Omaha daily bee., 1902-07-18
RAILROAD TAXATION IN COURT
of Counsel on the Issues Raised in the Manda
Case Before Nebraska Supreme COurt--Rue VIZ

today at $50 and the common stock at S106,
and yet not one dollar Of dividends can be
paid on the common until 4 per cent is paid
on the preferred. why is the preferred
selling at $50 and the common at 1907 1t
is the hope Of the future; It is stock ma
nipulations. 1t is uncertain and nuctua.-
ing.
No, the rule is that the board can take
into consideration all Of these different
items that / have enumerated and then
form their best judgment from all the cir
cumstances in the case. l mean to say
that if.it was conclusively shown that the
valuation was based solely upon the net
earnings. or capitalization Of the net earn
ings. and no other elements taken into
consideration. It would be absolutely void.
because II would be an income tax and be-
cause II would be a tax upon the labor and
good will. The labor Is what so largely
contributes to the returns, Independent OF
the tangible property Of the company. Be-
cause it is an arbitrary method OF dis
t~ributing the earnings on the various divi-
sions and they do not correctly represent
the net earnings Of Nebraska lines in any
particular locality. Because, IL you should
capitalize the earnings, you would include
all OF it's localized property, and the value
Of 1t does not appear and could not appear.
Now, what are these localized values? Mr..
White, in his argument, clearly and forcibly
showed to the court that from 50 per cent
to 81 per cent OF the operating expenses Of
the roads were incurred for labor. There
are about 900, 900 laborers in the employ
OF the railroads Of the United, with 1000 900
depending upon them. Nearly one-twen-
tieth Of the people OF the United States de-
pendent upon service in the railroads.
nearly 1900 in the employ of the Union Pa
cihc railroad in this state alone. You can
not tax labor. Localized values also are
the headquarters, the shops, the good will
and the good management, and the skill and
ability and business enterprise, all Of which
enter into the net earnings. These cannot
be taxed and are not taxed in the case Of
natural persons, and therefore could not be
In the case OF corporations.
II the railroad permits its road to run
down in order to show large earnings, the
property is actually worth less. Yet on
a capitalization on the basis Of net earn-
ings It would be worth more. On the
other hand, IL the company would exhaust
its earnings in improving it's property, a
capitalization on the basis of the earnings
would show 1t to be of less value. That
would be nothing more or less than an
attempt to make an item Of evidence an
aiOALlhIs LOTluufh loT tue dbbSbbm6uL OF
railroads. These are a few of the con-
siderations which show that a capitaliza-
ton Of the net earnings is not a rule and
cannot be a rule, and there is no court
In the land that has said IL can be a rule.
Earnings can only be taken into consider
alton.
We come down to the next question,
which is one Of the important ones in this
case. Did the board OF equalization as
sess the franchises Of these corporations
We insist that It certainly did. That
there was no way for It to mako any
assessment Of the properties Of these rail-
roads without taking into consideration
what is denominated franchise" "pre-
rogative.'' rights. etc. That It was a phys
ical impossibility In the act Of assessment
to separate II or segregate 1t, and that
they did take into consideration these
franchises. The court will, Of course, bear
In mind 1t is not a question whether the
board took II into consideration In a man
ner satisfactory to this court, or did II
skillfully. or whether It did It In a way
that this court would have done II. Did
they do itr II they did. that is the end
Of this case. This court cannot substi-
tute its judgment for that Of this tribunal.
IL 1t will, these applications upon such a
showing as appears here now, the first
thing we know It will be running all OF
the departments OF the state, which are
not within the Jurisdiction OF this CO.
ordinate branch of the government.
Did 1t assess these franchises? It would
have been impossible for the board to have
done other than assess the franchises, be-
cause 1t could not say that 1t assessed the
rails as iron, the ties as wood, the SUPER
structure as material and the whole prop
erty as dead. inanimAte and ~lifeless. Thu
respondents state in their answer, and state
before you. that they assessed the railroad
corporations as going, live concerns, and
that these inanimate properties were being
used. II they did not take these things
into consideration, then, II your honora
please, the assessment that was placed as
upon dead and inanimate property was ex-
tortionate and could be set aside upon that
ground.
Let me- give a few illustrations, taken
from the evidence, to show that they neces-
sarily took into consideration the fran
chises. The assessment OF the Burlington
& Missouri main line from P%lattsmouth to
kearney was fixed at a valuation OF $40, $50
a mile, while the assessed valuation Of the
Grand Island, Wyoming & Central divi-
sion OF the same company was
assessed at $500. have selected
these two lines because between
these two points they are practically Of
the same physical value, that is, neither
Of these lines has any very expensive OF
valuable improvements, except at Lincoln
possibly. In other respects they are about
the same, the same weight Of rails, the
same ordinary improvements. the same
shops and the same stations. The Crane
Island, Wyoming & Central road also does
a transcontinental or through business
) carries through trains to the Northern Pa.
oiho and Is used for similar purposes al
| the line from Plattsmouth to Kearney. The
difference In the assessed Valuation he.
, tween these two can only be accounted FOL
by the fact that the report OF the auditor
, Of public accounts shows that the net earn.
{ ings per mile is 312,55O on the main line
while the Grand Island, Wyoming & Contra.
shows II was operated at a loss OF $946 fol-
| the same year, One operated at a prof.
and the other at a loss. Did they assesi
the same physical properties? They tool
into consideration the earnings and the ca,
l pacity TO earn, that they were moving con.
. Germs, or else they could not rightfalI,
have assessed these roads similarly situated
In the same state, with like tangible prop.
{ erty and doing a like business, wish slcl
marked disparity. They took into con.
: sideration the earnings. What are III,
{ earnings? Is that tangible property
a What a the canacgfv a. ..u, y -.