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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would Involve violation of the copyright law. Author: Mills, Frederick Cecil Title: A statistical analysis of the tax burden on... Place: Albany Date: 1922 MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD Business D653 Mills, Frederick Cecil, 1892- M62 ... A statistical analysis of the teuc burden on corporations in the State of New York; being Part II of the 1922 report of the special joint legislative committee on taxation and retrench- ment of the State of NovrYork... AlbarQr, Lyon, 1922. 143p« tables. 24^ cm. 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'^ m H O o "0 m -o OL,"0 > C Cd X Tl ^ 0(/) ; m 3] O m A. €^ ^ ^ <^ 1— • rN> cn O E 3 3 5f> Is 3x ii <^« *• 9 V. -<<^. 1\«r II UjU A S'^i^/T'T^TIOAT, ATTiLY^T8 OF T^ V TAX BURJ'I^^N ON CQEP^^ . 1 IV h^' \ THE STA'TE OF IJEW YOFJi € Columbia ^Hnibersiitp LIBRARY School of Business PREPRINT LIBRARY ■■^ne SCHOOL OF BUSINESS A Statistical Analysis of the Tax Burden on Corporations in the State of New York BEING PART II OF THE 1922 REPORT OF THE SPECIAL JOINT LEGISLATIVE COMMITTEE ON TAXATION AND RETRENCHMENT OF THE STATE OF NEW YORK 't ALBANY, JANUARY 10, 1922 ALBANY J. B. LYON COMPANY, PRINTERS 1922 6(L PART TWO wsine^S __j) C 53 Mgx A Statistical Analysis of the Tax Burden on Corporations in the State of New York By FREDERICK C. MILLS Object and Scope* Object of the investigation. — This report summarizes the re- sults of an investigation undertaken for the purpose of deter- mining the relative burden of present taxes on corporations in Xew t^ork State. Under the existing laws different types of corpora- tions are taxed on different bases. Some pay in proportion to their net income. Others are taxed; on their gross earnings or excess dividends. Taxes on certain corporations are levied on capital stock, or on capital, surplus and undivided profits. Combined with these varying classifications, which cut across each other in diverse ways, are general property taxes and special franchise taxes. The complicated character of the corporation tax system has rendered difficult a ready comparison of the burden of taxes on different classes cf corporations. An attempt is made in the following pages to reduce the prob- lem to quantitative terms, on a common basis, in order that effective comparison may be possible. Specifically, the following have been the ends in view : 1. The compilation of available data on the capital and income of different types of corporations in "New York State. Where complete aggregate figures could not be obtained, representative samples were studied. 2. The assembling of all available information concerning the amounts paid in taxes to the State of ^N^ew York under existing laws by different classes of corporations. 3. The determination of the burden of general tax charges upon different classes of corporations. To facilitate comparison, tax payments have been reduced to a common basis, in so far as this was possible. 4. The determination of the burden of specific taxes upon the different classes of corporations paying them. * The Committee desire to acknowledge the aid which has been given in the preparation of this report by the office of the Commissioner of Tntorcal Revenue, Washington, D. C, the Tax Commission and the Public Service Commission of the State of New York, the office of the Superintendent of Banks and the office of the Comptroller of the State of New York. The heads of these departments and the members of their staffs have rendered valuable assistance in this work. Special acknowledgm^'nt should be made of the valuable services rendered bv Mr. Donald H. Davenport. A member of the Staff of the Committee since the in- ception of the work, he has assisted in the administration of the entire investiga- tion and in the anal.vsis of the results. [5] 6 5. The assembling of such additional material as, in conjunc- tion with the above, might be of use to the Committee in framing proposals for changes in the tax system and in determining the practical effects of such changes. Scope of study and sources of information.— For the purpose of this study, the corporations in the State have been grouped into three general classes, with minor subdivisions. These classes are : (1) Mercantile and Manufacturing Corporations taxed under article 9-a of the tax law; (2) Public Service Corporations; (3) Financial Institutions.* ^ The problem of dealing with the iirst group has been relatively simple, in that these corporations pay a straight tax of 4% per cent on their net income. The essential problem has been"' that of reducing the complex taxes paid by the other two groups to such terms that comparison with the first group might be possible. Published statistics dealing with the capital and income of these three classes of corporations in New York State have been summarized and studied. It has been necessary, in addition, to conduct an intensive survey of all banks, trust companies and investment companies in the State, and of a representative list of public service corporations. The sources of information are listed in detail below: I. General sources, all classes of corporations. 1. United States Government Departments. Treasury Department; Division of Internal Revenue. Statistics of Income — 1916, 1917, 1918. In addition to the published statistics of the Division of Internal Revenue, the Secretary of the Treasury, upon the request of this Committee, prepaied the following detailed tables, based upon the tax returns of corporations in Xew York State: Table 1. Showing sources of corporate income and nature of deductions, by industrial groups, for corporations in Xew York State, for the year 1918, with detailed information for the following sub-classes: Transportation and other public utilities: Steam railroads. Electric railways. Express companies. Electric light and power companies. Gas companies. Telephone and telegraph companies. Water works. All other public utilities Total, transportation and other public utilities. ance companies are given in a separate section below. C/. in/raf pp 97 101 Banking and related business: National banks. State banks. Trust companies. All other corporations engaged in banking and related business. Total, banking and related business. Table 2. Corporation returns — Distribution by industries for New York State, for the year 1918. Table 3. Aggr^ate figures for banks and public utilities in New York State, classified, giving, for the following classes of corporations: a. Amounts received in the form of dividends from other corporations subject to federal income tax, in the year 1918. 6. Amounts received as non-taxable interest on federal bonds in the year 1918. Transportation and other public utilities: Steam railroads. Electric railwavs. Express companies. Electric light and power companies. Gas companies. Telephone and telegraph companies. Water works. All other public utilities. Total, transportation and other public utilities. Banking and related business: National banks. State banks. Trust companies. All other corporations engaged in banking and related business. Total, banking and related business. Department of Commerce, Bureau of the Census. Census of Manufactures, 1909, 1914. Advance sheets of 1919 Census. Census of Electrical Industries, 1907, 1912, 1917. Financial Statistics of State, 1915, 1917. Taxation and Revenue Systems of State and Local Govern- ments, 1914. 2. New York State Government Departments: Reports and records of the State Tax Commission. Reports and records of the State Comptroller. Figures in all published reports have been analyzed and addi- tional information has been secured from the original records in the files of the Tax Commission and the Comptroller. II. Additional Sources of Information, PuJilic Service Corporations. 1. Reports and records of the United States Interstate Commerce Com- mission. In addition to its published reports, this Commission permitted the Conunittee to utilize its valuation figures for railroads in New York State, in so far as the work of valuation had been completed. 2. Reports and records of the Public Service Commission of the State of New York. A detailed analysis of the returns to this Commission by public service corporations has been made. All public utilities in the State, the returns of which were complete for the ten-year period, 1911-1920. have been included in this study. The follow- ing is a classification of the corporations studied: Steam railroads. Electric railways. 8 ! Telephone and telegraph corporations. Gas and electric corporations: a. Electric light and power. b. Gas and electric (combined). c. Manufactured gas. d. Natural gas. ^ ^'fh«''V?.hH'%"*"-*'^'n ''^"'i'*^"^ ^^ ^" ^^""^^ ^^««e reports with period giM Sir ^°^^^«t^^re eomplete for the ten-year period 1911-1920, was circularized in order that certain addi- tional information might be obtained. The results secured are summarized in the table on this page. securea are III. Additional Sources of Information, Financial Institutions 2 pfrj'f ^^ records of the Comptroller of the Currenc^. 2. Reports and records of the Superintendent of Banks, State of Xew York. For the purpose of obtaining certain material in addition to that obtained BaScs ?vf,l'T'^^'''-^' ^" ?"*^^"^^ ^-°^«' State Banks Savn!^ Banks Trust Companies, and Investment Companies in the State Ta'^es^se" T the tlv''r^V''''^'^'.'''' ^^^p'°- *« the quesW naires sent to the public utilities and financial institutions follows: Replies to Questionnaires Type of Corporation National banks . . . State banks Trust companies . . Savings banks .... Invest, companies. Total Financial Institutions Steam railroads . . Electric railroads Telephone, tele- graph and cable companies Gas and electric companies Total PubUc Utilities ' Num- ber of corpor- ations to which ques- tion- naires were sent Cor- rected list ex- cluding corpor- ations no longer in oper ation Replies to first letter July, 1921 Totals 495 232 100 144 35 1,006 50 113 89 163 415 1,421 490 232 100 143 30 995 48 112 82 143 385 Per cent reply- ing after first letter Total Per replies cent after reply- second ing letter after August. second 1921 letter 1,380 235 160 60 123 12 590 13 21 26 40 100 I 690 47.9 69.0 60.0 86.0 40.0 59.3 27.1 18.75 31.7 28.0 26.0 50.0 363 182 79 138 15 777 29 45 54 93 221 Total replies after third letter Septem- ber, 1921 99s 74.1 78.4 79.0 96.5 50.0 78 1 60.4 40.2 65.9 65.0 57.4 Per cent reply- ing after third letter 72.3 458 207 97 143 27 932 39 91 68 117 315 1,247 93 4 89.2 97.0 100.0 90.0 93.7 81.2 81.2 82.9 81.8 81.8 90.3 With very few exceptions, the financial institutions and public service corporations called upon were prompt to co-operate with the Committee in its work. Summary of Amiual Taxes Paid by Corporations The following brief outline of the taxes paid by the different classes of corporations operating in JSTew York State will serve as a background for the later discussion. No attempt is made to explain the various provisions of the tax law in detail. 9 A — Taxes Paid by Business Corporations. (The term "business corporations" covers mercantile and manu- facturing corporations, excluding: a. Real estate corporations. b. Holding corporations. c. Transportation and transmission corporations. d. Elevated or surface railroads not operated by steam. e. Waterworks companies, gas companies, electric or steam heat* ing, lighting and power companies. f. Insurance corporations. g. Banks. State and national, h. Savings banks. i. Trust companies. j. Investment companies. See article 9-a, section 210, Tax Law). 1. Franchise Tax (article 9-a, Tax Law), 4% per cent, on net income. (Minimum tax to be not less than $10 and not less than one mill upon each dollar of issued capital stock ) . (Definition of net income: "total net income before any deduc- tions have been made for taxes paid or to be paid to the Gov- ernment of the United States on either profits or net income or for any losses sustained by the corporation in other fiscal or calendar years whether deducted by the (Government of the United States or not." Section 208, article 9-a, Tax Law). 2. General Property Tax ( articles 1-5 inclusive, Tax Law ) . (Business corporations are taxable on real property and certain fixed equipment; they are exempt from the payment of taxes on personal property. See article 9-a, sections 219-i, 219-j. Tax Law). B — Taxes Paid by Financial Institutions. 1. State and National Banks. a. Bank Stock Tax (article 1, section 13, article 2. sections 23-24, Tax Law ) . 1 per cent, on value of shares (total value of shares equal to capital, surplus and undivided profits). b. General Property Tax (articles 1-5 inclusive. Tax Law). (Institutions paying the bank stock tax are taxable only on real property; they are exempt from the payment of taxes on personal property. See article 2, section 24-c). 2. Trust Companies. a. Franchise Tax (article 9, section 188, Tax Law). 1 per cent, on capital, surplus and undivided profits (based on average during preceding year ) . b. General Property Tax. (On real property; trust companies are exempt from pay- ment of taxes on personal property. See article 9, sec- tion 205. Tax Law). 3. Investment Companies. a. Franchise Tax (article 9, section 188-a, Tax Law). 1% mills for each dollar, face value, of capital. 1 per cent, on surplus and undivided profits. b. General Property Tax. (On real property; investment companies are exempt from payment of taxes on personal property. See article 9. sec- tion 205, Tax Law). 4. Savings Banks. a. Franchise Tax (see article 9, section 189, Tax Law). 1 per cent, on par value of surplus and undivided earnings. b. General Property Tax. (On real and personal property; deposits in savings banks ' exempt from taxation). c — D — 10 6. Insurance Corporations and Surety Companies. a. Franchise Tax (article 9. section 187, Tax Law). 1 per cent, on excess of gross amount of premiums charged over deduK-tions allowed by law, on business done within this State during previous calendar year. b. General Property Tax (on real and personal property). Taxes Paid by Public Service Corporations. 1. St€am Railroads. a. General Franchise Tax (article 9, section 182, Tax Law). (Franchise tax is based upon the capital stock of the corpo- ration. Tax rate variable, depending upon dividend rate, relation of assets to liabilities, and average price of stock sold). b. Additional Franchise Tax (article 9, section 184. Tax Law). One-half of 1 per cent, on gross intra-State earnings (not including earnings derived from business of an interstate character ) . c. Special Franchise Tax (article 2, sections 44-49, Tax Law). (Tax Commission annually determines valuation of special franchises subject to assessment in each city, town or village. Final equalized valuation is the assessed valuation on which all taxes based upon special franchise are levied by local authorities. Tangible property situated upon streets, highways, public places or public waters in connec- tion with the special franchise is taxed with such franchise), a. General Property Tax. (Real and personal property, excluding that which is assessed '''' special franchises, is taxed under this head). 2. Telephone and Telegraph Companies. (Taxed upon same basis as steam railroads). 3. Elevated or Surface Railroads not operated by steam a. Franchise Tax (article 9, section 185). 1 per cent, on gross earnings from all sources within the State. 3 per cent, upon amount of dividends declared or paid in excess of 4 per cent, upon actual amount of paid-up capital. b. Special Franchise Tax (article 2, sections 44-49, Tax Law). (Same as steam railroads). c. General Property Tax (same as steam railroads). 4. Other Transportation Companies (taxed upon same basis as steam railroad**). 5. Waterworks Companies, Gas Companies, Electric or Steam Heating, Lighting and Power Companies. a. Franchise Tax (article 9, section 186). One-half of 1 per cent, on gross earnings from all sources withm the State. 3 per cent, upon amount of dividends declared or paid in excess of 4 per cent, upon actual amount of paid-up capital. b. Special Franchise Tax (article 2. sections 44-49, Tax Law). (Same as for steam railroads). c. General Property Tax (Same as steam railroads). Taxes paid by corporations not included in the above classes. 1. Realty Companies. a. General Franchise Tax (article 9, section 182. Tax Law). (Franchise tax based upon the capital stock of the corpo- ration). b. General Property Tax (on real and personal property). 