REPORT
OF THE
JOINT LEGISLATIVE
COMMITTEE ON TAXATION
OF THE
STATE OF, NEW YORK
TRANSMITTED TO THE LEGISLATURE FEBRUARY 14, 1916
ALBANY
J. B. LYON COMPANY, PRINTERS
1916
DOCUMENTS
DEFT.
REPORT
OF THE
JOINT LEGISLATIVE
COMMITTEE ON TAXATION
OF THE
STATE OF NEW YORK
TRANSMITTED TO THE LEGISLATURE FEBRUARY 14, 1916
ALBANY
J. B. LYON COMPANY, PRINTERS
1916
'*' * **' I
DOCUMENTS
DEFT.
CONTENTS
Introduction PAGE
Joint resolution establishing a Committee 2
Problems facing the Committee 3
General scope of the Committee's investigation 4
Procedure of the Committee 5
Part I. The Revenue Situation 9
CHAPTER I. THE STATE 9 1
CHAPTER II. UP STATE CITIES -. 11
NEW YORK CITY 13
CHAPTER III. THE TOWNS 20
Part II. The New York System of Taxation 21
CHAPTER I. PECULIAR FEATURES OF THE NEW YORK TAX LAW 21
CHAPTER II. THE FAULTS OP THE NEW YORK SYSTEM OF TAXATION . 23
CHAPTER III. WHY THE PRESENT SYSTEM CANNOT BE RELIED UPON
FOR THE ADDITIONAL NEEDED REVENUE 26
Part III. The Failure of the Personal Property Tax 31
CHAPTER I 31
History of Tax in Europe 31
Failure in the United States 32
Report of the Commission of Taxation, Massachusetts, 1908 .... 32
Report of Maryland Commission, 1888 35
Report of Kentucky Special Commission, 1912 36
Report of Virginia Tax Commission, 1911 37
Report of National Tax Association, Vol. IV 37
Summary of reports of New York Commissions 38
Report of 1872 39
Report of 1893 40
Report of 1900 40
Report of 1907 40
CHAPTER II. CAUSES OF THE FAILURE OF THE PERSONAL PROPERTY
TAX 41
CHAPTER III. INJUSTICE OF THE PERSONAL PROPERTY TAX 43
As between tangible and intangible personalty 44
As between the poor and the wealthy 44
Concerning widows and orphans and trust estates 45
As between farmers and owners of other forms of wealth 47
Comparison of taxes on manufacturing and farms in California. 48
Table showing comparison of aggregates and percentages of
investments in manufactures and agriculture in Minnesota ... 50
Injustice as between various types and classes of enterprise .... 54
[iii]
679528
CONTENTS
PAGE
Part IV. Failure of the Personal Property Tax in New York 55
CHAPTER I. GENERAL SCOPE OF THE COMMITTEE'S INVESTIGATION. 55
CHAPTER II. PERSONAL INVESTIGATION IN THE Six COUNTIES 59
CHAPTER III. DECLINE IN THE PERSONAL PROPERTY ASSESSMENT IN
NEW YORK STATE 66
CHAPTER TV*. PERSONAL PROPERTY ASSESSMENT IN NEW YORK CITY. 68
CHAPTER V. PERSONAL PROPERTY ASSESSMENT IN OTHER CITIES
AND TOWNS 69
CITIES 69
TOWNS 71
Part V. Failure of Section 12 (Introduction) 73
CHAPTER I. WHAT SECTION 12 Is 73
CHAPTER II. IMPOSSIBILITY OF ENFORCING SECTION 12 77
CHAPTER III. INVESTIGATION OF 2,500 CORPORATIONS 81
CHAPTER IV. INVESTIGATION OF THE COMMITTEE BY MEANS OF VOL-
UNTARY RETURNS OF GENERAL BUSINESS CORPORA-
TIONS 88
CHAPTER V. FURTHER INVESTIGATION OF THE WORKING OF SECTION
12 THROUGH THE MEANS OF VOLUNTARY RETURNS OF
CORPORATIONS 91
CHAPTER VI. How CORPORATIONS ESCAPE THE PERSONAL PROPERTY
TAX IN NEW YORK STATE 92
LEGAL MEANS OF ESCAPING TAXATION 96
CHAPTER VII. WHY CORPORATIONS ARE IMPELLED TO EVADE PER-
SONAL PROPERTY TAX 101
Part VI. Taxation of Foreign Corporations. 103
The law regarding the taxation of personal property of foreign
corporations 103
Failure of the law 109
Investigation of country records 109
Testimony concerning failure of the personal property tax in
regard to foreign corporations Ill
Why foreign corporations should make a substantial contribution
to the support of State and local government 113
Part VII. New York System of Taxing Manufactures 117
CHAPTER I. STATE TAX 117
CHAPTER II. LOCAL TAXATION OF MANUFACTURING CORPORATIONS .. 118
CHAPTER III. NEW YORK MANUFACTURING INDUSTRY AS A TAXABLE
BASE 119
CHAPTER IV. YIELD IN NEW YORK 126
CHAPTER V. YIELD OF NEW YORK MANUFACTURING CORPORATIONS
UNDER THE FEDERAL INCOME TAX 129
CHAPTER VI. NEW YORK COMPARED WITH OTHER STATES : . . . 130
CHAPTER VII. SUMMARY AND CONCLUSIONS CONCERNING THE TAXA-
TION OF MANUFACTURING CORPORATIONS 133
Part VIII. Section 182.. . 137
CONTENTS v
PAGE
Part IX. The Listing System 143
Report of Oregon Special Tax Commission 144
Report of 1906 Washington Commission 144
Report of New York Special Tax Commission, 1907 144
Drastic laws to secure disclosures have always failed 145
Report of Ohio Commission, 1893 147
Report of Kentucky Special Tax Commission, 1914 ^. 148
Part X. Miscellaneous Business Taxes 149
Part XI. Some Forms of Corporate Taxation Found in Other States. . . . 151
The franchise tax based on the par value of capital stock, such
as is found in New Jersey 151
The capital stock tax, such as is found in Pennsylvania 151
The corporate excess tax 153
The Wisconsin Income Tax 155
Part XII. Substitutes for the Personal Property Tax 161
CHAPTER I. THE ABILITY, OB PRESUMPTIVE INCOME, TAX 161
Habitation Tax 161
Occupation Tax 164
Salaries Tax 165
Objections to Ability Tax 167
CHAPTEB II. THE CLASSIFIED PROPERTY TAX 168
CHAPTER III. THE Low RATE OF INTANGIBLES . 170
Arguments for the low rate on intangible property 171
Criticism of the above arguments 172
Pennsylvania low rate on intangibles 172
Results of Pennsylvania experience with 4-mill tax 173
Tax upon corporate loan 174
Conclusions concerning the Pennsylvania low rate on intangibles. 174
The experiment of Maryland with the low rate on tangibles 175
Results of Maryland's experience with the low rate on intan-
gibles 176
Where Maryland law has failed 177
Conclusions concerning the Maryland low rate on intangibles. 177
Connecticut's experience with the low rate on intangibles 178
Fiscal results of the tax on choses in action 179
Minnesota's experience with the three-mill tax on intangibles. . . . 180
Conclusions as to the Minnesota tax 181
General conclusions concerning the low rate on intangibles 181
CHAPTER IV. THE INCOME TAX 184
Experience in the United States of America 185
Wisconsin Income Tax 186
General characterization of the tax 186
What is taxable under the Wisconsin income tax 188
What is not taxable 188
Definition of income ; 189
Income of individuals exempted from taxation 189
Rates of Wisconsin income tax 189
Administration 192
Advantages of the income tax , . , 195
vi CONTENTS
PAGB
Conclusion 206
General conclusions 206
Inheritance tax 207
Apportionment of excise and automobile tax 210
Federal and State subjects of taxation 210
Income Tax Bill 215
Appendices 235
STATE OF NEW YORK
No. 26
IN SENATE
February 14, 1916
Report of the Joint Legislative Committee on
Taxation
INTRODUCTION
The taxation of personal property in the State of New York
has presented a serious problem for the last fifty years. Prior
to 1852, because of the low rate, the burden of the tax does not
seem to have been seriously felt, nor the inequalities which have
since arisen in its administration to have existed. However, in
1872, the rate for state and local purposes had risen to three
per cent and the defects and injustice of the taxation of personal
property at the general property rate became more and more ap-
parent. The situation resulted in the appointment of the Com-
mission of 1872, which was one of the first of the many com-
missions that have investigated and reported on this trouble-
some problem. This problem still remains unsolved.
During the last thirty years the State has developed a system
of special taxes imposing specific taxes upon certain classes of
personal property and businesses, withdrawing them thereby
out from under the personal property tax. Thus, banks, trust
companies, mortgages and motor vehicles are all free from the
local personal property tax and are taxable under special laws.
But, except for these particular classes, the great mass of personal
property in the State is still taxed locally at the same rate as
real estate, and under the same rule as existed a half century
ago.
This was the situation when, in the year 1911, the Legislature
enacted what is known as the Secured Debt Law, under the
terms of which certain classes of securities, to wit, bonds, notes,
debts secured by mortgage of real property situated in any State
or country other than New York, or secured by the deposit of
2 : STATE OF NEW YORK
securities under a deed of trust, or any bonds, debentures or
notes not payable within a year from their date of issue, were,
upon the payment of a tax of one-half of one per cent, exempt
from all taxation during the life of the security. The law was,
broadly speaking, modeled on the Mortgage Recording Tax Law,
but there is this fundamental difference between the taxation
of so-called secured debts and of mortgages: the tax on mort-
gages is paid by the borrower, whereas the holder pays the tax on
secured debts. The Secured Debt Law cannot, strictly construed,
be considered a tax measure, for the payment of one-half of one
per cent upon a security which may run for fifty years is so
light a charge as to amount to little more than a registration fee.
The purpose of the law was to exempt, rather than to tax, and
unless the general policy of the State can be said to contemplate
the relieving from taxation of the great and increasing accumu-
lations of wealth represented by securities, credits and other
forms of intangible property, this purpose must have run counter
to our general policy.
The law was not only disappointing as a revenue producer,
but in the opinion of many constituted an unfair discrimination
in favor of the holders of a particular class of property. The
justness of this opinion, and the belief that it represented the
sentiment of the majority of the people of the State, led the
Legislature in 1915 to repal the Secured Debt Law. Various
measures were introduced as substitutes, which contemplated
sweeping reforms in the taxation of personal property, and which
involved drastic efforts to reach securities and other intangibles.
The Legislature, however, felt that the time at its disposal was
sufficient neither for a careful study of so important a sub-
ject nor for an adequate disposition thereof. It adopted, there-
fore, a measure of a temporary character, under the terms of
which secured debts, upon the payment of three-quarters of one
per cent, could obtain exemption from the personal property tax
for a period of five years ; and by joint resolution appointed this
Committee to study the subject and to report at the next session
of the Legislature. The joint resolution reads as follows :
" Eesolved (if the Assembly concur), That a joint legisla-
tive committee is hereby constituted consisting of three
senators, to be appointed by the president of the senate,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 3
and five members of the assembly, to be appointed by the
speaker of the assembly, to examine the laws of this state
and of other states and countries relating to taxation; to
investigate generally in respect of systems and methods of
taxation, particularly with regard to the best methods of
equitably and effectually reaching all property which should
be subjected to taxation and avoiding conflicts and duplica-
tion of taxation on the same property; and to prepare the
needed legislation to carry such methods into effect in this
State.
" Resolved, That such committee be hereby authorized to
sit at Albany or elsewhere within the state, to choose a chair-
man from among its own members, to employ a secretary and
counsel and such other assistants as may be needed, to take
testimony, subpoena witnesses and compel the production of
books, documents and papers, and otherwise have all the
powers of a legislative committee.
" Resolved, That such committee, on or before February
first, nineteen hundred and sixteen, report the results of
its investigation to the legislature, together with such pro-
posed legislative measures as it deems advisable to carry its
recommendations into effect.
" Resolved, That the expense of such committee, not ex-
ceeding fifteen thousand dollars, be payable from the contin-
gent fund of the legislature upon the certificate of the chair-
man of such committee."
In view of the misapprehension which has existed in some
quarters as to our functions, we desire to state what we believe
those functions to be. The Committee does not understand that
it was appointed with a view to developing new sources of revenue
for the purposes of the State government, but rather to investi-
gate the relative burden borne today by different classes of prop-
erty and persons; to devise ways and means of doing away with
such inequalities as exist, more particularly in so far as the
personal property tax is concerned, both in its application to indi-
viduals and to corporations ; and to present to the Legislature such
a plan as in its judgment will tend to equalize present, as well as
future, tax burdens, by the establishment of a broader tax base
and a fairer distribution of those burdens. The reasons which
4 STATE OF NEW YOKE
led to the creation of this Committee and the terms of the Reso-
lution under which it is created, seem to make this entirely clear.
The study of the relative burdens borne by the different classes
of property and taxpayers necessarily involved an examination
of the financial condition of the State, cities and other localities,
while the determination of the best remedies called for a careful
study of the tax systems of foreign countries and other American
States, and more particularly of the recent reforms which have
taken place in many of the latter. The time available to the
Committee rendered it impossible to make a complete analysis of
all the classes involved. Such investigation would have required
the study of
(a) Public service corporations, including railways, car
companies, telegraph and telephone companies, rapid transit
companies, gas, electric light, water and power companies;
(b) Financial corporations, including commercial banks,
trust companies, savings banks, fire, life and miscellaneous
insurance companies;
(c) General business corporations, including manufactur-
ing companies, mercantile companies and miscellaneous
companies.
The time required by similar investigations in other states
for example: Virginia, one and a half years; Connecticut, two
years ; Kentucky, one and a half years ; California, two years -
made it clear that it would be impossible for the Committee to
undertake the complete task and at the same time to report by
February 1, 1916. The CcymTnit.tp.ft felt justified, therefore, in
postponing for further consideration if the Legislature deems
this to be desirable (a) the taxation of public service corpo-
rations, (b) the taxation of financial corporations, etc.
The Committee devoted its attention to
(a) An investigation of the personal property tax, the
causes of its failure, and possible remedies or substitutes,
involving a study of systems tried elsewhere ;
(b) The reform of the taxation of general business cor-
porations, including mercantile, manufacturing and miscel-
laneous, involving a study of the principal methods of taxing
general business corporations in the principal States of
the Union ;
JOINT LEGISLATIVE COMMITTEE ON TAXATION 5
(c) The revenue to be derived from any new methods of
taxation, including
(1) The yield of the various substitutes for the personal
property tax, such as the 'Classified Property Tax, the Habita-
tion, Occupation and Salary Taxes, the Income Tax and
Miscellaneous Business Taxes ;
(2) The yield of a tax on manufacturing, mercantile and
general business corporations, according to methods used in
other States.
PROCEDURE OF THE COMMITTEE
The Committee met for the purpose of organization in Albany
on July 9, 1915. Senator Ogden L. Mills was elected Chairman;
Assemblyman Frank B. Thorn was elected Vice-Chairman ;
Assemblyman H. Edmund Machold was elected Secretary;
Charles R. Hotaling was elected Sergeant-at-Arms and William
R. Weed was chosen Clerk to the Committee. At a subsequent
meeting Bronson Winthrop, Esq., was selected as Counsel-in-
Chief, and Walter Lindner, Esq., Henry M. Powell, Esq., and
Robert C. Gumming, Esq., were selected as Associate Counsel to
the Committee. Professor H. A. E. Chandler was selected as
Tax Expert and Advisor to the Committee. Upon the resignation
of Frank B. Thorn, Assemblyman William W. Chace was ap-
pointed by the Speaker as a member of the Committee and
Assemblyman Edward A. Everett was elected Vice-Chairman.
The Committee established an office at 9 East 84th street,
New York City. The chairman collected all of the important
and more recent reports of the special tax commissions
appointed in the different states of the Union, and the annual
and special reports of the various tax commissions in other
states, together with such works as would enable the Committee
to familiarize itself with the tax systems of European countries.
Letters requesting their advice and suggestion were written to
the leading tax experts throughout the country, and to the boards
of supervisors, to the boards of assessors of the cities of the State,
to the county treasurers, to the mayors of the cities of the State,
to the State Grange, to the boards of trade and chambers of
6 STATE OF NEW YORK
commerce and merchants' associations throughout the State, to
all individuals interested in the subject of taxation in the State
and to those who had attended the various New York State Con-
ferences. Numerous conferences have been held with tax experts
in New York and neighboring states. In addition, specific ques-
tionaires were sent to every county and to every city in the State,
for the purpose of obtaining information as to the workings of
the personal property tax. This was supplemented in six coun-
ties by personal investigations.
A questionaire was sent to 500 of the leading foreign and
domestic corporations doing business in the State, requesting such
information as would enable the Committee to determine what
property of those corporations was actually liable to personal
property taxation and what taxes were actually being paid. In
this particular field the Committee received great assistance from
the Associated Manufacturers and Merchants Association of the
State.
The Committee held public hearings in New York City during
the month of October, at which city and State officials, real estate
owners, representatives of the Merchants Association, of the
Chamber of Commerce, of various taxpayers', and civic associa-
tions, of the Savings Bank Association, of the Investment Bank-
ers Association, leading business men and experts on taxation,
presented their views. At the conclusion of these hearings and
prior to the hearings held up-State, the Committee issued a state-
ment which contained a brief summary of the evidence presented
to the Committee, together with the three principal plans which
had been suggested as substitutes for the personal property tax,
and invited criticism and suggestions on the part of the public.
This statement was sent to the various chambers of commerce
and boards of trade throughout the State, to the State Grange,
and to all the newspapers of the State, with the request that it
be published.
During the latter part of November and the early part of
December, hearings were held in Syracuse, Kochester -and Buffalo,
at which the city and county officials, the Secretary of the State
Grange, the representatives of the chambers of commerce, the
Committee of the Associated Manufacturers and Merchants of
JOINT LEGISLATIVE COMMITTEE ON TAXATION 7
the State, real estate owners and operators, leading merchants
and business men, and Francis M. Lamon, Secretary, Northern
New York Development League, were heard.
The Committee returned to New York where a brief hearing
was held, at which Professor Bullock of Harvard University
presented his views to the Committee and explained the tax situa-
tion in Massachusetts, and Professor Adams, formerly of the
University of Wisconsin and a former tax commissioner of the
State of Wisconsin, described the workings of the Wisconsin
income tax, and presented his views on the New York situation.
At this hearing resolutions were presented on behalf of the
Merchants Association, the Committee on Taxation of the New
York Chamber of Commerce, and the Special Committee on
Taxation appointed by the Mayor of the City of New York,
endorsing the income tax as a substitute for the personal prop-
erty tax.
The Committee desires to acknowledge the assistance it has
received, more particularly from Professor E. R. A. Seligman of
Columbia University, Professor T. S. Adams of Cornell Uni-
versity, Hon. Lawson Purdy, President of the Department of
Taxes and Assessments of New York City, Alfred E. Holcomb,
Esq., Treasurer, National Tax Association, Professor Charles J.
Bullock of Harvard University, and A. C. Pleydell, Esq., of the
New York Tax Reform Association. The Committee desires also
to acknowledge the assistance which it has derived from the
cordial co-operation of the Special Committee on Taxation
appointed by the mayor of the city of New York; of the Com-
mittee on Co-operation consisting of representatives of the various
real estate associations, the Trust Company Association, the Sav-
ings Bank Association, the Association of Insurance Presidents,
the Merchants' Association and of the New York 'Chamber of
Commerce; of the Associated Manufacturers and Merchants As-
sociation of the State of New York ; of the Rochester Chamber of
Commerce and of the press of the State, which has been of ma-
terial aid in presenting to the people the various plans suggested
as substitutes for the personal property tax, and in keeping the
public in touch with the work of the Committee.
8 STATE OF NEW YORK
The Chairman acknowledges the very great assistance he has re-
ceived from Professor H. A. E. Chandler in the preparation of this
report. Mr. Chandler has been in constant touch with the work
of the Committee, has had charge of much of the original in-
vestigation 'and has made valuable contributions to the writing of
the report itself.
PART I
THE REVENUE SITUATION
The success or failure of the personal property tax is directly
connected with the rate of the tax. Given a very low rate, it can
be administered more or less satisfactorily and with comparative
fairness and equality. Thus when, as in 1852, the rate in this State
for both State and local purposes was but 7 mills on the dollar,
there was little or no complaint. But let the rate rise to 1% or
2 per cent, and the inequalities and injustice become well-nigh
unbearable. Experience has conclusively shown that a personal
property tax at a 2 per cent rate is bound to be an absolute and
complete failure, and to the extent that it does succeed, grossly
unjust.
It is pertinent, therefore, to examine the rates in New York
State and to determine the likelihood of an increase or decrease
by an examination of the financial situation of the State and of
the localities. In so far as the latter are concerned, we have con-
fined our investigation for the most part to the cities, because it is
in the cities principally that we find the largest aggregates of
wealth in the form of personal property, and because, broadly
speaking, it is in the cities that the tax problem is most acute.
CHAPTER I
THE STATE
The average tax rate in the 'State for the year 1914 was .018995
or approximately $1.90 per $100 of valuation. In the cities the
tax rate ran in the year 1914 from .0166 in Geneva to .0655 in
Port Jervis.
These figures do not include a direct State tax, and yet the
steady increase in the cost of State government and the probability
that the present indirect sources of revenue have reached approxi-
mately their maximum yield, suggest that the direct State tax
may well become a permanent part of our revenue system.
The expenditures for the general purposes of -State government,
exclusive of interest on the canal and highway debts and of the
free school fund and sinking and trust funds, have increased from
$7,163,831.18 in 1885 to $42,408,488.24 in 1914, or an increase
10 STATE OF NEW YORK
of nearly 500 per cent in thirty years. In the meanwhile the
population of the State has increased 82 per cent and the assessed
value of. real and personal property liable to taxation 274 per
cent The per capita cost of government has risen from $2.47 in
1895 to $5.41 in 1914, or an increase of 235 per cent during a
period when the population of the State increased but 53 per cent.
From 1903 to the present time the net debt of New York State,
over and above all sinking funds, has increased from $7,400,000
to over $148,051,000. The funded debt outstanding today is over
$186,000,000, and in the last election the people authorized an
additional indebtedness of $27,000,000. Thus the per capita net
State debt has arisen from 94 cents in 1903 to $15.04 in 1915.
The total appropriations for the general purposes of govern-
ment, including sinking fund contributions, aggregate for the last
five years $263,149,265.50, and exclusive of sinking fund contribu-
tions, $225,244,800.77 ; while the income from sources other than
the direct State tax aggregates but $211,049,892.59. For the
last five years the appropriations for the general expenses of
government, exclusive of sinking fund charges, have averaged in
round numbers $45,048,960, and including sinking fund con-
tributions, $52,629,853.10. The yield of the indirect taxes and
of sources other than the direct State tax, has averaged in round
numbers but $42,209,978.51 for the last five years. The
Comptroller estimates that the debt service for the next five years
will cost as follows :
1916-1917 $12,576,684 42
1917-1918 13,155,718 05
1918-1919 13,734,751 68
1919-1920 14,313,785 31
1920-1921 14,892,818 94
To this must be added increased maintenance charges for the
State highways and the Barge canal, which, when both are com-
pleted, will represent an increase per annum of $2,740,000. Under
these circumstances it is hard to escape the conclusion that, unless
new indirect sources be devised, a direct State tax for the purposes
of the debt service at least must be included in estimating future
local rates, even assuming that the most rigid economy be
practiced.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 11
That such economy is highly desirable is not open to dispute,
and yet in estimating possible reductions in future expenditures
for State purposes, it is well to remember that many new func-
tions have been assumed by the State government under a policy
demanded by the people, a policy which calls not only for in-
creased service, but for service of a better quality. Thus, for
instance, greater opportunities for education are offered today
than ever before; large sums are annually appropriated for the
encouragement of agriculture and for the development of scien-
tific farming; there has been a large increase in the number of
those confined in our penal and correctional institutions and State
hospitals, at the same time the construction and reconstruction of
hospitals, prisons and other public buildings is paid from current
income; huge sums have been voted by the people for the acqui-
sition of Palisades Park and for the construction of thousands of
miles of improved highways and of a barge canal, the latter two
of which add materially to the annual financial burden, not only
for interest and amortization charges but for maintenance and
repair. Unless, therefore, the people of the State desire a com-
plete change of public policy, and are prepared to limit the
activities of government, there is little likelihood, with the grow-
ing population and with the increased complexities of modern
life, of any material decrease, no matter what administrative
economies may be effected.
This is borne out by the experience of other states and of the
Federal government and of all foreign countries that have accepted
modern democratic reforms with the new demands which they
make upon government. The cost of the Federal government
for thirty years prior to 1908 increased nearly 400 per cent,
while the population increased but 84 per cent. The average
cost of government of all of the states of the Union increased
105.9 per cent from 1903 to 1913, according to the Federal
Census, while the population of the states rose only 20 per cent.
CHAPTER II
THE CITIES
Turning now to the cities, we find a similar situation. The
cost of government and the bonded indebtedness of almost every
city in the State have risen steadily year by year. In the Ap-
12 STATE OF NEW YOIIK
pendix will be found tables showing the per capita bonded in-
debtedness, the per capita municipal taxes on property, and the
per capita expenditures for municipal purposes of the cities of
the State in the year 1913, giving the same figures in the case
of the 16 principal cities for the years 1902 to 1913. These
summaries show that the per capita indebtedness of cities having
over 30,000 inhabitants, excluding Amsterdam and Niagara
Falls, averaged in 1890, $21.35; in 1902, $47.-05 ; in 1913,
$59.82, or an increase in 1913 over 1890 of 180.15 per cent.
In Amsterdam the per capita indebtedness decreased 14.5 per
cent from 1902 to 1913, and in Niagara Falls increased from
1902 to 1913, 29.2 per cent. In Albany., Auburn, Binghamton,
Buffalo, Elmira, Eochester, Schenectady, Syracuse, Troy, Utica
and Yonkers, the per capita municipal taxes on property averaged
in 1913, $14.64; in 1902, $10.79, or an increase for 1913 over
1902 of 35.72 per cent. The per capita expenditures for muni-
cipal purposes for these same cities averaged in 1902, $18.49 and
in 1913, $25.11, showing an increase for 1913 over 1902 of
35.81 percent.
A careful study of the tables unquestionably shows that there
has been a marked upward tendency in practically all of the
cities, a tendency so universal that it cannot be fairly attributed
to governmental extravagance. In our judgment the explanation
will be found in the fact that the increased expenditures have
been incurred in response to the demands of the citizens of the
localities for better service and for the assumption by the muni-
cipal government of duties unthought of by previous generations.
Indeed, this was the almost unanimous opinion of those who ap-
peared before us. There are but few cities in the State that in
recent years have not improved their lighting systems, repaved
their streets, constructed new sewers, built school buildings of the
most modern type, and in general undertaken a comprehensive \
system of public improvements which, however desirable they
may be, and however they may add to the comfort and enjoy-
ment of the inhabitants, necessarily mean an increased bur-
den to the taxpayers. As a result, the tax rate is so high as to
preclude the effective administration of the personal property
tax, and the full weight of the increase has fallen on the owners
.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 13
real estate. Without, at this time, discussing the equities of
the situation as between the owners of real and of personal
property, it is fair to say that, with the possible exception of the
City of New York, in most cases the increase in value of real
estate has, to a great extent, taken care of these increased taxes.
This is still the case as far as we can ascertain in the majority of
the up-state cities, but if the cost of government continues to
increase during the next decade at the rate that it has in the
last, these cities will unquestionably face as serious a situation as
now confronts the owners of real estate in the City of New York,
unless in the meanwhile some measure can be devised to compel
the owners of personal property to contribute their share.
The increase in the debt of the City of New York since Decem-
ber 31, 1905, is shown in the following table:
Gross Funded Debt (exclud- Dec. 31, 1905 Dec. 31, 1915 Increase
ing General Fund Bonds) $565, 056, 512 $1, 155, 479, 156 $590, 422, 643'
Net Funded Debt (held by
the public) 424, 675, 900 979, 750, 749 555, 074, 848
Amount of Gross Funded
Debt which is self-sus-
taining (not included in
computation cf debt
limit) 27,113,879 322,525,502 295,411,623
This net increase of $590,000,000 in the gross funded debt
is due principally to the initiation and construction of the new
dual subway, the Catskill Water Supply System, and exten-
sions to the city's other systems of water supply. The bonds
issued during this decade on account of the new subway amount
to $112,500,000, and on account of the construction and exten-
sions of the city's greater water supply system $182,910,000;
the amount issued for dock development during this same period
has been $64,150,000, making a total of $359,560,000 for rev-
enue producing purposes. In addition, there were issued $27,-
500,000 of assessment bonds which will be redeemed from the
assessments collected. The other large items of increase in the
city debt -are $84,250,000 for streets, sewers and the elimination
of grade crossings; $79,850,000 for public buildings; $73,450,000
for schools, libraries and sites, and $45,300,000 mainly for
bridges crossing the East river so that the four boroughs
14 STATE OF NEW YORK
be physically connected and the Greater City become one city in
fact. During the ten years under review, the city has redeemed
$135,000,000 of its funded debt.
The city debt, however, will not increase in any such ratio
during the next decade. The adoption of the " pay-as-you-go "
policy and the determination of the present city administration
to curtail new authorizations of corporate stock as evidenced by
the authorizations of 1914 and 1915 have already checked the
growth of the city's debt. The average annual authorizations and
allotments of corporate stock throughout the 10-year period, 1906
to 1915, for revenue and non-revenue producing purposes are
shown below :
AVERAGE ANNUAL AUTHORIZATIONS OF CORPORATE STOCK
Distribution
Administration Period Amount
McClellan 4 yrs. $102, 417, 114 63
Gaynor 4 yrs. 87, 951, 998 46
Mitchel, 1914... 1 yr. 14,594,67048
Revenue
Producing
$51,663,423 62
56,311,014 23
5, 636, 583 30
Non-Revenue
Producing
$50,753,691 01
31, 640, 984 23
8,958,087 18
Mitchel, 1915... 1 yr. 11,585,98169 3,545,07056 8,040,91113
Administration Period
McClellan 4 yrs.
Gaynor 4 yrs.
Mitchel, 1914... 1 yr.
Mitchel, 1915... 1 yr.
AVERAGE ANNUAL ALLOTMENTS OF CORPORATE STOCK
Distribution
Revenue Non-Revenue
Amount Producing Producing
$64, 871, 366 72 $23, 978, 468 18 $40, 892, 898 54
79, 164, 221 21 42, 575, 322 26 36, 588, 898 95
62, 234, 689 52 40, 823, 620 55 21, 411, 068 97
57, 226, 931 38 40, 378, 105 56 16, 848, 825 82
The 1916 budget, excluding the direct State tax, is $198,981,-
155.81, a net decrease of $8,630.71 below the budget for 1915,
and an increase of $82,175,655.44 above the 1906 budget. The
budget for 1916, including the direct State tax of $13,975,021.73
is an increase of $96,150,687.17 over 1906.
The two following tables show in summary form the budget for
1906 and 1916 and the city's population, together with the
amount and percentage of increase :
JOINT LEGISLATIVE COMMITTEE ON TAXATION 15
BUDGET
Item
No. 1906 1916
1 Expenses of city government, exclud-
ing charitable institutions $53', 240, 226 84 $78, 075, 306 43
2 Education 23, 938, 006 69 41, 107, 19& 32
3 Charitable institutions 3, 456, 056 44 5, 483, 875 00
4 Total City Government $80, 634, 289 97 $124,666,37975
5 Total County Government 4, 151, 360 50 7, 101, 565 95
6 Debt service 31,116,20721 63,213,21011
7 Tax deficiencies 4, 000, 000 00
8 Direct State Tax.. 903,632 69 13,975,021 73
9 Grand Total $116, 805, 490 37 $212, 956, 177 54
Population
10 Population 4, 166, 556 5, 742, 999
COMPARISON 1916 WITH 1906
Increase
Item Average Annual
No. Amount Per cent Per cent
1 $24,835,07959 46.647 4.665
2 17,169,19163 71.724 7.172
3 2,027,81856 58.674 5.867
$44,032,08978 . 54.607 5.461
5 2,950,20545 71.066 7.107
6 32,097,00290 103.152 10.315
7 4,000,00000
13,071,38904 1446.538 144.654
$96,150,68717 82.316 8.232
Population
10 1,576,443 37.836 3.784
The above tables show that the average annual increase in the
total expense of city government has been 8.23 per cent, whereas
the average annual increase in population has 'been 3.784 per cent.
The average annual increase in the expense of city government
would more nearly approximate or possibly be even less than the
average annual increase in population were it not for the fact
that until recent years, commencing about 1910, many of the
current maintenance charges of city government were not paid
from the tax budget but from the proceeds of the sale of corporate
stock. The budgets from 1910 to 1916 inclusive, contain appro-
16 STATE OF NEW YOKK
priations in substantial amounts for a number of debts which
formerly were not included in the annual tax budget. The
chief example is the Department of Docks. Prior to the year
1910, all annual maintenance charges for that department were
charges against corporate stock. In order to correct this unsound
method of financing, the first appropriation in the tax budget for
the department was made in the 1910 budget in the amount of
$2,821,932, and the amount in the 1916 budget for this depart-
ment is $1,501,549.
Although the cost of administrative departments under the
jurisdiction of the Mayor and the Board of Estimate for 1916 has
been decreased by $3,125,904.29 since 1914, the total of the
budget has increased, and according to the testimony of the Mayor
and the Comptroller of the city before this Committee, will con-
tinue to increase principally on account of the adoption of the
" pay-as-you-go " policy. The Comptroller estimates that the
budget for the next three years will be approximately as follows :
1917 $204,439,623
1918 207,233,298
1919 221,299,848
Mayor Mitchel's estimates are' somewhat higher. He estimates-
that the city will have to raise, exclusive of the direct State tax,
for the purpose of interest on serial bonds, redemption of serial
bonds and the quota of public improvements, and beginning with
1918 interest on subway bonds, the following amounts, which
are additional to its present budget of $198,989,786.52 for 1915:
1917 $10,137,000
1918 19,400,000
1919 34,719,000
1920 34,554,000
Bearing In mind that New York City realty is assessed at practi-
cally full value, if to this burden be added a direct State tax,
there is no question that the tax rate will 'soar to a height rarely
known in this country. The consequences of this no man can fore-
see, but, in any event, they cannot with safety be minimized
or brushed aside. It is only fair to say that the estimated increase
will not be due to any increase in the general cost of administra-
tion, but will result principally from the adoption of what is-
JOISTT LEGISLATIVE COMMITTEE ON TAXATION 17
known as the " pay-as-you-go " policy a method recently adopted
as a more scientific and proper way of financing public improve-
ments.
The testimony of the experts in many lines of trade and com-
merce all points unmistakably to the fact that this great and
increasing burden has been borne largely by one class of in-
dividuals, to wit, the real estate owners and their tenants. When-
ever the real estate owner is able to shift the tax to the tenant, it
falls with the greatest weight on those least able to pay, because
of the fact that a much larger percentage of their income is paid
for rent by the poor than by the rich. If, on the other hand, the
owner of real estate is unable to shift the tax, the new burden
may amount to a decrease of his income, and therefore to a fall
in the capital value of the real estate.
At the New York hearings it was the opinion of those most
familiar with real estate in ]STew York City that this class of
property was overtaxed, that its value was in danger of being
seriously impaired, and that the situation, generally speaking,
was critical. For example, Mr. Alfred Marling testified:
" I can say without any hesitation, based on my 38 years ex-
perience as a real estate broker, appraiser and manager in this
city, that real estate is down on its back, and it cannot stand
any more burden absolutely none. There is no doubt whatever
on that point in my mind. (Q) If these new taxes were imposed,
what would be the effect? (A) Trouble, distress of all sorts.
It would be practically confiscation to the poor property owner.
He is gasping, breathless, now. (Q) You consider the situation
serious? (A) I certainly do."
The facts and figures submitted by the real estate men are
interesting and significant: it was shown that the tax levy for
1915 upon real estate, including land, buildings, special fran-
chises and real estate of corporations, amounted to 77 per
cent of the 1915 budget, while personal property paid but 3.3
per cent. One group of 11 parcels of real estate paid 30 per cent
of net income in taxes. Another group of seven paid 41 per cent
in taxes. The average percentage of net income paid in taxes
by the entire Astor estate in Manhattan was in 1885, 29.3 per
cent ; 1904, 31.6 per cent ; 1909, 30 per cent and 1914, 3*. per cent.
18 STATE OF NEW YORK
Their property in Manhattan represents an assessed value of
over fifty million dollars, and consists of parcels located all over
the borough, and used for all kinds of purposes, from business
to residential. An investigation made by Mr. Stewart Browne,
who appeared before the Committee, shows that 400 parcels
paid 30 per cent more in taxes than ten years ago, while rentals
decreased 25 per cent. The same gentleman estimates that the
aggregate net income received on improved property in Manhattan
does not exceed 3% per cent on assessed valuations and 4% per
cent in outlying boroughs.
Equally significant was the testimony with reference to the
borough of Brooklyn. We quote from the testimony of Mr.
William M. Greve:
" We have taken into consideration 133 dwelling houses, 49
flats, 88 stores and flats, and 7 stores, for the period of 6 years.
Our net return is 4.2 per cent. Of our net return we pay 36 per
cent', in taxes ; that is the average tax paid. On dwellings it runs
from 31 per cent, in 1909, 32 per cent, in 1910, and in 1911 when
the valuations or assessments were increased we paid 60 per
cent. It would run in the 6 years on dwellings from 31 to 40
per cent.; on flats it has run from 28 to 39 per cent; on stores
and flats it has run from 29 to 38 per cent; and on stores it has
decreased, according to our holdings, but that it attributed to
the fact that we owned one very large piece of real estate that
the rental was more than doubled after the expiration of an old
time lease. But I think it is fair to say that in the six years the
increase in taxes of the net has been at least 10 per cent."
All the real estate experts agree that real property is to-day
paying all that it can possibly afford ; that additional taxes could
not be shifted to the tenants, who are to-day paying all that they
can; that an increase, therefore must come out of the capital
value of real estate ; that such an increase would necessarily wipe
out the equities of thousands of owners and might precipitate a
panic.
In so far as mortgages are concerned, it is well to remember that
the insurance companies, savings banks, etc., whose investments
represent largely the savings of the poorer classes, are the largest
investors in real estate mortgages. The mortgages held by sav-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 19
ings banki aggregate $1,017,493,000 out of a total investment
of $1,739,000,000, or 53 per cent, and there are no less than
3,450,000 depositors in the savings banks of the State.
Mr. Pulleyn, representing the Savings Banks Association, testi-
fied as follows :
u Any increase upon real estate holdings in the city of New
York, probably in the State of New York, beyond the present
figures, would tend to reduce the equities in the investment of
$1,017,000,000 of real estate loans that are held at the present
time by savings banks. We have seen the indication in the last
year in the depression of real estate. We have seen the hand-
writing on the wall. We believe, those of us who look at the
real estate investment as seriously as savings banks must, that this
increase of assessed valuation and increased rate is hurting us
very, very seriously hurting our investment.
u Q. That is to say, putting it plainly, it is reducing the margin
of equity? A. It is reducing the equity in each one of our
loans, and will continue to reduce the equity, because whilst
there is an increase of a few mills in taxes, it means quite a per-
centage on the face of the loan.
" Q. There is a point beyond which of course you cannot go ?
A. Yes.
" Q. A point beyond which your borrowers cannot go, in realiz-
ing the increase of taxation out of rents, is there not? A.
Exactly.
" Q. You feel that that point is very nearly reached ? A. Since
there are two ways we have to look at it One is this. In the
reappraisal of our investment loans in real estate we take as a
basis income. Our income is reduced. It reduces values and
when values are reduced, we come under the law of the State
which says savings banks shall not lend any more than 60 per
cent, of the price value.
" Q. Then you have got to call for a scaling down of loans ? A.
We have got to call for a scaling down of loans, which we have
been unable to do. We are able, of course, to call, but the
owners are unable to meet the demand."
From the great volume of testimony presented to the Com-
mittee with reference to New York Citv. the following conclu-
sions may be drawn:
20 STATE OF NEW YORK
(1) That real estate is paying* the bulk of the taxes and that
personal property, comparatively speaking, is escaping almost
entirely.
(2) That material increases have taken place in the past dec-
ade in the city's bonded indebtedness, the annual tax budget and
the tax rate.
(3) That in view of the new "pay-as-you-go" policy, adopted
by the present city administration, there is likely to be a
further material increase during the next few years in the
total budgets (due to the increased appropriations for retarding
and reducing the city's debt) and consequently material increase
in the tax rate.
(4) That from the standpoint of equity, real estate alone
should not bear the full weight of increased taxes, and that if
such a plan is attempted, serious consequences may ensue.
(5) That so far as New York City is concerned, therefore, it is
imperative that the tax base be broadened so as to include that
property and those persons that are not contributing to-day in
proportion to their ability to pay taxes.
CHAPTER III
THE TOWNS
As already stated, the Committee's investigation of rural con-
ditions was by no means as thorough or as complete as that of
the cities. We are in a position to say, however, that, generally
speaking, in rural districts the assessed value of real property
is higher and nearer to true value than it was a few years ago;
that the xate at which it is taxed is higher, and that personal
property, in so far as taxation is concerned, has almost ceased to
exist. Nor is there any likelihood of there being any material
change in either one of these respects.
Our conclusion, then, as to the entire State is, that the tax
rate is altogether too high to permit the successful taxation of
personal property at the general property rate, and that the future
financial needs of the State and of its subdivisions, are such as
to deny the hope that the tax rate can be reduced to the point
where such taxation becomes comparatively successful or even
possible.
PART II
THE NEW YORK SYSTEM OF TAXATION
CHAPTER I
PECULIAR FEATURES OF THE NEW YORK TAX LAW
The New York tax system contain several peculiar features
that differentiate it in a striking manner from nearly every
other tax system in the United States. Several of these peculiari-
ties are of special interest because they are unquestionably account-
able for some of the weakest spots in the present tax law.
(1) In the first place the theory of intrastate situs of tangible
personalty is quite different in New York from that of most other
States, and this difference results in much unfairness, not only
between different classes of individuals, but also between different
communities within the State. In most states there has been a
tendency more and more to tax tangible personal property of
residents where located ; but in New York State all tangible as
well as intangible personalty is taxable only at the legal domicile
of the owner, whether it be an individual or a domestic corpo-
ration. The extent to which this peculiarity is responsible for
tax evasion will be pointed out in the following chapter dealing
with the faults of the New York system.
(2) The second peculiarity of the New York system is found
in the debt exemption feature. The custom as to the exemption
of debts varies in different states. In some states the taxpayer
is permitted to deduct only certain debts from credits; in other
states all debts may be deducted from credits. In most states
the deduction of debt feature under the general property tax is
troublesome. In New York State, however, the debt deduction
difficulty is accentuated because of the peculiar privilege which
permits the total deduction of all debts not simply from credits,
but from all personalty. In the next chapter will be pointed out
how this privilege enables corporations to escape from personal
property taxation. The whole question of debt deduction, whether
limited to credits or not, presents one of the insuperable difficul-
ties of the present property tax.
22 STATE OF NEW YOEK
(3) The third peculiarity is that public service corporation
franchises, or so-called " special franchises/ 7 are treated as real
estate. This whole question of special franchises is a large one,
deserving treatment at another time. This feature, of course, is
not responsible for the failure of the personal property tax.
(4) The fourth peculiar feature is found in the absence of the
so-called listing system. New York is the only state in the Union
that has not had a complete listing system. It is true that corpo-
rations are theoretically required by law to render a complete
list of all property subject to taxation, but as a matter of fact the
law is a dead letter. New York, however, never has had, even
in theory, the rule that individuals should list their personalty,
tangible and intangible, for purposes of taxation. To this,
peculiarity a few tax reformers with a little knowledge of ex-
perience in other states, have attributed the failure of the personal
property tax. It can be said, however, without fear of contra-
diction that no one acquainted with the results of the listing
system in other states has the slightest confidence in this con-
tention. The uniform experience of other states has been that
the listing system, even with drastic attempts at enforcement and
heavy penalties, has failed absolutely to secure an enforcement
of the personal property tax. Indeed, it might be added that were
the listing system successful in enforcing this unjust tax, it would
to that degree achieve a most regrettable success. It is not be-
lieved that this peculiarity in the New York law is in any consider-
able way responsible for the present inequities.
(5) The next peculiarity which is of considerable importance
grows out of the phraseology of the New York law. In most
states the law declares all property, read and personal, subject to
taxation. It then defines real property, and defines personalty
as all property not included in real estate. The New York law,
after declaring all property, real and personal, subject to taxation,
proceeded to define personalty, not in the usual way, but through
the method of enumerating the various types of property included
within the term. For some reason, good-will was not included
in the enumeration, and the courts have declared it to be untax-
able. As will be explained in full in the next chapter, this
peculiarity has rendered it impossible to reach a large part of the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 23
earning power of some of the wealthiest corporations in the
State.
(6) The New York system of taxing corporations is the most
complex of its kind in the United States. In the case of certain
types of corporations, the aggregate tax burden is split up into
so many different taxes levied at varying rates and upon different
bases, that it has been impossible to determine the relative burden
borne by various classes of wealth. In regard to the taxation of
general business corporations, the law is especially complex and
confused. It has been called the most illogical corporation law
in America. It is so ambiguous that it baffles the best tax at-
torneys in the State, and in many cases it is utterly impossible for
the corporation that wishes to pay its full share to know what that
share is. It is an interesting fact that under this law many cor-
porations, through their inability to understand it, have actually
paid more taxes than they were liable for.
