The Richmond Virginian. (Richmond, Va.) 1910-1920, 1918-02-22
UNIFORM BANK TAX

UNlFORM BANK TAX
CONTINUED from First Page.)
poses of taxation at It's fair market
value or actual value. Bank stock,
however, Is required to be assessed
according to a scheme set out in the
tax law by which the value of bank
shares for the purposes OF taxation
is arrived at as follows---add together
the capital, surplus and undivided
profits: deduct from this sum the as
sessed value OF real estate owned by
the bank and otherwise taxed.
To Ascertain Value.
The amount thus aAcertained di-
vided by tho number Of shares OF
stock outstanding and. held by the
various stockholders will show the
value of each share for the purposes
of taxation. This value has little
relation TO the market value of stock.
Generally speaking. 1t In little more
than one-haif Of the actual market
value. unless the banking corporation
Is being dissolved and the capital.
surplus and profits being distributed
in cash to the Stockholders. because
ths market value Of bank stock. or
of any other stock. Ia determined
largely by the earning power The
earning powe~ Of bank stock depends
not on the eIount Of capital. surplus
and undivided prohts solely but to q
large extent on de- osits which, you
sill observe. are not taken into con-
sideration by the scheme OF assess
ment above mentioned. except i'm
pliediy.
Therefore. the fact that for the
4-a- -&~aA ~ Il
trust companies and national banks
earned SIS per cent on their total
Investment OF capital. surplus and an
divided profits 10. IL sesSns to me.
easily explained. Figures which !
have which are taken from the re-
porte of the auditor of public ac-
counts. the state banking bureau and
the comptroller OF currency show that
banks OF all kinds on June 10. 1919.
had a total investment of capital. sur
pins and profits undivided OF s6I.is&.-
seT.2s, on which the total earnings
for the year ending juno 80. 1917.
were s6.o4s,2s47 IN dividends paid
and surplus Increased. or g.. as per cant
Furthermore. the auditors report
for 1917 shows that banks did not
pay taxes on the larger sum rust shove
mentioned but only on tsb.ess. ses.4s.
the difference being due to the deduc-
tons for assessed values OF real es-
tate owned by banks and otherwise
taxed. Comparing the last mentioned
sum with thu earnings. which To a
fair comparison IN considering bank
stock along with other intangibles,
such as notes and bonds. the earnings
are about els per cent.
Befievee Comparison Fair.
TT would seem that this compari-
son la fair, because most OF the large
banking institutions in Virginia have
farge real estate holdings which fur
nish a basis for deductions, and these
holdings are not used mainly or sole
W in most instances for barking pur-
pc ees, but are themselves revenue pro
ducerw to the banks In the form OF
rental returns from business and Of
foe purposes.
TT must also be remembered that
one consideration which influenced
the legislators 10 put such q low rate
on money. twenty cents per hundred.
was that money might be eAcouragsd
to flow into the banks for deposit
rather than be hidden away at home.
Now, the following comparison
seems to me to be fair: The owner
of bond for sS0o cannot charge more
than sir per cent interest to his debt.
or. He must pay In taxes nth ety 1--we
cents per hundred If the local rate
10 fully availed OF as IL La In most
instances. leaving him net return OF
i've and ave-tenths per cant. The
average owner OF 5000 in bank stock
during the year ended June 30. 1917.
made S.2S per cent. not considering
the real estate deductions for taxation
purposes Deduct his taxes OF $3.50
per hundred and he has left e75 per
cent net on his whole investment: or.
IL the actual amount on which he
pays the $3.50 tax ia considered, he
makes on his Investment the differ
ence between SIS and so. or ys5
per cent.
Il am aware that these figures will
not apply with absolute accuracy to
every bank In Virginia. but they will
apply to the large majority. and. In
all cases, I believe it can be shown
that the returns from ha6k stocks
are sufficient to more than justify the
present rate of taxation. certainly by
comparison with other Intangible prop
erty.
The fact that at auction sales OF
bank stock the PROFITS obtained in
many instances has little relation to
tho so~cslied book value OF the stock
ia chiefly explained, I think. by con-
sideration of the earning power of
the stock which must and which does
have a direct and most reasonable eff
feet on the market value. II cannot
be explained by saying that bank
stock has fictitious value. for business
men do not part with nor invest their
money for fictitious -easons."
What the state Forfefts.
Mr.. Slant said the state would lost
sla7,s5o by the reduction of twenty
fee cents In the rate, eli went on TO
explain that because Of local influence
many localities were not levyins any
tax on shares of bank stock, and the
rate varied all the way from ten cents
up to the limit OF ti.15 allowed by
law, exclusive of the thirty Ave cents
which goes TO the state under the pres
ent law.
And therein. gentlemen" he said.
rs the reason why the bankers are
anxious to get the tax back to the
localities in its entirety by segrsga-
ton. He objected strenuously to isav-
Ing II optional with the localities Al
TO how much they would ASSESS, and
asserted that the schools would suf-
fer. He cited instances where tho
bankers ana tho authorities" were 90
closely related that bank shares e.
capped without any assessment or tax
alton whatever.
Mr.. Reeds speech In support OF his
making the rate mandA-
tory and the assessment uniform was