The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1923-01-10
k|LbY ADvOCAT ES.
GREATER TAX RATE.
TO PAY OFF DEBTS.
Limitations Now Imposed by
Constitutions Effect Sale of
State Bonds at Favor
able Rate
STATE CAPITAL BUREAU /
THE AGT-IIERALD !
Montgomery, Ala, Jan, o /


STATE CAPITAL BUREAU
THE AGT-UERALD
Montgomery, Ala, Jan. Q
In order that the credit of the
state may be protected at all times
and its securities may find the best
market the legislature should sub
init an amendment to Section 214
of the constitution which will per-
nit the state to levy a rate of tax
alton sufficient to meet its obliga-
tions Incurred by vote OF the peo-
pie, according to Governor kiiby's
quadrennial message to the legisla-
ture.
Governor Kilby called the lawmak-
ers' attention to Section PA of the
constitution as now written which
prohibits the imposition of tax
greater than, sixty-five one-h1n-
dredths of one per centum ON the
value of all taxable property within
the state. The governor suggested
that the section be rewritten so that
such limitation may be imposed ex-
cept when it is necessary to levy a
greater rate of taxation for the pro-
lection of the securities of the state
authorized by direct vote of the peo-
Pile
Effects Bond Sales
Although Governor Kilby did not
mention the fact in his message ii
is we'll known among persons who
watched the negotiations for the
sale OF the states highway bonds a
rev months ago that New York fl
naneial interests were opposed to
the Alabama issue because the con-
sututional inhibition would prevent
the legislature from increasing the
tax rate to such figure as would pro-
vide for the interest and retirement
OF the state securities Governor
kilby's suggestion had no other pur-
pose than to make Alabama securi-
ties s valuable in the money mar
ket as any other securities in the ma
ton.
As the state develops there are
certain difficulties growing out of
the Limitation imposed by Section PA
OF the constitution of 1901 which be-
come more serious and, in my opin-
lon, the time has come when in the
interest of the state generally, and
particularly in the interest of the
taxpayers, steps should be taken sc
to modify this section of our consti
tuition as to exempt from its provi
sions debts and obligations of the
state, evidenced by bonds or other
securities, for the payment of which
such bonds or other securities pledge
the full faith and credit of the
state.
Quotes Constitution
as follows:
:" The legislature shall not have
the power to levy in any one wear
greater rate of taxation than sixty
flVe -hundredths of one per cen.
tum on the value of the taxable prop.
erty within this state
Il am of the opinion that this sec.
ton should be modified so as t.
read as follows:
Except as to payment of debt,
or obligations of the state, now out
standing or hereafter created evil
deneed by bonds, mortgages or Other
securities pledging the full faith ant
credit of the state to the payment
thereof the Legislature shall no
have the power to levy in any one
year greater rate of taxation thar
sixty-five one-hundredths of one pei
centum on the value of the taxabl,
property within this state
Such modification would, in my
opinion, relieve the difficulties grow.
ing out of the provisions OF this sec
tion as ii now stands, and such mod
if,cation should be made for the fol.
lowing reasons:
FIRST The original purpose anC
Intention of this provision was alone
to prevent extravaganza and useles.
expenditure of public funds by dis
couraging the contracting of unnec
cessary debts and obligations, but
was never Intended to prevent the
state from paying its debts, or tc
make 1t more difficult for the state
to meet promptly its necessary obi.
cations.
Second: This section not onl,
discourages the contracting of un.
necessary debts and obligations, bu'
goes farther and places a Limitation
upon the right and power of the stat,
to meet its obligations and to pa,
debts after the same have been con
tracted in good faith and of neces
sity.
1t is wise and good to limit 9TH,
power of the state to contract debts
of the state to pay such debts al
faith is different matter altogethe
and can not be justified on eithe
moral or economic grounds
Third, The provision of this sec
ton impairs the credit of the stat,
and increases the burden of the tax
payer by forcing higher rate of in
terest.
Suggests Amendment
When the state offers a bond, o
other security. for sale and the pros
pective purchaser discovers that gu
constitution places limitation upol
the power-of the state to levy a di
rect tax sufficient to meet prompt,
Interest payments and to provide 70
final liquidation or retirement of tn
0curity, such prospective purchase
very naturally demands a higher rat
Of interest, and if the demand is re
fused he invests in securities of othe
states, or in another character of Sc
curities not subject to such limita
lions, and the difference in interes
payments is, of course, borne by tn
taxpayer.
Fourth: This limitation place
the state in the attitude of impair
ing its sown securities, which impair
ment. whether in the form of in
creased interest charge or depresse,
sis be made good by the taxpayer
of the state.
1T must be borne in mind that tn
criterion by which state or munici
pal bonds or securities must be judg
ed is whether everything has beel
done to pledge the full faith an,
credit of the state or municipality t.
the payment of it's obligations.
- Fifth, This provision. insofar a
Tit affects the obligations of the stat
evidenced by bonds or other securi
ties which can be offered for sal
that the section be rewritten so tina
vote authorize their issuance. cal
not possibly do any good while
impairs the credit of the state. at
fects adversely the sale price of tn
states securities, increases interes
rates and forces the state into al
attitude of misrepresentation. All o