(7) The last peculiarity of the tax law to be mentioned here is
section 12, covering the taxation of the personal property of
corporations. This feature is dealt with at some length in the
chapter covering the failure of the corporation personal property
tax. It is sufficient here to say that there is yet to be found in
this State one man, either among the tax officials or the corpora-
tions taxed, to commend the law. While it has proved practically
unenforceable all over the State, it has been a source of great
annoyance to corporate business in general.
CHAPTER II
THE FAULTS OF THE NEW YORK SYSTEM OF TAXATION
In the previous chapter it was pointed out that many of the
features which differentiate the New York system from those of
other states constitute not only its peculiarities, but also its faults.
The faults of the system, however, are not limited to its peculiari-
ties. New York, like every other state in the Union, has suffered
the same inequities that arise from the outgrown general property
tax.
(1) The most conspicuous defect, therefore, of the New York
system is found in the utter failure of that part of the personal
property tax that is still left under the general property system.
24 STATE OF NEW YOKK
While it must be admitted that New York has in part reformed
her personal property tax through the substitution of her system
of special taxes, and to this extent is better off than many of
her sister states, nevertheless, it is doubtful whether in any other
State in the Union that part of the personal property tax still
left under a general property scheme is a more lamentable failure
than in New York. And this statement is applicable with rein-
forced emphasis both to the personalty of individuals and to the
personalty of corporations. For the details of this failure, the
reader is referred to Part IV of this report. It is sufficient here
to conclude with the statement that all familiar with the New
York system of taxation, however they may disagree as to the
correct reform, are unanimous in the conclusion that the present
personal property tax should be eradicated from our system as
soon as possible.
(2) The second great fault in the New York system of tax-
ation is to be found in its lack of adequate provisions for the ad-
ministration of the tax law. As is well known to all those in-
formed upon tax matters, the present law was designed to deal
with conditions that no longer exist. The framers of the law
lived in a world different from our own. They designed a law
to deal with a simple society in which most property was tan-
gible and in which ability to pay was roughly measured by the
amount of tangible property owned by each. It was designed for
business units of local scope. Since that time has come the
great revolution in American industry, and with it the great
state-wide and nation-wide corporation. Any system which
leaves in the hands of the local assessor the assessment of that
part of nation-wide business enterprises that happens to be
located in, or to traverse his little district is, of course, nothing
short of mediaeval. All authorities agree that so long as we
leave the assessment of the personalty of great corporations in
the hands of the local assessor, we must remain in the dark ages
of taxation.
In the matter of administration, New York can make no claim
to leadership in taxation. For a number of years, while New
York was developing her system of special taxes, this State was
looked to for guidance in tax reform. That time is past and
JOINT LEGISLATIVE COMMITTEE ON TAXATION 25
many states have progressed far beyond New York. Upon this
point there seems to appear no difference of opinion among the
authorities on taxation either in this or other states. All agree
that the next reforms in taxation must come in the form of im-
proved and more centralized administration. In whatever direc-
tion reform in the 'New York system of taxation shall come, it
is clear beyond the shadow of a doubt that to be successful it
must be accompanied by improved administration.
(3) The next most striking fault of the -New York system is
to be found in its peculiar form of intrastate situs of personal
property. This peculiar feature has been explained in the pre-
vious chapter. It remains here to illustrate how subversive it
is of all equity as between localities, and to what extent tax eva-
sion is possible under this theory.
Personal property, both tangible and intangible, is taxable
under the New York law only at the legal domicile of the owner.
This principle works with especial unfairness with regard to
business men generally, whether carrying on their business as in-
dividuals or as a partnership or in corporate form. An individual
merchant residing in the town of Brighton, Monroe county, may
own and operate a large store in the city of Rochester. Or that
same mercantile business may be incorporated and the corporation
may select the town of Esopus as its principal place of business,
though the latter town has no connection whatever with the busi-
ness. In either one of the instances mentioned, it would be im-
possible under the law for the city of Kochester to tax either the
individual merchant or the corporation on the large stock of goods
carried by the store in the city of Rochester, while it is highly
improbable that any considerable tax would be paid either to the
town of Brighton or to the town of Esopus. In other words, the
locality that supplies lire and police protection, as well as other
advantages, is required to yield the right to tax the property so
protected to other localities supplying none of these protections,
while the individual merchant or the corporation doing business
and actually residing in the city of Rochester, to continue our
illustration, is obliged to meet, in so far as local trade is con-
cerned, the competition of a rival who is free from all the taxa-
tion on personal property.
26 STATE OF NEW YORK
This peculiarity of the New York law is such a prolific source
of tax evasion that considerable attention will be given to it in
those sections of this report dealing with the failure of section 12.
(4) The next important fault of the New York system is
found in the needless complexity and ambiguity of the method of
taxing corporations both for State purposes and for local pur-
poses. As this phase has been briefly touched upon in the pre-
vious chapter, and as it will be elaborated to some extent in a
special section of this report, we shall only mention here that it
comprises a very acute fault which demands immediate and radi-
cal reform.
(5) The last important fault to be dwelt upon in this chapter,
because of its far-reaching consequences, deserves special atten-
tion. It may be summed up in one statement that not only do
large groups of wealth escape taxation entirely, but many in-
dividuals most able to pay taxes and enjoying great privileges
within the State cannot be reached under the present law. The
effect of this evasion has both important direct and indirect
results. The direct effect is that in escaping their fair share,
these sources transfer their share of the burden to those already
heavily taxed. The indirect effect, which is perhaps of greatest
importance, is that the knowledge of this wide-spread evasion sows
discontent and in many cases dishonesty in the minds of those
who would otherwise be willing to pay their full share. From
the results of a wide investigation, it appears beyond doubt that
the average person, both individual and corporation, would be will-
ing to pay his fair share of taxes, were the burdens more equitably
and evenly distributed.
CHAPTER III
WHY THE PRESENT SYSTEM CANNOT BE RELIED UPON FOR ADDI-
TIONAL NEEDED REVENUE
To anyone familiar with the working of the general property
tax in New York State, it is inconceivable that the communities
of the State should continue to raise additional revenue by
increasing year after year the rate of the direct tax. There are not
less than four important reasons why it would be inequitable
as well as unwise from the point of view of the stability of certain
lines of business to place additional burdens upon that property
bearing the general property rate.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 27
(1) In the first place, a horizontal raise always accentuates
existing inequalities. The existing inequalities of the present
system are altogether too great to permit any degree of accentua-
tion. This fact would be true were the horizontal raise applied to
all taxes, but under our system, the situation is even worse because
a horizontal raise is always limited to only part of the taxable base.
Under our system of special taxes, a large number of sources have
been taken out from under the general property tax. Included in
this part of the tax base are banks, trust companies, insurance
companies, savings banks, mortgages, etc. The rates upon them
are fixed and remain the same every year regardless of the rise in
the cost of government. This system throws upon the remaining
sources, viz., real estate and that small part of personalty that is
actually reached, a burden which in many cases is already too
heavy to bear.
Much can be said in favor of our special taxes and in no place
does this report suggest the return to a general property system.
It must be admitted, however, that when the bank and trust com-
panies those forms of wealth which according to the returns
of the internal revenue department yield the largest profits of
any American business when these are unaffected by the
increased cost of government, it is unfair to continue to heap
burdens upon that wealth coming under the general property
rate. Of course all lines of business in so far as they own real
estate are reached by the general, property rate. However, many
of those branches which are most able to pay have a small propor-
tion of their capital invested in real estate. The large element
of intangible personalty which represents such an important part
of the earnings of American business is not reached by an in-
creased tax rate under our present system.
(2) The second reason why the present system should not be
relied upon for additional revenue is, that great masses of wealth
are now escaping, in part or in whole, from paying their fair
share of taxation; and furthermore, that these sources cannot be
reached under the present system. And in this connection it
should be noted and emphasized that the present high rates of the
general property tax are due principally not to the unusually
great expenditures of money in the State of New York nor to
28 STATE OF NEW YORK
great extravagance, but to the fact that so much wealth is totally-
escaping from taxation. In other words, the part which escapes
has loaded its burden upon the part that is caught. Were the
people of New York once aroused to the full extent of evasions
under the present law, another year could not pass without an
important tax reform.
What are the principal sources that are now escaping? We
have already mentioned intangible personalty. Under this term
is grouped the greatest earning power, and therefore, the greatest
ability to pay taxes in America. And yet under our present law
it is impossible to reach an important part of this wealth. It is a
well-known fact that the more complex our business world grows,
the larger the amount of income that is not directly derived from
real property. Our present law is based upon the theory that
earning power is fairly represented by property and especially
real property. However, a superficial knowledge of business of
today discloses the fact that quite the contrary is true. As a
result of this inconsistency between the law and the fact, we have
permitted an important part of our well-to-do citizens to grow up
and enjoy large incomes, and therefore large tax-paying ability,
without actually requiring them to bear their share of the burden.
Another fruitful source of tax evasion is found among those
wealthy citizens of New York who shift their legal residence for
the purpose of evading taxes. While they may not be reached
under our present law, they represent a large taxpaying ability
which ought to be reached and which could be reached under
other forms of taxation suggested in the latter part of this report.
A still more important source that escapes almost all taxation
is that of foreign corporations doing large amounts of business
in the State of New York. It is argued by some that foreign cor-
porations ought not to be taxed to any extent in this State. How-
ever, a careful study discloses the fact that most of these corpo-
rations are foreign only in name, and that in reality they are
domestic corporations with many of their plants located in the
State. In fact, many of these foreign corporations now own and
control property located in this State which formerly was owned
and controlled by domestic corporations. In other words, large
groups of wealth legally and fairly subject to taxation in the
JOINT LEGISLATIVE COMMITTEE ox TAXATION 29
State of New York have been by virtue of a legal fiction trans-
ferred to another jurisdiction. This is a subject of greater
importance for New York State than for any other State in the
Union.
In addition to the above, there are several other groups of
wealth that are escaping from paying their fair share. Space does
not permit the discussion of these in detail. In summarizing,
however, it is sufficient to say that were proper and thoroughly
possible means taken for reaching the sources which now escape,
it would not be necessary to consider the doubtful results of
increasing present rates. Present rates would not be increased;
they would be decreased materially.
(3) The final reason why we cannot rely upon the general
property tax for additional revenue lies in the fact that any con-
siderable increase would threaten to disturb important business
conditions. In this connection the real estate situation in New
York City and other localities is already such as to cause appre-
hension. This statement should not be misunderstood. Much
confusion has been injected into the discussion by the exaggerated
claims of the real estate men, on the one hand, and of a group of
radical social reformers, on the other. It should be noted that
nothing but confusion can result from talking of real estate in the
aggregate. In some localities certain sections of the real estate
field are in a very prosperous condition and any reasonable in-
crease in the tax rate would be taken care of by the normal
increase in the value of property. In such cases comprising
possibly one-third of the entire State, it is foolish to speak of the
unbearable burden of the general property tax. This condition
represents important parts of the city of New York.
On the other hand, there are large sections of the city of New
York, as well as parts of the State at large, where an increase in
the tax rate might constitute nothing short of confiscation.
Indeed, the present high rates upon real estate have already,
through the reduction of net income, actually destroyed capital
value. In proof of this fact we have abundant evidence. In a
large number of cases the value of the real estate has not increased
as the tax rates increased. Indeed, in many cases while the tax
rates have increased, the actual value of the property has
30 STATE OF NEW YORK
decreased. And, moreover, this has taken place during a period
when the tax officers have been pushing the assessed value nearer
and nearer to the market value. They have, in fact, actually
pushed the assessed value beyond the market value in some cases.
The cases presented as sworn testimony at the New York City
hearings of the Joint Legislative Committee serve to illustrate
how inequitably the present general property rate bears upon
real estate.
And it should be carefully noted here what great varieties of
tax-paying ability are grouped under the term " real estate
owners." Our single-tax friends are fond of talking of certain
well-known wealthy New York families and give the impression
that most of New York real estate is monopolized by the few rich
holders. It is greatly to be regretted that they have created a
false impression by centering public attention, not upon the nor-
mal condition, but upon the unusual and abnormal.
A careful examination of the real estate situation, not only in
the State at large, but in New York City itself, will disclose a
surprising number of small holders of real estate, who depend
upon the income from this property for living. In many in-
stances the head of the family before dying has invested his
earnings in real estate in the hope that either the increased value
or the increased earning of the property would be sufficient to
take care of his wife and partly educate his children. Cases are
now frequent in which those who owned the property pay out a
large part or nearly all of the income in taxes. The situation of
the small salaried man who desires to own his own home is even
more serious, in fact the high rates constitute a positive deter-
rent to home building. In summarizing, therefore, it should be
clearly borne in mind that the injustice of the present system
lies not in the fact that it bears heavily on all real estate owners,
but rather in the fact that it fails to discriminate and sometimes
bears with such crushing force upon those who are least able
* pay.
PART III
THE FAILURE OF THE PERSONAL PROPERTY TAX
CHAPTER I
HISTORY OF TAX IN EUROPE
We would like, did space permit, to trace the history of the
personal property tax from mediaeval times down to the present
day; to show how it was once in use in practically every country
in Europe ; how, as the earlier and simple economic structure gave
way to modern complex development, its weakness and defects
became apparent, so that one by one these countries abandoned it
until to-day Switzerland is the only country in Europe where the
general property tax still remains. \Ve cannot do better in this
connection than to quote briefly from Seligman's Essays on Taxa-
tion, page 61 :
" Historically, the property tax was once well-nigh universal.
Far from being an original idea which the Americans instinctively
adopted, it is found in all early societies whose economic condi-
tions were similar to those of the American colonies. It was
the first crude attempt to attain a semblance of equity, and it at
first responded roughly to the demands of democratic justice.
In a community mainly agricultural, the property tax was not
unsuited to the social conditions. But as soon as commercial and
industrial considerations came to the foreground in national or
municipal life, the property tax decayed, became a shadow of its
former self and, while professing to be a tax on all property, ulti-
mately turned into a tax on real property. The disparity be-
tween facts and appearances, between practice and theory, almost
everywhere became so evident and engendered such misery, that
the property tax was gradually relegated to a subordinate position
in the fiscal system, and was at last completely abolished. All
attempts to stem the current and to prolong the tax by a more
stringent administration had no effect but that of injurious reac-
tion on the morale of the community. America is to-day the
only great nation deaf to the warnings of history. But it is fast
near ing the stage where it, too, will have to submit to the
inevitable."
32 STATE OF NEW YORK
FAILURE IN THE UNITED STATES
The personal property tax has had a fair trial in nearly every
State in the Union, and has everywhere proved a failure. This
is the practically unanimous verdict of the many able commis-
sions that have made a careful study of the tax in the various
states. To quote from all of these reports, however impressive
the evidence would be, would be merely cumulative. We give
therefore, but brief extracts from five of the most important,
which may fairly be said to be typical and representative.
REPORT OF THE COMMISSION ON TAXATION, MASSACHUSETTS,
1908, Pages 22-24, 25, 26-28, 33-34
" This method of taxation is frequently described as peculiarly
American and democratic, and it is supposed to be a method
which, if fully carried out, would oblige every man to contribute
to the support of public charges in proportion to his ability to pay.
But, as a matter of fact, the system is neither distinctively Ameri-
can nor democratic, and it is admitted that, however excellent
the intent of the law, the practical result has never been that
all citizens do contribute in proportion to their ability to bear
the charges of government.
" The general property tax was once in nearly universal use
in Europe, and was brought to Massachusetts by the early settlers,
who merely introduced here a system with which they had been
familiar in the country from which they came. In England, as
in most other countries of Europe, the principal form of direct
taxation had long been a general levy upon property. In the
seventeenth century this tax was known as the subsidy, and in
practical operation produced the same results as followed its in-
troduction in the 2sTew World. Personal property always man-
aged to escape taxation in whole or in part, so that complaints
about the inequality and injustice of the system were almost as
common as they are in Massachusetts in our own time. In 1592
one writer stated that not more than five men in London were
assessed upon goods exceeding 200, and in 1601 Sir Walter
Ealeigh complained that l The poor man pays as much as the
rich/ About the middle of the seventeenth century the subsidy
became so unsatisfactory that it was replaced by a new tax,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 33
known as the monthly assessment, which was, however, but the
same thing under another name. The immediate result of the
change was a somewhat more complete assessment of property;
but before long personalty began to evade taxation as before; so
that in 1692 the monthly assessment was abolished, and re-
placed by a new tax designed to reach the true yearly value of
all lands, tenements, offices and personal estates. This new tax
was but another property tax in a somewhat different form, and
it soon fared as badly as its predecessors. During the eighteenth
century personal property disappeared from the assessment rolls
as rapidly as ever before, so that by 1798 over nine-tenths of the
levy fell upon real estate, and less than one-tenth upon offices and
personal estate. By this time, in fact, the tax had generally
come to.be known as the ' land tax.' In some towns, we are told,
the whole tax was assessed upon land and houses and personal
estates wholly escaped.
" In 1798 an act was passed by which the land tax became
virtually a fixed charge upon the land, and since that time no
further attempt has been made in England to levy a general
property tax. The national revenues are now derived from an
income tax, taxes on inheritances and the usual indirect taxes;
while local revenues are drawn chiefly from a tax levied upon
occupiers of land, houses and trade premises.
"And in most of the other countries of Europe the result has
been the same. * * *
" It is equally erroneous to call the general property tax a dem-
ocratic form of taxation. It is not found in such ultra-demo-
cratic communities as the Australasian States; nor, with the ex-
ception of Switzerland, is it found in those countries of Europe
in which democratic ideas have taken deepest root. It was
brought to America from England in the seventeenth century,
when democracy existed neither in the mother country nor the
colonies, and has been fastened upon us rather by historical acci-
dent than because of its inherently democratic qualities. * *
' The history of the general property tax in Massachusetts is
not materially different from its history in other States. From
1651 to the present date complaints that personal property evades
taxation are met at every hand. During the last thirty-five years
2
34 STATE OF NEW YORK
four commissions or special committees, exclusive of the present,
have heen appointed to study the question ; and their reports dis-
close the fact that the taxation of intangible property is the
weakest point in the entire system. There is reason to believe that
the administration of the law by Massachusetts assessors has
been considerably better than the administration of the laws of
many other States. The taxation of intangible property has not
been such a complete farce with us as it has been elsewhere ; yet
we find no one who supposes that we are now taxing more than
10 or 20 per cent, of the money, credits and securities taxable
under our present law. After careful study of the subject, our
commission is forced to the same conclusion that was reached by
the commission of 1897, which we reproduce here:
" e It is obvious, however, that this method of taxation en-
counters, as to intangible property, exceptional and indeed al-
most insuperable difficulties. There are no such external indi-
cations of taxable liability as appear in the case of live stock,
vessels, stock in trade or machinery. General repute as to the
possession of large means, or a mode of life indicating an ample
income, do not necessarily signify any thing as to taxable securi-
ties. The investments of a person of means may be in real es-
tate within or without the State, or in Massachusetts stocks or
mortgages, or in bonds of the United States. An ample income,
indicated by general expenditure, may be derived either from
such sources already taxed or not taxable, or from trade and pro-
fession, or from taxable securities, these last two being taxable,
but 'taxable at very different rates. The assessors hence must
rely on their knowledge and judgment in estimating the taxable
property of this form. In a great and complicated society, with
a mass of investments ramifying in all directions the assessors
are here confronted with a task which the best of them could not
execute satisfactorily. Even the most capable, most experienced
and most conscientious assessors could not have sufficient knowl-
edge and judgment. But only average capacity can be expected;
experience is often lacking; and, even for conscientious assessors,
the temptations to laxity are in many cases irresistible. Conse-
quently, the taxation of this form of property is in high degree
uncertain, irregular and unsatisfactory. It rests mainly on guess-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 35
work; it is blind, and therefore unequal. Here is its greatest
evil, though not its only evil. It is haphazard in its practical
working, and hence demoralizing alike to taxpayers and to tax
officials.' "
KEPORT OF MARYLAND COMMISSION, 1888, PAGES 101, 103, 151
" The truth is, the existing system is so radically had, that
the more you improve it the worse it becomes. This lies in the
nature of things and nothing any Legislature can do can alter
this condition of things. Experience and reason alike teach this,
and in my opinion place it beyond controversy for all those who
have eyes to see what it passing about them every day of their
lives."
( The reason why our present system of taxation does not
operate satisfactorily can be stated in a word; although it is on
the face of it fair and simple, it is found in practice to be an
impracticable theory, for a large portion of property escapes tax-
ation, and that the property of those best able to bear the burdens
of government, namely, the wealthy residents of cities. On the
one hand, it is impossible to find this property, and to force men
to make returns under oath, results invariably in perjury
and demoralization, without discovery of property; on the other
hand, federal laws over which our States and municipalities have
no control, enable many to escape taxation by investments, often
temporary, in federal bonds, exempt from taxation.
" Personal property is sometimes discovered in its entirety,
but it is then nearly always the property of the comparatively
helpless, namely, widows and orphans, whose possessions are a
matter of public record. Less often a burden is imposed upon
the conscientious. Thus, I happen to know of one wealthy town
>f a few thousand inhabitants, where three men of conscientious
sonvictions with regard to a man's duty to the commonwealth,
pay taxes on their personalty, although they have as good an op-
portunity to escape as others. This state of things naturally
produces dissatisfaction on the part of farmers and other hard
working people, who feel that personalty ought to bear a share
of the burden of taxation. On this account they suggest various
:hings, like taxation of mortgages, and a more vigorous search
36 STATE OF NEW YORK
for hidden property. Their aim, as I have said, is commendable,
but to attempt to reach the desired goal by direct means, under
existing laws, or any laws which do not imply a change of the
system of taxation, is as Utopian as the dream of the most radi-
cal socialist. If we desire to accomplish a purpose we must use
means adequate to the end in view. *
" Another aspect of this case is presented by the facts of com-
petition in business. Those who escape the payment of a fair
share of business taxes have an advantage in business which en-
ables them to undersell their competitors, and when a business man
sees ruin staring him in the face because his dishonest neighbor
makes false returns and pays taxes on only a fractional part of his
property, the temptation to do likewise is almost irresistible,
except for moral heroes, and moral heroism cannot be made the
basis of governmental action."
KEPORT OF KENTUCKY SPECIAL COMMISSION, 1912, PAGES 83-84
" In 1904 the total roll was $630,795,464, and monies, credits
and securities were assessed at $68,829,446, or 10.9 per cent.
" In 1911 the total roll was $846,450,020, and monies, credits
and securities were assessed at $83,468,030, or 9.8 per cent.
" In 1906 the ratio was 10.8 per cent.
" In 1907 the ratio was 11.5 per cent.
" In 1908 the ratio was 10.1 per cent.
" In 1910 the ratio was 9.5 per cent.
" As we said in our preliminary report : The State of Kentucky
received more revenue for the year 1912 from its dogs than it
did from all the bonds, monies and stocks in the State."
" When finally we note that money, credits and securities taxed
in 1910, the year of the census, were $79,000,000 or only $34
per capita, the necessity for further research seems to disappear.
" Nobody can seriously maintain that all monies, credits and
securities are taxed or any substantial part.
" In the opinion of the Commission, the present methods of
taxing money and credits are ineffective in producing revenue
and highly unjust in their operation on individual taxpayers.
They constitute one of the gravest problems connected with our
JOINT LEGISLATIVE COMMITTEE ON TAXATION 37
system of taxation, and until they are changed our tax laws will
remain vitally and fundamentally defective."
REPORT OF VIRGINIA TAX COMMISSION, 1911, PAGES 69-70
' To summarize, it has appeared that inequalities and under-
valuations of every sort appear in our taxation of personal
property. How extensive these are can only be surmised; how
iniquitous they are can merely be imagined. Viewing the situ-
ation as a whole, the writer believes that it would be better to
remove the tax on personal property altogether and seek other
sources of revenue, than to perpetuate the frauds, inequalities
and undervaluations which now encumber the administration of
our tax laws.
"A law which permits these things is unquestionably a failure,
and it behooves those interested in the problem to ascertain why
and wherein the law has broken down. Examination has shown
that the failure of the property tax in Virginia may be traced to
four things. These are, first, the attempted enforcement of a
law under industrial conditions which render it inoperative of
necessity and invalidate the theory upon which it is based;
second, the failure of many commissioners of the revenue to en-
force the existing laws; third, certain defects in the law which
make deceit and injustice easy; fourth, the growth of a feeling
among our people that there is nothing dishonorable or discredit-
able in ( dodging taxes.' '
REPORT or NATIONAL TAX ASSOCIATION, VOL. IV, PAGES 309^-
310
" To sum up, your Committee finds :
' That the general property tax system has broken down ;
' That it has not been more successful under strict administra-
tion than where the administration is lax;
1 That in the States where its administration has been the most
stringent, the tendency of public opinion and legislation is not
towards still more stringent administration, but towards a mod-
ification of the system;
( That the same tendency is evident in the States where the
administration has been more lax ;
38 STATE OF NEW YORK
" That the States which have modified or abandoned the gen-
eral property tax show no intention of returning to it ;
" That in the States where the general property tax is required
by constitutional provisions, there is a growing demand for the
repeal of such provisions.
" We conclude, therefore, that the failure of the general prop-
erty tax is due to the inherent defects of the theory ;
" That even measurably fair and effective administration is
unattainable; and that all attempts to strengthen such adminis-
tration serve simply to accentuate and to prolong the inequalities
and unjust operation of the system."
SUMMARY OF REPORTS OF NEW YORK COMMISSIONS
The New York authorities are all to the same effect.
"A more unequal, unjust, and partial system for taxation could
not well be devised.' 7 (First Annual Report of the State As-
sessors, 1860, p. 12.)
" The defects of our system are too glaring and operate too
oppressively to be longer tolerated." (Comptroller's Report,
1859.)
" The burdens are so heavy and inequalities so gross as almost
to paralyze and dishearten the people." (Assessor's Report, 1873,
p. 3.)
" The absolute inefficiency of the old rickety statutes passed in
a bygone generation is patent to all." (Assessors' Report, 1877,
p. 5.)
" The hope of obtaining satisfactory results from the present
broken, shattered, leaky laws, in vain." (Report Association of
Taxes and Assessments, 1876, p. 52.)
" The system is a farce, sham, humbug." (Assessors' Report
of 1879, p. 23.)
' The present result is a travesty upon our taxing system, which
aims to be equal and just." (Comptroller's Report, 1889, p. 34.)
The general property tax is a reproach to the State, an out-
rage upon the people, a disgrace to the civilization of the Nine-
teenth Century, and worthy only of an age of mental and moral
darkness and degradation when " the only equal rights were those
of the equal robber." (Comptroller's Report, 1889, p. 34.)
JOINT LEGISLATIVE COMMITTEE ON TAXATION 39
The above quotations from the ^ew York reports are taken from
Seligman's Essays in Taxation.
REPORT OF 1872
The report of the Commission of 1872, of which Mr. David A.
W T e!ls was chairman, was one of the ablest tax reports ever writ-
ten. We, therefore, quote from it at some length :
" In the case of New York, no one, either officials or citizens,
is satisfied with the existing system or its administration ; and so
apparent, moreover, are its defects, that the necessity of reform
is almost universally acknowledged. But the Commissioners,
who have made the system a matter of special study and inquiry,
go further, and unqualifiedly assert that, as it exists to-day it is
more imperfect in theory and defective in administration than
almost any system that has ever existed, and that its longer recog-
nition and continuance is alike prejudicial to the material interest
of the State and the morality of its people."
Real property being visible and tangible, presents no inherent
difficulty in the way of assessment, and the system might be rea-
sonably supposed to work with some degree of uniformity and
equality, yet they found it impossible to find any two contiguous
towns, cities or counties in which the valuation of real estate
approximates in any degree to uniformity.
"It is evident that the law in this respect has become a dead
letter and wholly inoperative. The attempts to tax personal
property under the same system are infinitely more farcical and
disgraceful."
The reasons for the failure are as follows:
In the first place, a large part of personal property " is incor-
poreal and invisible, easy of transfer and concealment, not ad-
mitting of valuation by comparison with any common standard,
and the situs or locality of which for purposes of assessment and
taxation, involves some of the oldest, most controverted and yet
unsettled questions of law. * * * It is obvious, therefore,
that the law contemplates the doing of an act * * which
cannot be done without the fullest co-operation through com-
munication of information, of the taxpayer himself; and yet for
the imparting of which the two most powerful influences that can
40 STATE OF NEW YORK
control human action, viz., love of gain and the desire to avoid
publicity in respect to one's private affairs, co-operate to oppose."
REPORT OF 1893
The taxation of personal property is " unsatisfactory and un-
just, and if no better plan of administration be devised and
carried into effect than that now in existence, it is idle and worse
than useless to attempt the taxation of personalty, however ob-
jectionable the alternative." (Report of Counsel to Revise the
Tax Laws of the State of New York, 1893.)
REPORT or 1900
The Joint Committee on Taxation for the year 1900 likewise
found that the personal property tax was a failure, and did not
believe any reform would remedy the situation unless the listing
system were adopted. This, however, the committee was unwilling
to recommend. It found that while the first returns were ap-
parently good under the listing system, it eventually drove capital
out of the State.
REPORT OF 1907
" The principal difficulty connected with our system of local
revenue is the taxation of personal property. * * It is a
universally accepted maxim that direct taxation of the citizen
should be nearly as possible in proportion to his ability to pay.
The actual situation in New York involves in practice the very
inverse of this principle."
As a result of its study the committee concluded :
" (1) That there has been gradual and steady increase in the
value of real and personal property ;
" (2) That personal property escapes paying its share of the
burden ;
"(3) That the greater the amount of personal property placed
on the rolls, the larger the cancellations or reductions ;
" (4) That the burden falls heaviest on the residents of our
State and the smaller taxpayer ;
" (5) That the nonresidents have almost ceased to pnv taxes;
" (6) That the collection of the personal property tax has be-
come more and more difficult."
JOINT LEGISLATIVE COMMITTEE ON TAXATION 41
CHAPTER II
CAUSES OF THE FAILURE OF THE PERSONAL PROPERTY TAX
Briefly stated, the objections to the personal property tax and
the reasons for its failure are as follows :
(1) Inequality of assessments.
(a) As between towns. It is notorious, and the facts to be
submitted later will show beyond question, that in some towns
personal property is assessed at something like true values, whereas
in others no attempt whatsoever is made to reach the personal
property of either corporations or individuals, or if it is reached,
it is assessed at a value insignificant as compared with true value.
This has a tendency to produce throughout the State " isles of
safety " or residential districts desirable from a tax standpoint for
both individuals and corporations who, by establishing a nominal
residence, and by the payment of a small or nominal tax, in one
town, are enabled to escape their proportion of the taxes in the
town in which they actually reside. Thus, the one town is enabled
to increase its tax base and lower its rate, while the other is
deprived of large amounts of taxable property and is obliged to
tax that which remains within its juristiction at a higher rate.
(b) As between citizens of the same town. The system is
practically one of self -assessment, under which the dishonest man
who is willing to swear off his taxes, does so at the expense of the
honest man whose conscience does not permit him to do so.
(2) The personal property tax at a general property rate, let
us say 2 per cent, is confiscatory and an actual incentive to dis-
honesty. Two per cent is the equivalent of 50 per cent of the
income of a 4 per cent bond, and no country in the world in
normal times has or can successfully impose a 50 per cent income
tax. The taxpayer will not submit to it, particularly when he
knows that thousands of fellow citizens, in many cases with in-
comes much larger than his own, are actually evading its payment.
(3) The theory underlying the general property tax is that
both real and personal property should be taxed at the same rate
and on the same basis. Without at this time discussing the sound-
ness of this particular theory, as a matter of practice, real estate
bears practically the entire burden, while personal property,
42 STATE OF NEW YORK
though theoretically liable, fails to contribute its share to the
support of government.
(4) The deduction of debts invites fraud and evasion, yet not
to allow deduction of debts is in some cases double taxation. As
has been said, " Individuals should be taxed on what they own, .
not on what they owe." This, of course, is not true in the case
of many corporations that obtain most of their working capital by
issuing bonds.
(5) The personal property tax is unequal as between different
grades of property. It falls with equal weight upon unproductive
property, on property yielding comparatively small income, and
on property bringing in a very large return.
(6) Under modern conditions, property no longer represents
the true test of ability to pay. In a simple agricultural com-
munity, where personalty is for the most part tangible and visible,
property furnishes a fairly equal measure of a man's ability to
contribute to the support of government ; but under modern busi-
ness development this is by no means the case. Take the case of
the merchant with a large turnover and a comparatively low
profit. His ability to pay taxes is by no means the equal of that
of the merchant with a small stock of goods, a rapid turnover and
large profits; yet under the personal property tax the former
rather than the latter will pay the larger tax. Take the case of
the manufacturer. The one may own a very large plant with
complicated, expensive machinery, and the necessities of his
business may require him to carry a large inventory. He may
earn but a small return on his investment. Another manufacturer
in another line may have a smaller plant, much less valuable ma-
chinery, a comparatively light inventory, and yet because of the
nature of his business may have a greater income. Here again the
ability of the latter to contribute is greater than that of the
former, yet the former under the personal property tax pays
the heavier share. As between individuals, the lawyer earning
$50,000 a year pays nothing on the taxable ability represented
by these large earnings, while the widow or the retired busi-
ness man or wage-earner with $500 a year derived from accumu-
lated savings of $10,000 is compelled to turn over $200 of it
to the tax gatherer. The investor who makes an unwise invest-
ment from which he gets little or no return pays as much as the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 43
fortunate individual enjoying fat dividends; the man with a large
unearned income and extravagant habits gets off scotfree, while
the thrifty one who in spite of a lower earning capacity and less
ability to pay taxes manages to lay something aside is taxed on
the evidences of his thrift.
(7) Personal property under modern conditions consists for
the most part of securities, credits and other intangibles, easy
of concealment and which cannot be discovered without the
co-operation of the taxpayer himself, a co-operation which the
taxpayer declines to furnish, and which experience has demon-
strated cannot be compelled. Moreover, the large accumulations
of wealth in form of intangibles are usually concentrated in the
great cities under conditions which make it well-nigh impossible
for the assessors to locate the owners a complete change from
the conditions under which the personal property tax was adopted,
when life was simple, wealth fairly equally distributed, when
people lived in villages or small towns, and when each man knew
not only what his neighbor owned, but what property of his was
assessed. Even in so far as tangible personalty is concerned, con-
sider the difficulty which confronts the average assessor who may
be required to assess accurately anything from a Rembrandt pic-
ture to a large modern industrial plant. The fact is that, at the
wages paid which in many instances do not exceed three dollars
a day it is impossible to obtain any man with a sufficient
accumulation of knowledge to enable him to deal successfully with
a field so wide as to include within its range practically every
form of property found in a complicated society.
(8) The great number of exempt securities makes it possible
for the wise investor lawfully to escape personal property taxation,
leaving the tax to fall on those not sufficiently fortunately situated
to obtain wise legal advice and on those ignorant of the law.
CHAPTER III
INJUSTICE OF THE PERSONAL PROPERTY TAX
All semblance of justice and equity has long since left the
personal property tax, which has been suffered to remain on our
statute books because of the widespread apathy and ignorance of
the public in regard to taxation, and because of the fact that it
has not, generally speaking, been enforced.
44 STATE OF NEW YORK
(1) As Between Tangible and Intangible Personalty. Tangible
property can be seen; intangible property cannot be seen. Tax
assessors find it comparatively easy, therefore, to discover tangible
property, while they have the greatest difficulty in locating in-
tangible property. Everywhere the result is the same not only
is a much larger proportion of tangible property reached for
the purposes of taxation, but that proportion reached bears a much
higher rate of taxation as a result of the escape of intangibles.
The inequity is further accentuated by the fact that those most
able to pay have their wealth largely invested in intangibles and
that those least able to pay have their wealth largely invested in
tangibles. The magnitude of this' injustice will appear as we
examine the effect of this tax upon the rich as compared to the
poor, upon the widows and orphans, upon the farmers as compared
with owners of other forms of wealth and upon the struggling
business as compared to the well-established business. In every
case the inequity increases with the inability of the particular
classes to bear taxes.
2. As Between the Poor and the Wealthy. Not only do the
poor and those in only moderate circumstances have their wealth
invested in easily seen and easily taxed tangibles, but the kind
of tangible personalty in which the poor man invests his money,
whether it be in his household effects or in his small business,
is of such nature that the ordinary tax assessor is familiar with it
and can therefore assess at well-nigh its true value. This is true
as well of the tangible personalty that makes up the small business
concern as of the tangible personalty included in the household
goods and other personal effects. In the case of the wealthy
man, however, the case is a very different one. Not only is a
large part of his wealth ordinarily invested in intangibles, but
much of his tangible personalty, whether that of his personal ef-
fects or that of his business, is of a kind that the ordinary
assessor (in his daily life) is unfamiliar with, and it is also of
a kind that is difficult of valuation. This is true not only of
the wealthy individual but of the wealthy corporation as well. In
regard to the former, the valuation of such property as jewelry,
works of art, books, etc., require a knowledge and skill not
possessed by the average assessor. In regard to the rich corpo-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 45
rations, such as mercantile corporations, carrying large stocks of
fine fabrics, jewelry, etc., and those manufacturing corporations
having machinery of great value as well as large stocks of products
in the process of manufacture, the experience of forty-eight
states of the Union discloses with unmistakable clearness that
the average assessor does not and cannot assess these subjects
with any degree of fairness.
When we come to investment in securities, a large investor
usually has the knowledge, or can obtain such advice, as will
enable him to invest in tax-exempt securities, while the small
investors, particularly women, are apt, through ignorance, to
invest in taxable bonds.
3. Concerning Widows and Orphans and Trust Estates. If
there is one group of property which should escape with reasonable
taxation, it would seem to be that property the income from which
is set aside for the .support and education of those who have been
deprived through death of the head of the family, viz., the widows
and the orphans. When the chief bread-winner dies, a record of
his property must be filed in the probate court, where it is easily
accessible to the tax assessors. Here it is caught and taxed,
while similar property held by others is untaxed. Were it taxed
at only a fair rate, it would still be questionable whether this
property ought not to be partially exempt. However, it is not
taxed at a fair rate, but at a rate which makes the personal prop-
erty tax in this case one of the most barbarous to be found in any
country. Cases are frequent where as high as 25 to 50 per cent
of the total income set aside for the support of widows and orphans
is taken by this tax. How serious the situation is was well ex-
emplified by investigation made by one of the witnesses who ap-
peared before the Committee. He stated that he found that in one
county (not in the State of New York) the roll showed that about
20 to 25 per cent of the personal property taxes were paid by
women. It will, of course, be readily agreed that women do not
own anything like 25 per cent, of personal property in any state.
Another witness told us of a woman whose husband had died leav-
ing an estate all invested in 4 per cent bonds. The woman was
assessed by !N"ew York City's Tax Department for the full value
of the bonds. There was no possibility of getting the tax re-
46 STATE OF NEW YORK
duced. Counsel advised her to change her investments, but she
refused to do that because her husband had made them, so she
was obliged to leave the city and change her residence.
A simple example will illustrate how this tax works. Assume
that a prudent head of a family had been able to save $15,000
which had been invested in municipal bonds yielding four per
cent. The annual income to the widow would be $600. At a tax
rate of 2 per cent, on the value of this personal property, the
widow would be compelled to surrender $300 to the tax authorities
or one-half of her total income. In some localities tax rates have
risen as high as three or four per cent, and cases are not unknown
where, had the tax law been enforced, the widow would have been
deprived of her entire income. Indeed, cases are known where
the tax has not only absorbed all of the income, but has compelled
the owner to pay an additional amount. In the 1915 New York
Tax Conference, Mr. Lawson Purdy cited such a case. Before
the December, 1915, hearings of the Joint Legislative Committee
on Taxation, Professor Charles J. Bullock of Harvard University
testified that cases of such gross injustice amounting to the taking
of from one-third to one-half of the income of widows and orphans
were not infrequent where the general property rate was applied
to personalty. Upon this point, the Report of the Massachusetts
Tax 'Commission for 1908 speaks as follows:
" The situation is made worse by the fact that the local tax
rates throughout the country are so high that they take from
the holder of good securities an excessive proportion of his income.
According to the United .States census, the average rate levied
upon property assessed for local taxation in the United States in
1902 was about 2 per cent, of the capital value thereof, or as tax
rates are usually reckoned in Massachusetts, $20 on each $1,000
of the assessed valuation. In many places real estate was so
far undervalued that a tax of 2 per cent, upon the assessed value
may not have amounted to more than 1 per cent, or even one-
half of one per cent, of the true value of the property. But per-
sonal property, if returned for taxation, must be valued usually
at its true cash value; and it is clear that a tax rate of 2 per
cent, may take from the holder one-third or one-half of his in-
come. Under such circumstances few persons can or will make
JOINT LEGISLATIVE COMMITTEE ON TAXATION 47
returns of their personal estates ; and the usual result is that this
property is taxed by the method of arbitrary estimate, or
' doomage ? . When returns are made they come usually from
trustees and executors of small estates, who cannot easily evade
the law, and have less inducement to do so. Thus it comes about
that the mx on personal property bears with exceptional severity
upon widows and orphans, the most helpless class in the commu-
nity, and is most easily evaded by the rich and powerful, who
can best afford to pay it. Instances have come to the attention of
members of the present Commission in which widows are paying
upon small estates taxes that take as much as 40 or 50 per cent, of
the income; whereas in the same communities men whose tax-
able property would probably amount to millions are paying a few
hundred dollars of personal taxes upon merely nominal assess-
ments. These conditions are not peculiar to Massachusetts,
they have been repeatedly disclosed by the reports of tax com-
missions in other States; and among students of American taxa-
tion it has become a mere truism that our present taxes upon
personal property actually fall upon the taxpayers in inverse
proportion to their ability to pay."
4. As Between Farms and Oilier Forms of Wealth. That
the farmers bear a disproportionate share of taxation is gen-
erally known and accepted by most of the informed throughout
the United States. It is not generally known by the farmers or
the public at large, however, to what an extreme degree this dis-
proportion is carried. It is, of course, well known that most of
a farmer's personalty is in a tangible form, and that it cannot
be hidden from the tax assessor. Wherever the law is enforced
the farmers' machinery and implements, his stock and other tan-
gibles not; only pay a much higher rate than their share, but a
rate out of all proportion to the earning power of such property.
This disproportionate rate is, of course, largely made up of
that part of the tax burden that is evaded by other forms of
wealth. The full significance of this inequity cannot be grasped
without comparing the rates upon agricultural property and in-
come with that of the other principal industries of the State.
A study of California in this regard is of much value to New
York. A few years ago a very careful investigation was made
48 STATE OF NEW YORK
of the relative tax burdens borne by the various classes of wealth
in California, and the results of this investigation were set forth
in the 1906 California Tax report. Most of the statistics given
immediately below are either copied from that report or represent
computations based upon the data there set forth. The following
table taken from page 68 of this report is a comparative statement
of manufacturing industries and agriculture in respect to the
capital investment, percentage of total capital value invested in
realty and personalty, and percentage of each taxed:
COMPARISON OP TAXES ON MANUFACTURING AND FARMS IN CALFORNIA
Percentage of total capital
Aggregates Manufac- Agricul-
Manufactures Agriculture tures ture
Capital total
$205, 395, 025
$796, 527, 955
100.0
100.0
Land
34, 735, 416 \
630, 444, 960
16.9
79.0
Buildings
22, 562, 385
77, 468, 000
11.0
9.7
Machinery, resp. imple-
ments
62, 440, 759
21,311,670
30.4
2.7
Other assets
85,656,465
67, 303, 325
41.7
8.5
Assessed value
63, 500, 000
474, 731, 497
31.0
65.0
Taxes
1, 049, 932
9, 030, 000
.51
1.14
Gross produce
302, 874, 761
131, 690, 606
147.0
16.5
Net product
52, 172, 862
91, 419, 866
25.4
11.5
Taxes of gross
.346
6.86
Taxes of net product
2.01
9.88
This table discloses some very interesting facts; and these
facts are of considerable interest to New York, because they
illustrate a condition in California very similar to the one now
prevailing in New York 'State. At least this is true in so far as
they illustrate the inequity existing between farm property and
that of other forms of wealth. It should be remembered, how-
ever, that the actual inequity as between these two forms of
wealth is probably greater in New York than in California.
The above table shows that while agriculture pays 6.86 per cent
of its gross product in taxes, manufactures pay only .34 per
cent or one-third of 1 per cent. In other words, measured in
terms of gross product, the tax burden upon agriculture was
about twenty times as heavy as that upon manufactures. In
terms of net product, the disproportion, though not so extreme, is
still very large. The table shows that while manufacturers pay
JOINT LEGISLATIVE COMMITTEE ON TAXATION 49
2.01 per cent of net products in taxes, agriculture pays 9.88 per
cent in taxes. In other words, the tax burden measured in terms
of net product is nearly five times upon agriculture what it is
upon manufacture. It should be noted here that this statement is
based upon the assumption that manufactures pay approximately
2 per cent of net income in California. This rate is probably
higher than that borne by manufactures in New York State.
Statistics such as those gathered by the Federal Census indicate
that the proportion borne by manufactures in New York is less.
These facts are brought out in more detail in part VIII of
this report which deals with the taxation of manufacturing
corporations.
