but not savings banks deposits) it 
 reached 4i,*„ per cent., a iDroportion I have never seen 
 equalled in the returns from any other large and rich corn- 
 community. * In 1890, the personal, exclusive ol corporate, 
 in Massachusetts is 2 5/„ per cent, of the total, and inclusive 
 of corporations is 34^^ per cent. The average for the whole 
 of the United States, in that year, was only 23J'„ per cent. 
 (U. S. Census Bulletin, No. 192, p! 4) though several 
 states included corporate property in their personal prop- 
 erty returns which Massachusetts did not do. 
 
 The tax law of Ohio has often been pointed to as a 
 model of a thorough going doomage law, with its compul- 
 sory listing, its fifty per cent, fine, and its paid spies, who 
 share in the extra tax collected through their efforts. The 
 recent tax commission of that state, appointed by Governor 
 McKinley, however, tmanimously reports against these se- 
 vere listing laws. It says : 
 
 * New Hampshire would, at first glance, seen) to have exceeded this, but New 
 Hampshire includes in assessed personalty Jioo apiece for each assessed poll, and all 
 savings banks deposits and much corporate property ("See Valuation of New Hamp- 
 shire, 1890, pp, 38-39) none of which is included in the Massachusetts figures. This 
 allowed for, Massachusetts stands far ahead of New Hampshire. (See post p. 49). 
 
OHIO'S EXTREMELY RIGID SYSTEM. 47 
 
 " It is confidently. believed that no appreciable part of 
 the intangible property existing in the city counties is 
 reached by our method of taxation." " It is to be remem- 
 bered, too, that we have in this State an extremely rigid 
 system. The state is pointed to by the commissions of 
 other states, notably that of Pennsylvania, as one where 
 personal property is reached." (Report of Tax Commis- 
 sion of Ohio of 1893, PP- 3I) 32, also pp. 21-42.) 
 
 Governor McKinley, speaking of the results after years 
 of the severe listing laws of Ohio, says: " Real estate and 
 other tangible property now pay the large share of the 
 taxes, while other varieties of property, which are intangi- 
 ble, either wholly escape or bear a disproportionate share." 
 (Governor McKinley to General Assembly of Ohio, Jan. 4, 
 
 1894-) 
 
 The Chamber of Commerce of Cleveland, Ohio, has 
 petitioned for a repeal of these laws. 
 
 Vermont and New Hampshire are two other states 
 held up as models of double and quadruple doomage laws. 
 In the first of these states the severe tax law went into oper- 
 ation in 1 88 1, and in New Hampshire in 1879. What have 
 been the results ? Has personal property been driven away ? 
 If business is prosperous, it always attracts people. Be- 
 tween 1880 and 1890 Vermont increased in population just 
 136 souls, being the only state except the mining community 
 of Nevada that did not materially increase. (See U. S. 
 Census Bulletin, No. 192, p. 3.) In wealth Vermont de- 
 creased 12 per cent., while New Hampshire decreased 10^^ 
 per cent. There is only one other state in the Union 
 that did not increase in wealth during this period, and 
 the average increase in wealth in the United States was 
 nearly 50 per cent. (See U. S. Census Bulletin, No. 379.) 
 The rate of taxation in Vermont in 1891 was $18 per thou- 
 sand,* instead of $14.88 in Massachusetts. In New Hamp- 
 
 * History of Taxation in Vermont, Columbia Studies in Political Science, Vol. 
 IV, No. 3, p. 119. 
 
48 DOOMAGE LAWS. 
 
 shire in 1894, the rate (exclusive of the rate on savings 
 banks' deposits) was very nearly #17 per thousand.* This 
 is not a very good showing for the two model states. 
 
 As to the enforcement of the listing law of New Hamp- 
 shire, which quadruples the tax when a sworn list is not 
 filed, the Board of Equalization for that State in its report' 
 for 1894, p. 241, says: "The law requiring sworn invento- 
 ries . . . has practically become a dead letter." " If 
 public sentiment does not sustain the law, as evidently it 
 does not, it should be stricken from the statutes." 
 
 DOOMAGE LAWS ARE MEDIEVAL. 
 
 Some of those who urge stricter doomage laws seem 
 to think they have made some new invention. If they 
 think so, they are ignorant of history. These laws date 
 back from the earliest dawn of civilization, and were preva- 
 lent in mediaeval times, and have been abandoned by all 
 civilized countries except a few of the states of the 
 United States. The Romans employed torture to make 
 people disclose their taxable property. (General Property 
 Tax, by Prof. Seligman, p. 46, Report Commissioners of 
 N. Y., 187 1, p. 53 ; p. 30 in Harper's Edition.) 
 
 The English kings, before the supremacy of Parlia- 
 ment, employed all sorts of compulsory listing rnethods. 
 These are succinctly set forth with the authorities in Cooley 
 on Taxation, pp. 35 and 36, note i. 
 
 The taxing lists employed in Germany in the sixteenth 
 century are shown in the Report of the Ohio Tax Com- 
 mission to resemble the Ohio tax returns, (1893, p. 23). 
 The very plan suggested by the Bliss Bill of 1894 was in 
 operation in Kentucky in 1837, (See Johnson vs. the Com- 
 monwealth, 7 Dana (Ky.) 338,) and is now abandoned. 
 
 All the modern authorities on taxation, Cooley, Selig- 
 man, Wells, Ely, and almost every well known student of 
 
 * Valuation and Taxation, N. H.^ 1894, p, 239. Valuation (excluding savings 
 
 banks' deposits,) $197,839,543; taxes assessed in cities and towns (excluding savings 
 
 banks' taxes) S3, 325,603. 27. The rates, as Hxed in Massachusetts, do not include 
 the savings bank's rate. 
 
LISTING SYSTEM A FAILURE. 49 
 
 financial and economic history, declare the listing system a 
 failure, excepting in extremely rural communities, where 
 each person knows all about his neighbors, and where per- 
 sonal property consists mostly of tangible objects. 
 
 The great increase in the assessed personal property 
 in Vermont and New Hampshire, after their doomage laws 
 were passed, is frequently pointed to as an inducement for 
 us to adopt similar laws. In Vermont the increase from 
 t88o to 1890 was 245 per cent., that is, from $42,022,057 
 of personal in 1880, to $127,332,539 in 1890, and in New 
 Hampshire from 1879 to 1890 of nearly 300 per cent, it has 
 been claimed. 
 
 In order to understand the situation it must be known 
 that in both those states before the passage of their listing 
 laws, their assessments of personal property were very lax. 
 In Vermont in 1880, the last year before the listing laws 
 were in operation, the assessed personal property, includ- 
 ing much home corporate property, was only 17/0 per 
 cent, of the total (U. S. Census Bulletin, No. 192, p. 4) ; 
 while in Massachusetts that year, the personal, with no home 
 corporate property, was 29^^ per cent. But after the change, 
 in 1890, Vermont had only 31 per cent., though, in her 
 personal, there was still included a considerable amount of 
 home corporate property. This does not come any where 
 near the 2)7 L per cent, of Massachusetts in 1869. That is, 
 Vermont, while it increased its proportion of personal assess- 
 ment, only came from a very lax system to about the 
 average of Massachusetts during the same years, and not 
 up to our former record. 
 
 In New Hampshire there is included in the personal 
 property the savings bank deposits, a capitalization of the 
 poll tax at $100 a poll, and much corporate property, none 
 of which is included in the Massachusetts personal prop- 
 erty. After making the proper deductions for a compari- 
 son with Massachusetts the assessed personal property of 
 
50 DOOMAGE LAWS. 
 
 New Hampshire is only i7/„ per cent.* of the total for 
 1890, or far below the 257^ per cent, of Massachusetts. 
 
 Thus, it will be seen that the usual statement of the 
 experience of New Hampshire has been misleading from 
 the different manner of estimating assessed personal prop- 
 erty in that State and in ours. 
 
 It has been argued that, although Vermont has reached 
 only the Massachusetts percentage of personal property, 
 with all its listing laws, yet that is so because Vermont has 
 no large cities, and in Massachusetts there is more personal 
 property. It is no doubt true that there is more personal 
 property in Massachusetts cities than in the smaller ones 
 of Vermont, but at the same time, the presence of this ad- 
 ditional personal estate makes the real estate of the Massa- 
 chusetts cities just so much more valuable, for it is only the 
 presence of personal property that gives value to real 
 (See ante p. 12) so there is no reason why the proportion 
 of personal to total would be any greater in Vermont than 
 in Massachusetts. On the contrary, experience shows that, 
 by listing laws it is in the rural communities that the largest 
 proportion of personal to total assessed property is found. 
 " It is the country counties which pay the taxes upon per- 
 sonal property." (Report of Tax Commission of Ohio, 
 1893, p. 31). On the same page of this report it is shown 
 that the country counties find w^l^ per cent, intangible 
 personal property to total, while in the city counties there 
 is found only 5,'^ per cent., and special instances are shown, 
 illustrating this principle on pages 33 to 35. In Massachu- 
 
 *By the U. S. Census (Bulletin, No. 192, p. 4), the assessed personal property 
 of New Hampshire is put at ^127,332,539. By turning to the Valuation and Taxation 
 of New Hampshire for 1890, pp. 38 and 39, it is evident that from this must be deducted, 
 to bring it to the basis of the Massachusetts figures, 
 
 Deposits in Savings banks, . . ^63,846,977 
 
 Polls, valued at ;?ioo each, . . 9,656,900 
 
 Mills and Machinery, . . . 18,240,240 
 
 Capital in Insurance Companies, 1,305,000 
 
 Corporate personalty (estimated) 2,800,000 
 
 None of which is in- 
 cluded in the Massachu- 
 setts personal property 
 as estimated. 
 
 S95.849-I17 
 Leaving only J!3i,483,422 personalty, on the Massachusetts basis. 
 
NEW HAMPSHIRE AND PENNSYLVANIA. 51 
 
 setts the thirty cities and towns larger than the largest city 
 of Vermont find 2)^tL per cent, of personal to total, while 
 the rest of the State, including, of course all farming towns, 
 finds 33i'<J, per cent. Thus instead of being, as our oppo- 
 nents say, it is just the opposite, so that in such a state as 
 Vermont, with equally efficient laws, they ought to find a 
 larger proportion of personal to total property than in 
 Massachusetts, instead of a smaller. This also incidentally 
 shows that strict listing laws bear most heavily on the farm- 
 ing districts. It is only in small towns where every man 
 knows about his neighbor's affairs that listing laws are 
 successfully enforced. 
 
 Again, in all the states which have recently adopted 
 dooming laws, though the laws when first put in operation 
 increase the yield, yet after a few years' trial they produce 
 a smaller and smaller proportion of personal property. The 
 proportion of personal to total in Vermont in 1890 was 
 31 percent. (U. S. Census Bulletin, No. 192, p. 4), in 1892 
 was 30/0 per cent. (Laws of Vermont, Grand List, p. 482), 
 and in 1894, 29^^ per cent.* (from official figures not yet 
 printed). In New Hampshire every item of personal prop- 
 erty, such as is included in the Massachusetts data, has 
 fallen from 1890 to 1894, excepting the value of hogs and 
 stock in trade, with a total falHng off in personal in 1894 
 of $1,800,000 or 20 per cent, from that of 1890, while in 
 real estate there has been a gain of $13,000,000, or over 
 9 per cent. (Valuation and Taxation of the State of 
 New Hampshire, 1890, pp. 38-9, and 1894, pp. 278-9.) 
 " In the same time there has been a decrease in ' money on 
 hand, at interest, or on deposit,' from $20,000,000 in 1879, 
 when the law requiring sworn inventories went into effect 
 and was universally enforced, to about $6,000,000, in 1894, 
 when in a large portion of the cities and towns it has prac- 
 tically become a dead letter." (Id. p. 241.) 
 
 * The Vermont percentages include considerable corporate personalty, not 
 included in the Massachusetts figures and percentages. 
 
52 DOOMAGE LAWS. 
 
 In Pennsylvania we find the same state of affairs. In 
 that State the percentage of personal to total assessed, was 
 in 1890, 18 per cent, in 1891, 17! per cent., and in 1892-3 
 17 per cent. In the period from 1890 to 1893, assessed 
 real estate increased $325,000,000, and assessed personal 
 only $36,000,000. (Reports of Secretary of Internal Af- 
 fairs for Pennsylvania, 1890, pp. B 207-9, ^-^^d 1893, pp. 
 B 222-9.) 
 
 The Ohio Tax Commission of 1893 (p. 25), says of 
 Cleveland, Ohio, " It will thus be seen that while in the 
 years 1868 and 1869, the personal property on the duplicate 
 for taxation was more than the real estate, in 1891, the 
 real estate was 75,'J„ per Cent, of the whole, and the per- 
 sonalty 24,3^ * per cent, of the whole, and that these ratios 
 were substantially the same in the year 1892." On page 24 
 they show an actual loss in personal property in Cincinnati, 
 between 1867 and 1892, of nearly $24,000,000. 
 
 The experience of Georgia, with its new dooming law 
 and twenty-nine specific statutory questions, called " a 
 model of its kind," is put forth in the New York Evening 
 Post of Jan. 27, 1893, as follows: "The State makes a 
 powerful effort the first year, a somewhat less powerful one 
 the next year, and so on, until she discovers that the only 
 persons paying the personal property tax are the banks 
 which cannot conceal anything, the widows and orphans 
 -whose property is in the probate court, and a few conscien- 
 tious people whose treasures are mostly laid up in heaven." 
 
 These are the only states that have been recently held 
 up as models of severe dooming laws. As these all show 
 a falling off, just as Boston has shown a falling off, (See 
 ante, p. 16,) what is the conclusion? Either these doom- 
 ing laws have driven away personal property, or else, if 
 personal estate has actually Increased In proportion to the 
 real, then these listing laws fail more and more to accomi 
 
 * More than half the personal is corporate property that is not included in Massa- 
 chusetts. (See same page of same report.) On the Massachusetts basis it is ^bout 
 twelve per cent. 
 
THE WHISKEY TAX. 53 
 
 plish their ends. The truth is, severe listing laws encourage 
 perjury and evasion, and discourage enterprise and accumu- 
 lation. 
 
 If, in a school, the boys who tell the most lies get the 
 biggest rewards, what is the tendency of that school ? Try- 
 ing to find intangible personal property by forcing sworn 
 returns is giving money rewards to those who perjure them- 
 selves, and punishing those who conscientiously tell the 
 truth, and that in a matter where it is practically impos- 
 sible to find the evidence with which to contradict the 
 deponent. 
 
 The Ohio Tax Commission of 1893 (p. 22) says of 
 the Ohio listing law ; " The system, as it is actually admin- 
 istered, results in debauching the moral sense. It is a 
 school of perjury." Gov. McKinley of Ohio in 1894 com- 
 plains of *' false returns." Prof. Seligman, in his General 
 Property Tax (1890, pp. 30-31), collects similar statements 
 from tax commissions of several states. Judge Cooley, on 
 page 36 of his work on Taxation, says : " The listing system 
 
 is objectionable " " as holding out a strong 
 
 temptation to false swearing in matters where a false oath 
 would be difficult if not impossible of detection." 
 
 In the experience of the U. S. Internal Revenue De- 
 partment it was found impracticable to collect a tax of %2 
 a gallon on distilled spirits. The temptation to human na- 
 ture was too great. It was actually found that far more 
 revenue was collected at a smaller tax, and that there was far 
 less illicit distilling. The attempt to collect the %2 tax was 
 not given up till after a vigorous fight. In 1866 it was said 
 by a Member of Congress " that he was not ready to admit 
 that the nation, which has put down such a great rebellion 
 at the cost of so much blood and treasure, could not collect 
 a tax of $2 a gallon on whiskey," but, after 1868, when, with 
 an estimated consumption of fifty millions of gallons, the $2 
 tax was collected on only seven millions, the high tax was 
 given up. (Report of Hon. David A. Wells to fion. J. G. 
 
54 DOOMAGE LAWS. 
 
 Carlisle, Secretary of U. S. Treasury, July 8, 1893, pp. 4-8.) 
 If sworn returns regarding tangible property, like whiskey, 
 are of so little use, what can be said of the value of oaths 
 as to intangible property, much of which is subject to an 
 unjust double tax? 
 
 The English income tax is often referred to. As far 
 as the income is from real estate, English corporations, and 
 business that can be estimated by stock in trade, the system 
 works well, but as to assessing income from intangible prop- 
 erty, and from business that cannot be seen, there is constant 
 trouble and failure. About twenty years ago a number of 
 wealthy firms in London, whose business had been broken 
 up by city improvements, presented and conclusively proved 
 claims for damages, showing that their annual profits had 
 amounted to from three to five times as much as they had 
 returned for income tax in the same period. (Hon. T. G. 
 Shearman's argument before Ways and Means Sub-Com- 
 mittee, Oct. 16, 1893, p. 10.) It is not uncommon to find 
 when an estate is in Probate Court that it is assessable for 
 many times what it had previously been taxed for, though 
 sometimes these taxes had been based on sworn returns. 
 
