The Topeka state journal., 1900-12-27
TAXATION QUESTION
Discussed at Annual Session of
Economic Association.

Detroit, Dec. 27.-'eThe taxation Of
quasi public corporation was the
subject discussed at the initial session
of the thirteenth annual meeting of the
American Economic association in the
convention hall of the Hotel Cadillac
here today. There were no preliminar1es,
but as soon as the hour arrived for the
session to begin, Richard T. Ely, Ii. D
president of the association. announced
Dr. Frederick c. Howe, of Cleveland, as
the first essayist, and he responded with
a very interesting paper. DR.. Howe read
follows:
DIR. HOWE'S PAPER
'aThe present confusion in the state and
local taxation is largely traceable to legal
the restrictions Of the courts and the fed
eral constitution upon the powers of he
and those engaged in interstate traffic
Many of the evils of the personal proper
Of iiIrisdiction In no branch of the sci
ence of finance is there as much confusion
and lack of uniformity as in the taXaI1on
of corporations of quasi-public charac-
ter, such railroads, telegraphs, reIe-
phones. express, gas, water. electric light
laws Of our states show no fundamental
plan or principle In some states ai ,ln3 we dind
property tax; in others under a gross re-
censes. Taxes on receipts from interstate
traffic are Objectionable owing to the fact
that it is a regulation of interstate COM
rnerce and hence invalid. The courts
have, however, permitted the taxation OF
when it assumed the form of a franchise
tax or tax levied upon the privileges OF
doing business within a state.
''In recent years the tendency has been
back to the taxation OF property ana
away from the taxation of earnings. But
instead of taxing railroad property by an
inventory of its roadbed, right of way,
rolling stock etc, under later laws the
valuation has been made up from the
stock and bonds of the company. In some
Instances this has been called a property
tax n n franchise
case of the Ford franchise tax law re-
Gently passed in New York. This is the
method approved by the Pennsylvania tax
conference in its celebrated report of 1879
It is the method employed in Connecticut.
and, with some modifica tions. has been
adopted in Massachusetts, New Jersey
Ohio Indiana and Illinois. One of tie
chief advantages of this tax lies in the
fact that it has been approved by the
United States courts. Moreover 1t treats
the CORPORATIONS as entity. unit or a
going concern. and values It as such; FUR.
ther than this, It adopts the VaIuatlon oI
apoIS and nd vailIes the corporation bv add
ing to the market value of the stock of
the company the par value of the bonds.
IN some states this method is employed
as to all corporations. Under the Ford
franchise tax law, which taxes the prop
critics upon their franchises as well as
their physical property, the assessments s
OF street railways, gas water, electric
lighting and similar companies p an ss in the year
previous, valuation upon the physical
value only"
DR.. Howe was listened to with close
attention.
Frederick N. Judson, of St Louis. read
the second paper on the subject. His
paper was in part as follows:
MIR. JUDSON'S VIEWS.
.'Quasi public corporations are assumed
in this connection to be those which,
though private in ownership, are affected
with a public use. as railroads, or enjoy
a municipal franchise in the use of the
streets or public places
This as all other questions in taxation,
is now becoming more practical than aca-
demic, and in the general public discon-
tent with the failure and the chaotic con-
dition of our existing system of taxation,
there is danger of hasty and nl-considere5
Tilted States in a recent series Of de-
cisions relative TO the taxation by states
trated the developing power of our juris-
prudence, reconciling the taxing power of
state commerce. Thus has been estab-
lished, first, the rule of entirety that is,
the value of a. railroad in a state for tax
alton means the part within the state of
the value of the entire road. which more
than the aggregate value of its separate
! parts; second. as a means of determining
this state value. the mileage apportion-
ment rule has been approved that is. that
the proportion of mileage in the state to
the entire mileage may be considered in
determining that state value and third
that cars, such as sleeping cars and re-
frigeratOr cars operated in several states
may be taxed in one state by taxing the
average number of cars habitually used
in the state. The first two of these prin-
ciples have been applied not only to rail-
road companies, but to telegraph COM
panies, upon the basis of the same mile
age apportionment of the poles and
wires in a state to the total mileage; and
also to express companies, upon the basis
of a comparison of the rail- and water
ways operated IN the state as compared
with the total mileage of rail and water
ways The supreme court has based these
principles upon the theory that, fairly car
ried out by the different states they will
tax corporation upon the full value of
its tangible and intangible property. and
no more.
Thus the state may ascertain, through
the mileage rule, or any other means the
value in the state of the entire system.
or tax its share of the entire gross or net
earnings by the application of this mile
age rule of apporuonment to the total
earnings.
road property as other corporate and in
dividual property is assumed to be as
seSSed at its cash value; that is, at what
the assessors say is the cash value. In
other states. now in Michigan, the rax
is levied upon the gross earnings, although
recently the constitution of that state has
been amended so as to authorize a tax
The tax upon gross earnings, while easily
aScertained, is opened to the economic OBJ
lection that it discriminates against COM
pan1eS who have heavy operating expenses
with a small margin of profit: and to the
practical objection that it is difficult to
earnings so as to produce equality of tax
alton, as compared with property tax
upon other property. So it is difficult to
avoid a. seeming inequality.
Where the tax is upon value, there is
] an obvious difficulty in fixing the stand
N