St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1895-09-07
EXHAUSTIVE COMPARISON OF
AID VALOREM AND GROSS
EARNINGS METHODS.
WHAT is SHOWN IN FIGURES
THE GROSS EARNINGS SYSTEM
is APPARENTLY THE BET
TER ONE
IN THE NORTHWESTERN GROUP
IOwa,s Plan Seems Not to Work
So Well as That in Use in
Minnesota.

The recent action of the North
Dakota legislature in repeating the
law which taxed the Northern Pa
cific railway on its gross earnings
the only road in the state taxed by
this method-and that Of the state
board of equalization assessing the
value Of several roads operating in
that state, taken in connection with
the pendency in Minnesota of a law
subjecting the land grants to taxa
ton, subject to approval by a vote
of the people, with it's alleged effect
of releasing the railways from pay
ment of gross earnings tax, sug-
gests a study of the methods of tax
ing these corporations used by this
Northwestern group of states and a
comparison of the results There
are two radically different methods
The one is based on the theory that
railways are no different in their
nature from other private property,
and that the general principle of
taxation levied on valuation
should be applied ito them
as to private property. The other
method is based on the theory that
the railways are the creations of
the state, vested with it's power of
eminent domain, essentially monop-
olistic in their nature and operation,
and that, thus endowed, they should
yield to the public treasury more
revenue than is derived from capital
invested in private industry. This
is sought to be accomplished by
making them turn into the public
fisc a certain percentage of their
gross earnings. Whether the gross
earnings feature was adopted be-
cause of the recognition of the mo-
nopoistic nature of the enterprise
or because it was apprehended that
II laid on the net earnings there
would be an inducement to swell
the operating expenses, or whether
1t was from a mixture of these con-
siderations, is interesting merely as
a speculation. The fact is that the
unusual and exceptional method was
income without permitting, as in
the case of income taxes, the deduc-
ton of expenses and levying the tax
on the net.
Lit Is worth noting, in passing, that
this apparently onerous method of
taxing these properties was adopted
IN this state on the initiative of the
railways themselves, cloaked, of
course, as a granger device for "get-
ting even" with the corporations.
Twenty odd years ago local taxa
uon gave a high rate of percentage.
and the gross earnings of the exist
ing roads were comparatively small.
and the proposition to tax these
monopol1es per cent of their entire
gross income was very attractive to
0ne grangers in the legislature. Thew
DIT eagerly at the bait, and, not con-
tent with mere legislative enact
ment, they imbedded in the organic
law or the state a provision forbid
ding any innovation on the method
without it's submission to and on
proval by the voters of the state.
Hence the necessity of submitting a
proposed change to the people be-
fore the land grants, exempted hv
the gross earnings law, can be SEN
arately taxed by the ad valorem
method. Now, however, with the do
Velopment of the state, the increa GO
OF taxable property, the diminution
Oh the rate and, ON the other hand
the immense. increase of gross earn
lngs, there is manifest on the mart
OF some, though not all, of the rail-
ways or the state a desire to eet
rld OF the gross earnings tax and
return to the sad valorem method
mat prevails in Iowa and North
dakota. With equal tenacity the
people are determined to keep wbat
was nrst offered them, and thew
nave hedged the proposed law about
with provisions that are expecfed IN
subject the lands to general tsxa-
tlon, while retaining the gross earn
lngs tax. This. however, is a legal
question, not embraced in the scope
of this article.
The DIFFERENT METHODS.
prevailing in these adjoining states of
wisconsin, Iowa, North Dakota and
Minnesota are briefly as follows: wis
consin and Minnesota tax by gross
earnings and the other two by the ad
valorem method. In Wisconsin If tho
gross earnings of the road exceed s3 Oo0
mile 1T pays per cent of them info
the treasury. If they are less than
that but over $1,500 mile, they pav a
tax of $5 a mile of road and nor
cent on the excess or gross earnings
over $500 a mile, but if their gross
earnings fall below the 81. 500 line then
they pay but $5 per mile. In Minne-
sofa the time limit is adopted instead
of the earnings grade and for the first
three years of it's operation a road paws
1 per cent, for the next seven 2 per
cent and after that per cent of IFS
gross earnings In lieu of all other tax
alton, both by the state and its sub
divisions. In Iowa the executive co,ln-
Gil of the state, in March of each wear
assesses the railway property in the
state used in actual operation. The
law requires the actual cash value,
to be put on the property. To enable
the council to do this the companies
are required to file with 1t in February
statement showing the number of
miles, the value per mile, a descrip-
tion of its property and its gross earn
ings in the state. In fixing the mile
age value the gross earnings are to be
taken into consideration. Having as
certained the mileage and assessed it's
value the council certify to the county
auditors the number of miles of rail-
way in their respective counties and
the valuation per mile. The county
board then fix the mileage in each tax
ing district in the county with .ts as