 Besides the temptation to perjury it is easy to manipu- 
 late one's property with reference to the tax laws. United 
 States bonds. United States notes, "greenbacks," gold and 
 silver certificates, deposits in savings banks, shares of home 
 corporations, mortgages on real estate, goods in transit, 
 imported merchandise in the original package, and goods 
 produced in another state, sent on commission, are not 
 taxable, and the indebtedness of the tax payer can be offset 
 in certain cases. By arranging one's affairs before the first 
 of May it is possible to make a true return and greatly 
 diminish one's tax. As Prof. Seligman pointed out in the 
 case of People ex rel Ryan, 88 N. Y., 142, the Court of. 
 Appeals held that the assessors were bound by a transac- 
 tion which the court itself declared to be "a device to es- 
 cape taxation." 
 
VISIONARY AND IMPRACTICABLE IDEAS. 55 
 
 Again, many persons carelessly assume that certain 
 classes of property are free from tax. They do not dis- 
 tinguish between the laws of different states, and between 
 different classes of property of the same general kind, 
 some of which are taxable and some not, such as mort- 
 gages on real estate outside our commonwealth and on real 
 estate within. Thus a listing law is a premium on vague- 
 ness, carelessness and inaccuracy. Profits of business are 
 so variously estimated, even where there is no temptation 
 to deceive, that there is sure to be a stretching of methods 
 to lessen the tax while keeping clear of perjury. The value 
 to be put on furniture, pictures, horses, etc., by the owner 
 for purposes of taxation, is extremely indefinite and gives 
 great scope for evasion without being subject to any penalty. 
 
 The argument from the United States customs laws 
 requiring invoices of all imports has been urged. The case 
 there is very different. The invoices have to be certified 
 to by consuls abroad, and, when the vessel arrives, there 
 are the specific goods in the hold of the ship, which are 
 examined by the appraisers, samples taken and subjected 
 to tests. It is nothing but a duty on tangible property, on 
 which there are evasions enough, but which is easy to 
 assess in comparison with a tax on the intangible. 
 
 Another argument to sustain severe listing laws has 
 annually been pressed in the Legislature. Why not apply 
 that searching method of the poor debtor process to the 
 discovery of intangible property ? This is a very good illus- 
 tration of how visionary and impracticable are the ideas of 
 the extreme listing law advocates. They forget the cost. 
 In the poor debtor proceedings it is usually only a small 
 business that is examined into, and, in three successful cases 
 out of four, the examination stops short of full disclosure of 
 all the debtor's business. When a moderate amount of 
 property is discovered a compromise usually ensues. For 
 assessment, the whole of each man's affairs must be fully ex- 
 amined, and these examinations must often be carried out to 
 
56 DOOMAGE LAWS. 
 
 cover complicated business, taking days of hard expert work. 
 Fifty dollars would be a very small cost for each examina- 
 tion. The average would be nearer $ioo. If only \ of the 
 adult population of Massachusetts were subjected to such an 
 examination at a cost of only $50 apiece, the total expense 
 would be ($50 times 186,000) $9,300,000, which would be 
 more than all the tax collected on personal property within 
 the State of Massachusetts last year, ($8,088,313. See 
 Aggregates of Polls, Property and Taxes for 1894, Pub. 
 Doc. 19, 1895, p. 62). 
 
 Another argument In favor of adopting the Vermont 
 listing system is based on the decrease in the Stale tax of 
 Vermont, from 1880 to 1883, the listing law going into 
 operation in 1881. The Special Tax Commission of Maine, 
 1889, on p. 26 of its report, says, "The effect of the grand 
 list law, (Vt. 1880) is very clearly seen when the rate of 
 state taxation before and after its passage are compared. 
 For the three years immediately preceding its passage, the 
 rate averaged 33 mills on the dollar, while for the three 
 years succeeding its passage, and before the corporation 
 tax took effect, the average rate was but i^ mills." 
 
 First it should be noted that this refers to the state tax 
 and not to the general rate, which latter includes the county, 
 town and city taxes as well as the state tax. As noted before 
 (see ante. p. 49), the personal property tax in Vermont 
 prior to 1891, had been very lax and not by any means as 
 thorough as in Massachusetts — and the Vermont law of 
 1 880 only produced results just about equal to what we now 
 produce in Massachusetts, and far less than was produced 
 some years ago. 
 
 Besides that, together with the more careful assessment 
 of personal property in 1881, there was also a more careful 
 assessment in real estate, which also had its share in reducing 
 the rate. 
 
VERMONT RATES COMPARED. 57 
 
 REAL ESTATE ASSESSED IN VERMONT. 
 
 1878 $70,919,120 Increase Percent. 
 
 1879 71,017,981 $98,861 -00139 
 
 1880 71,114,747 96,766 .00136 
 
 1881 102,437,102 3i»322,355 44. 
 
 1882 106,372,797 35,258,050 49. from 1880 
 
 1883 104,549,674 
 
 That is from 1880 to 1881, there was an increase in 
 real estate assessments of $31,322,355, or 44 per cent, 
 as against a previous average annual increase of less than 
 $100,000, or ^ of one per cent.-! From 1880 to 1882, the 
 increase in real estate assessments was $35,258,050, or very 
 nearly 50 per cent. That alone would have reduced the 
 state tax rate by nearly one-third its former size. 
 
 Moreover, while the Maine Commissioners are right in 
 saying the law of 1882, which gave a large state tax on 
 corporations, did not go into effect till 1883, yet they take 
 into account that year 1883, as one of the three years making 
 up the average of the state X.2.y..after 1880, and they overlook 
 the fact that by the law of 1880, express and telegraph 
 companies were directly taxed by the state* which got these 
 additional sources of revenue it had not had before. 
 
 Therefore, taking this all into account there were other 
 things besides the listing of personal property which largely 
 contributed to the diminution of the state rate. 
 
 Though the state rate fell from 1880 to 1881 and 1882, 
 yet it rose again, notwithstanding that after 1882. the state 
 had a large amount oi corporation tax it did not have before. 
 
 VERMONT STATE TAX. 
 Average, 
 187A-80 20 * Laws of Vermont, Chap. 
 
 1880 20 Ixxxii, p. 83. 
 
 t History of Taxation in Ver- 
 Vermont list law in effect. ^^^^^ Columbia Studies in 
 
 1881 17 Political Science, Vol. IV., 
 
 1882 10 No. 3, p. 119. I have 
 1887 12 given all the rates for all 
 
 QQ the years after 18S0 con- 
 
 1891 i8t 
 
59 
 
 MUNICIPAL BONDS. 
 
 The reason for exempting municipal and state bonds 
 from taxation is based, not on any claim that it is double tax- 
 ation to tax the holders, but solely on the business advan- 
 tage to the state and municipalities. 
 
 Take the case of Boston. Its net debt, over and 
 above all sinking funds, is $33,509,675. (Tax Commission- 
 ers' Report for Dec. 31, 1894.) The treasurer of the 
 city believes that the bonds of Boston could be placed 
 at about I of one per cent, lower if they were free from tax. 
 (Hearings before Joint Special Committee on Taxation, 
 1893, P- 5-) If that is so, the city would save $167,548 a 
 year in interest. The loss it would suffer would be the tax 
 on the $294,000 of such bonds as it finds for taxation. 
 (Assessing Department of Boston, Report for 1894, p. 18.) 
 The tax collected on this is just $3,763.20. The net saving 
 to Boston and its tax-payers would, therefore, be about 
 $163,785 a year. That would be a saving that would 
 permit the city to borrow $5,000,000 at three per cent, for 
 any great improvement, and allow for a sinking fund of 
 $i3i7^5 ^ year, without a ce^it of cost to the i?ihabitants of 
 the city. 
 
 The total net indebtedness of all the cities and towns 
 of Massachusetts, in 1893, was $80,125,652. (Tax Com- 
 missioners' Report, 1893, p. 219.) Of the 354 cities and 
 towns of the state only 80 towns are without indebtedness. 
 The tax collected by these towns, on municipal obligations, 
 is so little that it would not count, and any one of them may 
 at any time be a borrower, and would, therefore, gain, as 
 Boston would, by having a better market for its bonds. 
 
 That a stale or city can sell its bonds to better advan- 
 tage, if they are not taxable, appears from the decision of 
 the U. S. Supreme Court in IVeston vs. City of Charles- 
 ton, 2 Peters 449, in which the Court declared a tax on 
 
6o MUNICIPAL BONDS. 
 
 U. S. bonds to be unconstitutional for the very reason that 
 the U. S. government could not sell its bonds to as good 
 advantage, if they were taxable, as if they were not. Fol- 
 lowing this reasoning. Congress has issued bonds free 
 from any tax, as the best policy, no matter how much in 
 need of money the government was ; indeed, the more It 
 needed money, the more important was it to sell its bonds 
 to advantage. Thirty-nine out of the forty eight states 
 and territories of the United States follow the example of 
 Congress and exempt from taxation to a greater or less 
 degree its state or municipal bonds. The only states, bear- 
 ing company with Massachusetts in refusing this, are, 
 Idaho, Kansas, Louisiana, New Mexico, South Dakota, 
 Rhode Island and Vermont. * 
 
 As to the evidence that a city can issue its bonds, if 
 non-taxable, to better advantage, in addition to the opinion 
 of the U. S. Supreme Court, and of the thirty-nine states 
 which exempt such bonds, is the opinion of several of the 
 most experienced city treasurers of Massachusetts, and 
 many mayors, including the present and the last mayor of 
 Boston and its treasurer. 
 
 New York City, Brooklyn and Philadelphia, which do 
 not now tax their new bonds, issue them to better advant- 
 age than Boston. The majority of the Joint Special Com- 
 mittee on Taxation for 1S93 (Senate Doc. No. 9, 1894, p. 
 12), explains this by saying that " Boston is plunging rap- 
 idly into debt." The net indebtedness of Boston, on the 
 contrary, has been growing proportionately less. In 1878, 
 it was .041 of its assessed value; in 1890, .037; in 1891, 
 .036; in 1892, .034; and in 1893, -OSo- (See Reports of 
 Tax Commissioner.) In 1891, the net indebtedness of 
 Philadelphia was higher in proportion than that of Boston, 
 being just .040 of its assessed value. (Reports Secretary 
 
 * See State and City Supplement of Commercial and Financial Chronicle, April 
 21, 1894, which gives all the issues of state and municipal bonds, and, among' other 
 information, whether they are taxable or not, as stated by the various 'state and city 
 authorities. ' 
 
COMPARISON WITH NEW YORK. 6i 
 
 Internal Affairs Penn. for 1891, p. B 163, and Commis- 
 sioner of Sinking- Funds for Phila. for 1891.) Again, the 
 majority's report says, that in 1876, when Philadelphia was 
 more in debt than Boston, Boston bonds were placed on 
 more favorable terms than those of Philadelphia ; and, to 
 prove this, quotes 
 
 " Philadelphia old fives, '94, 
 Boston fives of 1905, 112." 
 On looking up the reference (Martin's tables for 1876), it 
 appears that the " Philadelphia old fives" were payable in 
 paper, and " Boston fives of 1905 " were gold bonds at a 
 time when the same tables show us gold was at a premiutn 
 over paper of 112^. After this it is hardly worth while 
 examining the report of the majority of that committee any 
 further on this point, except for the fact that it admits that 
 Philadelphia and New York place their non-taxable bonds 
 at better advantage than Boston does her taxable ones. 
 
 Boston taxable and New York taxable bonds sell at 
 about the same basis, with a little advantage for Boston. For 
 example, Oct. i, 1893, Messrs. Blake Bros. & Co. sold a 
 lot of $100,000 New York taxable 6 per cent. goJd bonds 
 due 1 90 1, at a price that yielded the investor 4 per cent. 
 At the same time, Messrs. R. L. Day & Co. were offering 
 several series of Boston bonds due from 1899 to 1923 at 
 prices which yielded the investor 3^ to 4 per cent. 
 
 On Oct. 27 to 31, 1893, Messrs. Blake Bros. & Co. 
 sold a lot of $200,000 New York taxable 6 per cent, gold 
 bonds due 1896, at a price that yielded the investor 4 per 
 cent., and, on the same date, Messrs. R. L. Day & Co. were 
 offering the Boston bonds of various descriptions at prices 
 that yielded the investor i\ per cent. Thus showing that 
 when New York and Boston bonds, both taxable, are on 
 the market, the Boston bonds sell at about \ per cent, lower 
 basis than the New York bonds. 
 
 On Dec. 5th and 7th, however, Messrs. R. L. Day & 
 Co. reported a sale in New York of a lot of $500,000 New 
 
62 MUNICIPAL BONDS. 
 
 York consolidated 3 per cent, stock due in 19 13, and also 
 a lot of $725,000 New York 3 per cent, dock bonds due in 
 1924, both lots being exempt from taxation at prices which 
 yielded the investor 2 «„ per cent. At the same dates Messrs. 
 R. L. Day & Co. quote the various lots of Boston bonds 
 at prices which yield the investor 3I per cent. Thus show- 
 ing that the Boston taxable bonds are selling at prices yield- 
 ing the investor \ per cent, higher rate than the exempt 
 New York bonds.* 
 
 It is better, perhaps, to compare the sales of taxable 
 and non-taxable bonds of the same city, if possible, so that 
 all questions of relative credit, or other different local 
 circumstances, may be eliminated excepting the one matter 
 of taxability. It happens that we have just such a case. 
 Both New York City and Brooklyn have some old, outstand- 
 ing taxable bonds selling on the market, and some newer ones 
 that are not taxable. The editor of the Financial Chronicle 
 says that the non-taxable bonds always sell on a basis that 
 nets less to the investor than the taxable, or, to put it the 
 other way, on a basis that would enable the city to sell 
 non-taxable bonds to far better advantage to the city and 
 its tax-payers than the taxable. 
 
 On Oct. 27 to 31, 1893, Messrs. Blake Bros. & Co. sold 
 a lot of $200,000 New York City 6 per cent, taxable gold 
 bonds due in 1896, at a price which yielded the investor 4 
 per cent. The very next day, Nov. i , there being no sud- 
 den change in the stock market, the same firm sold in 
 New York a lot of over $100,000 New York 4 per cent, 
 bonds due in 19 10, exem.pt from taxation, at a price which 
 yielded the investor 3^ per cent., or, at \ of one per cent. 
 lower than the non-taxable bonds of the same city. 
 
 * The Argument that the limitations on investments of N. V. Savings Banks 
 lowered the rate of interest on N. Y. bonrls has no application, as 1st the N. Y. bonds 
 that are taxable sell at about the same rates as the Boston bonds, and 2nd at the date of 
 these sales the law had been amended so as to allow the New York Savings Banks to 
 invest in bonds of Boston, Worcester, Providence, New Haven, Detroit and St. Louis, 
 and to take 5 per cent, more in mortgages and the special sales of N. Y. bonds referred 
 to were not to Savings Banks but to other corporations. 
 
METHODS OF DEALING IN BONDS. 63 
 
 All interest-bearing obligations are bought and sold 
 with a view to the rate of interest named in the face of the 
 bond, and the length of time before maturity. With these 
 two factors known, the current or market rate of interest 
 determines the premium paid. 
 
 For instance, a 4 per cent, bond, having ten years to 
 run, must be sold at 104.19 to net the investor 3^ per cent. 
 
 A 4 per cent, bond, having twenty years to run, must 
 be sold at 107.15 to net the investor 3^ per cent. 
 
 A 4 per cent bond, having thirty years to run, must be 
 sold at 109.24 to net the investor 3^ per cent. 
 
 A town or city, which sells a lo-year 4 per cent, bond 
 at 104.19, or a 20-year 4 per cent, bond at 107.15, or a 30- 
 year 4 per cent, bond at 109.24, will, in reality, pay exactly 
 3^ per cent, for the money it receives in each case. 
 
 A 6 per cent. 10-year bond is worth 120.94, provided 
 the market rate of interest is 3^ per cent. A similar bond is 
 worth only 1 16.35, '^ the market rate of interest is 4 per cent. 
 
 The ^200,000 lot of New York taxable bonds sold in 
 1893 were 6 per cent, gold bonds due in 1896. In other 
 words, they had three years to run, and sold at 105.60, at 
 which price they netted the investor precisely 4 per cent. 
 At the same time various descriptions of Boston taxable 
 bonds, having various periods to run, were sold at various 
 prices ; each price, however, calculated to yield the investor 
 3^ per cent., thus showing that, both bonds being taxable, 
 Boston's credit was enough better than that of New York 
 to warrant \ per cent, lower interest rate. 
 
