The Richmond Virginian. (Richmond, Va.) 1910-1920, 1919-08-26

l i
We have included in the above re-
port recommendation that the fran
chise tax on public service corpora
tons be increased onc-eighth OF one
per cent. In this connection, how
ever, we wish to call attention OF tne
finance committee to the following
facts;
First.---That II has been called TO
| the attention of this committee by
! the chairman Of the state corporation
commission that there Is contention
on he part Of the railroads OF this
state that an annual franchise tax
| In excess ~ one per cent is unconsti-
| tuticnal
/. They rely upon the following pro-
vision contained In section III OF the
constitution. which is as follows;
Every such railway or canal cor
poration, including also any such as
Is Exempt from taxation as to its
works. visible property or profits,
shall also pay an annual state fran
chise tax equal TO one per centnm
upon the gross receipts
The tax originally imposed was one
per cent in compliance with this pro-
vision Of the constitution. The extra
session Of 1915 increased 1t from one
per cent to one and one-eighth per
cent: the regular session OF 1915 In
creased II from one and one-eighth
per cent to one and one fourth per
cent: and the regular session of 1918
increased it from one and one-fourth
per cent to one and FIVE sixteenth per
cent.
The franchise tax on one Virginia
trunk line was increased from s17o.-
1892 in 1907 to s51s,sS5.53 in 1919,
inf Oh nv the
corporation commission that the in
crease in franchise tax alone, over
and above the amount they paid for
1918, will amount to 1855, 900. due
to increased rates and increased tom
mage, which will be available in the
fall OF this year. We herewith file
statement prepared by the Office OF
the state corporation commission,
showing assesrn ents of railroad prop
critics and total taxes paid from 1902
to 1918.
Second,---In addition to the above.
we are Informed by the chairman of
the state corporation commission that
very serious question arises with
the national government in regard to
the imposition of the franchise tax
tax on stores and supplies. and rolling
stock purchased under the railway
administration.
The act OF congress under which
the railroads were taken over by the
federal government provides that
moneys and other property derived
from the operations OF the carriers
during tn, federal control are declar-
ed TO be the property of the United
Statcs
II such money or other property
ia the property of the federal govern
ment. serious question arises as to
whether such money or other property
Ia taxable for state purposes. although
there is provision in the act OF con-
gress taking over the railroads that
nothing therein contained shall be
construed to amend, repeal, impair or
affect the existing laws or powers of
the states in relation to taxation .
of the several states.
We would not have raised this ques-
ton at this time but for the fact that
it has been called to our attention
that in 1918 the Hon. John Barton
Payne, counsel for the director-gen-
eral OF railroads, took the position
that property of such corporations
purchased under federal ownership
was not subject to state taxation and
addressed a telegram to the proper
officials of the railroads of this state
advising them not to pay the tax on
stores and supplies OF railroads. which
amounted TO about 100000 in taxes
to the state and different localities.
This being brought to the knowl-
edge of the very efficient corporation
! commissioner, Judge William F.
| Rhea. now chairman of the commits
sion. he INN ediately took up the mat
ter with Judge Payne and advised
him of the very serious difficulties
that wouli arise in Virginia IL such
a policy on the part OF the railroad
ADMINISTRATION was pursued, because
1t would so materially reduce the
revenues OF the different localities as
to seriously embarrass them. and
would require them to place an addi-
tionai tax upon other subjects of taxa
ton in order to meet their needs.
RAILROAD SITUATION
On account OF this situation Judge
Rhea afterwards went to Washington,
and in an interview with Mr.. linden
wood. the then counsel for the direc-
tor-gcneral OF railroads, reached an
agreement with him whereby he rec
commended as counsel for the railroad
administration that the situation in
Virginia be left alone at the present
time, with the understanding that the
assessments should remain the same
as those OF taSt year up the pnySl-
cal properties Of the railroads, and
that the railroad administration
would recommend the payment OF the
tax on rolling stock. stores, and sup
plies, and the franchise tax as at pres
ent assessed in Virginia without pro-
test =, $500
This is the situation now. and while
we do not desire to advise the COM
mittee what attitude It shah take. we
think It proper to bring these facts
to their attention. ana we recommend
hat the chairman OF the state corpora
ton commission be requested to ap-
pear before the committee to explain
the situation fully.
II Is our view that the attitude of
the committee was at the time the
resolution appointing this sub-com-
mittee was passed that we should
consider ali Increase OF the franchise
tax on public service corporation
This we nave done. and have incor-
porated the same In our report. We
submit this addendum to our report
for the committees information.
We have been informed that II the
federal government should exempt
from taxation for state purposes the
property which it asserts Is exempt.
the situation in Virginia would be
very serious
The physical property, including
r,.-l1t t.. al.