THE SEPARATION OF STATE AND 
 LOCAL REVENUES 
 
 BY 
 
 EDWIN R. A. SELIGMAN 
 
 COLUMBIA UNIVERSITY, NEW YORK, N.Y. 
 
 Reprinted from the Addresses and Proceedings of the 
 National Conference on State and Local Taxation 
 held at Columbus, Ohio, Nov. 12-15, 1907 
 
 NATIONAL TAX ASSOCIATION 
 COLUMBUS 
 
THE SEPARATION OF STATE AND 
 LOCAL REVENUES 
 
 BY 
 
 EDWIN R. A. SELIGMAN 
 
 COLUMBIA UNIVKKSITV, NEW YORK, N.Y. 
 
 Reprinted from the Addresses and Proceedings of the 
 National Conference on State and Local Taxation 
 held at Columbus, Ohio, Nov. 12-15, 1907 
 
 NATIONAL TAX ASSOCIATION 
 COLUMBUS 
 
THE SEPARATION OF STATE AND LOCAL 
 REVENUES 
 
 By Professor Edwin R. A. Seligman 
 Columbia University, Xew York, N.Y. 
 
 I 
 
 The discontent with the conditions of American taxation 
 is growing apace. The reason is not far to seek. On the one 
 hand, the development of industrial democracy is everywhere 
 creating greater demands upon the public purse for a collec¬ 
 tive action which shall be in the interests of the entire com¬ 
 munity; on the other hand, the growth of prosperity and the 
 transition from more primitive economic conditions to those 
 of a complex industrial society are rendering more and more 
 inadequate the fiscal basis and the fiscal machinery which 
 have been bequeathed to us by our ancestors. Thus at both 
 ends the pressure is felt. The fiscal needs are multiplied and 
 the fiscal machinery is getting out of gear. Expenditures 
 are growing, and the old forms of revenue are no longer suitable. 
 Hence the pressure of public needs upon public resources. 
 And since these public needs are augmenting most rapidly in 
 the domain of local rather than of national government, it is 
 primarily questions of state and local revenues that are becom¬ 
 ing increasingly embarrassing. 
 
 It would be a mistake, however, to suppose that the public 
 resources are in themselves inadequate. The fault does not 
 lie with the social income. National prosperity is great and 
 growing, and the increase of wealth and of social income is 
 proceeding unchecked. Were our state and local resources 
 marshaled and organized for fiscal purposes as is done by the 
 national government, the embarrassment would soon vanish. 
 We all know that in normal times there has never been the 
 slightest difficulty in securing a revenue for national purposes 
 which should be, not only abundant, but on the whole satis- 
 
 485 
 
STATE AND LOCAL TAXATION 
 
 486 
 
 factory to the community. We know equally well, however, that 
 what has been so successfully done by the national govern¬ 
 ment is very imperfectly accomplished by our state and local 
 governments. The wealth is there, the resources are there, 
 but the method of tapping the resources has become unsatis¬ 
 factory, lopsided and unequal. What is needed is a readjust¬ 
 ment of the system to make it fit modern necessities. 
 
 In an empire like the United States the problem will natu¬ 
 rally assume a somewhat different form in various sections. 
 Finance and politics are but the ultimate expression of eco¬ 
 nomic forces and relations, and the economic conditions vary 
 widely throughout our country. The transition from the 
 frontier life and the activity of a purely agricultural commu¬ 
 nity to the conditions of a highly developed and complex 
 industrial community has made far more progress in some 
 sections than in others, and to the extent that this transition 
 has only begun, the older methods possess a certain measure 
 of validity. What is good for New York is not necessarily 
 good for Mississippi, nor again for Utah. But notwithstand¬ 
 ing this diversity of economic conditions, there are certain 
 phenomena which are common to all. The large corporate 
 agencies of transportation are found throughout the country. 
 Some of the great trusts are selling their products in the little 
 hamlets as well as in the important commercial centers. Cer¬ 
 tain defects in our fiscal system are therefore being recognized 
 as common to the whole country, and with the development 
 of more homogeneous economic conditions this is bound to 
 be increasingly true in the future. We have tax commissions 
 wrestling with very much the same problems, not only in Mas¬ 
 sachusetts and New York, but in Minnesota and Wisconsin; 
 not only in Louisiana, but on the Pacific slope. 
 
 What, then, are the chief difficulties in our tax system which 
 are coming more and more to be recognized everywhere through¬ 
 out the length and breadth of the land. I should sum them 
 up under eight heads. 
 
 First and foremost is the breakdown of the general property 
 tax, which is almost everywhere still the chief reliance of state 
 and local government. The general property tax works well 
 only amid most primitive economic conditions for which alone 
 
THE SEPARATION OF STATE AND LOCAL REVENUES 487 
 
 it was calculated. Almost everywhere, for reasons which it is 
 unnecessary here to recapitulate, and which it is utterly im¬ 
 possible to prevent, personalty is slipping from under. The 
 administration of the general property tax is everywhere 
 attended with increasing difficulty, and in our large industrial 
 centers it has become, to use the words of a recent tax report, 
 “ a howling farce.” Everywhere, north and south, east and west, 
 although in varying degree, comes the cry that the attempt 
 to enforce the general property tax, whether by listing bills or 
 tax ferrets, by oaths or by inquisitors, is doing much to force 
 upon the average citizen habits of falsehood and corruption. 
 
 Second, a growing lack of equality in tax burdens, not 
 only as between classes in the community, but as between 
 individuals of the same class. Where land, for instance, is 
 assessed at 20 per cent of its value in certain counties, and at 
 80 per cent or 100 per cent in other counties, it is obvious that 
 the contribution to the state tax is grossly unequal and unfair. 
 
 Third, the application to general purposes of what was 
 intended to be only a local revenue. All direct taxation was 
 originally local in character, and the assessment of property 
 for local taxation was at the outset a comparatively simple 
 matter. When the need for state revenues made itself felt, 
 it was obviously expedient to tack on to this local taxation a 
 quota for general purposes. But with the great development 
 of state functions, and with the breakdown of the local barriers 
 of commerce and industry, what was originally equal soon 
 turned into inequality, and the attempt to fetter interlocal 
 or even interstate business conditions by the bonds of purely 
 local assessment has proved to be a fruitful source of difficulty. 
 
 Fourth, the failure to make modern corporations bear their 
 fair share of taxation. The corporation is a growth of the last 
 half century. It was unknown when the present framework 
 of our tax system was established. The attempt to force the 
 new wine into the old bottles is not only spoiling the wine, but 
 cracking the bottles. 
 
 Fifth, the failure to secure adequate compensation from 
 individuals and corporations alike for the franchises and privi¬ 
 leges that are granted by the community. An earnest effort 
 is being made at present throughout the length and breadth of 
 
488 
 
 STATE AND LOCAL TAXATION 
 
 the land to repair this defect. But with the historic system 
 as it has come down to us in this country of estimating wealth 
 in terms of property rather than, as abroad, in terms of income, 
 we have been plunged into the vortex of the assessment of 
 franchises, and have thus been compelled to attack a problem 
 which does not even exist in other parts of the world. 
 
 Sixth, the undue burden cast upon the farmer. Practically, 
 this is the problem of taxation in many of our rural districts 
 and in all agricultural communities where the failure of an 
 adequate revenue system and of the readjustment of social 
 resources makes it impossible to secure good schools or fairly 
 decent roads without overburdening what is, after all, the chief 
 source of American prosperity. 
 