 The lot of $500,000 New York non-taxable bonds, 
 sold December 5th, 1895, were 3 per cent, bonds having 
 twenty years to run, and sold at a premium sufficient to 
 yield the investor 2^9 percent. ; and the other lot of $700,000 
 New York non-taxable bonds, sold December 7th, being 
 30-year bonds, sold at a higher premium, but still yielding 
 the investor the same interest, viz : 2,9, per cent. Both lots 
 cost the city of New York only 29, per cent. 
 
64 MUNICIPAL BONDS. 
 
 At the same time Boston taxable bonds were issued 
 and sold at such rates of premium as to yield the investor, 
 and consequently cost the city, 3! per cent. It is of no 
 consequence whether the Boston bonds were long bonds or 
 short bonds. The premium was calculated in either case 
 so as to make the net rate 3I per cent., thus showing that 
 New York non-taxable bonds commanded more than \ per 
 cent, (nearly \ per cent.) lower interest than Boston's taxa- 
 ble bonds. 
 
 From these data it seems clear that the Treasurer of 
 the City of Boston is right in assuming that he could sell 
 the Boston bonds at \ per cent, lower rate of interest if they 
 were exempt, and thus save $163,700 a year in taxes. 
 
 LEGALITY. 
 
 It being established that it is good policy to exempt 
 municipal bonds from taxation, is it legal to do so ? 
 
 Municipal real and personal estate are free from tax, 
 because to tax them would be taking money out of the 
 treasury and paying it back again. The same principle ap- 
 plies to municipal bonds, both being necessary instruments 
 of government. Suppose the city, in order to secure 
 certainty of taxation was allowed to deduct the tax before 
 paying interest. It would have to pay just as much more 
 interest as it deducted, over what it would have to paTy 
 if the bonds were exempt from taxation. If Boston ex- 
 empt bonds sell on a 3 per cent, basis, and other bonds were 
 issued from the interest on which Boston was to retain ■&, 
 tax of 1,3, percent, a year, it would have to pay 4^^ per cent. 
 That is, Boston would pay i ^^ per cent, more interest, and 
 then repay itself that extra interest in taxes. 
 
 It has been the policy of the State to exempt the per- 
 sonal and real estate of churches, charitable corporations, 
 and others, from earliest days, to an amount greater than all 
 the net indebtedness of the municipalities of the State of 
 Massachusetts. (See Tax Commissioners' Report for Dec. 
 31, 1893, pp. 219, 255.) 
 
LEGALITY OF EXEMPTION. 65 
 
 Incomes under $2,000, furniture under $1,000, ceme- 
 teries, young mules, horses, neat cattle, sheep and swine, 
 tree plantations (for ten years) , ships engaged in foreign 
 carrying trade, etc., are exempt. If these may be all 
 exempted, far more reasonably may we exempt the bonds 
 of a city, the interest on which, as well as the principal, has 
 to be provided for by taxation. 
 
 The constitution of most of the states of the Union 
 require uniformity of taxation ; yet, in none of the various 
 states exempting new issues of municipal bonds from taxa- 
 tion has the exemption been declared unconstitutional. 
 The general principle seems to be that uniformity only re- 
 quires that the same classes of property shall be uniformly 
 taxed. For example, in Massachusetts, savings banks are 
 taxed at a rate only about 3 of the rate of taxation on 
 other kinds of banks, and the deposits and investments are 
 exempt, and yet the partial exemption has been declared 
 constitutional. 
 
 Commonwealth vs. People s Five Cent Savings Bank, 
 5 Allen, 428. 
 
 Commonwealth vs. Provident Institution for Savings, 
 12 Allen, 312. 
 
 Again, the act of Pennsylvania, June 30, 1885, P- 193. 
 Sect. 20, abolished all taxes (except real estate taxes), laid 
 upon manufacturing corporations, with the proviso that this 
 should not apply " to corporations engaged in the manufac- 
 ture of malt, spirituous or vinous liquors, or to the manu- 
 facture of gas." In the case of Commonwealth vs. Ger- 
 mania Brewing Co., 145 Pa., 83, it was held by the highest 
 court of Pennsylvania, that the proviso was not unconstitu- 
 tional, as its effect was merely to make two classes of man- 
 ufacturing companies, one of which it taxed, while the other 
 it left untaxed, and that, therefore, uniformity of taxation 
 was not interfered with. 
 
 Again, in Massachusetts, charitable corporations, incor- 
 porated under the general laws, owning productive real 
 
66 MUNICIPAL BONDS. 
 
 estate, are taxable, while similar ones incorporated by 
 special acts are exempt (P. S. of Mass., Chap, ii, Sect. 5, 
 part 3), thus making two classes of charitable corporations, 
 one exempt and the other not exempt from taxation. 
 
 SAVINGS BANKS. 
 
 It is suggested that savings banks should be exempt 
 from their franchise tax on that part of their deposits in- 
 vested in such Massachusetts municipal bonds as are made 
 free from taxation. 
 
 Savings banks deposits are mostly of poor people. 
 The average of deposits made during the year ending Oct. 
 31, 1894, was $35.06, seventy- five per cent, of the deposits 
 being $50 or less (Report of Commissioners of Savings 
 Banks, 1894, p. XII.) ; so the commissioners state " that the 
 banks are being generally used by those people of small 
 means for whose special advantage they were designed." 
 (Report of Commissioners of Savings Banks, 1894, p. IX.) 
 
 The State of Rhode Island only taxes savings banks 
 at one-half the rate Massachusetts does, and New York 
 does not tax them at all. It is doubtless good public policy 
 to encourage these savings, and the average of deposits is 
 so small that private individuals, owning only that amount, 
 are either exempt (P. S. of Mass., C. 11, Sect. 5, Clause 
 10), or would, practically, not be taxed at all. 
 
 The present tax on savings banks is about $1,150,000. 
 A tax on individuals owning the same property, even if all 
 municipal bonds were free from tax, would be $2,800,000. 
 
 Savings banks of Connecticut are taxed, even though 
 their Investments are in mortgages on real estate which are 
 not taxed to individuals, and Massachusetts savings banks 
 have also been taxed, without any deduction for that 
 portion of their investments in United States bonds not 
 taxable. (See Commonwealth vs. Provident Institution 
 for Savings, 12 Allen, 312.) Therefore, any gift in the 
 way of further exemption to the savings banks, which, it is 
 
A GIFT TO SAVINGS BANKS. 67 
 
 believed, is perfectly proper and good policy, should be 
 charged to the account of public charity, like the exemption 
 of hospitals, etc., and not to the municipal bond question. 
 Indeed, it might be wise to follow the Rhode Island or the 
 New York example. However, the loss to the state of the 
 tax, if savings banks were thus exempted for investments, 
 in future issues of municipal bonds would ultimately be only 
 $212,000 a year ; and the gain to the municipalities, on the 
 basis of \ per cent, lower interest would be $400,000 a year, 
 to say nothing of the advantage of encouraging thrift, sav- 
 ings, and, therefore, conservatism among laboring people. 
 For example, in Worcester, the gross indebtedness is 
 $4,175,000, and the net indebtedness is $2,772,000.* On 
 the basis of the net indebtedness Worcester could, if her 
 bonds were exempted, borrow so as to save $1 1,500 a year, 
 while her share in the loss from exemption of savings banks 
 would be less than $8,000, thus showing a net gain to 
 Worcester. In other cities where the net indebtedness is 
 proportionately larger, the gain would be still greater. 
 
 As the exemption to savings banks would only apply 
 to the new issues of municipal bonds which they would buy, 
 the change would be gradual, and it would be many times 
 made up for by the increase in collateral inheritance tax. 
 
 In deference to the opinion of an experienced assessor 
 who opposes the exemption of municipal bonds, the calcu- 
 lations of savings to the public have been made on the basis 
 of the»^/ debt only, after deducting all sinking funds. The 
 reasoning was, that the sinking funds are invested in the 
 respective town and city bonds, and that any saving in inter- 
 est on those bonds covered by sinking funds would be offset 
 by a lesser interest from the sinking funds themselves. 
 While Worcester has its sinking funds invested wholly in 
 its own bonds, and Boston nearly all, yet other cities do 
 not follow the same rule. For example, Cambridge has 
 nearly half its sinking funds in other investments. Also, if 
 
 * Report of Tax Commissioner, 1893, p. 219. 
 
68 MUXICIPAL BONDS. 
 
 on account of the exemption, the rate on future issues 
 of municipal bonds should diminish one-half of one per 
 cent., it would be perfectly possible to find other good 
 securities for the sinking funds at about the old rates of 
 interest ; therefore, it would be fairer to take the gross 
 indebtedness for a basis. The gross indebtedness of the 
 cities and towns of the State is $121,063,143. (Tax Com. 
 Report for 1893, P- 204.) 
 
 The saving of interest at \ per cent, would be $605,000.00 
 After deducting the savings bank tax which 
 
 would ultimately be lost, .... 212,000.00 
 
 there would be a net gain of . . . $393,000.00 
 
 to the public. In other words, $13,100,000 could be 
 borrowed by the public with no extra expense, or, say, 
 $12,000,000, with $33,000 a year for sinking funds. This 
 $12,000,000 could be used for public improvements all free 
 of cost to the citizens. The present loss of this $393,000 
 a year has now to be raised by local taxes all for the sake of 
 a theory of taxation which cannot be carried out in practice. 
 
 THE UNITED STATES SUPREME COURT HOLDS THAT A TAX ON 
 THE BONDHOLDER IS A TAX ON THE MUNICIPALITY. 
 
 The U. S. Supreme Court in the recent income tax de- 
 cision (Aprils, 1895), has practically unanimously* declared 
 the United States tax on the income derived by the bondholder 
 from state and municipal bonds to be unconstitutional ; and 
 the sole ground for the decision is that the tax raises the 
 rate of interest the state and municipalities have to pay on 
 issuing their bonds. This shows that the United States 
 Supreme Court unanimously agrees with our chief conten- 
 tion. If, as our opponents say, the tax to the bond holder 
 does not raise the rate of interest the states and municipali- 
 ties have to pay, then the whole ground on which the 
 decision of the Supreme Court rests is taken away, and the 
 
 * The only dissenting Judge agrees witli the majority on the principles. 
 
SUPREME COURT DECISION. 69 
 
 decision is wrong. The report of the decision on this 
 point, in the daily papers, is as follows : 
 
 "The court is further of opinion that the act of Aug. 
 15, 1894, is invalid so far as it attempts to levy a tax upon 
 income derived from municipal bonds. 
 
 " As a municipal corporation is the representative of 
 the state, and one of the instrumentalities of the state gov- 
 ernment, the property and revenue of municipal corpora- 
 tions are not the subjects of federal taxation, nor is the 
 income derived from state, county and municipal securities, 
 since taxation on the interest therefrom operates on the 
 power to borrow, before it is exercised, and has a sensible 
 influence op the contract, and therefore such a tax is a tax 
 on the power of the states, and their instrumentalities, to 
 borrow money, and consequently repugnant to the con- 
 stitution." 
 
7° 
 
 TAXATION OF INCOMES DERIVED FROM 
 PROPERTY SUBJECT TO TAXATION. 
 
 The language of the statute seems to be expressly de- 
 signed to forbid such taxation. It is as follows : — (Public 
 Statutes, Chap, ii, Sec. 4.) 
 
 "Personal estate shall, for the purposes of taxation, in- 
 clude" * * * * "so much of the income from a profession, 
 trade, or employment as exceeds the sum of two thousand 
 dollars a year, and which has accrued to any person during 
 the year ending on the first day of May of the year in which 
 the tax is assessed, but no income shall be taxed which is 
 derived from property subject to taxation * * * *." 
 
 Nevertheless, it is the practice of the assessors through- 
 out the Commonwealth to assess the incomes of merchants 
 and tradesmen, although the stock in trade of such mer- 
 chants, without which they could derive no income, is also 
 subject to taxation. The assessors' action in this respect is 
 justified by a decision of the Supreme Court in the case of 
 Wilcox V. County Commissioners of Middlesex, reported in 
 103 Mass., 544 (1870). 
 
 This decision states In effect, that the business man's 
 income is the " creation of capital, industry and skill," and 
 that because industry and skill have contributed to utilize 
 the capital, and so create the income, therefore, the taxa- 
 tion of the income, in additon to the taxation of the capital, 
 is allowed and justified by the laws of the State. 
 
 Subsequent to the decision of the court quoted above, 
 it was the practice of the assessors of Boston to deduct 
 from the business man's income to be taxed, the amount of 
 six per cent, on the capital invested, on the theory that 
 only that part of the income due to industry and skill should 
 be taxed, and in support of this action they obtained the 
 opinion of Hon. J. B. Richardson, then corporation counsel 
 of Boston. 
 
DOUBLE TAXED INCOMES. 71 
 
 In this opinion the learned counsel says, in effect, that 
 there is no reason why the assessors should not deduct 
 from the taxable income any amount which, in the assessors' 
 judgment, is attributable to the capital invested if consid- 
 ered separately from the skill and ability. 
 
 Such a practice opens a wide door for inequality and 
 injustice. It is common knowledge that the business man's 
 returns are precarious and liable to enormous fluctuations. 
 In one year, a fortunate business man might make profits of 
 fifty or a hundred per cent, on his capital invested, while 
 in the next year, with precisely the same skill, ability and 
 industry, he might make nothing. 
 
 Without the capital, the skill and ability are worthless 
 for the production of income, and without the skill and 
 ability to manage it, the capital invested in trade can earn 
 nothing. 
 
 The two elements cannot be separated without a great 
 degree of uncertainty, which implies injustice, and this is an 
 unfortunate and demoralizing condition of any system of 
 taxation. 
 
 In considering the whole question of income taxes the 
 late Special Tax Commission of Maine arrived at a conclu- 
 sion which they express in these words : 
 
 "To tax capital, property, lands, and also the income 
 arising from their employment is intolerable as double 
 taxation." (Report of Special Tax Commission of Maine, 
 1889, p. 35.) 
 
 This seems- to be exactly what Massachusetts is doing, 
 and which, so far as we can learn, no other state in the Union 
 attempts. 
 
73 
 
 MORTGAGES ON REAL ESTATE. 
 
 The question of double taxation in relation to mort- 
 gaged real estate comes before the Massachusetts Legisla- 
 ture of 1895, in the form of a bill to prevent freedom of 
 contract between the borrower and lender. The admitted 
 purpose of this bill is to prepare the way for re-imposing 
 the double tax. Apart from that purpose, the bill has no 
 reason for existence. Therefore, it touches indirectly the 
 whole question of double taxation. 
 
 The law repealing the double tax in the case of mort- 
 gaged real estate was passed in Massachusetts, May 13, 
 1 88 1. (Acts of 1 88 1, C. 304, now embodied in P. S. of 
 Mass., C. II, Sects. 13 to 16, C. 12, Sects. 52 and 55, 
 amended by Acts of 1882, C. 175, and 1888, C. 390, Sects. 
 62 and 63 ; 1889, C. 84, and C. 334.) 
 
 Before the passage of that law the borrower was taxed 
 not only for his equity of redemption, but also for the rest 
 of the real estate mortgaged. The mortgage note was also 
 taxed, thus resulting in over assessment of property. After 
 the passage of the law the lender was taxed on his interest 
 in the mortgaged real estate, and the borrower was assessed 
 on the balance only, or on what is commonly called his 
 equity of redemption. Either party could agree to pay 
 the taxes of the other. In absence of agreement, the bor- 
 rower, who paid any delinquent taxes of the lender, could 
 deduct the sum so paid from the amount due on the mort- 
 gage. As a matter of practice, the borrower has univer- 
 sally agreed to pay the whole tax to the mutual advantage 
 of both parties. 
 
 This law went into effect immediately upon its passage, 
 except that savings banks had to pay two half year's taxes 
 of \ per cent, each, before they were fully relieved. 
 
 The law of 1 881 was just. No new property is created 
 by mortgaging real estate. The market value of the inter- 
 ests of both borrower and lender now form the basis of 
 
RELIEF TO BORROWERS. 7j 
 
 assessment, and they both together equal the market value 
 of the real estate in question. If any money passes when 
 the mortgage is given, that is assessable as much after, as 
 before the mortgage is made. 
 
 As a result of this relief from over assessment, or dou- 
 ble taxation, as it is commonly called, the rate of interest 
 on real estate mortgages fell. The United States Supreme 
 Court has decided that a tax on the lender is a tax on the 
 borrower ( Weston v. Charleston, 2 Peters 449) holding a 
 tax on United States bonds unconstitutional, on the very 
 ground that a tax makes the borrower pay a higher rate 
 of interest. As to how much it should reasonably be 
 expected to have fallen, one must consider the circum- 
 stances. 
 