1 2. Holding Companies. a. General Fi-anchise Tax (article 9, section 182, Tax Law). b. General Property Tax (on real and personal property). General Considerations The summary of the existing corporation tax laws of Xew York State, presented above,* indicates the diverse bases ou which corporations are taxed. The chief object of the present investigation has been to reduce the taxes actually paid b^^ cor- porations to a common basis in order that a comparison of the relative burden might be facilitated. In attempting to measure the relative burden of taxes a double problem is involved. In the first place, it is important to know how a system of taxation affects the different corporations within a given group, as, for ins-tance, to determine whether a given tax falls most heavily upon small or large institutions. It is also important to determine the relative weight of the tax burden on different classes of corporations, such as business corporations, public utilities and financial institutions. The pages immediately following are devoted to a consideration of this double problem. !N'et income has been adopted as the standard best adapted to the measurement of tax burden. f For each class of corporation an attempt is made to express the amount paid in taxes as a per- centage of net income, though the original levy may have been upon an entirely different base. Inasmuch as business corpora- tions in New York State are now taxed upon net income, the problem has been that of reducing to the same base the taxes paid by other classes of corporations. At the outset it is necessary clearly to define the term ^^net income," and to indicate certain divergent uses of the term. !Net income, as defined in Article 9-a of the Xew York State tax law, dealing with the taxation of business corporations. " means the total net income (as reported to the Commissioner of Internal Revenue of the United States) before any deductions have been made for taxes paid or to be paid to the government of the United States on either profits or net income or for any losses sustained by the corporation in other fiscal or calendar years, whether deducted by the government of the United States or not '' (Art. 9-a, § 208. * Supra, p. 9 et seq. t Cf. The discussion of the relation between taxes, net income and gross income. Infra, pp. 95-97. fill 12 Tax Law). The basis for the determination of net income for state purposes is thus, fundamentally, net income as defined in the federal revenue act. Certain items exempt from taxation under the federal law are taxable under the JSTew York law. These are : (1) Dividends from other corporations subject to the federal income tax and (2) ^N'on-taxable interest on federal bonds. With the exception of the net loss provision noted above and the inclusion of these two items, taxable net income in Kew York State corresponds almost exactly to income taxable under the federal law.* This definition of net income has been adopted in the tablea relating to financial institutions. All the financial institutions in the state (excluding insurance corporations) were requested to furnish the Committee with information as to the amount re^ turned as net income to the Commissioner of Internal Revenue, the amount received as dividends from other corporations subject to the federal income tax, the amount received in non-taxable in- terest on federal bonds, and the amount deducted for losses sus- tained in other years. By adding these four items a figure almost exactly equivalent to the net income on which business corporations are taxed in iNew York State could be obtained. The returns received from the financial institutions were satisfactory except in regard to the last item — deductions for losses sustained in other years. As some institutions returned answers to this question which were obviously incorrect, none of these returns was used. Fortunately this item was so small a^ to be negligible in the case of financial institutions. The results, therefore, are not sensibly affected by the failure to take account of it. A direct and accurate comparison of the tax burden upon the financial inst itutions and business corporations is thus possible. 13 The difficulties are greater with regard to public utilities. In determining the burden of taxes upon this class it was essential to secure a base period covering eight or ten years in time, since the condition of the public service corporations during the last several years has been somewhat abnormal. The reports submitted an- nually to the Public Service Commission of the State of New York have provided excellent material for a study of the relation of taxes to income. The sole difficulty has arisen from the fact that net income, as defined in the regulations of the Public Service Commission, does not correspond to net income as reported to the tax authorities. A full discussion of the detailed differences is impossible in the present report. In brief, net corporate income, as given in the reports of the Public Service Commission, is equal to total revenues, operating and non-operating, less expenses, taxes, uncol- lectible bills, sinking fund accruals and certain other contractual deductions, such as rent and interest.* While net income as here defined does not depart widely from the federal definition, there does not seem to be a direct and consistent relationship between the two items. The cause, no doubt, lies in the lack of thoroughly standardized accounting practices. One change is made in this item in using it in the present report. In working out the tax ratios for public utilities, the total sum paid in taxes has been added to net income to correct for the previous deduction of this item. Thus the basis of all the public utility tax ratios is net income before taxes have been deducted. In comparing these ratios with the ratios for business corpcra- tions and financial institutions, this difference in the meaning of net income must be borne in mind. While general comparisons are not invalidated by this difference, attempts to make refined comparisons would be out of order. As between public utilities, of course, this objection does not hold, for the base is the same for all classes of public utilities. Certain other terms used in the ratios for public utilities should be explained. 'Net worth as here used is the sum of the follow- • For a more complete deflnition, see Uniform System of Accounts for Electrical Corporations, New York State Public Service Commission, 1908, p. 31, sec. 10. 14 ing items: "capital stock'' and "surplus" (or "deficit")- ^'re- serves" and "undivided profits." This is, of course, merely a bookkeeping figure for net worth, and in some cases includes Items which could be questioned as representing elements of present value. The item "gross earnings," as given in this re- port, IS the sum of operating revenue and non-operating revenue as reported to the State Public Service Commission. ' The Burden of Taxes on Business Corporations Inasmuch as the tax on business corporations is now on an income basis, this class has been used as the standard to which the other groups have been compared. The exact status of the cor- porations falling within this class should be made clear, however, before the taxes paid by other corporations are discussed. The basic tax now paid by business corporations '- is a 41/^ per cent tax on net income as defined above. This is in lieu of aU other fran- chise and personal property taxes. These corporations are ta^ed in addition, of course, upon all real property held, certain forms of fixed equipment being included in the definition of real property. The amounts paid by corporations taxed under Article 9-a of the tax law are shown below for the last four vears (fiscal years ending June 30th). The figures for 1918 and 1919, it should be noted, represent taxes collected when the franchise tax was 3 per cent of net earnings, while the 1920 and 1921 figures rep- resent 41/^ per cent of net earnings. TABLE 1 Receipts From Tax ox Business Corporatioxs Receipts f ^^^^ $13,676,676 ^^^^ 19,785,618 ^^^^ 29,789,350 ^^^^ 42,389,822 In addition to the basic tax of 41/2 per cent on net income, business corporations are subject to taxes on real property as coio^ad^f SxTaw«"^^/. TprTv- 9 ""'^ ^'^" "'"^^ ^° *^^ «""^"^--- ^^ --«°« t The 1919 figures include some taxes levied in 1918, but not collected till 1919. 15 noted above. For reasons which are discussed in more detail below,* these property taxes are not, in general, as burdensome as are other direct taxes. The amount of such taxes paid by business corporations may be noted in passing, however. While specific figures are not obtainable, this amount may be approxi- mated by multiplying the total assessed values of property held by business corporations by the average tax rate. In 1920 the amount paid in property taxes by mercantile and manufacturing corporations was approximately 30 millions of dollars or 4^/^ per cent of their total net income. Thus total taxes paid in New York State by business corporations under existing laws would be about 9 per cent of their net income. This percentage would be slightly lower (about 8.65) if the base taken were net income before any taxes were deducted. f Later reference will be made to these figures in comparing the burden upon these companies with the burden of taxes on other corporate groups, t The Burden of Taxes on Financial Institutions The classes of financial institutions studied in the present sec- tion are national and state banks, trust companies, investment companies and savings banks. The taxes paid by these institu- tions have been summarized aJbove.§ In brief, national and state banks pay annually, on behalf of their stockholders, a tax of one per cent on the value of their shares of stock. As the value of the shares is based upon the capital, surplus, and undivided profits of the individual banks, the tax amounts to one per cent of capital, surplus, and undivided profits. Trust companies pay a franchise tax of exactly the same percentage of their capital, surplus, and undivided profits. Investment companies pay a franchise tax calculated upon a double basis ; it is equal to one per cent of surplus and undivided profits, plus one and one-half mills on each dollar of capital stock. Savings banks pay a franchise tax equal to one per cent of the par value of surplus and undivided earnings. In addition, all these institutions are subject to a tax on their real property. * Gf. infra, pp. 25, 26. , , . t Attention should be called to the fact that the base used in these calculations Is that part of the total net income of business corporations which has been allocated to New York. t Infra, pp. 28, 90-93. § Supra, p. 9. -/ 16 of L':k~irS- /;r '"^^^^^ '''''''''-' ^^ ^^^ ^- t^^^jv ui irancnise taxes are e-iven in i^h^ ^^n • , 1 1 coveimg the period 1917-1990 t^^ ^ /. *= taoie, state banks have been es'ti b^Ldirt r^^;"^^^ -"^^ from the bank-stock tax between the^ JoZstthefjT^ the aggregate capital, surplus, and undivided nrnfi^ Tl ^^^ groups. The fact ha. been ^oted elthere ^C Is T *"° which are actual reeeinfQ h^ fio i , ^^^^^ figures, a lag of one ,ea ZZolZjZl "^'"^ '""^ ''*^' ^''- banks, which have been ns^^ , "l''""* '"*"™ ^^<'™ ^^^^ section. "^ '° compxhng the other tables in this Recei PTS TABLE 2 From Bank Stootc m> t?^. ^ OIUCK OR -bRANCHlSE -b iNANciAL Institutions* Taxes on CLASS OF CORPOKATION l^^ ^"-^ '^ ''-^ «™- <>« Fk..ch„. T«,, 1917 1918 National banks. State banks. . . . Trust companies Savings banks «4, 390, 105 932.032 2,536,718 1.394.647 1919 $4,602,252 981,762 2,778.674 1,455.434 15,010,510 1.068,152 2,911.474 1.337,961 1920 $5,792,208 1.239,268 3,196,586 1,439,896 1921 S3, 377, 292 881,950 What do these taxes amount to in terms of net income? TV question must be answered fir,t fn,. ,1. 7-J^ mcome? This falling within a given clat, t^^L ^IH 'T'^''^''' whole in nrHp^ +v,o+ • s^conaiy, ±or the class as a be made ""^"""'^ "^^'^ ^-'-- corporations may The first question relating to the Kiir,l»r, ^f . members of a given class i. L I 1 *^''^ "P<»^ ^^"^ immediatelv fdW ^g' Tab le Tsh'""'!'^'^ '"^ *^ ^^ *«"- income paid in the ba^k l\^l u ' '^' Percentage of net York sLe, clal:rfiracrL:^o'c tr '^"^ ^" f- "sed, has been defined above Botl, T ■ ''"''*°''' "' ^"^ are averages for the three ^ar! 8 Zr 'f.T '^^^^ remaining tables present similar fi^S fir tl'^tt f "^'^ financial institutions. ^^^^'^ '''^^^^ ^^ thrs'e-iliraTe-L't-r-.'- "-^ "»' »-' '-.uded in thi. table. The receipts fron. 17 TABLE 3 Percentage op Net Income Paid in Bank Stock Tax by National Banks in New York State Frequency Table Showing the Relative Burden of the Bank Stock Tax on National Banks, by Classes (Based upon the average tax and the average State net taxable income for the "three years 1918, 1919 and 1920) Number Patinq Num- ber in each CLASS* 2% 4% 6% 1 8% 10% 12% [14% 16% 18% 20% 22% 1 24%;26% 30% ^ to ! jr_ class to to to to to to to 1 to to to to to to to 1.9% 3.9 5.9 7.9 9.9 11.9 13.9 15.9 17.9 19.9 21.9 23.9 25.9 27.9 31.9 per cent A 11 28 1 2 3 5 8 1 7 4 1 4 i i i B c 204 155 1 2 1 6 8 20 31 33 37 83 35 33 45 26 31 11 47 20 11 32 7 6 13 3 3 6 5 2 8 3 1 4 3 4 3 2 5 2 5 D Total 398 1 76 j 75 2 5 * Class A is composed of companies with capital, surplus, and undivided profits of .$10,000,000 and over; Class B. of $1,000,000 to $10,000,000; Class C, $100,000 to $1,000,000 ; and Class D, less than $100,000. (Three national banks reported an average deficit for this period) TABLE 4 Percentage of I^et Income Paid in Bank Stock Tax by State Banks in New York State Frequency Table Showing the Relative Burden of the Bank Stock Tax on State Banks, hy Classes (Based upon the average tax and the average State net taxable income for the three years 1918, 1919 and 1920) Num- ber in each class Number Fating CLASS * to 1.9% 2% to 3.9 4% to 5.9 6% to 7.9 8% to 9.9 3 17 16 36 10% to 11.9 3 7 8 18 12% to 13.9 2 9 4 15 14% to 15.9 i 8 3 18% to 19.9 i 1 20% 22% to to 21.9 23.9 2 i 1 3 1 34% to 35.9 i •■ 1 Over 40 per cent A 1 21 77 57 "2 i 1 2 3 14 6 1 9 13 17 B C 1 D Total 156 2 23 1 40 12 2 1 * Class A is composed of companies with capital, surplus, and undivided profits of $10,000,000 and over; Class B, of $1,000,000 to $10,000,000; Class C, $100,000 to $1,000,000; and Class D, less than $100,000. (Two State banks reported an average deficit for this period) 18 TABLE 5 Percentage of Net Income Paid in Franchise Tax by Trust Companies in New York State Frequency Talle Showing the Relative Burden of the Franchise Tax on Trust Companies, by Classes (Based upon the average tax and the average State net taxable income for the three years 1918, 1919 and 1920) CLASS* Num- ber in each class Number Patino to 1.9% 2% to 3.9 1 1 3 4% to 5.9 i 6 6% to 7.9 4 4 10 18 8 /O to 9.9 2 4 5 11 10% to 11.9 1 8 7 16 12% to 13.9 3 5 8 1AC/ •l*/0 to 15.9 2 16% to 17.9 i 1 18% to 19.9 3 20% to 21.9 2 2 26% to 27.9 i 1 30% to 31.9 1 1 36% to 37.9 i 1 Over 40 per cent 8 25 48 "2 1 A. B C i Total 81 3 5 1 ' 1 1 2 2 3 1 of*«lft*nnnnnA*^°™S®^^^ ^* companies with capital, surplus and undivided profits $ioo^o2b'?oT,Oo'o%o""'''' ""'^'^ ^' '' $1,000,000 to $10,000,000; Cla^ C. (One trust company reported an average deficit for this period) TABLE 6 Percentage of Net Income Paid in Franchise Tax by Investment Companies in New York State Frequency Table Showing the Relative Burden of the Franchise Tax on Investment Companies, by Classes (Based upon the average tax and the average State net taxable income for the three years 1918, 1919 and 1920) CLASS * Number class Number Paying to 1.9% 2% to 3.9 4% to 5.9 6% to 7.9 8% to 9.9 B 3 12 1 1 1 7 1 2 i c Total.. i 15 2 1 8 3 1 1 of 7i!S^.oV\olWiA TSt »Ioo.oS.n'o'"*i»!o"ob.''°'' •'■'*'^""''' "^''^ F-W I 19 TABLE 7 Percentage of Net Earnings Paid in Franchise Tax by Savings Banks in New York State Frequency Table Showing the Relative Burden of the Franchise Tax on Savings Banks, by Classes (Based upon the average tax and the average net earnings over expenses and dividends for the three years 1918, 1919 and 1920) CLASS* .Vumbrr in class Number Paying to 1.9% 2% 4% to to 3.9 5.9 i 6% to 7.9 8% to 9.9 6 10 3 10% to 11.9 12% to 13.9 14% to 15.9 18% to 19.9 20% to 21.9 26% to 27.9 B 30 73 32 1 3 3 1 s 6 i 21 7 ! 10 8 21 7 3 5 2 1 5 1 1 i 1 C D Totel * 135 7 14 1 39 36 19 10 6 1 1 1 1 * Class B is composed of companies with surplus and undivided profits of $1,000,000 to $10,000,000; Class C, $100,000 to $1,000,000; and Class D, less than $100,000. The outstanding fact is that the tax, as at present levied, falls ui)on members of the same group with very unequal weight, when expressed in terms of tax-pajing ability, as represented by net income. In the national bank group one institution paid less than two per cent of its income in the bank stock tax, while five paid over forty per cent. Between these two limits there is a wide dispersion. Twenty-eight banks pay more than twenty per cent of their net income in meeting this tax. Two hundred and one of the total of 398 banks pay ten per cent or more. The extent to which this inequality is connected with inequali- ties of size is also indicated by the table. There is no uniformity of burden, even within a given class, but in general the large banks pay a smaller percentage of their net income in taxes than do the banks of medium or small size. Thus ten of the eleven banks in Class A (having capital, surplus, and undivided profits of $10,000,000 or over) pay less than ten per cent of their net income in meeting the bank stock tax. Of the 204 banks in Class C (having capital, surplus, and undivided profits of $100,000 to $1,000,000) only 79 pay less than ten per cent. The average burden in each class is indicated in the following table, a summarv of the five detailed tables: 20 TABLE 8 AvEKAOE Ratio of Baxk-Stock Tax or Frain^chise Tax to Xet Ixcome, Financial Institutions in New York State by Classes. f JP' average employed in each case is the median ; thus one-half of the total number of corporations included in each of the gven Iroups Paid more htlf%'i^d?rsy'"'"'^-"^ ^' *'^^^ "^^ '^^^"^ - --'-^ theTa'x! whHeTn" Average ratio of bank stock or Class of Corpohation * Number franchise tax u«AiioN reporting to net income National Banks — {median) Class A (Over $10,000,000) ... „ « ^^ B ($1,000,000 to $10,000,000):::::* 28 q?2 C ($100,000 to $1,000,000).. 