The San Francisco call., 1903-01-20

SUPREME COURT DECISION.
Subsequent to the adoption of our state
constitution our Supreme Court declared that
It illegal to tax in any manner shares OF
stock. the court holding that the shares OF
stock represented the value of the property
Of the corporation. and stating that when all
franchise. had been assessed. then the
law had been complied with and that there
remained nothing further to assess. To assess
the shares of stock. as the court stated would
be double taxation The added: 1T
cannot be doubted that the Legislature. acting
on the subject Of revenue and taxation, did not
intend TO leave the system in relation TO so
important a matter in such shape that so
large an amount of property indicated by
the difference between the market value of the
shares OF the corporation and the value of the
tangible property should escape taxation. To
come to any other conclusion would be to i'm
pute to that body most culpable dereliction
of duty" This language makes it perfectly
clear that our courts sustain the intent of our
conStitution-makers, which was TO assess all
the intangible elements Of value in the prop
This being the law of our state as declared
in our constitution and interpreted not only
by our Supreme Court. but by the United States
courts we. as ASSESSORS have but course
open TO us-we must assess the franchises of
all corporations or we fail TO perform duty.
In arriving at the value of franchise for
assessment many things must De taken into
consideration. Ii is not as simple matter to
value a franchise as ii is to value piece of
land; yet there are certain principles to guide
us We must first determine the value of the
entire property of the corporation 1t is not
IL
Of this value the market value of the shares OF
stock As we all know, market value and
''full cash value" are not necessarily synony-
nous. The Assessor is the sole judge in this
case of the actual cash value, and here is an
illustration OF one Of the weghty responsible
ties which he must bear. He must eliminate,
TO be entirely just. any purely speculative ele-
nent in the market value of the shares OF
stock. TO be sure. there decisions rendered
by the highest courts in the land justifying
Assessors in assuming the market value to be
the tuli cash value for purposes OF assessment.
NJ
On the other hand there are decisions given
by very eminent turlsts which favor cash
valuation based entirely on the income ca rnfng
capacity of the property | think the trend Of
know that the tendency of late years is toward
manipulation of stocks and toward stock deals.
a fictitious market value. II however the
earning capacity of the corporation be taken,
not for few months. but for a period OF a
year preceding. we have safer basis for cal
culattng the true value of the stock. In addi-
ton to this believe that the Assessor should
take INTO consideration the character of the
corporations business-whether il is OF very
or uncertain nature or whether IL is
stable in character and gives promise of some
permanency of earnings Having then deter
mined the net earnings of corpora ton, the
Assessor is ready to fix a fair cash value on
the corporations stock property. To illus
trate; Let US assume that the net earnings for
a year have been $50. COO This would represent
3 per cent on $1,000. 0O0 and II is fair TO pre-
sumo that the total property of the corporation
having this earning capacity would be worth
FifNovVVV anu WOulu readily sell Tor tnat In the
investment markets of the world without there
necessarily being any speculative element in
VOWED. III. then. there no reasons such as
those mentioned which would be justification
for the Assessor placing a lesser valuation on
It's property. it would be his plain duty to take
this amount as representing the total value Of
the corporatons property. If he discovers that
the entire property Of the corporation taxed
amounts TO but $3.50, 600 he must conclude that
ether values amounting to $3.50 900 remain un-
taxed and he should tax these values as he
taxes other species of property. IT, as Is the
rule IN some countless real estate Is assessed
Tor but 60 per cent Of its market value the
Assessor would not in my opinion, be justified
IN assessing these values at 100 per cent In
all assessments of this character which / have
thus far made the valuations placed upon such |
franchises have been, in comparison with /
other species OF property. extremely low, yet, |
mests were an innovation they have been per-
sistently combated.
COMMON MISAPPREHENSI
There is in this connection a common mis-
to which ] desire to call your |
attention, and that is that the franchise of !
every corporation must be assessed While !
this may be true. If the assessment of it at |
merely nominal amount is 10 be considered, |
II is also true that the franchise of a large |
owning perhaps hundreds OF thou
sands of dollars of property, may have no |
value for assessment purposes. The corpora |
ton may not be earning any considerable |
amount OF money, not more than sufficient to |
pay a fair rate of interest on the amount in |
vested in its tangible property and which 1t |
pays taxes. Take the case cited, although the |
net earnings of the corporation $50, 900, !
per cent on capital stock valu- |
alton of 81 .000 900. If the tangible property OF
he corporation should represent investment |
of million dollars. and IL is assessed for a /
reasonable proportion of this amount, Ii GER !
Iainly would not be just TO tax 1t In addition |