 The average rate of taxation in Massachusetts in 1881 
 was about i^ per cent., but less than \, more probably only 
 ,0, of real estate mortgages were ever specifically taxed. 
 The rate of taxation of savings banks was a special rate of 
 \ of I per cent., and that formed the limit of their relief ; 
 and, in 1881, the savings banks held $82,500,000 of the 
 $200,000,000 of mortgages in the State. It was estimated 
 at the time, by the friends of the measure, that the net de- 
 crease in the rate of interest would be from \ to \ per cent. 
 The evidence that the rate has declined by that amount is 
 the testimony at the numerous legislative hearings, from 
 1882 to 1895, on the part of many large borrowers of 
 mortgages on real estate, and real estate brokers acting for 
 borrowers. In 1884 the savings banks from all parts of the 
 State were represented at the hearings, and stated that the 
 rate went down immediately after the passage of the law in 
 all the banks, from \ per cent, to as much, in some cases, 
 as I per cent. 
 
 Hon. Charles J. Holmes, Chairman of the Committee 
 of Associated Savings Banks of Massachusetts, has repeated 
 this statement at several hearings, notably in 1889 and in 
 1895. As savings banks are carried on for the sole benefit 
 
74 
 
 REAL ESTATE MORTGAGES. 
 
 of the depositors, and as the president and directors give 
 their services gratuitously, this testimony is peculiarly free 
 from self-interest. 
 
 The following table, compiled from the Suffolk Regis- 
 try of Deeds by the Hon. Nathan Matthews, Jr., now 
 Ex-Mayor of Boston, in 1889, shows the situation* 
 
 SUFFOLK MORTGAGES. 
 
 
 5% 
 
 4?% 
 
 4ifo 
 
 4i% 
 
 4% 
 
 July, 1880 
 
 ^358-981 
 
 None 
 
 None 
 
 None 
 
 None 
 
 Jan, 1 88 1 
 
 250,700 
 
 
 ti 
 
 it 
 
 ti 
 
 Feb. 1 88 1, 
 
 295,100 
 
 
 ^35,000 
 
 It 
 
 ti 
 
 Mar. 1 88 1 
 
 315-404 
 
 
 None 
 
 ti 
 
 $ 8,000 
 
 Apr. 1881 
 
 191.354 
 
 
 30,000 
 
 a 
 
 5,550 
 
 May, 1 88 1 
 
 510.736 
 
 
 None 
 
 a 
 
 None 
 
 June, 1881 
 
 536,525 
 
 $7,000 
 
 247,750 
 
 None 
 
 85,000 
 
 July, 1882 
 
 380,740 
 
 None 
 
 22,000 
 
 a 
 
 60,000 
 
 Jan. 1882 
 
 570,598 
 
 It 
 
 302,500 
 
 it 
 
 23,000 
 
 July, 1882 
 
 509,250 
 
 23,000 
 
 112,300 
 
 ti 
 
 129,000 
 
 Jan. 1883 
 
 411,789 
 
 33,000 
 
 85,900 
 
 it 
 
 128,050 
 
 July, 1888 
 
 Not counted 
 
 15,000 
 
 45,000 
 
 30,000 
 
 326,000 
 
 Jan. 1889 
 
 li ti 
 
 None 
 
 249,350 
 
 None 
 
 313,975 
 
 The law passed May 13, and probably the first mort- 
 gages negotiated after its passage were put on record soon 
 after June ist. Therefore, the dark line separates the 
 period before and after the passage of the law. Mr. R. M. 
 Bradley, a real estate broker of Boston, showed from the 
 Suffolk Registry of Deeds that the average decline in inter- 
 est on mortgages, from March and April, 1881, to March 
 and April, 1882, was ,t^ per cent. ; while there was, practi- 
 cally, no decline to investors in the bond market at the 
 same time. This statement has been frequently published 
 without contradiction. 
 
 The most satisfactory comparison, however, is gath- 
 ered from the following chart compiled from the census 
 statistics (Extra U. S. Census Bulletin, No. 71), and loans 
 by the Commonwealth to cities and towns. These census 
 tables, the Hon. Carroll D. Wright says, are mathematically 
 correct statements, compiled by a set of experts who col- 
 lected the data from the Registrys of Deeds. 
 
 * Double Taxation of Mortgaged Real Estate, by Nathan Matthews, Jr., 1889, 
 and Quarterly Journal of Economics, April, 1890, page 339. 
 
INTEREST ON NEW MORTGAGES. 
 
 75 
 
 Table showing average rates of interest on new mortgages in Massachusetts, from 1880 to i88g, in- 
 cllisive, and first five months of 1892. Also average rates of interest on loans by the Commonwealth to 
 cities and towns, 1880 to 1893, inclusive. 
 
 Perct. 
 6.10 
 6.05 ' 
 6.00 
 S.9S 
 5.90 
 5.85 
 5.80 
 5. 75 
 5.70 
 5.65 
 5.60 
 5.55 
 5.50 
 5.45 
 5.40 
 5.35 
 5.30 
 5.25 
 5.20 
 
 1880 1881 1882 
 6.06 
 
 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 
 
 5.20 
 
 4.35 
 
 3.76 3.76 
 
 3.65 
 
 4.30 
 
 4.25 
 
 4.20 
 
 4.15 
 
 4.10 
 
 4.05 
 
 4.00 3"7 
 
 3.9S 
 
 3.90 
 
 3.85 
 
 3.80 
 
 3.75 
 
 3.70 
 
 3.65 
 
 3.60 
 
 3.55 I 3.53 ..-•• 
 
 3.50 
 
 3.45 
 
 3.40 
 
 3.35 
 Rates on Loans. 
 
 Highest: 5 5 6 6 S 5 44 6 
 
 Lowest: 3 3 34 3S 3S 3 3 3 
 
 The figures of the average rates on new mortgages in Massachusetts, from 1880 to 1889, inclusive, 
 are derived from the U. S. Extra Census Bulletin, No. 71. We have no means of ascertaining the 
 average in 1890 and i8i)i, but in i8g2 the tax commissioner secured the actual rates of new mortgages re- 
 corded in every county during the first five months of the year, and the average of these is shown. 
 
 The figures of the average rate on loans by the CommonweaUh to cities and towns were obtained 
 from a transcript of all actual loans made, prepared by the Treasurer at the request of Representative 
 Bliss who expected to prove by these figures just the contrary from from what the facts show. 
 
 3.39 
 
 5\ 
 3', 
 
 44 
 3S 
 
 5 
 
 6 
 3S 
 
76 REAL ESTATE MORTGAGES. 
 
 From this table it will be seen that from 1880, the last 
 year when all the mortgages put on record in Massachu- 
 setts were taxable, up to 1893, the last year of which we 
 have any official statement of the rates of mortgages, the 
 interest rate fell l^ per cent., while the rates on the loans 
 from the State of Massachusetts to the various cities and 
 towns fell only ,^ per cent., making a net fall in the rate of 
 mortgages of ll, per cent, over and above the fall in a large 
 series of loans on uniformly good security, for lengths of 
 time varying from three months to thirty years, and at mar- 
 ket rates. For good loans and under equal conditions, 
 probably no better series can be found for a fair compari- 
 son, and this series of state loans was first suggested by the 
 friends of double taxation, who believed it would prove their 
 case. The highest and lowest rates shown at the foot of the 
 chart, give substantially, the same results as the average rates. 
 
 In 1880 there were ten states that had lower rates of 
 interest on mortgages than Massachusetts, and yet, during 
 the ten years, from 1880 to 1889, inclusive, in eight and two- 
 thirds of which the mortgages in Massschusetts were made 
 free from tax, the percentage of amount of mortgages in 
 Massachusetts, placed at rates under 6 per cent., is larger 
 than in any state in the Union, being 48^,^ per cent. The 
 only states that come near her are : New York, where the 
 savings banks, which held $235,000,000 of real estate mort- 
 gages In 1890 (Assembly Documents, New York, 1891, Vol. 
 XII., No. 65, page 13) are 2i\\ free from lax, and very few 
 mortgages are assessed to individuals. * 
 
 Rhode Island comes next, and in that State the savings 
 banks in 1890 held $26,000,000 (page 92, Pub. Doc. of 
 R. I., 1889) out of $36,700,000 mortgages of the State of 
 Rhode Island (U.S. Extra Census Bulletin, No. 71, page 13) 
 and the savings banks of Rhode Island are only taxed ' per 
 cent. 
 
 *The proportion of assessed personal property to total assessed valuation in New 
 York in 1890 being only ten per cent., as against over twenty-three per cent, on the 
 average, in the United States. (U. S. Census Bulletin, No. 192.) 
 
THE FALL LN INTEREST. 77 
 
 Connecticut comes next, and there all mortgages are 
 free from tax when held by other than savings banks. 
 
 Pennsylvania comes next, where mortgages between 
 1880 and 1889 were assessed at only $3 a thousand. No 
 other state in the Union besides these has half as large a 
 per cent, of mortgages under six per cent as Massachusetts 
 has.* 
 
 The fall in interest between 1880 (the last full year in 
 Massachusetts unaffected by the repeal of double taxation) 
 and 1889 (the last census year) was l^^ per cent., which is 
 far larger than the average fall in the Middle and New Eng- 
 land States ; but as Massachusetts had no usury laws 
 during this period, and most of the other states had, the 
 comparison, though favorable to our contention, is not of 
 much value for scientific purposes ; but the only one of 
 these states, which at the same time had no usury law, and 
 in which during all that period mortgages were subjected to 
 about the same tax as they were in Massachusetts in 1880, 
 was the State of Maine. In that State the interest on 
 mortgages fell only ^^ per cent., against a fall in Massa- 
 chusetts of 11^ per cent., or, an excess of fall in Massachu- 
 setts of ,00 per cent. Also Massachusetts, during the ten 
 years, has the lowest average rate of interest of any state 
 in the Union, the only other states approaching her being, 
 and undoubtedly for the reasons just given. New York, 
 Pennsylvania, and Connecticut. If the comparison be lim- 
 ited to 1882 to 1889 inclusive, the years in which mort- 
 gages were not taxed in Massachusetts, it will be seen that 
 the difference in favor of Massachusetts is still larger. 
 Again, in New York and Pennsylvania, and in most of the 
 other Middle and New England States there were usury 
 laws with such penalties as to prevent any mortgages being 
 put on record as above six per cent. Taking this into 
 account, the average rate in Massachusetts, from 1882 
 to 1889 inclusive, is still farther below the re^/ rate in New 
 
 * See Appendix B. 
 
78 REAL ESTATE MORTGAGES. 
 
 York. * A contrast to the rates of interest on mortgage 
 loans in Massachusetts and New York, are the rates on 
 municipal bonds. The tax exempt municipal bonds in New 
 York are at about \ per cent, lower rate than taxable muni- 
 cipal bonds of Massachusetts, t and the untaxed mortgages 
 in Massachusetts are at lower rates than taxable mortgages 
 in New York. 
 
 The immediate stimulating effect of the law of 1881 on 
 building in the city of Boston is shown by the following table 
 collected by Ex-Mayor Matthews in 1889 (Quarterly Jour- 
 nal of Economics, April, 1890, page 345). 
 
 Year. Brick Buildings. Wood'n Build'gs. Alterations. Total. 
 
 1880 $1,490,100 $474,752 ;?i,327,230 113,292,082 
 
 1881 1,521,852 686,643 935.765 . 3.144,260 
 
 1882 
 
 4,932,640 
 
 2,379,278 
 
 1,607,051 
 
 8,918,969 
 
 1883 
 
 5,864,577 
 
 1,670,806 
 
 2,386,226 
 
 9,921,609 
 
 1884 
 
 5,400,77s 
 
 3,078,145 
 
 1,983,287 
 
 10,462,207 
 
 1885 
 
 6,218,800 
 
 4,552,538 
 
 2,560,212 
 
 ■^3,331,550 
 
 1886 
 
 8,818,100 
 
 3,992,792 
 
 3,064,813 
 
 15,875,705 
 
 1887 
 
 6,108,825 
 
 4,153,181 
 
 2,365,096 
 
 12,627,102 
 
 1888 
 
 5,276,350 
 
 4,470,510 
 
 2,596,373 
 
 12,343,233 
 
 1889 - 
 
 9,078,750 
 
 4,919,342 
 
 3,122,685 
 
 17,120,777 
 
 The testimony of builders of large experience, at legis- 
 lative hearings, is to the effect that they themselves, and 
 others in their own business, were encouraged to increase 
 their building operations by the lower rates of interest 
 obtainable upon mortgages occasioned by the passage of 
 the law of 1881. 
 
 The various efforts to repeal the law of 1881 caused 
 a clause to be put in the blank form commonly used in 
 mortgage deeds, to the effect that the borrower would pay, 
 not only the taxes and assessments on the granted premises, 
 but also "on the debt secured hereby." 
 
 The simple purpose of this is evident. The lender 
 cannot safely lend at low rates of interest on the theory that 
 
 * See Appendix B. 
 
 t (See Ante, pp. 60-64.) 
 
ACTION OF OTHER SPATES. ' 79 
 
 he is going to be free from a tax, if during the hfe of the 
 mortgage the Jaw of 1881 maybe repealed. The borrower 
 could only obtain the benefit of the low rate by secur- 
 ing the lender against any such change. It is against this 
 particular clause, now universal in mortgage deeds, that 
 the present bill to prevent freedom of contract between bor- 
 rower and lender is aimed. 
 
 The following states, and possibly others, have abol- 
 ished the double tax in case of mortgaged real estate : Ari- 
 zona', California^ Connecticut^ Idaho"*, Maryland^, Massa- 
 chusetts'^, Michigan^, New }ersey^ and Oregon'. In numer- 
 ous other states the mortgage debt can be deducted from 
 credits or other personal property. 
 
 In New Jersey an experiment was tried by which the 
 double tax in case of mortgages was successfully enforced. 
 It is thus described in the Report of E. L. Martin and Wm. 
 M. Canby of the Delaware Tax Commission (1893) p. 10. 
 " Prior to that (1869) New Jersey enacted an honest uni- 
 form law of taxing mortgages, which could with the 
 utmost certainty be executed; namely, that the person giv- 
 ing the mortgage should pay the tax on it, and deduct the 
 tax from the principal or interest in settling with the credi- 
 tor. The result was that all mortgages falling due were 
 immediately foreclosed, and as no new loans, moreover, 
 could be made, the inhabitants of the growing counties 
 near the city of New York, wishing to borrow money on 
 land, or to sell land, found themselves in an uncomfortable 
 
 1. Rev. Stats, of Arizona, 2630 (Sec. 4), 2631 and 2640 (Sec. 14,) Terr. vs. 
 Delinquent Tax list, (Supr. Ct. An.) 24 Pac. Rep. 186. 
 
 2. Constitution of Cal., Art. 13, Sect. 4. 
 
 3. Acts of Conn., 1875, Chap. 27, and Gen. Stats. Conn., Sec. 3824. 
 
 4. Rev. Stats, of Idaho, Title X. Chap, i, and Majority Report Del. Tax Com- 
 mission 1893, p. 14- 
 
 c. Acts of Md., 1870, Chap. 394. Pub. Gen. Laws of Md., p. I2IO,, Art. 81, 
 
 Sec. 4. 
 
 6. P. S. Mass., Chap. 11, Sects. 13-16, and Chap. 12, Sects. 52 and 55. 
 
 7. Pub. Acts of Mich. (1891;, Art. 200, Sects. 2, 15, 17. 
 
 8. Acts N. J., 17 April, 1876, and Revision of N. J., p. 1163. 
 
 Q. Hill's Annotated Laws of Oregon, Chap. 17, Title III., Sec. 2754. 
 
So ■ REAL ESTATE MORTGAGES. 
 
 position." In consequence of this situation, the double tax 
 was repealed, for parts of the state near New York, and 
 later for the whole State. Hardly any proof could be re- 
 quired more conclusive that a tax on the lender is a tax on 
 the borrower in the case of mortgages on real estate. 
 
 The Special Tax Commission of Maine (1889), after 
 weighing the arguments on both sides, decided in favor of 
 the present Massachusetts system. (See their report, pp. 
 40-49.) 
 
 The New York State Grange sent on the secretary of 
 its legislative committee in the summer of 1894, to inquire 
 into the effect of the present Massachusetts system of 
 taxation in case of mortgages on real estate. The secretary 
 made inquiries in the chief cities of the State, and heard the 
 leaders on both sides of the controversy, and decided that 
 the law of 1881 had reduced the rate of interest to the bor- 
 rower, and reported in favor of adopting the present Massa- 
 chusetts system. (See Report to Legislative Committee of 
 the New York State Grange on Effect of Taxation on 
 Mortgages, and Resolutions of said Committee thereon, 
 Rochester, N. Y., June 18, 1894; H. H. Goff, Secretary.) 
 