The following table summarizes the tax burdens borne by Cali-
fornia farms :
Per cent of taxes to true value 1 . 14
Per cent of taxes to gross returns 6.86
Per cent of taxes to net returns, including farmer's own
compensation and certain expenses 9 . 88
The following tabulation compares the percentage of tax paid
by farms and manufactures :
Ratio of farm
taxes to manufac*
Farms Manufactures turing taxes
Percentage paid on capital value 1.14% 1/2 of 1% 3 to 1
Percentage paid on gross income 7.00% 1/3 of 1% 20 to 1
Percentage paid on net income 10.00% 2 % 5 to 1
In regard to the comparative burdens borne by various kinds
of wealth in New York State, no study similar to that of Cali-
fornia has been made with the same degree of care and thorough-
ness. The New York problem is much more complex than that
of California. The multiplicity of corporation taxes at varying
rates and upon different bases makes the difficulties of a
similar study for New York almost insurmountable. We have,
however, sufficient data to justify a rough comparison between
New York and California and between New York and states
like Minnesota and Michigan that have also made studies similar
to that of California. These comparisons all indicate that the
disparity as between agriculture and other forms of wealth is
even greater in New York.
An examination of Minnesota's experience is pertinent. The
50 STATE OF NEW YORK
following facts are gathered from the experience of Minnesota
as it appears in the 1908 Report of the State Tax Commission
of Minnesota (pp. 54-5) :
" The special commission on revenue and taxation of 1906 ap-
pointed by the governor of California declared that the per-
centage of taxes to the gross products for manufactures in that
state was .346, or about one-third of 1 per cent; for agriculture
the relation of taxes to total product was 6.86 per cent. On the
net product of manufactures the commission found the relation
of taxes to be 2.01 per cent, and for agriculture 9.88 per cent.
The basis of these figures is the United States census of 1900.
Applying the same methods and the same data to Minnesota, a
somewhat different result is obtained. Expressed in the terms of
product, the percentages of taxes to the returns secured from
manufacturing and agriculture are as follows :
" Taxes to gross product Manufacturing 3223%
Agriculture 4.7200%
" Taxes to net product Manufacturing 2 . 0480%
Agriculture 6 . 8850%
" TABLE SHOWING COMPARISON OF AGGREGATES AND PERCENTAGES OF INVEST-
MENTS IN MANUFACTURES AND AGRICULTURE IN MINNESOTA
Aggregates Percentages
Capital Items
Land
Manufactures
$29, 548, 954
Agriculture Manufactures
$559,301,900 17.810
110,220,415 11.980
30,099,230 22.886
89,063,097 47.324
Agriculture
70.90
13.97
3.83
11.30
Buildings .
19, 850 136
Machinery
37, 953, 943
Other assets
78 479 213
Total capital $165, 832, 246 $788, 684, 642 100 . 00 100 . 00
" The assessed value of manufactures was $32,509,514, and
of agriculture $299,567,765. Reduced to percentages, the rela-
tion of the assessment of manufactures to capital was 19.6 per
cent, and of agriculture, 37.9 per cent. The manufactures paid
$846,570 in taxes and agriculture $7,609,021; in other words,
.51 per cent and .96 per cent, respectively, of their capital
values. The gross product of the manufacturers of the State
amounted to $262,655,881, or 158.3 per cent of the capital in-
vested in manufactures, and the agricultural product was $161,-
217,304, or 20.4 per cent of the capital invested. In the case of
the net product, the manufactures of the state earned $41,318,-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 51
363, or 24.9 per cent on their capital, and agricultural interests
$111,050,884, or 14.08 per cent.
" Manufacturers pay a little more than 2 per cent on their net
product, and farmers pay more than three and one-third times as
much as when measured on the same basis; and on the basis of
gross product the farmer pays more than eleven and one-half
times the amount turned in by the manufacturer for taxes. On
a net income basis the manufacturer pays 2 per cent of it for
taxes, but the farmer pays nearly 7 per cent of his net income,
which includes the benefits he receives from his garden, poultry,
etc. And, further, the farmer's net income includes his reward
for management as well as interest return. These items make
the difference still more marked.
" These are eloquent figures. While the commission is not
ready to accept them in their full meaning as conclusive, they do
show clearly the general situation."
The experience of Michigan is also of much value, although
the disparity between farms and manufactures is probably not so
great as it is in the State of New York. The following table is
taken from the 1911 " Report of the Commission of Inquiry Into
Taxation of Michigan" (page 9).
It gives the rate of taxes per thousand of actual value for farms,
banks, residence, railroads, manufacturing corporations, public
service corporations and mines. It also gives a comparison of
the value and taxes paid by each of these classes except residences :
Values
Taxes Rate
per $1.000
City real estate
$14.85
Farms
$1, 000, 000, 000
$10, 000, 000
10.00
Banks and trust companies ....
75, 000, 000
1, 250, 000
17.00
Railroads
212, 000, 000
4, 378, 000
20.65
Sleeping car, express, car loaning
and telephone and telegraph
companies
24, 000, 000
493, 000
20.67
Manufactures
750, 000, 000
3, 938, 000
5.31
Mines
250, 000, 000
1, 750, 000
7.00
Electric railway, power, heat,
light and gas companies
130, 000, 000
900, 000
7.00
An examination of this table discloses the fact that manufac-
tures bear the lowest rate of taxation of any class of wealth in
Michigan, this rate being about one-fifth of that of the public
service corporations, about one-half that of farm property and
52 STATE OF NEW YORK
about one-third that of city real estate. This table is of value in
so far as it throws light upon the disproportion of the tax burden.
It should be clearly borne in mind, however, that the dispro-
portion between manufactures and farms is very much less than
in either California or New York.
In view of the great inequality as between the actual assess-
ment of farmers and manufacturers, it is of considerable interest
to know whether any compensation is found in the difference in
their tax-paying ability. The following quotation from page 66
of the 1906 California Report is very clear upon this point:
" The same facts may be exhibited in another way. After
allowing $2,446,238 for the average annual increase in value of
farm property and taking 6 per cent as interest on the value of
farm property, the census estimates that the 145,801 persons en-
gaged in agriculture earned an average of $499.70 in 1899. The
113,155 persons engaged in manufactures earned an average of
$870.
" It would seem, then, that from the per capita earnings manu-
facturers could afford to pay nearly 75 per cent more taxes than
could the farmers. As a matter of fact, however, the farmers
pay 10 per cent of their net earnings and manufacturers only
2 per cent of their net earnings."
The present personal property tax works a severe hardship
upon the property of farmers, irrespective of whether the tax is
rigidly enforced or not. If the tax is actually enforced upon
the personalty of farmers it obviously lays a highly dispropor-
tionate burden upon that part of the farmer's wealth. In an-
swer to this statement it is often said that the personal property
tax does not discriminate against the farmer inasmuch as the
average assessor does not actually assess any considerable amount
of the tangible personalty found upon farms. It is true that to
the extent that an individual farmer is underassessed by the
local tax officer he escapes a certain part of a highly dispropor-
tionate burden. It is utterly fallacious, however, to infer that in
escaping to this extent the farmer is freed from the inequities
of the personal property tax. The greatest injustice to the
farmer arises from the indirect results of the almost complete
failure of the general property tax as applied to personalty in
general. When practically one-half of the tax base escapes in
JOINT LEGISLATIVE COMMITTEE ON TAXATION 53
the form of personalty, the rate upon the remaining half must be
double what the rate would be, were it levied uniformly upon the
entire base. To the extent, therefore, that anyone's wealth is
composed of real estate, to just that extent does he bear an in-
creased disproportionate share of the tax burden.
A reference to the above tables from the California report is
illuminating at this point. The first table shows that 79 per
cent of the total value of agriculture is invested in land and that
88.7 per cent is invested in land and buildings. Manufactures,
on the other hand, have invested in land only 16.9 per cent of
total capital and only 27.9 per cent in land and buildings. Per-
sonalty of manufactures makes up 72.1 per cent, of which not
less than 50 per cent is intangible. The significance of these
figures must not be overlooked. They show not only that that
part of the fair share of personalty escaping taxation is borne to
a very large degree by agriculture, but that that particular bur-
den is partly accounted for by the failure of the assessors to reach
the very large per cent of the capital of manufacturing and other
corporations that is represented by personalty.
It must not be understood that manufactures represent the only
group of wealth that shoves off part of its tax burden upon the
farmer. The manufacturing industry has been used for pur-
poses of illustration, and did space permit, it could be shown that
other business corporations as well as some of the public service
and financial corporations fail to bear a tax burden proportion-
ately as heavy as that of agriculture.
In answer to the above arguments it is often said that the
farmer suffers no injustice because as his tax burden increases,
the value of his land increases. Wherever the increase in value
of his land assumes the form of the so-called " unearned incre-
ment ", this fact may be true in those particular cases in which
the increment is as large as the tax increase. In those cases, how-
ever, where the increased value of the farm has been due to the
labor and capital investment of the farmer, it cannot be truth-
fully said that the increased value " takes care of " the increase
in the tax burden. In any case where the property has not in-
creased in value, the increased burden is a heavy one.
In summing up the case of the farmer, the evidence is well
nigh overwhelming that the general property tax in so far as it
54: STATE OF NEW YORK
pertains to personalty, directly or indirectly, imposes on him an
increasingly disproportionate burden.
5. Injustice as Between Various Types and Classes of Enter-
prises. As the personal property tax is now levied in New York,
it constitutes not only a serious impediment to the development of
some businesses, but a constant annoyance to many branches of
business. It is unjust as between various units of business and
types of corporations. It is unjust as between mercantile and
manufacturing corporations and it is unfair to corporations
within the same group. The extreme to which this unfairness
is carried is illustrated by the ridiculous differences in the per-
centage of personalty assessment to total assessment in the same
counties. In the same type of business, the ratio of personalty
to realty sometimes varies from 1 to 2, to 1 to 75. In the same
town the personalty of manufactures escapes while the personalty
of mercantile corporations is assessed. Moreover, local mercan-
tile corporations are taxed upon personalty, while foreign corpor-
ations, doing large business next door and carrying large stocks of
personalty, are taxed neither in the locality nor at their domicile.
The unfairness as between manufacturing corporations of
nearby competing towns is often very great. In fact the present
investigation discloses the fact that in general throughout the
State of New York the personal property tax bears to business
the relation of an unmitigated nuisance. Were the law fully
enforced, it would drive business out of New York ; with present
sporadic enforcement it falls with inequality and injustice.
6. As Between the Various Counties in New York State.
Reference to the comparative statistical tables in the Appendix will
show with what wide difference personalty is actually assessed in
the different counties of the State. When the direct State tax
is levied, the inequalities in the assessment of real estate are
partly remedied by equalization. With personalty, however, all
inequalities remain, because the board of equalization does not
equalize personal property, but accepts the returns of the various
counties. Thus the more efficient the personal property tax is
levied in any county, the higher the percentage of the direct
State tax that county is required to pay. In other words, the
present law penalizes every county in proportion to its efficiency
in enforcing the law.
PART IV
FAILURE OF THE PERSONAL PROPERTY TAX IN
NEW YORK
One of the main purposes for which this Joint Legislative Com-
mittee on Taxation was appointed was to seek out that property
which is now escaping and to recommend changes that would
equalize the tax burden by broadening the base.
For many years it has been the belief of a large number of tax-
payers that the weakest point in our present system is the per-
sonal property tax; and this applies both to the individuals and
the corporations. For that reason the Committee early deter-
mined to make a most careful investigation into the working of
the personal property tax.
CHAPTER I
GENERAL SCOPE OF THE COMMITTEE'S INVESTIGATION
At one time or another the Committee has attempted to investi-
gate by every known method the success or failure of the personal
property tax. In this investigation the Committee approached
the subject by not less than eleven different avenues, as follows :
(1) An investigation of the assessment of the personal prop-
erty tax in the sixty-two counties of the State by means of cor-
respondence with local officers, such as the clerks of the board of
supervisors, county treasurers, etc.
(2) An investigation of the same subject by means of inspect-
ing the records on file in the office of the State Board of Tax
Commissioners.
(3) An investigation in which investigators were sent into
a selected list of counties to examine the records in the offices of
the town and county collectors, assessors, etc., as well as the
records, so far as certificates of incorporation were concerned,
filed in the county recorders' offices.
(4) An examination of data gathered by an employee of the
State Board of Tax Commissioners in regard to the assessment
of corporations in a particular county under Section 12.
(5) An examination of data furnished by a member of the
56 STATE OF NEW YORK
Constitutional Convention in regard to the assessment of the per-
sonal property of corporations under Section 12 in another county
that had been called to the Committee's attention.
(6) An investigation of the records of the Commissioners of
Taxes and Assessments of the City of New York for the years
1908, 1909, 1910, 1911, 1912, 1913 and 1914, containing data
as to the following points :
(a) The tentative personal property assessment of resi-
dent personal, estates, corporations resident and corporations
nonresident.
(b) The amounts cancelled.
(c) The amount retained on the final assessment rolls.
(7) An examination of three reports prepared within recent
years upon the same subject.
(8) An investigation into the amount of personal property
taxes paid by some two hundred corporations selected at random,
information concerning which could not be found in Moody's
Manual, Poor's Manual and elsewhere.
(9) An investigation into the personal property tax paid by
another list of some 250 corporations selected at random by
means of statements furnished by the corporations themselves.
(10) An examination of the Federal Census Eeports as to the
relative percentages of personal property tax collected in New
York and other states.
(11) An examination of data filed by the State Comptroller
and the State Board of Tax Commissioners as to the relative
increase and decrease of personal property tax and other taxes,
and as to the effect of the method of reaching certain forms of
personalty by means of specific taxes upon the yield of that part
of the personal property tax assessed at the general property rate.
In the first place, the Committee attempted, through the
local officers, viz., the clerks of the boards of supervisors, clerks
of the county treasurers, etc., to obtain information concerning the
success of the personal property tax in the sixty-two counties of the
State. At the time of this investigation letters were sent to one or
more of these local officers in every one of the counties, and an
effort was made at different times to obtain information upon
some twelve or fifteen points that might be used in one way or
JOINT LEGISLATIVE COMMITTEE ON TAXATION 57
another as a basis for an estimate of the success or failure of the
personal property tax. The results of the Committee's effort along
this line of investigation, after repeated attempts, were very dis-
couraging. Some of the local officers attempted by every means
to assist the Committee in this investigation, and the Committee
is indebted especially to the officers in a number of localities for
considerable work and some valuable material.
In the hope of obtaining more complete information in regard
to the amount of personal property tax collected from resident
natural persons, resident corporations, nonresident natural per-
sons and nonresident corporations, the Committee investigated
the statistical information which is filed in the Department of
Statistics of the State Board of Tax Commissioners.
'Section 61 of the Tax Law provides as follows :
" Statement of valuation to be forwarded to state board of tax
commissioners. The clerk of each board of supervisors shall,
on or before the second Monday in December, transmit to the
state board of tax commissioners in the form to be prescribed
by such state board of tax commissioners a certificate or return
of the aggregate assessed and equalized valuation of the real
and personal estate in each tax district as the valuation of such
real estate has been corrected by such board, and the amount of
tax assessed thereon for town, city, school, county and state pur-
poses. Also the aggregate assessed valuation of personal prop-
erty classified as follows :
" 1. Property of resident natural persons assessed pursuant to
section twenty-one.
" 2. Property held by agents, trustees, guardians, executors or
administrators, assessed pursuant to sections eight and thirty-three.
" 3. Property of domestic corporations assessed pursuant to
section twelve.
" 4. Property of nonresident natural persons assessed pursuant
to subdivision one of section seven.
" 5. Property of nonresident natural persons assessed pursu-
ant to subdivision two of section seven.
" 6. Property of foreign corporations assessed pursuant to sec-
tion seven.
58 STATE OF NEW YORK
" In the City of New York such report shall be made by the
department of taxes and assessments.
" The state board of tax commissioners shall certify to the
comptroller, on his request, before the thirty-first of December in
each year, such extracts or items, from the returns above men-
tioned, as he may desire."
Were this law followed, the Committee would be able to obtain
a mass of valuable data for purposes of investigating the degree
of success of the personal property tax in New York State.
For the purposes of this investigation, the Committee's expert
went through the records in the Bureau of Statistics of the State
Board of Tax Commissioners at Albany. Of the sixty-two counties
of the State, it was found that with the exception of four or five
counties, none of them filed the complete information required
by section 61 of the Tax Law. Of the six groups of informa-
tion required by section 61, most of the counties failed to file
in complete form most of the information required under subdi-
vision 1. A few of the counties filled out sporadically the informa-
tion required under subdivision 2. Unfortunately, nearly all of
the counties failed to file the information required under subdi-
vision 3. Inasmuch as the information required under subdivi-
sion 3 relates to domestic corporations assessed pursuant to sec-
tion 12, it was impossible to obtain the very data which was neces-
sary for purposes of investigating the most important phase of
the personal property tax in New York State. The information
called for by subdivisions 4 and 5 was also lacking in more than
80 per cent of the counties. It was particularly unfortunate that
this data was lacking. One of the important conclusions reached
by the Special Tax Commission of 1906, was :
(1) That the burden falls heaviest upon the residents of our
own State, and principally upon the small taxpayer.
(2) That nonresidents find it easier to escape taxation and
have almost ceased to pay any tax.
The failure of the local officers to return the information re-
quired under subdivisions 4 and 5 rendered it impossible in this
particular branch of the investigation to determine to what degree
the conditions set forth by the 1906 Committee were still true.
The data concerning the assessment of the property of foreign
JOINT LEGISLATIVE COMMITTEE ON TAXATION 59
corporations required to be filed by subdivision 6 of section 61,
is also lacking from all but a very few of the reports filed with
the Tax Commission. While from these records in themselves it
would be impossible to conclude that foreign corporations escape
their fair share to a large degree, yet the absence of this data,
together with other information obtained, establishes a fair pre-
sumption that the foreign corporations are not assessed for per-
sonal property in most of the localities.
Failing to obtain sufficient data for the purposes of anything
like a complete investigation of the personal property tax in New
York State, the Committee next resorted to the method of personal
investigation.
CHAPTER II
PERSONAL INVESTIGATION IN THE SIX COUNTIES
For the purposes of this report, the names of the counties are
not given but are designated as " County A," " B," " C," " D,"
" E " and " F." The reason for this designation appears as fol-
lows : In the time at the disposal of the Committee it was obvi-
ously impossible to investigate by means of personal visits the
enforcement of the personal property tax in all of the counties.
Out of the sixty-two counties it was found possible to send an
investigator into only six. Inasmuch as the investigation in these
counties disclosed the fact that many of the local officials were not
assessing personal property of corporations according to the law,
it seemed unfair to give the names of the counties and towns.
Were these six counties the only offenders against the law, it might
be wise to publish the fact. But inasmuch as they were selected
as representative counties, and inasmuch as the practice of the
local officers is in all probability no worse in these six counties and
the towns contained therein than in the rest of the State at large, it
seems only fair to use them as typical of the State without sing-
ling them out from the other counties. In justice to the truth, it
ought to be said that the six counties discussed below, notwith-
standing their deficiencies, actually came nearer to enforcing the
law than some other counties which were not investigated by this
method.
County A. County A contains a large mercantile and manu-
facturing city and seven towns, in most of which exist important
60 STATE OF NEW YOEK
corporations claiming some town of the county as its principal
place of business. An examination of the statistics gathered
in this county reveals three striking facts.
(1) There is the greatest inequality in the assessment of
corporations as between the various localities within the county.
(2) Considerable inequality exists as between mercantile and
manufacturing corporations, most mercantile corporations being
taxed, most manufacturing corporations escaping in whole or in
part.
(3) The ratio of the real property to personal property varies
greatly throughout the county.
The facts in regard to this county may be summarized as fol-
lows:
In one locality every mercantile corporation listed as paying
real estate, also pays a personal property tax. (We have no way
of determining whether or not the corporations pay all that they
ought to pay under section 12.) Nearly every corporation
claiming this town as the principal place of business, pays some-
thing under section 12.
In striking contrast to this locality stand the other seven towns
of the county. Some of them contain large and important
mercantile or manufacturing corporations. However, not a single
one assesses a dollar's worth of personal property to manufactur-
ing or mercantile corporations. These seven towns contain
eleven mercantile corporations and fifty-seven manufacturing
corporations listed as paying real property tax. All of these cor-
porations, except fifteen, claim as their principal place of busi-
ness one of the towns within the county, and therefore should pay
personal property taxes at such place.
As' to the exact extent of the evasion of the personal property
tax by corporations in the county as a whole, it is very difficult
to determine. There is no way by which the Committee, in the
time at its disposal, could ascertain exactly what each corporation
should pay, or how many corporations were liable for taxation
under the law. The following figures, however, indicate that
the evasion of the tax is widespread throughout the county. An
examination of the certificates of incorporation filed in the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 61
county clerk's office discloses the fact that only about one corpo-
ration in ten claiming some town in this county as its principal
place of business, pays any personal property tax. Mne hundred
and eighty-two certificates of incorporation were on file with the
county clerk. This number includes those corporations that are
alive and claim some town in the county as the principal place of
business. A large number of these corporations are doubtless
practically dead for business purposes, and would have little or
no personal property subject to taxation. Of the 982, the in-
vestigator estimated that about 400 were actually alive and carry-
ing on business, and that the remainder, viz., about 582, though
legally alive, are practically dead so far as liability for personal
property taxes is concerned.
While these figures cannot be relied upon to determine the
actual extent to which corporations escape from the personal
property tax in County A, still they establish a strong presump-
tion that the personal property tax is evaded by a great many
corporations that ought to pay it.
Conclusions as to County A. (1) It is fair to assume that
a large number of corporations, through one means pr another,
escape paying their fair share of the personal property tax.
(2) It is definitely determined that the greatest inequality
exists as between towns.
(3) It is definitely determined that in most of the towns of
this county no attempt whatever is made to assess the personal
property tax upon corporations known to be subject to that tax.
County B. In County B the investigator obtained a complete
list of all corporations paying taxes of any kind. He did not
obtain a list of all corporations claiming County B as principal
place of business. The generalizations contained herein are based
upon the corporations listed upon the assessors' rolls for either
real or personal property tax. Of the fifty-two manufacturing
corporations listed upon the assessors' rolls, forty-four claim some
town in County B as principal place of business. Of the forty-
four manufacturing corporations claiming County B as prin-
cipal place of business, only eight pay any personal property tax,
and thirty-six pay no personal property tax of any kind. Of the
62 STATE OF NEW YORK
twelve towns in the county, ten contain manufacturing corpora-
tions claiming those towns as their principal places of business.
Of the ten towns, however, only two assess personal property to
any corporation. Eight towns containing corporations claiming
the town as the principal place of business fail to assess any
personal property whatever. The ratio of personal property as-
sessed to manufacturing corporations in this county to real prop-
erty assessed to manufacturing corporations, is about 1 to 75.
In the case of the mercantile corporations in County B, the fail-
ure to assess the personal property tax seems to be less flagrant
than in the case of the manufacturing corporations. So far as the
list could be completed, the facts are as follows :
Of the twenty-two mercantile corporations claiming County B
as principal place of business, nine pay a personal property tax
upon some small amount. Thirteen pay no personal property tax.
The ratio between the personal property tax paid and the real
property tax is about 1 to 13 for mercantile corporations. This
ratio, however, is misrepresentative of the actual assessment.
As explained above, some of the mercantile corporations paying
personal property tax own no real estate, and therefore in includ-
ing the amounts of personal property tax paid by such corpora-
tions we obtain a ratio of the aggregate personal property tax to
the aggregate real property tax, which is higher than the actual
assessment of personal property warrants.
In summarizing the investigation of County B, the following
conclusions stand out :
(1) In most of the localities of the county no effort whatever
is made to. assess personal property of manufacturing corporations.
(2) Mercantile corporations, although assessed more regularly
than manufacturing, are greatly under-assessed.
(3) The total assessment of personal property, the situs of
which is located in the county, is ridiculously low as compared
with the total of real property assessment.
County C. The investigation of the assessment of the per-
sonal property tax of general business corporations in County C
disclosed the following facts :
Forty manufacturing corporations claiming some town in
County C as principal place of business are assessed upon per-
sonal property to the value of $206,800, and upon real property
JOINT LEGISLATIVE COMMITTEE ON TAXATION 63
to the value of $945,500. The total amount of taxes collected
from these corporations was $31,945.45.
Of the forty manufacturing corporations claiming some town
in County C as the principal place of business, twenty-seven pay
a personal property tax and thirteen pay no personal property
tax. The ratio of the assessed valuation of corporation personal
property to the assessed valuation of corporation realty located in
the principal place of business is about 1 to 41/2.
Fifty-five mercantile corporations claim some town in County
C as their principal place of business. Of the fifty-five, all but
six pay a personal property tax. Of the fifty-five, only seventeen
pay real property tax. It is assumed that the remaining thirty-
eight rent the premises occupied and own no real estate. The
ratio of personalty assessment to realty assessment is about 1 to
41/9. In other words, seventeen corporations paying real estate
tax actually pay four and one-half times as much tax as the forty-
nine pay upon the personalty tax. The ratio of personalty to
realty under these conditions is quite unreliable.
Summary of County C. In summarizing the results of the
investigation in County C, the following points stand out :
(1) In County C the officials reach a very much larger pro-
portion of both the mercantile and manufacturing corporations
than are reached in Counties A and B described above.
(2) As between mercantile and manufacturing corporations,
no great discrepancy appears in County C.
It should be added, however, that the report on County C is
limited to one large manufacturing city. Had this county a
large number of small manufacturing towns, as in the case of
Counties A and B, we might expect to find the same failure to
assess the tax in the smaller towns.
County D. County D, located in the central part of the State,
contains one of the largest cities in the State, with a great many
mercantile and manufacturing corporations. The statistics gath-
ered cover all of the manufacturing and mercantile corpora-
tions listed on the tax assessors' books in the principal localities.
They do not include the corporations in six small places, most of
which contain no corporations. That part of the data lacking
64 STATE OF NEW YORK
would probably not amount to over 5 per cent of the total num-
ber of corporations doing business in this county.
Of 240 manufacturing corporations actually engaged in busi-
ness and claiming County D as principal place of business, 167
paid personal property taxes in the year 1914, and 73 paid no
personal property taxes.
Of the 150 mercantile corporations claiming County D as
principal place of business, 100 paid personal property taxes and
50 paid no personal property tax.
From the sources available to the investigator, it was impossi-
ble to determine how much personal property tax should have
been paid under the law by most of the corporations. It is be-
lieved, however, that not only a considerable number of corpora-
tions claiming this county as principal place of business pay less
than they ought to, but also that a large number of corporations
claiming this -county as principal place of business paid no per-
sonal property 5 tax whatever.
The records appear to be very unreliable. Thirty-four mercan-
tile corporations out of 160 doing business in one of the cities
have no principal place of business on record in the office of the
Secretary of State. Notwithstanding this fact, most of them
are paying, a personal property tax in County D.
The data collected by the investigator in this county is not of
much value for the purposes of determining the extent of the
evasion of the personal property tax. It is of value, however, as
evidence of the slipshod way in which the records of corporations
are kept in this State.
County E. County E contains one of the smaller but princi-
pal manufacturing cities of the State. This county contains
four cities and towns that include mercantile or manufacturing
corporations of importance. Of the four localities, only one
assesses personal property tax to corporations.
Of the eighteen mercantile corporations claiming principal
place of business in County E, eleven pay personal property tax
and seven do not.
Of the forty-one manufacturing corporations claiming County
E ,as principal place of business, nineteen pay personal property
tax, while twenty-two pay no personal property tax.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 65
From the sources wliich were available to the investigator, it
was impossible to determine in the case of most of the corpora-
tions whether or not they were paying the full amount for which
they were liable under the law. In the few cases where the in-
vestigator was able to obtain sufficient data, it was found that
about one-half of them paid considerably less than they should
have paid. So much of the necessary data, however, was lacking,
that it is impossible to make any very positive generalizations.
The evidence brought to light, however, would seem to indicate
that here, as in the other counties, only a very weak attempt is
made to assess the personal property of corporations.
Another rough method of ascertaining the inequality of assess-
ing personal property as between towns within the county and
as between counties, is to compare the ratios of personal property
assessment to real property assessment. This is not an accurate
method of measuring, and probably in no individual case does
the ratio between personal property assessment .and real property
assessment express the correct ratio between personal property
legally subject to the tax and the real property assessment. The
limitations of this method are a3 follows :
(1) In some localities there may be a very large percentage
of personal property listed for taxation, not because the law is
rigorously enforced, but because a larger percentage of the prop-
erty in the community is in the name of corporations claiming
the locality in question as the principal place of business, while
the corporations may have real estate in the form of plants situ-
ated in surrounding towns. In this case the apparent high per-
centage which the personalty would bear to the realty in the given
locality would not indicate necessarily a rigorous enforcement
of the law. The facts might be found to be just the opposite.
(2) On the other hand, in another locality where there might
be a number of plants owned by corporations claiming an out-
side town as principal place of business, the ratio of personalty to
realty would necessarily be very low, for the reason that the
realty of the corporations would be assessed where located, while
the personalty located in those towns could not be assessed there.
In this case a rigorous assessment of the personal property actually
liable to taxation might still show upon the records a very low
66 STATE OF NEW YORK
ratio between the personal, property assessed and the real property
assessed. Notwithstanding the limitations of this method, we can
still gain some very interesting information as to the assessment
of personal property in New York State.
In our investigation of the five counties we find that the ratio
of personal property assessed to real property assessed varies all
the way from 1 to 4 to 1 to 75. In one case within the same
county we find the ratio of personal property assessed to vary
almost as widely as indicated above. In two; counties situated in
the same part of the State, each of which has a fair proportion
of manufacturing, it is found that in one county where most of
the corporations taxed, either for realty or personalty, claim
some town in the county as the principal place of business, the
ratio of personalty to realty in one city of the first county is 1 to
10, while the ratio for the county as a whole is about 1 to 25.
In the other county in which most of the corporations taxed upon
realty claim some town in the county as the principal place of
business, the ratio of personal property assessment to real prop-
erty assessment of manufacturing corporations is only about 1
to 75.
While it cannot be said, of course, that the inequality in the
assessment of the personal property tax is accurately represented
by the above difference in, ratios, it is clear that after discounting
for all possible variations growing out of reasons indicated above,
still the actual inequality of assessment must be very great. In
the case of the mercantile corporations the actual inequality is
likely to be much greater than is indicated by the ratio of per-
sonal property assessment and real property assessment. Many
mercantile corporations rent their premises and are subject to
no real property tax of any kind. In those localities having a large
proportion of their corporate investment in mercantile corpora-
tions, the ratio of personalty to realty ought to be very high.
CHAPTER III
DECLINE IN THE PERSONAL PROPERTY ASSESSMENT IN NEW YORK
STATE
Another telling piece of evidence as to the failure of the per-
sonal property tax in New York is found in the records of the
Federal Census and the annual reports of the State Board of Tax
JOINT LEGISLATIVE COMMITTEE ON TAXATION 67
Commissioners. These reports contain the records of the per-
centage of the assessment of personal property to the total assess-
ment for every county of the State from 1840 to 1914. In
Appendix A-IV-I will be found the details of these percentages.
We give immediately following a brief analysis of this appendix.
Appendix A-IV-I includes a statement of the percentage of
the assessment of personal property to the total assessment for
each county of the State for the years 1840, 1845, 1850, 1855,
1860, 1866, 1870, 1875, 1880, 1885, 1890, 1895 and 1900;
(2) includes the same data for the years 1 1903, 1904, 1905, 1906,
1907, 1908, 1909, 1910, 1911, 1912, 1913 and 1914.
This table shows that there has been a steady decrease in the
percentage of assessed personal property to the total assessment
from 1866 down to 1914. This percentage has decreased in
practically every one of the sixty-two counties. For the State
as a whole it has decreased from 25.5 per cent in 1866 to 3.77
per cent in 1914. During this same period the actual ratio of
total personal property in the State to total real property has un-
doubtedly increased greatly. It is conceded by all experts that
the total amount of personal property probably exceeds that of real
property.
In examining this table three questions may be asked :
(1) Has the percentage of personal property in the State to
eal property in the State declined since 1866 ?
(2) Has the percentage of taxable personal property to tax-
ible real property declined since 1866 ?
(3) During recent years the State has segregated certain
forms of personal property, such as bank shares, mortgages, vehi-
cles, etc., and has devised new special forms of taxation to cover
;hese classes. Has the apparent decline in the percentage of per-
jonal property assessed to the total assessment been due to the
:*act that these special forms of personalty have been taken out
Tom under the general property tax ?
In reply to the first question: It is well known that since 1866
he ratio of personal property to real property has increased
ffiormously. This is borne out by the best statistical evidence
hat we have. As to what is the exact ratio between the two at
he present time it is impossible to say. Various estimates have
68 STATE OF NEW YORK
been made, some authorities claiming that the personal property
is now about three and one-half times as great as real property.
Practically all agree that the total amount of personal property
is now at least equal to the total amount of real property.
In answer to the second question, it also may be said that not-
withstanding all exemptions in the State of New York the per-
centage of taxable personal property to taxable real property has
increased to a marked degree since 1866.
In answer to the third question, it must be admitted that in
taking away from the general property tax mortgages, bank
shares, etc., the amount of personal property actually liable to
taxation under the general property tax has been diminished.
The table referred to, however, shows that the ratio of assessed
personal property to total assessment steadily decreased without
regard to the years when these special forms of taxation were
introduced. In other words, while the segregation of these forms
of personalty did reduce for the time being the actual amount
of personalty liable to taxation, it had practically no effect upon
the percentage of personalty to reality that was assessed.
To summarize: During the last fifty years the ratio of per-
sonal property to real property has greatly increased, the ratio
of taxable personalty to taxable realty has greatly increased,
and the ratio of personalty taxable under the general property tax
to the total assessment under the general property tax has in-
creased. The actual assessment on the other hand has decreased
from 25% per cent to 3.77 per cent.
CHAPTER IV
PERSONAL PROPERTY ASSESSMENT IN NEW YORK CITY
Taking up the personal property assessments in rather more
detailed form, we will first consider the situation in New York
City from 1907 to 1914, and then take up the personal property
assessment as we found it in the other cities and towns through-
out the State. The complete New York City figures will be
found in Appendix A-V.
The tables show that
(1) There has been a large decline in the tentative assessments
placed on the roll;
JOINT LEGISLATIVE COMMITTEE ON TAXATION 69
(2) There has been a sharp decline in the final assessment
retained on the roll;
(3) That there has been a very large increase in the percent
age retained, as compared with the original tentative assessment
Thus we find that the tentative assessment in Manhattan for
the year 1907 was $2,525,084,325 ; that the final assessment was
$432,654,158, or 17.1 per cent of the orginal assessment, was
retained. In 1914 in Manhattan the tentative assessment was
$622,825,820. The final assessment was $287,768,270, or 46.2
per cent of the original assessment.
In Brooklyn, in 1907, the tentative assessment amounted to
$444,188,425, and the final assessment was $92,866,547, or 20.9
3er cent of the original assessment. In 1914 the tentative as-
sessment amounted to $117,426,950, while the final assessment
amounted to $39,296,065, or 33.4 per cent of the original assess
ment.
A similar situation was found to exist in the other boroughs.
These figures would seem to indicate that in spite of a greater
efficiency on the party of the tax commissioners, as indicated by
the percentage retained on the tax rolls, there is, nevertheless, a
constantly decreasing amount of personal property actually
reached for taxation.
CHAPTER V
OTHER CITIES AND TOWNS
In 1911 Mr. Lawson Purdy presented to the New York State
Conference on Taxation the results of his study of the working
;>f the personal property tax in cities and towns of the State
Following the lines of his investigation, we have made a further
study, and for purposes of comparison have used the identical
groupings that he used. Our statistics, which, of course, are
brought down to date, completely corroborate his findings. The
details of our investigation will be found in Appendix A VI,
Arranging all of the fifty-three cities of the State outside the
City of New York according to the proportion which their per-
sonal property assessment bears to their total assessment
In two cities personal assessment was less than 1 per cent.
In five cities personal assessment ranged from 1 to 3 per cent.
In five cities personal assessment ranged from 4 to 6 per cent
70 STATE OF NEW YORK
In ten cities personal assessment ranged from 6 to 8 per cent.
In seven cities personal assessment ranged from 8 to 11 per
cent.
In twelve cities personal assessment ranged from 11 to 13 per
cent.
In five cities personal assessment ranged from 13 to 18 per
cent.
In three cities personal assessment ranged from 18 to 20 per
cent.
In three cities personal assessment ranged from 20 to 21 per
cent.
In one city personal assessment is greater than 21 per cent.
The average per cent of personal assessment to total assess-
ment for the fifty-three cities is 7.8 per cent. It must be re-
membered that this is the tentative assessment. If we compare
the assessments in some of these cities with the assessments in
others, the inequalities of the personal property tax become
plainly evident. ' Thus, taking Buffalo, Lackawanna, Tonawanda,
Niagara Falls, Port Jervis, Kensselaer, Mt. Vernon, New
Eochelle, Dunkirk and Lockport on the one hand, and Hudson,
Utica, Geneva and Ogdensburg on the other, we find that the ten
cities first named have a population of 592,751. Assessed value
of real estate $485,267,340. Assessed value of personal prop-
erty $30,970,429.
Four Cities
Population 114,215
Eeal estate $66,554,338
Personal property 15,025,612
The ten cities have approximately five times the population of
the four; nearly eight times the real estate value, but only a
trifle more than twice the value of the personal property. Omit
now Buffalo, Dunkirk and Lockport, and the remaining seven
compare with the group of four as follows :
Seven Cities
Population 133,345
Real estate $135,328,812
Personal property 3,133,893
JOINT LEGISLATIVE COMMITTEE ON TAXATION 71
Four Cities
Population 114,215
Keal estate $66,554,338
Personal property 15,025,612
The personal assessment in the seven cities is 2.17 per cent
of the total assessment, while the personal assessment in the four
cities is 18.54 per cent of the total assessment. The per capita
assessment of personal property in the four cities is $131.55, and
in the seven cities it averages $24.14 and ranges from $7.88 in
Lackawanna to $54.48 in Port Jervis. The per capita assess-
ment of personal property in the other five is a follows:
New Kochelle $10 21
Mt. Vernon 11 12
Rensselaer 15 97
Niagara Falls 38 02
Tonawanda . 52 00
Dunkirk, New Rochelle and Lockport, the three of the original
ten cities omitted in the last comparison, have a population of
64,058, a real estate valuation of $51,722,154 and a personal
assessment of $2,032,070. Per capita personal assessment,
$31.72.
Towns. Now let us see what the report shows us as to the
conditions of the towns. There are 934 town, and the assessed
value of their personal and real property is approximately equal
to that of the fifty-three cities :
53 Cities
Real estate $1,585,978,451
Personal property 137,505,796
Total assessed value of property 1,723,484,247
934 Towns
Real estate $1,536,809,551
Personal property 84,730,979
Total assessed value of property 1,621,540,530
72 STATE OF ISTsw YORK
Arranging the 934 towns according to the assessed value of per-
sonal property, we have the following :
Number
Assessed value of personal property of towns
Assessed value of personal property $0.00 77
Greater than '$0.00 but less than $1,000 38
From $1,000 to $5,000 136
From $5,000 to $25,000 , 258
From $25,000 to $100,000 213
Over $100,000 212
934
Some of the towns in the first class are Green Island, West Al-
mond, Willing, Kirkwood, Binghamton, Olean, Arkwright, etc.
The towns of Hamilton and Washington counties, respectively,
are relatively most numerous here. Upon examining in greater
detail the range of the personal assessments of the towns in the
second class, we have :
Beekman, $50; Thurston, $100; Ulster, $150; Greenville,
$200 ; Richford and Hartsville, $300 each ; about 10 from $300
to $500 and about 20 from $500 to $600. Upon closer examina-
tion of the last class, we have the following interesting results :
About 75 towns show personal assessments ranging from
$100,000 to $200,000; about 55 towns from $200,000 to
$500,000; about 37 towns from $500,000 to $1,000,000; and only
6 towns of the 934 show an assessment greater than $1,000,000.
These honored six are: Elizabethtown, Batavia, Hempstead,
North Hempstead, Oyster Bay, and last but not least, Greenburg
(Westchester county), with the greatest assessment of all,
$3,225,040.
Assuming the rate to be 2 per cent, 509 towns, or 54 per cent
of the total number, get anywhere from nothing to a maximum
of $500 from the personal property tax; 22 per cent get $2,000
or less, while but 22% per cent get over $2,000.
In the language of Mr. Purdy : " What's the use ? "
PART V
FAILURE OF SECTION 12
INTRODUCTION
We shall divide the discussion of section 12 into the following
five divisions: (1) a statement of the law; (2) the impossibility
of enforcing the law; (3) the results of the Committee's investi-
gations into the working of the law; (4) the principal means
whereby corporations are enabled to escape taxation upon their
personal property; (5) why corporations are impelled to evade
personal property tax.
CHAPTER I
The taxation of the personal property of corporations for local
purposes is covered by section 12 of the Tax Law, which reads as
follows :
" The capital stock of every company liable to taxation,
except such part of it as shall have been excepted in the
assessment-roll or shall be exempt by law, together with its
surplus profits or reserve funds exceeding ten per centum of
its capital, after deducting the assessed value of its real
estate, and all shares of stock in other corporations actually
owned 'by such company, which are taxable on their capital
stock under the laws of this State, shall be assessed at its
actual value."
As is pointed out elsewhere, this law has proved wholly unin-
telligible, not only to the tax assessors, but to the tax attorneys
and, in part, to the courts themselves. It is, therefore, impos-
sible to understand the law without recourse to the court decisions.
For purposes of this report, little can be gained, however, by a
discussion of these decisions. It is sufficient to state that several
attempts have been made by the various taxing boards to inter-
pret the law as modified by the court decisions in such language
as can be understood by the average tax assessor. The State
Board of Tax Commissioners has made the following rule :
" From the total assets of the corporation (including full
value of real estate and personalty) and both taxable and
74 STATE OF NEW YORK
te^ ;? '
non-taxable property, deduct the value of the stock belonging
to the State, property exempt, non-taxable property (includ-
ing shares of stock of other corporations, patent rights and
good will), assessed value of the corporation's real estate,
debts of the corporation, and surplus, if any, up to ten per
centum of the capital."
The most careful attempt to explain the law has been made by
the commissioners of taxes and assessments of the City of New
York. The following blank schedule is used by the department
of taxes and assessments of the City of New York, not for the pur-
poses of original assessment but for purposes of reassessment in
those cases where the corporation objects to the original assess-
ment. This interpretation of section 12, as well as the blank
form, have been followed closely by several of the large cities of
the State:
The (Please state full name of the corporation), a corporation
organized under the laws of the State of New York, claiming to
be aggrieved by the assessed valuation of its property for the
year 1906, makes application by the undersigned, one of the
officers of the said corporation, to have the same revised and
corrected.
Dated, October 1, 1915.
STATE THE VALUE OF THE FOLLOWING ITEMS
Assets
All assets must be scheduled, whether located in the State of
New York, or elsewhere, including deposits in banks and debts
due from nonresidents.
1. Heal estate $
2. Machinery, plant, office, furniture and fixtures
other than real estate. .-....,
3. Goods, wares and merchandise
4. All other tangible personal property. (This
does not include mortgages or credits. )
5. Cash on hand and on deposit
6. Debts due from solvent debtors. (This includes
bonds and all credits, also " secured debts.")
JOINT LEGISLATIVE COMMITTEE ON TAXATION
75
7. Shares of stock of other corporations. ....... $
8. Value at which patent rights, copyrights, trade-
marks, good will and franchises were taken in
payment for capital stock
9. The aggregate of the above assets,
10. Property exempt
by law which ^
includes.
Deductions
Except the items numbered 12, 15, 17 and 18, the value of
every item to be deducted must be the sum at which it is included
in the above statement of assets.
U. S. Bonds, K Y. State
and Municipal Bonds ... $
N. Y. Mortgages recorded
on or after July 1, 1906,
and mortgages on which
a registration tax has
been paid since May 13,
1907, also " secured
debts." (This includes
only mortgages and " se-
cured debts " owned by
the corporation) ....... $
Goods imported by above
corporation from for-
eign countries on hand
in unbroken original
packages $
11. Value at which patent rights, copyrights,
trademarks, goodwill and franchises were
taken in payment for capital stock. ....... $
12. So much of the surplus, if any, as shall not
exceed ten per centum of the par value of
the shares of stock issued $
13. Shares of stock of other corporations actually
owned by the above corporation which are
taxable upon their capital stock. ......... $
76 STATE OF NEW YORK
14. Tangible personal property having a perma-
nent situs outside of this State, specifying
its nature and location. (This does not
include bonds, notes, evidences of debt of
any kind, currency, deposits in banks, bills
receivable, or any other intangible prop-
erty.)
15. The assessed value of the corporation's real
estate in this State, including its special
franchises. Give Section or Ward and Lot
Numbers if in the City of New York
16. Eeal estate outside of this State, specifying
its location
17. Indebtedness secured by the corporation's
bond and mortgage on real property to
which corporation now holds title
18. All other indebtedness of the cor-
poration not contracted or in
curred in the purchase of non-
taxable property or securities, or
for the purpose of evading taxa-
tion. (The amount owing for
goods imported by above corpo-
ration from foreign countries on
hand in unbroken packages and
the capital stock of the corpora-
Bonds not
secured by
mortgage of
real estate.
Notes ....
Open ac-
counts .
tion must not be included.