204 u^ D (Less than $100,000)..: f^ " ;J| Total — ~: State Banks- ^^^ ^^•<« Class A B :: 1 7 C 21 7.67 D :: II »oo 57 8.56 Total ~ Trust Companies— ^'^^ Class A B S 7.5 C 25 10.12 48 9.6 Total . . r ^ Investment Companies — ^ " ^^ Cla^s B C 3 3 12 3.43 Total 71 Savings Banks— ^'^'^ Class B C 30 7.25 D 73 6.62 32 5.20 Total — 135 6.42 The average given above as most representative of the typical condition m each class is the median, the value of the middle Item m an array. Thus for national banks in Class A the median IS 6.6 per cent. That is, the number of banks paying more than ^•^ P^^ ""^^ ^^ ^^^'^ ^^^ income in meeting the bank stock tax (in ?hroaVorS??n|? SLTJ^'wifh^Trn^^l'^ capital surplus, and undivided profits and over: Class B of floOO 000 to $10 000 on?»"^^^^^ P/.^At^) ^^ $10,000,000 and Class D, less than IIOO.OOO. ^^^'^^^'^^ 5 Class C, of $100,000 to $1,000,000; 21 is exactly equal to the number paying less than that amount. In Class B the median is 9.14 per cent, while in Class C it is 11.02 per cent. Thus of the 204 national banks in Class C, 102 pay more than 11.02 per cent of their net income in meeting this tax, while 102 pay less than that amount. The difference between the situation in this class and that in Class A is obvious. The median value in Class D is 9.18 per cent, a smaller value than that in Class C. The median of the entire group of national banks, 398 in all, is 10.03 per cent. One hundred and ninety-nine banks pay less than this amount, and 199 banks pay more. This inequality as between corporations in a given class is found in the case of each of the other types of financial institu- tions. State banks show a distribution much the same as that found for national banks, though the difference between classes is not so pronounced. The same is true of trust companies. In the case of investment companies, a group in which the general tax burden is less than it is for other financial institutions, the inequalities within the group are less pronounced. Of the fifteen institutions for which complete records were obtained, none paid more than 10 per cent of their net income in meeting these franchise taxes. The median for the group as a whole was 3.37 per cent. In studying the burden of taxes on savings banks, the basis has been net earnings over expenses and dividends. This figure corresponds to net income as used by other financial institutions. That the franchise tax on savings banks, when expressed as a percentage of net earnings, falls with unequal weight upon these institutions, as in the cases of other classes of institutions, is demonstrated by the table and graph covering this group.* These wide discrepancies in tax burden which occur among corporations of the same class are due to the fact that there is no consistent relationship between capital and surplus on the one hand and earning power on the other. In general, of course, an ♦ When account is taken of three national banks, two State banks and one trust company which reported deficits for the period covered, and two savings banks paying no tax because of credit granted for bonds held, the medians become : Per cent National banks 10 . 11 State banks 8.67 Trust companies 9.45 Investment companies 3 . 37 Savings banks 6 . 36 22 increase in capital and surplus means increased earnings, but that the relationship is not direct is demonstrated by the fic^ires presented above. A tax which must be paid out of net ear^™ ecur"^ tZT T'T '"^' "^^' ^'^ ''''''' ^^^^ -^^ --tion"^ occur m the burden of taxes, expressed in terms of net income. One other aspect of the present system is worthy of note As nto tt; !1 '"^'"^ "P ^ ^"^'P^- ^^^' I-^^-^ --ings back mto the enterprise, the present method of le^Ting taxes on financial institutions places the heaviest burden iLn thelatter n a sense, thus, these taxes are taxes which discriLna^ agal" ^e consen^ative concern which builds up a surplus. Thev can be partly evaded by distributing dividends closely ' tionsTxf "" °' ^"^"^^^^ institutions and business corpora- ne;ms o7net'^ "" '" '^^'"'^ ''''''^''^^ ^^^ -P^--^ tL on the ""'"' T^'"^ ^''^ '^' '"^^'-^ ^y^ P- -nt tax on the net income of business corporations? It has been ttrTher' ^'" '''-' r^^"^^^^ - ^--^ financial ItS: t on of 2 ""T '." ^' ^'"^""^ ^^^ ^"^*^- - *- the rela- tion of the average burden on financial institutions to the average burden on business corporations. ^ witht T7 " .T^^-^^^^ ^y t^e -^e variation in burden withm the financial groups. In classes characterized by such ex reme variation, what figure is to be t.ken as representative of the average burden of present taxes ? One average, the median, has b en used above, and the comparison on this basis may bJ extended for the present purpose. Another average, however should be used to supplement the median. The latter gives the sa^e weight to both large and small banks, but in computing tt ome w ;^"-^r '" '""'"' ^' '"^"^^-^ -^^* ^- - -t in- come would yield as much as the present bank stock and franchise taxes, a ratio giving this information is required h/V^l\rT"" '^" P-^^-tage of net income paid in taxes by each of the classes of financial institutions has been determined by computing the ratio of total taxes paid over a given period to 23 the total net income of all the corporations In each class for the same period. Thus, in the case of national banks in IN^ew York State, the total amount paid in bank-stock taxes by 397 banks, during the years 1918, 1919 and 1920, and the total net income of these banks during this period have been determined. The ratio of the former figure to the latter is .068. The amount paid in taxes is thus 6.8 per cent of net income during this period. The percentages as determined for the different classes of financial institutions are shown in the following table. The comparison made, it 'should be understood, does not include real or personal property taxes paid by any of the groups involved. TABLE 9 Percentage of Net Income Paid in Bank Stock or Franchise Tax by Financial Institutions (Ratios based on aggregates of three-year figures, 1918-1920) Ratio of bank-stock tax (or franchise tax) to net income after property taxes deducted Percentage National banks 6 . 80 State banks 6.58 Trust companies 7.33 Investment companies 3.13 Savings banks 5 . 80 It is evident that with one exception financial institutions pay a somewhat larger percentage of their net income in meeting their bank stock or franchise taxes than do business corporations in paying the tax on net earnings. In comparison with the 4^/2 per cent paid by business corporations the three-year average for national banks shows that 6.8 per cent of their net income has been paid in taxes, as has been stated above. The corresponding figure for state banks is 6.58 per cent, for trust companies 7.33 per cent, and for savings banks 5.8 per cent.* Investment com- panies constitute the one class paying less than- business corpora- * These ratios for trust companies and savings banks are based upon taxes actuaUy paid, not including the amount of the levy for which credit was granted for State bonds held. If the tax levied be used. Instead of the tax paid, the ratios become 7.5 per cent for trust companies and 6.74 per cent for savings banks. 24 tions, on the average. The fifteen companies included showed an average of 3.13 per cent of net income paid in taxes.* A comparison may dso be made of the number of corporations of each type pajmg a percentage of net income in taxes equal to IS given in the following siimmarj: » T:ABLE 10 Financial iT^sTiTUTio^s, by Classes, Paying 41/2 Per Cent o^^^ET Income on Less in Bank-Stock Tax on Fbanchise CLASS National banks State banks Trust companies . . Investment companies Savings banks... Total number reporting Number paying i^ per cent or less in bank-stock tax or franchise tax 398 156 81 15 135 17 7 11 11 30 mve tment companies group pay more than 4% per cent of their net income m meeting the taxes named. These figures sub- s.n late the evidence of the other tables and throw some addi- In studying the percentage of net income paid in taxes it i. of some interest to determine the year-to-year changes. The fo" owing table shows, for all the classes here considered, the ratio of taxes to net income for the years 1918, 1919 and 1920 The perceiuages given were calculated on the basis of yearly 'a^^n-e- gates, the general method being that indicated above. "^ ^et^nco^e means m each case net income before bank stock or franchise taxes have been deducted. -Liducnise of *t?e'YaftV;^bilnT n^^fiS.'" "" ""'^^ ^-"^^^ ^- Stat, bonds held, the amount 25 TABLE 11 Percentage of Net Income Paid in Bank-Stock Tax or Franchise Tax by Financial Institutions in New York State, Classified, by Years, 1918-1919 CLASS OF INSTITUTION National banks State banks Trust companies Investment companies Savings banks Percentage of Net Income Paid in Bank-Stock Tax or Franchise Tax 1918 7.0 8.2 8.4 5.0 8.1 1919 6.3 5.9 7.6 3.0 7.0 1920 6.7 6.2 6.5 2.7 3.3 It is apparent that a tax on capital and surplus means a tax which varies from year to year, when expressed in terms of net income. When income is increasing faster than the surplus is being built up, this means a decreasing annual tax. This con- dition prevailed during the three years here considered. This is particularly true in the case of savings banks and investment companies. The tax on the former, which amounted to 8.1 per cent of net earnings in 1918, fell to 3.3 per cent of net earnings in 1920. The fact that the present tax is based upon a variable surplus, having no immediate relation to earnings, is clear in this case. For the savings banks here included (135 in number) surplus and undivided profits decreased from $144,780,305 in 1918 to $98,080,640 in 1920, while net earn- ings increased from $14,274,279 in 1918 to $23,275,379 in 1920.* In the above treatment the comparison of tax burden, as between financial institutions and business corporations, has been confined to the discussion of taxes other than property taxes. This has been done on the assumption that the burden of non-property taxes is much more direct and immediate than that of taxes on real property. A long-standing tax on real property has in gen- eral been capitalized in determining the value of the property, so that the present payer does not feel the burden directly. It is • These figures are for net earnings after taxes had been deducted. The ratios are based upon net earnings before taxes were deducted. 29 considered, therefore, that a comparison of the burden of non- property taxes has more significance for our present purposes than a comparison of the burden of all taxes. Having stressed the main relations involved in the first com- parison, however, it is of some interest to compare the burden ot property taxes, as borne by the different corporate groups In ■computing the ratios given in the table following, the returns from individual financial institutions have been utilized The ratios are based upon the amount paid in property taxes and the net income for the year 1920. The net income used as a base is the net income before any taxes, franchise or property have been deducted. In determining the ratio for business corpora- tions, total net income has been calculated by capitalizing the amount paid in income taxes. The amount of property taxes paid by business corporations is a fairly close approximation obtained by multiplying the total assessed value of such property by the average tax rate for the State. TABLE 12 Perce^taoe of Nbt Ir^coME PAin IN General Property lAXES BY Business and Financial Coeporations, 1920 Percentage of net inrome Class of corporations P^'^ '" general property Business Corporations (Mercantile and '-<-'— .o„a., Manufacturing) . ^ National Banks . ^ State Banks « « Trust Companies ^ ^ Investment Companies q */^ Savings Banks on o . o It is apparent that there is a considerable variation in the "^T.?^!. ""' """' P'^^ ^" P^^P^^^^ '^''' A« compared with the 41/. per cent paid by business corporations, trust com- panies pay 4.1 per cent and State banks 3.5 per cent The amount paid by national banks was only 1.5 per cent of their net income, m 1920, while investment companies paid but seven- tenths of one per cent. These figures are in all cases somewhat 27 smaller than the percentage paid in earlier years, the decrease being due to the increase in the incomes of financial institutions in 1919 and 1920. The figures for the earlier years are given below for financial institutions, with the exception of Savings Banks. TABLE 13 Percentage of IN^et Income Paid in Property Taxes by Financial Institctions in ISTew York State^ by Years, 1918-1920 class of corporation National banks State banks Trust companies Investment companies Savings banks Percentage of Net Income Paid in Phoperty Taxes 1918 1 7 5 4 5 1 6 1919 1.5 3.6 4.8 1.9 1920 1.5 3.5 4.1 .7 3.6 A summary of the total amounts paid in taxes by business corporations and financial institutions may now be given. Th^ following table shows the percentage of net income paid in all taxes (bank-stock (or franchise) and property) by business cor- porations and financial institutions. For financial institutions, with the exception of savings banks, figures for three years are given. In the case of business corjx)rations 1920 figures alone are used, the property taxes paid in that year being added to 4^/2 per cent of their total net income in securing the total tax figures. Net income in each case is a figure from which no taxes have been deducted.* * There is thus a slight difference between the present base and the one used for the earlier ratios. Property taxes had been deducted as an element in expense in arriving at net income as used in the earlier tables, but in the present case no such deduction has been made. 28 TABLE 15 PkhC KyTAGES OF JSTet InCOME PaID IN FRANCHISE (OR BaNK- Stock) and PRorERTY Taxes by Business Corporation3 AND Financial Institutions in :New York State 1918-1920. ' CLASS OF corporation Business corporations National banks State banks Trust companies Investment companies Savings banks Pekcentace of Nkt Income Paid in Taxes 1918 1919 8.7 13.3 12.9 6.4 7.7 9.4 12.0 4.8 1920 8.65 8.1 9.6 10.3 3.3 6.8 The table shows somewhat the same distribution of burden as was found in the case of non-property taxes, trust companies and investment companies standing at the two extremes. The difference between the burden on business corporations and financial institutions is less pronounced, however, the property taxes being relatively larger for the former class. The warning which was given above that taxes on real property, apart from improvements, are not necessarily borne by the present tax-payer, must be remembered in studying these tables. Real burden is better indicated by the first tables, dealing with non-property taxes, than by those in which account is taken of all taxes paid. The detailed figures on which the above ratios are based arc included in the appendices. The Burden of Taxes on Public Utilities The taxes paid by public service corporations in Xew York State have been described in an earlier section of the present report.* The following is a brief summary of that section: All public service corporations are taxed on their real and ]yer- sonal property and on the value of their special franchises. This latter tax is based in part on the value of tangible property in • Cf. supra, p. 10. 29 the streets, and in part upon the value of certain intangible ele- ments. The value of these intangible elements is determined with reference to corporate earning power. The taxes described above are paid to the localities in the form of a general property tax. In addition to these local charges all public utilities are taxed by the State on their gross earnings (or on gross earnings and excess dividends), and certain classes are taxed on their capital stock. The rate of the gross earnings tax varies, being one-half of one per cent for steam railroads, telo})hone and telegraph companies, and gas, electric and water companies, and one per cent for ele- vated or surface electric railroads. Underground electric rail- roads are taxed upon the same basis as steam railroads. The general franchise tax on capital stock is paid by steam railroads, underground electric railroads and telephone and telegraph companies. The amounts paid in taxes by the different classes of public service corporations during the period 1917-1920 are shown in the following table. The totals for all public utilities show the yields of the various taxes. In certain cases the exact amount paid by a given class of public service corporation in meeting a given tax could not be ascertained from the Tax Commission records, and in these cases the figures presented are estimates. These have been checked and tested, and are believed to approxi- mate closely the actual tax paid. 30 CO 1—1 W PQ < o OS CO OOOeO CO CO o5 lOCOCO ooooo csT "5iO OS CO wo CO .12; o H O « o O n P Ph o (g OS H Oh l-H o p^ OS ,— I OS ■*os ot» 00 00 «o l-H «» CO >CM-40 '-'O-^O r^NoocsT CO ^ 00 ■*Tf SB C0C0U5 O-^iC eo o5 eo* 00® ss-^ 00 00 ®-H oo ®i-i OSiH CON CO 00 00 00 1-HCO «00 coco iCCONO s •^■*o-< r» CO i-< r-4 OS >Ct^Cr TfN C«OS «i*< •<*.