Omaha daily bee., 1902-07-17

be conducting the same successful and
profitable business7 The price will be de-
termined by the value Of the stockholders
right to participate, through dividends, In
the profits Of the boarding house business,
and those profits we have seen to be the
outcome only In part OF what may truly
be regarded as rent, and much more the
outcome Of earnings through labor, skilled
and unskilled. This market price OF the
stock in the boarding house, II its business
be successful, will be much higher than
would be the price OF the stock Of n com,
pany merely owning the premises and
renting them as a residence; for in tho
latter case the stockholders would merely
participate In the rent, while in the case
Of the boarding house, the stockholder
participates in the additional earnings
from the business conducted on the prem
ises.
A real estate agency conducted by a per-
son or corporation is also within this
class. He, or Il may be in the business
OF buying or selling real estate, employing
a number of clerks and solicitors. and yet,
not at any time be the owner Of any prop
erty except the once furniture used In the
conduct of the business. Profits from a
we'll conducted business OF this character
may be considerable, yet their value could
not be assessed and taxed.
Railroads, come within the second class.
We may use one as an illustration. Let US
suppose that the lines Of the Burlington
company in Nebraska 1--WE refer to the Bur
lington company for the reason that u
has a greater mileage within the state oil
Nebraska than any other company should
come to be owned by a company not Ike
wise owning the Burlington system Of rail-
roads in other states. The Burlington
property in Nebraska would remain the
same as II is today, but the business con-
Quoted thereon by the new owner would
undoubtedly be very much less. than the
business which the Burlington company now
does upon that property, for the reason
that the new owner would not have the
advantage OF all the trafac which the Bur-
lington company Is able to procure for Its
Nebraska lines through it's control OF other
railroad property in adjacent states. AS
respects earnings, the result would be
that the new owner would earn very much
less on its Nebraska railroad than the Bur-
lington company does today.
The market price Of stock In the new
company owning this Nebraska road would
be much less than the market price Of
the Burlington company's stock. Would
that difference in the market price Of the
two stocks be due, except In a relatively
small degree. to the difference in the value
OF the railroad In Nebraska, being the same
railroad in all it's features. whether owned
by the Burlington company or by the new
purchaser? Surely not. The difference
would be due, rather, to the difference of
earnings OF the two companies through
the reduction OF business thereon In the
hands OF the new company. That Is to
say, the Burlington company runs two and
perhaps three times as many trains, car
ries two or three times as much freight,
considerably more passengers and employs
80 per cent more men than the new COM
rany would with it's diminished volume OF
business. The difference in earnings, there
fore, chiefly amounts from the different
amount Of labor done on the property and
this element, while 1t Is all important as
respects the profits Of the business and
the consequent market price Of the stock,
is not In any way a measure or test OF
the value Of the property on which the
business is conducted. That property is
the same whether owned by the Burlington
company or the supposed new purchaser
and It's fitness for use in business is the
same in the two cases, but the difference
as respects earnings and, consequently, as
lNoPVSN5 Aho PAASS va - CAhR1 -
stock lies in the fact hat in one case a
very much larger business Is done through
the possession OF extraneous advantages
and opportunities for obtaining business
and a very much larger amount OF labor
is consequently expended than In the other
case.
As an Illustration Of the third class we
might take a large department store, owned
and conducted either by al individual or
by a corporation. In either event we Will
assume the individual or corporation to be
tho owner Of the building and q large stock
and variety of goods such as are usually
found in the department stores Of great
cities. The building is Of great value.
The stock is constantly being depleted and
supplied. turned over two or three times q
year. There may be the usual number
of department managers and clerks, but
the profits, II made, will result to a greater
extent from the property used and sold
than from the labor employed, although the
latter may be Of considerable value and
form quite a factor In the production Of
earnings.
It is no more lawful to ind the value Of
railroad property by aggregating the market
value OF stock and bonds or capitallzing the
net earnings than 1t is to find the value Of
the property of the engineer, the nremen,
the clerk or day laborer by cApitalizing
their earnings. In either case It Is an in
come tax. Under the constitution the as
sessment and collection Of taxes must be
upon a property valuation and not upon
the value of the labor which proceeds from
an effort Of the brain or the application OF
the hands and the feet, or all combined.
The truth Is that stock and bond prices
do not measure the value of a railroad prop
erty for the purpose, either of taxation or
Of rate making. Such prices do not indi-
cate the value Of railroad property at all;
but rather the value Of the right Of q stock
OF bondholder to participate In the earnings
through the company's dividends or the
stipulated interest on bonds. and these
earnings. the right to participate In which
is the basis OF stock and bond prices, pro-
coed. as has been already indicated. far
more largely and far more truly from the
labor OF thousands of men than from the
mere use Of the property. In other words.
a railroad company's earnings in much the
larger part, II 1t be prosperous, represents
compensation for the labor Of large num-
bers Of men. rather than the mere rental
value Of the property by the partial help OF
which the work is done.
You cannot arrive at the fair value OF
railroad property in the aggregate by this
method Of combining the market value Of