Evening star. [volume] (Washington, D.C.) 1854-1972, 1917-01-18
THE Low RATE TAX
ON |NTANG|BLES
Tax Conference Washington State,
1914-Remarks Of C. J. Bullock
of Harvard University-Proceed
ings, Page 231.

for the reform of state and local tax
ation--abandonment of the uniform
rule and the adoption of the principle
of classification. If experience proves
the impossibility of taxing all prop
erty in the same manner and at the
same rate. it necessarily follows that
we are bound to apply different meth
DDS of taxation to different classes OF
property: and this is all that CLASH
fication means. The principle upon
which it rests is nothing new, but is
merely that on which the success of all
legislation depends--reasonable dis
elimination between the different
classes of things to which law may
apply. Our laws of property are no,
the same for all classes of objects that
may be reduced to private ownership;
contracts and torts are governed by
no uniform rule; at every point pena!
laws carefully classify different Of
lenses and offenders. Nowhere, per-
haps. except in taxation. have we at
tempted to apply identical rules to
classes Of things widely different in
their nature: and our tax laws nave
failed to secure certainty and equality
precisely because they have disregard
the success of all legislation.
THE whole case in favor of classi-
fication is stated impressively by the
Supreme Court of the United States in
the following language: This court
has repeatedly laid down the doctrine
that diversity Of taxation. both with
respect to the amount imposed and
the various species OF property selected
either for bearing its burdens or for
being exempt from them. is not incon-
uniformity and
equality of taxation in the proper
sense of those terms: and that a sys-
tenn which imposes the same tax upon
every species of property. irrespective
of its nature or condition or class VIII
be destructive of the principle of uni
formity and equality in taxation. ana
OF a just adaptation of property to Its
burden Pacific Express Company VS..
Siebert. 142 L. s., 351) Addition or
comment would be supererogation.
classification is necessary because
property is not homogeneous, but rails
into certain well recognized classes
which differ widely in their economic
nature and characteristics. Real estate
tangible personal property and lntan,
gible> personally. are classes Wen
;;uoWA, to the law and to the world OF
busi1ess. The general property tax
has undertaken to ignore the economic
differences of the three kinds OF prop
erty and to tax them by UNIFORM
rule but it has never secured anything
remotely resembling uniformity OF re-
suits. Intangible property almost Who'll
Nv evades assessment; tangible person
atty does not escape to the same ex'
tent, but is usually assessed at only
fraction of it's true value; and real es-
tate. which cannot be hidden or remoV-
ed, pays three-quarters, or even more
of the total taxes. The lawmaker has
ignored the economic differences of the
things with which he deals: the as
SCISSOR and taxpayer do not and cannot
ignore them.
learning in the hard school of expert
ence, and classification is gradually re-
placing taxation by a uniform rule
One of the most promising experiments
is the taxation of intangible property
at a fiat rate of three, four or five mills
upon the dollar, which. in Pennsyl-
vania, Maryland. Minnesota and Rhode
Island has materially increased the
revenue derived from this class OF
property and secured far greater equal
ity between taxpayers With proper
methods of administration any state
can now adopt this plan with full as
surance that it affords a remedy for the
worst evils of the general propert!
tax, which has always failed to reacf
the greater part of intangible prop
erty but has practically confiscated the
income of the few persons unable oil
unwilling to evade it.
"Other states have preferred to adopt
registration taxes for mortgages an
secured debts. which may reach the
same result in another way. provided
care is taken to adjust the rate of the
tax to the term for which exemption
from other taxation is granted. New
York, however, has made the mistake
of granting. exemption for an indefinite
term upon payment of a registration
tax of one-half of l per cent, with the
result that her law is drying up the
future sources of revenue.
Tangible personal property has MOI
yet been given separate classification
although the subject has been under
consideration in one or two states. II
my opinion such classification is desir
able. 1t is difficult and in many case:
impossible to secure a full assessment
of goods and chattels at the high rate:
estate, and it would be unjust to do so
because tangible personally does no
benefit to the same degree as real es
tate from certain classes of public ex
penditures. Many forms of municipa
expenditure. such as those for thu
maintenance. cleaning and lighting o
streets. tend to enhance realty values
and it is but fair that real estate SHOULD
be subject to a higher rate Of taxation
THE plan of classification. then. re
auires the establishment of separat
rates for tangible and intangible per
sonalty. Upon the former the rat
should not exceed so cents to 81 pc
500, and upon the latter should no
exceed 40 or so cents per 500. Thes
rates are not arbitrary, but are base
upon the economic characteristics Q
the two classes of property Intangibl
property consists chiefly of investmen
securities that yield an income of no
more than per cent upon an average
The rate varies considerably In differ
ent sections of the United States, an
where the investor takes more thai
the average risk 1t naturally exceed
the figure mentioned. Experience show
that it Is difficult for any government
to collect from this class Of propert.
a tax that exceeds. or 10 per cent o
the income, and If we were levying al
income tax no one would propose
the rate of property tax upon tn
same principle. and this leads to tn
conclusion that a tax of 40 to SO cent
per 500 Is as high as can be collected
To impose a higher rate will proba bl,
cause so much evasion that the revenu
will suffer. and to levy tax Of 81 pc
500 will drive most intangible prop
erty into hiding.
Tangible personally. on the othe
hand, consists of merchandise. live
stock and, in general. capital employee
in Industry or commerce where !
Yields the usual trade profit, whicl
must be taken to. be about doublenh
ordinary rate of interest. If intahgi
bles yield an average return OF pc
cent. tangible personally must yiel
about 10. and If the former can b
taxed at a rate of 40 to so cents tn
latter can be taxed so cents to 81 pc
s1OO. This Is the precise result whicl
would be reached by an income tax