 ANSWERS TO THE ARGUMENTS OF THE DOUBLE TAXATIONIST. 
 
 The question would need no further argument were it 
 not for the strenuous efforts of certain individuals, very few 
 in number, but very persistent, and who have collected 
 numerous arguments and statistics which, if not carefully 
 examined, would be extremely misleading. 
 
 First in weight is the Report of the Commissioners on 
 Taxation for Massachusetts of 1875. This report is signed 
 by Thomas Hills, an assessor for Boston, Julius H. Seelye, 
 late President of Amherst College, and James H. Barker, 
 Esq. Their report was made six years before the repeal of 
 the double tax in 188 1. At the foundation of their reason- 
 ing is the fear of the " fraud and deception to which the 
 door" would be opened, and the "innumerable difificulties " 
 
QUEER REASONING. 8i 
 
 that would occur (p. 88 of report). No such " fraud " or 
 " difficulties " have occurred in fact. 
 
 Their chief direct argument is based on the " ability." 
 They reason thus : " A and B make up a community. A 
 is the landowner, his land being worth $i,ooo. B is a capi- 
 talist, and has in money, $i,ooo. It fs plain that they 
 should contribute in equal amounts to the public charges. 
 Before the next assessment day, B has loaned A his money, 
 receiving only his verbal promise of repayment. A has the 
 money in hand on assessment day, and is ready to repay it 
 if asked. It is plain that B has the same ability to pay taxes, 
 in respect of his money, that he had the year before, and 
 A the same ability in respect of his land." (p. 93.) 
 
 . The last sentence seems undeniably true, and yet, how 
 under the old system were A and B taxed ? The first year 
 both were assessed $1,000 apiece, and the assessed prop- 
 erty of the community was $2,000. The next year A is 
 assessed $1,000 for his land, $1,000 for "the money in 
 hand," and B $1,000 on his mortgage note. That is, A at 
 $2,000 and B at $1,000. In the community there is $3,000 
 assessed property instead of $2,000. To meet the absur- 
 dity of the proposition that wealth is created by getting into 
 debt, the commissioners, on page 94, try to get rid of the 
 money in A's hands by saying, " The money, or its pro- 
 ceeds, in A's hands, may have been taxable, or not, accord- 
 ing to circumstances." If that is so, is it not equally so 
 when it was in B's hands ? If counted when in the hands 
 of one ought it not to be counted when in the hands of the 
 other ? Altogether, this sort of reasoning reminds one of 
 the persistent school boy who had said five and seven are 
 eleven, and stuck to it. On his teacher's taking five mar- 
 bles and adding seven more to them, and showing by count 
 there were twelve, the boy triumphantly replied, " You 
 mio-ht have lost one and then there would be only eleven." 
 Another line of their reasoning is that, to be consistent, 
 our basis of taxation should be " the balance which each 
 
82 REAL ESTATE MORTGAGES. 
 
 contributor is worth after deducting all his debts." A gen- 
 eral offset of debts, allowed in some states, has resulted in 
 considerable evasion of taxation. It seems to be no good 
 reason for dis-allowing a just system where there is no dan- 
 ger of fraud, because we do not carry the system to another 
 set of cases in which the danger exists. 
 
 Mr. Henry Winn, ex-mayor of Maiden, and formerly • 
 populist candidate for governor, is the chief statistician for . 
 the double taxationists in Massachusetts, being relied on 
 by Mr. Thomas Hills, ex- assessor of Boston, Representa- 
 tive Bliss and others. Mr. Winn said, in 18^4, " This state^ 
 has produced no man eminent in the science of taxation to 
 sustain the exemption." President Francis A. Walker of 
 the Massachusetts Institute of Technology, and Ex-Presi- 
 ident of the American Economic Association, Professor 
 Charles F. Dunbar of Harvard, and also ex-president of 
 the same association, Professor John B. Clark of Amherst, 
 the present president of that association. Professors Frank 
 W. Taussig and Edward Cummings of Harvard University, 
 Davis R. Dewey and William Z. Ripley of the Massachusetts 
 Institute of Technology, H. H. Powers of Smith College, 
 President Elmer H. Capen of Tufts College, John Bascom 
 of Williams College, and Miss Katharine Coman of Wellesley, 
 all Professors of Economics, have signed a protest against 
 the double taxation in case of mortgaged real estate since 
 Mr. Winn publicly made the above statement. Not one 
 living and active professor of economics in Massachusetts 
 now favors the double tax. 
 
 Mr. Winn's chief contention is that it was only the 
 " Shylock " lender that got any benefit from the law of 1881, 
 and that the rate of interest did not fall. To contradict the 
 direct evidence of the savings bank officials that the rate 
 immediately fell in 188 1, Mr. Winn shows that between 1882 
 and 1883 the rate of interest from a mixed fund, about 53 
 per cent, mortgages only fell .^J^ of i per cent. If Mr. 
 Winn had taken the data for proper years to show the fall 
 
MISLEADING STATISTICS. 83 
 
 in i88i,viz. : 1880 to 1882 it would show a fall of ,tt.o or 
 nearly \ of i per cent. These figures give the actual rate 
 of interest received on this mixed fund, and many of the 
 mortgages existing in 1882 were old ones made before 
 
 1 88 1, and running on the old higher rates of interest. 
 With this simple explanation the official figures show as 
 great a fall as was testified to. 
 
 Again, Mr. Winn gives the following table showing the 
 average rate on new mortgages taken by the Boston Five 
 Cents Savings Bank : 
 
 1878, •, 6.170 1881, 5.210 
 
 1879, 6.000 1882, 5.160 
 
 1880, 5-410 1883, 4.940 
 
 Mr. Winn, in this case, takes the fall between 1881 and 
 
 1882, and shows that it was only l^ of i per cent. The 
 testimony Mr. Winn seeks to contradict was that the fall 
 took place not between 1881 and 1882 but in 1881. This 
 table shows a fall from 1880 to 1883 of X. of i per cent. 
 The law went into effect May 13, 1881, and the savings 
 banks had to meet the competition of individuals, trustees, 
 etc., at once; but 1883 was the first year savings banks 
 were fully free from the tax. 
 
 Again, notwithstanding the fall which Mr. Winn admits, 
 he claims that the savings banks, as a fair sample of lenders 
 generally, and not the borrowers, got the benefit of the law. 
 He shows that the dividends of the savings banks of the 
 State increased from 3,% per cent, average in 1880,. 1881, 
 and 1882, to \ll, in 1884. Again the wrong period is taken. 
 Besides that, in 1881 the tax on savings banks was reduced 
 fi^om 3 to ^ of I per cent., or equal to an outright gift of l^ 
 per cent, to the banks in the year that the mortgages were 
 exempted. That more than accounts for the ;jo per cent. 
 gain Mr. Winn points out. The average of t^Voo per cent, 
 was made up of the average of all the banks ; and, in 1880, 
 nineteen banks paid no dividend, and thirteen only one, on 
 account of the severe losses incurred during the financial 
 
84 REAL ESTATE MORTGAGES. 
 
 crisis from 1875 to 1879. (p. 380, Report of Savings 
 Banks Commissioners, 1879, and p. 419 of same for 1880.) 
 Out of the sixteen failures of savings banks in the sixty- 
 four years of their existence, thirteen occurred between 
 1875 and 1880, and many savings banks were, voluntarily, 
 or by process of court saving from the dividends of 1880, 
 1 88 1, and 1882, to make up the losses. 
 
 Again Mr. Winn takes a special series of bonds which 
 he selects, and shows that on them the net rate to the 
 investor fell as much or more than the rate on mortgages 
 in the same time. This set of selected bonds has been so 
 ably delt with by Hon. Nathan Matthews, Jr., Ex-Mayor of 
 Boston, in a special pamphlet, and also in the Quarterly 
 Journal of Economics for April, 1890 (p. 339) that it is 
 only necessary to say, that taking other sets of bonds; for 
 example, not an arbitrary selection, but all the bonds held 
 by Massachusetts savings bank, or all the loans on business 
 and manufacturing paper by leading brokers and banks, it 
 shows a wholly different state of affairs. Also the com- 
 parison made between the mortgage rates in Massachusetts 
 from the United States Census, and the state loans to cities 
 and towns {ante p. 74) shows the true state of affairs. By 
 selecting special bonds which happen to go a particular way, 
 as Mr. Winn does, almost anything may be proved. 
 
 Mr. Winn tries to meet the natural law that tax exemp- 
 tion would increase the demand for mortgages and so.lower 
 rates, by saying that the ruling rate of interest on Massachu- 
 setts mortgages was not the natural rate of the State but 
 was lowered by the presence of English and other European 
 capital loanable on mortgages. Coming, as this capital does, 
 from countries where the rate is lower than the " natural" 
 rate in Massachusetts, it lowered the rates here he says, and, 
 as these foreign lenders would not gain by the Massachusetts 
 exemption, they would not lend at any lower rates on account 
 of the law of 188 1. In reply, let us observe that it is 
 necessary that there should be a considerable amount of 
 
THE FOREIGN MONEY MYTH 85 
 
 this European money, for if only a little were present its 
 owners would only be too glad to take advantage of the 
 higher rates ruling here. There would have to be enough 
 to create a considerable competition to produce any appre- 
 ciable effect. Again this " foreign " capital must come from 
 Europe where the rates are lower than in Massachusetts and 
 not from the neighboring states of Connecticut or Vermont. 
 At the legislative hearings in both 1894 and 1895, the lead- 
 ing real estate brokers and several savings bank officers 
 were asked whether they knew of any such European capital 
 loanable on mortgages here. They all replied that they did 
 not know of any. Mr. Alex. S. Porter, president of the 
 Real Estate Exchange, testified that he had gone to London 
 for the e.xpress purpose of getting English money for in- 
 vestment in real estate mortgages in Boston, and he could 
 not get any at the ruling rates of interest in Massachusetts. 
 It would only come in case the rates here were considerably 
 higher. He also tried in vain to get New York money for 
 Boston mortgages. The president of the Massachusetts 
 Title Insurance Company writes us confirming the same 
 absence of English or European money. The only evidence 
 that any money is borrowed out of the state is that the U. S. 
 Extra Census Bulletin No. 64, p. 22, shows that in Franklin 
 and Hampden Counties, two of the border counties of Massa- 
 chusetts, about three per cent, in amount of the mortgages 
 were made to persons not "residents of the State." in regard 
 to this and to the general subject of " foreign" lenders on 
 mortgages, Hon. Carroll D. Wright, head of the U. S. 
 Census office under date of Feb. 11, 1895, writes as follows: 
 
 " Eleventh Census 
 
 of the •' Department of the Interior 
 
 United States." Census Office 
 
 Washington, February 11, 1895." 
 " My dear Sir : — 
 
 I have referred your letter to the Special Agent who 
 has charge of the investigation of real estate mortgages, and, 
 
86 REAL ESTATE MORTGAGES. 
 
 from the information that came to him in the prosecution of 
 his work, it is his beHef that the claim that there is a per- 
 ceptible amount of foreign money in Massachusetts markets 
 for loan upon real estate mortgages cannot be maintained. 
 In the two counties of your state where this was made a 
 matter of special inquiry, it was found that the mortgagees 
 living out of the state were not only comparatively few in 
 number, as the table that you refer to shows, but that they 
 nearly all lived in the country neighboring to Massachusetts." 
 
 W w w w 
 
 Very truly yours, 
 (Signed) CARROLL D. WRIGHT, 
 
 Commissioner of Labor in Charge. 
 
 With this utter absence of any English or European 
 money loanable on mortgages, Mr. Winn's whole theory, 
 which is based on its presence, falls to the ground. 
 
APPENDIX A. 
 
 TAXATION OF BOTH CORPORATION AND SHAREHOLDERS. 
 
 I. 
 
 The shareholders constitute the corporation. 
 
 See the usual form of incorporation, which is as fol- 
 lows: — Section i. A, B, C, D, E, their associates and suc- 
 cessors, are hereby made a corporation by the name of 
 . e. g. (Act 1893, Chap. 463, and numerous other 
 acts of incorporation.) Now A, B, C, D, E, their "associates 
 and successors " are the shareholdei^s. See also general 
 laws for incorporation, " Any such number of persons as is 
 hereinafter provided, who associate themselves together . . . 
 shall be and remain a corporation. (Pub. Stat., Chap. 106, 
 Sec. 6. ) 
 
 It is evident that to tax the same persons collectively 
 as associates in a corporation, and separately as shareholders, 
 in relation to the same property, business and franchise is 
 like taxing tenants in common of a farm for their shares in 
 the farm, in addition to the tax on the farm itself. The 
 taxes come out of their income in either case. 
 
 II. 
 
 To tax both the corporation and the shareholders in 
 relation to the same property, business and franchise has 
 always been looked upon by the courts as " unjust and un- 
 equal," and in construing statutes, " all presumptions are 
 against such an imposition." 
 
 MASSACHUSETTS. 
 
 Salem Iron Factory Co. vs. Danvers, 10 Mass. 5 14, Holds 
 that a tax on shareholders is so far a tax on corporate prop- 
 erty, as to exempt the corporation from a tax on its personal 
 
II APPENDIX A. 
 
 property, if the shareholders are taxed. The court says : 
 " We are satisfied in the present case that each individual 
 stockholder was liable, in the town where he resided, to 
 taxation for his shares in the stock of this company." 
 " This being the case, it appears unjust and 
 contrary to the spirit of our lazvs that the corporation 
 should stlso be taxed for the same property." 
 
 Amesbury W. & C. Mfg. Co. vs. Amesbury, 1 7 Mass. 
 461, and Tremont Bank vs. Boston (1848) i Cush, 142, 
 confirm the above case. 
 
 In Boston and Sandwich Glass Co. vs. Boston 4 Met. 
 181, the Court decides against taxing both^h^ shareholders 
 and the corporation, though a literal reading of the statutes 
 would seem to allow it, saying: ''Double taxation, being 
 apparently unjust and unequal, will never be presumed to have 
 been within the intention of the legislature, unless the language 
 imposing such a tax shall be clear and unequivocal." And 
 again, " The whole corporate property might be taxed by 
 an assessment exclusively upon the shares of the stock- 
 ^lolders." And again, speaking of its construction of the 
 law, the Court says, " thus double taxation is avoided!' 
 
 This case is confirmed by the Mass. Supreme Court as 
 recently as 1878, in Fall River vs. Bristol, 125 Mass. 567. 
 In Boston Water Power Co. vs. Bosto7i, 9 Met. 199, the 
 Court sustained the same point, and our celebrated Chief 
 Justice Shaw, in the opinion, says: "The whole value of 
 their (the corporation's) personal estate is included in the 
 value of the shares of the stock, and, as such is liable to be 
 taxed to the holders of shares eo nomine." 
 
 In Middlesex R, R. Co. vs. Charlestown (1864), 8 
 Allen 330, sustaining this view. Hoar, J., says, p. 333 : " Its 
 stockholders are liable to taxation upon their shares in the 
 towns where they dwell. The value of the personal prop- 
 erty owned by the corporation is included as a subject of 
 taxation in the value of the shares" In these later cases 
 the corporations are organized under modern charters. 
 
THE LAW IN VARIOUS STATES. Ill 
 
 As a result of these decisions all attempts to tax both 
 the shareholders and the corporations, in case of home cor- 
 porations, has been abolished in the legislation of Massa- 
 chusetts. 
 
 NEW YORK. 
 
 By the New York Statutes only such property as is 
 " within the State " is taxable. In Trowbridge vs. Commis- 
 sioners, 4 Hun. 595, appealed and order affirmed in 62, 
 N. Y. 630 (1875) it was held that ''stock certificates are 
 ■not themselves property but are evidences of the rights " in 
 property, and, consequently, shares of foreign corporations 
 in the hands of a resident taxpayer of New York, are not 
 property " within the State " for purposes of taxation. 
 
 This principle was affirmed in iSpj, and this case cited 
 with approval, in People vs. Campbell, 138 N. Y. 543, the 
 Court saying : "Its property in these (foreign) corporations, 
 represented by its shares of stock, was outside of this State." 
 " These stocks had no situs here and were not taxable 
 here, although the certificates of stock were in New York." 
 
 The same general doctrine is upheld in the following 
 States : — 
 
 NEW HAMPSHIRE. 
 
 Smith vs. Burley, 9 N. H. 423 ; Smith vs. Exeter, 
 37 N. H. 556; Kimball vs. Milford, 54 N. H. 406; 
 Cheshire Co. T. Co. vs. State, 63 N. H. 167 (1884). 
 
 VERMONT. 
 
