The Jersey City news. (Jersey City [N.J.]) 1889-1906, 1900-01-09
FRANCHISE TAXATION.
Governor Thinks Corpora
tions Should Pay for
Monopoly Of Public
Privileges.

report, discusses at considerable
length a problem of grave impor-
tance, namely, the taxation of fran
cRises enjoyed by certain classes of cor
porations. The members suggest no spe-
cial remedies by way OF legislation, con
tenting themselves with calling your at
tention to the following facts:-
Four elements of taxable property value
are found in OBSERVATION-DISCLOSURES IRAN
chises; second, corporate property third
bonds and shares of the capital stock in
the hands of the individual stockholders;
and fourth, capital stock In the handS
of the corporation.
Upon each and al, of these the State
may impose taxes, unless forbidden by
constitutional prohibition.
The law now provides for the taxation
of corporate property. AS matter OF fact
it is taxed the same as that OF the indi-
vidual, certain designated corporation
being excepted P. L. 1886, page llo; o. ).
935 Sec 1889.
emit law provides for the assessment
against the corporation itself. and there
fore the bonds and stock in the hands OF
individual shareholders and capital stock
owned by corporations are not taxable.
In other words, the property of the cor
poration is now taxable in the hands of
the company itself, and should not again
be taxed in the hands of it's stockholders.
Certain franchises are now taxable by
aurhority Of, express legislative enact
merit. Under the act of 1854 all steam
railroad companies pay one--haf OF one
per cent. upon the value of their fran
chises, as determined by the State Board
of Assessors, such taxes. being paid to
the State and affording no nconsiderable
portion of its revenues. The legality of
this metf.od of taxation has BEEN unheld
by the highest court of the State and by
the U. S. Supreme Court (92 U. S. 575).
The State requires from all corporations
when they are organized the payment of
a certain fee and annually thereafter a
moderate tax is payable. except by such
companies as are engaged in manufactur-
ing in the State. This cannot, however,
they rightly say, be considered a proper
ty tax. lit is merely a license fee exact
ed by the State for the right granted by
business as such. All citizens may avail
themselves of the provisions of the law
Compliance with the established require
ments is all that is necessary to incorpor-
ate Property acquired is assessed in the
same manner as property of the individ-
ual. Corporations so organized DO not ac-
cannot use any of the public property,
such as streets or highways, in further
ance of the objects OF their incorporation.
They have no more rights than the in
dividual in, this regard.
But corporations organized for certain
purposes have the right to such use.
Street railway companies, telephone and
telegraph companies and gas, water and
electric light companies, under the law
have and exercise such rights. Their use
Of the public property may not in a strict
sense, be deemed monopoly. but prac-
tically it is such. In SO far as they use
the public property to the exclusion of
others they may be regarded as having a
special and peculiar franchise. Upon its
exclusive character depends in large
measure their successful and profitable
operation
Such is brief summary of the fair and
instructive discussion Of the subject to be
found in the report of the board.
The question pressing upon your atten-
ton and demanding. answer is. Do the
franchises of corporations of quasi pub
lie nature, enjoying special privileges in
the use of public property possess value
which should be the subject of taxation,
and, if so, are the laws defective in not
subjeeting them to such taxation?
This special privilege or exclusive right
is as much an element of value as the
rest of the property of such corporations,
and is so regarded by those interested
this fact is found in the vast increase of
the amount of their interest bearing Sc
curities and stocks, large part whereof
have been issued upon the basis of the
value of the franchises referred to, and
find their security in the possession there
of by the companies issuing them. The
rapid growth of our cities, thus affording
greater patronage and iacomes the dl-
Tninished cost of constructing and extend-
ing quasi public works, inventions that
facilitate and decrease the expense of op-
Grafton have each contributed to the en-
hance1nent of the relative value of the
franchise. Shall that element of value be
subject to taxation?
fully realize the Importance of dealing
with this matter in a conservative spirit.
The prosperity of a State depends largely
upon the security which it affords to IN
vested capital. 1T ought not to be for
gotten that when many of the corpora
tionS now exercising these franchises eS+'
tablshed their business, the success was
by no means certain. Those who have
been. and who still are, willing to take
the risks involved in such enterprises,
hazardous and uncertain in the beginning,
are entitled ITO encourag cement and consid-
crate treatment 1t should be rerne1n-
bered that in addition to the tax on their
property payable locally, there has been
for many years exacted from them an an
of their capital stock. Besides, it is no
doubt true that the people have derived
much benefit from the growth and opera
tiofr< of these corporatfQNS in the way of
better service and cheaper rates than in
former years. 1t would III manifestly un-'
just to impose on tiSa1n n undue burden
or discourage all enss psises by excessive
taxation At the #3isae time this great
element in the valne nf the property of
these companies, in so far as it does not
already bear its s5aSre of public burdens
should be subject 81 fair and reasonable
imposition.
to classify by legislative enactment these
special franchises for the purpose of tax
alton by one Of the State Boards. This
think, Is partiVu}&Sly necessary in view
of the fact that sn{438H of the corporations
referred to ardt ss{sfcising franchises in
SCISSORS of munieIas zzz in which part
.srake time by the fdr4c If your blood