Itemized as follows :
19. The aggregate of the items set down in answer
to questions 10 to 18 inclusive
J
Additional Information Required
a. Total par value of capital stock issued . $
b. Rate of last dividend Date
c. Amount of surplus, if any, as shown by the
books ...... $
d. Amount of indebtedness for above imported
goods; this amount is not included in No.
18 but is an addition thereto. . .... $
JOINT LEGISLATIVE COMMITTEE ON TAXATION 77
Gross assets as shown by answer to question 9 .... $
Aggregate of deductions from gross assets as
shown by answer to question 19 $
Subtract the deductions from the above assets. . . .
Add " secured debts " upon which no registration
tax has been paid .
The result is the CAPITAL STOCK LIABLE TO TAX-
ATION .
The principal office or the place of transacting the Financial
Business of the said corporation is situated in the Borough of
Manhattan, in the City of New York, at !NTo. . . street.
CHAPTER II
IMPOSSIBILITY OF ENFORCING SECTION 12.
In order to understand how utterly impossible is the present
system of taxing corporations upon their personal property, it is
important to know wherein the law is unenforceable.
In the first place, it is framed in such ambiguous terms as to
be thoroughly obscure to the mind of the average assessors. It has
been called the most ambiguous and unintelligible tax statute in
the United States. Without recourse to court decisions it is im-
possible to have much idea as to what the law means and these
court decisions are not known or understood by the average as-
sessor in the State. Indeed, there are very few tax attorneys
who pretend to understand the law. . Moreover, we may go fur-
ther iand say that the courts themselves have frankly stated that
they were in doublt as to what was intended by the language of
the law. The 2Tew York Court of Appeals, in the case of The
People ex rel. v. Commissioners of Taxes, 95 "N. Y. 554, stated
the following:
" There is a most extraordinary confusion of ideas in the
section * * * ." And again : " Its interpretation has
met some difficulty of solution by the very bungling and
confused manner in which the statutes, are worded/ 7
78 STATE OF NEW YORK
In the hearings of the Joint Legislative Committee on Taxa-
tion, held in New York City in November, 1915, there appeared
many competent witnesses who testified as to the confusion of
this law. In every case the witnesses testified that the law was
so ambiguous as to be utterly impossible of enforcement.
In the second place, were the law understandable, it would be
impossible for the assessors to obtain adequate information for its
enforcement. The sections 27, 28 and 29 of the Tax Law attempt
to provide means of obtaining this information. Section, 27 reads
as follows :
" The president or other proper officer of every moneyed
or stock corporation deriving an income or profit from its
capital or otherwise shall, on or before June fifteenth, de-
liver to one of the assessors of the tax district in which the
company is liable to be taxed and, if such tax district is in
a county embracing a portion of the forest preserve, to the
comptroller of the state, a written statement specifying:
" 1. The real property, if any, owned by such company, the
tax district in which the same is situated and, unless a rail-
road corporation, the sums actually paid therefor.
" 2. The capital stock actuaHy paid in and secured to be
paid in, excepting therefrom the sums paid for real property
and the amount of such capital stock held by the State and
by any incorporated literary or charitable institution, and
u 3. The tax district in which the principal office of the
company is situated or in case it has no principal office, the
tax district in which its operations are carried on.
" Such statement shall be verified by the officer making the
same to the effect that it is in all respects just and true. If
such statement is not made within twenty days after the
fifteenth day of June, or is insufficient, evasive or defective,
the assessors may compel the corporation to make a proper
statement by mandamus."
It is, however, the unanimous opinion of those having to do
with the enforcement of section 12 that section 27 is well-nigh
useless. While it requires corporations to file certain definite
information, this is not the information that is needed for pur-
poses of determining the taxable personalty of the corporations
JOINT LEGISLATIVE COMMITTEE ON TAXATION 79
under section 12. As pointed out in another chapter of this
report, in order to assess the personalty of corporations with any
degree of intelligence, it is necessary to obtain detailed informa-
tion upon no less than twenty-seven principal items of the corpora-
tion's financial affairs. The assessor cannot obtain information
in regard to these items directly from the corporations, nor can
he obtain the information, in most cases, from any public source.
An examination of Moody's Manual and of Poor's Manual dis-
closes the fact that not one corporation in ten publishes a balance
sheet containing any of the necessary information, and very few
publish adequate data.
In the third place, many assessors have no means of knowing
when; a corporation is taxable in their districts. Section 29 of the
Tax Law attempts to provide these means. It reads as follows:
" Between the first and fifteenth days of June in each
year the county clerk in each county of the State, except-
ing counties containing a city of the second class and coun-
ties wholly situate within the corporate limits of a city, shall
prepare from the records in his office and mail to each of the
town clerks in his said county, a certified statement contain-
ing the names of every stock corporation, whose certificate
of incorporation has been filed with him since his last pre-
ceding annual statements to said several town clerks, whose
principal business office or chief place of business is desig-
nated in its certificate of incorporation as being in such
town or in any village or hamlet therein, together with the
fact of such designation and the names and addresses of the
directors of each such corporation so far as said county clerk
can discover the same from the certificate of incorporation or
from the lastest certificate of election of directors of such
corporation filed in his office. Each town clerk receiving
such statement shall forthwith file the same in his office and
mail a notice of such filing to each of the assessors of his
town."
The Committee's investigation, however, disclosed the fact that
this section is in many localities a dead letter. "No compensa-
tion is allowed for this work, with the usual result that the local
clerks do not carry out the directions of the statute.
80 STATE OF NEW YORK
In the fourth place, even though the law were clear beyond
mistake, and even though all necessary information could be
obtained with the greatest facility, and even if the assessors were
always informed as to the local taxability of any corporation, it
would be utterly futile to expect the average tax official to assess
the personal property of corporations. This is especially true of
manufacturing corporations. The appraisal of a manufacturing
plant is a highly technical job. It involves not only wide train-
ing in accounting and some engineering, but also a special knowl-
edge of the particular branch of business to be appraised. Even
a rough estimate of the value of a manufacturing plant involves
a thorough understanding of principles of depreciation and ob-
solescence. When we add to this the difficulty of assessing large
stocks of raw materials and of goods in the process of manufac-
ture, as well as finished products, it is seen how utterly hopeless
it is to expect an untrained local assessor even to approximate
the value of such property. The comparative ease with which
the average corporation can keep from the average tax assessor
the knowledge necessary to a correct assessment is illustrated by
the difficulty which the Committee had in investigating some
2,500 corporations liable to taxation in the State of New York.
The Committee had much greater facilities for obtaining correct
information than the average assessor. In attempting to deter-
mine how much personal property should be assessed to these
corporations the Committee had access to Moody's Manual of
Corporations, to Poor's Manual, and to several other sources. It
employed statisticians and accountants who were trained to do
just this sort of work. In the end, however, it had the greatest
difficulty in obtaining the necessary information, and was able to
obtain sufficient data concerning only about one hundred of these
corporations. Even after carefully sifting the doubtful cases, it
was still doubtful whether the Committee was able to obtain
anything more than a very rough estimate of the amount of per-
sonalty taxable to these corporations under the law. In order
to do full justice to corporations they were given the benefit
of the doubt in every case. While this is the fair thins; to do
for purposes of investigation, it would not be the fair thing to
mittee is convinced that it is a comparatively easy thing for most
do for purposes of taxation. In view of its experience, the Com-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 81
corporations to keep from the assessor the data necessary to any-
thing like a complete assessment. In this respect the New York
assessor is in a situation in no way different from that of the other
states of the Union that still adhere to the outworn, mediaeval
system of local assessment of corporate personalty. The utter
fatuity of this system is borne out by overwhelming evidence in
every state in the Union. Wherever anything like scientific ap-
praisal and assessment of corporation property has been accom-
plished, it has been necessary to break away from the local assess-
ment. In concluding this paragraph, it is sufficient to say that
every tax authority in the United States agrees that it is utterly
hopeless and impossible to assess under a corporation tax law
such as that now prescribed by section 12 of the New York law.
CHAPTER III
THE COMMITTEE'S INVESTIGATION OF SECTION 12
In order to obtain a measure of the practical workings of sec-
tion 12, the Committee undertook several investigations, the
results of which are given below.
Investigation of Some 2,500 Corporations. The names of
some 2,500 general business corporations actually doing business
in the State of New York were obtained. This list was largely
made up of domestic corporations, and included mercantile, manu-
facturing and other general business corporations. It did not
in any case include public service corporations, moneyed corpo-
rations or philanthropic and non-stock corporations. The list
was selected entirely at random. Some of the names were ob-
tained by investigators, who went through the city directories,
telephone directories, etc., of various counties. Some of the
names were obtained by an assistant who went through Moody's
Manual, selecting domestic corporations, without any knowledge
as to the purpose for which the names of the corporations were
to be used.
In ascertaining whether or not the corporations in question
were paying all of the personal property tax on which they were
82 STATE OF NEW YORK
liable under section 12, the following routine of procedure was
followed :
(1) An attempt was made to obtain from Moody's Manual or
Poor's Manual a copy of the general balance sheet of the cor-
poration, with such other detail as to capitalization, bonded
indebtedness, etc., as was necessary to determine what the cor-
poration should pay.
(2) From the Secretary of State's office, or from the county
clerk's office, information was obtained as to what town was
claimed by the corporation as the principal place of business.
(3) An inquiry was sent to the local taxing officer as to the
amount of personal property tax paid by the given corporation.
Of the some 2,500 corporations, it was possible to locate the
names of only about 300 in the corporation manuals. Of the
300, it was necessary after a study of the data recorded to dis-
card the names of about 200 corporations. In the case of the
latter, either the balance sheet was wholly missing or the report
lacked some of the details that were absolutely essential, even to
a rough estimate of the amount of personal property which these
corporations should pay under section 12. Of the remaining 100
names of corporations listed in the corporation manuals, a care-
ful study was made of their balance sheets, and an attempt was
made to estimate the amount of personal property which each
should pay according to law.
An examination of the New York City blank form given above,
which contains some 19 principal headings and several sub-
headings, will indicate with what difficulty the Committee was
able to determine the amount of personal property tax which
should be paid by any given corporation. In order to estimate
with approximate accuracy the amount of personal property sub-
ject to taxation, it is necessary to have quite correct informa-
tion in regard to items 10, 11, 12, 13 and 14. From the
balance sheets and other data obtained from the corporation man-
uals, it was found very difficult to determine in any given case
the amount which should be set opposite items Nos. 10, 12, 13
and 14. Wherever in any case doubt existed, the benefit of the
doubt was given to the corporation. From the financial state-
ments of the corporations it was often impossible to determine
JOINT LEGISLATIVE COMMITTEE ON TAXATION 83
what percentage of securities held by the corporation should be
allowed under item 10. Wherever securities were so listed, a
deduction was allowed of the total amount.
In regard to item No. 11, it was always impossible to deter-
mine what percentage of the value of patent rights, copyrights,
trade mark, good will, etc., listed in the general balance sheets
of the corporation, was taken in payment for capital stock.
Although the value of patent rights, good will, etc., in some cor-
porations amounted to as high as two-thirds of their total assets,
they were in every case deducted in whole from the taxable assets.
In regard to item 13, it was impossible to determine from
the financial statements obtained what percentage of the shares
of stock of other corporations actually owned by the corporation
were taxable upon their capital stock. In every case the corpora-
tion was given the benefit of the doubt, and it was assumed that
the total amount of shares of stock so held had been taxed else-
where and were therefore exempted.
Without fairly accurate knowledge of the information called
for under item 14, it would be impossible to approximate the
amount of personal property in any given case which should be
assessed under section 12.
It was impossible for the Committee to obtain access to any
source that revealed this information, and it therefore resorted
to the following four methods of determining the amount of tan-
gible personal property having a permanent situs in the State:
(1) Where details were given as to the total capacity or out-
put of manufacturing plants of a given corporation, in addition
to the details of the capacity or output of each plant, it was
assumed that the tangible personal property located within the
State would bear about the same ratio to the total tangible per-
sonal property as the capacity or output of the plants within the
State bore to the total capacity or output of all the plants.
(2) Where the details of the acreage of the various plants
were stated, it was assumed that the amount of tangible personal
property within the State would bear about the same ratio to the
total tangible personal property as the acreage of plants within
the State bore to the total acreage of plants.
(3) In the case of mercantile corporations, information was
obtained from the Comptroller's office as to the proportion of
84 STATE OF NEW YORK
total assets subject to taxation under section 182. This propor-
tion of assets was assumed to represent roughly the proportion
of tangible personalty situated within the State.
(4) In the case of other corporations whose business was
known to be done largely in the State of New York, an arbitrary
but conservative estimate was made of the proportion of business
that was done in this State ; and in the case of such corporations,
it was assumed that the percentage of tangible personalty situa-
ted in New York would be approximately the same as the per-
centage of total business carried on in New York. The results
of this investigation will be found in the tabulation given in
Appendix D-I.
We give below a list of twenty-five corporations taken from
Appendix D-I. This group is not selected but includes the names
of those corporations about which we were able to obtain data
sufficiently complete. The list is as follows :
Amount
Amount of actual
of taxable
assessment under
Designation of Corporation
personalty
section 12
A2
$4, 000, 000
$100, 000
A4
2, 100, 000
1,800
A5
8, 541, 000
750, 000
B3
352, 877
B9
1,634,913
C2
350, 524
C3
3,759.361
25. 000
Co
85, 573
150, 000
El
332, 108
E2
5,758,831
E3
1, 000, 000
F2
1, 033, 691
G2
42, 850, 000
1, 100, 000
G3
1,066,714
G6
497, 000
8,000
G7
887,112
G8
78, 356
LI
3,512,752
Ml
9, 608, 055
1,200,000
Nl
1, 027, 488
N9
445,865
S2
301,105
5.000
S3
998. 906
Wl
300, 502
Total . , $90, 522, 733 $3, 339, 800
JOINT LEGISLATIVE COMMITTEE ON TAXATION 85
The summary of this list is as follows:
Total number of corporations listed 24
Total taxable personalty $90,522,733
Aggregate actual assessment 3,339,800
Percentage of taxable personalty actually paid. ... 3.46%
Percentage of taxable personalty legally liable but
evaded 9G . 54%
Further comment on the above is unnecessary.
Important as these results are in disclosing the failure of the
personal property tax of corporations, they do not disclose the
full significance of that failure. In the first place, corporations
are permitted through the peculiar features of the New York
Tax Law to escape by thoroughly legal means from paying taxes
upon an important portion of their personalty that yields large
returns. This investigation, however, attempted to determine not
what corporations should pay fairly, but only what they should
pay under the generous New York Tax Law. The results dis-
closed the fact that even after reducing, through the peculiarities
of the law, the amount of taxable personalty to as low as one-fifth
or less of the actual personalty owned, the larger part of this one-
fifth is usually evaded. Furthermore, reference to the other in-
vestigations of the Committee, carried on by means of voluntary
returns from general business corporations, shows that the volun-
tary reports of the corporations disclosed the failure of the law
to a greater degree than the original investigation of the Com-
mittee.
In order to understand, not only to what extent the law is
evaded, but also how the result is very unequal even where the
tax law is enforced we may examine the facts in regard to a few
of these corporations.
Corporation A-4:
Has an authorized capitalization of $10,000,000 and capital
stock outstanding of $3,000,000. No bonded debt.
This corporation has its actual place of business and its only
factory located on Long Island, but claims as its principal place of
business a little town up in the northwestern part of the State.
Its total assets are $3,651,524.
86 STATE OF NEW YORK
A careful analysis of its balance sheet results in the conclusion
that the minimum amount of personal property, after making all
possible deductions according to the law, is $742,630. This cor-
poration actually paid upon an assessed value of $1,800. In this
case the estimate was less than one-fourth of 1 per cent of the
minimum amount taxable under the law.
Corporation A-5:
A large manufacturing corporation located in the centre of the
State, claiming as its principal place of business the city in which
its largest plants are located. It is capitalized for $50,000,000
and has a bonded debt of approximately $7,729,000. Its total
assets amount to over $73,000,000. After deducting all possible
deductions and giving the corporation the benefit of the doubt in
every case, there is left $3,655,291 of taxable personal property.
A reasonable estimate of this corporation's taxable personalty
would be several times this amount, but in order to give the cor-
poration the benefit of every doubt the figure given was selected.
This corporation pays personal property tax upon the estimate of
$750,000, or an amount which is only about 20 per cent of the
lowest possible amount subject to section 12.
Corporation A-8:
A paper manufacturing company with all of its mills located in
New York. Capital stock $350,000. No bonded indebtedness.
Pays dividends upon its 6 per cent preferred regularly and 20
per cent upon the common stock. Pays no personal property tax.
Corporation B-l :
An important corporation manufacturing optical goods. Cap-
ital stock, $600,000. No bonded indebtedness. Pays a personal
property tax upon assessment of $175,000. Impossible to obtain
sufficient data to determine whether corporation pays tax upon its
total taxable personal property. However, this company would
appear to be one of the exceptions, in that it probably pays all
that it ought to.
Corporation B-5:
A large shoe manufacturing company. Capital stock $9,900,-
000. Notes payable $2,336,000. Surplus $285,739. Total as-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 87
sets over $12,000,000. Good will, etc., about $5,000,000. Under
present law apparently no taxable personalty. Here is a con-
spicuous case illustrating the inadequacy of the present property
tax. A large corporation of great wealth with personalty to the
extent of $5,000,000 that would be taxable in other states. In
New York, however, the corporation can escape without paying
any personal property tax, although it enjoys a large income.
Corporation B-7:
A manufacturing corporation located in the northwestern part
of the State. Capital stock, $1,150,000. No bonded debt. Divi-
dends on preferred paid regularly. Dividends on common not
reported. This corporation pays upon a total personal property
assessment of $25,000. From the corporation manuals and other
material at the service of the Committee sufficient details cannot
be obtained to determine how large the personal property, assess-
ment should have been made.
Corporation B-8 :
A large furnace company with capital stock of $1,160,000. No
bonded debt. Preferred dividends are paid regularly, and com-
mon dividends are also paid but not made public. Net earnings
average nearly 20 per cent of the total capitalization. Corporation
paid taxes upon personal property assessed at $50,000. Here is
another case of a large corporation making unusually large divi-
dends with a personal property assessment that is insignificant as
compared with its total assets and capitalization.
Corporation B-10:
A by-products company. Capital stock $4,000,000, bonded
indebtedness $2,000,000, and total assets of $6,738,000. Under
the present law allowing deduction of bonded debt from person-
alty the corporation has no personal property liable to taxation.
Were the New York Law similar to that of most states, there
would be a large item of personalty liable to taxation.
88 STATE OF NEW YOK
CHAPTER IV
INVESTIGATION OF THE COMMITTEE BY MEANS OF VOLUNTARY
RETURNS OF GENERAL BUSINESS CORPORATIONS
Another plan of investigating the working of section 12 fol-
lowed by the Committee was by means of voluntary returns from
general business corporations. For the purpose of this investi-
gation the Commitee obtained the names of some 300 representa-
tive general business corporations and requested them to fill out a
blank form prepared by the Committee.
Of the 300 to whom this blank was sent, only a small per-
centage made returns, and in many cases the returns were incom-
plete. The Committee discarded the too incomplete returns and
based its conclusions upon only those complete or nearly complete.
In this connection it should be stated that in every case the Com-
mittee accepted the returns of the corporation without question.
While, for purposes of drawing conclusions, it was unfortunate
that a large number of returns could not be obtained, yet it is
believed that the data received does not underestimate the failure
of section 12. It is only reasonable to assume that those corpora-
tions voluntarily returning a statement of their taxable base
would be made up of the least offenders under the law. In as-
suming, therefore, that the data is typical of the situation we are
giving the corporations the benefit of the doubt.
In examining the data returned, it is nothing short of surpris-
ing to find how completely the personal property tax of corpora-
tions has broken down. An examination of Appendix D-IV,
which contains a tabulation of the facts gathered from these re-
turns, discloses two facts: that a large number of corporations
escape from paying taxes upon a large part of their personal
property through the bonded debt means or the good will means.
But entirely apart from this, it will be noted that most of the
corporations there listed also escape from paying taxes, if not
entirely, at least upon a large part of their taxable personal prop-
erty. The summary of the results brought out by this computa-
tion is as follows :
Of the fifteen corporations included in the list, six do not pay
any personal property tax whatever. These six, however, have a
total capital stock outstanding of $19,719,200, and, according to
JOINT LEGISLATIVE COMMITTEE ON TAXATION 89
their own statements, have a total capital stock liable to taxation
of $4,962,003.19. The remaining nine corporations, acec/rding
to their own statements, have an aggregate capital stock liable to
taxation of $3,019,851.75, and pay on an actual assessment of
$1,303,405.50. For the whole group the percentage of capital
stock liable to taxation actually assessed varies from O 1 per cent to
121.2 per cent.
An examination of the last column of the tabulation in the ap-
pendix will explain in part why many of these corporations own-
ing millions of personal property are actually liable for such a
small percentage under the Tax Law. While the column entitled
" Actual assessment, percentage of taxable personalty " will not
explain why the system fails so completely, it shows unmistakably
what an almost complete farce is this personal property tax of
corporations. The following typical cases serve to illustrate this
point further:
Take, for example, Corporation SS-2, with an outstanding
capital of $10,000,000, paying dividends to the amount of
$600,000 a year, or at the rate of 6 per cent. This corporation
is not assessed for a dollar's worth of personal property and pays
no taxes.
Corporation AA-1 :
This corporation has outstanding capital of $900,000. Total
assets, $1,326.617.98. Good will, $50-0,000. Total deductions
allowed under section 12, $837,124.58. Personal property liable
to taxation, $489,493.40. This corporation pays no personal
property tax.
Corporation AA-2:
This corporation is a manufacturer of engines and boilers. It
has a total outstanding stock of $700,000. Total assets, $741,622.
Total deductions allowed under the law, $143,005. Personal
property liable to taxation under section 12, $598,617. The cor-
poration was assessed for $250,650 personal property. This
assessment was equal to less than one-half of the taxable personal
property. It is, however, unusual for corporations to be assessed
up to as much as one-half of their taxable personalty. This case
constitutes an exception to the general rule.
90 STATE OF NEW YORK
Corporation BB-1:
This corporation has total assets of $2,249,655.05 and a capital
stock issued of $500,000, The total deductions permitted under
the law are $1,521,205.49. The amount of taxable personalty is
$628,449.56. This corporation pays no personal property tax.
Corporation BB-2:
This corporation has an issued capital stock of $7,000,000,
a surplus of over $2,500,000, and annual net earnings varying
from $860,000 to $1,700,000. It pays upon personal property
assessed at $393,220. This corporation has an annual interest
charge of over $500,000 upon bonded indebtedness, or in other
words has a bonded -indebtedness of approximately $9,000,000.
Here is another case where a corporation with a large amount of
personal property is allowed to escape with a very small assess-
ment as the result of the peculiarity in the New York law which
permits deduction of total indebtedness from personal property.
Corporation CC-1 :
This corporation has capital stock of $150,000 and total assets
of $609,346. It pays interest upon bonded indebtedness of
$6,315, or in other words has a bonded indebtedness of an average
of $500,000. It pays a personal property tax of $374, which at
a 2 per cent rate of taxation represents an assessment of $18,700.
After allowing for all legal deductions it still has taxable per-
sonalty of $58,204. It pays, therefore, a tax upon less than
one-third of its taxable personalty. Were it not for the bonded
indebtedness the taxable personalty would be several times as
great.
Corporation GG-1:
This corporation is capitalized for $383,600, and has total
assets of $1,035,298.52. It has taxable personal property of
$695,945, and pays a personal property tax of $106.07. It
actually paid upon an assessment of $4,925.28. This assess-
ment was less than 1 per cent of its actual taxable personal
property.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 91
Corporation HH-1 :
This corporation has capital stock of $800,000 and assets of
$757,763. It has taxable personalty to the value uf $325,954,
and was assessed upon only $45,000. This is a clear case of
under assessment, but this assessment represents a much higher
proportion of actual taxable personalty than the ordinary assess-
ment.
Corporation LL-1 :
This corporation has a capital stock of $1,600,000 and total
assets of nearly $2,400,000. After making all deductions per-
mitted under the law it still has taxable personal property to the
value of over $1,000,000. It pays no personal property tax of
any kind.
CHAPTER V
INVESTIGATION OF THE WORKING OF SECTION 12 THROUGH THE
MEANS OF VOLUNTARY RETURNS OF CORPORATIONS
For the data used in this investigation, the Committee is in-
debted to the Associated Manufacturers and Merchants Associa-
tion of New York. At the request of the Committee the associa-
tion undertook to gather from all of the important manufacturers
within the State the necessary data. In this way the Committee
received sworn statements from thirty-four of the more important
business corporations in the State. In appendix D-Y will be found
a tabulation of the more important data obtained from these
statements. It is not necessary to go into much detail in explain-
ing this data. It speaks for itself. The important point to note
is, that in so far as it bears upon the failure of section 12, it coin-
cides very closely with the results of the other investigations of
the Committee. Moreover, it bears out completely the conclusions
of the Committee that have been based upon the other investiga-
tions. An examination of a few of these returns will serve to
confirm our statements.
For example, corporation 'No. 252, according to its own state-
ment, is liable under section 12 for an assessment of $57,022.20,
but was actually assessed for only $1,780.
Corporation No. 424 was actually liable, according to its own
statement, for a personal property assessment of $785,138.11. It
was assessed upon $200,043.
92 STATE OF NEW YORK
A still more flagrant case is No. 444. This corporation, accord-
ing to its own statement, should have paid taxes upon an assess-
ment of $1,232,502.60, and it was actually assessed upon only
$59,427.
Corporation No. 467 was liable to assessment for $2,071,-
665.76, and was not assessed for personal property.
Corporation No. 449 was liable to assessment for over a mil-
lion dollars, and paid no personal property tax.
Corporation No. 546 was liable to assessment upon $1,830,860,
and paid on $15,096.50.
On the other hand, there are several cases in which corpora-
tions have paid all that they were liable for. The table illustrates,
therefore, not only that these corporations as a group are ridicu-
lously under-assessed, but that there is an utter lack of uniformity
as to the percentage at which the various corporations are as-
sessed, some of them being assessed from nothing to ten per cent
of their taxable personalty, while others are assessed for one hun-
dred per cent.
CHAPTER VI
HOW CORPORATIONS ESCAPE THE PERSONAL PROPERTY TAX IN
NEW YORK STATE
In the attempt to construct a scientific and at the same time a
thoroughly practical method of reaching that great body of cor-
porate wealth that now escapes taxation, the first step is to take
notice of the means whereby the present system permits this
escape. Under the New York Tax Law there are no less than five
important ways through which corporations may escape their fair
share of the tax burden. If any system for successfully reaching
corporate wealth is to be devised, it must take into account all
these methods of evasion. Some of these methods may be classed
as illegal, but the means by which the larger part of corporate
personalty escapes its fair share may be called thoroughly legal.
In other words, the present evasion is due not to the disposition of
the corporations to evade the legal requirements of the statute,
but to their effort to evade through the legal channels a system of
taxation which, if actually enforced, would impose great hardship
upon them. This possibility of evasion is not limited to the
present system, but is to be found to a more or less extent with
some other systems that have been proposed. For purposes of con-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 93
structive reform it is therefore of utmost importance that we con-
sider the means whereby corporations may escape their fair bur-
den of personal property taxation.
In the first place, the corporation may escape part of its per-
sonal property taxation by taking advantage of that feature of the
New York Tax Law which permits a corporation to select as its
principal place of business any locality in the State. This locality
may be where it transacts an important part of its business, or it
may be a little obscure place, far removed from the site of any of
its business. Owing to another peculiar feature of the New York
Law which makes the situs of all personal property for purposes
of taxation the principal place of business, the corporation may
limit the power of taxing its personalty to the one small locality
which it selects as the legal principal place of business. It may
have large stocks of goods in the principal cities of the State and
enjoy fire protection, police protection, etc., without distributing
one cent to the maintenance of the government of those cities. It
may have large amount of tangible personal property located in
cities where the cost of government is very high, and by trans-
ferring its principal place of business to some little obscure town
where the expenses of government are very low, it may escape
with a very low rate of taxation. More than that, it may, and
very often docs, escape without paying any personal property tax
in any place.
In our investigation of the assessment of the personal property
of several hundred corporations, we found a number of cases in
which corporations claimed particular towns as principal place of
business, while the tax officers were ignorant of the fact and had
never assessed them.
For the purpose of evading their fair share in the localities
where they actually carry on their business and have their tangi-
ble assets located, corporations have been accustomed to select cer-
tain localities. These localities are notorious either for the low
tax rate or for their willingness to assess the corporations only at
a nominal amount. Through this means many cities have been
deprived of a large amount of their legitimate tax base.
The extent of this evil is well borne out both by the testimony
of the witnesses before the hearings of the Joint Legislature Com-
mittee on Taxation and by numerous investigations. The results
94 STATE OF NEW YORK
of the investigation are set forth in the appendix of this report.
Appendix D-II and D-III bear upon this point.
Appendix D-II contains a list of corporations in a single town
that was presented to the New York Constitutional Convention of
1915 from data furnished by the office of the State Board of Tax
Commissioners. The summary of this table is as follows:
1. Number of corporations 51
2. Aggregate capital stock $33,257,370
3. Aggregate assessment , 60,700
4. Percentage of aggregate assessment to aggre-
gate capital stock . 18%
or less than one-fifth of one per cent.
While the percentage of assessment to capital stock of any
particular corporation does not necessarily reflect the degree of
evasion with accuracy, yet in the aggregate the comparison is
highly significant. The most interesting fact is that very few, if
indeed any, of these corporations, do any business in the town of
Esopus.
Appendix D-III contains a list of corporations that claim the
town of Washington, county of Dutchess, as the principal place
of business. The summary of this table is as follows :
1. Number of corporations 43
2. Aggregate of capital stock $52,302,000
3. Aggregate assessment 477,500
4. Aggregate assessment as per cent of aggre-
gate capital stock 0.91%
or less than one per cent.
The conclusions from this table coincide at every point with
those of every other piece of evidence presented to the Committee,
namely, that corporations select as " principal place of business "
towns in which they actually do no business for the purpose of
evading the personal property tax.
The testimony of the various tax officials, including the Chair-
man of the State Board of Tax Commissioners, is completely cor-
roborative of the Committee's investigation. Chairman Saxe tes-
tified that this evil was of widespread importance. He stated
that conditions similar to those of Esopus and Dutchess county
JOINT LEGISLATIVE COMMITTEE ON TAXATION 95
" obtains in a great many of the so-called desirable taxing dis-
tricts, where these corporations locate their principal place of
business. You will find in that Esopus list, so-called, a large
number of New York city corporations, paying no tax here, and
paying a very nominal tax up there, for the privilege of escaping
taxation down here."
Mr. Joseph C. Wilson, President of the Board of Assessors
of the City of Rochester, testified that the City of Rochester loses
millions of dollars of taxable base through the custom of corpora-
tions to transfer their so-called principal place of business. He
testified that many large corporations having their plants and
tangible personalty located in the large cities, transfer their so-
called principal place of business to one of the smaller towns for
the reason that the towns do not assess them, as high in many
cases as the cities. Furthermore, he testified that " the town
assessors do not know that they [corporations] are located there
and they escape without any tax whatever."
At the New York hearings, one of the former city comptrollers
testified to the same effect. He testified that there are hundreds
of corporations incorporated up-state for the purpose of evading
taxes which should be paid in New York City. Furthermore,
he said, " I am one of them I am entitled to do it under the
law, but it is not fair."
As to availing himself of the opportunity to escape taxation,
he said : " I have two offices in Esopus a tin box in each
I know I do it every chance I get, and I suppose every other man
does the same thing."
A second reason why corporations escape their personal pro-
perty tax is found in the failure of the local assessors to assess.
As has been pointed out in the previous chapter, this is partly
due to the ambiguity of the law and partly due to the fact that
the law provides no method for successfully checking up under-
assessments. The important point to be considered here, how-
ever, is the wide extent to which corporations escape taxation
through local favoritism. This is due not necessarily to the dis-
honesty of any particular group of tax assessors, but rather to the
fact that the system of locally assessing corporate property is one
which proves too great a test for human nature, and this statement
is as true of every other state in the Union as it is of New York
06 STATE OF NEW YORK
State. For thus locally favoring the corporations the assessor is
not to be blamed. In so doing he undoubtedly in most cases
acts in harmony with the wishes of the community. The com-
munities are eager to obtain factories and other corporate invest-
ment in their localities, and know that low rates will furnish an
inducement to a corporation to locate in their town. This evil
is inherent in any system of taxation that provides for the local
assessment of corporate personal property, and it can be rectified
only by changing the system completely.
Legal Means of Escaping Taxation. The most important
means by which corporations escape taxation are to be found in
two recognized institutions of the New York tax system. To
this extent the evasion is accomplished by thoroughly legal means.
These means are through New York's peculiar system of deduc-
ting indebtedness and of exempting, through omission, good will.
In a large number of states of the Union, corporations are per-
mitted to deduct debts from credits, but in New York State cor-
porations are permitted to deduct total indebtedness from per-
sonal property. As a result of this provision it is possible for
corporations to create a large bonded indebtedness, and thus to
escape entirely from taxation upon personal property. Especially
in the cases of those corporations having large amounts of valu-
able personal property, these means of evading the personal prop-
erty tax have been used.
The extent to which this evasion is accomplished was brought
out by the Committee's investigation into the relation between
the amount of bonded indebtedness and outstanding capital stock
of a large number of important New York corporations. In the
appendix will be found two tables illustrating this statement.
Appendix D-YI contains a tabulation of the bonded indebted-
ness and capital stock outstanding of 36 representative domestic
manufacturing corporations that were selected at random. Appen-
dix D-VI-2 contains a list of 36 domestic mercantile and miscel-
laneous corporations that were selected for the purpose of illus-
trating the large bonded indebtedness. Appendix D-VI-1 may be
said to be representative of manufacturing corporations as a
group. Appendix D-VI cannot be said to be representative in-
asmuch as those corporations were selected that had the largest
bonded indebtedness. However, bot v tables illustrate what a
JOINT LEGISLATIVE COMMITTEE ON TAXATION 97
large portion of the possible personal property tax base of cor-
porations is lost to New York State through these provisions.
The amount of taxable base so lost runs up into many hundreds
of million dollars annually. This one feature alone deprives
the ]STew York personal property tax on corporations of all
semblance of justice. The following is a summary of
Appendix D-VI-1 :
Number of corporations 36
Aggregate bonded debt $161,697,896
Aggregate capital stock outstanding 311,952,286
Bonded debt as per cent, of capital stock 51.8%
The following is a summary of Appendix D-VI-2 :
Number of corporations 38
Aggregate bonded debt $118,069,207
Aggregate capital stock outstanding 143,191,753
Bonded debt as per cent, of capital stock 82 . 4-%
The question naturally arises why the framers of the Tax Law
have enacted a provision containing such a large loophole. The
question was answered by Professor Seligman at the hearings of
the Joint Legislative Committee, as follows:
" The whole system of personal property taxes arose be-
for there were corporations; and when corporations de-
veloped, about the middle of the century, they first began
on a large scale in this State, they [legislators] simply
slapped that section [debt-deduction section] because they
thought it would solve the problem, and they did not realize
that the situation was an entirely new one. We therefore
go along in the old way, being one of the very few American
states which still retain their primitive method of assessing
corporations locally."
The fallacy of the deduction of bonded indebtedness from
personal property is evident to anyone who is familiar with
modern corporation finance. Legally, to be sure, funded debt is
iebt, but economically it is nothing of the kind. Economically
|>
98 STATE OF NEW YORK
it is a means of obtaining capital. This fact is recognized by
all authorities upon corporation finance and is recognized in the
accounting. Bonded indebtedness is but a part of the capitaliza-
tion of the corporation, and in the average corporation accounting
system, is included with capital stock under the general term of
capitalization. A bonded debt is not looked upon by the cor-
poration as a handicap, but as an advantage. While it is
legally a debt of the corporation and occupies the position of a
fixed charge, it is economically a part of the capitalization which
provides the revenues of the corporation. Just as the capital
stock, through a fiction of accounting, is a liability of the corpo-
ration, so the bonded investment, through a legal fiction, is called
a debt of the company. The corporation, however, looks upon
the debt not as a disadvantage, but as an advantage, and the ques-
tion which faces the corporation often is not whether there should
be a debt, but as to the proper proportions of the capital which
should be obtained through means of bonds and stock. It is clear,
therefore, that no sound reason exists for the deduction of bonded
indebtedness from personal property. The bonded indebtedness
instead of decreasing the earning power of the corporation, in-
creases it, and thus, instead of decreasing the ability of the corpo-
ration to pay taxes, increases the ability. This fact has been
recognized by the best tax commissions that have investigated
the taxation of personal property of corporations in other states,
and is also recognized by authorities on corporation finance.
Another important intangible element that represents large
earning power and therefore large ability to pay, is often grouped
in the corporation balance sheet under the designation " good
will." This item entirely escapes from taxation under the un-
usual section of the New York Tax Law pertaining to personal
property. In most states good will is not specifically designated
for purposes of taxation, but is, however, taxable by implication
under the general term " personal property." New York State,
however, departs from the usual custom. In designating what
personal property is taxable, New York State enumerates those
items that are included in the term " personal property." Prob-
ably through oversight the term " good will " was omitted from
this enumeration. The courts, however, have decided that good
will is not taxable under the New York Tax Law.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 99
The unreasonableness of this omission comes out clearly when
we consider what the element of good will stands for in the modern
corporation. The relation of good will to earning power, and
therefore to taxpaying ability, is very clear. In many corpora-
tions it represents nothing more than the capitalization of that
part of the earning power which is not derived from tangible
assets. To the extent that this is incorporated in patents and
copyrights, it is of course not taxable legally under the general
property tax. Economically, however, it represents taxpaying
ability.
But entirely apart from that portion of the good will which
represents copyrights and patents, the remainder, especially in
mercantile corporations, represents, in many cases, a large amount
of the real earning power of the corporation. Indeed, it is cus-
tomary in many corporations, after apportioning to their tangible
assets a part of their income at a reasonable rate of interest, to
capitalize the remainder of the income and designate it as good
will. In some corporations it is becoming the custom to write off
good will. This does not, however, destroy the earning capacity,
but only covers it up in a different form. In either case, this
intangible asset represents the best taxpaying ability of the
corporation.
This system deals with various types of corporations very un-
fairly. Wherever the law is enforced, those corporations, the
nature of the business of which requires a heavy investment in
tangible personalty, are subject to a very heavy tax. Those cor-
porations, on the other hand, the nature of whose business re-
quires a very small investment in tangible assets, escape with
almost no tax.
For purposes of illustrating this, the Committee compiled a
selected list of important domestic corporations having large earn-
ing capacity as compared with their tangible assets. This tabula-
tion is included in Appendix D-VIII, and contains a statement
of the value of the capital stock outstanding, the total assets, and
the value of the good will. The value of the good will was taken
from the balance sheets of the corporations, as published in
Mjoody's or Poor's Manual. In several cases it was found im-
possible to determine precisely what proportion of the total assets
100 STATE OF NEW YOKK
was made up of good will. In making up their balance sheets
some corporations have the habit of grouping one or more items
under the term good will. Very often patents, trade-marks, etc.,
are grouped under this heading. In come of these cases therefore
it cannot be said that the total amount set opposite the term good
will represents personalty that could be reached for purposes of
taxation under any general property system. In most cases, how-
ever, it is represented largely by intangible personalty that could
be reached were the New York law altered so as to include good
will within taxable personalty. And in almost every case it repre-
sents a just source of taxation. Reference to Appendix D-VII
will show that the 35 corporations there listed have an aggregate
good will valued at $287,651,371, while the total aggregate assets
of these corporations is only $497,327,898, and the capital stock
is $405,569,070. The aggregate good will is 70.9 per cent of the
capital stock outstanding and 57.8 per cent of the total assets.
A few examples will serve for illustration:
(1) The F. W. Company, possessing total assets of about $74,-
000,000, is absolutely untaxable in New York to the extent of
$50,000,000. And yet this $50,000,000 represents little more
than the capitalization, at a reasonable rate of return, of the very
large earnings of one of the most prosperous of New York
corporations.
(2) Another example is that of X. Y. Z., with a good will
valued at $15,000,000 out of a total asset of a little over
$21,000,000.
(3) Another prominent case is that of P. C. & Co., with total
assets of less than $22,000,000, $18,000,000 of which is listed as
good will.
In conclusion, it should be pointed out that this intangible
wealth can best be reached not by a general property tax, nor,
indeed, by a classified property tax (for a certain portion of it
cannot be reached by either), but by a tax levied according to
earning capacity or net income.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 101
CHAPTER VH
WHY CORPORATIONS ARE IMPELLED TO EVADE PERSONAL PROP-
ERTY TAX
In another portion of this report it has been pointed out that
a large proportion of the corporations doing business in the State
of J^ew York succeed in one way or another in evading entirely
or almost entirely their personal property tax. In some cases
this is done by making an arrangement with the local assessor
whereby the corporation agrees to choose the domicile of that local
assessor as ita principal place of business, providing the corpora-
tion shall be greatly under assessed. In another case it is ac-
complished by secrecy and deceit. In many cases it is accom-
plished through a technicality of the law, and in a large number
of cases it is accomplishel by legally evading the intent of the law
through the means of large bonded indebtedness.
The purpose of this paragraph is not to dwell upon the evasions
of the law, but to point out the fact that only through evasion can
the corporations avoid much injustice in matters of taxation. The
present personal property tax law as applied to corporations is
one of the most illogical, unenforced and unjust laws that has
ever been put upon the American statute books. Were it honestly
enforced many corporations would either be forced to leave the
State or be forced into bankruptcy. This is especially true in the
case of many manufacturing and mercantile corporations. In the
case of these types of corporations, the nature of the business of
which requires the carrying of a large stock of raw material and
partly finished products, or a large stock of finished products, the
enforcement of the personal property tax would result in not only
great injustice to the corporation but in great injury to the State
itself. The present personal property tax of twenty mills is
equivalent to an income tax of from 25 to 40 per cent, upon
that proportion of the assets embodied in personal property.
Were this tax enforced those corporations whose assets were largely
made up not of fixed capital but of current assets would be stimu-
lated to remove from the State as soon as possible. Those corpora-
tions whose assets were largely of specialized and fixed character
and thus lacked a ready market would be forced to remain within
the State, but in remaining within the State they would be forced
STATE OF NEW YORK
to compete upon unequal terms with corporations in other states.
It is needless to say that new capital would not invest in the
State of New York under such unfavorable conditions.
Another most unfair aspect of the present personal property tax
law is that when enforced it bears with great inequity upon those
corporations that are struggling to keep upon their feet. A per-
sonal property tax which amounts to 40 per cent, of the income
may be paid by a corporation enjoying a, fairly large income, but
a tax of this size when imposed upon a corporation that is strug-
gling to get upon its feet would mean in some cases ruin. In the
latter case it would result not in taking 40 per cent, of income,
because there would be no income, but the taking of capital value.
In looking up the financial condition of a large number of
corporations in the State of New York for the purpose of ascer-
taining whether or not corporations were paying the personal
property tax according to the present tax law, the Committee found
a number of corporations that were approaching dangerously near
to bankruptcy. In some of these cases the corporations were
forced to carry a large stock of tangible personalty. Had a gen-
eral property tax been rigidly enforced upon the later, and had
the corporations been unable to evade the law according to some of
the well-known methods in this State, some of these particular cor-
porations might have been forced to the wall.
In considering, therefore, the extent to which the corporations
are enabled to, and do, evade the personal property tax, it should
always be borne in mind that the corporations are evading a most
unjust tax, and moreover it should be borne in mind that the State
has imposed upon the corporations in many cases the necessity
either of evading this tax, or moving from the State, or going into
bankruptcy. The unescapable conclusion is not that the tax
should be rigidly enforced but that it is all wrong, out of date,
palpably unjust, and should be supplanted by a fair system.
PART VI
TAXATION OF FOREIGN CORPORATIONS
In no other state of the Union do foreign corporations consti-
tute such a large proportion of the legitimate tax base as in New
York State, and jet it is doubtful if in any other state of the
Union these corporations bear such a small proportion of their
fair tax burden. The problem of the foreign corporation is of
such large importance that the subject calls for a thorough ex-
amination. We shall deal with this subject under the following
four heads :
(1) The law regarding the taxation of the personal property
of foreign corporations.
(2) The failure of the law.
(3) Why foreign corporations in New York should contribute
substantially to both State and local government.
(4) Foreign corporations as a tax base present yield and
potential yield.
THE LAW REGARDING THE TAXATION OF PERSONAL PROPERTY OF
FOREIGN CORPORATIONS
Section 7, subdivision 1, of the New York Tax Law, which
applies to foreign corporations, reads as follows:
" Nonresidents of the State doing business in the State,
either as principals or partners, shall be taxed on the capital
invested in such business, as personal property, at the place
where such business is carried on, to the same extent as if
they were residents of the State."
The intrastate situs of foreign corporations, for purposes of
assessment for taxation, is only at the principal place of business.
(Bay State Shoe and LeatJi. Co. v. McLean, 80 N. Y. 254.) The
principal place of business may not necessarily be where the cor-
poration carries on its actual business or the larger amount of its
business, but at the place named in its certificate filed under sec-
tion 16 of the General Corporation Law as its principal place
within the State. (Armstrong Cork Co. v. Barker, 157 N. Y.
159.)