 Foster vs. Stevens, 63 Vt. 175 (1890); Biigbee vs. Stev- 
 ens, 63 Vt. 185. 
 
 CONNECTICUT. 
 
 New Haven vs. City Bank ^ 31 Conn. 108; Lockwood 
 vs. Town of Weston, 61 Conn. 211 (1891). 
 
 NEW JERSEY. 
 
 Jersey City Gaslight Co. vs. Jersey City, 46 N. J. 194 
 (1884); State v-,. Branin, 21^.]. \%A,; States-,. Powers, 2 \ 
 
 N. J. 400- 
 
IV APPENDIX A. 
 
 MARYLAND. 
 
 State vs. Sterling, 20 Maryland 502 ; Confirmed In 
 State \%. Central Savings Bank of Baltimore, 67 Md. 290 
 (1887). ^^^ Cases, 12 Gill & Johnson, 117. 
 
 VIRGINIA. 
 
 Commonwealth vs. Richmond & P. R. Rk Co., 81 Va. 
 355 (1886). 
 
 NORTH CAROLINA. 
 
 Railroad vs. Commissioners, 91 N. C. 454 (1884) ; 
 Railroad Co. vs. Wake, 87 N. C. 414; Worth vs. Wil- 
 mington R. R. Co. 89 N. C. 291. 
 
 SOUTH CAROLINA. 
 
 State vs. Hood, 15 Rich 177. 
 
 KENTUCKY. 
 
 Franklin Co. vs. Deposit Bank, 87 Ky. 370 p. 384 
 (1888) ; Johnson vs. Commonwealth, 7 Dana 338. 
 
 TENNESSEE. 
 
 Memphis vs. Bank & Ins. Co., 91 Tenn. 546 (1892). 
 
 INDIANA. 
 
 Hyland vs. Central Iron & Steel Co. 129 Ind. 68 
 (1891). 
 
 MISSOURI. 
 
 State vs. Hannibal, Etc., Co., 37 Mo. 265. 
 
 TEXAS. 
 
 Gillespie vs. Gaston, 67 Tex. 599. 
 
 KANSAS. 
 
 Ryan vs. Leavenworth, 30 Kan. 185. 
 
 CALIFORNIA. 
 
 Burke vs. Badlam, 57 Cal. 594; San Francisco vs. 
 Mackay, 22 Fed. Rep. 602 ; San Francisco vs. Mackay, 21 
 Fed. Rep. 539. 
 
SUPREME COURT DECISIONS. V 
 
 UNITED STATES SUPREME COURT. 
 
 In Gordon Y?,. Appeal Tax Court (1845), 3 Howard 
 133, it was unanimously held that when a bank's charter 
 enacted " that the banks should annually pay to the treasu- 
 rer the sum of twenty cents on every hundred dollars of 
 capital stock of each bank actually paid in," and " that 
 upon any of the aforesaid banks accepting of and comply- 
 ing with the terms of this act, the faith of the State is 
 pledged not to impose any further tax or burden upon them 
 during the continuance of their charters," a subsequent law 
 taxing the shares in the hands of the individual share- 
 holders was void as a breach of contract. The Court says, 
 at page 147 : " Does it exempt the respective capital stocks 
 of the banks, as an aggregate, and the stockholders from 
 being taxed as persons on account of their stock? We 
 think it does both. The aggregate could not be taxed with- 
 out its having the same effect on the parts, that a tax upon 
 the parts would have tipon the whole!' This case overruled 
 a decision of the Maryland Supreme Court, which permitted 
 the tax on the shareholders. 
 
 In Van Allen vs. Assessors (1865), 3 Wall 573, it was 
 unanimously held that a tax on the shares of National 
 Banks in the hands of individual shareholders was so far a 
 tax on the banks that a state could tax those shares only by 
 permission of Congress, and that the New York law taxing 
 the shareholders was not in conformity with the Act of Con- 
 gress, and therefore void. 
 
 In Farrington vs. Tennessee (1877) 95 U. S. 679, the 
 following is the head note : " The charter of a bank, 
 granted by the Legislature of Tennessee, provides that the 
 bank shall ' pay to the State an annual tax of one-half 
 per cent, on each share of the capital stock subscribed, 
 which shall be in lieu of all other taxes.' Held, i. That 
 this provision is a contract between the State and the bank, 
 limiting the amount of tax on each share of the stock. 2. 
 That a subsequent revenue lazv of the State, itnposing an 
 
VI APPENDIX a: 
 
 additional tax on the shares in the hands of stockholders, 
 impairs the obligation of that contract, and is void." This 
 case overruled a decision of the Supreme Court of Ten- 
 nessee, which permitted the tax to the shareholders. In 
 the opinion, the Court says, " The idejitity of the thing 
 doutily taxed is not affected by the fact that in one case the 
 tax is to be paid vicariously by the bank, and in the other 
 by the owner of the share himself. The thing thus taxed 
 is still the same, and the second tax is expressly forbidden 
 by the contract of the parties." It was at one time sup- 
 posed that this case might have been decided on a con- 
 struction that the statute was intended to relieve only the 
 shareholders from " all other taxes " but not the corpora- 
 tion itself or its property. On this theory the city of Mem- 
 phis assessed the property of the bank, but in Bank of 
 Commerce vs. Tennessee, 104, U. S., 493, the United States 
 Supreme Court decided that the very same charter provis- 
 ion included an exemption of the property as well as the 
 shares of the bank. The same doctrine is sustained by the 
 United States Circuit Court in Tennessee vs. Bank of Com- 
 merce (1892) 53 Fed. Rep. 735, and by the Tennessee Court 
 in 91 Tenn. 546 (1892). according with our view. 
 
 In Teniiessee vs. IVhiiworth (1886) 117 U. S. 129, a 
 provision that the capital stock of a company shall be forever 
 exempt from taxation, and that the road and all its fixtures 
 and appurtenances shall be exempt from taxation for a pei-iod 
 of twenty years and no longer, exempts the shares of the 
 capital stock of the company in the hands of various holders 
 from taxation. On page 136 the Court says without dis- 
 sent : " In corporations four elements of taxable value are 
 sometimes found, i. Franchises; 2. Capital stock in the 
 hands of the corporation; 3. Corporate property ; and 4. 
 Shares of the capital stock in the hands of the individual 
 stockholders. Each of these is, under some circumstances, 
 an appropriate subject of taxation ; and it is no doubt with- 
 in the power of a State, when not restrained by consti- 
 
SUPREME COURT DECISIONS. VII 
 
 tutional limitations, to assess taxes upon them in a way to 
 subject the corporation or the stockholders to double tax- 
 ation. Double taxation, is, however, never to be presumed. 
 Justice requires that the burdens of government, as far as 
 is practicable, be laid equally on all, and if property is taxed 
 once in one way, it would ordinarily be wrong to tax it again 
 in another way when the burden of both taxes falls on the 
 satJte person. Sometimes tax laws have that effect, but if 
 they do it is because the Legislature has unmistakably so 
 enacted. All presumptiojis are against such an imposition. 
 
 In New Orleafis vs. Houston, 119 U. S. 265, it was 
 decided that a provision of law that on the payment of a 
 specified sum the " corporation shall be exempt from all 
 other taxes and licenses, of any kind whatever, from the 
 State, parish or municipal authorities " made illegal a tax 
 upon the shares of shareholders, payable by the company, 
 to be repaid by the shareholders. The passage on " double 
 taxation" quoted above, in Tennessee vs. Whitworth was 
 quoted and affirmed in this case. This is the latest utter- 
 ance of the Supreme Court of the U. S. on this subject. 
 
 The United States Circuit Court held that the consti- 
 tutional provision of California against "double taxation" 
 applied to the taxation of both the corporation and its share- 
 holders, and made any law imposing such a tax void. San 
 Francisco vs. Mackay, 22 Fed. Rep. 602. 
 
 In the opinion of the United States Supreme Court, in 
 Farrington YS. Tennessee (1877), 95 U. S. 679, there is a 
 dictum on page 687, on which the opposition continually 
 relies, viz. : " The capital stock and the shares may both be 
 taxed, and it is not double taxation." 
 
 This very case decides against taxing both the corpo- 
 ration and the shareholders. On the next page (688), the 
 Court says : " The identity of the thing doubly taxed is not 
 affected by the fact that in one case the tax is to be paid 
 vicariously by the bank, and in the other by the owner of 
 the share himself." 
 
VIII APPENDIX A. 
 
 The dictum relied on by our opponents is very broad. 
 On the preceding page the Court says : " The capital stock 
 is the money paid, or authorized or required to be paid in 
 as the basis of the business. ... If a large surplus be 
 accumulated and laid by, that does not become a part of it." 
 In this sense of " capital stock" it may be proper to tax the 
 " capital stock" for the money paid in, " and the shares " for 
 the surplus, and this would certainly not be double taxation, 
 and not unjust or unequal. The dictum may have been 
 given out in deference to the Tennessee Supreme Court, 
 whose decision was being overruled, and which was based 
 on a Tennessee case, Union Bank vs. Slate, 9 Yerg. 490, 
 decided in 1836, at the height of the "wildcat" bank times, 
 in a community where paper certificates were supposed to 
 increase wealth until, by severe losses, they learned the 
 contrary. At all events, the dictum seems to be overruled 
 by the United States Supreme Court, in the later cases of 
 Tennessee MS. Whitworth, 117 U. S. 129, and New Orleans 
 vs. Houston, 119 U. S. 265, which call it " double taxation." 
 
 Judge Thomas M. Cooley, LL.D., the greatest authority 
 on taxation, calls taxing both the corporation and the share- 
 holder "duplicate in effect." Cooley on Taxation (2d Ed., 
 1886), pp. 220, 228, and note; 229 and note; 231, 232, and 
 
 234- 
 
 It may be that in Farrington vs. Tennessee, the Court 
 was thinking of that technical kind of "double taxation" 
 described by Judge Cooley on page 275 of his work, which, 
 he says, would be " wholly inadmissable under any consti- 
 tution requiring equality and uniformity in taxation," no 
 matter how clear the intent of the Legislature to impose it 
 might be. " By duplicate taxation in this case," he says, 
 " is understood the requirement that one person or any one 
 subject of taxation shall directly contribute twice to the same 
 burden while other subjects of taxation belonging to the same 
 class are required to contribute but onceT 
 
 This he distinguishes from " duplicate in effect," which. 
 
PERSONAL EXEMPTION. IX 
 
 though the courts oppose, is not wholly inadmissible if the 
 intent of the Legislature is clear. He also says, as his 
 interpretation of this same case, Farrington vs. Tennessee, 
 " An exemption of the corporate stock of a corporation is 
 an exemption of the shares" (same p. 212 and note i). 
 
 " To tax a bank on its property and the shareholders 
 on their shares is double taxation, and not allowable under 
 the laws." Destey on Taxation (1884) p. 199, Vol. I. At 
 p. 364 of same vol. Destey makes a somewhat contrary 
 statement, but Destey on Taxation was published in 1884, 
 while the case of Tennessee vs. Whitworth, in which the 
 U. S. Supreme Court overruled the dictum of Farrington vs. 
 Tennessee was decided in 1885, and New Orleans y?,. Hous- 
 ton in 1886. 
 
 The Massachusetts Supreme Court has always called 
 the taxation of both corporation and shareholders in respect 
 of the same property, etc., "double taxation," without any 
 qualification. 
 
 What is here maintained is not so much any special 
 epithet, as that the courts hold such taxation to be unjust and 
 unequal, and have decided against it in every case where it 
 was possible to construe the statute law against it. 
 
 Even the early Tennessee cases have been overruled by 
 a recent case decided by the Supreme Court of that State. 
 Tennessee vs. Bank of CoTnmerce (1892), 91 Tenn. 546. 
 
 SPECIAL PROVISION AGAINST DOUBLE-TAXATION IN THE 
 NEW INCOME TAX LAW. 
 
 The United States Congress, in passing the income tax 
 law of 1894, provided against taxing both the corporation 
 and the shareholders, even when the shareholders live in 
 different states from where the corporations are incorpor- 
 ated and situated. In the case of Moore vs. Miller (see p. 
 503, Foster and Abbot's Income Tax Law of 1894), which 
 was decided January 23d, 1895, the Court said it would 
 be '^duplicate taxation" to tax both the corporation and 
 
X APPENDIX A. 
 
 the shareholder, and suggested a construction of the law 
 which would avoid this duplicate taxation In the only case 
 where it could occur, and the United States Treasury 
 Department has followed that suggestion in its latest 
 Instructions. 
 
 PERSONAL EXEMPTION OF SHAREHOLDER. 
 
 It has been argued that It Is proper to tax both share- 
 holder and corporation because the shareholder is exempted 
 from personal liability for the debts of the corporation. If 
 that Is so, then special partners In limited partnerships 
 should be doubly taxed, for their liability is even less than 
 that of the average shareholder. (P. S. of Mass., c. 75.) 
 
 But It is a mistake to suppose that shareholders are 
 always or even usually wholly exempt from liability for the 
 debts of the corporation. In thirty-seven states they are 
 personally liable for all the debts of the corporation to the 
 amount of unpaid subscriptions, and In South Carolina to 
 five per cent, of par value beyond. All shareholders in 
 national banks, situated in every state, are personally liable 
 for the debts of the bank to the amount of -the par value of 
 their shares in addition to the amount invested in such 
 shares. (Rev. Sts. of U. S., § 5151.) So are shareholders 
 in all kinds of corporations organized in 
 
 Minnesota, Pennsylvania. 
 
 New York, 
 
 Stockholders are personally liable for labor debts, to 
 an Indefinite extent in 
 
 District of Columbia, New Hampshire, Pennsylvania, 
 
 Massachusetts, New York, So. Dakota, 
 
 Michigan, 
 
 indefinitely, for all debts, pro rata, in 
 
 Arizona, Idaho, 
 
 California, Indiana. 
 
 District of Columbia, 
 
PERSONAL EXEMPTION. XI 
 
 State bank shareholders are personally liable to double 
 the par value of stock in 
 
 Colorado, Iowa, Pennsylvania, 
 
 Georgia *, Michigan, West Virginia. 
 
 Indiana f, 
 
 Shareholders in all kinds of corporations, except rail- 
 roads, are indefinitely liable unless otherwise provided in 
 articles, and in railroads, pro rata, in 
 Iowa. 
 
 By a constitutional provision to double the amount of 
 stock in 
 
 Ohio. 
 
 Indefinitely liable on failure to file affidavits in 
 Florida. 
 
 All but railroad shareholders are liable to double the 
 amount of the stock at par in 
 Kansas. 
 
 And the only states, in which there are any kinds of 
 corporations whose shareholders are not liable at all, are 
 the three states of 
 
 Illinois, Utah. 
 
 Nevada, 
 
 * In Georgia, for equivalent of original subscription in addition to amount unpaid, 
 fin Indiana, in various other companies also . 
 
 (This is gathered from the American Corporation Legal Manual, corrected to 
 Jan. I, 1894, which gives the essential features of the laws of each state affecting 
 corporations.) 
 
XII 
 
 APPENDIX B. 
 
 STATISTICS OF REAL ESTATE MORTGAGES OF ALL THE NEW ENG- 
 LAND AND MIDDLE STATES, FROM U. S. EXTRA CENSUS BULLE- 
 TIN NO, 71, (June 30, 1894), BASED ON RATES OF 
 INTEREST ON MORTGAGES RECORDED. 
 
 Per cent, (in am't) Average rate 
 of mortgages bear- of interest 
 
 
 ing rates of 
 interest under 6^ 
 
 for 10 y rs. 
 1880-1889. 
 
 Massachusetts 
 
 48.66 
 
 5-51 
 
 New York 
 
 42.59 
 
 5-53* 
 
 Rhode Island 
 
 31.82 
 
 5-76 
 
 Connecticut 
 
 30.76 
 
 5.69* 
 
 Pennsylvania 
 
 29.20 
 
 5.67* 
 
 Delaware 
 
 24-34 
 
 S-75* 
 
 New Jersey- 
 
 23-38 
 
 S-7S* 
 
 Maine 
 
 6-44 
 
 6.1S 
 
 Vermont 
 
 3-49 
 
 5.96* 
 
 New Hampshire 
 
 1.94 
 
 5-98* 
 
 Mortgages exempt from tax after May 13, 1881. 
 
 Mortgages held by savings banks exempt from, 
 tax, and very few held by individuals taxed. 
 The savings banks of R. I. hold 72^ of all the 
 mortgages of the state, and they are taxed at 
 only }^^. Very few held by individuals are 
 taxed. 
 
 Mortgages exempt from tax except those held 
 by savings banks. 
 
 Mortgages taxed at only J3 per $1000 from 
 1880 to 1880. 
 
 Mortgages taxed on the Pennsylvania system. 
 5 . y ^ Mortgages exempt from taxation. 
 