 Seventh, the interference with business, due to the partial 
 and spasmodic enforcement of antiquated laws. Witness the 
 attempt in some States suddenly to levy the mortgage tax, as 
 recently in New York, where the entire building industry was 
 thrown into confusion; or the attempt in other States to enforce 
 now this and now that kind of property tax on businesses 
 which led to a change in the location of the business rather than 
 to any increase of revenue. The harassing of the individual 
 business or the fear of harassment is becoming less and less 
 defensible in the delicately adjusted mechanism of modern 
 business society. Over a century ago Alexander Hamilton, in 
 his famous report on manufactures, stated this golden maxim: 
 “All taxes which proceed according to the amount of capital 
 supposed to be employed in a business are inevitably hurtful to 
 industry and are particularly inimical to the success of manu¬ 
 facturing industry and ought carefully to be avoided by a 
 government which desires to promote it. It is in vain that 
 the evil may be endeavored to be mitigated by leaving it, in 
 the first instance, in the option of the party to be taxed to 
 declare the amount of his capital or profits.” 
 
 Eighth, the failure to make great wealth contribute its due 
 share. In former times, where property was fairly equally 
 distributed and conditions simple, inequalities in tax burdens 
 were slight and unperceived. Before the huge aggregations of 
 modern wealth, the crude tax machinery of earlier days stands 
 impotent. And yet we hug ourselves with the delusion that 
 
THE SEPARATION OF STATE AND LOCAL REVENUES 489 
 
 all that is necessary is to patch up the old machinery, whereas 
 what is really needed is to throw the old machinery on the scrap 
 heap and to utilize entirely new and modern instruments and 
 processes. 
 
 II 
 
 We must recognize the fact, however, that revolutions of 
 this kind occur but seldom. The only method of achieving 
 substantial progress in society is, after all, by attempting to 
 go forward step by step. But however slow the change, it is 
 imperative that the goal be kept clearly in mind if there is to 
 be any progress at all. If we move step by step, it is highly 
 important that each step be a forward, and not a retrograde, one. 
 Now the starting point from which progress of all kinds must 
 set out is at the present time in the United States the abandon¬ 
 ment of the use of the identical revenue for state and local 
 purposes. Whatever other reforms are needed, and they are 
 many, no lasting progress can be made unless we take this 
 preliminary step. It is for this reason that I have ventured 
 to put in the foreground of discussion the problem of the 
 separation of state and local revenues. 
 
 The utilization of the same sources for both purposes is, 
 as we have seen, a natural development, at least in Anglo-Saxon 
 communities where the spirit of self-government has always 
 been strong, and where the local unit has been the cell that 
 has grown through accretion into a mighty nation. Yet the 
 employment of the identical sources of revenue for state and 
 local purposes has not only engendered all the difficulties which 
 have been adverted to above, but has succeeded in confusing 
 the issue, and in rendering almost impossible a satisfactory 
 solution of the problem. Where each local community finds 
 that its interests are in some unaccountable way bound up 
 with those of other communities, the tendency is to induce an 
 unwillingness to experiment with any changes, no matter how 
 necessary, which through the influence of these common inter¬ 
 ests may perhaps react disadvantageous^ upon the interests 
 of the particular community. The result is the breeding of 
 mutual suspicion and, what is still worse, of lethargy. Just as 
 no single individual can be expected to submit an accurate 
 
490 
 
 STATE AND LOCAL TAXATION 
 
 list of his taxable property when he is absolutely sure that his 
 neighbors are all successfully withholding their own, so no 
 community will be willing to make any change in methods, the 
 result of which would, in all probability, only be to increase its 
 common burdens. The separation of state and local revenues 
 is therefore a matter of vital importance in the American com¬ 
 monwealths of to-day, not so much because it forms in itself any 
 solution of the problem, but because it is the indispensable 
 initial step to any substantial progress. The separation of 
 state and local revenues is not a cure, but it alone will make 
 a cure possible. It is from this point of view that we must 
 address ourselves to the problem. 
 
 There are four aspects of the subject: First, what is meant 
 by separation of state and local revenues ? Second, what are 
 its disadvantages? Third, what are its history and develop¬ 
 ment? And fourth, what are the dangers of the system? 
 
 I. In the first place, separation denotes, as the word im¬ 
 plies, some distinction between the classes of revenue. Almost 
 everywhere in the United States the general property of indi¬ 
 viduals is assessed for local purposes, and as corporations 
 developed, their property was also assessed in the same way 
 by local assessors. County expenses are usually defrayed by 
 apportioning the necessary amount to the localities according 
 to the assessed valuation of property and thus adding a county 
 rate to the local rate. Finally, the state expenditures are 
 defrayed in precisely the same way by dividing up among the 
 separate counties a sum proportioned to the assessed valuation 
 in the counties. Thus the final tax rate upon property is 
 made up of the addition of these various rates. But the assess¬ 
 ment and the collection are for the most part in the hands of 
 local authorities. 
 
 What will be gained by the separation of state and local rev¬ 
 enues is that the state revenues will no longer be collected from 
 the same source and in the same manner as the local revenues. 
 It means practically that there should be no state tax rate on 
 general property added to the local tax rate through the process 
 of apportioning state expenditures among the localities accord¬ 
 ing to the assessed valuation. And it implies as a corollary 
 that some other method of securing the state revenues be 
 
THE separation of state and LOCAL REVENUES 491 
 
 devised. The demand for separation is primarily a negative 
 rather than a positive one; it is destructive rather than con¬ 
 structive. It claims that the root of the present evil must at 
 all costs be pulled out. It leaves open for debate what particu¬ 
 lar alternative methods should be substituted. It proclaims 
 in no uncertain tones, “Leave to the locality what properly 
 belongs to the locality; allot to the State what properly belongs 
 to the State.” 
 
 II. The second aspect of the problem is a discussion of the 
 advantages that would ensue from separation. These may 
 be summed up under the following heads: A . Conformity with 
 the natural division of government functions and activities. 
 B. Greater equality in assessments. C. Lowering of the tax 
 rates. D. Removal of conflicts between city and county. 
 E. Greater flexibility and adaptation of means to end. 
 
 A. The first advantage is the conformity with the natural 
 division of government functions and activities. The relation 
 of government to business life necessarily changes with the 
 conditions of business activity. When business was purely 
 local in character, as was true in former times, the local authori¬ 
 ties were competent to deal with them. To-day yet, activities 
 connected with real estate are still largely of this character. 
 The real estate cannot be removed from the locality, and the 
 benefits and burdens attaching to real estate are still to a very 
 large extent bound up with the people who live in the immediate 
 neighborhood. What is true of real estate was originally 
 true of almost all economic phenomena. But it is no longer 
 true. The scope of the great industries connected with the 
 transportation of wealth and the transmission of power or 
 intelligence is obviously no longer local in character, and many 
 of the ordinary corporations and businesses are stretching out 
 with an activity that transcends all local bounds. While the 
 central office must indeed be in some one locality, the scope and 
 content of the activities are no longer local, and in the great 
 majority of cases any attempt to estimate the economic capac¬ 
 ity of the business or corporation to bear the tax burdens by 
 the property existing in that locality would be woefully inac¬ 
 curate. Not only would the local property often be in no pro¬ 
 portion at all to the local sales, but even the local sales would 
 
492 
 
 STATE AND LOCAL TAXATION 
 
 not be any index of the relative profits or tax-paying ability. 
 The insurance company (although situated with its head office 
 in some one town) does business throughout the entire State; 
 the railroad may have four tracks in a little country village 
 which contributes practically nothing to the traffic; a bank 
 may derive its profits in large measure from out-of-town busi¬ 
 ness. Where the activity is primarily interlocal or state, the 
 burden should be interlocal or state. 
 