104 STATE OF NEW YOEK
In the matter of the taxation of foreign corporations, as in so
many other sections of the Tax Law dealing with corporations,
the exact meaning of the law is uncertain. It is impossible to
know what property of foreign corporations is taxable and under
what conditions such property is taxable, without referring to the
court decisions. These decisions have cleared up the matter to
some extent, but still leave considerable doubt as to several im-
portant points. In 1915 the Department of Taxes and Assess-
ments of the City of New York issued a pamphlet entitled
" Memorandum of Examinations on Applications for Correction
of Personal Assessments." This pamphlet contains the best short
summary of the essential. points affecting the taxation of foreign
corporations that has_ appeard. The following brief summary
consists largely of extracts from this pamphlet.
Recurring to section 7, subdivision 1, of the Tax Law, the
question arises as to when capital is invested in New York, and
as to when foreign corporations may be said to be doing business
within the State. In regard to the question as to when capital
is invested, the following may be said. If a, nonresident actually
has capital invested in business in the State of New York, the
amount of such capital is to be determined by the same rules as
would apply to the resident if the resident owned no property
other than such capital and had no debts other than debts arising
out of the conduct of such business. To determine the amount
of the assessment, the aggregate of taxable personal property must
be ascertained, and from that amount must be deducted such debts
as were incurred in the purchase of such taxable personal property
and such debts as affect and lessen the value of the thing subject to
taxation, viz., the capital invested here. (Heeler- Jones- Jew ell
Milling Co. v. Barker, 147 N. Y. 31.)
Section 6 of the Tax Law reads as follows :
"All real and personal property subject to taxation shall be
assessed at the full value thereof, provided, however, that the
owner of personal property shall be allowed a deduction from
the full value of his taxable personal property to the ex-
tent of the just debts owing by him but no such deduction
shall be allowed by reason of the indebtedness of the owner
JOINT LEGISLATIVE COMMITTEE ON TAXATION 105
contracted or incurred in the purchase of nontaxable prop-
erty or securities owned by him or held for his benefit, nor
for or on account of any indirect liability as surety,
guarantor, indorser or otherwise, nor for or on account of
any debt or liability contracted or incurred for the purpose
of evading taxation."
The prohibition of this section against the deduction of debts
incurred for nontaxable property or securities is applicable to the
debts of a nonresident.
In regard to what constitutes " doing business in the State "
the following may be said. If a nonresident corporation is to be
subjected to taxation on its capital invested in business in this
State, the business must be continuous and permanent and not
transitory. No general rule can be given that will make it pos-
sible to determine in every case when a business is a permanent
one and when it is temporary. It is necessary to examine the
nature of the business as well as the intention of the nonresident.
The following summary is quoted verbatim from the pamphlet
referred to:
" The decisions of the courts in particular cases have been
somewhat in conflict, but in recent years they have limited
the character of a business which may be regarded as perma-
nent and continuous.
" The law was enacted in 1855, and shortly thereafter in
1861 the case of Parker Mills v. Commissioners of Taxes
was decided. (23 1ST. Y. 242.) An extract from the opinion
in this case recites the facts as follows :
" ' It had a depot and agent in the city of ISTew York, to
whom it transmitted nails for sale. Its only business within
this State consisted in making such sales, the proceeds of
which were remitted at once to the corporation in Massa-
chusetts, and where sales were upon credit, the securities
received were sent to the corporation for collection. It ap-
peared by the testimony of the agent that the sales amounted
to about $300,000, and that the value of the nails which he
then had in store was $10,00'0. 7
" Nothing is said in this opinion as to whethei or not the
106 STATE OF NEW YORK
Parker Mills had a bank account in New York. It is certain
that they carried a large stock of goods continuously and per-
manently in the city of New York. Nevertheless, it was
held that the Parker Mills did not have capital invested in
business in the State of New York subject to assessment pur-
suant to section 7 of the Tax Law.
" On the other hand, a case decided in 1903 on a similar
state of fact held that there was capital invested in business
in this State. (Dumnd-Ruel v. Wells, 41 Misc. 145 ; affd.,
92 App. Div. 622, without opinion.)
Durand-Ruel had a stock of pictures of the average value
of $75,000. They maintained a continuous bank account
here sufficient to pay current expenses, consisting of salaries,
rents and import duties. As paintings are sold they are re-
placed by new ones. They leased an entire building for
$20,000 a year, reserving one floor for themselves, and sub-
letting the remainder.
" In two recent decisions the fact that a foreign corpora-
tion had no bank account in its own name in New York
seems to have been an important if not a determining factor
in holding that these corporations did not have capital in-
vested in business subject to taxation. In one of the cases
mentioned, the Tower case, the facts appear from the follow-
ing extract from the opinion of the Appellate Division :
" ' The relator is a foreign corporation organized under
the laws of the State of Maine, in which State it has its
principal place of business. Its plant is located in Massa-
chusetts, where it carries on the business of manufacturing
water-proof clothing. It maintains and had maintained a
salesroom in the city of New York for the past five or six
years, and at the time of the levying of the assessment had
goods on hand at its place of business in the city of New
York of the value of $13,490, and the average value of the
stock kept on hand in such place of business was about
$8,000. The store which it occupies is on the ground floor
of 35 Howard street, is about 28 feet wide by 100 feet in
depth. In connection with the business it has a manager,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 107
two salesmen, a typewriter and a bill and shipping clerk. It
keeps no bank account in the city of New York and all
checks, drafts and other payments for goods sold are remit-
ted to Boston for deposit. The manager draws a draft upon
the relator in Massachusetts upon an average of once a week
for money sufficient to pay the expenses connected with the
business, although some money, the proceeds of the business,
is kept in the safe at its place of business here and is used to
pay running expenses. This sum is never very large. The
goods which are shipped to the New York house are mainly
reshipped and distributed to various parts of the country,
although above one-tenth of the goods received are sold in
the city of New York; it sometimes runs above that per-
centage. Much of the larger proportion of the goods received
are reshipped to points outside the State of New York/ (98
App. Div. 82; affd., 182 K Y. 533.)
" The second case was that of A. Leschen & Sons, which
was decided by Judge 0' Gorman, on the authority of the
Tower case, and the assessment was canceled. The following
facts appear from the petition:
" ' Leschen & Sons was a foreign corporation organized
under the laws of the State of Missouri. Its business was
to manufacture wire rope, and its plant was in- the State of
Missouri. It had a branch office at 90' West street, in the
borough of Manhattan, city of New York, for which it paid
$7,000 a year. It had maintained an office in the city of
New York continuously for over seven years, and in 1902
had made application to the Comptroller of the State of New
York for the usual certificate to do business under the Gen-
eral Corporations Law. It maintained a storage room where
goods were kept on hand continuously, the average amount
being about $14,000. The New York office was advertised
as a branch office on the bill heads and office stationery.
The majority of the sales orders filled from, stock in New
York were sent direct to the main office in St. Louis, but in
many cases goods were sold directly from stock in New York,
and the proceeds of the sales were received in New York.
108 STATE OF XEW YORK
Checks were mailed to the main office in St. Louis, but cash
was retained to pay current expenses, and any balance de-
posited in the personal account of the manager who remitted
checks for these balances to the main office.'
" The opinion was printed in the New York Law Journal on
February 14, 1910.
"A consideration of the Tower, Parker Mills, and Leshcen
cases seems to make it clear that there must be a stock of
goods kept in E"ew York continuously, and there must be a
bank account in the name of the nonresident assessed."
In regard to the taxation of tangible personal property, sec-
tion 7, subdivision 2, reads as follows :
" The personal property of nonresidents of the State hav-
ing an actual situs in the State, and not forming a part of
capital invested in business in the State, shall be assessed
in the name of the owner thereof for the purpose of identifi-
cation and taxed in the tax district where such property is
situated, unless exempt by law. This subdivision shall not
apply to money, or negotiable collateral securities, deposited
by, or debts owing to, such nonresidents nor shall it be con-
strued as in any manner modifying or changing the law im-
posing a tax on real estate mortgage securities."
The comment of the New York City Department of Taxes and
Assessments upon this section is as follows:
" It is understood to have been the intention of the drafts-
men of this subdivision chiefly to tax household furniture,
pictures, rugs, yachts, habitually kept in this State by non-
residents of the State. But the language is capable of a
much broader construction, and may be deemed to confer the
right to tax as property, and not as ' capital invested in busi-
ness/ merchandise and other personal property having an
actual situs in this State, owned by a nonresident. So that,
in case nonresident merchants have goods, store fixtures and
JOINT LEGISLATIVE COMMITTEE ON TAXATION 109
other personalty in this State, and yet are not doing business
in this State as that expression in section 7, subdivision 1
has been construed by the courts, this subdivision 2 permits
of the taxation of such goods, etc., as property just as a resi-
dent would be taxed upon it. In taxing under this subdivi-
sion, however, no deduction of debts is allowed."
Failure of the Law
Investigation of County Records. The investigations of the
Committee disclose the fact that foreign corporations as a group
escape paying taxation upon personal property almost entirely.
For the purpose of ascertaining the extent of the evasion of the
personal property tax by foreign corporations, the Committee at-
tempted to obtain information from the localities as to the taxa-
tion of foreign corporations.
Section 61 of the Tax Law provides as follows:
" The clerk of each board of supervisors shall on or before
the second Monday in December, transmit to the State Board
of Tax Commissioners, in the form to be prescribed by such
Board of Tax Commissioners, a certificate of return of the
aggregate assessed and equalized valuation of the real and
personal estate in each tax district as the value of such real
estate has been created by such board, and the amount of
taxes assessed thereon for town, city, school, county and
State purposes, also the aggregate assessed valuation of per-
sonal property classified as follows: * * * Subdivision
6. Property of foreign corporations assessed pursuant to sec-
tion 7."
An examination of the statements of the aggregate valuations
of personal property pursuant to section 61 of the Tax Law in the
several towns and cities in each county, filed in the office of the
State Board of Tax Commissioners, disclosed the fact that only
eight counties out of the sixty-two in the State returned this in-
formation in partial or complete form as required by law. Cor-
110 STATE OF NEW YORK
respondence with the clerks of the boards of supervisors and tax
assessors of the several counties disclosed the fact that in very few
localities is any attempt made to ascertain the taxable personalty
of foreign corporations. The data obtained, however, in this in
vestigation was too incomplete to determine precisely to what ex-
tent the personal property of foreign corporations escaped taxa-
tion. The evidence obtained, however, establishes a very strong
presumption that less than 10 per cent of the personal property
of foreign corporations liable to taxation is actually assessed.
In the second investigation the Committee obtained the names
of some 250 important foreign corporations known to carry on
large business in the State of New York and to have considerable
amounts of actual taxable personalty permanently located in this
State. To these corporations was sent a printed blank form re-
questing information as to the following items :
(1) The percentage of the total assets of the corporation in-
vested permanently in New York .State.
(2) The amount of taxable personalty permanently located in
New York.
(3) The locality which the corporation claimed as its principal
place of business in New York.
(4) The assessed value of personal property in New York.
(5) The actual amount of personal property tax paid in New
York.
The failure of the corporations even to acknowledge these re-
quests was enlightening. Of the 250 corporations only about
thirty acknowledged the receipt of the Committee's communica-
tion, and only nine attempted to fill out the blank, and of the nine
only four actually filled in the required information. Several of
the corporations reported that they paid no taxes, and most main-
tained that inasmuch as they were foreign corporations they were
not liable to taxation. It is perfectly evident from these replies
that the average foreign corporation either believes that it is not
liable for taxation under New York law or else knows that it
<san escape under the present system.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 111
A great many of the foreign corporations having valuable tangi-
ble assets in the State of New York have undoubtedly been ad-
vised by their lawyers that their tangible personal property can-
not be taxed under the 1902 decision of the Court of Appeals,
known as the McLean decision. The relation of this decision to
the New York Tax Law was summed up by Mr. Henry M. Powell
of the New York Bar in a paper read before the 1915 New York
State Conference on Taxation, as follows:
" Ever since 1855 there has been a statute on our books
by which the property of a nonresident invested in business
shall be taxed to the same extent as the property of residents.
In 1902 it was held by the Court of Appeals in the City of
New York v. McLean, 170 N. Y. 374, that this tax could not
be collected by an action in personam. In other words, our
remedy must remain one in rem, or against the property.
Since that time our statute has not been amended to conform
to the opinion of the Court of Appeals and the result has
been that property of nonresidents, invested in business, pays
only a nominal tax because there is no effective remedy for
the collection of the tax. In 1901 before the McLean de-
cision, the annual tax collection in the City of New York
for nonresidents was about $900,000. In 1913 and for some
years prior thereto, it has averaged about $500,000, although
population has increased 50 per cent and property of all
kinds has correspondingly increased."
Testimony Concerning Failure of the Personal Property Tax
in Regard to Foreign Corporations
At the public hearings of the New York Joint Legislative Com-
mittee on Taxation held in the various cities of the State of New
York, 1915, the testimony of the tax officials, both State and local,
was unanimous in bearing out the statement that foreign corpora-
tions escape almost entirely from paying any of the tax burden
under the personal property tax. Chairman Martin Saxe of the
State Tax Commission was asked to state the effect of the McLean
112 STATE OF NEW YORK
decision upon the collection of nonresident taxes. He answered,
" Well, it has had the effect of making those taxes practically
uncollectible."
Mr. A. C. Playdell, Secretary of the New York Tax Eeform
Association, testified that there is practically no personal prop-
erty of nonresidents collected in the State of New York outside
of New York City.
Mr. Lawson Purdy, of the Board of Tax Commissioners of
New York city, in answer to the effect of the McLean decision,
testified as follows:
" Since that decision was rendered, the City of New York,
in practice, has been without power to enforce the payment
of taxes levied pursuant to section 7, Some years ago the
amount of uncollectible taxes which had been levied pur-
suant to that section was a very serious matter. In recent
years, where it has been found impossible to collect taxes from
a particular person or corporation, pursuant to section 7, the
assessment has been abandoned."
In fine, Mr. Pleydell says that there is no personalty of foreign
corporations assessed outside of New York City, and Mr. Purdy
says that even in New York City the tax is, in the main, unen-
forceable. Furthermore, Mr. Purdy testified that he could see
no way under the general scheme of the tax laws that now exist
to reach foreign corporations.
In the city of Rochester, Mr. Joseph C. Wilson, President of
the Board of Assessors, in reply to the query as to the amount col-
lected from foreign corporations, stated: " Very few can we
get. The majority of foreign corporations, particularly the large
ones, fix their main office for the State of New York in New York
City or Buffalo, mostly in New York City, and in that way es-
cape." He further testified that they carried large amounts of
goods in Rochester that could not be assessed.
From the combined testimony of Messrs. Saxe, Pleydell, Purdy
and Wilson, it is unmistakably evident that foreign corporations
are escaping substantially tax-free in regard to all of their vast
investments in personalty in the State of New Tor*.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 113
Why Foreign Corporations Should Make a Substantial Con-
tribution to the support of State and Local Govern-
ment.
In regard to foreign corporations, New York State occupies a
unique position, and this unique position explains in a large part
why the foreign corporation question is of so great importance.
In order to appreciate the peculiar significance of this problem, it
is necessary to examine the relation of New York to the business
of the foreign corporation.
The first thing to call attention to is the tremendous taxpaying
ability of foreign corporations doing business in New York State.
And this taxpaying ability is surprisingly large, whether measured
by the tangible assets situated in the State, the business transacted
in the State, the product produced in the State, or the financial
concerns handled within the State. An examination of each of the
above discloses the fact that foreign corporations own a large
percentage of tangible assets in the State and transact a larger
percentage of the total business done in the State than the aver-
age citizen has any comprehension of. In this respect the position
of New York is unique and in several ways stands out quite apart
from most of her sister states. Some comprehension of the vast-
ness of this business can be obtained by examining the follow-
ing facts :
In the first place, the position which New York City occupies as
the financial centre of America attracts to it for the transaction of
its financial concerns a large proportion of all the important cor-
porations in the United States. The importance and indeed even
the necessity of transacting the financial concerns in New York
City are too well known among business men to call for any
elaboration. It suffices to say that out of the privilege of trans-
acting financial business in this State come great advantages to
those corporations establishing offices here. And these advantages
mean larger earnings and greater taxpaying ability.
In the second place, New York State possesses within its boun-
daries ten million people, or approximately one-tenth the popu-
lation of the entire United States. In addition to this, there is
another five million people in the cities and towns about New
114 STATE OF NEW YORK
York City that technically reside in other States, but actually live
within the New York market. The opportunity of reaching such
a large population within such a circumscribed area is taken ad-
vantage of by almost every important selling agency in America.
Several large foreign corporations, each one of which is capital-
ized for several million dollars, sell a large part of their product
through branch offices scattered throughout the State. They draw
tremendous profits from this State and so increase their earnings
and taxpaying ability.
In the third place, in many lines of industry New York is the
selling market of America. Many foreign corporations who have
their factories in the New England and Middle States and even
in the Western States, find it necessary to come to New York
to market their product. A good illustration is the wholesale
woolen industry. This industry is largely owned and controlled
by foreign corporations. Its mills are scattered all over New
England and many other States. Yet the industry is absolutely
dependent upon New York for the sale of its goods. The home
office of most of these corporations is found in other states, but
the selling office is located in New York City. Every year the
representatives of these great corporations travel throughout the
United States exhibiting their samples, but it is a well-known fact
that many of the sales are actually made in New York where the
buyers flock every season. To the woolen industry as well as to
other big industries the New York market is a. tremendous asset
which is reflected in increased earning power and taxpaying
ability.
In the fourth place, the unrivaled shipping facilities of New
York have attracted many corporations that are incorporated
in other states. The advantage of New York in this respect is
evidenced by the great number of foreign corporations that have
in recent years shut down or dismantled their plants in other
states, and have built new ones in the tide-water district in New
York State, especially on Long Island.
One reason, however, why foreign corporations control such a
large percentage of New York business is due not to the fact that
foreign corporations come to New York, but that the New York
plants go to the foreign corporations. In this respect a remarkable
JOINT LEGISLATIVE COMMITTEE ON TAXATION 115
transition has been taking place during the last few years. Many
plants, both mercantile and manufacturing, that were once the
property of domestic corporations have become the property of
foreign corporations. An examination of Poor's or Moody' s Man-
ual discloses part of this very interesting history. As the great
trusts and holding companies have developed, they have absorbed
many of the smaller corporations. Had these larger companies
incorporated in New York, it would have made little difference
from the point of view of taxation. Since, however, they have
mostly incorporated in New Jersey, Delaware and other states,
the effect has been to carry the domicile of much of our wealth over
into other states.
As a revenue producer it is clear, therefore, that that great
mass of personal property belonging to foreign corporations is of
little use to New York State. It is impossible to estimate how
much New York is losing through the absorption of her domestic
corporations by foreign corporations. It has been estimated,
however, that the State has been losing not less than a million
dollars of revenue every year as a result of the McLean decision.
In summarizing the answer to the question why foreign cor-
porations ought to make substantial contributions, we must say:
In the first place, these foreign corporations enjoy unusual
benefits in New York City. The opportunities which these cor-
porations avail themselves of, whether they be the financial ac-
commodations, the shipping facilities, or the strategic merchan-
dising possibilities, all add greatly to the prosperity and the in-
come-paying ability. An office in New York for financial or sell-
ing purposes is a great asset. These corporations spend millions
in advertising annually and from that advertising gain an earn-
ing power. The increased earning power, however, which New
York contributes, represents in many cases a gift of the city and
State. This same increased earning power enlarges their ability
to pay taxes. Thus, New York actually adds in an important
degree both to the capital value and to the income of these
corporations.
On the other hand, the privilege extended to foreign corpora-
tions cost the citizens of this State large sums. Fire protection,
police protection and all the other expenses that are incurred in
116 STATE OF ^\EW YORK
keeping up a great trade and financial centre are largely increased
by the presence of these foreign corporations. From every point
of view, whether from that of the cost of the service, the benefit
derived or the ability to pay, the answer is clear ; foreign corpora-
tions should contribute liberally to the support of New York State
government.
PART VII
NEW YORK SYSTEM OF TAXING MANUFACTURES
CHAPTER I
STATE TAX
The policy of New York in regard to the taxation of manu-
factures for State purposes has-been for many years practically
that of exemption. The law governing the taxation of manu-
facturing for State purposes is included in sections 182 and 183
of the Tax Law. Section 182 reads, in part, as follows:
ff Franchise tax on corporations. For the privilege of
doing business or exercising its corporate franchises in this
State, every corporation, joint-stock company or association,
doing business in this State, shall pay to the State Treasurer
annually, in advance, an annual tax to be computed upon
the basis of the amount of its capital stock, employed during
the preceding year within this State, and upon each dollar of
such amount. The measure of the amount of capital stock
employed in this State shall be such a portion of the issued
capital stock as the gross assets employed in any business
within this State bear to the gross assets wherever employed
in business."
Then follows a detailed statement of the law which is exceed-
ingly complex.
Manufacturing corporations, however, are exempt, providing
40 per cent, of their assets are invested in the State of New York.
Section 183 reads in part as follows:
laundering corporations, manufacturing corpo-
rations to the extent only of the capital actually employed
in this State in manufacturing, and in the sale of the product
of such manufacturing, mining corporations wholly engaged
in mining ores within this State * * * shall be exempt
from the payment of the taxes prescribed by section 182 of
this chapter. But such a laundering, manufacturing or
mining corporation snail not be exempt from the payment
of such tax, unless at least 40 per centum of the capital stock
118 STATE OF NEW YORK
of such corporation is invested in property in this State and
used by it in its laundering, manufacturing or mining busi-
ness in this State."
According to the law, it would seem that a large number of
manufacturing corporations should be taxable for State purposes.
An analysis of the business and financial statements of many im-
portant New York manufacturing corporations as given in the
corporation manuals, would seem to indicate that an important
number of such corporations have less than 40 per cent, of their
assets invested in the State. It appears, however, that no very
serious attempt had been made to ascertain which of these corpo-
rations are not entitled to the exemption of section 183, and that
practically all manufacturing corporations, regardless of the
amount of their tangible assets invested in New York State,
escape paying the general franchise tax on corporations.
CHAPTER II
LOCAL TAXATION OF MANUFACTURING CORPORATIONS
Corporations are taxable locally upon their personal property
under section 12 of the Tax Law. This law, with its peculiarities,
has been described in Part V of this report. Everything there
stated in regard to the inability to enforce the law applies with
particular emphasis to the manufacturing corporations. It is
sufficient to state here that not only is the law enforced very un-
evenly and with considerable inequity as between various manu-
facturing centres, but that it yields a comparatively insignificant
revenue.
The inequity of the present law is well brought out by the
statistics presented by Mr. John D. Kernan of Utica. He pre-
sented a report at the First New York State Conference on Taxa-
tion, and at the request of the Committee, brought the statistics
of that report up to date and presented similar facts at the Joint
Legislative Committee hearings in New York City. The facts
presented in his paper before the New York State Conference on
Taxation showed unmistakably that manufacturers in some lo-
calities of the State were assessed at ridiculously low percentages,
whereas in other localities their personal property was assessed
at a fairly high value, thus producing an inequality seriously
JOINT LEGISLATIVE COMMITTEE ON TAXATION 119
detrimental to the latter business interests. In his testimony be-
fore us he summarized his investigation as follows ; and the situa-
tion of which he describes in respect to Utica, Home and the
neighboring towns is typical of the inequalities which exist
throughout the State.
" I had this prepared * * * in three tables, first
showing the manufacturing corporations that are assessed
for personal property in the city of Utica, showing the
amount of the personal property assessment in the year
1914; showing the real property assessment for that year,
and that being pertiment, in order to determine the rate of
taxation as based upon Bradstreet's estimates, and then con-
taining Bradstreet's published estimates * * * estimated
wealth of each of those corporations. Then I have next done
the same thing with all the manufacturing corporations as-
sessed for personal property, outside of the cities of Rome
and Utica, and then I have prepared a similar table for
Rome city * * *.
"An examination of the results of the footing of these
tables shows that in Utica the manufacturing corporations
are assessed upon personal property 25 or 36 per cent, of
their estimated wealth as given by Bradstreet. That the
corporations in the counties outside of Rome and Utica are
assessed from 11 to 15 per cent. * * * That in the
City of Rome manufacturing corporations are assessed from
7 to 11 per cent, of their estimated wealth.*"
CHAPTER III
NEW YORK MANUFACTURING INDUSTRY AS A TAXABLE BASE
In considering the possibilities of using the manufacturing
industry for purposes of taxation, the first question to ask is, to
what extent the tax policy of the State should be altered to con-
form with the State's broader economic policy. It is the settled
policy of the State of New York, as of nearly every other state
in the Union, to attract capital into the manufacturing industries.
For this purpose it is necessary to establish no conditions that
would in any way tend to drive this industry from the State.
The ability of the industry to grow depends upon the relative
120 STATE OF NEW YORK
advantages which it enjoys as compared with those competing
corporations in other states and foreign countries. The question,
therefore, arises, would a material increase in the rate of taxa-
ation affect to any appreciable degree the ability of domestic
manufacturing corporations to compete in the American and
world markets. In regard to foreign competition, it may be said
that it is the settled policy of the country that American manu-
facturers shall be protected against competition of the foreign
manufacturers, and to thisi end the protective tariff shall be levied
at a rate which will compensate for the difference in the cost
of manufacturing at home and abroad. Whenever taxes are levied
by American states, they enter into the cost of the manufactured
articles, and to that extent are taken account of in the framing of
the tariff schedules. We may, therefore, dismiss from further
consideration the effect of New York tax rates upon the ability
of the New York manufacturing corporation to compete with
foreign manufacturing corporations.
In the matter, however, of competition with corporations of
other states, the subject cannot be dismissed so quickly. In the
United States the American manufacturer enjoys the largest free-
trade market existing anywhere in the world. Whatever the con-
ditions of the foreign market, it is absolutely necessary that the
New York manufacturer be able to compete in this large Ameri-
can free-trade market upon equal terms with corporations of other
States. To do this it is necessary that New York offer facilities
for manufacturing that will enable the New York corporation
to produce goods for as low a cost as any other State. If New
York should impose a tax rate that would increase the cost of
manufacturing to any considerable degree as compared with that
of foreign corporations, not only would new capital refuse to
come into this State, but capital already invested would leave so
far as possible. The whole matter, therefore, hinges upon the
relative facilities offered to manufacturing industries in this State
as compared to others. We believe that the advantages which the
State of New York now offers to manufacturing corporations are
so much greater than those of any of its competing states that any
reasonable increase in the tax rate would not in any way tend to
drive capital from this State.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 121
The principal factors which attract investment of outside capi-
tal to the manufacturing industries of the State are
(1) Nearness to abundant supplies raw materials;
(2) Transportation facilities;
(3) Labor market;
(4) Power facilities.
For purposes of ascertaining the relative advantages of New
York in regard to all of these factors, there is no better source
than the bulletin of the 13th Census of the United States dealing
with manufactures of New York.
The advantage of New York in regard to raw materials is set
forth as follows :
u The geographic position and topography of New York,
as well as the abundant natural wealth of its fields, forests,
mines, and quarries, have contributed to its industrial de-
velopment and have been instrumental in making it the lead-
ing manufacturing State of the Union."
In regard to transportation facilities, the following:
" The Hudson river, the Erie canal, connecting Lake Erie
with the Hudson river, and a system of canals which con-
nect Lake Ontario with the Erie canal and Lake Champlain
with the Hudson river, form a network of inland waterways
for the exchange of various commodities within the State
and furnish excellent communication by water from Duluth
and Chicago in the West and from various points in Canada
on the North to New York City, thereby affording an outlet
for coastwise and foreign commerce through the most im-
portant seaport in the United States. A large majority of
the commercial and manufacturing centres of the State are
located on these waterways or on the connecting waterways
which border the <State. The 8,448 miles of steam-railway
trackage within the State also afford excellent transportation
facilities."
The advantage of New York to the manufacturer in the matter
of transportation facilities is fully borne out by the testimony of
the manufacturers themselves. Hon. John D. Kernan of Utica,
122 STATE OF NEW YORK
in appearing before the Joint Legislative Committee, testified as
follows :
" The coming opportunities that the State is going to have
with the opening of the Barge Canal, The transportation
opportunities are going to be greater in the State of New
York, when that is opened, through the influence that they
will have, not only in the rate that it will give itself, but
in the control that it will give over railroad rates, than any
other place in the United States. " And again he stated:
" New .York State has, over and above Pennsylvania, or
Connecticut, or Rhode Island, or any other State, great ad-
vantages for manufacturing industries, and this is very well
illustrated by the fact that for fifty years the trunk lines
have had to maintain a differential of two or three cents a
hundred for like service, in favor against New
York State, in favor of Philadelphia, Baltimore, Newport
News and those Southern ports, etc., New Orleans. Other-
wise the natural advantages of New York would draw all
the traffic here, and it has not been thought wise by the trunk
line people to permit that to be done. Now, that illustrates
the situation New York has as to its natural advantages for
manufacturing, etc."
In regard to labor facilities, it is sufficient to state that New
York enjoys the greatest labor market in America.
Mention should be made of the important advantages which
have come to the manufacturing industries of the State through
the large expenditures of New York in recent years for develop-
ment of barge canals. For this purpose the State has and is now
expending millions of dollars.
The importance of these improvements to the manufacturing
industry can hardly be overestimated. Indeed, when measures
providing for these expenditures were put before the people for
ratification, the chief argument advanced at the time was that the
construction of these canals would cover the State with manufac-
turing towns and cities. A study of the distribution of the im-
portant manufacturing cities and of the growth of these cities
since these improvements have been made bear out this contention.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 123
In view of the advantages stated above, there appears no reason-
able doubt that the manufacturing industry of the State could
bear a considerable increase in its burden of taxation without
driving capital from the State and with no fear of deterring new
capital from entering the State. In this connection it should be
noted that in many recent consolidations the larger corporations
have shut down their plants located in other states and are now
building new plants in New York State.
The importance of the manufacturing industry as compared
with that of other great industries in New York is so great that
an increase in taxation of this industry at a very low rate would
yield a large revenue. For the purpose of gauging the potential-
ities of the manufacturing industry as a tax base, it is important
therefore to consider the extent and growth of manufactures.
This can be done in no better way than by quoting some extracts
from the brief general summary of the 1910 Census Bulletin deal-
ing with New York manufactures.
"Although New York has important interests in agriculture
and mining, its predominance is most marked in manufac-
turing. Since the completion of the Erie canal in 1825, New
York has held the foremost rank in this respect. * * *
" In 1849 the total value of the manufactured products of
New York, including those of the neighborhood and hand
industries, amounted to $237,597,249, while in 1909, ex-
clusive of the value of the products of the neighborhood and
hand industries, it reached a total of $3,369,490,192, or more
than fourteen times that in 1849. During the same period
the population of the State increased 194.2 per cent. In
1849 an average of 199,349 wage earners, representing 6.4
per cent of the total population, were employed in manu-
factures, while in 1909 an average of 1,003,981 wage earners
or 11 per cent of the total population, were so engaged.
During this period the gross value of products per capita of
the total population of the State increased from $77 to $370.
" In 1909 the State of New York had 44,935 manufactur-
ing establishments, which gave employment to ah average
of 1,203,241 persons during the year and paid out $743,-
263,000 in salaries and wages. Of the persons employed,
124 STATE OF NEW YOKK
1,003,981 were wage earners. These establishments turned
out products to the value of $3,369,490,000, to produce which
materials costing $1,856,904,000 were utilized. The value
added by manufacture was thus $1,512,586,000, which figure,
as explained in the introduction, best represents the net
wealth created by manufacturing operations during the year."
The relative importance of the manufacturing industry of New
York is further illustrated by the wide diversity in the manufac-
turing activities of the State. " With the exception of Penn-
sylvania, the diversity is greater in New York than in any other
State in the Union." Of the 264 classifications used in the
presentation of the 1909 manufactures statistics for the country
as a whole, 243 were represented in New York.
The size and great wealth of many of these manufacturing cor-
porations that are now almost entirely escaping their fair burden
of the general property tax, so far as personalty is concerned, is
well brought out by the following statistics taken from page 4 of
the 1910 Bulletin dealing with manufactures in New York.
" The table referred to gives separate statistics for 139
industries or industry groups for which products valued at
more than $1,000,000 were reported in 1909. These in-
dustries include 12 with products exceeding $50,000,000 in
value, 20 with products between $25,000,000 and $50,000,-
000 in value, and 26 with products between $10,000,000 and
$25,000,000, making an aggregate of 58 industries with a
value of products in excess of $10,000,000 each. The other
industries shown separately comprise 30 with products be-
tween $5,000,000 and $10,000,000 in value, and 51 with
products between $1,000,000 and $5,000,000.
" In addition to the industries presented separately in the
table, there were 32 other industries in the State which re-
ported products in 1909 to the value of $1,000,000 or over,
comprising 5 with products exceeding $10,000,000 in value,
2 with products between $5,000,000 and $10,000.000 in
value, and 25 with products between $1,000,000 and $5,000,-
000 in value."
JOINT LEGISLATIVE COMMITTEE ON TAXATION 125
POTENTIALITIES OF THE MANUFACTURING INDUSTRY AS A TAX-
ABLE BASE
Tlie possibilities of the manufacturing industry as a taxable
base will be grasped by an examination of the statistics of manu-
facturing published, respectively, by the Federal Census Bureau
in 1910 and the Internal Revenue Bureau in 1914. The follow-
ing are the principal statistics taken from the Federal census.
They are for the year 1909 :
Total capital invested in manufacturing in New
York $2,779,496,814
Value of products 3,369,490,192
Value added by manufacture 1,512,58,5,850
'Net returns 383.249,162
The following statistics are taken from the 1914 report of In-
ternal Revenue Department, in regard to the receipts from the
Federal Income Tax:
Number of manufacturing corporations re-
turning income tax data 12,640
Number of manufacturing corporations whose
returns show tax due 6,446
Capital stock of domestic manufacturing cor-
porations $6,644,640,357 84
Bonded and other indebtedness. 2,134,031,252 41
Net income 522,666,412 05
In comparing these two sets of data it should be noted that
the internal revenue statistics of the capital stock of domestic cor-
porations was more than double the census statistics of the total
capital invested in manufacturing in New York. This difference
is partly to be accounted for by the increase in the growth of
manufactures between the years 1909 and 1914, and partly by the
fact that the Census statistics undoubtedly underestimated the
actual capital investment in manufactures in New York State.
It is possible also that the Internal Revenue statistics, in in-
cluding the total capital stock of domestic manufacturing corpo-
rations irrespective of where the property may be located, thereby
126 STATE OF NEW YORK
takes in a larger item than that represented by the capital in-
vestment in New York State of foreign corporations, the latter
item, of course, not being included within the Internal Kevenue
statistics for New York. It is believed, however, that the In-
ternal Revenue statistics are fairly representative of the total
capital investment in manufactures in the State of New York.
CHAPTER IV
THE YIELD IN NEW YORK
In considering the yield of manufactures as a tax base it is
necessary to distinguish carefully between the yields of the fol-
lowing separate taxes :
(1) The yield of manufacturing taxes for State purposes.
(2) The yield of the personal property tax of manufacturing
corporations for local purposes.
(3) The yield of real estate taxes for local purposes.
(4) The aggregate yield of manufacturing taxes, both State
and local, for all purposes. '
In regard to the yield of the manufacturing corporations for
State purposes, we have shown above that it is insignificant.
Likewise, the yield of personal property taxes for local purposes
is ridiculously low. The yield of the real estate tax for local
purposes represents a large part, and in many cases nearly all,
of the total contribution made by manufacturing corporations for
all state and local purposes. This fact is of particular signifi-
cance for the reason that only a comparatively small percentage
of the total investment of manufacturing corporations is found
in real estate. In other words, a small part of the total invest-
ment of manufacturing corporations yields a very large part of
the tax contribution of manufactures. This means, not that the
real estate is taxed heavily, but that most of the property escapes.
U. 8. Census Figures. Inasmuch as the taxes paid by manu-
facturers in the various localities are not segregated in the records,
it is impossible to obtain anything like a correct estimate of the
amount of taxes contributed in the year 1914 or 1915 for all
purposes. The best estimate which we have is that collected by
the Federal Census for the year 1909. In this report the Census
Bureau collected data as to the total taxes paid by manufacturers,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 127
both for State and Federal purposes, for every state in the Union.
In this investigation the manufacturers were asked to divide their
total tax contribution into (a) internal revenue taxes, (b) all other
taxes. The item entitled " all other taxes " included the total
taxes paid by manufacturers for all purposes of both state and
local government. In 1909 the manufacturers of New York State
paid $10,844,403.
For purposes of appreciating the relative importance of this
contribution of the manufacturers it is helpful to look at it from
several points of view. We may compare the contribution of
manufacturers to the total revenue receipts of the State, or we
may compare the contribution of the manufacturers to the total
capital investment in manufactures in the State.
For the purpose of these comparisons it would be well if we
could have the statistics under all of these items for the corre-
sponding year. This it is impossible to obtain. However, we
have the figures for these various items for periods only four
years apart, and they may be used for purposes of these compar-
isons. For the year 1912 we have a record of the total wealth
of the State of New York, which is $25,011,105,223. For the
year 1909 we have the capital investment in manufactures which
is $2,779,496,814. For the year 1913 we have the total revenue
receipts of the State, which is $330,622,071. And for the year
1909 we have the taxes paid by manufacturing corporations as
stated above. In making these comparisons we must compare
the capital invested in manufactures for the year 1909 to the
total wealth in 1912. The discrepancy in years is not important
for two reasons. In the first place, the capital investment in
manufactures does not include the total capital investment in
manufactures. The census does not include establishments which
are idle during the entire year or had products valued at less
than $500. It does not contain securities and loans representing
investments in other enterprises, and it contained no lands or
buildings rented. In the second place, the discrepancy between
years is not important because after allowing a reasonable in-
crease in the value of the investment between 1909 and 1912,
the results for purposes of our comparisons are unappreciable.
In comparing the taxes paid by manufactures in 1909 with
total revenue receipts of 1913, we are possibly underestimating
128 STATE OF NEW YORK
to a small degree the percentage of total revenues contributed by
manufacturers. This underestimation, however, is so small that
it loses its significance in the comparison made, and moreover it
should be borne in mind that the statistics of taxes paid by manu-
facturers for the year 1909 included " all taxes paid other than
internal revenue."
In comparing total taxes paid by manufacturers to the total
revenue receipts, we find the following: The total revenue re-
ceipts, for the year 1913 were $330,622,071; the total taxes paid
by manufacturers in 1909 for all purposes, State and local, were
$10,844,403, or in other words, manufactures paid only 3.3 per
cent of the total revenue receipts. Bearing this in mind, we may
now compare the total capital investment in manufactures in the
State of New York to the total wealth of New York. The total
capital investment in manufactures in 1909 was $2,779,496,814,
while the total wealth in 1912 was $25,011,105,223. The capital
investment in manufactures was 11.1 per cent of the total wealth.
In other words, while the manufacturing -industry possesses 11.1
per cent of the total wealth of the State, it paid in taxes for all pur-
poses only 3.3 per cent of the total revenue receipts. Assuming
that the ability of the various classes of wealth to pay taxes was
roughly measured by their capital investment, the manufacturers
should have paid 11.1 per cent of the total revenue receipts.
They paid, however, only 3.3 per cent or less than one-third of
their proportional burden. In this connection it should be stated
that reference to the statistics published by the Internal Revenue
Department concerning the income tax yield of manufactures in
New York in the year 1914, would lead us to think that the 1909
estimate of capital investment in manufactures was much below
the actual investment. If this suggestion is correct, the dis-
crepancy between the percentage of taxes actually paid by manu-
facturers and their proportional share upon the basis of capital
investment would be even greater.
Or, we may look at the matter in another way by comparing
the percentage of capital investment paid in taxes by manufac-
turers. The taxes paid by manufacturers for all purposes in
New York, viz., $10,844,403, is only .39 of one per cent of the
capital investment in manufactures in the State. In other words,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 129
manufactures paid less than 4 mills upon the dollar, assuming
always that the figures represent full valuation of the total in-
vestment in manufactures. It should be home in mind that the
.39 rate is not the rate for State purposes, nor the rate for in-
tangible personalty, but the average rate for the total investment
including real estate taxes for local purposes.
We may assume that the real estate of manufacturing corpora-
tions is assessed at the same proportion of its full value as the
real estate of other property owners in the localities. We may
also assume that the total -real estate investment of manufactures
is about one-third of the total capital investment. Under these
assumptions the total yield of taxes upon the real estate of manu-
facturers should at the average State rate yield approximately
from $14,000,000 to $1.5,000,000. We know, however, that the
total yield is less than $11,000,000. Under these assumptions
we can come to one or two conclusions; (1) either that manu-
facturing corporations are escaping entirely from taxation for any
purpose upon at least two-thirds of the capital invested, and even
upon that fraction are assessed at a lower rate than that of other
forms of wealth, or (2) that all property of manufacturing corpo-
ations is grossly under-assessed as compared to that of other
forms of wealth.
CHAPTER V
YIELD OF NEW YORK MANUFACTURING CORPORATIONS UNDER THE
FEDERAL INCOME TAX
In view of the preceding estimates based upon the 1909 cen-
MUS figures, it is interesting to note the revenue possibilities for
State purposes in the light of the yield of these same sources for
Federal Income Tax purposes. The statistics given by the In-
ternal Revenue Department in regard to manufacturing corpora-
tions of New York State are given below. In comparing the two
:.t should be noted that the Internal Revenue statistics have to
do, not with capital investment in manufactures in 'New York
State as in the case of the census figures, but with the capital in-
vestment and income of New York corporations, irrespective of
whether the investment is in New York or in other States. While
;hey include the total investment of !New York corporations every-
where, they at the same time exclude the investment in New York
130 STATE OF NEW YORK
manufactures belonging to all foreign corporations. Further-
more, these statistics do not include the capital investment of
any New York manufacturing corporation that did not earn a
net income in the preceding year. From an examination of the
business and financial statements of many important corpora-
tions as given in the corporation manuals, it appears that there
are a large number of manufacturing corporations that are tem-
porarily earning no net income and therefore are not included
within the Internal Revenue figures. A further fact should be
noted, viz., that a large number of manufacturing plants that
were formerly owned by domestic New York corporations are
now owned by corporations whose domicile is in another State.
Much of the property represented by these corporations would
not, therefore, be included within the Internal Revenue statis-
tics. For these reasons it is believed that the statistics given by
the Internal Revenue Department do not overestimate either
the actual capital investment of manufactures in New York
State or the earning power of the capital investment in New
York State.
CHAPTER VI
NEW YORK COMPARED WITH OTHER STATES
Whenever it is proposed to increase the tax burden of New
York manufacturing corporations, we are always met with the
argument that an increase in the tax burden will not only
hamper New York manufacturing corporations in their compe-
tition with the corporations of other States, but that it will both
prevent new capital from investing in the State and drive pres-
ent capital out of the State. As indicated in another part of
this report, it is the belief of the Committee that this argument is
utterly fallacious. However, in order to give the manufacturing
industry the. benefit of the doubt, we may assume that this argu-
ment is sound. Under this assumption it is important, there-
fore, to ascertain the relative burden borne by New York manu-
facturing corporations and manufacturing corporations of other
States. In Appendix E-V of this report is given a statistical
tabulation of every State in the Union, including the following
items :
JOINT LEGISLATIVE COMMITTEE ON TAXATION 131
(1) The total wealth of each state.
(2) The capital invested in manufactures in each state.
(3) The total revenue receipts of each state.
(4) The taxes paid by manufactures in each state.
(5) The percentage of total wealth invested in manufactures
in each state,
(6) The percentage of total revenue receipts paid by manu-
factures in each state.
(7) The percentage of capital investment paid by manufactures
in taxes in each state.
An analysis of this table brings out some very interesting
information. It is worth while to compare the tax burden of
w York manufacturing corporations to that of other states
from several points of view. From the point of view of percentage
of capital investment paid in taxes by manufacturers in each
state, the following is interesting: New York State pay .39 of
1 per cent., New Hampshire pays .61 per cent., Massachusetts
pays .77 per cent., New Jersey pays .39 per cent., Pennsyl-
vania pays .28 per cent., Illinois pays .39 per cent, Michigan
pays .73 per cent., California pays .41 per cent. Other states
pay from .25 per cent, in Oregon up to .96 per cent, in Mississippi.
Vv'ith the exception of Oregon, Delaware and Pennsylvania, in
ao other states in the Union do manufacturers pay a smaller per-
3entage than New York State, and with the further exception of
N"ew Jersey no other State pays so small a percentage as New
York. The percentage paid by manufacturers in many states
)f the Union is more than twice as high as that of New York
State.
A comparison of the percentage of total revenue receipts paid
oy manufactures in the various states is not as representative of
:he comparative abilities as the previous comparison. However, it
orings to light some very interesting things. New York pays
3.3 per cent, of the total revenue receipts of the State. New
Hampshire pays 12.2 per cent., Massachusetts, 8 per cent., New
Jersey 5.5 per cent., Pennsylvania, 5.6 per cent., Illinois, 5
per cent, Michigan, 8 per cent., Wisconsin, 9'.7 per cent. In
Dther words, in no one of the important manufacturing state**,
132 STATE OF NEW YORK
do the manufactures pay so small a percentage of the total rev-
enue receipts as in the State of New York. In view of the fact
that New York State is the leading manufacturing state in the
Union, and in view of the fact that 11.1 per cent, of the total
wealth of the State is invested in manufactures, this statement
is illuminating.
