The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1902-10-17
DRAWN TO Be LEGAL
The Gross Earnings Measure Was
Carefully Aligned With su-
preme Court Decisions.
By the Same Authority the Roads
Now Pay Taxes on an
Illegal Basis.

e. H. McGrew, expert railroad account
ant under Public Examiner Johnson, re-
turned this morning from Chicago. Mr.
McGrew has examined the books Of Min
nesota railroads to verify their state.
ments of gross earnings. He had full &C.
cess to the books and was able to calcu-
late the amount Of local business and the
interstate business done by each road
1t is understood that Mr.. McGrew's fig.
ures prove conclusively. that the state
will be large gamer by the passage Of
the gross earnings law. He declined tc
discuss the question to-day, in the alb
sence Of his superior. Mr.. johnson will
return tomorrow; and will probably give
out statement during the day.
The 1901 gross earnings bill, as sub.
mitted to the people, is drawn to conform
with repeated decisions of the United
States supreme court. AS long ago az
1885 the court in two cases laid down the
rule that states could not tax earning.
on Interstate business. This was reaf
hrmed In the North Dakota case Alvorl
vs.. McHenry, 1853 United States, in which
the court holds plainly that taxation i.
levied on. the property of a railroad, ant
not on it's earnings. u .F,~:. :, - =
I Minnesota railroads, when they paw. their
taxes to the state, now compute thei,
gross earnings by adding to receipts from
local traffic the Minnesota share OF each
interstate shipment going through, into
or out OF the. state. In other words the
companies pay a direct tax on their earn
1ngs from interstate business. The state
authorities make such Interpretation OF
the 1889 law. It would not stand in court
following the rule laid down by the SUI
preme court Rather than change the
system, the railroads acquiesce and pay
their taxes on an illegal basis.
The legislature defeated a per cent
bill In 1899, which was drawn along the
lines Of the present law. At the 1901 ses-
sion, Mr.. Jacobson introduced the same
Dill, but later amended it. The amend
ment was recommended by Attorney Gen
eral Douglas, and 1t brought the bill in
line with the courts rulings. It pro
vided that railroad companies should pay
per cent tax on earnings on business
local to the state, and on such proportion
of the interstate business as is repre-
sented by the company's mileage in Min
nesota, compared to the mileage Of the
entire system. This was the only rule
possible to make, that would stand in
court. In this shape the law will be ef-
fective and the tax will be collected. That
is why the great Northern. through Mr.
Hills paper, the st. Paul Globe, does not
want the bill passed Nov. 4.
The railroad companies have claimed
that the 8 per cent tax was contract,
which could not be broken without their
consent This argument was broken in
the decision Of the United States supreme
court in the Anderson case. This de-
cision held invalid a law taxing the un-
used lands Of railway companies. on the
ground that the gross earnings tax was in
lieu of all others.
The decision in the Anderson tax case
which is recorded as Stearns VS.. Mime
sofa, 179 United States, 223. was by Just
Ice Brewer. In the course of his opin.
ion he said:
1.-THE constitutional amendment of 1871
forbade any change by repeal or amend
ment Of laws respecting the taxation OF
railroad companies except upon vote
Of the people. The converse Of that prop
osition may be accepted, to-wit, that by q
vote Of the people the tax provision con-
corning railroads might be repealed OF
amended"
The" gross earnings bill submitted this
fall is an amendment. "-