-i »^C0 t-00 » • e^^ •» t^os OS*U5 »ooo CO OSi-iOSt». I ?o •-Hcoooco I t^ OS OS CO OS C0»0 tN. (Dm N •OOONiO 'i' 00 ^ »H co^Mico" »O00»Cif5 t^eo ^OS ,—1 ^ cc* c eo CO 00 OS i-ico«5j Ni-HCCOS CDiOC^W CO l-H MOS 00 C4 eo^ CO© (OS s CI o OS CO* CO »o CO McO ITS CO OS^ N* CON.au5 00 -^IN^ 00 OS ,692 329 844 175. 1-4 ^ $ OC»-t t-00 COO CO CO N.ev>t^eo t^CSt^CO 00 298 362 329 069 00 CO»-4 l-l E I 3 as a 00 >. as js 4) « HI """S OQ u c M h d « Qi d I o a o o a 00 a c3 9i 2§« «Ph^M . ao H 2-5:0 O U O. b. K as o 31 C^CS coco CS»t^ coos 00« COiOOO <5 CD OSOSI>» CO Sg"' g N CO «» coo OcO (NO t>.co mo OS 00 COO C»CD cocoes CO NOOM o OS c^ CO CO f-oeo CO 00 OS CO ">*OS 0» l^ t* ■> » Vk » «eo»o "5 COCO M C4 UO «» «t* eoiH COi^CO ift^CO M COf-H« M • ■> •> «k CO COO CO ost^t^ l-H cot^c^ »o f-H 1— ( M t»CO os^ 00 00 OS l-H CO l-H 00 M M W5 0S cot* CO-* i-Tos esi-* »OM W5 CO M COOS MCO COOS eo * O-* os>o »ot* t»«0 OSt* est- CO* •*oo CO coo CO OS 00 coco OS »oc5m eot*M U5 CO cot* Ml-H ■*M OS (Neo»o ■*iOiO eo CO CO t*t»oo to »-H (N CI ;s 00 OS 00 OS 00 e< OOM o 00 t* » •4 2g *c« COOS 1-1 eo 00 1* 182,185 297,037 399,972 CO 116,134 410.388 M ^ OS rH ^CO <©■* o t* eo 10 1* •1 a a s I® 3 60 c 03 V s ■ s.a ■ H « O 2 ^* 2-^ OS'S 5 «« 2 S ft « 5 5, 32 ^ 1—1 CO 5* 00 CO /■OMO OC0-* ooeoiN 1-H cooou5 •-•on>. «)§fO O CO CO e5 , ^ t^ lO I 05 00 ;D CD .-I I CO CO 3 00 S3 a . OB SS,c • *^* O V Q. i; K 08 OHO OD 04 "3 hi V 1-H "d OiO 1 "^ ^ e >OcO (N ^ eS (NO Oi CO ■<** CO -S OQ $181 84 CO CO «» c 73 eS o I I S "^ 05IN (N C - « O ^T»< a d CO (N 00 OS coo 00 ^^«> g" oo"oo* s fa «• 1 I a 03 u a o Oi ■•^ V T3 3 CO (N CI JO 0.0 eS t-> oo 03 OQ IS a a -♦J ■♦a •mm B S JS to g8 OQ 0) S §■ o .© "53 OQ s o o B s CO JS I ki 33 Method of Study.— The general method employed in deter- liiining the burden of taxes on the different classes of public serv- ice corporations has been the selection of a sample group from each class, and the intensive study of this group with respect to earn- ings, expenses, and taxes. It has been possible to secure adequate samples of telephone and telegraph corporations, street railways, and gas and electric corporations. For these groups the ratios and tables are based upon an intensive study of the individual cor- porations included in the samples during the period 1911-1920. A study of steam railroads upon the same basis has been impos- sible. Because of the wartime control of railroads by the govern- ment, the reports for the years 1918, 1919 and 1920 are not directly comparable with those of earlier years. Secondly, most steam railroads engaged in interstate operations make no segre- gation of their tax payments by States, in reporting to the Public Service Commission or to the Tax Commission of ^ew York State. A detailed study of representative railroad companies has thus been impossible, for the small number of companies for which detailed figures were available was not considered suffi- ciently representative to justify the drawing of conclusions. The ratios for steam railroads have therefore been derived in another way. The total amount paid in taxes to New York State and localities by all the steam railroads operating within the State has been determined from the records of the Tax Com- mission. From the records of the Public Service Commission have been secured figures on gross earnings, operating expenses, and net income for the period 1911-1919, inclusive, for all steam railroads operating in New York State. In using the records of the last two years of this period the actual net earnings, apart from the federal rental, have been taken.* An allocation has been made in each case on the basis of main track mileage. In determining the ratios of taxes to earnings and expenses it has been necessary to exclude figures for the year 1916, as the fiscal year of the State was changed in that year, and the tax receipt figures are correspondingly distorted. * For each road under federal control the sum of the net income of the corpo- ^^tion and the reported net income of the Railroad Administration, less the amount or the federal rental, has been taken as the actual net income of the road 84 Katios for the steam railroad group have been worked out for all the railroads in the State, therefore, on the basis of figures covering eight years (1911-1919, inclusive, excluding 1916). Total tax receipts have been compared with total gross earnings, expenses, and net income for this period. The ratios of taxes to gross earnings and operating expenses have been based upon returns from the operating companies only. In securing the total net income of all the railroad companies in the State, an allocated portion of the net income of lessor companies has been added to the net income of the operating companies.* Certain of the tables presented below are based upon returns from individual public service corporations. Steam railroads are not included in these tables, appearing only in the tables based upon aggregate figures. Relation of Income to net Worth. — Before attempting to determine the relative weight of the various taxes upon different classes of utilities, something should be known as to the percentage of corporations in each class operating at a loss, and as to the general relation of income to invested capital. The following table shows, for the sample group studied, the number of corporations in each class operating at a profit and operating at a loss during the ten-year period 1911-1920: * The aUocation basis for lessor roads was main track mileage, the basis employed for operating roads. 35 TABLE 17 Summary of Public Service Corporations in New York State The records of which were examined hy the Joint Legislative Committee on, , Taxation and Retrenchment Number Number operating at operating at a profit (1. e.. a loss (i. e.. Total reporting reporting an Number an average Percentage average Percentage of cor- net income, operating deficit, operating Class of utility porations 1911-1920) at a profit 1911-1920) at a loss Steam Railroads* 60 43 71.5 17 28.5 Electric Railways 56 34 60.7 22 30.3 Telephone and Telegraph 66 62 94.0 4 6.0 Gus and Electric: Electric Light and Power 50 45 90.0 5 10.0 Gas and Electric (com- bined) 22 1» 86.5 3 13.5 Coal Gas and Water Gas 18 15 83.5 3 16.5 Natural Gas 1« t 18 100. Total Gas and Electric. 108 1 97 80.8 11 10.2 Grand Total, Public Ser- vice Corporations 290 236 81.5 54 18.5 Efforts have been made to make the above samples as repre- sentative of the different classes of utilities as possible. In making the first selection, all corporations, the records of which seemed complete for ten years, as reported by the Public Service Com- mission, were included. The inadequate character of some of the records made it necessary to exclude certain of these corpo- rations. In some cases corporations having partially complete records were included, the average being worked out for a slightly shorter period. It is apparent from the figures given that certain classes of utilities are much better off than others and that the utilit}^ group as a whole is not in as strong a position as the financial institutions studied in the preceding section.:}: Thirty-nine per cent of the electric railways operated at a loss during the decade 1911—1020, * Based upon reports from 60 operating steam railroads for the period covered. C/. supra, pp. 33, 34. t This figure includes one company the net worth of which was a negative figure ; it is included since it showed a positive net income. % CJ. supra, pp. 17, 18. Of the total number of financial institutions reportin g only six showed an average deficit for the period 1918-1920. This Is a shorter period, of course, than that covered by the utility figures. Note.— This statement does not include a number of public service corporations the records of which were examined by the committee for the ten-year period, 1911-1920, but which were inadequate for the purposes of the committee. *^, 36 37 while G per cent of the telephone and telegraph corporations showed a net loss during this period. Of the utility group as a whole, 18.5 per cent showed an average loss for this period. The number in each class operating at a deficit is shown in the detailed tables which follow. The majority of the corporations failing to show a profit are small companies. These facts should be borne in mind in considering the tax figures presented.* For apart from the absolute size of the taxes, the losses suffered by some companies serve to increase materially the average percentage of net income paid in taxes. In the tables dealing only with the profitable companies this difficulty is not present. For the corporations reporting an average profit for the period here studied, the relation of net income to net worth is shown by classes in the detailed tables following. f TABLE 18 Relation of Net Income to JSTet Worth, Electric Railways IN New York State Frequency Table Based upon the Average Annual Net Income and the Average Net Worth During the Period 1911-1920 Percentage relation, net income to net worth Electric Railways reporting from New York State Num- ber in class Number showing deficit Number Earnino CLASS Less than 2% 2% to 3.9 4% to 5.9 6% to 7.9 8% to 9.9 10% to 11.9 12% to 13.9 A Operating revenue $1,000,000 or over 10 27 19 3 8 11 1 7 4 1 2 2 1 4 2 2 2 1 1 2 B Operating revenue $100,000 to $999,999 1 C Operating revenue less than $100,000 1 Total 56 22 12 5 7 4 1 3 2 • As was explained above, the net income on which these results are based is net income before any taxp.s have been deducted. t As explained above, steam railroads are not included in the freauencv tablps based upon returns from individual corporations. t«u't3» TABLE 19 Relation of Xet Income to Net Worth, Telephone and Telegraph Corporations in New York State Frequency Table Based upon the Average Annual Net Incoine and the Average Net Worth During the Period 1911-1920 Percentage relation, net income to net worth Telephone and Telegraph Corporations reporting from New York State Num- ber in class Number showing deficit Nxtmber Earning CLASS Less than 2% 2% to 3.9 4% to 5.9 6% to 7.9 cor o to 9.9 10% to 11.9 12% to 13.9 14% to 15.9 16% to 17.9 18% to 19.9 24% tu 25.9 Class A Operating revenue $1,000,000 or over. 2 . , , . 1 1 .. .. ■ • • Class B Oneratine revenue $100,000 to $999 ,999 7 .... 2 1 2 1 1 .. • ■ • Class C Operating revenue $25,000 to $99,999 10 .... , . . , . . 3 1 2 1 1 1 1 Class D Operating revenue $10,000 to $24,999 29 2 .... 1 4 8 4 4 2 2 1 1 • • • Class E Operating revenue less than $10,000. . 18 2 1 4 7 5 9 4 13 1 9 8 5 1 4 3 2 Total 66 4 1 1 mm- TABLE 20 Relation of li^BT Income to ]^et Worth, Electeic Light AND Power Corporations in I^ew York State Frequency Tables Based upon the Average Annual Net Income and the Average •\et Worth During the Period 1011-1920 Percentage relation, net income to net worth Electric Light and Power Corporaticy>xs reporting from New York State CLASS Operating revenue $1,- 000,000 or over Operating revenue $100- 000 to $999,999 Operating revenue $25,- 000 to $99,999 Num- ber in class Number showing deficit Number Earning 8 22 15 D Operating revenue less than $25,000 Total. Less than 2% 2% to 3.9 4% to 5.9 6% to 7.9 50 1 3 8% to 9.9 10% to 11.9 12% to 13.9 14% to 15.9 16% to 17.9 10 I 8 CLASS Num- ber in class A Operating revenue $1,000,000 or over B Operating revenue $100,000 to $999,999 Total 8 14 22 WS^ TABLE 21 Eelation of 'Net Income to Net Worth, Gas and Electric Corporations in New York State (Combming gas and electric service.) Frequency Table Based upon the Average Annual Net Income and the Average Net Worth During the Period 1911-1920 Percentage relation, net income to net worth Pas and ElectHc Corporations reporting from New York State Number showing deficit Less than 2% 4% to 5.9 39 TABLE 22 Relation of Net Income to Net Worth, Manufactured Gas Companies in New York State Frequency Table Based upon the Average Annual Net Income and the Average Net Worth During the Period 1911-1920 Percentage relation, net income to net worth Manufactured Gas Companies reporting from New York State class Operating revenue'$l ,000,000 or over B Operating revenue $100,000 to $999,999 Num- ber in class Number showing deficit Number Earning 1% to 1.9 Operating revenue $25,000 to $99,999 D Operating revenue less than $25,000 Total 18 2% to 2.9 3% to 3.9 2 3 I 2 5% to 5.9 6% to 6.9 2 1 7% to 7.9 8% to 8.9 10% to 10.9 12% to 12.9 14% to 14.9 40 41 TABLE 23 Relatio.x of 'Net Income to I^et Worth, J^atural Gas Com- panies IN New York State Frequency Table Based upmi the Average Annual Net Income and the Average Net Worth During the Period 1911-1920 Percentage relation, net income to net worth Natural Gas Companies reporting from Neio York State Number Earning Num- ber in class CLASS Less than 2% 2% to 3.9 4% to 5.9 6% to 7.9 8% to 9.9 1 10% to 11.9 12% to 13.9 1 14% to 15.9 16% to 17.9 Operating revenue $1,000,000 or over. . . 2 Operating revenue $100,000 to $999,999. 6 .... 2 . . 1 1 1 1 c Operating revenue $25,000 to $99,999. . . 6 .... 1 . . 2 1 1 , , , ^ 1 D Operating revenue less than $25,000 3 1 1 1 , , 3 1 Total 17 1 2 3 ' 2 1 2 TABLE 24 Relation of Net Income to Net Worth, All Gas and Electric Companies in New York State Frequency Table Based upon the Average Annual Net Income and the Average Net Worth During the Period 1911-1920 Percentage relation, net iRCome to net worth All Gas and Electric Companies reporting from New York State CLASS Num- brr in class Operating revenue $1,000,000 or over 20 Number showing deficit NiTMBBB Earning Less than 2% B Operating revenue $100,000 to $999,999 Operating revenue $25,000 to $99,999 Operating revenue less than $25,000 Total 51 26 10 107 2% to 3.9 2 2 4 11 4% to 5.9 6% to 7.9 8% to 9.9 10% to 11.9 1 3 3 5 6 11 12% to 13.9 14% to 15.9 16% to 17.9 5 I 2 13 16 15 12 18% to 19.9 22% to 23.9 1 1 The marked variation in each group in the return upon capital invested is apparent. Electric railroads, excluding those oper- ating at a loss, show a marked concentration in the group earning less than 2 j3er cent, though one company earned as much as 13 per cent on its net worth. The rates of return earned hy telephone and telegraph companies extend from less than 2 per cent to 25 per cent, the largest single group being made up of companies earning from 6 per cent to 8 per cent. The range for gas and electric companies extends to 23 per cent, the largest single class being those earning from 8 per cent to 10 per cent over the ten-year period covered. The meaning of net income and net worth should be kept in mind in using these figures. Net income is income before taxes have been deducted and net worth is a book-keeping figure, the sum of capital, surplus and undivided profits. 42 ^ In the following- tables the median value of the ratio of net income to net worth is presented for each class of utility. In the first table this average has been computed when all companies in a given class have been included, while in the second table only those operating at a profit have been included. TABLE 25 Average Ratio of ISTet Income to !N'et Worth Public Service Corporations in New York State, 1911-1920 r,„I^ average employed in each ease is the median; thus one-half of the total number of corporations included in each of the given groups earned more than the given percentage on their net worth, while one-half earned less. Average Ratio, Net In- come to Net Worth (expressed as a per- centage relation) Class of Utility Electric Railways Telephone and Telegraph Gas and Electric: Electric Light and Power Gafi and Electric (com- bined ) Gas (manufactured) Gas (natural ) Total Gas and Electric Number of Corpora- tions Included 66 •66 1.0 7.85 50 22 18 *17 10.0 8.0 6.5 8.33 107 8.44 ♦ One company has been excluded because its net worth was a negative figure. 43 TABLE 26 Average Ratio of Net Income to Net Worth Public Service Corporations Operating at a Profit, 1911-1920 (Excluding corporations showing a deficit) Class of Utility Electric Railways Telephone and Telegraph Gas and Electric; Electric Light and Power. Gas and Electric (com- bined ) Gas (manufactured) .... Gas ( natural ) Total Gas and Electric Number of Corpora- tions Included 45 19 15 17 Average Ratio, Net In- come to Net Worth (expressed as a per- centage relation) 34 4.00 62 8.00 10.5 8.75 6.6 8.33 96 9.12 These tables show the median return to the electric railways to be lowest, but 1.0 per cent upon net worth, while gas and electric companies show the highest median return, 8.44 per cent of net worth. These rates are of course higher when companies operating at a loss are excluded, as in the second table, though the relative standing of the different classes is unchanged. The characteristics of the median have been explained above.* In the present case the large number of small companies earning small returns, serve to make the median value low. The condition of the larger companies is brought out more clearly by a ratio based upon aggregate net income and aggregate net worth. In computing this ratio the actual income and net worth figures of all the corporations have been added, and the relation of net income to net worth computed from these aggregate figures. The following table gives the ratios so computed. • Supra, pp. 20, 21. 