 Mortgages taxed. 
 
 Mortgages taxed under severe listing laws 
 and savings bank tax 5^^. 
 
 Mortgages taxed under severe listing laws 
 and savings bank tax i?t. 
 
 ♦These states have usury laws with penalties for interest above six per cent. In 
 them the r^fz/ average rate is higher than is shown above, (See p. 27 of same Census 
 Bulletin.) 
 
TABLE OF AUTHORITIES CITED. 
 
 XIII 
 
 Aggregates of Polls, Property and Taxes, Mass., 1869, 
 
 1881, 
 
 1889, 
 
 1891, 
 
 ■ 1893, 
 
 i895> 
 
 American Corporation Legal Manual, 
 Arizona, Revised Stats, of. 
 Assessors of Boston, Report of, 1891, 
 1894, .... 
 
 Bascom, Jolin, Professor Williams College, 
 Baxter, Dudley, an English economist, 
 Boston Associated Board of Trade, Petition of, 
 
 " — City Government, Petition of, 
 
 Chamber of Commerce, Petition of, 
 
 Earthenware Ass'n, Petition of, 
 
 Master Teamsters' Ass'n, Petition of, 
 
 Merchants' Ass'n, Petition of, 
 
 Real Estate Exchange, Petition of, 
 
 Report of Special Tax Commission of 1891, 
 
 13 
 
 15, 
 
 9. 14, i5i 
 
 Page 
 
 • 14 
 . 28 
 10, 29 
 . 28 
 
 29> 31 
 
 4S> 56 
 
 . XI 
 
 • 79 
 
 • 15 
 26, 59 
 
 . 82 
 12 
 26 
 27 
 27 
 27 
 27 
 27 
 27 
 26 
 
 California, Constitution of, . 
 
 Canby, Wm. M. and E. L. Martin, Tax Commissioners of Delaware 
 
 Capen, Elmer H., President Tufts College, 
 
 Citizens' Association, Petition of, . 
 
 Clark, Prof. John B., President American Economic Association, 
 
 Connecticut, General Statutes of, 
 
 '■ — Acts of, r 8 7 5 , . 
 
 Coman, Miss Katherine, Professor at Wellesley, 
 
 Cooley on Taxation, 10,42,48,53 
 
 Crocker, Hon. Geo. G., " An Exposition of Double Taxation," 
 Cummings, Edward, Professor Harvard University 
 
 Delaware, Laws of. Vol. r 7, . 
 
 Tax Commission of, 1893, 
 
 Desty on Taxation, Vol. i, 1884, . 
 
 Dewey, Davis R., Professor Mass. Institute Technology, . 
 
 Dunbar Chas. F., Ex-Pres. American Economic Association, 
 
 79 
 79 
 82 
 27 
 82 
 
 2> 79 
 79 
 82 
 
 VIII 
 
 7,9 
 82 
 
 79 
 IX 
 
 82 
 82 
 
XIV 
 
 TABLE OF AUTHORITIES CITED. 
 
 lO, 12 
 
 33 
 
 IX 
 
 12 
 
 73 
 
 79 
 34 
 
 Ely, Richard T., " Taxation in American States," 
 Ensley, Enocii, of Tenn., 
 
 Foster & Abbott's Income Tax Law of 1894, 
 
 Hills, Thomas, Address on Taxation, 1890, 
 Holmes, Hon. Chas. J., of Fall River, . 
 
 Idaho, Revised Stats, of, . . . 
 
 Ingalls, M. E., of Cincinnati, 
 
 Lane, Hon. Jonathan A., and others of Boston P^xecutive Business 
 
 Ass'n, Report on Taxation, 1889, . . . . .12 
 
 Maine, Special Tax Commission of, 1889, . . . 56,71,80 
 
 Martin's Tables for 1876, ........ 61 
 
 Martin, E. L. and Wm. M. Canby, Tax Commissioners of Delaware, 79 
 Maryland, Acts of, 1870, ........ 79 
 
 Pub. Gen. Laws of, . . • \ • • ■ • -79 
 
 Massachusetts, Acts of 1881, C. 304., . . . . . -72 
 
 Acts of 1882, Chap. 17s, . . . . . . -72 
 
 Acts of 1888, Chap. 390, ....... 72 
 
 Acts of 1889, Chaps. 84 and 334, . . . . -72 
 
 Acts of 1893, Chap. 463, ....... I 
 
 Auditor's Report of, 1893, ... . . 31 
 
 Body of Liberties of, 164 1, . . . .20 
 
 Constitution of. Part i, Declaration of Rights, Art. X, . 8 
 
 Constitution of. Part 2., Chap, i., Sect, i, . . . -17 
 
 Joint Special Committee on Taxation, 1893, Senate Doc- 
 ument, No. 9, 1894, ..... 59,60,61 
 
 Pub. Stat, Chap. 11, . . . . . . . 72, 79 
 
 Pub. Stat., Chap. 11, Sects. 2, 13, 20, . . 44 
 
 " " " II, " 4. • • • ■ i9i 44. 70 
 
 " " " II, " 5, 66 
 
 « " « 12 72, „ 
 
 " " " 13, Sects, 25, 29, 40, . . . ■ . 22 
 
 " " " 75- X 
 
 — " " " 106, Sect. 6, I 
 
 Revised Statutes of, 1836, Chap. 7, . . . . .20 
 
 Savings Banks, Report of Commissioners of, 1875, , . -25 
 
 Savings Banks, Report of Commissioners of, 1894, . . 66 
 
 State Board of Trade, Vote of, . . . . .^ . 26 
 
 Tax Commissioner, Report of, 1869, . . . . .14 
 
 " " " 1875. 80' 
 
TABLE OF AUTHORITIES CITED. xV 
 
 Mass. Tax Commissioner, Reports of, 1878, 60 
 
 1890, . . .60 
 
 1891, . 60 
 
 1892, . . . . .60 
 
 1893, 14, 29. 39. 59. 60, 64, 67, 68 
 
 1894, . . . . 45, 59 
 Matthews, Hon. Nathan, Jr., " Double Taxation of Mortgaged Real 
 
 Estate," ....... 
 
 Michigan, Pub. Acts of. 189 1, 
 
 Mill, J. S., " Principles of Political Economy,'' 
 
 New England Metal Ass'n, Petition of, . 
 
 New Hampshire, Pub. Stat, of. Chap. 55-1891, 
 
 Report of Board of Equalization for, 1894, 
 
 Valuation of, 1890, ...... 
 
 — " " 1894, 
 
 New Jersey, Acts of, April, 1876 . 
 
 • Revision of, . ' . 
 
 New York Commercial and Financial Chronicle, State and City Sup- 
 plement of, April, 1894, ...... 60 
 
 State Grange, Report to Legislative Committee, June 18, 
 
 1894, . . 80 
 
 Assembly Documents, 1891, Vol. XII., No. 65, . . 76 
 
 Evening Post, ..... ... 52 
 
 Report of Commissioners of, 1871, ... 10, 12, 48 
 
 Ohio, Gov. McKinley to Gen. Assembly of, 1894, . . . 47.53 
 
 Report of Tax Commissioners of, 1893, 17, 23, 47, 48, 50, 52, 53 
 
 Oregon, Hill's Annotated Laws of, . .... 79 
 
 Pennsylvania, Act of June 30, 1885, 
 
 Reports of Secretary of Internal Affairs for, 1890 & 1893, 
 
 Reports of Secretary of Internal Affairs foriSgi, 
 
 Philadelphia, City Comptrollers' Report of, 1893, . 
 
 Commissioner of Sinking Fund for 189 1, 
 
 Powers, H. H., Professor Smith College. . . 82 
 
 Quarterly Journal of Economics, April, 1890, . . 74, 78, 84 
 
 74 
 
 78,84 
 
 
 • 79 
 
 
 9. 17 
 
 
 • 27 
 
 
 22 
 
 
 . 48 
 
 
 46, 51 
 
 
 48,51 
 
 
 ■ 79 
 
 
 22, 79 
 
 65 
 
 52 
 
 6r 
 II 
 61 
 
 Rhode Island, Pub. Doc, 1889, .... 
 
 - Pub. Stat, of. Chap. 42, 
 
 Richardson, Hon. J. B. . . • 
 
 Ripley, Wm. Z., Professor Mass. Institute Technology, 
 Ross Prof. E. A., in Annals of the American Academy, 
 
 76 
 
 22 
 
 71 
 82 
 42 
 
XVI TABLE OF AUTHORITIES CITED. 
 
 Seligman, Prof. E. R. A., "General Property Tax," lo, 17, 24, 48, 53 
 
 Prof E. R. A., " Shifting and Incidence of Taxation," . . 42 
 
 Shearman, Hon. T. G., Argument before Ways and Means Sub-Com- 
 mittee, Oct. 16, 1893, ........ 54 
 
 Smith, Adam, " Wealth of Nations," . . . . . 9, 1 7 
 
 Suffolk Registry of Deeds, ........ 74 
 
 Taussig, Frank W., Professor Harvard University, . . . .82 
 
 U. S. Census Bulletin, No. 192, . . . 11,46, 47, 49, 50, 51, 76 
 
 Census Bulletin, No. 379, . . . 11, 33, 47 
 
 Extra Census Bulletin, No. 64, ...... 85 
 
 Extra Census Bulletin, No. 71, . . . . 74, 75, 76, XII 
 
 Rev. Stat., Sect. 5151, ....... X 
 
 Vermont, History of Taxation in, Columbia Studies in Pol. Science, 47, 5 7 
 
 Laws of, Grand List, . . . . . 51, 56, 57 
 
 Revised Laws of, 270, . . . . . . .22 
 
 Walker, Hon. Francis A., Ex-Pres. American Economic Association, . 82 
 Wells, Hon. David A., Report of, to Hon. J. G. Carlisle, July 8, 1893, 53, 54 
 
 David A., and others. Commissioners of N. Y. Report, 
 
 1871, . . . . . . . . . 10, 12 
 
 Winn, Hon. Henry, of Maiden, 82, 83 
 
 Wright, Hon. Carroll D., . . . . . . . 74, 85 
 
TABLE OF CASES CITED. 
 
 XVII 
 
 Amesbury W. & C. Mfg. Co. m. Amesbury, 17 Mass., 461, 
 
 Bank of Commerce vs. Tenn., 104, U. S., 493, . 
 Boston & Sandwich Glass Co. vs. Boston, 4 Met., 181, 
 
 Water Power Co. vs. Boston, 9 Met., 199, 
 
 Bugbee vs. Stevens, 63 Vt., 185, 
 
 Burke 7>s. Badlam, 57 Cal., 594, .... 
 
 Cheshire Co. T. Co. vs. State, 63 N. H., 167 (1884), . 
 Cole vs. Cunningham, 133 U. S., 107, 
 Commonwealth vs. Standard Oil Co., loi Pa. St., 119, 
 
 — ■ vs. Germania Brewing Co., 145 Pa., 83, . 
 
 vs. Hamilton, 12 Allen, 298, .... 
 
 vs. People's Five Cent Savings Bank, 5 Allen, 428, 
 
 vs. Provident Institution for Savings, 1 2 Allen, 312 
 
 vs. Richmond & P. R. R. Co., 81 Va., 355 (1886), 
 
 Crutcher 7's. Kentucky, 141 U. S., 47, 
 Cunningham vs. Butler, 142 Mass., 47, 
 
 Dwight vs. Boston, 12 Allen, 316, 
 
 Fall River vs. Bristol, 125 Mass., 567, 
 Farrington vs. Tenn. (1877), 95 U. S., 679, 
 Foster vs. Stevens, 63 Vt., 175, . 
 Franklin Co. vs. Deposit Bank, 87 Ky., 370 (if 
 
 i), 
 
 Gillespie vs. Gaston, 67 Tex., 599, 
 
 Gleason vs. McKay, 134 Mass., 424, . 
 
 Gordon vs. Appeal Tax Court (1845), 3 Howard, 133, 
 
 Green vs. Van Buskirk, 7 Wall, 139, . 
 
 'Page 
 II 
 
 VI 
 
 6, II 
 
 6, II 
 
 III 
 
 IV 
 
 III 
 18 
 6 
 65 
 15 
 65 
 
 65566 
 IV 
 
 19. 36 
 
 19, 21 
 
 6, II 
 V, VII, VIII, IX 
 22, III 
 IV 
 
 IV 
 18 
 
 V 
 
 18 
 
 18 
 18 
 
 IV 
 
 Hadden vs. The Collector, 5 Wall, 307, 
 Hoyt vs. Commissioners, 23 N. Y., 224, 
 Hyland w. Central Iron and Steel Co., 129 Ind., 68 (1891) 
 
 Income Tax Law Decision U. S. Supreme Court, April, 1895, . 68, 69 
 Inhabitants of Cheshire vs. County Commissioners of Berkshire, 118 
 
 Mass., 386, -17 
 
 Jersey City Gaslight Co. vs. Jersey City, 46 N. J., 194 (1884), III 
 Johnson vs. Commonwealth, 7 Dana (Ky.) 338, . 48, IV 
 
XVIII 
 
 TABLE OF CASES CITED. 
 
 Kimball vs. Milford, 54 N. H., 406, 
 
 Lawrence vs. Batcheller, 131 Mass., 504, 
 
 Lockwood vs. Town of Weston, 61 Conn., 211 (1891), 
 
 Mass. vs. Western Union Telegraph Co., 141 U. S., 40, 
 Memphis vs. Bank & Ins. Co., 91 Tenn., 546 (1892), 
 Moore vs. Miller, (Foster and Abbott's Income Tax Law, 
 Middlesex R. R. Co. vs. City of Charlestown, 8 Allen, 330, 
 
 New Haven vs. City Bank, 31 Conn., 108, 
 New Orleans vs. Houston, 119 U.S., 265, 278, 
 N. Y.,-L. E., & W. vs. Penn., 153 U. S., 628 
 
 People vs. Campbell, 138 N. Y., 543, 
 
 vs. Home Ins. Co., 92 N. Y., 328, . 
 
 ex re/ Ryan, 88 N. Y., 142, . 
 
 Portland Bank vs. Althorp, 12 Mass., 252, . 
 Proctor vs. Bank of Republic, 152 Mass., 223, 
 Pulbnan Car Co., vs. Penn., 141 U. S., 18, . 
 
 Railroad vs. Commssioners, 91 N. C, 454 (1884), 
 
 Co. 7)s. Wake, 87 N. C, 414, 
 
 Ryan vs. Leavenworth, 30 Kan., 185, 
 
 Salem Iron Factory Co., vs. Danvers, 10 Mass., 514 
 
 San Fran. vs. Mackay, 21 Fed. Rep. 539, and 22 Fed. Rep., 60 
 
 Smalley vs. Burlington, 63 Vt., 443, 
 
 Smith vs. Burley, 9 N. H., 423, 
 
 vs. Exeter, 37 N. H., 556, . 
 
 State vs. Branin, 23 N. J., 484, 
 
 — 7)s. Central Savings Bank of Baltimore, 67 Md., 290 
 
 vs. Hannibal, etc., Co., 37 Mo., 265, 
 
 vs. Hood, 15 Rich., 177, 
 
 vs. Powers, 24 N. J., 400, 
 
 vs. Smith, 25 Atlantic Rep., 277, 
 
 vs. Sterling, 20 Maryland, 502, 
 
 Tax Cases, 12 Gill & Johnson, 117, . 
 Tennnessee vs. Bank of Commerce (1892) 53 
 
 vs. Bank of Commerce (1892), 91 Tenn, 
 
 vs. Whitworth, 117, U. S., 129, 
 
 503) 
 
 III 
 
 18 
 III 
 
 37 
 
 IV 
 
 IX 
 
 6, II 
 
 III 
 
 6, VII, VIII 
 
 37 
 
 18, 22, HI 
 6 
 
 54 
 
 21 
 
 18 
 
 8,18, 19.37 
 
 IV 
 IV 
 IV 
 
 I 
 
 , 22,iv,vn 
 
 22 
 
 III 
 
 HI 
 III 
 1887), IV 
 IV 
 IV 
 III 
 22 
 IV 
 
 IV 
 
 735, VI 
 
 . VI, IX 
 
 6, VI, VII, VIII 
 
 Territory vs. Delinquent Tax List, Arizona, 24 Pac. Rep. 186, . 79 
 
 Tremont Bank vs. Boston (1848), i Cush., 142, ... II 
 
 Trowbridge w. Commissioners, 4 Hun., 595, . . . 18, 22, III 
 
 Fed. Rep. 
 , 546, 
 
TABLE OF CASES CITED. XIX 
 
 Union Bank vs. State, 9 Yerg. 490, VIII 
 
 Van Allen vs. Assessors (1865), 3 Wall, 573, .... V 
 
 Weston vs. City of Charleston, 2 Peters, 449, . . . 59, 73 
 
 Wilcox Z/J-. County Commissioners of Middlesex, 103 Mass. 544 (1870) 70 
 Worth i^j-. Wilmington R. R. Co., 89 N.C., 291, . ... IV 
 
XX 
 
 Pace 
 
 S, 8i 
 40 
 80 
 70 
 
 INDEX 
 
 " Ability " argument examined, ...... 
 
