New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1899-06-19
KENTUCKY FRANCHISE TAX
THE SWEEPING LAW OF THE BLUE
GRASS STATE
IT HAS BEEN REGARDED AS BURDENsoME IN
LOUISVILLE. AND HAS PROVOKED
MUCH LITIGATION.

MUCH LITIGATION.
Louisville. KY, June IS (SpeciaD.-The State
OF Kentucky has had In operation for FIVE years
Franchise Tax law much more stringent and
comprehensive than the Ford measure The
principle Of franchise taxation was embodied In
the new Constitution. framed in 1S9091. and
was enacted into statute law by the Legis-
lature Of 1S9l-'92. II went into effect in Sep
tember. 1893. TO show how far the principle
or the taxation Of franchises is carried In Ken
lucky. the law on the subject is quoted in full
a follows:
Every railway company corporation. and
every incorporated bank or trust company guaran-
zee or security company, gas company. water com
pany' ferry company, bridge company. street rail
way way COMPANY. express company. electric light
pany. press dispatch company. telephone company
turnpike company, palace-car company. chair-car
company, and every other like company. cor
poration or association. also every other cor
aTeadei1 pUrauon company or association having or
FRANCHISE not allowed by law to natural persons. or
the other ax mposs d m Shs & IN aagon M dS 10
tax on It's franchise to the State. and local tax
taxing district where Its franchise may Re
are hereby constituted Board OF Valuation and
Assessment for fixing the value of said franchise.
vided for in Section 4O95 OF this article The place
or places where such local taxes are TO be paid by
portioned, where more than one jurisdiction is en-
Titled to share OF such tax. shall be determined
oy the BOARD or valuation and Assessment.
SWEEPING LAW
In order TO determine the value Of these
franchises the law further specifies that the
companies and corporations shall make annual
reports to the Auditor of the State giving all
details as to their financial condition. the par
and real value Of the stock. and so on In order
hat acIao
1t Will be seen at once that the law is most
sweeping one, and 1t lies wholly within the dis
cretion Of the officers to make II easy or most
oppressive. It is bitterly resented by capitalists
but 1t Is generally regarded a just and proper
piece Of legislation by everybody upon whom It
does not bear
What makes the franchise tax harder is that
when the new Constitution was framed it was
provided that all taxation should be levied by
an ad valorem assessment at the fair cash value
of the property assessed. This provision bears
the hardest upon banks and other corporations
for the valuation Is made upon the basis Of 100
per cent Of the market price while real estate
escapes with bare so per cent. A bank with
S1000000 capital and 100000 surplus, which
pays a dividend OF per cent, can be taxed for
$2000OOO the amount which at 6 per cent
would be required to produce the dividend. Upon
the S2O00000 assessment there is then levied the
municipal. State and county tax. which In this
city amounts to 50 521s on 500
OPPOSITION TO THE TAX
Nearly all the franchises Of value were in
Louisville and the State Board OF Valuation as
sessed those of banks trust companies railroads
etc. at their full cash value. making the burden
exceedingly Onerous Assessments were so heavy
that an attempt was made to put the valuations
for local purposes in the hands OF the local au-
thorties. This required amendment to the
Constitution. but 1t was voted down by the rural
districts. Last year, however. relief was obtained
for Louisville by the passage Of an enabling act
through the Legislature providing that the
City Assessor shall make all the assessments OF
franchises for local purposes. He made the valu-
ations for the present years levy, and they have
been satisfactory The franchise tax on banks
and trust companies is made merely nominal;
and their capitals and surpluses assessed on
the same scale of valuation as real estate. This
system gives much more satisfaction and under
II the banks which have heretofore fought the
law, are now paying the tax imposed. The banks
thought they were protected under contract
made with the State In 1881 but this applied
only 10 a few State institutions. The final court
decisions exempt the National banks entirely,
the state has no authority to tax National
franchise. The law must now be amended In
some way to reach them, and then, perhaps, it
can be framed so as to bear equally upon ALL
Bitter litigation has followed the franchise tax
legislation all over the State. In the city OF
Paducah. which encourages the introduction of
capital, the authorities regularly compromise the
bank end railway taxes a basis of 30 per
cent and there has been no trouble In this
city, until the present arrangement made,
there was a rapid liquidation OF bank capital,
amounting to $3500000 in five years. Banks
still regard their taxes too high. and two
banks have reduced their capitalization this
summer but this is more because OF dull busi-
ness and low interest rates. In the State the
liquidation has also been heavy, and the revenue
is probably not as large now as 1t before the
taxes were raised.
The law seems to give the State power to tax
the franchise of the ordinary business corpora
tion. Last summer the Court OF Appeals decided
that any corporation was taxable for its fran
chise but this decision reversed later by
full bench.
The city OF Louisville has profted largely by
the franchise taxes, but they have caused
great decline In the shares Of the corporations
subject TO such taxes.