 Not only, however, is there this natural division between 
 state and local functions, but even where the phenomenon 
 itself is purely local, experience has disclosed in some cases the 
 great advantage of assessment by state rather than by local 
 officials. Real estate, for instance, can far better be valued by 
 officials of the neighborhood who are cognizant of the local 
 conditions. But the administration of a liquor license law is 
 apt to be far more effective if divorced from local influences. 
 It is for such a reason, for instance, that the liquor-license tax 
 is now levied in New York by state officials with a far greater 
 degree of efficiency and therefore with a far greater resultant 
 revenue than was formerly the case. So also certain taxes 
 are more effective when resting on a broad than on a narrow 
 basis of assessment. The inheritance tax, for example, is 
 obviously unfit for a source of local revenue because the 
 number of wealthy individuals who die in any one year in 
 a single town or city is so unpredictable and oscillating that 
 the revenue would be entirely too spasmodic. Broaden the 
 base by taking in the whole State, and the amount of 
 property passing by death from year to year will be found to 
 fluctuate very little. 
 
 Thus, from the double point of view of historic changes in 
 the scope of government functions and in the effectiveness of 
 administration, a clear line can often be drawn between what 
 is properly a state and what is properly a local source of revenue. 
 
 This consideration really carries one step farther a distinction 
 which is found almost from the beginning of our national 
 existence. At first, there was no line drawn between national 
 and state sources of revenue, and in the critical years succeeding 
 the Revolution the Union had to depend upon requisitions 
 addressed to the separate States to be raised by them in the 
 
the separation of state and LOCAL REVENUES 493 
 
 same way as their own local revenues. With the collapse of 
 this system was settled once and for all the principle of a sepa¬ 
 rate and independent national revenue from sources, in part at 
 least, distinct from those of state revenue. The whole domain 
 of foreign commerce, which up to that time had been within 
 the purview of the separate States, was now transferred to the 
 Union, and the force of historical necessity has since then con¬ 
 verted certain forms of internal taxation, which were still for 
 a long time administered by the separate States, to the prac¬ 
 tically exclusive possession of the Union. The process is not 
 indeed entirely complete, and we are even now debating whether 
 certain forms of state taxation should not hereafter be rele¬ 
 gated to the general government. The point which it is desired 
 here to emphasize, however, is that the principle has been 
 settled. It is the same principle which is now applicable to 
 the separation of revenues within the State. It was the finan¬ 
 cial collapse of the Confederacy which brought about the 
 separation of national and state revenues. It is the practi¬ 
 cal collapse of our antiquated fiscal system within the States 
 which is just beginning to bring about the separation of state 
 and local revenues. The change in the economic conditions at 
 the end of the eighteenth century was responsible for the 
 one; the change in the economic conditions at the beginning 
 of the twentieth century will be responsible for the other. 
 Thus, the first advantages of the separation of state and 
 local revenues is the fact that it is in harmony with an under¬ 
 lying principle of historical growth. 
 
 B. The second advantage is the securing of greater equal¬ 
 ity in assessments. The differences in assessed valuations in 
 various sections of our States have everywhere become so 
 glaring that the last few decades have seen in almost every 
 case the creation of boards of equalization designed to remedy 
 the acknowledged evil. It is equally notorious, however, that 
 the remedy has been entirely inadequate and that the boards 
 of equalization have been unable to accomplish what was 
 expected of them. The inequalities go on almost unchecked, 
 very largely for the reason that the members of the state 
 boards have too imperfect a knowledge of the local conditions 
 to admit of any successful revision of property valuations. 
 
494 
 
 STATE AND LOCAL TAXATION 
 
 The relegation of the general property tax to the localities 
 will at once render unnecessary any equalization, for if the 
 state revenues are secured in other ways, and if the general 
 property of individuals, whether real estate or personalty, is 
 not directly liable for state purposes, there will of course be 
 no inducement for the local authorities to seek to lower the 
 local valuations of property. For purely local purposes it 
 makes no difference whether there is a low valuation with a 
 high tax rate or a high valuation with a low tax rate; the result 
 is precisely the same. With the separation of state and local 
 revenues the individual landowner in one part of the State 
 will no longer be casting envious glances at the landowners 
 in other parts of the State, and this mad scramble for reduction 
 of assessments will be checked. It will depend entirely upon 
 the people in the community itself, and not upon those in other 
 communities, whether the individual tax rate shall be high 
 or low. 
 
 C. This brings us to the third advantage, the political aspect 
 of which is not slight. Where, as at present in some cases, 
 the state taxes form no inconsiderable part of the whole, the 
 tax rate upon the individual property owner is naturally aug¬ 
 mented to this extent. Under a system of separation of state 
 and local revenues, with a relegation of the property tax to the 
 localities, the rate of the tax will naturally be lowered by the 
 entire amount of the state revenue previously derived from 
 this source. In the development of the system in New York, 
 for instance, this argument had great weight with the legisla¬ 
 tors and was largely responsible for achieving the final result. 
 The separation of state and local revenue means a reduc¬ 
 tion of direct taxation of property. 
 
 D. The fourth advantage is the removal of conflicts between 
 city and county. The present situation in many of our States 
 is really an outgrowth of point B mentioned above; namely, 
 the inequality in the assessments of property. Many of the 
 rural counties claim that since there is a far larger proportion 
 of tangible and visible property within their borders than is 
 the case in the larger cities, the property actually assessed 
 in their case greatly transcends in its relative proportions the 
 property assessed in the cities. There is, therefore, a frequent 
 
the separation of state and LOCAL REVENUES 495 
 
 pressure upon boards of equalization to raise the total valua¬ 
 tions in the cities and to compensate for this by reducing 
 the valuations of the rural districts. In a State like New York, 
 for instance, there was an almost annual contest marked by 
 bitterness and asperity, leading in some cases to the threat on 
 the part of the city of New York that an attempt would be 
 made to create a separate State. The separation of state and 
 local revenues puts with one blow an end to all these sources 
 of difficulty and friction. The large city as well as the small 
 town, each is allowed to go its way in peace. 
 
 E. The final advantage is virtually a corollary of the one 
 just discussed; namely, a greater flexibility and adaptation of 
 means to end. If each locality is now, through the separation 
 of state and local revenues, divorced from the others and is 
 left to work out its fiscal salvation, to a certain extent at least, 
 independently, it is obvious that each locality will be better 
 able to adjust its fiscal system to its own particular fiscal 
 needs. The conditions of a commercial metropolis are very 
 different from those of a country hamlet, and what may be 
 entirely appropriate in the second case may be found to be 
 completely unworkable in the first. The slow steed and the 
 fleet pacer work very ill together in harness: set each of 
 them free to do what he can and the total result will be far 
 more satisfactory for all concerned. Uniformity of fiscal meth¬ 
 ods is desirable only where there is a uniformity of economic 
 conditions. If we allow the different localities to experiment, 
 within certain broad lines, as to the fiscal methods best suited 
 to their own prosperity, the result is ultimately bound to be 
 an adaptation of fiscal practice to economic fact. 
 
 Thus from each of these five points of view the benefits 
 which would accrue from a separation of state and local reve¬ 
 nues are clear and undeniable. But so strong is the force 
 of custom and prejudice, and so inadequate is the ordinary 
 analysis made of the situation, that the movement has really 
 only just begun in the United States. 
 
 III. We come then, in the third place, to a word as to the 
 history of the separation of state and local revenues. 
 
 The separation of state and local revenues in the sense of 
 abandonment of the general property tax for state purposes 
 
496 
 
 STATE AND LOCAL TAXATION 
 
 has been achieved in only one important commonwealth, 
 New York. In several States, indeed, a beginning has been 
 made by securing for state purposes a supplementary revenue 
 over and above that from the general property tax. But 
 this partial achievement virtually secures none of the advan¬ 
 tages of a complete separation except possibly that of a mod¬ 
 erate reduction in the tax rate. It is valuable only as afford¬ 
 ing a basis on which to erect the complete structure of an 
 independent state revenue. Again, in a few of the smaller 
 Eastern States, like New Jersey, Connecticut and Delaware, 
 where the state expenses are relatively slight, it has been 
 found practicable to defray the state expenses primarily from 
 taxes on corporations. But even here the separation of state 
 from local revenue is ostensible rather than real because as 
 in New Jersey the school taxes, which do not figure in the state 
 budget, are divided by the State in proportion to local valua¬ 
 tions on property, thus virtually continuing all the disadvan¬ 
 tages of a state assessment or a state equalization. Penn¬ 
 sylvania has almost reached the goal by discontinuing any 
 state taxation of real property, but Pennsylvania still enforces 
 the state tax upon personalty, even though this be done in 
 a somewhat peculiar way. New York is the real example of 
 separation of state and local revenues, although from the 
 local point of view the separation is not complete because 
 corporations are still nominally subject to the general property 
 tax for local purposes. So far, however, as the chief point is 
 concerned, namely, the abandonment of the general property 
 tax for state purposes, New York has in practice reached the 
 separation of state and local revenues. 
 