In many of the Western States where manufacturing is of
relatively small importance, the percentage of total revenue re-
ceipts paid by manufacturing corporations is of course very small.
With the exception of California, however, in no important manu-
facturing state do manufactures pay so small a percentage of total
revenue receipts as in New York.
A still more interesting and more trustworthy comparison is that
of the ratio of the percentage of total wealth invested in manufac-
tures to that of the total revenue receipts paid by manufacturers.
In no other way is the special privilege of New York manufac-
turers in this regard brought out so strikingly. While New
York State has 11.1 per cent, of its total wealth invested in manu-
factures it pays only 3.3 per cent, of the total revenue receipts.
New Hampshire having 21.6 per cent, of its capital investment
in manufactures pays 12.2 per cent, of the total revenue receipts.
Massachusetts with 20.3 per cent, of its total wealth invested in
manufactures, pays 8 per cent, of the total revenue receipts. New
Jersey having 17 per cent, of its wealth invested in manufactures,
pays 5.5 per cent. Pennsylvania having 17.8 per cent, of its
wealth invested in manufactures pays 5.6 per cent. Illinois hav-
ing 10 per cent, invested in manufactures pays 5 per cent, of
the revenue receipts. Michigan having 10.8 per cent, invested in
manufactures, pays 8 per cent, of the total revenue receipts;
and Wisconsin having 13.5 per cent, pays 9.7 per cent. It will
be noted that with the possible exception of two or three states,
the ratio of percentage of total revenue receipts paid by manu-
factures to the percentage of total wealth invested in manu-
factures is greater throughout the United States than in New York
and in many cases the manufacturing industries pay more than
double the proportion now paid by New York State.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 133
CHAPTER VII
SUMMARY AND CONCLUSIONS CONCERNING THE TAXATION OF
MANUFACTURING CORPORATIONS
In the first place, it must be frankly admitted that it has
been the policy of the American commonwealths to favor the
manufacturing industry, as compared with other forms of wealth,
in the matter of taxation. This policy has taken the form, not
only of what is equivalent to a lower rate of taxation, but also
in many cases of an absolute exemption from taxation. This
practice of offering special privileges in the form of tax exemp-
tion has been especially common in the New England States,
Pennsylvania and a few other states. It has not been limited,
however, to these states, but has been extended to practically
every state in the Union. To this extent, the policy of the states
has been directed toward accomplishing for the industries within
the State somewhat the same protection that has been afforded
by the Federal government through the means of the protective
tariff for American industries in general. In each case the pur-
pose of the policy has been to offer special advantages to the
manufacturers as opposed to their competitors in other govern-
mental districts.
The reason why this policy has been so generally accepted by
:he American states is not difficult to learn. Nearly all of the
principal business interests in any community are benefited by
the development of manufactures. The construction of new
plants, with the attendant increase in the laborers employed in
those plants, not only adds to the value of the real estate, but
adds to the profits of the merchants of the community. Since
i large number of those influential citizens in any community
"Jiat control the policy of the community are interested financially
in real estate and in mercantile business, they have naturally
been very eager to offer privileges that would attract the invest-
ment of capital. In this respect the introduction and develop-
ment of manufacturing industries in our communities has followed
somewhat the same course as that followed by transportation in
the middle and latter part of the nineteenth century. Just as
towns and states vied with one another in offering bonuses and
ier special privileges to the railroads for the purpose of in-
134 STATE OF NEW YORK
ducing the railroads to come through their localities, so have
the towns and states competed with one another in attracting
capital of manufacturers. From the point of view of the desira-
bility of building up communities, it is doubtless true that this*
policy of encouragement, to a certain extent, was justified, in]
regard to both the railways and the manufacturing industries of |
the community. The time came, however, in the development of
the railroads when the communities realized that they had gone
entirely too far, and that public policy demanded a more COH-!
servative course. So in the development of manufactures the
question is now being raised in many parts of this country as to
whether we have not gone much farther than was necessary in
extending special privileges to the manufacturing industry.
The present inequality in the matter of taxation as between the
manufacturing industry and other industries is very great. In-
deed, it is highly doubtful that the people ever intended that the
discrepancy as between the taxation of the various forms of
wealth should extend to the present extreme. Whenever the
facts have become known by the people in general, there has
resulted a strong movement for the readjustment of the tax
burden.
In the matter of inequities as between manufactures and other
forms of wealth, the situation is nowhere worse than in New York
State, and this point is of added importance when we consider
the additional benefits that accrue to the manufacturers from
the great investment of the State's wealth in barge canals and other
means of transportation.
In summing up the injustice of the present system of taxing
manufactures, we may say:
First, it is unjust as between manufactures and other forms
of wealth.
Second, it is unjust as between the various manufacturing towns
of the State.
In the third place, it is unjust as between the manufacturers
themselves.
And in this connection it should be said that we can make no
progress in dealing with the manufacturing situation so long
as we group under the same term conditions of such great va-
riance as we find in our various manufacturing communities.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 135
In some communities the manufacturing industry is highly pros-
perous and is able to bear an important increase in taxation
without affecting in any way its ability to compete successfully.
In other communities, however, the manufacturing industries
are struggling to get upon their feet, and an increased burden
at this time would not only be unjust to them, but would be
highly unwise from the point of view of public revenue. To
add any burden to a new industry before it can be said to be
well established, entirely apart from the injustice, would be the
greatest mistake that the State could make. Such a burden
would impair the capital from which the State might reasonably
expect in the future under right policy to obtain a large revenue.
In answering the question whether the manufacturing indus-
tries of the State in general can afford to bear a considerable
increase in the tax burdens if made upon a proper basis, we may
say, unquestionably, it can. It can, in the first place, because of
the great advantages growing out of public improvements con-
structed at State expense. These advantages have increased the
earnings of the manufacturing corporations and have given them
advantages in the matter of competition not enjoyed to an equal
extent by competitors from other states. In the second place, the
manufacturing industry can afford to bear a substantial increase
of the tax burden because as a group they have been and are
earning large dividends. The evidence of this is found in the
report of the Internal Kevenue Department concerning the in-
come tax.
In reply to the question, by what means should the increased
tax burden upon manufacturers be laid, we can say unquestion-
ably it should be on some basis other than that of property.
Neither the cost basis nor the reproduction basis is fair for pur-
poses of taxation. As pointed out in the previous chapters,
neither of these bases in many cases forms anything like an ac-
curate measure of the ability of the corporation to pay taxes.
When manufacturing corporations are taxed upon the property
basis, the only method of valuation that approaches justice is that
of market value. But to determine market value involves a knowl-
edge of the business as a going concern. As pointed out in the
previous chapters, it is utterly impossible under our present sys-
tem for the assessor to determine this value.
136 STATE OF NEW YORK
In the final instance it is the opinion of the Committee, after
a careful investigation through consultation with a large num-
ber of the principal manufacturers in the State, that the manu-
facturing industry as a group is thoroughly willing to bear its
just share of the tax burden. The widespread evasion which
has resulted to date is a direct result of the attempt to enforce
a most inequitable tax. The introduction of a fair tax would
be equally acceptable, not only to those other forms of wealth now
bearing an unjust share of the tax burden, but also to the manu-
facturing industry.
PART VIII
SECTION 182 OR THE FRANCHISE TAX
All mercantile and miscellaneous corporations and all manu-
facturing, laundering and mining corporations, having less than
40 per centum of their capital stock invested in property in this
State and used in their laundering, manufacturing or mining
business in this State, are taxable under section 182 of the Tax
Law, more familiarly known as the " franchise tax." It is a tax
payable annually for the privilege of existing or doing business
in an organized capacity in this State.
The tax is computed upon the basis of the amount of the capi-
tal stock employed during the preceding year within the State.
The amount of the capital stock employed in the State is measured
by the proportion which the gross assets employed within the
State bear to the gross assets of the corporation wherever em-
ployed. The rates are as follows :
(1) If the dividends amount to 6 or more than 6 per centum
upon the par value of the capital stock, one-fourth of a mill for
each one per centum of dividends declared upon the par value
of the capital stock.
(2) If the dividends amount to less than 6 per centum on the
par value of the capital stock, and
(a) The assets do not exceed the liabilities, exclusive of capi-
tal stock, or
(b) The average price at which such stock sold during said
year did not equal or exceed its par value, or
(c) If no dividend was declared,
Then each dollar of the amount of capital stock employed in
this State, determined as hereinbefore provided, shall be taxed
at the rate of three-fourths of one mill.
(3) If such dividend or dividends amount to less than six per
centum on the par value of the capital stock, and
(a) The assets exceed the liabilities, exclusive of capital stock,
by an amount equal to or greater than the par value of the cap
ital stock, or
(b) The average price at which such stock sold during said
year is equal to or greater than the par value,
138 STATE OF NEW YORK
Then the amount of capital stock, determined as hereinbefore
provided to be employed in this State, shall be taxd at the rate
of one and one-half mills on each dollar of the valuation of the
capital stock employed in this State, but such valuation shall not
be less than
(1) The par value of such stock,
(2) The difference between the assets and liabilities, exclu-
sive of capital stock,
(3) The average price at which such stock sold during said
year.
Section 182 must be read in connection with section 193 of
the Tax Law, which, reads in part as follows :
" If the dividend or dividends amount to less than six per cen-
tum on the par value of the capital stock, or no dividend is de-
clared, the president, treasurer or secretary of the company liable
to pay a tax under the provisions of section one hundred and
eighty-two of this chapter, shall, under oath, between the first
and fifteenth days of November in each year, estimate and ap-
praise the capital stock of such company at its actual value."
The franchise tax was originally imposed in 1880. It was
based largely on the Pennsylvania system then in existence, but
which has since been abandoned by that State. Amended from
time to time, substantially the present statute was passed in the
session of 1906. Badly drawn in the first place, the various
amendments have utterly failed to clear up the ambiguities of
this section, and it has always been fruitful of litigation and eva-
sions. Nor did the law of 1906 materially improve the situation.
The original law levied a tax upon the par value of the capital
stock as fixed by the State Board, making the rate one and a
half mills if the dividends were less than six per cent, or if there
were no dividends at all, and one quarter mill for each one per
cent of dividends if the dividends were six per cent or more.
The chief 1906 amendments provided as follows :
1. The franchise tax was declared payable in advance.
2. The rule was provided in the statute itself for determining
the amount of capital stock employed within and without the
State.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 139
3. A method was provided in the statute for determining the
amount of capital stock employed within the State represented
by stock in other corporations.
4. Corporations paying less than six per cent dividends, or
paying no dividends, were re-classified in two divisions so that
a different rate applied to them as they fell into one of the other
classifications.
This last classification has caused the greatest confusion and
is generally held to constitute one of the major defects. Corpora-
tions paying dividends of less than six per cent whose assets exceed
the liabilities by an amount equal to or greater than the capital
stock, or in which the average price of the stock sold during the
year was par or over, and not included in the classification pro-
vided for in subdivision b (infra) pay at the rate of one and one-
half mills on the appraised value, but such appraised value shall
not be:
Less than the par value of the stock, or
Less than the difference between the assets and liabilities, or
Less than the average price at which the stock sold during the
year.
The second subdivision of corporations paying dividends of
less than six per cent is that class of corporations in which the
average price of the stock sold during the year was less than par,
or whose assets do not exceed the liabilities, exclusive of capital
stock. In either case, the tax to be paid is three-quarters of a
mill on the appraised value of the capital stock. There is no
minimum valuation in this class and under the appraisement pro-
vided for by section 193 the tax may be nominal.
It probably was intended by the framers of the amendment of
1906 to take into account a minimum valuation of par for this
class of corporations, but the statute did not clearly express it,
and after the amendment of section 193 it was decided in People
ex rel N. Y. Mail & Trans. Co. v. Gaus, 198 K Y. 250, that
the valuation referred to in this part of section 182 by the words
" each dollar of the amount of capital stock employed in this
state " was the appraised valuation provided" by section 193.
Another point of ambiguity which has given rise to litigation
14:0 STATE OF NEW YORK
is where corporations pay dividends of less than six per cent and
fall under one alternative subdivision of the second paragraph
of section 182 requiring it to pay the rate of three-quarters of
a mill and also an alternative subdivision of the third paragraph
or class of section 182 providing for the rate of one and one-half
mills. Under these circumstances, the practice in the State
Comptroller's office had been to assess at the higher rate. The
legality of this practice was attacked in People ex rel. American
Bank Note Co. v. Sohmer, 157 A. D. 1, and the court held that
since the reading of the statute discloses an inconsistency under
the general principles of interpretation, the taxpayer was en-
titled to the most favorable reading and the common stock of the
corporation in the case mentioned should be taxed at the three-
quarters mills rate.
Under the interpretation placed on the statute in the New
York Mail & Trans. Co. case, many corporations escape entirely
from taxation since their indebtedness exceeds their assets. Many
corporations under this decision pay a nominal tax. On examin-
ing the Treasurer's report for 1914, out of the first 4,800 cor-
porations, 2,079 pay a tax of less than $5, out of the next 4,903
corporations in the report, 2,043 pay a tax of less than $5. The
average tax paid by these corporations paying less than $5 is
somewhat less than $2. It would not be unfair for corporations
whose capitalization was $20,000 or less to pay no tax less than
$5 no matter what its appraisement might be, and no corpora-
tion whose capitalization was over $20,000 should pay a tax of
less than $10 a year, no matter what its appraisement might
be. This simp 1 ^ amendment would bring from $50,000 to $100,-
000 additional tax into the treasury every year. As it stands to-
day, it does not pay to audit or make out bills in 40 per cent of
these cases.
These are some of the principal defects in the wording of the
franchise tax, but the who'le section is so confused and misunder-
stood that no mere amendments can cure it. We cannot do better
in this connection than to quote the testimony of Deputy State
Tax Commissioner John J. M,erril, for over 21 years chief of
the Bureau of Corporations, and who is reputed to be the only
JOINT LEGISLATIVE COMMITTEE ON TAXATION 141
man in the State who understands this law. He testified as
follows :
" Section 182 as it is written and construed, I do not believe
is understood by a score of lawyers in the State of New York,
and of course it is understood less by the taxpayers. It is am-
biguous, prolix and as construed does not get anywhere; and it
is open to all kinds of evasions * I think it has been a
burning disgrace that the Legislature of the great State of New
York has allowed this thing to go on impossible of administra-
tion; I will say frankly, with all the years of time that I have
put on it, there are plenty of cases that it cannot be applied to,
that if it should ever come to the courts for review, they will be
vacated. I would not want to suggest what kind or character
in this public meeting, because it would not be proper. And it
is not at all surprising that good lawyers, men of ability who can
sit down and distinguish between two sets of conditions, neces-
sarily mislead their clients in making their reports. I say that
is a burning shame."
But assuming that existing ambiguities be eliminated and that
the law be so worded as to accomplish what was intended, it
would still, in our judgment, be defective. Class I, or corpora-
tions paying six per cent dividends or over are taxed one-quarter
for each one per cent of dividend on par value of capital stock.
This is for all purposes a tax on dividends and open to the ob-
jections that can be urged to such a tax, the principal one of
which is that it readily permits evasion through the medium of a
small stock issue and a large bonded indebtednes. In other
words, it tends to encourage financing by means of bonded indebt-
edness, which is not desirable from the standpoint of sound busi-
ness finance. Nor does it produce revenue commensurate with the
corporation's ability to pay.
Class II, or corporations whose assets exceed the liabilities
exclusive of capital stock by an amount equal to or greater
than the par value of the capital stock, or the average price
of whose stock during the year is equal or greater than the par
value, are taxed at the rate of one and one-half mills, (1) on the
value of the capital stock, or (2) the difference between the assets
and the liabilities exclusive of capital stock, or (3) the average
14:2 STATE OF NEW YORK
price at which such stock sold during the year. Let us consider
each one of these methods of valuation separately.
1. The par value of the stock. Here again bonded indebted-
ness offers a serious difficulty. The interest on the indebtedness
may, in the first place, have reduced the dividends below the six
per cent class. And, in the second place, the par value does not
represent either the capital invested in the business which con-
sists of both stock and bond investment and surplus, or the earning
capacity of the property measured by the actual amount of the
investment.
2. The difference between the assets and liabilities, exclusive
of capital stock. This, of course, tends to correct some of the
above-mentioned objections to (1) and was so intended. Thus it
takes care of the surplus. But it does not solve the bond difficulty.
And it involves, furthermore, the very grave difficulties of valuing
assets, some of which have been described in discussing property
taxation.
3. The average price at which the stock sold during the year.
This is inseparably connected with the outstanding funded debt;
and secondly, market value is too dependent on the speculative
factor of stock manipulation to make it an accurate basis of
valuation. Moreover, any number of stocks not listed on the Stock
Exchange have no readily ascertainable market value.
Class III. Corporations which would fall under the mini-
mum tax on par value. This is open to the objections already
enumerated in our discussion of par value valuation. It is, never-
theless, justifiable as a fair, if arbitrary, method of imposing a
minimum tax on all corporations for the privilege of doing busi-
ness in corporate form.
In conclusion, we are of opinion that the corporation tax on
a dividend capital stock basis is complicated and unscientific, in
that it fails to establish an accurate measure of the corporation's
ability to pay; and that a net earnings tax is not only more
desirable from a taxation standpoint, but from that of revenue
productivity as well.
PART IX
THE LISTING SYSTEM
Before taking up the various substitutes for the personal prop-
erty tax, we desire to deal with the attempts which have been
made actually to enforce the present system.
Every state in the Union, except New York State, has had the
listing system. It has been common with those acquainted only
with the Xew York system of taxation, to suppose that the failure
to collect the personal property tax in New York was due to the
lack of the listing system.
An examination, however, of the results in the states which
have the listing system discloses in some of them a condition
much worse than has ever existed in ]STew York.
According to the laws of these States, every taxpayer is re-
quired to fill out a minute inventory, not only of all his furniture
and other tangible personalty, but also of all his intangible per-
sonalty. Penalties for failure to list property are of great
severity. The most stringent laws have been passed to enable the
assessors to enforce the complete listing of property. The assessors
have had every power necessary to inquire into and to gain knowl-
edge of the ownership of personalty. Every inducement has been
offered to the assessors and to private citizens to ferret out per-
sonal property. Various states have had tax ferrets and boards of
inquisition, back-tax commissions, etc., and have paid at times
commissions amounting to a large part of the tax collected, yet
in every case (with the exception of one or two temporary suc-
cesses) the result has been failure to secure honest and complete
listing. Most of the states require that the statements shall be
filed under oath, and although these statements are sworn to, the
greatest lack of uniformity in this regard exists as between state
and state and as between localities. The most notable result ob-
tained from these drastic measures has been, not the listing of a
large proportion of intangible personalty, but widespread perjury.
The reports of practically every tax commission, that has in-
vestigated the problem disclose the same results, viz., that the
listing system in itself is not a remedy for the present difficulty
144 STATE OF NEW YORK
with the personal property tax. The following quotations from
various reports are sufficient to establish this contention beyond
controversy :
The Oregon Special Tax Commission reports as follows:
" Where the general property tax has been retained, it
has been sought to reach personal property by an exhaustive
listing system, whereby the taxpayer is compelled to prac-
tically assess himself by furnishing a detailed list of all
species of personal property owned by him. The system in
practice has not been effective. It results in evasion and
deception; it is not calculated to reach intangible personal
property. * * It works a great hardship upon the
person who honestly lists his property."
The 1906 Washington Commission reports as follows:
" This is the lesson of all history. The oath to make a full
and complete return is as sacred as the oath taken by the
juror, etc. How well it is observed can be gleaned from
the foregoing pages. The oath is a failure."
The Commission cites the experience of other States that have
attempted, by drastic laws, penalties and the informing system,
to enforce the assessment of intangible property. It reports that
in no case has the system been successful.
The 1907 New York Special Tax Commission sums up the
situation as follows:
" Two schemes have been discussed by the members of
this Commission to remedy the present evils of the personal
property tax. One of these consists in an attempt to retain
the present personal property tax, but to make its admin-
istration more rigorous, and to require some form of listing.
To your undersigned Commissioners, this plan scarcely
merits any further consideration at all.
" To any one who is acquainted with the history of per-
sonal property taxation in the various commonwealths of
the United States or the different countries of Europe, such
a proposition must seem entirely out of place. Every pos-
sible attempt has been made to enforce the personal property
tax.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 145
" We have had lenient measures and listing bills ; self-
assessments and official assessments, general i tax inquisitors '
and ' tax ferrets.' We have had taxation of debts and
exemption of debts. It needs no argument in this place to
prove what is universally acknowledged by all careful students
of the problem that a tax on personal property cannot succeed
under any conceivable method of administration. The root
of the difficulty lies in the fact that personal property legally
follows the residence of the owner, and that it is impossible
to localize intangible personalty. * * *.
" The sole result of increasing the rigor of the law will be
here, as it ha? always been elsewhere, to augment perjury
instead of revenue and to breed more inequality while aiming
at greater justice. Xo law, however carefully devised, can
enforce a system which is out of harmony with the economic
facts. The personal property tax has become an anachronism
find is hence unworkable under any possible administrative
method in our modern industrial centres.
" We, therefore, brush aside as undeserving of any serious
consideration, the proposition to remedy the present evils
of personal property taxation, by attempting to make the
law more rigorous."
One of the most drastic laws on any statute book was the former
law of Ohio, since much softened. The Kentucky law is a good
second to that of Ohio for the severity of its language. If any
law could compel the owners of intangible property to make a
return of their holdings and to pay a tax amounting to one-third
or one-half of the income therefrom, it would seem that the old
tax law of Ohio could compel them to do so.
For many years that State required all taxpayers to make a
return of their personal property " according to its value in
money," and this statement had to be made under oath. More-
over, the law authorized any county auditor to summon recal-
citrant citizens before a judge of the probate court, and made
it the duty of such judge to punish the citizen for contempt if
he refused to answer any question which the auditor might ask
concerning his personal property subject to taxation. Nor was
this all.
146 STATE OF NEW YORK
The auditor might summon any other person, including the
cashier of any bank, which he might suppose to have knowledge
of any taxpayer's affairs, and might compel him to testify under
oath. Such an investigation might extend hack over a period of
five years; and the law provided that in case of proved evasion
or false statement five years' back taxes might be collected, with
an addition of 50 per cent as a penalty. When we remember
that the average tax rate in Ohio until very recently was 2% per
cent of the capital value of taxable property, it will seem that,
with the penalty included, the amount that might be recovered
from a man who evaded taxes for a period of five years amounted
to no less than 18.75 per cent of the entire value of his property.
Under such a law it was discovered twenty-five years ago that
the assessment of personal property was decreasing not only rela-
tively, but absolutely. In 1887 the Governor of Ohio sent to
the Legislature a special message dealing with the question of tax-
ation. " Personal property ", he said " is valued all the way
from full value down to nothing. In fact, the great majority
of the personal property of the state was not returned, but en-
tirely and fraudulently withheld from taxation. So far as per-
sonal property is concerned the fault is chiefly with the people
who list their property for taxation. The idea seems largely to
prevail that there is injustice and inequality in taxation and
that there is no harm in cheating the State, although to do so a
false return must be made and perjury committed. This offense
against the State and good morals is too frequently committed by
men of wealth, and reputed high character, and of corresponding
position in society."
To remedy the conditions thus disclosed the Legislature ex-
tended to all parts of the State a device which had been tried
previously in a few counties. It was provided that the county
officials might employ agents to ferret out property escaping taxa-
tion, and these agents known as tax inquisitors, similar to the
revenue agents in Kentucky, were to receive as compensation a
part of the taxes recovered through their efforts.
Under the operation of this enlightened and civilized law,
some millions of personal property were uncovered and placed
upon the tax rolls; but this effect was merely temporary, since
JOINT LEGISLATIVE COMMITTEE ON TAXATION 147
many wealthy persons were driven out of the State and their per-
sonal property was thereby placed beyond reach. Many citizens
of Ohio at this time took up residences in the city of Washington,
others moved to New York; and it is disputed by no one that
the effect of the tax inquisitors law was to drive capital out of
the State. In many cases the law is reported to have led to
extensive blackmail; and it is a matter of common knowledge
that persons with sufficient political influence were able to secure
immunity from the tax inquisitors.
The conditions have been aptly described by the Ohio Com-
mission of 1893 :
" It must be perfectly apparent that we do not succeed in
getting upon the duplicate any appreciable part of the personal
property which is not tangible and which is not in sight
The system as it is actually administered results in
debauching the moral sense. It is a school of perjury. It sends
large amounts of property into hiding. It drives capital in large
quantities from the State."
More significant still are the figures which show the amount
of intangible property assessed under Ohio's severe laws.
TABLE SHOWING THE ASSESSED VALUE OF INTANGIBLE PROPERTY IN OHIO
Year Money Credits Securities Total
1881 $40, 600, 000 $101, 100, 000 $8, 600, 000 $150, 300, 000
1893 41,600,000 111,200,000 9,700,000 162,500,000
1906 59, 900, 000 77, 200, 000 10, 800, 000 147, 900, 000
From 1910 to 1914, if we exclude the $300,000,000 assessed
against one individual which cannot be collected because he is
a resident of the state of New York, the percentage of the assessed
value of personal property owned by individuals to the total
assessment of the State actually decreased from 14.5 per cent to
11.5 per cent, and this in spite of a new system whereby county
assessors appointed by the Governor made the assessment, a
system admittedly more effective from the administrative stand-
point.
In Kentucky, after the most vigorous efforts had been made
through a listing system to reach personal property, the Special
148 STATE OF NEW YORK
Tax Commission of 1914 found that " the state of Kentucky
received more revenue from its dogs than it did from all the
bonds, moneys and stocks in the State."
A story told the Committee by one of the witnesses well illus-
trates the workings of the listing system. It seems that a college
professor went from New York to Michigan, to a small college
town. He took his household goods and family along, and when
he was handed one of the listing blanks, took it seriously and
conscientiously filled it out. As it turned out, not only was his
the highest assessment of anybody in the town, but he was ac-
tually assessed for more personal property than everybody else
together in the town. The town council, horrified at this treat-
ment of a stranger within their gates, actually appropriated
enough money to reimburse him, so that his levy would not ex-
ceed the general average.
The New York Commission of 1872 refers to this system as
" a method of procedure which has no parallel except in the
records of the Middle Ages and of the Inquisition, and consti-
tutes, in itself, a satire of any claim to wholly free and enlightened
government."
But there is no need to continue to dwell on the shortcomings
of the listing system. We are of opinion that it cannot be made
to succeed; that its adoption would be highly detrimental to the
jest interests of the State; that it is contrary to all our tradi-
tions, and that public opinion would not sanction its adoption.
PART X
MISCELLANEOUS BUSINESS TAXES
One of the projects brought to the attention of the Committee
was the imposition of a number of stamp taxes on bank checks,
bills of exchange, legal instruments, telephone communications,
telegraph messages, etc. Such a proposition falls squarely into
the category of new sources of revenue for state purposes.
In this connection we desire to reiterate what we have already
stated in our introduction: That the Committee does not under-
stand that it was appointed with a view to developing new sources
of revenue for the purposes of the State government, but rather to
report " the best methods of equitably and effectually reaching
all property which should be subjected to taxation ", an investi-
gation in which the question of additional revenue is only inci-
dental. The imposition of new and miscellaneous indirect taxes
which, while yielding additional revenue, would not reach the
great mass of personal property now escaping taxation, or equalize
the relative burden borne by different classes of taxpayers and
different forms of property, would not, in our judgment, meet
the problem submitted to your Committee for solution.
Moreover our study has resulted in the conclusion that the
problem has become acute in the localities rather than in the state
budget. Two-thirds of all taxes are devoted to local purposes,
while by far the greater proportion of future needs are likely to
be local in character. The State enjoys a considerable revenue
from indirect taxes. These are, generally speaking, satisfactory
in character, and can, if the necessity arises, be supplemented by
a direct tax, which would never exceed a small fraction of the
total direct tax for local and State purposes. The localities,
however, must rely for the most part on direct taxation, which we
have seen falls almost entirely upon one class of property. We
are inclined to believe that any new indirect taxes should be for
local rather than for state purposes, and the miscellaneous taxes
suggested are for the most part unsuited to such a purpose.
Nevertheless, the Committee has investigated these miscellane-
ous taxes, both as imposed by the Federal government and as im-
posed by European countries, and has endeavored to ascertain the
probable yield of such taxes if imposed in the State of !New
150 STATE OF NEW YORK
York. The results of these investigations will be found in the
appendix.
Some of the more serious objections to the imposition of these
taxes are as follows:
(1) It is obvious that the yield would be small, unless the
rates were so high and the subjects of taxation so numerous as
to result in a serious burden upon the business interests of the
State.
(2) Formerly only used as emergency war measures, these
taxes apparently are to be relied on more and more by the Fed-
eral government.
(3) Not even from a revenue standpoint their imposition would
in no sense solve the personal property problem. Assume that
the yield would be four or five millions. The personal property
tax yields to-day somewhat in excess of six and a quarter millions
of dollars. If it were abolished and the new taxes returned to the
localities, the latter would be no better off than they are to-day,
in fact somewhat worse off. Moreover, real estate would have to
pay, even to a greater extent than under the present system, all
future increases in the cost of government.
(4) If the new taxes were retained by the -State for state pur-
poses, it is quite true that they could be used to reduce the amount
of any future direct tax that might have to be imposed. There is,
however, very grave doubt as to the wisdom of the further de-
velopment of the separation of State and local revenues by the
imposition of new indirect taxes. Experience has shown that
where local and state revenues are separated and indirect taxes
supplant a direct State tax, in the course of a very few years the
yield of the former is exhausted and the State is compelled to re-
turn to the direct tax under conditions by no means as favorable as
those which existed at the time of its abolition. The truth is,
that indirect taxes are not as severely felt as the direct. The
indirect are open, therefore, to the charge of leading to extrava-
gance, rather than economy.
(5) To superimpose these new forms of indirect taxation upon
our present heterogeneous system might temporarily alleviate, but
might also postpone and would eventually impede a proper solu-
tion of the already confused problem which demands immediate
action, rather than temporizing.
PART XI
SOME FORMS OF CORPORATE TAXATION FOUND IN
OTHER STATES
1. The Franchise Tax Based on the Par Value of Capital
Stock, Such as is Found in New Jersey. The objections to a
tax based on par value have all been discussed in connection with
our analysis of section 182. While the tax is readily ascertain-
able, the par value of the stock bears no direct relationship to
the actual value of the property of the corporation, nor to its
earning ability. Moreover, a small capitalization and a large
bond issue make this method of taxation easy of evasion.
(2) The Capital Stock Tax, Such as is Found in Pennsyl-
vania, where the capital stock is appraised " at its actual value
in cash, not less, however, than the average price which said stock
sold for during said year, and not less than the price indicated
or measured by net earnings or by the amount of profits made
and either declared in dividends or carried into surplus or sink-
ing funds." This tax has been described as follows: (See
" Brief History of Taxation," 1906, p. 66).
" The tax on the capital stock of a corporation is a tax
on its property and assets and franchises. The corpora-
tion is simply a trustee for its stockholders, and they are
the real owners of the property, and whether the property
is taxed in the name of the corporation or in the name of
the shareholders, the ultimate burden falls on the same per-
sons. The fact that the tax is called a tax on capital stock
is, therefore, not of the essence of the matter; whatever it
is called, it is a tax on the property and assets of the share-
holders for whom the corporation is simply trustee. The
tax is a tax on its property and assets, including its fran-
chise, and the question of the actual value in cash is a
question of fact which must be determined by considering
value of its tangible property and assets of every kind, in-
cluding its bonds, mortgages and moneys at interest, and its
franchises and privileges; and the amount of the encum-
brances on its property and franchises is also a relevant fact
1 52 STATE OF NEW YOKK
to be considered, but is riot to be specifically deducted from
the valuation so ascertained and determined, and the Su-
preme Court has held, in the case of Commonwealth v. N.
Y., P. and 0. R. R., 188 Pa. State 169, that it would be a
manifest error to hold that the debt should be deducted from
the aggregate value of the property, and thereby withdraw
tangible property to that extent from taxation."
Professor Seligman, in his " Essays on Taxation," page 240,
after describing the method of appraisal of the Pennsylvania
capital stock tax quoted above, has this to say :
" This has led to much litigation. It has been decided,
for instance, that the price at which the shares sell in the
market is not conclusive; and in a more general way that
the actual value in cash is to be determined by ' considering
the value of the tangible property, the amount of its busi-
ness, the rate of dividends declared, and the extent and
value of its good will, franchises, and privileges, as indi-
cated by the evidence bearing upon those subjects at that
particular time.' The result is that in practice the taxation
of capital stock, by such a method of appraisal, does not
differ much from the ad valorem system mentioned below."
Under this system the full value of corporate property, includ-
ing franchise value, is sought, the law undertaking to lay down
certain definite rules to be used in ascertaining the value of the
said property. It differs from the ad valorem system to the ex-
tent that it takes into consideration such important factors as net
earnings, dividends and profits carried into surplus.
If the tax is to be levied on the capital stock, the value of
which is to be based on net earnings, it is hard to see what ad-
vantages accrue from a capital stock tax as contrasted with a tax
on net earnings. If, on the other hand, in addition to net earn-
ings, the assessors must take into consideration the value of the
tangible and intangible property, they are compelled to deal with
all the objectionable elements and serious difficulties connected
with property taxation. It may be urged that a capital stock tax
provides for the contingency when there are no net earnings, in
which event under the net earnings system the corporation would
JOINT LEGISLATIVE COMMITTEE ON TAXATION 153
not pay taxes. It must be remembered, however, that the cor-
porations would, in any event, pay a tax on their real property,
and it is, to say the least, doubtful whether a corporation with-
out earnings has real taxpaying ability. Whatever may be true
of public service corporations which enjoy peculiar privileges, we
believe that in so far as general business corporations are con-
cerned, it is fairer and on the whole better public policy to tax
them on a net earning basis, and to require them to pay taxes
only when they have the income from which to pay them.
N. B. Capital stock tax does not apply to manufacturing corporations in
Pennsylvania.
(3) The Pennsylvania Mercantile and License Taxes. This
tax is paid by retail and wholesale merchants and is based on
their gross sales. The Pennsylvania tax committee of 1911
found that this tax was unequal, in that it was the same for the
merchant who made a large profit as for the one who made a
small one. The committee thought that " full realization of an
ideal system had been attempted in the Winconsin income tax
law," but found that without constitutional authoiity no such
progressive tax could be laid in Pennsylvania.
The criticism of the Pennsylvania committee is obviously
sound. A tax on gross sales is not a fair tax, because gross sales
have no controlling relationship with actual or net profits and
are therefore not a reliable index of ability to pay.
(4) The Corporate Excess Tax. Massachusetts claims to have
originated this form of corporate taxation. Business corporations
make an annual return to the State Treasurer, from which he
estimates the full value of the capital stock, in the estimating of
which debts may be deducted unless incurred for the purpose of
avoiding the tax. From the estimated full value of the capital
stock are deducted the assessed value of real estate and machinery
locally taxable and also such property as is located and taxed in
other states. The balance, or corporate excess, is taxed at the
average rate of taxation for cities and towns during the preceding
three years; providing, however, that the corporate excess shall
never exceed 20 per cent of the value of the real estate, machinery
and merchandise and taxable securities ; nor is the tax to be less
than one-tenth of 1 per cent of the market value of the capital
stock. The tax has, in the main, received the approval of the
154 STATE OF NEW YORK
various Massachusetts commissions that have studied its work-
ings. It is, nevertheless, fairly open to the following criticism :
(1) It favors corporations with a large bonded indeted-
ness. This means inequality. One Boston corporation,
which as a firm has been assessed locally for $837,000, paid
as a corporation no tax, either to Boston or to the State.
(2) The market value of stock is fluctuating and uncer-
tain, and it cannot be applied to closely held corporations
whose shares are not dealt in widely, and these last must be
taxed on the basis of net assets. The tax thus becomes a
tax on property rather than on capitalized earnings, and
is open to the objection of taxing property without consider-
ing its income-bearing character. Moreover, it is based on a
valuation that does not take account of debts, since cor-
porations enjoy the privilege of deducting debts and by this
means frequently escape taxation entirely.
(3) Corporations that have a large part of their capital
invested in real estate and machinery, pay practically no
corporate excess tax, and do not pay on whatever other prop-
erty they may own. This is likewise true of corporations
the value of whose merchandise exceeds the value of the
corporate excess; whereas corporations whose property con-
sists largely in intangibles and whose earning capacity as
compared with their tangible assets is relatively greater,
pay a large tax which they would not pay at all were they
individuals. These corporations, it was found, were rapidly
adopting foreign charters, and the 1903 amendment re-
ducing the maximum of the corporate excess tax to 120 per
cent of the value of the property was adopted for this
reason.
(4) The tax is not proportional to the earning capacity.
" It would seem fair to conclude that the taxation of
business corporations is proportional neither to property nor
to income. It is not an adequate means of reaching either
tangible or intangible property. It is not levied with re-
spect to taxpaying ability as measured by capitalized earn-
ings. The merits of the system lie rather in its superiority
to the general property tax, in its administrative efficiency
JOINT LEGISLATIVE COMMITTEE ON TAXATION 155
and in its approximation to the ideal system of taxing net
earnings directly or indirectly." (The Taxation of Corpora-
tions in Massachusetts, by Harry G. Friedman.)
The corporate excess tax is administered in Massachusetts by
a central board. Where it is administered locally it is by no
means as successful.
(5) The Wisconsin Income Tax. Returns are made for the
calendar year, though in cases where this rule would cause hard-
ship the Commission may allow the business year to be substi-
tuted. In its principal results and conclusions the return should
conform to the report made to the Federal government.
INCOME INCLUDES
1. All rent of real estate.
2. All dividends, and all interest.
3. All profits derived from the transaction of business or from
the sale of real estate or other capital assets; provided that of
the profits derived from such sales only such proportion shall be
taxable as the time between January 1, 1911, and the time of
sale bears to the entire period of ownership.
4. All royalties derived from mines or the possession or use
of franchises or legalized privileges of any kind.
5. All other gains, profits or income of any kind derived from
any source whatever, except such as are specifically exempt.
DEDUCTIONS ALLOWED
1. Wages and salaries paid in the production of such income.
The name, address and amount paid to each employee who re-
ceives over $700 to be reported. This is true whether corpora-
tion is liable to tax or not. The Commission may disallow the
deduction if the amount is excessive or not paid in the production
of income, or if the corporation has failed to file the name, etc.
2. Ordinary and necessary expenses paid out of income in the
maintenance and operation of its business, including a reasonable
allowance for depreciation, and in the case of mines and quarries
an allowance for depletion of ores; and including interest paid
on its bonded or other indebtedness to an amount of such indebted-
ness, not exceeding its paid-up capital stock outstanding at the
close of the year ; provided that the amount of such capital stock
156 STATE OF NEW YORK
shall in no case exceed the clear value of its assets over and above
all indebtedness and liabilities.
Additions or improvements are not " ordinary or necessary re-
pairs/ 7 nor are renewals or replacements which are covered by
depreciation.
Depreciation is limited to deterioration or exhaustion by " use,
wear and tear," and does not cover fluctuations in market value.
Depreciation of merchant's stock is not allowed.
3. Losses actually sustained within the year, and not covered
by insurance or otherwise. Loss cannot be deducted unless profit
from transaction could have been taxed as income. This rule
prohibits the deduction of losses sustained in business without
the State.
4. Taxes wherever paid, if upon the source from which the
income is derived.
Taxes paid upon idle property or unimproved real estate cannot
be deducted. Income taxes paid in cash may be deducted as
" necessary expenses." Taxes paid by corporations cannot be al-
lowed as deductions from the income of the stockholder.
Special assessments cannot be deducted.
5. Dividends received from any corporations, joint-stock com-
panies or associations, partnerships, etc., i. e., that proportion of
the income upon which the tax has already been paid.
6. Dividends received from state banks, national banks, mutual
savings banks and trust companies, none of which pays an income
tax.
APPORTIONMENT OF INCOME
" In determining taxable income, rentals, royalties and
gains or profit from the operation of any farm, quarry, or
mine, shall follow the situs of property from which derived,
and income from personal service and from land contracts,
mortgages,- stocks, bonds, and securities, shall follow the resi-
dence of the recipient. With respect to other income, persons
engaged in business within and without the state shall be
taxed only upon such income as is derived from business
transacted and property located within the state."
Two methods are provided for dealing with this last class of
income a separate accounting or an apportionment. Mercan-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 157
tile establishments and a few other special classes make a special
accounting. All others, unless exempted by the Commission, have
their income apportioned according to the following rule:
" In determining the proportion of capital stock employed
in the state, the same shall be computed by taking the gross
business in dollars of the corporations in the state and add-
ing the same to the full value in dollars of the property
of the corporations located in the state. The sum so obtained
shall be the numerator of a fraction of which the denominator
shall consist of the total gross business in dollars of the
corporation both within and without the state, added to the
full value in dollars of the entire property of the corporation
both within and without the state. The fraction so obtained
shall represent the proportion of the capital stock represented
within the state."
Gross business consists of at least two elements: the business
of production and that of distribution or sale. The former is
measured by costs of production, the latter by gross sales minus
costs of production.
It is believed that the word " property " as used in the appor-
tionment fraction means property from which apportionable in-
come is derived, i. e., the full or book value of property other
than or excluding farms, mines, quarries and property yielding
rents and royalties (income of which follows the situs of the
property), and land contracts, mortgages, stocks, bonds and securi--
ties (the income of which follows the residence of the recipient).
KATES.
On the first $1,000 of taxable income or any part thereof,
2 per cent.
On the second $1,000 of taxable income or any part thereof,
2% per cent.
On the third $1,000 of taxable income or any part thereof,
3 per cent.
On the fourth $1,000 of taxable income or any part thereof,
3% per cent.
On the fifth $1,000 of taxable income or any part thereof,
4 per cent.
158 STATE OF NEW YORK
On the sixth $1,000 of taxable income or any part thereof,
5 per cent.
On the seventh $1,000 of taxable income or any part thereof,
6 per cent.
On all taxable income in excess of $7,000, 6 per cent.
ADMINISTRATION
The State is divided up into assessment districts. An assessor
of income for each assessment district is appointed by the Tax
Commission. ' Every corporation, whether liable to the tax or not.
must make a sworn return.
In case a false or fraudulent return is made, the additional
amount is taxed at double the normal rate. In case of failure to
make the return, the Commission may estimate the income and
impose the double rate upon the income so fixed. In addition,
a penalty of not less than $100 or more than $5,000 can be im-
posed at the discretion of the court, and the officer of the com-
pany making the false return is also fined not to exceed $500,
or imprisoned for more than a year.
The State Tax Commission appoints three resident taxpayers
of each county to serve as a board of review, which is particularly
charged with the duty of examining and deciding upon the facts
of disputed cases. An appeal from its decision can be taken to
the State Tax Commission.
APPORTIONMENT
The taxable income once computed shall be assessed, and taxes
at such rate, shall be paid, in the several towns, cities and vil-
lages in proportion to the respective amounts of income derived
from each, counting the income derived without the State as
belonging to the locality of residence. The proportion may be
determined according to gross income, investment or, preferably,
by an exact allocation of net income. Ten per cent goes to the
State, 20 per cent to the county and 70 per cent to the town, city or
village. Personal property tax may be offset against income tax.
REPORT OF COMMISSION, 1912
The total income tax assessed amounts to $3,501,161, of which
$2,392,454, or 68.3 per cent is assessed against corporations and
JOINT LEGISLATIVE COMMITTEE ON TAXATION 159
$1,108,707, or 31.7 per cent against firms and individuals. The
average rate upon firms and individuals is 1.96 per cent and
upon corporations 5.4 per cent. The total taxable income
amounted to $100,845,862. The taxable income of corporations
amounted to $44,311,315, and of individuals $56,534,547.
" These figures are noteworthy in many respects. It has
repeatedly been charged by critics that although a number of
American states have experimented with the income tax, in no
case has it proved a success. The answer has been that the
income tax has never been given a fair trial by any American
state. This answer now proves to be essentially correct."
The reduction by reason of the personal tax offset was not
known at the time the report was written and was merely esti-
mated. In twelve selected counties, excluding the corporations
whose income tax is entirely offset by the personal property tax,
we have 1,055 corporations with an assessed income of $7,520,776,
paying a tax of $411,611. They formerly paid a personal prop-
erty tax of $71,473. Increase, $340,138.
The cost of administration in the first and most expensive
year will be only $45,000 over and above the former cost of the
supervisors of assessment. Total cost $100,000, probably the
cheapest tax of a general kind collected in the United States.
The Wisconsin tax has, on the whole, encountered very little
difficulty with the large interstate corporations.
" The large interstate corporations usually keep their
books in such a way as to make it possible to apportion or
allocate fairly to the State of Wisconsin its share of earn-
ings. Their stock is frequently listed on the exchange and
their financial operations are publicly reported. Moreover,
these corporations are above petty deception. These cor-
porations have dealt quite as fairly with the Wisconsin
income tax as any other class of taxpayers. It is just as
easy to assess the big interstate corporations under the in-
come tax as it is under the property tax a fact that will
be appreciated if one stops to think how ' property ' gets its
value, and the degree to which our state laws insist that
160 STATE OF NEW YORK
' franchise/ ' corporate excess ' and all ' intangible proper-
ties ' of corporations shall be assessed and taxed under prop-
erty taxes. Yet nobody proposes to do away with the state
taxation of the property of the interstate corporations."
