The farmer and mechanic. [volume] (Raleigh, N.C.) 18??-19??, 1907-06-25
7 ABROAD REPORTS
MUST BE SCR II
The Science of Padding Cooperating Expen IS
the Assessment of Roads for Taxation Being at
Least SIS, ZOO, 900 Too Low.

ruadrennial assessment of railroad
ttroperties for taxation by the Corpor-
ation Commission, the Commission
4-ill on or before the first Monday Of
ueKt July issue tentative assessment
upon which the various railroads will
he given the opportunity to be heard
Afterwards the G .n1mission makes
is assessment whi, 4, under the law
af the State, becomes the final basis
upon which taxes are levied upon this
class Of property.
There is no function of the Stale
Gnvernment more important. more
usoessary to be performed we'll and
with fearless honesty than this valua-
don OF the property Of the railroads
1t is a question in which every citizen
is vitally and personally interested. It
IS through the grant of the sovereignty
If the State-which is the sovereign gnty
Il the Citizen-that the railroad is
permitted and enabled to do business.
II S through the railroad that the bus
mess of the State is done And it is
largely according to the measure with
which the railroads share in the just
burdens OF government as well az
share in the profits of the peoples
prosperity, that the citizen himself
feels that in the delicate questions af-
tecting taxation he is Identified with
justice.
II the vast holdings of railroads are
taxed at a ridiculously small figure,
the moral influence towards shirking
he responsibility of a taxpayer is
vastly increased in the case of the in
dividual If the railroad is permitted
10 earn money upon basis OF capital
far in excess of what it is legally
valued at upon the books. the citizen
naturally is tempted to procure for
himself the same advantage. Even
deeper. If the railroad as the represen-
tative corporation is seen to possess
advantages that do not pertain to the
Individual, there IS created a feeling
of corporate antagonism that in the
end IS inevitably harmful TO both par
dies to an abnormal economic con-
dition.
The spirit Of understanding for
which Mr.. Finley pleads will be best
fostered and most nearly obtained
when the average man is led by re-
suits 10 believe that he and the rail-
road. in relation to their benefits. re-
sponsibilities and possessions are
treated upon an equality
The Theory of Assessment.
The theory upon which the railroads
are assessed for taxation is simple
enough and logical enough. It is that
their value in money depends upon the
Value on the market of their stocks
and bonds. These securities are sup
posed to represent what the roads cost
their owners to build. In estimating
their value. regard is had to market
prices and the general conditions OBJ
aiming in the financial world. What
the stocks are quoted at at the moment
"f valuation upon the exchanges is not
aiken as the arbitrary rule to gov
ern assessment For instance in 1903
fne assessment fell at a moment of in
rated values. Stocks were selling right
and left at prices that represented in
many instances an investment value of
less than four and even three per
cent In making the assessment,
therefore. the Commission is forced to
consider the amount of the stocks and
bonds at par and the earning capacity
If the property upon which they are
issued. In assessing such property for
valuation it is principle of assessment
that the valuation shall be low enough
TO allow the earnings to return a rea-
sOnable per cent Of dividend upon in
Vestment
That is the theory. Applying it.
Row does the problem present itself in
ne light of present conditions with
fespeCt to assessment?
seventy Millions Too Low.
In North Carolina, at the present
Ume. the total assessment of railroad
uroperties is s70,O0O,O00 in round
uambers
pom this assessment the returns of
tic railroads for the year 1906 showed
sross earnings of s25,63S,552 with net
aarnings of $S.717,116.
At the same time the capitalization
If the railroads for the State was
#Eured upon a mileage basis to be
S6a.57&,760 in bonds and s70,904, ,221
Fl. stocks or total. in par value of
equalization, of s139, ,482,9S1.
The net earnings OF the railroads are
therefore large enough to represent an
earning capacity of ten per cent on
$4,000 ,00O-or 81 100000 more than
the resent assessment-and six per
cent on $145,0O0, ,G0O-which is Sc
"9eUn9 more than the total par value
y their capitalization.
When it is remembered that the cap
-'.zation referred to is the face of
'"f bonds and stocks issued upon the
] .aa1S and that they are in reality SELL
."N IN many cases at much less than
+S'. and do in reality represent in
--ohE cases far more of water or pro-
Ho+n operation than investment,
"s4res Of the present assessment