 This has been accomplished only within a year or two. The 
 creation of an additional and supplementary source of state 
 revenue over and above that from the general property tax 
 began almost a quarter of a century ago, but it was not until 
 about a decade later that the author of this paper was fortu¬ 
 nate enough in impressing upon the authorities the importance 
 of a system of complete separation. Ever since that time the 
 process has gone slowly forward, until in 1906 the last step 
 was taken and provision was made for securing the entire state 
 revenue — between thirty and forty millions of dollars—from 
 
THE separation of state and local REVENUES 497 
 
 other sources than the general property tax. The separation, 
 however, is not yet enforced by any specific law; it is simply 
 the result of annual legislative decision. In New York, there¬ 
 fore, we stand on the threshold of a far more important 
 movement. We have cleared the way and are ready to begin 
 our onward march. What has been accomplished in New 
 York is certainly not impossible of accomplishment elsewhere. 
 
 IV. It may be inquired, however, in the last place, are there 
 no objections to the system of separation or are there no dan¬ 
 gers connected with it ? A candid consideration would compel 
 an answer in the affirmative, but a closer scrutiny will result, 
 I think, in the conclusion that the objections are largely spe¬ 
 cious, and that the dangers are at least remediable. 
 
 What are its objections and dangers ? They may be summed 
 up under three heads: a lack of suitable state revenues; a 
 lack of elasticity; a lack of suitable local revenues. Let us 
 consider these in turn. 
 
 It might be claimed by some States that if the general 
 property tax is abandoned as a source of state revenue, there 
 is nothing to put in its place. The experience of the more 
 advanced States, however, shows the fallacy of this conten¬ 
 tion. Even where the ordinary business corporations have 
 not assumed vast proportions, we find in all the States the 
 existence of the great public service corporations. Under a 
 proper system of assessment, the tax on corporations of this 
 kind, if reserved primarily for the State, would go far toward 
 defraying all legitimate state expenses. The difficulty now 
 is that in many of our States the greater part of the taxes on 
 corporations go to the localities, where, as we shall see in a 
 moment, they are not needed, and only a small part, if any, 
 is assigned to the State. If we render to Caesar what belongs 
 to Caesar, the tax on corporations will go primarily to the 
 States. Another source of state revenue which is now spread¬ 
 ing in this country, but which has by no means received the 
 development of which it is susceptible, is the inheritance tax. 
 In New York over one sixth of the entire state revenue is se¬ 
 cured from this source, and the same is true in many foreign 
 countries. Owing to defects in the principle as well as in the 
 administration of the law, the inheritance tax in many other 
 
498 
 
 STATE AND LOCAL TAXATION 
 
 States is very ineffective. But New York again has shown 
 the way. Where corporations and inheritance taxes do not 
 suffice, other sources of revenue stand ready at hand. There 
 is no reason, as we have seen above, why the license taxes 
 should be reserved exclusively for local purposes. In the 
 Southern States the license or occupation taxes have for a long 
 time gone, in part at least, to the State, although the whole 
 Southern system is capable of much improvement in this and 
 other respects. Here, again, in New York, it has been shown 
 what can be done, and about one third of the entire state 
 revenue comes from the liquor license tax alone. In short, 
 without going more in detail into this question, which is sus¬ 
 ceptible of a far larger treatment, it may be said that there is 
 scarcely a State in this Union where, under proper methods, 
 adequate sources of state revenues could not be discovered 
 and effectively employed. But even if this were not the case, 
 and if it turned out to be difficult to secure additional sources 
 of state revenue, there is still left a simple and efficacious 
 means of accomplishing all the advantages that can be derived 
 from separation, without incurring the hazard of not finding 
 sufficient state revenues. This method may be called the 
 apportionment-by-expenditure method. 
 
 The apportionment-by-expenditure method may be de¬ 
 scribed as follows: At present the state general property tax 
 is distributed among the counties by apportioning the quota 
 of each according to the assessed valuation of property. 
 The apportionment-by-expenditure method as opposed to 
 the apportionment-by-valuation method would distribute the 
 amount to be raised for state purposes to each county on the 
 basis of the total expenditure or, what is the same thing, on 
 the basis of the total revenues collected to defray this expen¬ 
 diture within each county and all the taxing districts contained 
 in the county. The advantages of this scheme are obvious. 
 
 First and foremost, it would permit each locality to raise its 
 revenues as it chose within certain broad lines, as laid down 
 by the general law. The apportionment being no longer ac¬ 
 cording to the valuation of property in general, but according 
 to expenditures or revenues, it would be immaterial to any 
 section in the State how the local revenues of any other sec- 
 
THE separation of state and local REVENUES 499 
 
 tion were raised. The important point would be the extent of 
 the revenue and not the manner of raising it. 
 
 It was mainly to secure at once local option in the selection 
 of the subjects of taxation that the apportionment-by-expen¬ 
 diture method was urged by Mr. Lawson Purdy, who first 
 suggested this scheme several years ago. 1 This designation 
 of local option is perhaps not entirely happy in that it does not 
 adequately describe the powers to be conferred upon local 
 communities. Moreover, the term “local option” has become 
 so intimately associated with the liquor problem that its utili¬ 
 zation for taxation is apt to become confusing. 
 
 Secondly, even if the general property tax were retained 
 for the basis of assessment by the localities, the apportionment- 
 by-expenditure method would result in a more equitable dis¬ 
 tribution of the burden than is the case at present. For, as 
 has been explained, it is notorious that assessments of personal 
 property in the rural counties are almost inevitably higher 
 when compared to actual values than is the case in the cities. 
 On the other hand, expenditures or revenues correspond much 
 more nearly to the actual taxable abilities of the communities. 
 Hence, apportionment by expenditure would bring about a 
 more equitable distribution of burdens than is the case at 
 present. A careful computation that was made several years 
 ago in New York when the board of equalization still appor¬ 
 tioned the state tax shows that under this new system the 
 counties which would pay more are either the rich counties 
 which contain the most valuable land in the State, or the coun¬ 
 ties which received too high a percentage rating from the board 
 of equalization. 2 
 
 Thirdly, the apportionment-by-expenditure method would 
 tend to economy in both state and local government. Local 
 extravagance would, to a slight degree at least, increase the 
 proportion of the state burden, and state extravagance would 
 be directly reflected in a higher charge on the localities. 
 
 1 “Local Option in Taxation,” a paper read at the Buffalo National Tax 
 Conference, May 23-25, 1901; also separately published by the New York 
 Tax Reform Association. In this paper, however, Mr. Purdy is perhaps unduly 
 critical of the other method of securing separation of state and local revenue. 
 
 2 The figures are given, in an appendix. 
 
500 
 
 STATE AND LOCAL TAXATION 
 
 The fourth benefit is that the present state boards of equali¬ 
 zation would be rendered entirely unnecessary, for the whole 
 matter would be settled by a mere arithmetical computation 
 which would leave no room either for favoritism or for unin¬ 
 tentional injustice. 
 
