The Saint Paul globe., 1902-02-28
Minnesota Tax Problem
BY MORITZ Helm.

In view of the fixed determination on
the part of so large a number Of leg
1slators to tax property in this state upon
the basis Of it's full, cash value, the pres
ent method of taxing public service cor
porations, in proportion to their gross
earnings, merits serious attention. 1t
must be conceded at the outset that the
exception of any class or species Of prop
erty in this state from the method of
taxation generally applicable to all other
property, is departure from the well
established rule of uniformity and equal
1ty which underlies our whole system OF
taxation. Such departure, therefore,
is justifable, if at all. only on the strong
est grounds of wisdom and expedieney
Let us inquire briefly into the practica.
workings of the gross earnings method
Of taxation, as exemplified by several
random illustrations in this state.
The two leading telephone companies,
with an aggregate capital of Sc, ,5OO0 900 and
gross earnings of $S25,7S3 from local busi-
ness, and exclusive of interstate traffic,
during the year 1901 have paid taxes last
year upon the basis of their gross earn
ings amounting to only $2477S. Now, if
the capital stock of these companies
alone had been taxed like other property
generally, the state would have received
$176,500; in other words, these companies
paid last year in taxes $141,727 less than
they would have been obliged to pay had
their property been taxed like other prop
erty generally upon an ad valorem basis
instead of according to their gross earn
ings.
Turning now to another instructive il
lustration of the practical workings OF
the system of gross earnings taxation,
the express companies last year earned
from their local business solely in this
state over $600000, upon which they paid
foxr f60 toto 1ors1
$4,000; such taxes being computed ar
bitrarily upon the basis Of gross earn
ings, and without reference to the pro
portionate value of the assets employed
in connection with the Minnesota busi-
ness of these express companies.
Again the sleeping car companies oper-
ating in this state pay only a very trivial
amount of taxes into the state treasury,
and escape taxation completely upon all
earnings realized from the sales of
tickets to all points without the state,
though such sales take place here
The larger cities of the state have all,
during the period of their infancy, grant
ed invaluable franchises to public utility
corporations. The plants Of these various
companies have all been built up out Of
the proceeds realized from the sale CT
bonds, such bonds deriving all their value
from the franchises thus procured. The
value of such franchises has augment
ed to an almost incredible degree with
the rapid growth and material develop
ment of the cities from which they were
originally obtained. The most favored Of
all. these corporations has been the street
railway company, a concern composed OF
constituent companies operating in St.
Paul, Minneapolis, Duluth and Saltwater
The great and increasing value Of it's
various franchises and their total omis-
sion from the tax books of the state
in time began to attract widespread at
tention until at length the popular dis
content thereat attained to such proper
tons that the local or state taxing board
or officials were either hailed as de
liverers'' or went down before the swell
ing chorus of denunciation from all parts
Of the state, according to their action in
respect thereto. A glance at the progress
made elsewhere in the taxation of street
railway systems will be highly instruc-
tive:
In the state of New York, where a.
somewhat similar condition Of affairs
had prevailed, the legislature convened
especially to deal with this problem,
finally adopted a law declaring fran
chises to be real property and to be as
sessed for taxation as such to their full
value.
In the city Of Detroit, the assessed
valuation of its street railway COM
pany was recently raised to $4,000, 900,
which amount was sustained by the su-
preme court of Michigan.
In the city of San Francisco. the street