44 TABLE 27 Ratio of Aggkegate jSTet Income to Aggregate ^Net Woktii Public Service Corporations in New York State, 1911-1920 The ratio for each class is the percentage relation of acffreeate net inonrn. to aggregate net worth. The aggrcffate fil^refl ii Jh «Lrl ^^^^^^^ "f* income averages for each of the corpofSs incM^^^^ *'" '^" '^" ^^ ^^-^^^^ I ^**?® o^ Aggregate Net Income to Ag- tions included centage relation) Electric Railways ^ Telephone and Telegraph gg ^'^^ Gas and Electric: ^'^^ Electric Light and Power . . 50 9 g^ Gas and Electric (com- ^^"^) 22 8 6 Gas (manufactured) ig ' Gas (natural) ig ^'^^ Total Gas and Electric iao ^ 9.68 ^ The above ratios are based upon reports from all the corpora- tions m each class including those operating at a loss The pre- ponderant influence of the large companies which are, on the whole, more profitable, serves materially to increase the rates as compared with the median values. It is clear from these as well as from the earlier figures that there is a wide variation in the return earned upon net worth. Electric railways show an average return of 3.47 per cent, while gas and electric companies earn on the average, 9.68 per cent on net worth.* ' ^ The relative standing of the different classes of public utilities IS the same m the table shown below, in which the ratios are based upon returns from profitable companies only. 45 TABLE 28 Katio of Aggregate !N"et Income to Aggregate Xet Worth Public Service Corporations Operating at a Profit, 1911-1920 (Excluding corporations showing a deficit) The ratio in each class is the percentage relation of aggregate net income to aggregate net worth. The aggregate figures used are the sums of ten-year averages for each of the corporations included. Class of Utility Electric Railways , Telephone and Telegraph Gas and Electric: Electric Light and Power . . Gas and Electric (com- bined ) Gas (manufactured ) Gas ( natural ) Total Gas and Electric The electric railway figure is materially higher in this table but the other ratios are approximately the same. The slight change resulting from the elimination of the companies operating at a loss is due to the fact that these companies are, in the main, small and affect the aggregate figures but slightly. For many purposes it is desirable that the small companies should not be given too much weight, and for this reason the tables based upon aggregates are of value. The variation in earning power revealed above in the compari- son of different types of utilities is found to prevail within each class when a division on the basis of size is made. The fol- lowing table gives ratios of aggregate net income to aggregate net worth, by classes, for different types of public service corporations. Number of Corpora tions Included i- Ratio of Aggregate Net Income to Ag- gregate Net Worth (expressed as a per- centage relation) 34 4.66 62 9.27 46 9.87 19 9.17 15 10.1 18 9.18 97 9.76 i^ 46 47 TABLE 29 Ratio of Aggbegate Net Ii^come to Aggregate Net Wobth Pubhc Se^ice Corporations in Xe«, York State, by Clm.e, (Katio expressed as a percentage relation) Class A. Class B. Class C. Class D. Class E . Electric railways Telephone and telegraph 3.9 1.6 Negative 9.3 8.8 12.6 6.4 3.7 Electric light and power Gas and electric (com- bined) Manufac- tured gas 9.9 9.7 8.8 Negative 9.2 6.7 Natural gas 11.8 4.8 4.6 Negative 9.6 8.5 8.2 2.4 Total gas and electric 10.0 7.9 7.9 Negative beSS - ^-- -- - ^o^^^ pro. or at a loss, have The return upon the investment is obviously greater for the arge companies than for the small ones. The one exception to this IS found among the telephone companies, where the Class C companies show a greater proportionate return than do the larirer corporations. Relative Tax Burden Within the Public-Utility Groups - ihe materials presented above have indicated the extent of the variation m earnings among public service cor]>orations. A lar-c percentage in some of the classes show an absolute deficit durin- the period 1911-1920. Others, and particularly the larger corixT- rations, have earned adequate returns upon their investment. Ihis variation m earning power means, of necessity, that the burden of taxes has been unequal. Our present problem is to determine the degree of inequality. The variety of taxes paid by each class of utilitv renders the problem more complex and more difficult than that encountered m studying the tax burden upon financial institutions. Inasmuch as many of the ratios given are based upon the total taxes paid by utilities, it is essential to determine the relative imi^rtance of the different types of taxes paid by each class. The absolute figures have been presented in Table 1 above. The following table presents the same facts upon a percentage basis. All the taxes paid by each class of utility constituting 100, this table shows the percentage of the total paid in meeting each of the specific taxes levied. o QO Oi m M H M Hi M H u O M h) P Ph CO o M %^ o 125 O M H P pq M H CO PU| /-\ flj t-^ r; m 3 b ^ c d OniS U 02.2 n 3-i g.2 QQ .1.2 m p o m < Total State CO oo<©ot* Capital stock Total gross earnings and excess dividends ooo Excess divi- dends o (NO Gross earn- ings y-i b»000000 « C t^ 1© ?o Total general property and special franchise O COQOOCO to WOt^N CO OM ^ >0 •* ^ d cs ■ercent- age of net income paid in State taxes by the corporations included in each of the public utility groups. • This ratio is 31.2 when operating roads only are inolnded. t The returns from one large telephone and telegraph company, which is primarily a holding company, affect the telephone ratio materially. When taxes and income of this company are omitted, the ratio of aggregate taxes to aggregate net income, for all other companies, becomes 21.8 per cent. Income, as used in establishing this ratio, includes non-operating as well as operating income. iy m^ 72 73 TABLE 60 Relation of Total State Taxes to I^et Income, Electkic Railways in New York State ^'*T;fJ''lJX?' fia..rf ,,pon the Average Annual State Tax Payments and the Average Annual Ae^ Income Previous to any Deduction for Tax^s During the Period 1911-1920 «*'*t^"un^ jor laxes Percentage of net income paid in total State taxes Electric Railways reporting from New York State Num- ber Number Paying CLASS in class Less than 9% 9% to 17.9 18% to 26.9 27% to 35.9 54% to 62.9 81% to 89.9 315% to 322 ^ A Operating revenue $1,000,000 or over. 7 6 1 B Operating revenue $100,000 to $999,999 19 10 5 2 1 1 C Operating revenue less than $100,000 . 8 4 1 2 1 • • • • .lotal 34 20 6 1 2 3 1 1 Supplementaby Table: Detailed Classification of Com- panies Paying Less than 18 Pee Cent CLASS A B C Total Number in class 7 15 4 Less than 2% 2% to 3.9 4% to 5.9 26 3 1 2 6% to 7.9 8% to 8.9 to 11.9 6 5 1 6 4 1 2 2 12% to 13.9 TABLE 61 Relation of Total State Taxes to !N^et Income, Telephone AND Telegraph Corporations in 'New York State Frequency Table, Based upon the Average Annual State Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total State taxes Telephone and Telegraph Corporations reporting from New York State Num- ber in class Number Paying CLASS Less than 1% 1% to 1.9 1 1 2 2% to 2.9 1 3 3 4 3% to 3.9 1 2 3 8 2 4% to 4.9 1 2 7 2 12 5% to 5.9 2 2 2 6 6% to 6.9 1 1 7% to 7.9 1 2 8% to 8.9 1 2 3 9% to 9.9 1 1 11% to 11.9 1 1 15% to 15.9 1 1 16% to 16.9 A Operating revenue $1,000,000 or over. R Operating revenue $100,000 to $999,- 999 2 7 10 27 16 1 1 1 C Operating revenue $25,000 to $99,999 D Operating revenue $10,000 to $24,999 E Operating revenue less than $10,000. . • • 1 • . . Total 62 3 11 16 2 ' -1 1 ^ - 74 TABLE 62 Relation of Total State Taxes to Net Income, Electric Light and Power Corporations in I^ew York State Frequency Table Ba^ed upon the Average Annual State Ta^ Payments and Percentage of net income paid in total State taxes ElectHc Light and Power Corporaticms reporting from New York State Num- ber in class Number Patino CLASS Less than 1% 1% to 1.9 2% to 2.9 3% to 3.9 4% to 4.9 2 5% to 5.9 6% to 6.9 7% to 7.9 38% to 38.9 Operating revenue $1,000,000 or over. . . . 8 1 2 3 • « • B Operating revenue $100,000 to $999,999. . 21 • > . . 5 6 3 4 1 2 • • • Operating revenue $25,000 to $99,999. 13 .... 1 2 3 3 3 1 D Operating revenue less than $25,000 3 .... 2 1 • . 9 • • 3 1 ~ Total j."^ 1 t r\ *«> 1 IV 12 6 1 75 TABLE 63 Relation of Total State Taxes to Xet Income, Gas and Electric Corporations in New York State (Combining gas and electric service.) Frequency Table Hased upon the Average Annual State Tax Payments and the Average Annual Xet Income Previous to any Deduction for Tawes During the Period 1911-1920 Percentage of net income paid in total State and local taxes Gas and Electric Corporations reporting from New York State Number in class Number Payixg CLASS 2% to 2.9 3% to 3.9 4% to 4.9 o 1 5% to 5.0 7% to 7.9 9% to 9.9 A Operating revenue $1,000 000 or over 7 12 3 1 2 7 2 B Operating revenue $100,000 to $999,999 1 Total 19 4 9 -•? 2 1 TABLE 64 Relation of Total State Taxes to !N^et Income, Manufac- tured Gas Companies in J^ew York State Frequency Table Baaed upon the Average Annual State Tax Payments and the Average Annual Xet Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net iiuome ])aid in total Slate taxes Manufactured Gas Corporations reporting from Xew York State Num- ber in class 2 8 5 15 NUMBEH Paying CL.VSS 1% to 1.9 1 1 2% to 2.0 1 1 «'. to 3.9 1 1 2 4% to 4.9 2 2 4 5% to 5.9 1 1 2 6% to 6.9 8% to 8.9 9% to 9.9 1 1 13% to 13.9 14% to 14.9 A Operating revenue $1,000,000 or over. B Operating revenue $100,000 to $999,- 999 1 1 1 1 1 1 • • ■ 1 . • • 1 C Operating revenue $25,000 to $99,999 . Total 76 77 TABLE 65 .Relation of Total State Taxes to :N'et Income, IN'atural Gas Companies in ^N'ew York State Frequency Table Based upon the Average Annual State Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total State taxe.s Natural Gas Companies reporting from New York State Num- ber in class Number Paying CLASS Less than 0.5% .5% to ! .9 1% to 1.4 15% to 1.9 2% to 2.4 2.5% to 2.9 3% to 3.4 1 1 4% to 4.4 1 1 5.5% to 5.9 7% to 7.4 1 1 8% to 8.4 • • 1 1 8.5% to 8.9 A Operating revenue $1 ,- 000,000 or over. . . . B Operating revenue $100,000 to $999,999 C Operating revenue $25,000 to $99,999 D Operating revenue less than $25,000 . . 2 6 7 3 1 1 1 • • 2 1 3 2 1 1 1 2 1 • • • 2 1 TotiJ 18 1 3 1 2 1 TABLE 6Q Relation of Total State Taxes to Net Income. All Gas AND Electric Companies in New York State Frequency Table Based upon the Average Annual State Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total State taxes All Oas and Electric Companies reporting from New York State ■ Num- ber in class NuHBER Fating class Less than 1% 1% to 1.9 2% to 2.9 3% to 3.9 4% to 4.9 5% to 5.9 6% to 6.9 7% to 7.9 8% to 8.9 9% to 9.9 13% to 13.9 14% to 14.9 38% to 38.9 a Operating revenue $1,000,000 or over 19 47 25 6 2 1 2 9 3 3 17 7 9 3 1 20 3 11 4 18 4 7 6 17 1 4 2 2 4 1 1 2 1 1 1 1 1 B Operating revenue $10O,06o to $999,999 C operating revenue $25,000 to $99,- 999 D Operating revenue leas than $25,000 • • • 1 • • * ToUl 97 3 7 2 5 3 2 1 1 The varying burden of these State taxes is revealed by the frequency tables. It is clear that these taxes, levied upon gross earnings, capital stock, or excess dividends, fall with very unequal weight upon different corporations when expressed in terms of net income. The comparison of the tax burden on the different groups is facilitated by the selection of typical cases for each class. The results are given below, the ratio of State taxes to net income for the median case being shown for each group. m .6 79 TABLE 67 AVEKAGE ILVTIO OF ToTAL StATE T.iXES TO Xet IjNCOME Public Service Corporations in 'S'ew York Slate, 1911-1920 The average employed in each case is the median; thus one-half of the total number oi corporations included in each of the given crroups paid more than tlie given percentage of their net income in meeting the taxes named, while one-half paid less. /-!„ f TT*.,-* Number of Corpora- Class of Utility tions lucluded Electric Railways ^ Telephone and Telegraph .... Q^ Gas and Electric: Electric Light and Power . . 50 Gas and Electric (com- bined ) 22 Gas (manufactured) 18 Gas (natural) 18- Total Gas and Electric 108 Average Ratio, Total State Taxes to Net Income (expressed as a percenrage re- lation) \ 31.50 3.94 3.33 3.78 5.50 2.25 3.78 For two of the main groups the ratios are not far apart. The typical telephone company (i. e. the median company) pays 3.94 per cent of its net income in meeting State taxes, and the tyjncal gas and electric company 3.78 per cent. Electric railways show an average very much gieater, the typical ratio being 33 per cent. When profitable companies alone are included, and the median ratios selected, the following values are secured. 1 TABLE 68 AvEKAGE Ratio of Total State Taxes to ^N'et Income Public Service Corporations Operating at a Profit, 1911-1920 (Excluding corporations showing a deficit) Number of Corpora- Class of Utility tions Included Electric Railways 34 Telephone and Telegraph. ... 62 Gas and Electric: Electric Light and Power . . 45 Gas and Electric (com- bined ) 19 Gas (manufactured) ... 15 Gas ( natural ) 18 Total Gas and Electric 97 Average Ratio, Total State Taxes to Net Income (expressed as a percentage re- lation ) 8.40 3.87 2.96 3.56 4.75 2.25 3.47 The electric railway ratio is materially smaller, being only 8.4 per cent, w^hile the figures for the other groups are somewhat lower. In the two preceding tables the different groups have been represented by typical cases, equal weight being given to large and small companies in the selection of the median cases. The following table shows the relations between aggregate State taxes and aggregate net income from l^ew York business for each of the utility groups. Note : The term " State taxes " as here used includes capital stock taxes, taxes on ^ross earnings, and taxes on excess diWdends. 80 TABLE 69 Ratio of Ao(iBEGATE State Taxes to Aggregate JSTet Income Public Service Corporations in New York State, 1911-1920 The ratio for each class is the percentage relation of aggregate State taxes i^Jr^^^'^^f ^ " i,'"??u • ^^^ ^regate figures used are the sums of ten-year averages for each of the corporations included. ^ Ratio of Aggregate State Taxes to Ag- vj „,u * ^ gregate Net Income Class of T'fiiitv Number of Corpora- (expressed as a per- SteamXifroVds^*' '^^°^ '"^^"^^ 109 ''"'^"^ '''''''''V 74 Electric Railways 55 0*00 Telephone and Telegraph . . 66 a'\K Gas and Electric: Electric Light and Power. . 60 2.8 Gas and Electric (com- bined) 22 3.9 Gas (manufactured) 18 42 Gas (natural) ig 1.5 Total Gas and Electric 108 2 90 Steam railroads, it is seen, pay 2.74 per cent of their net income from New York business in meeting State taxes, while electric railways pay 8.28 per cent. The ratios for the other classes lie between these limits. When ratios are determined for the companies operating at a profit the following results are secured. TABLE 70 Ratio of Aggregate State Taxes to Aggregate Net Income Public Service Corporations Operating at a Profit, 1911-1920 (Excluding corporations showing a deficit) The ratio for each class is the percentage relation of aggregate State taxes to aggregate net income. The aggregate figures used are the sums of ten-year average for each of the corporations included f Ratio of Aggregate State Taxes to Ag- gregate Net Income r^i * T-i.«^ Number of Corpora- (expressed as a per- Ciass or Ltility tions Included centage relation) Steam Railroads! gj 2.05 Electric Railways 34 6 . 55 Telephone and Telegraph!. . . 62 4*10 Gas and Electric: Electric Light and Power . . 45 2.7 Gas and Electric (com- * bined) 19 3.5 Gas (manufactured) 15 4.1 Gas (natural) 18 1.5 Total Gas and Electric 97 2 . 80 * For operating roads only the ratio is 3.08. t For the basis of the steam railroad figures, of. supra, p. 33. t For operating roads only the ratio is 3.04. ? This ratio becomes 3.2 per cent when returns from one large company, primarily a holding company, are excluded. <> 81 Relation Between Local Taxes and Net Income. — Taxes paid to localities on real and personal property and on special fran- chises constitute the chief tax payments made by public service cor- porations, in so far as Xew York taxes are concerned. Though property taxes are not in general so burdensome as income or capital stock taxes, it is desirable to determine the relative im- portance of these local taxes. The following frequency tables show the percentage of net income paid in local taxes by the various types of public service corporations, and indicate the ex- tent to which the burden of these taxes varies within each of the groups. TABLE 71 Relation of Total Local Taxes to Xet Income, Electric Railways in ^ew York State Frequency Table liased upon the Average Annual Local Tax Payments and the Average Annual Ket Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes Electric Railways reporting from New York State CLASS A Operating revenue $1,000,000 or over B Operating revenue $100,000 to $999,999 C Operating revenue less than $100,- 000 Total Num ber in class 19 8 34 Number Paying Less than 25% 3 7 25% to 49.9 11 2 16 50% to 74.9 75% to 99.9 100%: to 124.9 1 2 to 174.9 175% to 199.9 200% to 224.9 325% to 349.8 Supplementary Table: Detailed Classification of Com- panies Paying from 25 to 50 Per Cent CLASS Number in class 25% to 29.9 30% to 34.9 35% to 39.9 40% to 44.9 45% to 49.9 A 3 11 2 1 4 2 4 2 B 2 I C Total 16 5 6 2 2 ^ •4 ^ S'5 Hi 82 TABLE 72 Relation of Total Local Taxes to Xet Income, Telephone AND Telegraph Corporations in ^ew York State Frequency Table Based upon the Average Annual Local Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes Telephone and Telegraph Corporations reporting from New York State Num- ber in class 2 7 10 27 16 Number Paying CLASS Less than 5% 5% to 9.9 10% to 14.9 4 6 3 15% to 19.9 1 1 2 9 3 20% to 24.9 3 1 2 25% to 29.9 1 1 1 30% to 34.9 35% to 39.9 40% to 44.9 • • 2 1 3 45% to 49.9 1 1 1 3 55% to 59.9 1 2 65% to 69.9 • • 1 • • • • 115% to 119.9 A Operating revenue SI. 000.000 or over B Operating revenue SIOO.OOO to $999,999 C Operating revenue $25,000 to $99,. 