 Finally, fifthly, since it would be necessary to have full 
 figures of statistics and revenues of all counties and local divi¬ 
 sions, we should secure at once a system of comparative local 
 statistics which have hitherto been almost entirely wanting in 
 most of the States, and the lack of which is a serious obstacle 
 to fiscal form. 
 
 The chief objection to this scheme of apportionment by 
 expenditure is that it might tend unduly to prevent desirable 
 expenditures in the more progressive communities. The force 
 of this objection is, however, not so great as it seems. For, 
 in the first place, if the community is ready to subject itself 
 to the burdens of a larger expenditure for desirable aims, it 
 will scarcely be checked by the very slight additional burden 
 which would result from the increase of the state tax. For 
 the local burden is always very much greater than the state 
 burden. Secondly, even if this were not true, the force of 
 the objection could be very largely attenuated by combining 
 the apportionment-by-expenditure method with the system 
 above described of an independent state revenue from other 
 sources than property. If this were done, that is, if the greater 
 part of state revenues were derived from independent taxes, 
 and if only the necessary residuum were raised by the appor¬ 
 tionment-by-expenditure method, the proportion falling to 
 each locality would be so exceedingly slight as virtually to 
 rob the objection of whatever strength it might be supposed 
 to possess. 
 
 It is interesting to observe that the apportionment-by-expen- 
 diture method has been introduced into one State, namely, 
 Oregon. The Oregon law of 1901 adopted the scheme, how¬ 
 ever, only in part, in that it apportioned the state property tax 
 to the counties for the first few years according to a table of 
 fixed percentages based on valuations. According to the new 
 law of 1907, the system of apportioning taxes according to ex¬ 
 penditures is to go into effect in 1912. In Oregon, however, 
 
THE separation of state AND LOCAL REVENUES 501 
 
 there are two points in which we find a departure from the prin¬ 
 ciples of the system. The first is that the apportionment is 
 not to be made according to all expenditures, but only accord¬ 
 ing to some expenditures, — expenditures for roads, for inter¬ 
 est on the debt, for courthouses and for fighting pestilence 
 being deducted in each case. More important than this, how¬ 
 ever, is the adoption of the rule that the apportionment itself is 
 to be made according to county expenses instead of according 
 to the total expenses of all the localities within the county as 
 well as of the county itself. While something perhaps may 
 be said for the first derogation from the principle, it is difficult 
 to see the justification for the second. For in this way the 
 apportionment-by-expenditure method is robbed of many 
 of its advantages. Even this partial adoption, however, of 
 the system secures for Oregon the great object which was to 
 be attained; namely, the separation of state and local revenues. 
 It must also be remembered that Oregon joins to the apportion¬ 
 ment-by-expenditure method that of independent state reve¬ 
 nues by special taxes. 
 
 Thus we see that the contention that separation of state and 
 local revenues is impossible in some States, because of a lack of 
 adequate state revenues, is weakened, if not entirely overcome, 
 by the adoption, in part at least, of the alternative method 
 to be employed in one of the least developed of our com¬ 
 monwealths. It must, however, not be supposed that the prin¬ 
 ciple of separation of state and local revenue is conditioned by 
 the acceptance of the apportionment-by-expenditure method. 
 If this method should on the whole prove to be unwise or in¬ 
 expedient, the separation of state and local revenue would not 
 be affected thereby. The separation of state and local revenue 
 does not necessarily imply either complete local option or any 
 specific method of apportionment. These do not stand or fall 
 together. 
 
 The second possible objection to the scheme of separation 
 is the lack of elasticity in state revenues. Whatever are the 
 drawbacks of the general property tax for state purposes, it 
 is undeniable that the system is a highly elastic one. When 
 the State needs more revenue, it simply increases the tax rate; 
 when it needs less revenue, it diminishes the tax rate. By 
 
502 
 
 STATE AND LOCAL TAXATION 
 
 abandoning the general property tax for state purposes, we 
 therefore lose this necessary element in the system. 
 
 There are, however, three ways of reintroducing the elas¬ 
 ticity which will be lost. The one obvious and simple method 
 is to utilize as the elastic feature the apportionment-by-expen¬ 
 diture method just described. If any more money is needed 
 in any one year, so much more can be apportioned to the 
 counties. Secondly, in default of the adoption of this method, 
 the elasticity lost by the abandonment of the general property 
 tax for state purposes might be regained by introducing a 
 varying rate in one of the other taxes. There is no necessary 
 reason why the tax rate should always be the same from year 
 to year. In the case of taxes on business or on corporations, 
 indeed, it would be highly inadvisable to alter the rates from 
 year to year as tending to unsettle business. But to other 
 forms of taxation this objection would not apply. England 
 secures elasticity by varying the rate of the income tax from 
 year to year. There is no reason why in the American States 
 the rate on the inheritance tax should not be modified from 
 time to time so as to secure a slightly greater or slightly 
 smaller revenue. The change in the tax rate on inheritances 
 cannot very well bring about a change in the death rate of the 
 people whose property is inherited. And thirdly, even if neither 
 of the above schemes approves itself to the community, we 
 might adopt the suggestion which has been made in the recent 
 report of the New York State Tax Commission; namely, that 
 the State should accumulate a small surplus which it would 
 hold to meet any possible deficit, and that when the surplus 
 exceeded a certain figure, it should be automatically returned 
 to the localities for the relief of local taxation. 
 
 In any one of these three ways elasticity could surely be 
 secured. 
 
 The third and final objection to the separation of state and 
 local revenues is that the localities cannot afford to relin¬ 
 quish to the State any sources of revenue which they now 
 possess. It is claimed, for instance, that many of the rural 
 counties which now secure a large revenue from the property 
 tax on the property of the transportation companies which 
 happen to traverse them cannot afford to lose this revenue. 
 
the SEPARATION OF STATE AND LOCAL REVENUES 503 
 
 We here come to a point which has been much neglected in 
 the discussion of the subject; namely, an insufficient analysis 
 of what is really implied in the separation of state and local 
 revenues. 
 
 As I conceive it, there are two kinds of separation which 
 might be termed respectively the segregation of source and the 
 division of yield. The segregation of source means that an 
 entirely different source of revenue should be utilized for state 
 purposes from that which is used for local purposes. It is 
 this which is meant when we say that the State should no longer 
 derive its revenue from the source of the general property tax. 
 But there is an entirely different method of attaining the same 
 result; namely, by the exclusive state assessment of certain 
 sources of revenue coupled, however, with an apportionment 
 of a part of the proceeds to the localities. For instance, the 
 inheritance tax ought to be levied by the State and not by 
 the locality; therefore there would be here a segregation of 
 source in the assessment. There is, however, no reason why, 
 after the tax has been collected, a part of the proceeds should 
 not be apportioned to the localities. The corporation tax 
 ought indeed to be levied independently by the State, and 
 here again there is no reason why a portion of the proceeds 
 should not be distributed to the localities. The excise tax in 
 New York is admirably administered by the state officials, 
 yet one half of the proceeds is returned to the localities. The 
 division of yield of a tax is perfectly compatible with a segre¬ 
 gation of the source of a tax. The trouble with our present 
 system is that we attempt to make a local assessment of all 
 property and then add something for the State, thus producing 
 all the evils of the actual situation. What should be done, 
 and what is beginning to be done in some places, is to leave 
 the property tax on individuals entirely to the local divisions 
 and to develop a system of taxation assessed in first instance 
 by the State, but with an apportionment among the localities 
 of so much of the proceeds as may be necessary. We must 
 not confuse segregation of source with division of yield. If 
 we establish a separate system of state taxes, that is, a tax 
 levied and assessed in first instance by the State, and if we then 
 find, as can easily be accomplished, that the revenue is more 
 
504 
 
 STATE AND LOCAL TAXATION 
 
 than adequate for state purposes, it is an exceedingly simple 
 matter to arrange for a distribution of the overplus among 
 the localities. 
 
