The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1908-07-09
TAX commission
REPORT RENDERED

erty and taxed to the owner as such.
1t is not difficult to apply this Illus
tration to any agricultural or CONNER
cial enterprise which is assessed as a
unit on the basis of its earning capa-
city which is always dependent largely
on the skill and other purely personal
qualities of its owners, managers and
servants. The manager of business
enterprise should not have his skill
taxed as part of its property. He is
the pilot, not the rudder, of the ship.
Again as to the assessment, as prop
erty, of good will, let us suppose that
two merchants engage in the same line
of business with equal capital and
equally good locations. The one is ac-
tive, genial, and popular and turns
over his stock say four times a year.
The other is plodding and reserved and
unpopular and turns over his stock but
once a year. On assessment day the
stock of each is of like value, but the
one has profits four times as large as
the other. AS assessments go general
ly elsewhere, both would be taxed
alike on their business property; in
Hawaii one would probably be taxed
four times as much as the other. In
such an event is not the good will
of the Prosperous merchant being tax
ed as property? To the writer's mind
it is lodging the question to say that
the good will alluded to is not taxed,
nor the enterprise taxed, but that the
property of the successful merchant
has had an intangible quality mingled
with it which gives it additional value
as property and subject to the gem
eral property tax; but the good will
/ of the "store" we all know, departs
with it's owner and is not property
nor an attribute of property, but OF
! person.
| A careful reading OF several modern
| standard works on taxation and
finance, especially those by the well
known authorities DR.. Edwin R. Selig-
man of New York, and Dr. Henry q.
Adams, head OF the department of fl
nance, University of Michigan, and
statistician of the Interstate Com
merCe Commission of the United
/ States, and of various reports of tax
commissions in other jurisdictions
reveals no system of assessment under
| the general property tax which cor
responds to that under discussion, mol
any justification for such a plan. As
to extreme theories which partly un
derlie our enterprise tax, DR.. Adams
has this to say:
(a) "The certain relation which tn
theory of the general property tax as
sumes to exist between income and tn
value of personal property incident t,
the securing of income is a pure as
sumption"
| 10 Where industry is organized il
the form of corporations many consid
erations determine value besides tn
ability of stocks to secure DIVIDENDS
In many cases property is valuable TO
the industrial power which it brings u
its owner. Indirectly the ownership
of such property, as, for example, o
stockjs that never pay dividends, ma!
be the source of income because i
gives commercial advantage of som
sort; but in no such way that sucl
stocks that never pay dividends, ma
pendent on the annual return accru
ing from them"
A study of the fiscal systems of tn
] 81 40 70, 30
that the principles embodied in on
Enterprise Tax, such as fixing value
on capitalization of earnings and mar
lSet prices of stocks, and applicable t
all business enterprises in Hawaii, ar
f there confined to special corporation
tax laws, devised to reach the profit
of railroad, telegraph, express com
panies and other public service cor
porat1ons.
Y Again we quote from Adams: Il
= would be mistake to include all cor
( poratiOns within the scope of the COZ
e poration tax and the legislator is OF
S liged to. rely for the purpose of seleC
8 tion upon an economic analysis of in
dustries only which are monopolisti
( in their character, or, which for som
= other reason, bear a public or quas
n public character" Those indus
= tries that are superior to the norma
y control of commercial forces" W
y thus see that mainland special cOrpC'
y alton tax which seems to be the onl
C counterpart extant of our peculia
n Enterprise tax is a device to reac
= the intangible but commercial value {
s old time special grants, privileges an
s franchises which in former years hay
e not been taxed. The report of tn
# Michigan Tax Commission for Isl
n says, in connection with the asses
S ment of railroad properties,-"It
well known that with many roads a
i intangible value exists beyond thi
found in the physical properties.
X Ihe legislature ought to enact laws 1
e which franchises may be reached /
IS taxation To the physical valui