The Richmond Virginian. (Richmond, Va.) 1910-1920, 1913-09-18
Taxation in Virginia
The Corporation Tail. The FIRST DcHihe's
0n1IInrd POLICY.
ny EDGAR syDENsTRICkEI

The earliest taxation of public service enter
prises, which occurred in 1S42-lS43' as was
potnted ont and discussed IN my lHSt afticie
on the corporation tax in Virginia, was the
tax OF one and one-half per cent OF an NV
donds If nrotft' on turnpike railroad canal
and bridge incorporated companies II WAS
If little value as revenue producer Tor the
mems that 80 MANY companies paid no taxes
hacause they were favored with special exemp-
lions and that so few of those which we're not
exempted were profitable enough to declare
dividends The really significant thing about
this first step in corporation taxation was thas
it was based on actual net earnings,
The same basis of earnings for corpof ration
tavat{nn appeared in the first law ever passed
in Virginia which outlined anything Ike oshs
mite policy in taxing corporations ne Jaw ,oi
1S49.1843 continued until 1S55-lS5b. IN the
iatfer YEAR the general assembly provided that
every railroad not exempted by It's chafteF
from taxation" to pay "a tax OF one nun 1o'
every mile .pf transportation OF every pasSeh-
ger 1t sh8uid be noted, however that WINE
earnings was the basis OF the new netnou ~, ~
taxations as it was under the law Of fS42-!s4o
the law of Is55-1s56 made an Important enahss ,
in the kind of earnings. The first law based
taxation on net earnings; the second was
species of gross earnings tax here we haNe
the first appearance of our present gross earn
irss or gross receipts tax on railroads
The provisions Of the law of iSo5-is3o are
interesting In the first place. it's method of
ascertaining the amount OF the tax was lafRelS
the same method in principle which PfeNaue9
under the constitution of 1909. Every taNahle
railroad was required 10 report to the state
auditor the aggregate number OF miles tfaF-
eled by passengers -. g, the aggregate mum
auer-WhlGh passenEers were trans
ported and the number OF passeneers- hese
statements were required 10 ne made auafteflEt
under oath of the presidents of the roads ana
their superintendents of transportation Every
railroad company paying this passenger trans
nortation tax was not assessed with any tax on
it's lands, buildings equipment II, however
II failed to uaV his tax in six months then the
E hn iG8 "a
The railroads property under these conditions
was to be assessed under the direction OF the
auditor Of public accounts supposedly At the
fun cost of construction the tax was 10 ne
levied In the usual way by the local sheflHs
in the counties through which the rallfoad
passed. Here. too, we have the hfst instance
II physical valuation for purposes Of taxation
In addition the tax on railroads. there
was a gross receipts tax on express and teie-
craph companies and toll bridges and fer
:ies The taxation Of express and telegraph
COMPANIES fexcept by property taxation) APP
pears for the first time in the acts of the assem-
bly, in lS55-1s56. Express companies were taxed
one half of one per cent and telegraph conn
The taxation of toll bridges and ferries, as we
have seen, began in lS+3. when a rate q one
This rate was changed IN lS53-ts5 to three
per cent of their yearly rent according to
the definition of rent as explained IN the pre-
cedlng article and to six per cent in 1S5S-1S96
in 1850 further important changes occurred
as we shall see in the next article. The opera
cerned may be shown in the following table:
Table Showing Receipts From Corporation
Taxes ts56-tS5s.
1885 1857 1858 1859
Railroads ........ 1880 25,4t2 42is2 45'sos
| Express companies 252 SOL 36b Az
Tax on dividends. s95e9 55,ao5 47,51s 5413o
%Tncluding license tax.
1t viii he seen from the above statistics that
the receipts from corporation taxes from 1856
$50. although larger than under the "dfvi-
dend" tax of 1919, shown in the preceding
article. nconsderable. This was due to
the large number of exemptions for the most
part, and to the small amount Of business done
by those corporations not exempt. The lmpor-
lance of this system Of corporation taxation
from a historical standpoint has already been
pointed out by nr. p. s. Freeman in his report
to tho late tax commission follows:
When ii he remembered that this law
passed when railroads of compa lively
little value. when the great interstate decisions
had not been written and when the entire basis
OF taxation still in doubt the wisdom and
justice of the assembly must excite the greatest
admiration. More than fifty years they
devised system Of taxation which many econo-
mists today, in the light of modern theory
and vast experience. consider the ideal one
Some important and radical changes. how
over, took place in 1860.