 As stated earlier in this paper, the difficulty is not with the 
 social income as a whole. There is in the community an abun¬ 
 dance of wealth which has never been tapped. The difficulty 
 lies in the present method of apportioning the burden. By 
 raising local revenues primarily from those sources which 
 exist in abundance in the localities, and which are by nature 
 local in character, and by retaining for state assessment those 
 taxes which have a wider economic basis, we can be just to all 
 demands of both State and locality without imperiling the 
 fiscal situation in either, and at the same time securing a free¬ 
 dom from all the difficulties that beset us at present. The 
 separation of state and local revenues includes two distinct 
 phases, the segregation of the source of revenue and the divi¬ 
 sion of yield of the tax. The real principle is to reserve a 
 direct taxation of property for the localities and to hand over 
 to the State all the important sources of revenue, dividing a 
 part of the proceeds among the localities and possibly making 
 up any part of the deficiency for the State through the system 
 of apportionment by expenditure. In this way we may secure 
 all the advantages of separation of state and local revenue, 
 and yet avoid the dangers and pitfalls. 
 
 It will be seen from the above presentation that separation 
 of state and local revenue is by no means identical with what 
 is sometimes called local option in taxation — a term in itself 
 unfortunate for reasons that have been mentioned above. Sepa¬ 
 ration does, indeed, involve some measure of choice by the 
 localities, and that is, in fact, one of its great advantages; but 
 local option may obviously be carried to an extreme. The lib¬ 
 erty of taxation on the part of separate local communities must 
 not be permitted to disrupt the general scheme of taxation, or 
 to imperil business activities through a rivalry in the applica¬ 
 tion of the taxing power. What has been so laboriously gained 
 in state taxation through the intervention of the national 
 authority, which prohibits the state taxation of interstate com¬ 
 merce, must not be lost in local taxation through the absence of 
 state control. What the separation of state and local revenue 
 
the SEPARATION OF STATE AND LOCAL REVENUES 505 
 
 seeks to accomplish is, as we shall see below, to make it possible 
 for localities ultimately to exempt personal property from taxa¬ 
 tion. So far as a flexibility of local revenue may render this 
 possible, it is desirable to grant to the locality, at least to this 
 extent, a latitude of exemption. But this is far from being 
 synonymous with a general demand for complete local option. 
 That is a proposition which deserves discussion on its own 
 merits, and to which valid arguments may undoubtedly be 
 opposed. Let us not endanger the attainment of the principle 
 of separation by confounding it with a far more radical system 
 of complete local option. 
 
 Ill 
 
 There remains a word to be said about the ultimate outcome 
 of the process of which the separation of state and local revenue 
 is only the first step. To discuss this as it deserves to be 
 discussed would need a separate paper. All that I shall here 
 attempt is to give a faint indication of the probable develop¬ 
 ment. 
 
 In a primitive democratic community, the simplest way to 
 reach the taxable ability of the individual is through his prop¬ 
 erty. The general property tax is a satisfactory index of rela¬ 
 tive taxable faculty because the property is homogeneous. To 
 tax the individual and to tax the property of the individual is 
 virtually the same thing. But in modern times property is 
 no longer homogeneous. With the development of commerce 
 and industry on a vast scale, property splits up into all sorts 
 of forms and the old homogeneity disappears. It becomes 
 practically impossible to reach all forms of property equally. 
 But as soon as it becomes in practice, as it does everywhere, 
 an uneven tax, the social consequences of taxation make 
 themselves felt. The taxation of certain kinds of property is 
 no longer the taxation of the individual who owns the property. 
 He may pay the tax, but he no longer bears the tax. The 
 vast economic forces which affect the property relations of 
 class to class make themselves felt. Some taxes are shifted 
 onward to other classes, and are, perhaps, ultimately diffused 
 throughout the community. Some taxes are shifted backward 
 to the original owner and through the process of capitalization 
 
506 
 
 STATE AND LOCAL TAXATION 
 
 are discounted by the new purchaser of the property. Thus 
 while some taxes remain on the owner, others finally disappear 
 entirely as a burden through a process of diffusion or absorp¬ 
 tion. A tax on mortgages, as is now well understood, does not 
 remain on the lender of the money, but is shifted to the borrower 
 and where the borrower is a building operator, it affects the 
 dwellings and ultimately the rentals with various incidental 
 consequences all the way along. A tax on city lands is not 
 borne by the man who has purchased the land after the tax is 
 imposed, because he makes allowance for the tax in the purchase 
 price of the land. The same is true of the purchaser of cor¬ 
 porate or government bonds. A tax on the stock-in-trade of 
 a merchant or factory-owner, if predictable and applied to all 
 the members of a class, results in an increased price of that 
 commodity to the consumer. No constitutional provision can 
 be of avail against the overpowering force of economic pres¬ 
 sure. We may, like Cnut, order the waves to recede, but they 
 will not recede. The constitutional provision in most of our 
 States, that all property should be taxed alike, has outlived its 
 usefulness. You cannot tax all property alike, because it is 
 humanly impossible under modern conditions to reach all 
 property alike; and if you do reach all property alike, the 
 modern social effects of taxation are such that you would not 
 be putting an equal burden upon the property owners because 
 you would then be hitting the wrong man. Until we rec¬ 
 ognize the fact that under modern conditions to tax the prop¬ 
 erty is not, in many cases, to reach the owner of the property, 
 no solution of the problem can be attained. 
 
 The separation of state and local revenue is, therefore, of 
 such fundamental importance because it will allow every com¬ 
 munity to approach the problem in an unbiased way, and will 
 enable them to select those classes of property which could 
 profitably be relinquished. It means practically that those 
 communities which choose to abandon the personal methods 
 of taxation and to substitute an impersonal taxation mav be 
 permitted to do so. 
 
 The two questions that will naturally present themselves here, 
 however, are: first, how will great wealth be made to bear its 
 s are, and second, how is the burden on the farmer to be 
 
THE SEPARATION OF STATE AND LOCAL REVENUES 507 
 
 lightened. As to the first point, it may perhaps be queried 
 whether a better way of reaching great wealth is not by curtail¬ 
 ing the special privileges which so often make great wealth 
 possible. Without, however, developing this point here, it 
 may be affirmed that if we desire to reach the results rather 
 than the sources of great wealth, a method stands ready at 
 hand. By developing the inheritance tax we shall accomplish 
 all the advantages of a personal taxation without any of its 
 drawbacks. A state income tax would, under our actual 
 American conditions, not work a whit better than the dis¬ 
 credited personal property tax, and the only possible resort 
 to it would be under the ajgis of the national government. 
 With the corporation tax and the inheritance tax we shall go 
 far toward reaching the main elements of modern fortunes. 
 The difficulties here, irfdeed, arising from the conflicts of state 
 jurisdiction are great, but not insuperable. They will be over¬ 
 come either by the development of a system of interstate comity, 
 or perhaps by a further development of the principle of division 
 of yield, whereby the taxes will be assessed in first instance 
 on a uniform basis by the federal government and then appor¬ 
 tioned according to constitutional methods among the States. 
 
 The second problem is that of the farmer. If the local tax 
 is primarily on real estate, and if, as frequently happens, the 
 conditions of production are such that the farmer is unable to 
 shift the burden of the tax to the consumer, what can be done ? 
 Here a double avenue of escape is open. In the first place, 
 many of the expenditures of local communities ought to be 
 defrayed by the state government. Even now, in several of our 
 commonwealths, state roads are being constructed throughout 
 the local divisions because transportation is being recognized 
 as affecting the interests of the whole State. But if certain 
 roads ought to be state roads, and constructed at state expense, 
 why should not certain schools be state schools and conducted 
 at state expense ? Education, like transportation, is more than 
 a merely local matter. 
 