999 1 2 1 3 1 • • 1 • • 2 3 5 • • • • 1 D Operating revenue $10,000 to $24,- 999 E Operating revenue less than $10,000 Total 62 3 4 13 16 6 3 3 1 1 83 TABLE 73 Relation of Total Local Taxes to Net Income, Electric Light and Power Corporations in Xew York State Frer/uency Table Based npon the Average Anniutl Local Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1011-1920 Percentage of net income paid in total local taxes Electric Light and Power Corporations reporting from New York State ■ Num- ber in class Number Paying class Less than 10% 10% to 19.9 2 13 7 1 23 20% to 29.9 4 4 4 12 30% to 39.9 1 1 40% to 49.9 1 1 2 50% 60% to , to 59.9 69.9 1 2 1 • • • • 2 2 260% to 269.9 a Operating revenue $1,000,000 or over B Operating revenue $100,000 to ?999,999 C Operating revenue $25,000 to 199.909 D Operating revenue less than $25,000 8 21 13 3 45 1 1 ■ • • • 1 Total 2 1 TABLE 74 Relation of Total Local Taxes to Xet Income, Gas and Electric Corporations in Xew York State (Combining gas and electric service.) Frequency Table Based upon the Average Annual Local Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes Gas and Electric Corporations reporting from New York State class Operating revenue $1,000,000 or over. B Operating revenue $100,000 to $999,999. Total Number Payinc Num- ber 1 in class 10% to 14.9 15% to 19.9 20% to 24.9 25% to 29.9 30% to 34.9 40% to 44.9 50% to 54.9 55% to 59.9 7 . . 2 1 2 1 1 . 12 2 3 1 2 1 3 2 3 1 1 1 1 1 19 2| 5 1 74% to 79.9 1 1 84 TABLE 75 Relation of Total Local Taxes to Xet Income, Manufac- tured Gas Companies in ]N^ew York State Frequency Table Based upon the Average Annual Local Tax Paijments and the Ai'erage Annual Xet Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes Manufactured Gas Companies reporting from New York State Num- Number Paying 1 CLASS ber in class 10% to 19.9 20% to 29.9 30% to 39.9 40% to 49.9 60% to 69.9 80% to 89.9 90% to 99.9 100% to 109.9 130% to 139.9 A Operating revenue $1,000,000 or over. 2 1 1 B Operating revenue $100,000 to $999,999 8 2 3 1 1 1 C Operating revenue $25,000 to $99,999 . 5 1 , , 1 1 , , 2 .. .... Total 15 4 3 1 1 1 2 1 1 1 TABLE 76 Relation of Total Local Taxes to ^et Income, ;N'atural Gas Companies in New York State Frequency Table Based upon the Average Annual Local Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes Natural Gas Companies reporting from New York State Num- ber in class Number Paying CLASS Less than 5% 5% to 9.9 1 2 3 10% to 14.9 2 1 3 15% to 19.9 1 1 2 20% to 24.9 1 1 2 25% to 29.9 2 2 45% to 49.9 1 1 65% to 59.9 1 1 65% to 69.9 1 1 105% to 109.9 A Operating revenue $1,000,000 or over 2 6 7 3 1 1 B Operating revenue $100,000 to $999,999 C Operating revenue $25,000 to $99,999 1 D Operating revenue less than $25,- 000 • • • • Total 18 2 1 <> -» » 85 TABLE 77 ItELATlON OF ToTAL LoCAL TaXES TO Net InCOME, All GaS AND Electric Companies in New York State Frequency Table Based upon the Average Annual Local Tax Payments and the Average Annual Net Income Previous to any Deduction for Taxes During the Period 1911-1920 Percentage of net income paid in total local taxes All Gas and Electric Companies reporting from New York State Num- ber in class NUMBEE RAYING CLASS Less than 10% 10% to 19.9 6 23 9 1 39 20^0 to 29.9 7 10 5 2 24 30% to 39.9 1 2 1 1 5 40% to 49.9 2 3 5 50% to 59.9 4 1 5 60% to 69.9 1 2 1 4 70% to 79.9 1 1 80% to 89.9 2 2 90% to 39.9 1 1 100% to 109.9 130% to 139 9 260% to 269.9 A Operating revenue $1,000,- 000 or over 19 47 25 6 1 3 2 1 1 1 1 B Operating revenue $1CO,000 to $999,999 C Operating revenue $25,000 to $99,999 • ■ ■ • • 1 D Operating revenue less than $25,000 Total 97 7 2 1 1 The wide variations shown in these tables make difficult a comparison of the average burden in each of the different groups. This comparison is permitted by the following table, in which the median case has been selected as representative of each group. t 80 TABLE 78 Average Fiatio of Total Local Taxes to :Xet Lxcome Public Service Corporations in New Ymk State, 1911-1920 The average employed in each case is the median; thus one-lialf of the total number of corporations included in each of the given crroups paid more than a given percentage of their net income in nieeliii^ the taxes named, wliile one-half paid less. Averajte Ratio. Total Local Taxes t<» Net Income ( expresj-ed as a percentage re- lation) Class of Utility Electric Railways Telephone and Telegraph . . . Gas and Electric: Electric Light and Power. Gas and Electric (com bined) Gas ( manufactured ) .... ■ Gas (natural) Total Gas and Electric Number of Coip<»ra- tions Included 56 112 50 66 18 .44 50 20. 22 28. 33 18 55, 18 17. 5 108 2'S . 30 When a company representative of the profitahle concerns each group is selected, the followino- ratios are secured : in TABLP: 79 A VET? age TiATio of Total Local Taxes to ^et Ixcome Public Service Corporations Operating at a Profit, 1911-1920 (Excluding corjiorations showing a deficit) Class of Utility Electric Railways Telephone and Telegraph. . . . Gas and Electric: Electric Light and Power. . Gas and Electric (com- bined ) Gas ( manufactured ) Gas (natural) Total Gas and Electric Number of Corpora lions Included 45 19 15 18 Avera^'' Local Katio Taxes Total to Net Income *ex pressed ra- as a percentajr 87 Marked variations are found in each table, the differences being greater in the first case, where the ratios are based upon all companies. In determining the weight of local taxes it is desirable to sup- plement the above figures by ratios based on aggregate taxes and aggregate net income. These ratios are shown in the following table : TABLE 80 Ratio of Aggregate Local Taxes (Special Franchise and General Property) to Aggregate Net Income Public Service Corporations in New York State, 1911-1920 The ratio for each class is the percentage relation of aggregate local taxes (special franchise and general property) to aggregate net income. The aggre- gate figures used are the sums of ten-year averages for each of the corporations included.* Ratio of Aggregate Local Taxes (special franchise and gen- eral property) to Net Income (ex- pressed as a per- centage relation) 25.5 48.22 12.10 Number of Corpora- Class of rtility tions Included Steam Railroadsf 109 Electric Railways 56 Telephone and Telegraph .... 66 Gas and Electric: Electric Light and Power . . 50 Gas and Electric (com- bined ) 22 Gas ( manufactured ) 18 Gas ( natural ) 18 Total Gas and Electric 108 21.1 28.9 23.5 10.3 21.30 Excluding corporations operating at a loss during the period 1911-1920 the following ratios are secured: ^ * For the basis of tlie steam railroad figures, cf. sujjra, p. liS. 7" This ratio is 28.6 when operating roads only are included. yl *> 4 88 89 TABLE 81 Ratio of Aggregate Local Taxes (Special Franchise and General Property) to Aggregate !N^et Income Public Service Corjxirations Operating at a Profit, 1011-lf>20 (Excluding corporations showing a deficit) Ratio of Aggregate Local Taxes (special franchise and gen- eral property) to Net Income (ex- presse«l as a per- centage relation) 24.6 Number of Corpora- Class of I'tility tions Included Steam Railroads* 87 Electric Railways 34 Telephone and Telegrapht ... <>2 Gas and Electric: Electric Light and Power. . 45 Gas and Electric (com- bined) 19 Gas ( manufactured ) 15 Gas (natural ) 18 Total Gas and Electric 97 38.05 12.10 21.0 24.6 22.9 10.3 20.50 All the figures which have been presented in this section indi- cate that present State and local taxes are levied upon bases which cause them to fall with very unequal weight upon the different utility groups and upon the individual corporations within any given class. This is true not only of the property taxes, discussed in the last section, but of the gross earnings, excess dividends, and capital stock taxes which are paid to the State. As between the different utility groups, and within any given utility group, the burden of present taxes is markedly unequal. Comparison Between Public Utilities and Business Cor- porations. — In studying the burden of taxes on different classes of corporations, business corporations have been used as a standard, Ijccause of the fact that the chief tax on these institutions is now levied on a straight net income basis. In undertaking to compare the public utilities with business corpora- tions it is necessary to determine what taxes paid by the * This ratio is 28.2 when operating roads only are included. t This ratio heconies 18,6 per cent when returns from one large company, primarily a holding company', are excluded. former group are comparable with the net income tax paid by the latter class. In the pages immediately following the compariso:: is made on three different bases."* In the first table taxes paid by public utilities directly to the State (on gross earnings, excess dividends and capital stock) arc compared with the 4^4 per cent tax on the net income of business corporations. In the second comparison the tax paid on in- tangible elements in special franchise values is added to the State taxes of public service corporations. This seems to be a more legitimate comparison than the former, since the tax on intangible elements in special franchise values is not, in the economic sense, a direct tax on property. In the final comparison personal prop- erty taxes paid by public service corporations are combined with the two types mentioned above, and the burden of all these taxes is compared with the burden of the net income tax on business corporations. Since the latter tax replaces all taxes but those on real property, it seems just to set against it all taxes paid by public utilities which are not based on real property (speaking again from the economic and not the legal point of view), on or off the streets. The material necessary for comparing the burden of the State taxes paid by public utilities with the burden of the net income tax paid by business corporations has already been presented. It is summarized in the following table. Only those corpora- tions operating at a profit have been included. * An ncfurate foni))aris<)n of the l)urden of total taxes on l)nsiness corporations with the burden of total taxes on public utilities is not possible, because of differ- ences in tho detinitiou of real ami p<'rsonal i>ropertv for these tw«» elas.ses of corporations. 90 TABLE 82* Pekcextage of Net Ixco:me Paid ix State Taxes Business Corporations and Public Service Corporations in New York State The business corporation tax on which this table is based is that levied under Art. (>-a of the Tax Law. The public utility taxes included are those on gross earnings, excess dividends and capital stock. The ratio for each class of public utility is the percentage relation of aggregate State taxes to aggregate net income. The aggregate figures used are the sums of ten-year averages (1911-11)20) for each of the corporations included .f The base in each case is net income before any taxes have been deducted. nioco ^ft^ X. Ratio of State taxes Chiss of Corporation. to not income Business corporations (mercantile and manufacturing) 4.30 Steam Railroads 2 65 Electric Railways 6 35 Telephone and Telegraph 4 10 Gas and Electric: Electric Light and Power 2.7 Gas and Electric ( combined ) 3^5 Gas (manufactured) 4' j Gas ( natural ) j 5 Total Gas and Electric 2.80 The figures presented indicate that, with the exception of elec- tric railways, the public utilities pay a smaller percentage of their net income in State taxes than business corporations pay in meet- ing the net income tax. The latter figure appears as but 4.3 per cent of net income because the net income used as a base is net income before any taxes, property or otherwise, have been deducted. In comparison with this figure steam railroads pay- but 2.65 per cent, gas and electric companies 2.8 per cent, tele- phone and telegraph companies 4.1 per cent, and electric railways 6.35 per cent of their net income.ij: * The fdllnwiiig ratios have l)oen worked out indepeiulontlv for the years 19i3-ir)-17-18. Th<\v aro based upon the average State taxes paid in those vears and the average net income earix'd from Xi'w York business bv the diflferent classes Of public service corporations : ^, - ,..,.* Ratio of State Taxes Chiss of I tihty to net income Steam railroa.ls 2. 20 per cent Eleetrie railways s.^-, p^r cent Telephone and telej;iaph .3 4*^ per cent Gas and electric 0.28 per cent These figures which are based upon returns from all the public utilities in the T \^' %^P'*' ^^ ^ check upon the results secured from the sample group studied It Should be pointed out that these ratios are not in all respects comparable to those given above in Table 82. h 1 « t For the basis of the steam railroad figures, cf. Huprn, p. .S8. I,-? w tTJ^**^" should again be drawn to the fact that the "net income" upon Which these ratios are based is not exactly the same for business corporations and for public service corporations. The differences are not great enough seriously to affect the ratios presented. Cf. p. 11. supra. 4 91 A fairer comparison is secured if the taxes paid by public utilities on the intangible elements in their special franchise values are included with State taxes. The following table shows the percentage of net income paid by public utilities in meeting these combined taxes, in ('omparison with the franchise tax paid by business corporations. TABLE 83t Percextage of >>et income Paid in State Taxes Plus Taxes ON Intangible Elements in Special Franchise Values Public Service Corporations in New Yark State Ratio of State taxes plus taxes on intangible ele- ments in special fran- chise values to net income Class of I'tility Percentage Steam Railroads S. 74 Electric Railways 15 . 40 Telephone and Telegraph 7.10 Gas and Electric 7 . 15 When the taxes on intangible elements in special franchise values are included with State taxes the public service corpora- tions, with the single exception of steam railroads, are seen to be paying a larger percentage of net income in meeting these taxes than the business corporations pay under article 9-a. This tax, it was noted, amounted to 4.3 per cent of net income. The burden is materially heavier in the case of electric railways, which pay 15.4 per cent of their net income on these taxes.* The difference is less ill the telephone and telegraph and gas and electric groups, while steam railroads show the smallest percentage. t The following ratios are based upon complete returns from all public utilities in New York State for the years 1013-10-17-18. For all groups except telephone and telegraph companies the ratios are less than in the table based upon ten-year av taxes and aggregate net income for sample groups from each class. Only corporations operating at a profit have been included. * I 92 For the final comparison taxes paid on personal property by public service corporations are included with State taxes and taxes on intangible elements in special franchise values. This combination includes all taxes not levied on real property, and is thus directly comparable with the net income tax on business cor- porations. The latter replaces all franchise taxes and personal property taxes, it will be recalled. The following table 'shows the percentage of net income paid in these combined taxes. TA]]LE 84- Percextage of Xet Ixcome Paid in State Taxes Plus Taxes ox Personal Property axd Taxes ox Intangible Ele- ArENTs IN Special Franchise Values Puhlic Sen-ice Corporations in Xeir York State Rjitlo of state Taxes Phis Personal Prop- erty Taxes and Taxes on Intanjrible Klenientis in Snecial Franchise Values to ^1 4- ^'^1'. ^'^'f Income. Class of Lttlity Percentage Steam Railroads 3. 88 Klectric Railways 15. ({0 Telephone and Telegraph 7 . 20 Ga.s and Electric 7 . 40 From the above tables it is apparent that when all public utility taxes other than those on real property are expressed in terms of yiet income there are striking- inequalities of burden as between the different utility groups. When these burdens are compared with that borne by busines corporations taxed under article 0-a * The folhnvlnf^ ratios are Imsed upon complete returns from all public utilities in New York State for the years 1013 1.'-17-1S. Ratio of State taxes plus taxes on intangible ele- ments In special franchise values and personal property taxes to net income Class of Utility Percentage Steam railroads q q? Electric railways 1 4 * n«' Telephone and telegraph .' [[ 7 ' ^fi 4 These ratios are based upon returns from a larger group than are the ratios given in Table 84. but represent conditions for four years only (1913-15-17-18). <5^ 9:3 it is seen that all the public service corporations, with the excep- tion of steam railroads, pay more than do business corporations. The latter pay approximately 4.3 per cent of net income (taking as the base net income before property taxes have been deducted). Comparable taxes for steam railroads amounted to 3.88 per cent of net income. For telephone and telegi'aph companies the figure is 7.2 per cent, and 7.4 jxjr cent for gas and electric companies. Electric railways show the highest percentage, the amount paid in State taxes, taxes on intangible elements in special franchise values and taxes 611 jKusonal property amounting to 15.