 Answers to arguments for double taxation of shares, 
 
 to arguments " " " " mortgages, . 
 
 Assessors, Practice of, in assessing incomes from taxed property, 
 
 Bill, proposed to abolish double taxation of shares, . . 7 
 
 Board of Trade petition, . . . . . . . .26 
 
 Bonds, Premiums on and Value of, . . . . . -63 
 
 Borrowers got benefit of Law of 1 88 1, .... 73-78,82,84 
 
 Boston City Government petition, . . . . . -27 
 
 Experience in, of driving away intangible property, . -14 
 
 Municipal Bonds, Case of, . . . . . -59 
 
 Net indebtedness of, ....... 60 
 
 Results of dooming process, . . . . . .14 
 
 Results in, in case of repeal of double tax on shares, . .26 
 
 " outside of, in case of repeal of double tax on shares, 29 
 
 Shares of foreign corporations assessed in, ... 9 
 
 & New York, Taxable bonds, comparison of, . . . 6i- 
 
 Brimfield specially illustrating results to farming town, . . .31 
 
 Brooklyn city bonds, . . . ' . . . . . .60 
 
 Building in Boston, Table showing effect of law of i8?i in, . . 78 
 Builders, Testimony of, regarding mortgage exemption, i. . .78 
 
 Business driven away, . . . . . . . . .24 
 
 California does not tax shares of foreign corporations, 
 
 " Capitalization of tax," theory 
 
 Chamber of Commerce petition. 
 
 Citizens' Association petition. 
 
 Cities, gross indebtedness of. 
 
 Chart compiled from Census Statistics and State Loans, 
 
 Commissioners of Mass. of 1875.^ answered on mortgage tax, 
 
 Connecticut, Cases cited, App. A, . . . 
 
 does not tax shares of foreign corporations. 
 
 Corporation shares not doubly taxed, in what states, 
 Corporations driven away from the state, 
 
 nothing more than limited partnerships, 
 
 of other states, how taxed, 
 
 Decisions, Legal, against double taxation of shares, 
 Delaware does not tax shares of foreign corporations. 
 
 • 42 
 
 • 27 
 
 • 27 
 . 68 
 
 • 75 
 80,82 
 
 . in 
 22 
 22 
 
 37. 39 
 
 . 5,6 
 
 • s 
 
 42, 87 
 
 22 
 
INDEX. 
 
 XXI 
 
 Distinction, A subtle, 43 
 
 Doomage Laws 46 
 
 Laws are mediseval, . . ... . . . .48 
 
 Laws, Effect of in New Hampshire, . . . . 49, 51 
 
 Laws, Results of, in Ohio, New Hampshire and Vermont, 46, 47 
 
 Dooming process results, . . . . 13 to 16, and 46 to 57 
 
 . 6 
 . 6 
 
 Double Taxation, " an imposition," 
 
 Taxation, " extremely hard and unjust," 
 
 Exemption of Municipal Bonds constitutional, 
 
 Farmer, Results to, .... . 
 
 Farming towns benefitted, .... 
 
 Fiction, Legal, ...... 
 
 " Foreign " money, none loanable on mortgage, 
 
 Georgia, Experience of, ... . 
 
 Hills, Thomas, Chairman Boston Assessors, 
 Methods of, 
 
 Illinois exempts foreign tangible personal property, 
 Income brought into the state to be taxed but not the outside 
 Incomes frpm taxed property, taxation of, 
 Indiana, Cases cited, App. A, .... 
 
 exempts foreign, tangible personal property. 
 
 Inexpedient, double taxation of shares, . 
 
 Interest on Mortgages, Fall iij, between 1880 and 1889, 
 
 rate on Mortgages, Fall of, ... 
 
 Kansas, Cases cited, App. A, . . . . 
 
 exempts foreign tangible personal property, 
 
 Kentucky, Cases cited, App. A, . . . . 
 
 Law, Bad effect of present, . 
 
 Enforcement of present, . 
 
 the present, not an ancient one 
 
 of 1 88 1, Efforts to repeal, 
 
 of 1 88 1, Effect upon Savings Banks of, 
 
 of 1881, Result of, . 
 
 the original. 
 
 23 
 32 
 20 
 
 78 
 72 
 78 
 21 
 Listing Law, premium on vagueness, carelessness and inaccuracy, . 55 
 
 Results of, 46 to 59 
 
 Law, visionary and impracticable, . . . . -55 
 
 • 65 
 
 29. 33 
 . 29 
 
 • 17 
 84, 86 
 
 • 52 
 13, 80 
 i3> 15 
 
 • 23 
 property, 7, 8, 20 
 
 70,71 
 . IV 
 
 • 23 
 
 • 33 
 
 • 77 
 73 to 78 
 
 XII 
 
 IV 
 
 23 
 IV 
 
 72, 
 
 Peculiar History of the, taxing here property taxed elsewhere, 
 
XXII 
 
 INDEX. 
 
 Maine, Conclusion of Special Tax Commission of, in taxing incomes 
 from taxed property, .... 
 
 — ; exempts foreign, tangible personal property, 
 
 Special Tax Commission decides against double tax in case 
 
 of mortgages, ..... 
 
 Maryland, Cases cited, App. A, . . . . 
 
 Massachusetts, Cases cited, App. A, . . . 
 
 alone, of the rich Eastern and Middle States that insists on 
 
 the unjust double tax, .... 
 
 assessed estate in, . . . . 
 
 Average rate of taxation in, 
 
 corporations, how taxed, .... 
 
 Experience in, . 
 
 has lowest rates of interest on mortgages, . . -77 
 
 More personal property assessed in, . 
 
 Natural advantages of, ... . 
 
 Resources of, . 
 
 Total net indebtedness of cities and towns in, 
 
 Value of shares of foreign corporations held in 
 
 Value of property in, .... 
 
 ^lissouri, Cases cited, App. A, . . . . 
 
 exempts foreign, tangible personal property. 
 
 Mortgages, Exemption of, .... . 
 
 on Real Estate, double taxation of. 
 
 Municipal Bonds, Reasons for exempting, 
 Bonds, Legality of exempting, . ' . 
 
 Natural rate of interest argument answered. 
 New Hampshire, Cases cited, App. A, 
 
 does not tax shares of foreign corporations, 
 
 Increase of personal property in. 
 
 New Jersey, Cases cited, App. A, 
 
 does not tax shares of foreign corporations, 
 
 Experiment in, in doubly taxing mortgages, 
 
 New York, Cases cited, App. A, . 
 
 City bonds, ...... 
 
 does not tax shares of foreign corporations, 
 
 State Grange inquiry of, on double taxation of 
 
 North CaroHna, Cases cited, App. A, . . . 
 
 Ohio exempts foreign tangible personal property, 
 Tax law of, .... . 
 
 22 
 
 46, 47 
 Over-assessment, Result of relief from, in case of mortgaged real estate, 73 
 
 14 
 
 71 
 22 
 
 80 
 
 III 
 
 I, II 
 
 23 
 29 
 
 73 
 
 5 
 
 II 
 
 XII 
 
 50 
 32 
 32 
 59 
 29 
 II 
 IV 
 
 27. 
 
 mortgages. 
 
 23 
 72-86 
 72-86 
 
 • 59 
 
 . 64 
 
 . 84 
 
 . Ill 
 
 22 
 
 • 49 
 . Ill 
 
 22 
 
 • 79 
 . Ill 
 
 60, 64 
 
 22 
 
 . 80 
 
 . IV 
 
INDEX. XXIII 
 
 Pennsylvania does not, practically, tax shares of foreign corporations, 2 2 
 
 65 
 
 O, II 
 
 26 
 
 60, 61 
 
 21 
 
 Exemption of classes of corporations 
 system and its merits, 
 
 Petition, The Great, .... 
 
 Philadelphia bonds, .... 
 
 Policy, Public, ..... 
 
 Professors who protested against double taxation of mortgages, 
 
 Property, Difficulty of reaching all intangible, 
 
 customs, etc., Duty, a tax on tangible, 
 
 Personal, sometimes follows the owner, sometimes it does not 
 
 proportion of personal to real, . 
 
 Precedents for abolishing double taxation, 
 
 Present system unjust, .... 
 
 system unwise, . . ..... 
 
 Railroads, Interstate, ........ 
 
 Rate of taxation increased, how much if double tax abolished, . 
 Rates, Table of, in Vermont, ...... 
 
 Real estate dependent upon personal property near it. Value of, 
 
 Exchange petition, ....... 
 
 Mortgages, Statistics of, in New England and Middle States, 
 
 Results of abolishing double tax, ...... 
 
 Rhode Island does not tax shares of foreign corporations, 
 Rich men frightened away, ....... 
 
 Savings Banks, exemption in proportion to municipal bonds held by, 
 
 Banks, Failures of, affecting dividends. 
 
 Shares are not property, only evidences of title, 
 
 have no intrinsic value, ...... 
 
 Law doubly taxing, not ancient, .... 
 
 Registration of, unnecessary to secure title, 
 
 Shareholders, Personal exemption of, App. A, 
 
 to tax both and corporation " unjust and unequal," Appen 
 
 dix A, 
 
 South Carolina, Cases cited, App, A, 
 
 exempts foreign, tangible personal property, 
 
 States that had lower rates of interest on mortgages than Massa- 
 chusetts in 1&80, 
 
 which do not tax shares of foreign corporations, . 
 
 which exempt foreign, tangible personal property, 
 
 which have abolished double tax on mortgages, . 
 
 Suburbs, Annexation of, to Boston, ... 
 
 Suffolk Mortgages, Table of rates of interest, 1880- 1889., 
 
XXIV 
 
 INDEX. 
 
 Tax dodging altnost respectable, .... 
 
 English Income, ..... 
 
 The Double, not chiefly on the rich, . '■: 
 
 to corporations is shifted on to the consumers, 
 
 The Whiskey, ...... 
 
 Uncertainly of, on intangible property 
 
 6 
 
 54 
 25 
 41 
 S3 
 
 9, lO, II, 16 
 
 Taxation, Driven away by, . . . . . . 6, 7, 24, 39 
 
 of Incomes derived from property subject to taxation, . 70 
 
 Protection the general basis of, . . . . . .8 
 
 Tea trade driven from Massachusetts by taxation, . . . ,24 
 Tennessee, Cases cited, App. A, ...... IV 
 
 Texas, Cases cited, App. A, ..... . .IV 
 
 Theory, " Confining investments in the state," . . . 44, 45 
 
 that it is not double taxation, . . . . . .40 
 
 The Gift, ... 45 
 
 Towns, gross indebtedness of, ....... 68 
 
 " To Remove a Doubt," ...... .20 
 
 United States, Experience in, . . . . . . .16 
 
 Census statistics on mortgages, . . 74, 75, 76, 77, XII 
 
 only civilized country trying to tax both property and its 
 
 shadow, .......... 10 
 
 Supreme Court, Decisions of, 6, 8, 18, 19, 36, 59, 68, 73, and 
 
 App. A, V-IX 
 
 Supreme Court holds that tax on bonds is tax on the public, 68, 69 
 
 Supreme Court hold that tax on lender is a tax on borrower, 73 
 
 Uncertainty worse than inequality, . . . . . . -17 
 
 Unconstitutionality of the double tax on shares, . . . 17-21 
 of bill to compel foreign corporations to file lists of 
 
 shareholders, ........ 36, 37 
 
 Vermont, Cases cited, App. A, . . . , . . . . Ill 
 
 does not tax shares of foreign corporations, . .22 
 
 Grand list law of, ........ 56 
 
 Increase of personal property in, . . . . -47 
 
 Real estate assessed in, . . . . . . - 57 
 
 Virginia, Cases cited, App. A, ........ IV 
 
 West Virginia exempts foreign, tangible personal property, . .22 
 Widows and orphans doubly taxed, . . . . . -25 
 
 Winn, Hon. Henry, Statements of, on mortgage double tax, . 82, 86 
 
 Hon. Henry, mixes dates, ..... 82, 83 
 
 Worcester, Results in, if bonds not taxed, . . . . -67 
 
 Wright, Hon. Carroll D., Letter of, on " foreign " lenders on portgage, 85 
 
-THE- 
 
 massaGdusetts fUti-Doile-Taiatioii Leagne. 
 
 President, ALEXANDER S. PORTER. 
 
 General Counsel, RICHARD H. DANA, 
 906 Exchange Building, Boston. 
 
 Treasurer, HORATIO Q. CURTIS, 
 President Old Boston National Bank, So State Street, Boston. 
 
 DIRECTORS. 
 
 i^inherst, Prof. John B. Clark. 
 Selmont, Hon. Alanson W. Beard 
 Boston, Chas. E. Getting, Esq. 
 Boston, Hon. Jonathan A. Lane. 
 Boston, Col. Thomas L. Livermore. 
 Boston, Hon. Nathan Matthews, Jr. , 
 -Boston, Wm. Minot, Esq. 
 teoston, W. W. Vaughan, Esq. 
 proekton, Hon. J. J. Whipple. 
 SjBjiOokline, Hon. Edward Atkinson 
 i'&ookline, Henry Lee, Esq. 
 jjErookJine, James, Otis Porter, Esq. 
 Cambridge, Hon. Robert O. Fuller. 
 ■ Cambridge, Chester W. Kingsley, Esq. 
 Chelsea, Hon. Chas. A. Campbell. 
 Dedham, S. M. Weld, Esq. 
 Everett, Hon. A. ,H. Evans. 
 Fall River, Hon. Wm. S. Green. 
 Fall River, Hen. Charles J. Holmes. 
 Fall River, M. G. B. Swift, Esq. 
 Fitchburg, Hon. Rodney Wallace. 
 Franklin, H. E. Ruggles, Esq. 
 i>(31oucester, S. Cunningham, Esq. 
 Greenfield, Hon. James S. Grinnell. 
 ^aMi-hill, R. Stuart Chase, Esq. 
 Haverhill, Thomas Sanders, Esq. 
 Holyoke, Hon. Wm. Whiting. 
 ( i%wrence, Jos. Shattuck, Esq. 
 Leicester, Hon. Chas. A. Denny. 
 Lenox, Hon. Richard Goodman. 
 
 Lincoln, Hon. C. F. Adams. 
 Lowell, Chas. E. Adams, Esq. 
 Lynn, Philip A. Chase, Esq. 
 Maiden, Hon. E. S. Converse. 
 Maiden, Hon. John W. Pettengill. 
 Manchester, T. J. Coolidge, Jr., Esq. 
 Medford, Dana I, Mclntire, Esq. 
 Milton, Edward C. Perkins, Esq. 
 New Bedford, Hon. W. W. Crapo. 
 Newburyport, Edward S. Moseley, Esq. 
 Newton, Hon. J'. R. Leeson. 
 Newton, J. Howaird Nichbls, Esq. 
 Newton, Hon. Alden Speare. 
 North Adams, A. C. Houghton, Esq. 
 North Andover, Hon. Wm. J. Dale, Jr 
 Northampton, Oscar Edwards, Esq. 
 Pittsfield, Wm. R. Plunkett, Esq. 
 Pittsfield, Hon. Joseph Tucker. 
 Salem, Arthur L. Huntington, Esq. 
 Somerville, Robert Luce, Esq. 
 Somerville, John C. Nichols, Esq. 
 Springfield, Gurdon Bill, Esq. 
 Springfield, Hon. Edwin F. Lyford. 
 Taunton, Hon. Edmund H. Bennett. 
 Waltham, F. M. Stone, Esq. 
 W. Medford, Col. N. P. Hallowell. 
 Winchester, Samuel J. Elder, Esq. 
 Woburn, Hon. John Cummings. 
 Worcester, Col. A. G. Bullock. 
 Worcester, Orlando W. Norcross, Esq. 
 
 EXECUTIVE COMMITTEE. 
 
 Alexander S. Porter, Esq., of Beverly. 
 Hon. George G. Crocker, of Boston. 
 Horatio G. Cuitis, Esq., of Boston, 
 
 W. H. Sayward, Esq., of Boston. 
 Albert S. Bigelow, Esq., of Cohasset. 
 Chas. F. Adams, znd, Esq., of Quincy. 
 
 Secretary, JOS. E. WOODS, 904 Exchange Building, Boston. 
 
Cornell University Library 
 HJ2342.M4 D16 
 
 Double taxation in Massachusetts: 
 
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