 In the second place, while the expenditure side may be cut 
 down in this way, the revenue side may be augmented by 
 an- application of the principle of the division of yield whereby 
 the overplus of certain state taxes like the excise tax or the 
 
508 
 
 STATE AND LOCAL TAXATION 
 
 corporation tax or the inheritance tax is distributed among the 
 localities. Thus the burden on the local real estate will be 
 decreased rather than augmented. Under the present system 
 the farmer pays not only his own taxes, but in large part the 
 taxes of the rich men of the rest of the State. Under the 
 new system of separation of state and local revenue, carried 
 to its logical conclusion, the farmer will pay less and get more • 
 and what is true of the farmer is true of other classes. The tax 
 burden will be shifted from the individual to the economic 
 phenomena themselves. 
 
 The problems of taxation in the United States are becoming 
 every year more complex. In order to solve them we must 
 keep in mind the ultimate goal, and be prepared to take the 
 first step. The ultimate goal is the accommodation of fiscal 
 methods to our changed economic conditions. The first step 
 is the separation of state and local revenues. 
 
the separation of state AND LOCAL REV EM I.-. 
 
 APPENDIX 1 
 
 Apportionment of state taxes in the State of New York on the 
 basis of local expenditure or revenue , compared with ap¬ 
 portionment on the basis of the equalized assessment of 
 real and personal property. 
 
 Accompanying this memorandum there are two tables, one 
 of which shows the percentage of state taxes charged to each 
 county of the State of New York in 1902, based on the equal¬ 
 ized assessment of real estate and the assessment of personal 
 property. The table also shows the percentage of state tax 
 which each county would have been required to pay if the 
 state tax had been apportioned on the basis of the local revenue 
 in 1902, reported by the State Board of Tax Commissioners in 
 their report for 1903. This report is incomplete in that high¬ 
 way taxes are omitted from the reports of towns. This affects 
 the revenue of counties containing no cities more than the 
 revenue of counties which contain cities, as the tax for streets 
 is contained in the total revenue of cities. In the strictly 
 rural counties the highway tax amounts to from 7 per cent to 
 12 per cent of the total revenue. The percentage of state tax 
 paid by rural counties is so small that the omission of highway 
 taxes affects the percentage very little. 
 
 Comparison of the percentage columns shows that the coun¬ 
 ties containing large and progressive cities, in fact the three 
 richest counties outside the city of New York (Erie, Monroe, 
 and Westchester), and the city of New York itself, would pay 
 a larger share of the state tax if this share were determined 
 by an apportionment on local revenue. 
 
 All the other counties which suffer an increase are described 
 in the second table, with the exception of Oneida, Rockland and 
 Saratoga; for Oneida and Saratoga the increase is very slight. 
 Oneida contains prosperous cities, and Saratoga is a great 
 summer watering place; both are prosperous counties. Rock- 
 
 1 Prepared by the New York Tax Reform Association, of which Mr. Lawson 
 Purdy was at the time secretary. 
 
510 
 
 STATE AND LOCAL TAXATION 
 
 land is a suburban county which to some extent reflects the 
 prosperity of New York. 
 
 In the second table a comparison is made between counties 
 whose proportion is decreased and counties which suffer an 
 increase, and so far as possible counties of similar character 
 and nearly equal population are grouped together. For the 
 purpose of comparing the wealth of the counties, the table 
 shows the area in acres, the population in 1900, the “special 
 franchise” assessment, the real estate assessment, and the per¬ 
 centage of full value with which the assessment of the county 
 is credited by the State Board of Equalization. 
 
 The special franchise assessment is made by the State Board 
 of Tax Commissioners. It is the assessed value of the property 
 of public service corporations in streets and public places 
 together with the value of the right, privilege or franchise to 
 maintain and operate it there. The value of special franchises 
 is an indication of the density of population and reflects the 
 value of land bordering the public streets. Where the value 
 of land is low, a franchise is not valuable; where franchises 
 are very valuable, the land bordering the highways is valuable. 
 
 In the first group it will be noticed that the proportion to be 
 paid by Chautauqua County is increased, and that it is credited 
 with a very high percentage of assessed value. Tried by every 
 test, this percentage seems considerably too high. The value 
 of real estate in Chautauqua is evidently much more than in 
 Jefferson County, and much more than the assessment indicates. 
 Ulster County has land of high value because within it is situated 
 some of the most beautiful scenery of the Catskill Mountains, 
 and it is visited in the summer by many thousands of wealthy 
 people. 
 
 In the next group Clinton County is a remarkable example, 
 of underassessment, and the percentage rating of 50 per cent 
 is readily seen to be too high when Clinton is compared with 
 Chenango, Greene, and Livingston or with any other county of 
 similar character. Essex and Franklin both have many acres 
 of timber land, especially Essex, which is obviously under¬ 
 assessed. 
 
 Hamilton County stands by itself as a peculiar county. 
 It is narrow and very long, most of it in the Adirondacks. 
 
the separation of state and LOCAL REVENUES Oil 
 
 In Hamilton County there are the summer homes of many 
 wealthy men who own large tracts of forest land. The assess¬ 
 ment is low. 
 
 In the next group, Schoharie is one of the poorest counties 
 of the State in proportion to its population, yet its assessment 
 is high as compared with many others in the table. Sullivan 
 County is obviously given too high a rating. It has more than 
 double the population of Putnam County, almost three times 
 its franchise value and the assessment is about two thirds. 
 Putnam is a farming county just as Sullivan is. 
 
 In the next group, Madison and Washington are farming 
 counties, while Herkimer and Schenectady have considerable 
 manufacturing cities. 
 
 In the last group, Dutchess and Orange are farming counties, 
 and Suffolk is unique. It comprises the easterly two thirds of 
 Long Island. It is very poor for ordinary farming purposes, 
 but the north and south shores are becoming valuable for 
 summer homes. 
 
 Niagara County has the power of Niagara Falls, is developing 
 great manufacturing establishments, and there is no doubt 
 that the power privileges are greatly underassessed and that 
 the assessment as a rule is not high enough to justify the rating 
 of the State Board of Equalization. 
 
 These comparisons show that the counties which would pay 
 more if the state tax were apportioned on local revenue are 
 either rich counties which contain the most valuable land in 
 the State, or are counties which receive too high a percentage 
 rating from the Board of Equalization. The counties which 
 would pay less are poor counties with land of low value, or 
 counties which do not receive the percentage rating to which 
 they are entitled. 
 
512 
 
 STATE AND LOCAL TAXATION 
 
 Statement showing percentage of state tax actually paid by 
 each county of the State of New York in 1902, on the basis of 
 equalized assessments, and percentage which each county would 
 have been required to pay if the state tax had been apportioned 
 on the basis of local expenditure or revenue. 
 
 
 Percentage 
 
 PAID ON 
 
 Equalized 
 
 Assessments 
 
 Percentage 
 
 IF APPORTIONED 
 
 Albany. 
 
 1.517 
 
 1.486 
 
 Allegheny. 
 
 .252 
 
 .206 
 
 Broome. 
 
 .571 
 
 .495 
 
 Cattaraugus. 
 
 .404 
 
 .333 
 
 Cayuga . 
 
 .562 
 
 .454 
 
 -Chautauqua . 
 
 .548 
 
 .595- 
 
 Chemung. 
 
 .436 
 
 .397 
 
 Chenango . 
 
 .272 
 
 .205 
 
 -Clinton. 
 
 .160 
 
 .213- 
 
 Columbia. 
 
 .409 
 
 .328 
 
 Cortland. 
 
 .204 
 
 .168 
 
 Delaware. 
 
 .248 
 
 .237 
 
 Dutchess. 
 
 .754 
 
 .549 
 
 -Erie. 
 
 5.246 
 
 6.120- 
 
 -Essex. 
 
 .171 
 
 .176- 
 
 -Franklin. 
 
