Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1925-01-09

which would mean. according OF to
their estimate, reduction of $500
79I in their return to the state, or
total decline in revenue IN the oe enS $40
ing fiscal year of nearly si'ooV'ooo
The railroads base their request for
this alteration upon the great increase
in their annual tax incident to the
rate increases which. 1t Is contended.
are related in on Way to their aplllly
to pay. OF the two main systems
serving our State. the Bangor q. q
Aroostook Railroad has prospered IN
spite of the agricultural distress IN
| the region which 1t serves, wnlle the
Maine Central Railroad during recent
years has not paid dividends upon it's
common stock. 1t seems somewhat
| anomalous situation that the pros
porous railroad should have traffic
earnings of only $1,000 gross per
| mile, while the shareholders who are
in difficulty possess road with gross
| earnings Of $4,000 a mile.
1t is also to be observed that the
gross income of the Maine Central
1928 available for it's capital invest
ment of $60,O00,000 amounted TO ~
S.2S5.S2, or a net return OF four per
1 cent. Through a series of internal
arrangements, however, that work
| very much to the disadvantage of GER
tain groups of investors in this road.
I'some of the investors receive very
ample returns at comfortable guaran-
ties. while others receive nothing
at all. .
For instance. one of it's smaller
branch lines is capitalized at $4,000
mile as against the average capitaliza-
ton for the entire system of $3O3n0 a
mile. On this very high capitalization
certain Of its security holders are re
cciving each year return of eight
per cent and the regular return on enc
entire large capitalization Of this
branch averages well over six per cent.
The return of net operating income
for the entire system is $500 per mile,
but the investors in this subsidiary
are paid return of over $41O0 per
mile. This is, of course. matter
which is of primary concern to the
several groups of investors in the af-
filiated lines, but the public is entitled
to inquire, when relief at its expense
is sought, whether the failure to pay
dividends on certain stocks is a result
of insufficient gross earnings, or
whether it is due to an negotiable dis
tribution Ofthe earnings as result or
improvdent contracts made in the
past. If the latter is found to be the
case, it Is grave question as to what
extent the public should he obliged to
pay the penalty for the mistakes that
have been made.
The present tax is attacked as the
highest excise tax. with one exception.
|
states, however. use this system for a
levy. Thirty-four states use the sys-
TEN Of ad yalorem valuation treating
railroad properties by the same gen.
eral system by which other properties
are taxed. The tax return per mile of
road in Maine is practically the same
as the average tax per mile Of road
throughout the United States. Ger
tainly in SO far as the Maine Central
Railroad Company is concerned condi-
r.
ent from the average through the
United States. If we consider the great
number of miles in the south and west
that serve more sparsely. settled re-
gion with far less industrial develop
ment than exists in the southern and
central part of the State of Maine.
1t is said, however, that conditions
here are different from elsewhere in
the United States and comparisons of
taxes with the other New England
states are stressed by the advocates
of a change. The following table
shows the taxes paid per mile of
road by the railroads in the several
New England states in 1921:
Maine S1023
New Hampshire ......... ST
{ Vermont .............. $40
Massacnusetts ........... 1904
E fsnone Island '.....'..... i 7soS
| Average tax per mile in
New England .......... 1460.50
There Is much to be said in favor of
the proposition that public utilities
obligated to serve all of the public
who may apply upon terms regulated
by. government commissions to allow
only the expenses of operation to-
Eether with a reasonable return upon
the property devoted to the service.
At enc time strong arguments were
advanced for the adoption of this view
AS our civilization became more COM
pleX. however, and public utilities
multiplied it became apparent that
such a course would result in a very
negotiable distribution of the gov
ernmental burdens in any state, since
many citizens might be served by no
public utility at all and still Obliged
alton provided for the corporations
that were involved.
The other theory of taxation con-
templated that public utilities should
citizens and that those using the utili-
ty would then pay taxes for the prop
: erty that served them as distributed
in the rates. Many of the states have
, modified this plan to arrange for an
equitable assessment by central au-
thority and to secure uniformity in
the treatment of the roads, but sub
jet to this variation the predominant
practice in the United States today is
what is known as an ad Valorem tax,
The property of all other citizens
including many of the public utilities
within our State. shares the privi-
leges of government and bears the
, burden in proportion to the valuations
: is the historic basis for the distribu-
ton of the tax burden.
The Maine Central Railroad Com
pany IN 1923 had capital investment
, OF SJ9,36 7.bU9.92. For rate-mak king
purposes it's valuation has been fixed
. by the Interstate Commerce Commits
sion at approximately $70,000,000 and
the rates have been fixed with the de-
: sign that they should earn five and
three-fourths per cent upon this in
creased valuation.
At the average rate of tax of $3S IS
laid upon other property in the State
. in 1928, this railroad would have paid
upon a valuation based upon it's book
: investment the sum of S2.272. 59l.73
Upon it's valuation for rate-malljng
purposes. 1t would have paid tax of
$2,6l9,600. The railroad actually paid
to the State and to the several cities
and towns the sum of $1,O41 ,696.3S. or
saving. to the railroad, under the
excise tax over the valuation basis, of
$1,230,S95.35 or $1,63S, 003.62, accord
ing to which basis of valuation is used.
On any basis of valuation that could
reasonably be fixed comparable with
the general practice throughout the
State of Maine it is not conceivable
that the tax upon this railroad would
be appreciably less than the tax that
is now imposed. These comparisons
seem Of Importance as illustrating the
burden that it bears in comparison
with the burden of taxation resting
upon the property of other citizens in
our State, and of many public utilities
, as we'll. No other citizen is excused
from taxes because his property does
not pay.
In recent years the Public Utilities
Commission OF our State has had be-
fore 1t petitions for rate increases by