EEPORT OF COMMISSION, 1914
In 1914 the income assessed rose to $126,979,330, and the
tax to $4,140,571. The actual cash collected amounted to
$1,935,846, which represents the excess over the personal property
tax collected. It must be noted first that collections have been
slow owing to litigation, and, second, that the income tax assess-
ment machinery has resulted in an extraordinary increase in the
personal property assessment. The tax is largely one on success-
ful business concerns. Corporations paid 65.6 per cent and in
divi duals 34.4 per cent. The rate for corporations was 5.21 per
cent, for individuals 1.9 per cent. Eighty-five per cent of the
corporation tax is assessed on manufacturing and mercantile cor-
porations, and the former are by far the largest contributors.
" There is no reason why manufacturing concerns should
not contribute to the state when they are prosperous and
have reached the dividend-paying stage. There is every
reason why they should contribute. On the o.ther hand, the
new and struggling enterprise, the expirimental industry,
the weak and small producers, need and deserve protection;
and it would be well, in the opinion of the Commission, if
such concerns could be exempted from the personal property
tax and not be called upon to contribute to the state until
their taxpaying ability had been definitely proven."
The income tax law exempted from the personal property tax
Moneys, credits, household goods, farm machinery, and other
minor personal property, but much personal property, including
merchants' and manufacturers' stock, still pay the personal prop-
erty tax. These last " baffle the efforts of the best assessors " and
the Commission recommends that they be included in the exemp-
tion list.
PART XII
SUBSTITUTES FOR THE PERSONAL PROPERTY TAX
We now come to the three plans most seriously urged by wit-
nesses before the Committee as best possible substitutes for the
personal property tax:
(1) The Ability, or Presumptive Income, Tax.
(2) The Classified Personal Property Tax.
(3) The Income Tax.
CHAPTER I
THE ABILITY, OR PRESUMPTIVE INCOME, TAX.
" The ability tax, so-called, is a tax on the abilities of
those who profit from the opportunities afforded by the
State of New York. Conceding that the fairest test of
ability to pay is income, and assuming that a direct income
tax is- unattainable, the proposition is to get at the income
indirectly and by outward signs utilizing certain definite
facts of expenditure as affording some indication of rela-
tive income. The ability tax, as a presumptive income tax,
would therefore be composed of three parts:
A. A habitation tax;
B. An occupation tax;
C. A salaries tax;
which provisions by which only one of these taxes would be
payable by any particular person.
A. THE HABITATION TAX
'" The habitation tax is to be levied upon individuals
occupying houses or apartments for residential purposes. It
proceeds upon the theory that what a man spends for rent
is a rough indication of his ability to contribute to the
public burden. Inasmuch as the ratio of house rent to in-
come decreases as the amount of rent increases, it is ob-
vious that, in order to secure approximate justice', the tax
must be rather sharply graduated. The tax is accordingly
based upon a progressively graduated scale. The tax is so
162 STATE OF NEW YOKK
calculated that the taxpayer will pay a sum that is about;
equivalent to 1 per cent of his income, as indicated by hia
house rent. As a rental increases it is multiplied by a con-
tinually increasing figure in order to reach the presumptive
income, and only the excess of this over $2,000 is considered
the taxable income. Moreover, in order to prevent miscar-
riages of justice, it is provided that if any one finds that
the tax amounts to more than 1 per cent of his actual in-
come, he shall have the right to declare and prove his actual
income and to have his tax reduced to 1 per cent of his in-
come. Where a man lives in his own house the rental value
shall be calculated at 7- per cent of the assessed value of the
property. Provision is also made for people who live in
hotels or apartments and the tax is applicable to those who
have occupied the apartments continuously for at least three
or four months.
" Several criticisms might be urged against this scheme.
It might be alleged that the tax is a tax on the poor man.
In reality the opposite is the case. All rentals below $50 a
month, that is $600 a year, are exempt. This corresponds to
a total expenditure of from $2,500 to $3,000. Every one,
therefore, with a presumptive income under this amount,
pays no tax at all. Moreover, the amount of the tax on
slightly higher rentals is exceedingly moderate, while on
very high rentals the tax is much greater in proportion.
This will be seen from the following scale:
" On rentals from the tax is
$600 to $700 $5 00
1,000 to 1,100 30 00
2,000 to 2,100 87 00
4,000 to 4,100 226 00
6,000 to 6,200 426 00
10,000 to 10,200 796 00
25,000 to 26,000 4,400 00
In other words, the occupier of a house of $6,000 rental
pays about eighty times as much tax as the occupier of a
house of $600 rental, although his rent is only ten times as
JOINT LEGISLATIVE COMMITTEE ON TAXATION 163
great. If we compare the occupiers of houses of $1,000 and
$25,000 rental, respectively, we find that the latter pays
about 146 times as much tax as the former, although he pays
only twenty-five times as much rent.
" The habitation tax thus entirely exempts all those with
incomes under about $3,000 and imposes an insignificant
burden upon those between $3,000 and $6,000, while it con-
siderably increases as the income augments. The habitation
tax is not a tax upon the poor man, and not an appreciable
burden upon those in moderate circumstances, while even
for the rich man the tax cannot exceed 1 per cent of the
actual income.
" In the second place, it might be alleged that the habita-
tion tax falls upon the real estate owner, for the reason that
a prospective tenant of, let us say, a $650 apartment would
insist upon having his rent reduced to $600 in order to
escape the tax. This argument, however, is, to a large ex-
tent, fallacious. In the first place, the $650 tenant will
never secure the owner's consent to a reduction of $50 in
rent in order to enable the tenant to save $5 in tax. The
same would be true of somewhat higher rentals, because, ac-
cording to the scale proposed, a reduction of every $100 in
rent would involve a saving of only $5 in tax. So that
even at the very worst, it would only be at the margin of
each class of tenants that there would be any pressure at all
to demand any reduction of rentals. But even this would
not be true. The only way in which a landlord could be
induced to grant a reduction of rent would be through the
fear of having his apartments vacated. But if the tenants
of a particular grade of apartments would actually be in-
duced to move to a lower-priced apartment because of the
tax, the places vacated by them would be instantly filled by
the influx of the tenants from the next higher grade of
apartments, who would, in like manner, be induced to seek
lower-priced apartments. Therefore, what might possibly
be lost in one way would be gained in the other; and the
only apartments which might suffer a possible reduction of
rentals because of a threatened disappearance of their ten-
ants would be the highest-priced apartments in the city.
164 STATE OF NEW YORK
But as these highest-priced apartments are occupied by the
wealthiest classes, the amount of tax to which they would
be subject would be such an insignificant proportion of their
entire income as in all probability to lead to no such transfer
at all.
" Thus it will be seen that the argument that the habita-
tion tax falls on the real estate owner, is fallacious. If it is
shifted at all to the real estate owner, only an exceedingly
small part will fall on him and the rest will still be paid by
the tenant.
" The habitation tax is therefore not a tax on the small
man nor is it a tax on the real estate owner. It is a tax on
the presumptive income of everybody who resides in New
York City. Its chief value as compared with our present
system of taxation is that it reaches the man who is not in
business as well as the rich man who, although living here,
now escapes taxation by claiming residence outside of New
York.
" The habitation tax will, however, affect those who earn
their living in New York but who do not live here. They,
too, possess an ability which ought to be reached. These it is
proposed to reach by:
B. THE OCCUPATION TAX
" The occupation tax is a flat tax on the premises occupied
for business or for securing a livelihood. It is levied on the
basis of the annual rental value of the premises. The tax
is 7 per cent of the annual rental value, with a reduction of
$25 in every case. Where a man occupies his own building
for business purposes or for -purposes of a livelihood, the
rental value is estimated, as in the case of the habitation
tax, at 7 per cent of the assessed valuation. The occupation
tax is not a tax upon the small business man. Business
premises are liable to the tax only when the rent exceeds
$600 and as the tax is- levied at the rate of 7 per cent only on
the rental exceeding that sum, the amount of the tax is in-
significant. On even the more moderately successful busi-
ness man, whose business rentals are $1,000 a year, for in-
stance, the tax is only $50.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 165
" The occupation tax, although concededly not ideal, is
far better than a tax on the stock-in-trade and assets of the
business man. Any attempt to enforce the present personal
property tax or even to levy a new low-rate tax upon his
stock in trade and assets would be both more onerous and
less equitable than the occupation tax. No one, more-
over, will be held to both the habitation tax and the occu-
pation tax. The habitation tax will hit large classes who do
not pay the occupation tax; the occupation tax will hit
large classes who do not pay the habitation. In both cases,
any tax paid on personal property may be deducted.
" In the case of the occupation tax also, the objection
might be raised that the burden will be shifted to the owner
of the real estate. As has been pointed out above in the
case of the habitation tax, this argument is fallacious. Even,
however, if it were true in part, and if a portion of the tax
were to remain on the real estate owner, it must be remem-
bered that the whole project is to be regarded as an alterna-
tive to the general property tax, the chief burden of which
notoriously falls on real estate. The choice lies between
an increased rate of the general property tax (in actual
fact an increased rate on real estate) on the one hand, and
the ability or indirect income tax on the other. Even if, as
is most unlikely, a small part of the occupation tax should
be shifted to the real estate owner, it nevertheless would
prove as to the unshifted part a corresponding relief to real
estate. As a matter of fact, the tax will be borne, not by
real estate, but by the business and professional classes.
C. SALARIES TAX
" The third part of the project is a tax on all salaries
paid or received in the State of New York except salaries
paid by the Federal government. The exemption is in all
cases $2,000 and the tax is graded from 1 per cent up to
5 per cent, the last rate being levied on the excess of salaries
over $30,000. Provision is made for the reporting of sal-
aries by employers, and for withholding by them of the tax
at the source.
166 STATE OF NEW YORK
" The salaries tax is not a tax on the small man. Since
all salaries under $2,000 are exempt, the recipient of a
$5,000 salary would pay only $30 a year. On the higher
salaries like those of the more successful professional men
and of well-paid corporation officials the tax is graded ac-
cording to a progressive scale. The salaries tax is, there-
fore, in reality a tax on large incomes derived from per-
sonal exertion. It is a tax upon the wealthier class, not
upon the poor man.
" Moreover, it would be equally false to state that sal-
aries are taxed while other incomes are not taxed. Just the
reverse is true. Business incomes are reached by the occu-
pation tax; other incomes in general by the habitation tax.
~No one is to pay more than one of these taxes. The object
of the salaries tax is not to single out for taxation people
with salaries; but on the contrary, to prevent people with
large salaries, but living outside of the State and who carry
on no other business in the State from escaping justice.
" The salaries tax, instead of being an unequal tax on a
special class, is an attempt to secure equality of taxation by
reaching those who would otherwise escape.
t( In considering the ability or presumptive income tax,
it must be compared not to any ideal scheme, but with the
present methods. The general property tax is concededly
an absurdity. The low rate tax on intangibles would do
more harm than good. In New York there remains only a
direct income tax or a presumptive-income tax. The pre-
sumptive income tax is the ability tax.
" It is, indeed, quite true that neither the habitation tax
nor the occupation tax is in exact mathematical proportion
to the taxpayers' income. We must remember that a fairly
rough approximation of justice which is administratively
simple, and workable, may be better than some ideal scheme
which does not work out in practice. The ability tax would
be exceedingly easy to administer by either state or local
officials, and the revenue would be very large. In the City
of New York alone, at rates suggested, the revenue would
be from twenty to twenty-five million dollars a year. In the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 167
other cities of the State the revenue would be proportionate.
Under our present system vast classes of the population
escape and a small proportion bears the burden. Under the
new scheme many classes will be reached who now are not
reached. While ideal justice will not be attained, a great
step forward will have been taken. As in every question of
taxation reform, we must consider the proposition not from
the point of view of ideal justice, but from that of substan-
tial progress."
The above was prepared and submitted to us by Professor
Seligman, Chairman of the Executive Committee of the Now
York City Special Committee on Taxation. His Committee last
year recommended such a tax for the City of New York, but has
since declared its preference for the State income tax.
The business tax part of this plan has been in force in some
of the Canadian cities for a number of years, notably in Winni-
peg and Montreal, where in lieu of a personal property tax a
business tax is levied, based upon the annual rental of the prem-
ises occupied, in Winnipeg at the rate of 6% per cent, and in
Montreal at 7% per cent. Judging by the reports of the Can-
adian commissioners, the tax is a most successful one and gives
general satisfaction.
The system of business taxes in the City of Toronto and other
Ontario cities is somewhat different, the amount of levy depend-
ing not only upon the value of the real estate occupied, but also
upon an arbitrary classification applied to the different lines of
business, running from 25 per cent on some lines of business to
150 per cent on others. This system appears to offer many more
difficulties and complications than the simpler one prevailing in
Winnipeg and Montreal.
France and other European countries have used the habita-
tion tax and the business tax in different forms. In fact it is still
an integral part of the French system. However, the whole
tendency in Europe has been to rely more and more on a direct
income tax.
The Ability Tax has many advantages. We do not feel, how-
ever, that we can recommend its adoption as a State-wide sub-
stitute for the personal property tax. It is primarily an urban
168 STATE OF NEW YORK
tax. While rental value may in a large city be on the whole a
fairly accurate measure of the taxpaying ability of large classes
of taxpayers, the test would by no means hold good in the rural
districts. Thus it is well known that in the smaller towns and
villages, the habitation occupied is not an accurate test of the
wealth of the occupant.
Moreover, the plan is frankly one to reach income by indirect
means. Professor Seligman, in describing the tax, says : " Con-
ceding that the fairest test of ability to pay is income, and
assuming that a direct income tax is unattainable the proposition
is to get at the income indirectly, and by outward signs utilizing
certain definite facts of expenditure as affording some indica-
tion of relative income." Now, it is quite proper to assume in
the case of a single city that an income tax is unattainable be-
cause for rather obvious reasons a single city could not hope
successfully to administer such a tax. But this is not true of
the State; and if one of the main arguments for the ability or
indirect income tax is based on the unattainability of the direct
income tax, this reason disappears when the latter is attainable.
In the second place, if income be the fairest test of ability to
pay, why resort to outward signs, to approximations, to the in-
direct means of ascertaining the income when it is possible to
do so by the direct method ? As between the indirect income tax
and the personal property tax there is much to be said for the
former, but as between an indirect income tax and a direct one,
the advantages are clearly with the latter.
CHAPTER II
THE CLASSIFIED PROPERTY TAX
This tax is based upon the theory that real estate, tangible
personalty and intangible personalty, respectively, rest upon dif-
ferent economic bases, and that it is unjust to tax all
three classes at the same rate. Furthermore, that whenever a
tax upon personalty exceeds an amount equivalent to a 7 or 8
per cent income tax, the average taxpayer will not pay it, if he
can evade it.
Professor Bullock in describing this system gives the following
threefold classification :
JOINT LEGISLATIVE COMMITTEE ON TAXATION 169
(1) Real estate at the general property tax rate. The heaviest
burden will fall here, but this is greatly alleviated by the fact
that whenever real property changes hands, existing taxes are
capitalized, so that the purchaser buys upon what is practically
a tax-exempt basis.
(2) Intangible personalty a rate of three to four mills is a
safe limit for intangibles. The experience of Pennsylvania, Mary-
land and Minnesota would seem to bear this out. This rate is
equivalent to a 6 per cent income tax on a security paying 5
per cent interest.
(3) Tangible personalty. The rate on tangible personalty can
be about double that on intangible personalty, for the reason that
capital employed in trade is presumed on an average to yield the
ordinary trade profit, which is about twice the rate of simple
interest. Therefore six or eight mills seem to be a fair rate for
tangible property. This would be equivalent to an income tax
of 6 per cent upon intangible personalty yielding an income at
about 10 per cent.
ARGUMENT FOR CLASSIFICATION OF PROPERTY FOR PURPOSES OF
TAXATION
"All successful legislation is based upon a reasonable discrim-
ination between the classes of things with which it deals, and
laws that ignore necessary distinctions between classes prove in-
effectual or pernicious in their results.
" Uniform regulations for the transfer of all classes of prop-
erty, a uniform penalty for all crimes, and absolute uniformity
in the treatment of persons, without discrimination of age, sex,
or condition, would be no more unreasonable than a uniform rate
of taxation for all property, irrespective of its nature or class.
" Diversification of rates of taxation agrees with the ordinary
business principle of adjusting charges and prices to ' what the
traffic will bear.' No railroad charges as much for carrying logs
as for carrying furniture; but the discrimination in favor of
logs, by enabling that traffic to move, contributes to the revenue
of the road and decreases the charges upon furniture and other
traffic of higher grade.
" When the average rate of taxation was fifty cents per $100,
it was possible to tax all property at a uniform rate because the
170 STATE OF NEW YORK
tax was not higher than any important class of property could
bear; but under modern conditions the rate of taxation is
high that it is necessary to classify property and adjust methot
and rates of taxation to the needs of each important class.
" Reasonable discrimination between the objects of taxation is
the principle upon which our customs tariff and internal taxes
upon commodities are now adjusted. We tax beer at one rate,
spirits at another, and tobacco at another, and no sensible man
would propose to tax all three commodities at a uniform rate.
Our tariff taxes cut diamonds at the rate of 10 per cent and
levies upon sugar a duty equivalent to 60 per cent ad valorem.
This discrimination is both just and expedient, since a duty of
60 per cent upon diamonds would lead to so much smuggling as
to produce little revenue; while the duty of 10 per cent yielded,
in 1905, $2,500,000.
" This illustration not only makes clear the necessity of ad-
justing taxation to ' what the traffic will bear/ but points to the
reason therefor. The duty of 10 per cent can be collected from
any dealer in diamonds, because the government succeeds in col-
lecting it from practically all dealers. If the duty were raised
to 60 per cent, and a few dishonest dealers were tempted to evade
payment of it, the honest dealers, who would have no objection
to paying duties uniformly collected upon all persons engaged in
their trade would have no choice but to resort to smuggling or go
out of business. Evasion of taxation, when it becomes general,
is not due to dishonesty on the part of the average taxpayer,
but to the sheer inability of the honest man to pay his taxes when
other persons succeed in evading theirs." (C. J. Bullock.)
CHAPTER III
THE LOW RATE ON INTANGIBLES
This plan represents, in part, the scheme for a classified prop-
erty tax as proposed by Professor Bullock, except that the advo-
cates of this single scheme do not include Bullock's suggestion
in regard to a low rate for tangible personalty, but deal solely
with intangibles. The theory upon which this tax rests is :
(1) That the general property tax has been a failure as ap-
plied to intangibles, because the rate in most states amounts to
JOINT LEGISLATIVE COMMITTEE ON TAXATION 171
a sum which represents from 40 to 50 per cent of the entire in-
come from an average high-grade investment.
(2) That taxpayers refuse to pay a confiscatory rate, but that
they would voluntarily pay a rate consistent with the low rate of
income derived from such property.
CLASSIFICATION OF SYSTEMS OF LOW RATE UPON INTANGIBLES
( 1 ) The registration plan a simple payment f OT a term of
years upon the face value of the debt, without any attempt to
reach the real value.
(a) Exemption from other taxation for a period of years
upon the payment of a definite amount, but not for the life
of the security. Example : Connecticut exemption for
five years. Exempt locally in the hands of the holder.
(b) Exemption for the life of the security. Example:
New York Secured Debt Law before amendment of 1915.
(2) Annual tax based upon full value of the security.
(a) At flat rate for State or apportioned for local pur-
poses. Examples : Pennsylvania, Minnesota and Iowa.
(b) Combined local rates plus State rates. Example:
Maryland. Local: uniform rate of 3 mills. State: general
property rate, averaging about 1.8 mill. Total rate about
4.8 mills; now, 1915, 4.5 mills.
ARGUMENTS FOR THE LOW RATE ON INTANGIBLE PROPERTY
The principal arguments for the tax were presented by one of
the Massachusetts committees as follows :
(1) That it will impose upon the classes of intangible
personalty subject to it a rate of taxation proportionate to
the incomes which they yield;
(2) That it will reduce the temptation on the part of
owners of money and taxable securities to conceal such prop-
erty and evade the payment of taxes;
(3) That it will put a stop to the concentration of in-
tangible personalty in certain towns;
(4) That it will tend to make residence in this State more
attractive for wealthy property-holders ;
(5) That it will relieve the present inequality in the dis-
tribution of the tax burden between personalty and realty
172 STATE OF NEW YORK
by bringing a larger amount of the former upon the as-
sessors' lists;
(6) That it will do away with the general demoralization
attendant upon the working of the present system.
CRITICISM OF THE ABOVE ARGUMENTS
It is true that most of the above hold, in part at least, for
the low rate on intangibles. However, these arguments would hold
to the same extent if applied to almost any other scheme that
would reduce the tax rate to the equivalent of a 6 to 8 per cent
income tax.
The above arguments represent not simply the strength of the
so-called " low rate on intangibles," but rather the strength of
the general and broader idea that the tax rate should be adjusted
to all classes of personalty according to the income-bearing
capacity.
PENNSYLVANIA LOW RATE ON INTANGIBLES
The Pennsylvania system has two parts:
(A) The tax on intangible personalty other than corpo-
rate loans;
(B) The tax upon loans of
(1) Counties and municipalities;
(2) Business corporations doing business in Pennsyl-
vania.
(A) TAX ON INTANGIBLES OTHER THAN CORPORATE LOANS,
APPLIES TO
(1) Money at interest;
(2) Money owing by solvent debtors;
(3) Mortgages;
(4) Public securities not exempt from taxation and not
included under the corporate loan tax;
(5) -Shares of stock in all corporations other than cor-
porations subject to taxation upon capital stock or business
in Pennsylvania.
Method of Assessment
The tax upon intangible property other than corporate loans is
assessed by the county officials upon the basis of returns made
JOINT LEGISLATIVE COMMITTEE ON TAXATION 173
by the taxpayers. The law requires every person to make a
return of all taxable money, credits and securities ; and these state-
ments must be made under oath. Upon the refusal or failure of
any person to make the required returns, the assessors are au-
thorized to make an assessment from the best information they
can obtain. In most of the counties of the State, this arbi-
trary assessment law is not rigidly enforced.
*
Yield According to Classified Sources
(1) Mortgages a very large part of the tax, possibly 50 per
cent, is collected from mortgages on real estate, since the law
makes rigorous provision for ascertaining the ownership of this
class of property.
(2) Trust companies a considerable amount is paid by the
trust companies upon personal property which they hold in trust.
(3) The remainder, about 30 per cent, is paid by individuals,
assessed by a sworn return or arbitrary estimate.
Results of Pennsylvania Experience with 4:-Mill Tax
From the point of view of amount of intangible personal prop-
erty listed, the Pennsylvania system undeniably has been suc-
cessful. The following statistics, expressed in round numbers,
indicate the striking growth in the amount of intangibles listed
from 1885 to 1915:
1885 $14-5,300,000
1888 429,000,000
1891 575,000,000
1894 613,000,000
1897 , 073,000,000
1900 722,000,000
1903 847,100,000
1906 932,000,000
1907 1,014,000,000
1909 1,141,000,000
1910 1,184,000,000
1912 1,266,000,000
1913 , 1,402,000,000
174 STATE OF NEW YORK
It must not be inferred, however, that the local assessors dis-
cover all intangible property subject to taxation and list it
at its true value. As a matter of fact, the administration of
the Pennsylvania law is far from rigorous, and except in the
case of mortgages and personal property held in trust by trust
companies, there is more or less evasion. As brought out later on,
the field in which Pennsylvania has been most successful has
been that in which the State has not relied upon the self-assess-
ment of the individual taxpayer.
(B) TAX UPON" CORPORATE LOANS
This tax is deducted by the treasurers of the counties, mu-
nicipalities and business corporations when paying interest upon
loans and is paid directly into the State treasury.
It was the original intention of this law to levy the corporate
loan tax upon the bonds of all domestic corporations, as well as
upon other bonds held in the State. The Supreme Court of the
United States, however, decided
(1) That a corporation cannot be required to deduct a
tax from interest paid to nonresident bondholders;
(2) That a foreign corporation doing business in the State
cannot be required to deduct a tax from interest disbursed
in another State.
The result of these decisions has been to limit the tax to
Pennsylvania corporations and to only those bonds of Pennsyl-
vania corporations owned by residents of Pennsylvania.
Although limited in its operation to bonds owned by residents
of Pennsylvania, the yield of the corporate loan tax has steadily
increased at a satisfactory rate. From 1886 to 1890 the receipts
average $300,000 per year, this amount being somewhat less
than the usual, because considerable sums were withheld by cor-
porations pending the outcome of litigation.
From 1891 to 1895 the receipts averaged $1,130,000.
From 1896 to 1900 they averaged $1,260,000, and from 1901
to 1905 they averaged $1,530,000; 1906 $2,352,000.
CONCLUSIONS CONCERNING THE PENNSYLVANIA LOW RATE ON
INTANGIBLES
(1) The system is a decided improvement upon the old, dis-
reputable general property tax.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 175
(2) The success of the Pennsylvania system is most marked
(a) Where it is collected at the source, as in the case of
the corporate loans by methods which make evasion very
difficult ;
(b) Where it is collected from mortgages on real estate,
in which case the law makes rigorous provision for ascer-
taining the ownership of this class of property ;
(c) Where it is collected from trust companies upon per-
sonal property which they hold in trust.
(3) The weakest part of the law is that part dealing with in-
dividuals who list their intangibles. As pointed out above, the
experience of Pennsylvania in regard to this class is quite far
from satisfactory.
(4) The experience of Pennsylvania seems to show that a
four mill rate on intangibles will not drive this class of property
out of the State. At least in the case of corporate loans, even
though it is collected only on securities held in Pennsylvania,
the four mill tax does not drive this property out of the State.
In recent years corporations have often voluntarily assumed the
payment of the tax in order to be able to advertise their bonds
as being nontaxable in Pennsylvania.
THE EXPERIMENT OF MARYLAND WITH THE LOW RATE ON
INTANGIBLES
For nineteen years Maryland has taxed certain forms of in-
tangible personalty at approximately four and eight-tenths mills.
It has imposed a uniform rate of three mills for local purposes,
and for State purposes the general property rate, which has
varied between 1.6 mills and 3.1 mills. By recent amendment,
adopted this last year, Maryland now imposes a uniform rate of
three mills for local purposes, and also a uniform rate of one and
five-tenths mills for State purposes.
WHAT THE LAW APPLIES TO
It is important to note that the law applies only to certain
forms of intangibles, including the following:
(1) All bonds and certificates of indebtedness issued by
corporations (except State, county and municipal bonds).
176 STATE OF NEW YORK
(2) Stocks of foreign corporations, only on the condition
that interest is paid during the year.
WHAT THE LAW DOES NOT APPLY TO
(1) Shares of Maryland corporations;
(2) Ordinary mortgages;
(3) Book accounts of merchants;
(4) Holdings of savings banks;
(5) Deposits in banks;
(6) State, county and municipal bonds;
(7) Holdings of domestic corporations under certain con-
ditions ;
(8) Holders of nonproductive bonds and foreign stock.
KESULTS OF MARYLAND'S EXPERIENCE WITH THE Low KATE ON
INTANGIBLES
The success of Maryland with the low rate tax has been very
marked in spots. The following figures, indicating the amount
of intangible personalty brought upon the books, are instructive:
They include the assessment of interest-paying bonds, certifi-
cates of indebtedness, stocks of foreign corporations, in Baltimore
city, in round numbers.
1896 $6,000,000
1897 58,700,000
1900 65,700,000
1902 89,900,000
1905 104,000,000
1907 151,000,000
1910 158,000,000
1912 179,000,000
1914 192,000,000
N. B. It must be noted, of course, that this success was at-
tained under a rate (three mills) which is only a fraction of the
general property rate, and that it was attained in Baltimore city
under the direction of an unusually efficient public servant (Judge
Leser), and under more favorable conditions of administration
than existed for the State at large.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 177
The yield of the tax of course has not been in proportion to the
increase in the amount of the intangibles listed as a result of
the low rate.
WHERE THE MARYLAND LAW HAS FAILED
The Maryland tax officials have reported utter failure in some
counties. The reason given for this failure is weak adminis-
tration. The lamentable lack of success in some of the rural
counties as compared to the city of Baltimore was one of the
principal arguments which led to the creation of the tax commis-
sion with centralized power. Moreover, " nearly one-third of the
revenue from this three mill tax in Baltimore comes from a few
railroads that are incorporated under the laws of Maryland and
own the shares of companies outside the State." (Stenographer's
Minutes, p. 1044.) It must be remembered also that Maryland
taxes under this law the holdings of insurance companies.
CONCLUSIONS CONCERNING THE MARYLAND Low RATE ON
INTANGIBLES
(1) As compared with the old, broken-down general property
tax, the Maryland plan represents an unqualified improvement.
(2) However, Maryland's experience indicates that even a
rate as low as three mills cannot be collected under decentralized
administration. The local assessors cannot be depended upon,
unless closely supervised or controlled by a centralized body.
(3) It can be enforced with success in a city like Baltimore,
under a high type of personnel.
(4) The securities of foreign corporations can be listed where
administration is of high type.
FAILURE OF Low RATE ON INTANGIBLES IN MARYLAND
(Quoted from 1913 Maryland Report of Special Tax
Commission, pp. 27 and 28.)
" Maryland taxes the stock of domestic corporations * * *
differently from the stock of foreign corporations, and our dis-
cussion here refers only to the corporate bonds and the certifi-
cates of indebtedness of all corporations and the stocks of all cor-
178 STATS OF NEW YOKE
porations now taxed under Article 81, Section 214, at the full
state rate and a uniform local rate of 30 cents.
" We realize that this method of classification and the imposi-
tion of the 30-cent local rate has been the subject of favorable
comment by students of taxation, and many reports have cited
this State as an example of a low rate producing more revenue
than a high rate by reason of the fact that greater assessment is
thereby obtained.
" This conclusion is correct only in part. When this class of
property was taxed the full local rate (prior to 1896) Baltimore
City had $6,000,000 assessed, whereas it now has $179,412,676
on the books. The result throughout the State has not shown
anything like this change. Even now, but a small part of this
kind of property is assessed in Baltimore City and less in the
counties.
" The amount of securities taxed in each county is shown in
another part of this report. Four counties of the State, viz.,
Calvert, Caroline, Garrett and Worcester, have not a single as-
sessment against this class of property.
" !N". B. It is a well known fact that a large part of the
wealth of our people at the present time consist of securities
subject to this rate of taxation, and there is no doubt that in
every community a vast amount of this class of property escapes
taxation."
CONNECTICUT EXPERIENCE WITH THE LOW RATE ON INTANGIBLES
Connecticut's tax on choses in action has been in existence
since 1889, the rate being at first two mills, and since 1897 four
mills. The substance of the law is as follows :
Any person may send to the office of the Treasurer of the
State any bond, note or other chose in action, and pay a tax of
2 per cent on the face amount for five years, or for a greater or
less number of years at the same rate. " The Treasurer shall
thereupon make an endorsement upon said bond, note, or other
chose in action, or shall give a receipt for the tax thereon, de-
scribing said bond, note or chose in action," certifying that the
same is exempt from all taxation for the period of five years, or
for such longer or shorter period for which a proportionate tax
JOINT LEGISLATIVE COMMITTEE ON TAXATION 179
has been paid. The Treasurer shall keep a record of endorse-
ments, together with the name and address of the, party present-
ing them, and the date of registration. The Treasurer annually
sends to the town clerk of each town a description of all such
bonds, etc., registered by persons residing in such town, indica-
ting that such bonds, etc., are exempt from all taxation in the
state for the period during which the tax is enacted.
FISCAL RESULTS OF THE TAX ON CHOSES IN ACTION (STATED IN
ROUND NUMBERS)
Number of Amount of
Year
1908
notes, etc.
35, 000
notes registered
$38, 000, 000
Tax
$160, 000
1909
35, 000
37, 000, 000
161, 000
1910
37, 000
41, 000, 000
167, 000
1911
36, 000
39, 000, 000
159, 000
1912
37, 000
40, 000, 000
161, 000
1913
44, 000, 000
176, 000
1914
61, 000, 000
244, 000
1915 .
100, 000, 000
400, 000
As indicated above, the yield of this tax is not strikingly large,
but on the whole the tax seems to have been fairly successful.
The Tax Commission of 1911-1912 speaks of the tax as follows:
" The present statute permits the registration of choses
in action in the treasurer's office by the bearer, and does not
require the owner's name to appear on the records in that
office, nor to be sent to the town clerk of the town in which
the owner resides. It is customary for banks and trust com-
panies to pay the tax on a large amount of securities owned
by the different clients; the registration of the same being
in the name of the bank instead of in the name of the origi-
nal owner.
" Section 2325 requires the state treasurer to send to the
town clerks the list of choses in action so registered in the
name of the bearer, but not of the owner.
" This makes it difficult for the assessors to check the tax-
ation of bonds under this procedure in the name of the
180 STATE OF NEW YORK
MINNESOTA'S EXPERIENCE WITH THE THREE-MILL TAX ON
INTANGIBLES
In 1911 Minnesota enacted a law which provides for the sepa-
rate listing of the following:
(2) Promissory notes;
(3) Bonds, other than mortgages on Minnesota real
estate ;
(4) Muncipal bonds;
(5) Book accounts;
(6) Annuities;
(Y) Royalties and all claims and demands for money and
other things of value.
The law does not apply to the following:
(1) Money and credits belonging to incorporated banks;
(2) Shares of stock;
(3) Mortgages secured within the state (the latter con-
tinuing subject to the registry tax) ;
(4) Municipal bonds (which are exempt).
COLLECTION AND APPORTIONMENT OF THE TAX
The return of moneys and credits is made on a separate sched-
ule, and it is specifically required that the taxpayer make oath
as to the correctness of his return. The tax is paid into the
county treasury, as other taxes, but is apportioned as follows:
One-sixth to the revenue fund of the state ;
One-sixth to the county revenue fund ;
One-third to the city or town ;
One-third to the school district in which the property is
DEDUCTION OF DEBTS
Under the old law, deductions for debt were allowed as an off-
set to credits, but under the 3-mill tax no deductions for debts
are allowed.
RESULTS OF THE LAW
Minnesota's experience with the low rate tax on intangibles is
similar to that of other states. As a means of bringing upon
JOINT LEGISLATIVE COMMITTEE ON TAXATION 181
the tax rolls a large amount of intangible personalty, it has proved
successful, but as a revenue producer it cannot be said to have
been a huge success. The following table indicates its success in
listing property:
Year
1910
Number
assessed
6 000
Total
assessmen 1
$13 000 000
Per cent in-
crease from
1910
1911
41 000
115 000 000
730
1912
50 000
135 000 000
873
1913
57 000
156 000 000
1 027
1914.
73 000
196 000 000
1 309
FISCAL RESULTS
The foregoing statistics, indicating the striking increase in the
total assessment of intangible personalty, are entirely mislead-
ing, unless one refers to the actual revenue producing results.
Minnesota's revenue in 1910, the year preceding the enactment
of the three-mill tax, was approximately $379,000. In the fol-
lowing year, when the total assessment was increased more than
tenfold, the actual yield of the tax was only $347,000, or a net
loss to the treasury of about $32,000. Since 1911 the yield of
the tax has gradually increased.
From the point of view of public morals, the Minnesota low
rate on intangibles may be considered a success, if we mean by
" success " the listing of a large amount of intangible personalty
formerly escaping taxation. However, judged from a revenue
point of view, the success has been by no means as great. It is
true, however, that the tax base has been broadened, more tax-
payers have been reached and thus there is a better distribution.
Rhode Island and Iowa also have a low tax on intangibles.
The Rhode Island Commission expresses itself as well satisfied
with the results. In Iowa under a five-mill tax the revenue at
first showed a marked falling off, but seems now to have reached
the yield formerly received from the personal property tax.
GENERAL CONCLUSIONS CONCERNING THE LOW RATE UPON
INTANGIBLES
(A) ECONOMIC JUSTICE. Most tax authorities agree that
the present low rates of 3 to 5 mills upon tangibles are in
accord with economic justice. The application of the general
182 STATE OF NEW YOKK
property rate in the various states of the Union has in no
single instance administered justice either as between intangible
and tangible personalty, as between personalty and realty, or as
between classes within the community. The general property
rates, where enforced, have been confiscatory, but the present rate
of 3 to 5 mills with few exceptions is adjusted to the income-
bearing capacity of the property.
(B) EFFECT UPON PUBLIC MORALS. As to the degrading
effect upon public morals of an attempt to enforce the general
property tax, all authorities agree. When members of the com-
munity are invited by an unjust law to beat an unjust tax, they
naturally fall into the habit of attempting to beat all taxes. In
Baltimore, where Judge Leser has had large opportunity to notice
the effect of the low rate tax, the general attitude of the tax-
payer, not only in regard to the tax upon intangible property,
but also in regard to all other taxes, seems to reflect a much more
wholesome condition.
(C) SUCCESS AS A REVENUE PRODUCER. The success of the
low rate tax has been remarkable rather for the large amount of
intangible property put upon the books, than for the actual net
increase in the yield of the tax. However, in Maryland and
Pennsylvania, where peculiar conditions exist, there has been a
substantial increase in the revenue produced.
(D) CONDITIONS NECESSARY TO ITS SUCCESS. Whenever the
low rate has succeeded, either one or all of the following conditions
have prevailed:
(a) A large degree of central administration or supervision ; or
(b) A type of tax official more zealous and more efficient than
the average;
(c) A provision for reaching the source without reliance upon
self -assessment (and this has been possible only in the case of
particular classes of intangibles).
The Committee has given serious consideration and much
thought to the low tax on intangibles plan, not only because of its
own intrinsic merit and superiority over the present system, but
because of the earnestness with which it was pressed by its advo-
cates. Nevertheless, while conceding its good features, we do not
believe that this tax system will solve our New York problem. We
base this judgment on the following grounds:
JOINT LEGISLATIVE COMMITTEE ON TAXATION 183
(1) While the low rate will, to a great extent, do away with
the temptation on the part of taxpayers to evade the tax, never-
theless it is idle to hope that any great amount of personal prop-
erty will find its way on the rolls unless the owner he compelled
either to produce or to disclose his holdings. A three or a four
mill rate is, of course, much lower than the present one, yet even
so, it represents a fairly high rate on income, and in the case of
some securities anywhere from 6 to 10 per cent. A 10 per cent
tax on income is sufficient to inspire the average man with a desire
to escape therefrom. There are two well-recognized methods of
compelling disclosure. The first is to require the taxpayer to fur-
nish the assessor with a list of his taxable property. But even a
modified listing system is so contrary to our traditional public
policy and so obnoxious to the great majority of our citizens, that
we do not believe that public opinion would sanction its adoption.
The second method is that of voluntary registration, such as is
found in Connecticut. This plan contemplates the retention of
the personal property tax at the general property rate, but per-
mits the taxpayer to register his securities annually, to pay the two
three or four mill tax, as the case may be, and so to exempt his
property from the local personal property tax. The difficulty
with this scheme is that the threat of the enforcement of the per-
sonal property tax at the general property rate can never be made
severe enough to compel all of the property, or even the greater
part of it to pay the lower tax. Indeed, under the circumstances,
there is hardly incentive enough on the part of the local assessor
to induce him to make any very strenuous effort to furnish the
compelling force.
(2) In the second place, the experience of all the states that
have tried it show conclusively that the low rate on intangibles
cannot be made a success unless the administration be taken away
from the local assessor and placed in the hands of the State Tax
Commission, or some other central administrative body. This is
frankly admitted by the advocates of the plan. This in itself
is an insuperable objection to its adoption in New York, because
under the terms of our present Constitution the function of as-
sessing personal property, even at a lower rate, cannot be taken
away from the local assessor.
184: STATE OF NEW YORK
(3) The application of the tax would be necessarily much more
limited than in some of our sister states, because of the great
number of securities at present exempt which could not be
reached even under the new tax. Thus, for example, it is hardly
likely that mortgages would be included, or the securities held by
insurance companies, or savings banks. It was estimated by two
well qualified witnesses who- appeared before our Committee that
the exempt securities in the State of New York amounted to no
less than three billion dollars. When we add to these facts the
knowledge of the j)eculiar conditions in New York City that
render it so easy for the taxpayer to change his residence, it is
clear that sufficient revenue could not be obtained greatly to
alleviate the burden borne by real estate and other forms of tax-
paying property.
The State of Pennsylvania is the only one of the states having
the low tax on intangibles where general conditions are in any
way analogous to those existing in New York, and in Pennsylvania
it has been found that, except where the tax is collected at the
source, it is not particularly successful.
(4) The low tax on intangibles is a property tax, and the whole
modern tendency, particularly in the business world, is to get away
from property as a basis of assessment, and to look more and more
to income.
(5) The low tax on intangibles would in no sense solve our
corporation tax problem. In fact, Mr. Alfred E. Holcomb, who
is one of those who must strenuously urged its adoption before
our Committee, admitted that when we come to general business
corporations, it would be necessary to supplement the measure
by some such tax as the Canadian business tax.
CHAPTER IV
THE INCOME TAX
The first step in the construction of any scientific form of
taxation is a careful consideration of the fundamental principle
underlying all sound public finance. Our studies have led us to
the conclusion- that no fairer principle of taxation can be
adopted than that each man shall be called upon to contribute to
the support of government in proportion to his ability to pay.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 185
Adam Smith laid down as the first canon of taxation that the " sub-
jects of every state ought to contribute towards the support of
government as nearly as possible in proportion to their respec-
tive abilities; that is, in proportion to the revenue which they
respectively enjoy under the protection of the state.' 7 This
canon, as enunciated, has stood the test of more than a century of
criticism, and today comes as near universal acceptance as any
principle of taxation. As ability best represents the proportion
which each man is called upon to pay, so, in turn, ability to pay
itself is best determined by the income or revenue which a man
enjoys.
Taxes are paid out of income. All taxes have to be paid either
out of income or capital. To pay them out of capital is to destroy
the future source of income, both to the individual and the state
and if persisted in over a long period of time, to wipe out capital
itself. This principle has repeatedly been recognized in our
various taxes. In taxing property we have done so in the belief
that, in the main, it was a fair criterion of taxable income ; and this
was true when our property tax system was originally adopted
in a simpler state of society. But to-day property alone is not
a complete measure of the total income enjoyed, and if the above
enunciated principle be sound, it is necessary to abandon the in-
direct property method of reaching income, and to tax income
directly. This conclusion has received widespread recognition.
There is hardly a civilized country to-day where the income tax
does not make up an important part of the tax system. Thus it
is in use in nearly every country in Europe, notably in Germany,
England, France, Austria and Italy. At one time every one of
these countries had a personal property tax, but as its failure
became recognized it was abandoned and to-day they all resort to
the income tax.
EXPERIENCE IN THE UNITED STATES
From time to time various states in the Union, more particu-
larly the Southern States, have enacted income tax laws (of one
kind or another) but no really successful attempt has been made
to enforce them. The failure which has attended their efforts has
given rise to a misconception as to the possibility of enforcing
an income tax in this country. It might as well be noted here that
186 STATE OF NEW YORK
the income tax is not likely to be any more successful than the
personal property tax unless adequate means of enforcement are
provided. This fact was conclusively demonstrated by the earlier
experiences in this country. However, the Wisconsin experiment
proved beyond controversy that the income tax could be adminis-
tered with complete success under a centralized system of adminis-
tration and with reasonable provisions for its enforcement. In this
respect it merely confirmed what had amply been demonstrated in
Europe.
The Wisconsin income tax was devised as a substitute for the
personal property tax, the inequalities and injustice of which
were felt even more keenly than in New York.
WISCONSIN INCOME TAX
The principal facts in regard to the Wisconsin income tax have
been clearly set forth in the annual reports of the Wisconsin Tax
Commission and in papers presented before the National Tax
Association. The following data has been largely quoted from
these sources:
History
Adopted in 1911. Has been collected in 1912, 1913 and 1914.
General Characterization of the Tax
The Wisconsin income tax differs in several important particu-
lars from any other income tax ever adopted in this country. It
is, therefore, important to note the following salient features:
(a) It is not an additional tax, but a substitute for the
tax on certain classes of personal property and particularly
moneys and credits.
(b) Any personal property tax which a person pays is
subtracted from his income tax. This is popularly referred
to as the " personal tax offset."
(c) It is not a tax on the whole income of persons en-
gaged in business within and without the State, but is con-
fined practically to income derived from property located
and business transacted within the State.
(d) It is not a state tax. Seventy per cent of the tax
goes to the *own, city or village in which it is collected, 20
JOINT LEGISLATIVE COMMITTEE ON TAXATION 187
per cent to the county, and ten per cent to the state. Out of
this ten per cent, the State pays practically all the expenses
of administration.
(e) The rates imposed upon individuals differ materially
from those imposed upon corporations.
The rate upon individuals and co-partnerships is 1 per
cent on the first thousand dollars of taxable income; 1*4
per cent upon the second thousand dollars, and rises gradu-
ally to 6 per cent, where it stops.
The rate upon corporations, up to a year ago, was deter-
mined by the relation between the taxable income and the
assessed value of the property used and employed in the ac-
quisition of such income.
(For detail of present law, see supra.}
(f) The principle of collection at source has been exten-
sively applied. Thus the corporation pays on its total
profits, and the individual stockholder is not taxed upon his
dividend. So also the interest paid upon bonds of corpora-
tions subject to the Wisconsin income tax is, for practical
purposes, taxed directly to the corporation and exempted to
the individual bondholder.
(g) The administration of the law is centralized in the
Tax Commission and is not left to local officials. The as-
sessors of income are appointed after civil service examina-
tions and are entirely independent of local influences.