(5 j)er cent of net income. The complexities in the present system of taxing public utilities have been brought out.* The fact that present taxes fall with very unequal weight upon the individual corporations within any group has been demonstrated. It has been shown that the different utility groups are not on equal terms in the matter of tax burden, when that burden is expressed in terms of net income. In the final section the burden of taxes on the chief classes of public service corporations has been compared with the burden of taxes on mercantile and manufacturing corporations. f The fi^gures there presented have shown that business corporations and public service corporations bear unequal tax burdens, the public utility groups, with one important exception, paying more, in terms of net income, than do mercantile and manufacturing corporations. The relation between taxes, net income and gross income of public utilities. — In the preceding study of the relative burden of taxes upon public service corporations in New York State, net in- come has been used as the chief standard of comparison. Xet income as here used is gross incx)me less interest charges and certain other deductions. This standard has certain defects, chief of which is one which arises from the varying methods employed by different public utilities in securing capital. The net income of a company securing most of its capital by bond issue would be relatively small, while the corresponding figure for a company financed by the sale of stock would be much greater. The two might be in ♦ Cf. Hiipra, p. 10. * All real property taxes paid by both groups have been excluded in making this compariRon. 94 positions of equal strength, yet if the burden of taxes were meas- ured on the net income basis the former would appear to be in a position distinctly less favorable than the latter. It is desirable, therefore, to determine the relative importance of interest charges and other deductions from gross income for the various classes of public utilities in New York State. This comparison has been made for the six-year period 1912— 1917, inclusive. The four chief classes of public utilities report- ing to the New York State Public Service Commission have been included. 'No attempt has been made to allocate either net or gross income to New York, or to separate New York taxes from others. We are desirous of determining the general relations between tax payments and net and gross income,* and for this purpose no allocation is required. The details of this comparison, bv years, are presented in tables XV, XVI, XVII and XVIII in the Apr>endix. The fol- lowing is' a summary, showing the relations between the average annual gross income, deductions from gross income, net income and tax accruals, for the different public utility groups. * Gross income is the sum of operating income (i*. e., gross operating revenues less operating expenses, taxes assigneration9 and steam railroads stand between these two limits, the figure for the former being 38.95 per cent and for the latter 57.13 per cent. These figures indicate the relative importance of the various methods of securing capital employed by the different utilities, the electric railways being distinctly more dependent upon bor- rowing, with definite contractual obligations, than are the other i ^1 0() 97 utilities. Xet incoine, after these coiitiactual deductions are made, will be correspondingly lower. These differences are more sharply brought out by the figures showing the relation of tax accruals to gross and net income. For telephone companies tax accruals constitute but 9.09 per cent of net income (before deduction of tax accruals), the corresponding figure for electric railways being 37.71 per cent. Steam railroads and gas and electric corporations show less variation, the former being 22.71 per cent, and the latter 19.10 per cent. These wide variations are not entirely ironed out, but become much less pronounced, when gross income is used as the standard of comparison. Electric railways still stand at the upper limit, taxes constituting 13.46 per cent of gross income, and telephone corporations are at the lower limit with a ratio of 7.17 per cent, but the spread between the two is less marked. Were the non- operating income of the latter group excluded, the difference would be less pronounced. Steam railroads have a ratio of 11.13 per cent, and gas and electric companies a ratio of 12.58 per cent. Not income is not, therefore, a perfect standard for measuring the burden of taxes. Insofar as there are variations in the methods employed in securing capital, this standard is imperfect. The extent to which these variations exist and their effect upon the tax ratios for the different classes of utilities have been indicated above. The Burden of Taxes on Insurance Companies Insurance companies doing business in New York State are taxed on their gross premiums le«s certain deductions allowed by law.* It is desirable to determine the relative burden of these taxes upon the individual insurance companies, and upon the insurance companies as a whole, in comparison with other classes of corporations. Securing a standard of comparison is not [possible for certain classes of insurance companies, notably mutual life insurance companies. Difficulties are also encountered in con- nection with companies doing casualty and accident business. For these classes of corporations a figure directly comparable to the net income of business corporations or public utilities cannot be * Cf. 811 pro, p, 10. <^^ secured. For fire and fire and marine stock companies it is pos- sible, however, to approximate the net profits derived from New York business. These figures have been secured for the ten-year period 1911—1920, inclusive, and have been used as a standard for determining the burden of taxes paid on gross premiums during this period.* The general procedure in determining net profits from New York business has been as follows: The net underwriting profit for the period in question has been determined by subtracting from the total amount received as net premiums from New York business the amount of losses paid in New York State plus 40 j)er cent of the net premiums. The latter figure represents general underwriting expenses, the figure of 40 per cent being the average relation of such expenses to net premiums. A correction has been made for the lag between losses incurred and losses paid. To net underwriting profit as thus determined an allocated portion of the gain from investments has been added, f the sum being net profits from business in New York State. Inasmuch as taxes have been deducted in securing this figure, being included in the expense item, they are added back. The ratio of taxes to the base thus secured is then worked out. An exact determination of the net profit from New York business is impossible, but the above method gives an approximation sufficiently close for the purpose. The following table present the results secured by these calcula- tions. Tiie figures apply to domestic companies and foreign com- panies doing business in this State. * It should be noted that no account is here tak«n of other taxes or license fees. t The basis of allocation has been the relation of total premiums received in New Yorlt to total premiums written. 98 Pekcentage of Xet Profits From ISTew Yokk Bfsixess Paid in Taxes on Oross Premiums in New Ywk, 1911-1020 Inclusive Fire and Marine Insurance Companies Doing Business in New York State '5 >• a y. < CL. o O Cb o a a -? y-. •--1 O > ••^ ' t • fH 1-4 vO 05 Q0*>00 >— 1 1—1 •T^ 1-H •1-4 1— ( f-i 1-1 1-t -5 o ^ o • T-l I-l • 1^ 1-^ OS**® (N(N ■^ 00*^00 • eo CO I-H 1^ (N • CO COW 1-H 00 w Hi 1^ 1-H «ot>. 1-H 00 CO** CO ^t^ wo o 1-t 1-1 CO • CO 6? O OS d CO • CO Number of companies showing a loss from New York business 1911-1920 -IX Oi Number of com- panies included CO 00 eo>o 0) \ 1 •8 1 > 1 Fire Fire and marine . . < i 8 < 99 J The variation in burden on the general classes of insurance companies considered is apparent. When taxes are expressed in terms of net income the percentages vary from less than 1 per cent to over 25 per cent for companies operating at a profit. The largest single group is found within the class paying from 5 per cent to 6 per cent of net income in taxes. As representing the average situation that company lying midway in the distribution (the median) may be selected. Including only the profitable com- panies, the median has a value of 5.35 per cent. For fire com- panies alone the value is 5.1 per cent, and for fire and marine companies alone it is 5.71 per cent. In securing an average of this type (the median) equal weight is given to all companies, large or small. The burden of taxes upon the group as a whole is perhaps better represented by the ratio of the aggregate amount paid in taxes to the aggregate net profit from business in the State of New York. These ratios are presented below, all companies being included in one comparison and only the profitable companies in the other. TAELE 87 Relation of Taxes on Gross Premiums to :t^ET Profit from New York Business Fire and Fire and Marine Insurance Companies Number of com- Class of insurance panies included Fire *. gg Marine and fire and marine 91 All companies _———--—= Ratio of aggre- gate taxes to aggregate net profits (ex- pressed as * percentage re- lation) 4.76 5.89 5.75 \\^J > . 100 TABLE 88 Eelatio]?^ of Taxes on Gross Premiums to :N'et Profit from ^New York Business Fire and Marine Insurance Companies (Excluding companies operating at a loss) Ratio of aggre- gate taxes to aggregate net profits (ex- pressed as a percentage re- lation) 4.10 4.92 ni„o„ ,* • Number of com- Class of insurance panics included Fire Marine and fire and marine qq Total ~ 4.84 The ratios based upon aggregate figures are somewhat greater for companies doing a marine or fire and marine business than for the fire insurance companies. This is true when companies operating at a loss are excluded as well as when these companies are included. For the entire group of 91 companies studied (including 9 companies operating at a loss) the taxes on gross premiums amounted to 5.75 per cent of net profits from New York business during the decade 1911-1920. For the 82 companies reporting an average profit, the ratio of these taxes to net profits was 4.84 per cent. The frequeoicy table presented a})ove shows that present taxes fall with unequal weight on different insurance companies, when net profits are used as the standard of comparison. The general position of the insurance companies as a whole, in comparison ^ith financial institutions, business corporations, and public utili- ties may be determined by referencf^ to the tables presented in the earlier sections of this report.* diffeTilft%^lX/i^^o? cSr7o?a?fon^'^2lvri?ee*n'^de"r1?eT'?;".5?#e;'%* ^^^.vf^"- '- '^^ based upon periods of varying length As betwJpn th^o ii?.^''*^"*. methods, and are they should be used to establish general relations o^Vv ^'^^r^"* ^'"''"P^- therefore, for other classes of corporations a^ppear on pp -3 90^93 ^-^^^^Ponding tables . 101 Expenses Involved in Paying Taxes and Contesting Assess- ments The burden cf a complicated tax system is not measured by the amount of the taxes paid, alone. The corporations taxed are fre- quently put to considerable administrative and other expense in complying with the provisions of the tax law. An investigation to determine the amount of these expenses was conducted by the Committee, all public service corporations in the State being circularized. Of the 1628 corporations to which questionnaires were sent, replies were received from 717, or 44.1 per cent of the total number. Sixty-four of these replies were unsatisfactory. Of the remaining 653 corporations, 323 reported either that no expenses were involved in paying taxes, or that it was impossible to segregate these expenses. Figures in regard to expenses were received from 330 public service corj>orations. These figures are summarized in the following table : TABLE 89 Total Expenses Involved in Paying Taxes Number of replies stating ex- Class of utility expenses Steam railroads 90 Electric railways 27 Express and bus companies 6 Pipe lines 3 Water transportation .... 18 Telephone and telegraph. . 84 Gas and electric 119 Water companies 43 Total 330 Total annual expenses in- volved in paying spe- cial fran- chise tax $12,993 8,798 15 445 862 21,864 18,780 1,707 Total annual expenses In- volved in paying other taxes (State and local) $41,694 17,631 15,346 280 3,946 32,420 77,566 2,521 Total annual expenses in- volved in paying all taxes $54,687 26,429 15,361 725 4,808 54,284 96,346 4,228 $65,464 $191,404 $256,868 These figures indicate the amount of burden in the form of administrative expense to which public service corporations are put in complying with the present tax laws. For the 330 cor- porations from which figures were received, these expenses amount to more than one-quarter of a million dollars annually. The total figure for all corporations in the State would exceed this amount, of course. 102 In addition to the direct cost of paying taxes, it is desirable to determine the cost of contesting assessments of special franchises. The following table presents a summai-y of the returns from 98- corporations which reported such costs. TABLE 90 ExpEi^SEs Involved Ix^^ Contesting Special Franchise Assess- ments PuhUc Service Corporations in New York State Number of replies stating cost of Total annual cost rinsH nf nfiiu^ contesting as- of contesting as- Class of utility sessments sessments Steam railroads 17 ^f. „_- Electric railways V// ' ' [l lUi Water transportation ^ nn Telephone and telegraph 5 , ^1: Gas and electric ]]" " ^ a^'X^J Water companies [][ fj ^^'^^ ^****^ 98 $109,917 The replies received on this subject do not give a complete account of the situation in all utility groups, but, even though limited, indicate the importance of these costs. For the 98 com- panies replying the annual cost of contesting special franchise assessments amounted to $109,917. Adding this to the other expenses of paying taxes the total annual expenses, for 330 cor- porations alone, amount to $366,785. Of this total, $175,381, or 48 per cent, represents expenses connected with the payment of the special franchise tax. It is obvious that exact figures as to the expenses involved in complying with the tax laws of the State are unobtainable. The average corporation has no means of segregating such expenses from other administrative expenses. The figures presented, there- fore, are to be taken as indicating the degree of expense to which taxpayers are put, rather than as measuring these costs exactly. Even with this qualification, however, the replies received indicate how considerable are these administrative and legal charges, which constitute a burden to the taxpayer, even though they bear no fruit for the State. STATISTICAL APPENDICES TO PART II [1031 r* 104 105 ^ «(3 Tf OSU5 OC'O r-ii— I CM CO » 2 2 Oi 0) V 00 b- "3 00 s OCO (NCO Oi h] CD 4) 00 OS ooo * - CO 00 QD 05 CO CO Ci 1-1^ OS M a « ^ O r? 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CI CD 5 go OS CO ■<»< rH CI ,-1 OS O coo CI ■MOSCOW CO t^ J2'i^'^**wt^t*co CO S2^*0 t^ CO d O »H OS CI 11 •^ N ^ t» «0 JOiOi-lCICO ^OS'^ CO 00 00 co' ci»o»op ■<*<«oos^ CICOWCI CiTttOOCI OS CO CO -< coost«>o OcO ^co p C4 PllX'H «^Osos iOCICICI OiOt^d SpiUS OS»HCO CIOO V Cflcoeo^ PCDOSCO ^osco'««< 00 CO 00 CO CD 00 00 00 eo*»o -^ r?'* d dOOiooO Q0''1.t>. t^'^CO'-l •* O 00*10 as °^ t^ OS 00 CO ^lOt>. ^H CO-^d^ ^eopio PP>O0S co*ooV»H d-* CO S8 OOd-Hb- ^^OSd t>.dcoos COCDCOiO t^Pcoco COt^iHCO lO t* OS d CO ii eo i-t tn CO »o ■* 1-H IM i o »o CO CO ci d X d CO OS »o 1-1 CO ?5 CO OS lO co' o CO p CI CO eo CI o OS eo' d X eo' X ?§ CO CD 3 a 3 u S o It o O o e3 8h ■^n o o g o ■** S ^^\J ft o ai ft . ft uH OS MO 4 OS a ■ ^ •2 ot) ■^ OS o (h OS u 0) 3 u ft •*» O a a o o a a 09 1 I' > a g « a ca ..I SI ■** S 1 OS CO' 2 hi •i in "Sag : lap- 5 b ^ .2 .^S 5Q-3 a^ gtf . ;2;l s a a a o £ J3 S o H n •sl 127 TABLE V-D. INCOME WHOLLY EXEMPT FROM FEDERAL INCOME TAX, REPORTED BY TRANSPORTATION AND OTHER PUBLIC UTIL- ITIES AND BANKS AND TRUST COMPANIES, STATE OF NEW YORK (Corporation income and profits tax returns for the calendar year ending December 31. 1918. Table compiled by Statistical Division, Income Tax Unit, Bureau of Internal Revenue) * t x . Interest on Divi nds from obligations INDUSTRIAL GROUPS other corporations .