New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1910-02-07
STATE TAX REPORT
Basing Franchise Tar on Net
Earnings Difficult.

workings Of the special franchise tax la"
and many suggestions are made ID CON
necrion with the recent court decisions anu
other developments affecting the law Inc
report says:
Owing 10 the vigorous and well directed
efforts OF the Attorney Genera, S-o
S;antiaI progress has been made since our
last ANIMAL renort ln the collection OF I'M
paid special franchise taxes III NE ,hts
year 66i contested valuations Hat uS 80, 80
board have been settled, these VARIATIONS
amounting TO 81. aSS.ssS- Despite the COCO
record made last year. however mere
were in litigation on January l, OF t Iiis
year LAS Valuations. amounting TO N.l@.-
15e,62 Since that date cohSioeiaplS
number Of these cases nave otSi u.SpoSFo
OF, resulting in a substantial reuuctioll N
the total quoted. We are ADVISED mat III
the Forthcoming report o. the attorney
General the later and corrected nsureS *iii
be given
Having in mind the recent decision OF
the Court Of Appeals, involving the Special
franchise assessment OF the Jamaica Water
works Company, the state board calls the
attention of the Legislature To many
phases of franchise taxation. The report
points out some OF the difficulties IN the
way of basing the special franchise tax on
the net earnings OF public service corpora
tons. In this connection it says:
All agree that in arriving at net earn
tngs the operating expenses must oe de-
Quoted Yet we All know that operating
expenses is an elastic term. and Trey are
capab bic OF being manipulated even 10 me
extent OF Uiplns out al net earnings II
allowed without restriction or !iInt!.
The question then presented is, What is
the proper sum to be allowed for these
expenses IN the given case? Again the
burdens imposed upon the franchise by the
municipality granting IL are frequently 50
great as TO materially affect its value, ana
cases are known TO exist where these bur
0ens are SO great as TO practically destroy
its value as On earning proposition
In most of these cases the net earnings
RUE IS valuable as test, enl more GIlsn
than otherwise deceptive and unreliable as
q fixed standard of ascertainIng value
when practically the only information Is
10 be obtained from corporate reports made
10 this board. The court recognizes these
conditions in holding that no liked rule
or method IS required 70 ne followed III
making these valuations.
SITUATION IN NEW YORK
Referring 20 the situation in greater New
York the report SAYS:
II New York City there is we'll regu-
lated system and schedule OF rates for the
granting OF these privileges. which, as q
iCle, represents q value very much higher
tnan tie valuations fixed by this board
In the case OF street surface railroads IN
that city there Is provision OF the rail-
read law, existent for many years, which
precludeS the granting OF such franchises
except upon condition OF the payment OF
3 per cent Of the gross earnings for the
uTSt I'VE years Of It's existence and per
cent OF such gross earnings thereafter,
ana corporations are apparently willing and
ANXIOUS 10 accept these grants on thdt
basis. Can il be SAID that these condi-
items, these sales prices. have no influence
on the question Of the value OF these
privileges unless such value can be VeTlHed
by the application Of the net earnings
rule?
1t may De Instructive by way Of illus
tTation, TO point out the Consequences
which viii result in q considerable number
Of instances by not giving some heed 10
and which indirectly affect very many
others a street surface railroad in New
York City has tangible property ii the
streets OF the value o. A,HHp'@; the gross
earnings OF the company are Sl,e-eor, OF
which II pays 10 the city per cent or
.pp. pursuant to the mandate Of the
statute and the terms OF its franchise.
Now, assuming = tax rate O. per cent,
that the franchise tax law had not been
N the streets was assessed locally as re
quired by law Al its full value, and We
in taxes on its tangible property. assessed
ty local assessors, S-0e@l and the percent
age Of gross earnings paid pursuant 10 the
statute and the terms OF the franchise,
81 (sst. making total OF Sl.Qre.
The special franchise tax Law was a reVe-
rue naea sure, intended 10 benefit the local.
ties By increasing their tax revenues. The
Legislature never contemplated The result
iHs conditions referred 10 IN the case just
mentioned. Il was intended 10 he q benefi
10 the localities rather than means of
diminishing their revenues. II, however,
EEe net earnings rule must be applied N
disregard OF these general conditions. and
il the rule must be applied from informal
lion contained in the reports OF these cor
porations. which il substantially all the
information upo<l the subject OF net earn
ingS this board can obtain. II VIII largely
wipe ouI the special franchise valuations
in New York City in respect 10 street sur
face railroads. where these franchises are
supposed to be. and doubtless are, Of very
substantial value
After calling attention 10 the fact that
local assessors have no uniform metnod
OF taxing corporation property, the report
urges consideration OF the question as 10
whether tie time has not come when all
Of the property Of the public service cor
porations should be assessed by the state
board. the same as IS now being done with
that part Of corporation property which is
located IN the streets and public places Il
would seem only z natural step forward
me board observes, similarly TO place the
duty Of assessing the property Of these
corporations wherever located.
To do away with the confusion often
caused by present methods the state board
recommends that all real property assess
ments should be made against the prop
erty itself, ant not against individuals
In this way II is believed the chances OF
any property escaping its Just share OF
tax burdens would be mininized.
The board again recommends the repeal
OF Section D of the lax law, in order that
property may be assessed in whatever tax
district il lies, regardless of tax district
lines or the place OF residence OF the own
er- The board also recommends that the
Legislature establish q uniform system Of
equalization, 10 be followed by all boards
Of supervisors, with view TO ending the
iajustices which prevail under the present
methods.
The report shows the total assessed
value OF the property within the state for
the year 1905 10 be:
Real estS te.......................S Sc IL So SIS
Personal SIS, 90, s43
Making total OF real and personal
assessments Observation-Disclosures. 9,66e, ils,6s1
Increase over 1907 in real
estate ....-....-.-.... 1854 054. 65I
Decrease from 1897 IA
personal property. 71.5oe.2l5
Total increase 49,. 001 100
The report also brings out the fact that
the total exemptions from taxation of real
estate for the year 1903 aggregated ST.
71S.75I,6SS, an increase for the year Of
S66.567.Is5
KILLED BY MAIL TRUCK.