 .186 
 
 .201- 
 
 Fulton. 
 
 .250 
 
 .246 
 
 Genesee. 
 
 .400 
 
 .185 
 
 Greene. 
 
 .220 
 
 .189 
 
 -Hamilton. 
 
 .050 
 
 .070- 
 
 -Herkimer. 
 
 .357 
 
 .365- 
 
 Jefferson. 
 
 .561 
 
 .522 
 
 Lewis. 
 
 .163 
 
 .115 
 
 Livingston.. . 
 
 .443 
 
 .181 
 
 Madison. 
 
 .348 
 
 .265 
 
 -Monroe. 
 
 2.370 
 
 2.710- 
 
 Montgomery . . .... 
 
 .431 
 
 .368 
 
 Nassau. 
 
 .745 
 
 .461 
 
 -New York City. 
 
 66.431 
 
 68.107- 
 
THE SEPARATION OF STATE AND LOCAL REVENUES 513 
 
 
 Percentage 
 
 PAID ON 
 
 Equalized 
 
 Assessments 
 
 Percentage 
 
 IP APPORTIONED 
 
 -Niagara. 
 
 .684 
 
 .709- 
 
 -Oneida. 
 
 .974 
 
 1.076- 
 
 Onondaga . 
 
 1.803 
 
 1.796 
 
 Ontario. 
 
 .500 
 
 .287 
 
 Orange . 
 
 .726 
 
 .595 
 
 Orleans. 
 
 .259 
 
 .168 
 
 Oswego. 
 
 .457 
 
 .396 
 
 Otsego. 
 
 .359 
 
 .234 
 
 Putnam. 
 
 .124 
 
 .077 
 
 Rensselaer. 
 
 1.224 
 
 1.064 
 
 -Rockland. 
 
 .252 
 
 .294- 
 
 St. Lawrence. 
 
 .567 
 
 .359 
 
 -Saratoga. 
 
 .440 
 
 .449- 
 
 -Schenectady. 
 
 .360 
 
 .378- 
 
 Schoharie. 
 
 .187 
 
 .102 
 
 Schuyler. 
 
 .116 
 
 .071 
 
 Seneca . 
 
 .256 
 
 .153 
 
 Steuben. 
 
 .539 
 
 .428 
 
 Suffolk. 
 
 .757 
 
 .408 
 
 -Sullivan. 
 
 .101 
 
 .138- 
 
 Tioga. 
 
 .225 
 
 .171 
 
 Tompkins. 
 
 .274 
 
 .217 
 
 
 .445 
 
 .565- 
 
 -Warren. 
 
 .130 
 
 .188- 
 
 Washington. 
 
 .310 
 
 .248 
 
 Wayne. 
 
 .440 
 
 .232 
 
 -Westchester. 
 
 2.620 
 
 3.017- 
 
 Wyoming. 
 
 .251 
 
 .159 
 
 Yates. 
 
 .181 
 
 .084 
 
 
 100.000 
 
 100.000 
 
 Counties checked would pay more. 
 
 2l 
 
514 
 
 STATE AND LOCAL TAXATION 
 
 STATE OF NEW YORK 
 
 Comparisons between some counties, showing in the first column the 
 percentage of state tax paid in 1902, and in the second column the per¬ 
 centage which would have been paid if tax were apportioned on local 
 revenue. 
 
 The two right-hand columns show the local assessed value of real 
 estate, and the percentage of full value as estimated by the state board 
 of equalization. The average percentage of full value for the entire 
 State was estimated at 70+. 
 
 County 
 
 Prks. 
 
 P.C. 
 
 N KW 
 
 P.C. 
 
 Area 
 
 Acres 
 
 Pop. 
 
 1900 
 
 Special, 
 
 Franchise 
 
 Assess 
 
 Real 
 
 Estate 
 
 Assess 
 
 Equal¬ 
 
 ized 
 
 P.C. 
 
 Cayuga . . 
 
 .562 
 
 .454 
 
 415,629 
 
 66,000 
 
 $588,320 
 
 $31,719,000 
 
 .74 
 
 Jefferson . . 
 
 .561 
 
 .522 
 
 741,357 
 
 76,000 
 
 253,050 
 
 35,440.000 
 
 .83 
 
 Chautauqua 
 
 .548 
 
 .595 
 
 656,538 
 
 88.000 
 
 987,220 
 
 37,403,000 
 
 .90 
 
 Ulster. . . 
 
 .445 
 
 .565 
 
 663.331 
 
 88,422 
 
 290,690 
 
 26,293,827 
 
 .75 
 
 Chenango . 
 
 .272 
 
 .205 
 
 548,035 
 
 36,500 
 
 127,000 
 
 14,756,889 
 
 .73 
 
 Greene . . 
 
 .220 
 
 .189 
 
 372,850 
 
 31,500 
 
 97.500 
 
 12,137,988 
 
 .72 
 
 Livingston . 
 
 ,1 13 
 
 .181 
 
 384,300 
 
 37,000 
 
 120,690 
 
 23,752,499 
 
 .72 
 
 Clinton . . 
 
 .160 
 
 .213 
 
 591,168 
 
 47,000 
 
 78,135 
 
 6,302.627 
 
 .50 
 
 Essex . . . 
 
 .171 
 
 .176 
 
 1,152.188 
 
 30,000 
 
 77,000 
 
 10,352,776 
 
 .79 
 
 Franklin . . 
 
 .186 
 
 .201 
 
 1.026.034 
 
 42.000 
 
 113,765 
 
 10,467,726 
 
 .74 
 
 Hamilton 
 
 .050 
 
 .070 
 
 1,086,683 
 
 5,000 
 
 52,500 
 
 3,588,356 
 
 .83 
 
 Lewis . . . 
 
 .163 
 
 .115 
 
 778,147 
 
 27,000 
 
 34,260 
 
 9,197,452 
 
 .79 
 
 Putnam . . 
 
 .124 
 
 .077 
 
 129,417 
 
 13,000 
 
 26,830 
 
 8,249,346 
 
 .77 
 
 Schoharie . 
 
 .187 
 
 .102 
 
 372,111 
 
 26,854 
 
 54,340 
 
 10,782,865 
 
 .78 
 
 Sullivan . . 
 
 .101 
 
 .138 
 
 603,897 
 
 32,000 
 
 71,000 
 
 5,822,178 
 
 .74 
 
 Warren . . 
 
 .130 
 
 .188 
 
 498,672 
 
 30,000 
 
 134,000 
 
 7.909.807 
 
 .80 
 
 Madison . . 
 
 .348 
 
 .265 
 
 374,334 
 
 40,000 
 
 130,825 
 
 17,990,160 
 
 .68 
 
 Washington 
 
 .310 
 
 .248 
 
 495,632 
 
 45,000 
 
 226,000 
 
 17,115,170 
 
 .75 
 
 Herkimer 
 
 .357 
 
 .365 
 
 895,282 
 
 51,000 
 
 377,580 
 
 24,403,514 
 
 .90 
 
 Schenectady 
 
 .360 
 
 .378 
 
 114,948 
 
 47,000 
 
 441,570 
 
 22,587.038 
 
 .70 
 
 Dutchess. . 
 
 .754 
 
 .549 
 
 477,493 
 
 81,670 
 
 538,700 
 
 41,052,423 
 
 .72 
 
 Orange . . 
 
 .726 
 
 .595 
 
 478,513 
 
 103,000 
 
 604,000 
 
 37,719,122 
 
 .68 
 
 Suffolk . . 
 
 .757 
 
 .408 
 
 480,392 
 
 77,000 
 
 472,785 
 
 48,924,485 
 
 .80 
 
 Niagara . . 
 
 .684 
 
 .709 
 
 294,527 
 
 75,000 
 
 1,100,000 
 
 44,619,834 
 
 .81