^^J-^f ^ subject to United States, federal income tax etc. Transportation and other public utilities: Steam railroads Electric railways Electric light and power Gas companies Telephone and telegraph companies Water works Other railroads Water transportation Local transportation — Cartage, storage, etc . . All other public utilities, including express companies $5,692,239 1,146,248 1,067,935 2,208,624 40,799,236 307,495 1,865,935 894,073 352,108 2,983,391 Banks and trust companies: Banks — general — not properly defined, or private bankers National banks State banks Trust companies Related business, including — Stock and bond brokers, realty, holding and development companies, real estate loan and insurance agents, holding and leasing realty, etc $475,708 3,588,047 129,556 1,992,889 7,621,828 $727,272 7,630 152,087 76,210 136,405 4,127 100,380 723,518 54,321 65,631 Total, transportation and other public utilities $57 , 317 , 284 $2 ,047,581 $968,511 4,208,761 195,696 3,005,057 259,253 Total, banks and trust companies $13,808,028 $8,637,278 128 «j s 9 o £ «r "^^ O «a o 2 o « 00 v J-2m§ O S"S.S a 0 V 0) « ^2 ^ S OS ^ ^< t! O S& 0) O) M « o a o ^ft .2 a o t* o •7 S o QQ O QQ 1/5 CC "-H ecc^j .-H Oi S 00 (N (N CO 129 1-1 kOt^ 05 ►O »-i «• - - to 00 "3 OO o> i-iesi 0> C«3 <-H OS COb- t'. OO (N OOi* 1-1 cs 00 (N m rJ40 COOS CO s Nl-l C< «0>0 CO »-• coo «o CO COOO CO OC0 00 N CO 00 00 OS lO CO o ^ CO • CO — ITt<00 eo • o ■«*.00 o • o OSl^CO •«*< ■ tti eoosQ OS-<**00 •«j* CO cs • OS ^»cos o • ec 1-1 coo OS 1-1 OSWi-l C 00* -H* oc« t^co OS 00 C-• ■^ »-< 05 —I O Tf «o 00 ;o es o 00 00 cows <— I Tf :0 CJ O "^ '^ «0 OO CM ;0 03 "5 »C O *~- ^ ■^ "5 CnsOOOCO ^H 00 OS Tfi -^ »J5 CO o5 o»eo«o»-< 00 •-< '-< CM -^ (M i-H . -^ . . . . ^^^ - ^ . cotor^ eo «o »^ t^ «0 CO 00 '— ' b- ■^ •-< CM Oi C*5 CM 00 «-! CO "-I ^ CM St>- CM •^ 00 CS 00 O '-' 00 U3 ■»*< t^ >0 «0 00 OO -^ -H O •* •— c 00 O "^ 00 5C Ci OO t^ to O CM 00 ■^ CO -H CO t^O'^^'^OOt^ OO*— 'COt— < OCCM '-' CM CO CM <— I «* OO OS OS ( t>.< «0 ^*< O CM O CM W3 OO CO t~- f>- Tf CO 05 OO o 00 CO CO O ■— I »0 l^ CM OS CM t>r TjT t^ OS l-» 00 -^ t>. ^^ »— I CO '-H T-H i^ OO •«*< «o CM 00 T>< Q CM 00 OO O ^-< OS '-H ooeo ■^ >-" O CM u; OO CO 00 OO CM OS ■— < OO lO •^ O OO « OO •-I CM O CO •^ •-I CO s OS cot >00! O 00 00 OS 00 CM eO 00 CM U3 »0 O '— I OO >>• t^ r^ »o ■^ 00 ^H v-4 CO ^^ CO CO 00 00 CO 00 CM ooo •^od rl CM 00 00 «o OS 00< I CM P'l =0 QO ) Tt< Tft «0 O J50 UO CM CM tft CO OS CM r^ OCO OS 00-H >5 00 i— I us t>. cooo eMt>- oo «o OS OS OS "5 eo 00 00 t^ CM CO o CO ui r» CO t^ OS 00 CO «o -^ -^ CM O OS •« O 00 OO CO t". t^ O CO CO t--. t>. Tf >— t^ 00 CO CM O •^ ■* O ^^ OO 00 CO >-i CM U5 U3 —I CM O ui-^ O c^ '■» CO CO 00 O •« 1-^ I— I 00 ^^ OS CO 00 OS 00 CM CO OS c» CO CM CM 00 b- eo CO •»»< CO CM 1—1 OS CO O "5 UO OO 00 ■^ .-^ t^ 00 t- !-< CM -< 00 CO •^ 8 CM CM t>- 00 O OS ■<»< 00 fH CO -^ r^ O t~ lO CM OSIO .-I »-. CO OS § 8 OO 00 o_ OS t^ CM CM "5 -< OS CMO OS 00 t>-t^ o "5 eo OS CM Q0005"S r^ O 'i' •^ =* O •*! ^ Oi o ^^ '^ r». t^Tio 00 00 US 00 Tf irt Q •^ OS Tf OO O CM OS cm" coo t>. «0 ■«*< OS us •-< r- 1 OO CO CO CD CM CO>C CO cooous CO O OS O 1^ i-i 00 CM OS ^ C OS OS »-< •-< CO O OO CO OO (>• •^ _( OO OS «o t>. t>. OS CO OS OS oo^* -^ CM Tti CO 00 us us »H CM ■»•" r^ us 00 r^ CO CO 00 ■^ »^ l-H 00 00 CM eo CO us us o» s 8 CO us t« OS 00 o OO t» >— I OS »-< CM OO OO CO CO •<*' CD OO US t~» OS OS OS OS 00 O CO us CM OO CM 1— I 1— I 00 -3 so 3 a *• s "2 " C s OS P ■S-2 b gj > O 03 O S'teJ 8 t> o ^ S i^' 2 •3 « S » "S 5 S 2 Mg eo § 00 00 § fa's s. Cfl 3 OS ^2 ^-f VIM -^ 3 rt 3 ea O -si o? O "^ 2 k 00 o a o CO ^ CM OO 1-N O *^ 1^ CO "-: . . » (O CO o> 4) ■ n t, c8 l:|sS "3 2 2 ,-• «< eS O O y. a (i ■ ' £■3- o a OQ * «*^ 0.-S.-S o « S *» o a o oa 3 § b «> S a !•- ca: -^-^-5-5 *> = "35:- •3 « ■■^ ST3 O 4> 5 o '^ O , prepared by the Bureau of Internal Revenue. In computing tax ratios the above figure, based upon returns of the individual banks to this Committee, has been used. The dif- ference affects the ratios by less than half of 1 per cent, however. t There is a lag of one year in the annual tax payments recorded in the Report of the Tax Com- mission, as compared with the figures given above. Thus the 1920 figures above would appear under the year 1921 (the fiscal year in which received) in the Report of the Tax Commission This applies to the tax figures for all financial institutions. ^; i^ 133 TABLE Xa Relation Between Taxes and Net Income, Nationai. Banks IN New York State Greneral property tax to State Net taxable income* Bank stock tax to State net taxable income General property tax plus bank stock tax to State net taxable income* . . . jeneral property tax to capital, sur- plus and imdivided profits General property tax plus bank stock tax to capital, surplus and imdivided profits Dividends received from other cor- porations to State net taxable income Non-taxable interest on Federal bonds to State net taxable income 1918 1919 1920 srcentage Percentage Percentage 1.7 1.5 1.5 7.0 6.3 6.7 8.8 7.8 8.2 0.24 0.23 0.22 1.2 1.3 5.3 1.2 1.1 6.4 1.2 1.7 6.5 * If net income before property taxes have been deducted is used as a base, the following per- centages are secured: General property tax to net income General property tax plus bank stock tax to net income 1918 1919 1920 1.7 1.5 1.5 8.7 7.7 8.1 TABLE XI Capital, Income, and Tax Payments, State Banks in New York State (Based on returns to the Special Joint Legislative Conmiittee on Taxation and Retrenchment) 1918 1919 1920 Number of complete returns 157 157 157 Capital, surplus, and undivided profits. $67,339,913 $74,294,369 $97,559,078 Net taxable income 7,490,900 11,568,099 14,403,961 Deficits 38,797 227,943 39,843 Dividends received from other cor- porations subject to Federal tax. . 175,195 211,094 268,512 Non-taxable interest 518,711 987,878 954,677 State net taxable income 8,159,571 12,546,157 15,630,408 Deficits 13,66^ 7,029 43,101 Bank stock tax 673,399 742,943 975,590 General property tax 467,864 474,387 567,637 Total New York taxes paid 1,141,263 1,217,330 1,543,227 ^ Il I 134 TABLE XIa Relation Between Taxes and Income, State General property tax to State net taxable income* Bank stock tax to State net taxable income General property tax plus bank stock tax to State net taxable income* General property tax to capital, sur- plus and undivided profits General property tax plus bank stock tax to capital, surplus and undivided profits Dividends received from other cor- porations to State net taxable income Non-taxable interest on Federal bonds to State net taxable income A.ND INCOIVJ >KK State [E, State Banks in 1918 Percentage 1919 Percentage 1920 Percentage 5.7 3.7 3.6 8.2 5.9 6.2 13.9 9.7 9.8 0.69 0.63 0.58 1.7 2.1 6.3 .*til2flir°r.if.^°^^ P^°P«^y taxes have been deducted is used 1.6 1.6 7.8 1.5 1.6 centages are secured General property tax to net income. General property tax plus bank stock takto" net 'income! 6.1 as a base, the following pe^" 1918 1919 1920 5.4 3.6 3.5 13.3 9.4 9.6 IN TABLE XII Capital, Income, and Tax Payments, Tbust Companies New York State (Based on returns to the Special Joint Legislative Committee on Taxation and Retrenchment) KT U r . ^^^^ 1919 1920 JNumber of complete returns g2 §2 Capital, surplus, and undivided profits. $281,773,403 $292,764,579 $314,480,509 Net taxable mcome as returned to the Commissioner of Internal Revenue, United States 24,947,640 ^^^c^^s 471,997 Dividends received from corporations subject to Federal income tax 3,460, 124 Non-taxable interest on Federal bonds. 2 , 013 , 899 State net taxable income* 30 284 791 ^^fi^^^s 'sS5[l25 Franchise tax levied 2 817 734 Credit given on account of State bonds ^^^^•. 71,158 Franchise tax paid 2 746 576 General property tax 1 ,744 488 Total New York taxes 4,491064 29,979,388 113,890 3,214,284 1,784,109 34,863,891 2,927,645 67,730 2,859,915 1,916,526 4,776,441 39,550,061 2Jt2,702 3,501,313 1,328,241 44,299,594 162,681 3,144,805 76,346 3,068,459 2,024,347 5,092,806 pafd'^a's^'frnc^lf [L'X^uTdti^^dd^^^^^^^^ i'' ""^'T^^ ^?^ ^'^'^ "^--^^^ the arr-ount has been used in working out the Ratios. ^ ^"""^^ ^^'^ «''^^°' '^^^ corrected figure \i /• if 135 TABLE Xlla Relation Between Taxes and Income, Tkust Companies in New Yoek State General property tax to State net taxable income* Franchise tax to State net taxable income General property tax plus franchise tax to State net taxable income* . . General property tax to capital, sur- plus and undivided profits General property tax plus franchise tax to capital, surplus and undivided profits Credit given to tax levied Dividends received from other cor- porations to State net taxable income Non-taxable interest on Federal bonds to State net taxable income 1918 1919 1920 Percentage Percentage Percentage 5.2 5.1 4.3 8.4 7.6 6.5 13.6 12.7 10.6 0.61 0.65 0.64 1.5 1.6 1.6 2.5 2.3 2.4 11.4 6.6 9.2 5.1 7.8 2.9 * If net income before property taxes have been deducted is used as a base, the following per- centages are secured: ^gjg jgjg 1920 General property tax to net income ,'„• ^ ion 10 3 General property tax plus franchise tax to net income ^^ ^ *^ • " TABLE XIII Capital, Income, and Tax Payments, Investment Companies in New York State (Based on returns to the Special Joint Legislative Committee on Taxation and Retrenchment) 1918 1919 1920 Number of complete returns 15 15 15 Capital $8,150,000 $8,150,000 $12,150,000 Surplus and undivided profits 2,180,654 2,358,430 3,825,619 Total $10,330,654 $10,508,430 $15,975,619 Net taxable income as returned to the Commissioner of Internal Revenue, United States 649,185 1,152,090 2,040,779 Deficits ^0,0/,5 136 TABLE XUl — Concluded 1918 1919 1920 Dividends received from corporations subject to Federal income tax 4,528 3,888 18,078 Non-taxable interest on Federal bonds. 13,729 18,753 12,988 State net taxable income* 667,412 1,174,731 2,071,845 I>eficits 20,015 Tax levied 34^031 35,809 56,481 Credit given on account of State bonds ^eld 10 50 50 Taxpaidt 34,021 35,759 56,431 General property tax 11,633 23,071 14,756 Total New York taxes paid 45,654 58,830 71,187 * To secure a figure comparable to those given above for national and State banks, the amount paid as a franchise tax should be added to the income figures here given. This corrected figure nas been used in working out the ratios. t Cf. footnote, table VIII. TABLE Xllla Relation Between Taxes and Income, Investment Companies in ]^ew York State General property tax to State net taxable income* Franchise tax to State net taxable income General property tax plus franchise tax to State net taxable income .... General property tax to capital, sur- plus and undivided profits Franchise tax to capital, surplus and undivided profits General property tax plus franchise tax to capital, surplus and vmdivided profits Credit given to franchise tax Dividends received from other cor- porations to State net taxable income Non-taxable interest on Federal bonds to State net taxable income 1918 Percentage 1.6 4.8 6.5 0.11 0.32 0.4 0.0 1919 Percentage 1.9 2.9 4.9 0.22 0.3 0.5 0.0 1920 Percentage .7 2.7 3.4 0.1 0.3 0.4 0.0 0.67 2.2 0.33 1.6 0.87 0.6 * If net income before property taxes have been deducted is used as a base, the following oer- centages are secured: ^ General property tax to net income General property tax plus franchise tax to net income. 1918 1919 1920 1.6 1.9 .7 6.4 4.8 3.3 ^> 137 TABLE XIV Surplus, Income, and Tax Payments, Savings Banks in !N^Ew York State (Based on returns to the Special Joint Legislative Committee on Taxation and Retrenchment) 1918 1919 1920 Number of complete returns 135 135 135 Surplus and undivided profits $144,780,305 $147,036,336 $98,080,640 Net earnings (as defined in New York Banking Law) 84,203,342 91,556,330 105,510,976 Dividends paid to depositors 72,265,327 78,336,727 85,971,196 Net earnings over expenses and divi- dends* 14,274,279 16,920,404 23,275,379 Franchise' tax levied 1,447,803 1,470,363 980,806 Credit given on account of State bonds held 183,512 184,892 188,929 Taxpaid 1,264,291 1,285,471 791,877 Property tax paid SS7,Q05 * To secure a figure comparable to those given above for national and State banks, the a^^o'^o* paid as a franchise tax should be added to the net earnings figures here given. This corrected figure has been used in working out the ratios. TABLE XlVa Relation Between Taxes and ^et Earnings, Savings Banks IN !N'ew York State 1918 1919 1920 Percentage Percentage Percentage General property tax to net earnings over ex- penses and dividends* Franchise tax to net earnings over expenses and divi lends General property tax plus franchise tax to net earnings over expenses and dividends* Credit given to franchise tax levied 8.1 12.6 7.0 12.5 3.7 3.3 7.0 19.3 ♦ If net earnings before property taxes have been deducted is used as a base, the foUowing per- centages are secured: jg20 General property tax to net earnings over expenses and dividends • • . General property tax plus franchise tax to net earnings over expenses and dividends. 3.6 6.8 r\x I 11 Oi o w O M o w 138 « SQ M -« ^ ^ i te p ^ CO ^ Q O O 3 .^^ (11 W K> "— - U) 2w- 5 ■s «"0 owe IM 00000005 coooot^ooo ooooot^t»r>l (M '*a»oot^«o"5 t- »-i eq eo ■«»< 00 O O M -N OS c* M g p ^^ 2*" 3 5-^-S o w 100 ( >oo< - - JSS lOOOOO »-i CO tk T»< «o e«s 00 C5 -H t^ Tf e<5 05 •^t^ 000000 e. OS 00 10 05 00 o ■^ •O < e^ o o Q oToos esTos e<« coeeo )C0 s; OS CO W) & v eS 35 a T3««-i c o a"^§ CO ^4 «H ^ cot« e<) .-I ■.oo^» SS )CO OS •^ S! e^oo too CO.-I s -^ o ^•t? i i e 2 o 3J-I fe; SS! o_o< to" to g:2 iOO s e<>( SCO '-H OS 00 to h. o •^sii o o ooo< sss JSS 000 to 00 to "-I -H t- CO iM N oooe^i " O-^ OS OCO S"co •<*• CO-^— < coco CO 00 00 S: iOO< O 00 10 iM O OS t^e^ r^ -H 0000 'i" <-i CO to OS CO t^ ^H CO O >— ' ■^ CO ^<* t^ 00 00 oO 005>000 -000 s c o o o o OD CS ■«f to f O CO is OS CS o •* to OS •^ to es o ^ -^os-^co o ^ CO <—■ C'J <— 1 1-~ esi c^i (N co S! 00 -* OtO co«o toe> C» CO r>< to CO r^ ^ S •f -H '-I '-H-I — < "S s C^i ^^s /.^ C^^ ^^^ *^\ W . **' OS OS OS OS OS OS ^H »-< »H 1-^ 1-H ^H CT^ 1^^ ^ W t4-| eS O 139 an bp ^ '^ rt ■ ' & s ? c O O C s. -H to ■>* CO to CO - ^ to O 'l' -HtO-* »-i to CO ^— I to CO 00 1^ OS CO CO CO CO CO ^ CO Od > X #\ I i T \ •ft'S a-tt o ^J2 C o^"-S ^^2 a-o oT3 «-i CJ cs O U IM 03 <1> -C5 C os os '-h co co co ^tmOSOOCO cocoes CO CO to CO o »•» «' i-S-B O O ^— ( ^^ ^H l>» OS OS CO OS - OS -"f 00 OS t>- CO CO CO t>- '-I 00 CO ■<9< CO -H t» to 1—1 '^ e^ to 1-1 coc<« — < OJJOS 0000 00 •»«< -NO OS-N Q ^S, 9-^ >i \A ^ OQ ^ P^ tt 2^ o ci OS CO OS CO CO d ■^ 00 e— I CO t^ 00 00 OtO coos O^ J. -j- to CO to coco ^ Si 05-H coco tot^ 000s coco CO 'A t Til O O CO O >— 'CO OS e^ CO ■*■ -" -^ o — » •^ '— I 000s CD e^ coco CO t~- to o •^ •>- CO 00 00 00 CO IJ* rCt^ t^ t« oo OS O to -HOO »-l »-H iCcO OS-H CO --I 0000 -^.2S§ .2^-8 ''o afea" gfegs^ fg^^-io-Soc PQ « ^ A -e 02 ft^ TStC CO to CO o-* CO eo-^O »-- 1^ t^ t* 00 CO a •—(»-( to t^ 00 CO ^ 1-0 00 toco 00 CO «>^ OS >— I ■^ 00 OO"*! CO ^ ^ to M" 00 00 CO t~ OS C<1 (M to -^ <— I CO CO T^ CO (M -^ OS t^ CO CO O e^ s Oeo s ^H o ^ ^ . b- O to >-" ■* O «0 •* «0 to CO CO t^ OS OS *-^ — H CO CO CO CO ^ ^ OtO to to lOt^ w tj 1^ ' "B 000 SSi 0000 SS 1— I O 00 coos -H 00 (M CO OS C^ CO OS e>* CO (N to CO isssss 000000 -^^oTcot-^Vocs •«ti o toco o»o '^ O CO O CO 00 iOt»l>-00t»** 02 OD O O OS CO CO CO ca CO to CO OS OS C<1 c<> t^ 00 to T»< OS 00 CO ■* 00 00 1-- t^ CM to 00 00 00 CO CO 00 OS O CO O oT^-Tc^j e»t»QO 00 00 "^ n O a •- ., o 3 3 a c3 X 1^ o Jg owe t>"0 s. ■>* -H e<» ■<*i «o 00 t» 05 CO IC 05 «0 U3U30«DOO o ^^ O *>-S Mrs rt O o ^ P 'J^V. 00 eooeoeoeo bo Oooct^ e.a O ^-S pc] ^ ajj tX 3 »- 2v=, O ;og c^ o c t» t>. « »-i »o •^e t!i ui 00 1— -^ o -H e<5 00 CO C'4 CO 00 CO oo 00 OS >« ooeo «3 00 O W " t^ COW* TjflO 00 *"5 -<00 00 o> o 00 to g 1. r^ esi CO oo t>- OS •^ 00 CO e» CO t>- >0 CO cor-. >o 00 >o ^ ■* ■* Tj< «; S ?5 00 CO o«o 3-X3 a i a o 2 o 2 o OOOOto— <(Mrt 00 Tt< — lO M 03 CO CO OO !>. •^»< CO i 00 00 CO ■* 00 e. lO to o o oo-HOO^u5 co'^oo CO oevi 00 •* -HCO (MCO to CO 00 to (M ic O O CO to CO OS e» "-I lO O CO CO «o •»}< to to eo t>. .— I CO CO O •* OS •I 00 -H to 00 1— I OS to iC -H s\) e» CO T»» lo CO to ej ij OSOSOSOIOSOS r"^ •— < 1— < i-H »-l I— ( «— I M?^ 141 WA^l J'S?'?lt ?'5J?'??! Year ended June 30, 1915 1'332.579 1'461,635 2,794,214 Year ended June 30, 1916 908,562 1.373.777 2,282.339 Six months ended December 31, 1916 ^|f '281 617,614 1 ,261 ,895 Year ended December 31, 1917 ?31,556 I'gJM^S ?,2??'?f| Year ended December 31, 1918 480,578 9^8,559 J '4*9, 137 Year ended December 31, 1919 483.524 1-420.326 1 .903,8^0 Year ended December 31, 1920 359.121 1.878.064 2.237.185 Total $9,697,886 $13,787,509 $23.485.395 (31 companies report no paving charges.) II ■ 1 TABLE XIX — Continued B — Paving Costs of 35 Companies 1911-1920 Amounts chargea ble for paving T^ T^ ^ Year ended June 30, 1911 capital maintenance Total Year ended June 30. 1912 $228,088 $442,432 $670 "ion Year ended June 30 1913 291 .309 515 790 SOim^ Year ended June 30! 1914 409.272 1.013.147 1 422419 Yearended June 30, 1915. !^^''^03 1.367.063 1.'813 366 Year ended June 30. 1916:;:: ??3,923 1.103.733 1 H27 656 Six months ended December 31. 1916 JI? '^1? 1 , 054 , 158 1 , 228 ! 104 Year ended December 31. 1917 l^h^^^ 435.105 576 186 Year ended December 31 1918 ?^^^30 702.607 962 537 Year ended December 31 1919 103.124 606.044 709 168 Year ended December 31. 1920: '.'.W U?'2o^ , 9.54. 118 1 ,066;203 Tot^ ^^'6^^ ^'040,264 1.116.891 ,,„^ ; »2. 665. 688 $9.234,4 61 $11,900,149 U^ <^ompames report no paving charges.) ===== - Date Due ____ _>.cc_ - — — ■ . ''^U ^IIAY 9 1' — — • f n$t\ os^^i '/. 0041443632 D663 Mills mz I A statistical analysis of the tax i burden on the corporations of J the state of New York. mdN^ m ^ r lu k- I ¥ B^ m i i 'i I'* '§: ^^^^Bti'iS ^^^^HJJJni:! ^^^^■l:;!" iiijig^r: f:« END OF TITLE