Enacted as a Substitute for the General Property Tax on the
Following Forms of Personalty
(a) Intangible personalty. Coincident with the passage of the
Income Tax Law, the general laws were amended so as to exempt
from taxation
( 1 ) Moneys,
(2) Stocks and bonds,
(3) All debts due from solvent debtors, whether on ac-
count, note, contract, bond, mortgage, or other security, or
whether such debts are due or to become due.
(&) Tangible Personalty. In order that the owner of tangible
personal property should not be placed at a disadvantage as com-
pared with the owner of intangibles, the Income Tax Law pro-
188 STATE OF NEW YORK
vides that the receipts for general taxes paid on personal property
may be used as cash in paying for the income tax. This is called
offsetting.
What is Taxable Under the Wisconsin Income Tax
General rule all income derived from
(a) Persons,
(b) Property,
(c) Business,
having an actual or constructive situs in the State.
In detail all income, other than by statute exempt ;
(a) which residents of the State receive from within or
without the State,
(b) as well as that which nonresidents receive from within
the State,
is taxable.
Where a resident receives income partly from within and partly
from without the State (other than income derived from rentals,
stocks, bonds, and securities, or evidence of indebtedness), said
resident is taxed on a proportion of the total income, to be de-
termined by the amount of property from which it is derived,
located or to be acquired within the State and by the business
transacted within or without the State.
In determining taxable income, the general rule is followed
that income from property which is taxable at its situs also fol-
lows the situs of the property, and income derived from property-
taxable at the domicile of the owner also follows the residence
of the recipient of the income. Thus the resident is not taxable
on income from rents or royalties arising in another State, but he
is taxable on that derived from securities, regardless of their
origin ; while rents and royalties arising in Wisconsin are taxable
to nonresidents.
What Income Is Not Taxable
(a) Residents are not taxable on rents or royalties arising in
another State, or, in other words, on any income derived from prop-
JOINT LEGISLATIVE COMMITTEE ON TAXATION 189
erty having its situs beyond the jurisdiction of the State of Wis-
consin.
Definition of Income
Incomes includes " rent, interest, wages, dividends, profits, and
royalties, and all other income." !N". B. It also includes " esti-
mated rental of resident's property occupied by one thereof."
Income of Individuals Exempted from Taxation
(1) (a) To an individual income up to and including $800 ;
(b) To husband and wife, $1,200 ;
(c) For each child under the age of eighteen years, $200;
(d) For each additional person, for whose support the tax-
payer is legally liable and who is entirely dependent
upon the taxpayer for his support, $200 ;
(e) The aforesaid exemptions do not apply to incomes de-
rived from sources within the State by nonresidents
thereof, nor to firms, copartnerships, corporations,
joint-stock companies, nor associations.
In computing the exemptions and the amounts of taxes pay-
able, the income of a wife is added to the income of her husband,
and the income of each child under eighteen years of age to that
of its parent or parents, when said wife or child is not living
separately from said husband, parent, or parents.
(2) Income of any mutual savings or loan and building asso-
ciation, or of any religious, scientific, educational, benevolent, or
other association or individuals not organized or conducted for
pecuniary profit.
(3) Incomes derived from property and privileges by persons
now required by law to pay taxes or license fees directly into the
treasury of the State in lieu of taxes, and such persons shall con-
tinue to pay taxes and license fees as heretofore.
(4) Income received by the United States, the State, and all
counties, cities, villages, school districts, or other political units
of the State.
Rates of Wisconsin Income Tax
Individuals. On taxable incomes of individuals, firms, or co-
partnerships
*
190 STATE OF NEW YORK
Rate True rate on
per cent whole amount
On the first $1,000 or portion thereof 1 l .
second 1% 1.125
third 11/2 1.25
fourth 1% 1.375
fifth 2 1.5
sixth 21/2 1.6667
seventh 3 1 . 8571
eighth 3i/ 2 2.0625
ninth 4 2.2778
tenth 4V 2 2.5
eleventh 5 2 . 7273
twelfth 5y 2 2. 7582
twentieth 6 4 . 175
All additional amounts 6
Deductions from Incomes of Individuals and Co-partnerships
In the case of individuals, firms and copartnerships the follow-
ing deductions from the gross income are allowed :
(1) Necessary expenses, including salaries or wages, of less
than $700.
(2) Salaries or. wages of $700 or more, providing the name
and address of the employee is reported.
(3) Uninsured losses during the year.
(4) Dividends received from other persons whose income has
been taxed by the State, providing the amount of said dividends
has been reported by the person taxed at the time of the assess-
ment.
(5) Interest received from bonds or other securities exempt
from taxation under the laws of the United States.
(6) Amount paid in taxes, other than inheritance taxes, and
paid upon the property or business from which the income to be
taxed is derived.
(7) All inheritances, devises, and bequests on which inherit-
ance tax has been paid.
(8) Life insurance received to the amount of $10,000, if the
taxpayer was legally dependent on the decedent.
(9) Current interest paid on existing indebtedness, providing
taxpayer reports the name and address of the creditor.
(10) Compensation or pensions received from the United
States.
"
JOINT LEGISLATIVE COMMITTEE ON TAXATION 191
Income from Interstate Business
The following quotation from the Wisconsin Income Tax Law
explains how incomes from interstate business are apportioned:
(1) "In determining taxable income, rentals, royalties
and gains or profits from the operation of any firm, mine or
quarry shall follow the situs of the property from which de-
rived, and
(2) income from personal service and from land contracts,
mortgages, stocks, bonds and securities shall follow the resi-
dence of the recipient.
" With respect to other income, persons engaged in busi-
ness within and without the State shall be taxed only upon
such income as is derived from business transacted and prop-
erty located within the State, which may be determined by
allocation and separate accounting for such income when
made in form and manner prescribed by the Tax Commission,
but otherwise shall be determined in the manner specified in
subdivision (e) of subsection Y of section I770b of the
statutes as far as applicable."
The section of the statute referred to authorizes a computation
by taking the
(1) gross business in dollars of the corporation in the
State and adding the same to the
(2) full value of the property of the corporation located
in the State.
The sum thus obtained is used as the enumerator of a fraction
the denominator of which is to consist of the
(1) total gross business in dollars of the corporation, both
I within and without the State, added to
(2) the full value of the property of the corporation
within and without the State. The quotient of the enum-
erator divided by the denominator is a decimal which indi-
cates the proportion of the whole net income which should
be apportioned in Wisconsin, i. e., such proportion of total
income as gross business within the State and value of prop-
erty within the State is to local gross business anywhere and
total property owned.
*
192 STATE OF NEW YORK
II. ADMINISTRATION
The distinguishing feature of the Wisconsin Income Tax Law
is the prominence given to the scheme of administration. Of the
seventeen closely printed pages which contain the law in pamphlet
form, about two-thirds are devoted to the methods by which law is
to be administered. It was realized that the failure of all State
income taxes in the past was directly attributable to lax methods
on the part of the local officials, and this danger was sought to be
avoided by securing a higher degree of centralization. To this
end the administration of the law was placed wholly in the hands
of the permanent State Tax Commission.
For purposes of ascertaining the amount of income to be
assessed, the taxpayers are divided into the following classes :
(a) Individuals;
(b) Guardians, trustees, executors, agents and receivers;
(c) Firms and partnerships;
(d) Corporations;
(e) Farmers and dairymen;
(f ) Wage-earners, salaried men and other individuals deriving
their income from personal services.
Returns
Individuals. All returns of income by firms and individuals are
made to the income tax assessors.
Upon receipt of these returns, they are carefully edited, and
the assessors make an assessment of the tax in each case. If the
assessor has reason to believe that the return is erroneous, he .can
increase the amount upon which the tax is based, upon giving
written notice to the taxpayer.
A board of review of three persons is appointed by the Tax
Commission of each district. An appeal lies from the decision
of the assessor to the board of review, and then from the board of
review to the Tax Commission.
Use of Information at Source in Wisconsin
When the forms for income tax returns are given out, they are
accompanied by blanks upon which the taxpayer is required to
JOINT LEGISLATIVE COMMITTEE ON TAXATION 193
fill out the name and address of every person to \\ horn a salary or
wages to the amount of $700 or more has been paid during the
year and the amount paid in each case.
There is an additional blank for corporations upon which the
names and addresses of all stockholders to whom dividends have
been paid, together with the amount paid or given, are shown.
In like manner, claims for interest paid on indebtedness must
be accompanied by a statement of the name and address of the
person to whom such interest was paid.
The information thus obtained by the Tax Commission is classi-
fied and arranged so as to be furnished to the assessors of the
respective districts where the recipients of the wages or dividends
reside.
Threefold Check
1. The above data shows whether any excessive salaries are
being paid to officers of the corporation.
2. It enables the Commission to test the correctness of the
corporate deductions for wages, salaries and^ dividends paid.
3. It calls attention to any omission on the part of individuals
to report the full amount received by them as interest, wages or
dividends.
Centralized Control and Income Tax Assessors
The Income Tax Assessors. The success of the income tax
as applied to individuals is ascribed principally to the work of the
assessors of incomes. These assessors are selected through the
Civil Service Commission without reference to political considera-
tions, and are relieved of that local pressure which in so many
places has brought about the failure of the general property tax.
Cost of Administration
The cost of administering the Wisconsin income tax is very
small, indeed. The first year it cost 1.31 per cent, and the second
year only 1.11 per cent. Comparing these figures with the cost
of collecting other forms of taxes in this country, or in other
countries, discloses the fact that the income tax is one of the least
expensive direct taxes collected anywhere in the world. The only
possible exception to this statement may be found in the case of
7
194 STATE OF NEW YORK
license fees and similar taxes taken directly over the counter of
the public treasury without any difficult assessment work to be
performed. The latter are, of course, the least expensive forms
of revenue known to modern governments. The cheapest kinds of
taxes collected in the United States are internal revenue taxes of
the Federal government. However, it cost the state of Wisconsin
less proportionately to collect the income tax than it cost the
Federal government to collect the internal revenue taxes.
Delinquency
The experience of Wisconsin for the first three years indicates
that from 2 to 4 per cent of the income taxes are delinquent. Of
the total amount of delinquency, it is estimated, in the opinion
of the assessors of incomes, that about 50 per cent could be
collected, that about 25 per cent are noncollectible, and the re-
maining 25 per cent doubtful. In other words, with efficient
and vigorous collection on the part of the local treasurers, only
about one and one-third per cent should be finally lost.
Success of the Tax
The Wisconsin income tax is generally regarded as being highly
successful, and in our judgment tha.t opinion is well justified by
the results. The report of the Wisconsin Tax Commission for the
year 1914 has this to say:
" .Such were the ideals and objects of the income tax.
Whether it would accomplish the desired results was dis-
tinctly problematical. Income taxes had been employed in
this country continuously from the seventeenth century. But
they had not, particularly in recent years, worked well. In
theory the income tax was generally admitted to be the ideal
substitute for the tax on moneys, credits and perhaps all forms
of personal property. But experts doubted whether it could
be made to work as a state tax, and in particular they doubted
whether it would yield reasonable large revenues, whether it
would not prove exceedingly expensive to administer, and
whether the average taxpayer would co-operate with the
authorities in returning sufficiently accurate and truthful re-
ports upon which to base a fair and adequate assessment.
Three assessments have now been made under the income tax
JOINT LEGISLATIVE COMMITTEE ON TAXATION 195
law and a body of experience and data has been accumulated
sufficient to answer with some certainty the doubts and ques-
tions properly raised by the experiment with the incomei tax."
It then goes on to say what results have been accomplished,
which may be summarized, as follows :
(1) The income tax has yielded a very substantial revenue,
and one well in excess of that received from the personal prop-
erty tax. Thus, in 1912 the tax amounted to $3,482,145; in
1913, $4,084,497; and in 1914 to $4,140,571. It is to be noted,
however, that this does not represent actual cash collections, be-
cause under the Wisconsin law the man paying a personal prop-
erty tax may offset it as against his income tax.
(2) It has succeeded in reaching large classes of property and
groups of individuals that were escaping under the personal
property tax.
(3) It has reached those groups in proportion to their ability
to pay.
(4) It has proved from an administrative standpoint one of
the cheapest taxes known, costing both in the years 1913 and
1914 less than a hundred thousand dollars. It should be noted,
however, in this connection, that in this amount there is included
$34,000, representing the cost of the supervisors of assessment,
leaving $45,197.59 as the net cost of the income tax for the year
1913-1914. On this basis, therefore, the income tax cost to assess
and administer the first year 1.31 per cent, and the second year
1.11 per cent.
Advantages of the Income Tax
The income tax reaches everyone in accordance with his ability
to pay. It is the one tax that will most fairly' and equitably
reach the professional and salaried men who earn large incomes.
They now entirely escape taxation except on such property, as they
may have accumulated and which very obviously is no fair indi-
cation of their ability to contribute to the support of government.
This is likewise true in respect to the great wealth, represented
by the securities and credits of all kinds and by the various forms
of intangible property, which is now escaping taxation. One of
the most interesting facts to be gained from a study of the Wis-
consin results is, that the classes of occupations, of professions
*
196 STATE OF NEW YORK
and of property-owners that most successfully escape in ISTew
York, are the very ones that pay the larger part of the Wisconsin
tax levied upon firms and individuals. In ISTew York State the
following classes are able to escape taxation in a large degree:
Bankers and capitalists, brokers, lawyers, merchants and jobbers,
manufacturers, physicians and surgeons, and other professions.
We quote in this connection from the Report of 1914, which
reads as. follows :
Occupation
Bankers and capitalists
982
$116.33
8.00
1.61
4.76
Estates, guardianships, etc
977
82.42
5.98
1.60
3.76
Lumbermen
346
81.27
1.97
.57
1.32
Manufacturers
2, 920
78.26
16.01
4.80
11.36
Lawyers
1,202
59.26
5.02
1.97
4.18
Miners
80
38.89
0.22
.13
.18
Eetired
3, 263
37.24
8.51
5.36
6.93
Merchants and jobbers
11, 838
24.13
20.01
19.45
23.55
Physicians and surgeons
1,642
22.78
2.62
2.70
3.30
Brokers, real estate men, etc ....
5,338
20.86
7.80
8.77
8.72
Public officials
555
16.05
0.62
.91
.93
Mechanics and tradesmen
5,768
12.63
5.10
9.48
6.17
Professions miscellaneous ....
2, 359
12.30
2.03
3.88
2.96
Professors and teachers
2,372
10.40
1.73
3.90
2.08
State and public employees
1,203
8.15
0.69
1.98
.99
Public service employees
2, 870
7.96
1.60
4.72
2.07
Farmers
7, 225
7.66
3.87
11.87
6.40
Bookkeepers, stenographers, etc.
4, 148
4.96
1.44
6.82
2.54
Laborers
882
2.91
0.18
1.45
.34
Other occupations
4,336
20.25
6.15
7.12
6.78
Unknown
554
11.71
0.45
.91
.68
All occupations
60, 860
23.46
100.00
100.00
100.00
" Certain important conclusions may, however, be drawn
with safety. For instance, the census statistics make it plain
that there are not less than 165,000 farmers in the state,
from which it follows that certainly less than five per cent
of the farmers of the state are subject to the income tax.
Similarly, it is certain that considerably less than one per
cent, and probably less than one-half of one per cent, of the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 197
laborers of the state are assessed for income taxes. Of the
bookkeepers, stenographers and clerks, the statistics indicate
that something less than six per cent were assessed for in-
come tax in 1914.
" On the other hand, it is practically certain that more
than fifty per cent of the bankers and capitalists, lawyers
and physicians and surgeons were subject to the individual
income tax, to say nothing of the amounts which these per-
sons pay indirectly through the tax on corporations. It is
interesting also to note that probably not less than 20 per
cent of the public officials, public employees and public
laborers of the state were assessed for income tax. The
federal census for 1910 shows 7,338 employees in the public
service, not elsewhere classified, including guards, watch-
men, doorkeepers, firemen and laborers. Table IV shows
that 1,758 public officials and employees were assessed for
income tax in 1914, or somewhere between one-quarter and
one-fifth of the number recorded in the census. There can-
not be a very large number of public employees classified
elsewhere than in this group.
" Perhaps as good a measure of the relative burden of
the tax as could be secured is found in the figures showing
the average tax per taxpayer. The various occupations are
arranged in the order of the size of this average tax in Table
VI. The highest per capita tax, $116.33, is paid by bank-
ers and capitalists; the lowest by laborers, $2.91. The tax
was evidently highest upon investors and allied classes, those
drawing their incomes largely in the form of interest. Next
it touches the extractive and manufacturing industries
lumbering, manufacturing and mining though it should
be remembered that in these classes a relatively large pro-
portion of the tax is offset by the personal property tax.
Merchants and jobbers follow closely, among whom also a
large part of the tax is offset by personal property taxes, and
thereafter come the professional classes. The lawyers it
will be observed are above the other professional classes,
standing between manufacturers and miners. The tax on
the professional classes generally is additional or supple-
198 STATE OF NEW YORK
mentary. It is not offset by the personal property taxes
and no equivalent tax was collected from these classes be-
fore the income tax was introduced. The statistics indicate
that the income tax is performing exactly the service for
which it was introduced drawing a larger contribution
from the investing and professional classes and from those
elements of the manufacturing and commercial classes which
are usually prosperous and subject to higher income than
personal property taxes."
This conclusion is further emphasized when we remember that
the largest accumulations of so-called intangible personal prop-
erty are found in our great cities, and that the income tax is,
strictly speaking, an urban tax. In Wisconsin, the first year
over 40 per cent of the entire tax was charged in Milwaukee
County and more than 80 per cent in the 17 counties having the
larger cities of the state, while 20 per cent was charged in the
remaining 54 counties containing about 50 per cent of the popu-
lation.
The urban character of the tax is shown in another way by the
returns from Dane county in which the capital is located. In
the county there are six times as many farmers as there are pub-
lic employees, " yet only sixty-eight farmers in Dane County as
contrasted with six .hundred twenty-four public employees and
professors will pay an income tax; and the farmers will pay an
income tax of $877.35, while the public officials, professors and
teachers will pay $7,224.44, more than eight times as much."
" The income tax is primarily an urban tax. Milwaukee
county, for instance, contains only 8.56 per cent of the
population of the state, but 42.55 per cent of the total in-
come and 47.12 per cent of the total income tax are assessed
in that County. The fifty-four rural counties, on the other
hand, contain nearly fifty per cent of the population but pay
less than one-fifth of the tax.
" The marked urban character of the tax comes out in
other relationships. For instance, the total income tax as-
sessed in 1914 amounts to $1.77 per capita. But the per
JOINT LEGISLATIVE COMMITTEE ON TAXATION 199
capita tax in Milwaukee City is $4.50, and in the rural coun-
ties only 53 cents. Again, the average rate of taxation paid
is 3.61 per cent in Milwaukee County, but only 1.95 per cent
in the rural counties of the state. Finally, in Milwaukee
County 4.69 per cent of the population is subject to the tax
on firms and individuals, while in the rural districts only
1.71 per cent of the population was assessed. In short, a
smaller proportion of the people pay, and they pay lower
average rates on smaller average incomes, in the country than
in the city."
As has already been shown, the property tax falls with the
greatest weight on the man of small means, on ths widow, on
trust estates, on young and struggling business concerns, and,
generally speaking, on those least able to bear it. Under the
income tax these people contribute their proportion, but their
proportion is relatively small as compared with that of the
wealthy and prosperous, who enjoy large incomes and are, there-
fore, better, and with much less sacrifice, able to shoulder the tax
burden, and yet who to-day are practically free from taxation,
except in so far as they own real estate.
We cite again the Wisconsin results for purposes of illustration :
" This table contains some very significant data. Of those
assessed in 1914 for income tax, 41,732 had taxable in-
comes under $1,000. This group of small taxpayers con-
stituted 68 per cent of the total number, but paid less than
11 per cent of the total tax. The average tax in this group
is 3.74.
" On the other hand, 315 taxpayers having incomes of
$15,000 or more, and constituting about one-half of one per
cent of the total number of taxpayers, were assessed for
practically forty per cent of the aggregate tax, and the aver-
age tax on each person in this group is $1,794. This group
of 315 taxpayers constitute less than 2/100 of 1 per cent
of the population of the State. The two upper groups of
taxpayers 667 in number constitute less than 3/100
of 1 per cent of the entire population but contributes nearly
one-half of the income tax."
200
STATE OF NEW YOKK
Classified by
amount groups
of income
Num-
ber
assessed
Per cent
of each
group
to total
Taxable
income
Per cent
of each
group
to total
Tax
Per cent
of each
group
to total
Average
tax per
indi-
vidual
Total
60,560
100.00
$73,969,905 25
100.00
$1,427,923 13
100.00
$23 46
Under 1,000...
41,732
63.57
15,545,782 60
21.02
156,202 53
10.94
3 74
1,000 to 1,999.
10,528
17.30
11,004,276 71
18.93
152,871 09
10.71
14 52
2, 000 to 2, 999.
3,855
6.33
9,210,837 07
12.45
110,348 59
7.73
28 62
3,000 to 3,999.
1,691
2.78
5,760,689 61
7.79
75,436 33
5.28
44 61
4,000 to 4,999.
908
1.49
4,027,847 43
5.44
57,906 82
4.05
63 76
5,000 to 9,999.
1,479
2.43
9,820,371 30
13.28
182,901 61
12.81
123 70
10,000 to 14,999
352
0.58
4,245,486 58
5.74
127,168 00
8.91
361 26
15,000 and over.
315
0.52
11,354,613 95
15.35
565,087 56
39.57
1,794 00
As a further illustration we may give an example of the amount
that would be contributed by the highest and the lowest classes
of tax-payers under the terms of the bill attached to this report.
72,345 people having incomes less than $3,000 would pay a
total of $287,587.15, while 82 people having the larger incomes
in the State would pay a total of $1,809,649. The result is
almost startling, and yet the 82 would be paying only their
share. But neither for the wealthy man nor for the poor man
would the burden be a heavy one, for a low rate running from
one-half of 1 per cent to a maximum of 2 per cent on indi-
viduals would satisfy all our needs. Under this rate, with an
exemption of $1,500 to a single man and of $2,000 to the average
family, the family man with an income of $3,000 would pay but
$5 per annum, while the man with an income of $100,000 would
pay somewhat less than $2,000 per annum. Could either one of
them fairly complain? Nor, under such circumstances, would
there be any real incentive to escape.
No man will willingly pay a two per cent tax on capital
value, which amounts to taking from 30 to 50 per cent of
his income. Experience has shown, however, that he will
pay so reasonable an amount as 2 per cent on income, par-
ticularly when he knows that all who should are contributing
their share. Under our present system the conscientious tax-
payer is not only asked to pay a confiscatory rate, but he is
asked to do so with the full knowledge that nearly everyone in
the community is dodging the tax in one way or another. Most
men are honest. Most men, we believe, are willing to pay a fair
and reasonable tax, but there is a point in taxation where it is
dangerous to test human nature too far, and where the honesty
JOINT LEGISLATIVE COMMITTEE ON TAXATION 201
of the average citizen is forced to give way to the instinct of self-
protection.
Turning now to general business corporations and to individ-
uals and partnerships engaged in business, we find that in so far
as these classes are concerned, the personal property tax is illogical,
burdensome, unequal and therefore inequitable; that the great
majority of business houses escape taxation, but that those that do
pay are taxed at a rate altogether too high, a fact which puts them
at an unfair disadvantage as compared with their competitors;
that, in brief, the personal property tax is, in the main, a failure,
and to the extent that it does succeed, grossly unjust. ' We find,
moreover, that the assessment and valuation of property gives
rise to all manner of difficulties, particularly in the case of cor-
porations where it is necessary to include the franchise value as
part of the gross assets or of the capital stock value ; and that ulti-
mately the assessors find that the fairest way to reach the capi-
tal value of the property is through the capitalization of net
earnings. Few, if any, of these difficulties arise when individuals
engaged in business and general business corporations are taxed
on a net-earning basis. As has been well said by Dr. Ely in the
report of the Maryland Tax Commission :
" Furthermore, it is of moment that the income tax does
not make it more difficult for a poor man to begin business
or to continue business. Its social effects, on the contrary,
are beneficial, because it places a heavy load only on strong
shoulders. Even for men of large means engaged in busi-
ness it is a tax to be strongly recommended, fur such men
will in some years make little or nothing, or even lose money.
!N"ow, our property tax is merciless; it exacts as much in a
year when a business man is struggling to keep his head above
water as in a year of rare prosperity; whereas the income
tax exacts much only when much can be given without finan-
cial embarrassment. If it were practicable to substitute an
income tax for the whole of the property tax it would save
many a man from bankruptcy. I will repeat, with some
202 STATE OF NEW YOKE
modification, in this connection, words I used in my special
report as member of the Baltimore Tax Commission:
" t It is the fairest tax ever devised ; it places a heavy bur-
den when and where there is strength to bear it, and lightens
the load in case of temporary or permanent weakness.
Large property does not always imply ability to pay taxes,
as taxes should come from income; even when assessed on
property it is only an indirect device for estimating income.
An income tax spares the business man in season of distress
and helps him to weather the storm, but asks a return for
the consideration shown in days of increasing prosperity. 7 '
Moreover, as we have repeatedly stated throughout this report,
property is not a fair test of ability to pay, and this is particu-
larly true in the case of merchants and manufacturers. We again
desire to emphasize, that the amount of stock of goods on hand or
the capital value of the property does not adequately measure
earning capacity for the purpose of taxation, and that we know of
no fairer way of determining what should be the proper contribu-
tion of an individual corporation than by considering its net
earnings. This is all the more true when we consider that it
takes, in some instances, several years for a business to develop to
the point that it* can pay a return upon the original invest-
ment. It is neither good policy nor sound finance to overtax
an infant industry, nor, for that matter, even an established
industry, in bad times. Taxes are paid out of income, and one
of the great advantages of an income tax as a business tax is that
it levies tribute only when there is an income from which to pay
it. That the income tax is the best way of taxing both individ-
uals engaged in business and general business corporations, was
the opinion of practically every business man that appeared
before our Committee, and of the Tax Committees of such repre-
sentative commercial bodies as the Chamber of Commerce of the
City of Kochester, of the Merchants Association of the City of
"New York, and the Chamber of Commerce of the City of New
York.
The income tax is the only tax that will reach that great class
of people who do business in New York City, enjoying all of its
JOINT LEGISLATIVE COMMITTEE ON TAXATION 203
commercial and other advantages on the same basis as a citizen
of the State, and who, under the present law, pay no taxes whatso-
ever.
One of the chief difficulties of our present system is the vary-
ing rates in different localities which tend to produce grave
inequalities as between towns and between the residents of differ-
ent towns. The tendency, of course, is for taxpayers to establish
a real or fictitious residence in that locality where the rate is
lowest, and this inevitably results in injustice to the other less
fortunate towns and their taxpayers. By the establishment of a
uniform rate throughout the State, the income tax will do away
with this situation entirely. " Isles of safety " and favorite places
of residence will disappear, and individuals and corporations will
all meet on an equal and fair basis, subject to a just burden, and
with the full knowledge that it is common to all and that there
are neither a fortunate many nor an unfortunate few.
To equalize the burden is the principal function for which
this Committee was appointed. Certain classes of property are
to-day paying too much, others too little. No equality can exist
until those paying too little are compelled to pay their share.
It seems to us that the income tax meets these requirements.
The Committee has caused to be made various estimates as to
the possible yield of an income tax in the State of New York.
Different methods have been used, and a number of experts have
made various estimates based on these different methods. The
results in each case are not far apart. All tend to indicate that a
corporation tax as outlined in the attached bill would yield in
1916, at a one per cent rate, approximately, $9,000,000 ; at two per
cent, approximately, $18,000,000; and at three per cent, approxi-
mately $27,000,000. In the year 1917, at one per cent, approxi-
mately, $9,000,000; at two per cent, approximately, $19,000,000;
and at three per cent, approximately, $29,000,000.
The estimate of the yield from the individual income tax at the
rates contained in the attached bill is as follows:
1916 $18,000,000, approximately
1917 19,000,000, approximately
204 STATE OF NEW YORK
From these amounts would have to be deducted, however, the
present revenue derived under section 182 from the corporations
that would be subject to the income tax, which corporations, by
the terms of the attached bill, would be relieved from payments
under section 182. The State would then, out of the total amount
collected, retain a little over $2,000,000, plus the cost of ad-
ministration; and the balance, under the terms of the bill,
would be returned to the localities. This balance, in 1917,
would amount to over $44,000,000. In considering the net
gain to the localities over the present system, we would have
to take into consideration the loss of approximately $6,000,-
000, at present derived from the personal property tax. After
allowing for all these deductions there would still be a net gain
of $38,000,000, to be distributed to the localities with a view to
equalizing the present burden of taxation by relieving real estate
and such other forms of wealth as are now contributing more than
their share. We give in the appendix a table showing the amount
which would be received by each county if the $38,000,000 were
distributed on the basis of the assessed values of real estate for the
year 1914. This table shows beyond any question that there is
not a county in the State that would not be infinitely better off
than it is to-day.
The suggested method of distribution according to assessed
values in each county is novel, but it has these advantages:
1. It will avoid the difficulty which would arise if each locality
were permitted to retain the tax paid by residents of that district.
Under this latter method some districts, where many rich men
have established a residence, or where many prosperous corpora-
tions are located, would have more revenue than they could use,
while others, whose inhabitants enjoy smaller incomes, would
receive little or no revenue.
2. The new method will tend to encourage the raising of real
estate assessments to a point approaching true value.
3. It will meet the criticism made of an income tax to the effect
that, although the rate is usually low at the start, there is a con-
stant temptation to raise it in order to obtain more revenue.
Under the proposed system there will be no temptation on the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 205
part of the Legislature to raise the rate, inasmuch as the State
will not profit, while it is hardly probable that all of the localities,
or even a majority of them, will unite at one time in demanding
an increase, or at least such a situation will not occur unless the
increase is fully warranted by the general circumstances.
It is sometimes said that the income tax is inquisitorial, but it
will be noted that the bill hereto attached makes it possible for the
taxpayer to file with the State authorities a return which is, for
all practical purposes, a duplicate of the information already fur-
nished to the Federal government, together with such additional
information as may be necessary for State purposes. We hear
little or no complaint to-day as to the inquisitorial features of the
Federal income tax. People have become accustomed to it. Nor
do we feel that there will be any great reluctance to disclose to
the State authorities information already furnished by the Federal
government, particularly under a law which provides severe pen-
alties for the disclosure of any information by the public officers.
Again others object to a state income tax on the ground that
there is already a Federal income tax. But let us analyze the ob-
jection. There is no question that, in addition to the Federal
income tax, personal property must contribute its quota to the sup-
port of the State government. Is it better to impose a 2 per cent
property tax on capital value, or to impose a 2 per cent tax on net
income? We can hardly assume that the State will continue to
allow the personal property tax to remain on the statute books and
to permit its evasion. And so the choice does not lie between no
tax and some new form of taxation such as the income tax, but be-
tween a continuance of the present hopeless system, and some
better and more equitable way of raising revenue. If such a
latter plan can be devised, are we to reject it because it is already
employed by the Federal government, and in order to avoid dupli-
cation, continue to tax the same property in a manner which we
admit ourselves to be inequitable, and to be a failure ?
Finally, it is often said, that while theoretically sound, the in-
come tax will not work in practice. This may have been true
prior to the enactment of the Federal Income Tax Law, but this
law is of immense help to any state desiring to impose an inctrae
206 STATE OF NEW YOKK
tax; and for two reasons. In the first place, many people are
already accustomed to it, they understand its workings and will
not resist its enforcement; and in the second place, the fact that
the Federal government requires a return, and has the machinery
to check up that return in a strictly accurate manner, makes the
evasion of the State income tax a matter of no little difficulty and
danger. In so far as corporations are concerned, the Federal law
to-day permits a state to examine the returns. A similar provi-
sion in so far as individuals are concerned, could probably be ob-
tained from the Federal government. But in the meanwhile it
seems to us highly doubtful whether any individual having already
filed a correct statement with the Federal government would be
foolhardy enought to file an incorrect duplicate with the State
authorities.
The income tax will work in practice. It has been successfully
administered in practically every European country for a great
number of years. The Federal income tax works, and the Wis-
consin experiment has conclusively demonstrated that with a good
administration a state income tax does work. There seems to be,
moreover, a strong movement in favor of such a tax throughout
the country. Connecticut and West Virginia both adopted an in-
come tax in so far as corporations are concerned last winter, while
the people of Massachusetts, by a vote of almost three to one,
adopted at the last election an amendment which permits the im-
position of such a tax in the State of Massachusetts. Practically
every witness that appeared before our Committee and the list
included representatives of leading commercial and business or-
ganizations, as well as tax experts, business men and individuals
from many walks of life advocated the abolition of the per-
sonal property tax and the substitution therefor of the income
tax.
CONCLUSION
The Legislature submitted to this Committee the question:
" How can the State most equitably and effectually reach all
property which should be subjected to taxation and avoid conflict
and duplication of taxation on the same property ? "
Without passing upon the broad questions of public policy in-
volved in the adoption of a new tax system, which questions
JOINT LEGISLATIVE COMMITTEE ON TAXATION 207
should more properly be decided by the Legislature as a whole,
this Committee, in answer to the specific question submitted to it,
desires to state that all the evidence presented and all our investi-
gations, the results of which are presented in full in this report,
tend to show that the end sought for will be accomplished best by :
(1) the abolition of the present tax on personal property; (2) the
withdrawal of general business corporations from the provisions
of section 182 of the Tax Law; and (3) the imposition of an in-
come tax on individuals and general business corporations, in-
cluding manufacturing corporations.
To illustrate the general outline of what is involved in the sub-
stitution of income taxation for the personal property tax, and to
furnish a concrete basis for criticism and suggestion on the part
of the public and the Legislature, we attach to this report an
income tax bill. There is some difference of opinion among the
members of the Committee as to the details of this measure and
the advisability of some of its provisions. In view of this differ-
ence, the Committee as a whole submits this specific bill to the
Legislature merely for the purposes of illustration.
We emphasize that such a bill does not contemplate the imposi-
tion of an additional tax but a substitute for a hopelessly bad
system, that it is not advanced as a means of raising additional
revenue for State purposes but rather to equalize local burdens.
Again, it is advanced because of all the many reforms and new
methods of taxation adopted in other states of the Union and in
foreign countries, it seems to promise the closest approximation
to the ideals of equity and equality. It does this by taxing each
man in accordance with his ability to contribute to the support
of the government which protects him, his property and the
social structure of which he is a part.
If the Legislature intended that this Committee should make
a complete survey of our tax system, the work is by no means
finished. For example, the study of the taxation of public service
and financial corporations could not even be begun in the time at
our disposal, and though consideration has been given to the many
amendments to the Tax Law submitted by the State Tax Commis-
sion and by others 7 we find it impossible to report definite con-
clusions as to them at this date. If a complete study of the tax
208 STATE OF NEW YORK
laws is desired, the time of the Committee should be extended to
February 1, 1917.
We are in a position, however, at present, to make one or two
suggestions in addition to our main recommendations.
The inheritance tax as it stands is, generally speaking, of satis-
factory character. It is regarded as a fair and equitable law,
while the progressive feature is almost universally acknowledged
to be sound. Nevertheless, from a revenue standpoint the tax is
a disappointment. The Comptroller informs us that the normal
income to be expected therefrom is between seven and nine mil-
lion dollars, an amount well below what had been anticipated.
In order to make the tax more productive, the Comptroller
recommends that the law be amended in the following particu-
lars:
(1) The present inheritance tax law as amended in 1911 ex-
empts from taxation in this State intangible property belonging
to nonresidents, such as shares in New York corporations, and
money and securities kept on deposit here. The Comptroller
would restore the provisions which existed prior to 1911, and tax
the intangible property of nonresidents. The Committee does
not feel that it can agree with this recommendation. This prop-
erty has a situs and is taxable at the decedent's residence. As
nearly all states have inheritance tax laws, the taxation by New
York is double taxation. When originally adopted, few states
had inheritance tax laws, and the question was not, therefore,
serious, as it has since become. Aside from the unfairness of a
double tax of this character, we do not believe that the amend-
ment would result in a greatly increased revenue, but rather in
driving property from the State and in preventing residents of
other states investing in New York corporations. The evil results
of an unwise law are well exemplified by experience in connection
with the 1910 amendments to the inheritance tax law.
" The law of 1910 established high graded rates with prac-
tically no exemption, and so greatly increased the tax to which
such investments were liable that it attracted attention through-
out the United States and Europe. Investors residing outside the
State were warned by circulars from banking houses and by the
JOINT LEGISLATIVE COMMITTEE ON TAXATION 209
newspapers of their liability to taxation under the New York
law, of which many of them had been unaware, with the result
that millions of dollars of investments and deposits were with-
drawn from the State, and more withdrawals were in contempla-
tion.
"Attention was called to this situation by the State Comptroller
in his report of 1911. The Comptroller said:
" ' Instances have lately been brought to my attention in which
foreign capital, seeking investment in New York through bank-
ing houses, which, by reason of their connections, would, under
normal conditions, have invested it in stocks of domestic corpora-
tions, has, by reason of the hardship of this law, been diverted
from the natural course and invested in the stocks of corporations
domiciled in other states. No argument is needed to show the
effect which a continuation of the present law will have upon the
corporations domiciled here.
" ' The great custodial institutions incorporated under the bank-
ing law of the State to care for the property of its citizens are
likewise suffering loss of patronage due to the severity of this
law.' "
After the law had been in operation eight months it was esti-
mated that the withdrawal of securities and investments in this
State had amounted to $400,000,000.
(2) The Comptroller further suggested that a tax should be
collected on the amounts bequeathed to educational and charitable
institutions in other states which are now exempt. The wisdom
of such an amendment is open to the gravest doubts, and we can-
not recommend its adoption. The exemption from taxation of
religious, charitable and educational institutions has long since
been recognized as a permanent policy in the State of New York.
If such institutions are to be encouraged, we do not know why
this principle should be limited to our own State. As a matter
of broad public policy, New York's interest in the development
of educational and charitable enterprises in other states should be
second only to her interest in the development of such enterprises
within her own border. Men should be encouraged to make be-
quests to institutions devoted to the public good, not discouraged,
210 STATE OF NEW YORK
no matter where those institutions may be located. Any other
point of view is narrow and provincial, unbecoming to a great
State, and will inevitably lead to retaliation.
(3) The third amendment contemplates the bringing of the
various groups or classifications closer together, so as to lower
the point at which the higher rates are applicable. The rates
remain unchanged, but the progression is made somewhat more
rapid and sharper. The Comptroller estimates that such an
amendment will add $2,500,000 to the annual yield of the tax
" without imposing any appreciable hardship upon those whose
immediate interests in property would be affected thereby." We
are in accord with this suggestion, which appears to be a sound
and proper one, though we do not agree to all the details of the
amendment as contained in his report.
Should the last recommendation be adopted and the State's
revenue increased $2,500,000, it would then be possible to give
some measure of relief to the localities pending a more thorough
reform, through the division between the State and the locality
of the increase in the excise tax, should that increase be made
permanent, and of the automobile license tax, with the under-
standing, however, that as to the latter both the State and the
county should continue to devote their respective shares to the
maintenance of highways. There is no novelty involved in such
a division. It is in line with the policy adopted in the past as
exemplified by the division of the excise taxes and of the mort-
gage recording tax.
In conclusion, it is pertinent to call attention to the fact that
if the Federal government is to abandon its traditional policy
of relying upon indirect taxation, and is to look more and more
to direct taxes for its support; if Federal income tax rates are
to be raised and a Federal inheritance tax imposed, it will be
necessary to revolutionize our systems of State taxation. The
Federal government is much better able to effectively impose
indirect taxes, such as custom duties, excise, etc. These have
been and are its natural sources of revenue; while the states are
of necessity compelled to rely for the most part on direct taxes.
Time and space do not permit the adequate discussion of so large
JCINT LEGISLATIVE COMMITTEE ON TAXATION 211
a topic. We cannot refrain, however, from pointing out the utter
folly of building up side by side two independent and totally un-
related systems of taxation, without conference, mutual under-
standing or an intelligent endeavor to determine the limits of the
fields of taxation to be assigned, respectively, to the Federal
government and to the states.
OGDEN L. MILLS, Chairman,
ARCHIE D. SANDERS,
EDWARD A. EVERETT,
H. EDMUND MACHOLD,
WILLIAM W. CHACE.
While I concur in the majority report of the committee, believ-
ing that all the testimony taken points irresistibly to the conclu-
sions reached, yet I most strongly disapprove of many features
of the Income Tax bill attached to the report, the details of which
are not at all in accord with my views of such a measure.
WILLIAM W. CHACE.
DRAFT OF LAW FOR INCOME TAX
[213]
*
DRAFT OF LAW FOR INCOME TAX
AN ACT
To amend the tax law, in relation to imposing an income tax.
The People of the State of New York, represented in Senate
and Assembly, do enact as follows:
Section 1. Chapter sixty-two of the laws of nineteen hundred
and nine, entitled "An act in relation to. taxation, constituting
chapter sixty of the consolidated laws," is hereby amended by
adding a new article to be article sixteen, to read as follows:
AETICLE 16.
TAX UPON AND WITH RESPECT TO INCOMES.
Section 340. Definitions.
341. Tax upon and with respect to incomes.
342. Definition of " income."
343. "Net income" and "taxable income" defined.
344. Deductions to persons other than corporations.
345. Deductions to corporations.
346. Specific personal deduction.
347. Income exempt.
348. Persons not subject to income tax.
349. Income within and without the state.
350. Rate of taxation.
351. Administration and assessment.
352. When returns to be made.
353. Consolidated return from certain corporations.
354. Powers of tax commission; revision of accounts.
355. Penalties.
356. Certification of assessment to comptroller.
357. Notice of assessment.
358. When payable.
359. Warrant for the collection of taxes.
360. Action for recovery of taxes; forfeiture of char-
ter by delinquent corporations.
[215]
216 STATE OF NEW YOEK
Section 361. Distribution of the tax.
362. The tax on salaries paid to non-residents to be with-
held by employers.
363. Persons acting in a fiduciary capacity.
364. Tax commission authorized to make such regula-
tions and to collect such facts as are necessary to
enforce this article.
365. :Secrecy required of officials. Penalty for violation.
366. Persons subject to the income tax exempt from the
personal property tax and from the provisions of
sections twelve, one hundred and eighty-two and
one hundred and ninety-two of the tax law.
340. Definitions. For the purpose of this article and unless
otherwise required by the context:
1. The word " person " or the word " taxpayer " shall be
deemed to include individuals, firms, copartnerships, representa-
tives and corporations as hereinafter defined.
2. The word " corporation " shall be deemed to include corpo-
rations, joint stock companies, associations and those trusts whose
property is represented by transferable certificates or by capital
stock divided into transferable shares. For the purpose of this
act corporations shall be deemed to reside within the state under
whose laws they were organized and erected.
341. Tax upon and with respect to incomes. A tax is hereby
imposed upon every person residing within the state, and shall
be collected and paid annually upon and with respect to his entire
net income from all sources except that from property located or
from any business, trade or profession carried on without the
state as hereinafter provided ; and a like tax shall be collected and
paid annually upon and with respect to the entire net income from
all property located and of every business, trade or profession
carried on in this state by persons residing elsewhere. Such tax
shall first be collected and paid in the year nineteen hundred and
seventeen upon and with respect to the taxable income for the year
ending December thirty-first, nineteen hundred and sixteen.
342. Definition of income. 1. The term " income " as used
in this act shall comprise all gains, profits and income derived
from any source whatever, including the income from but not the
value of property acquired by gift, bequest, devise or descent.
It shall include but shall not be limited to:
JOINT LEGISLATIVE COMMITTEE ON TAXATION 217
a. Salaries, wages, fees and compensation for personal service
of whatever kind and in whatever form paid.
b. Interest, dividends, and rent, including royalties from mines
or the possession or use of franchises or legalized privileges of any
kind.
c. Gains, profits and income derived from securities, or from
professions, vocations, businesses, trade, commerce or sales, or
from transactions growing out of the ownership or use of or inter-
est in property.
d. So much of any debt or account due to the taxpayer and col-
lected after January first, nineteen hundred and sixteen, as has
been written off as worthless at any time prior to such collection.
2. Income shall not include the proceeds of life insurance
policies paid upon the death of the person insured; nor amounts
paid by the insured on a life insurance, endowment, or annuity
contract when returned to him upon the maturity or surrender of
the contract, but the amount by which the sum received exceeds
the sum paid shall be included as income; and so much of any
annuity as is composed of an interest return upon the principal
sum paid therefor, shall also be included as income.
3. Of the gain derived or loss sustained from the sale of real
estate, stocks, bonds, securities or other property acquired before
January first, nineteen hundred and sixteen, not regularly bought
and sold by the taxpayer, only such proportion shall be included
as the time between January first, nineteen hundred and sixteen,
and the date of sale bears to the entire time between the date of
acquisition and the date of sale.
343. "Net income" and "taxable income" defined. The
term " net income " shall mean the excess of income as herein-
before defined over and above the deductions and exemptions here-
inafter authorized. As applied to persons residing within the
state, the term " taxable income " shall mean all net income ex-
cept that from property located, or from any business, trade or
profession carried on, without the state. As applied to persons
residing without the state, the term " taxable income " shall mean
the entire net income from all property located, and of every busi-
ness, trade or profession carried on, within the state.
344. Deductions to persons other than corporations. In com-
puting net income of persons other than corporations there shall
be allowed as deductions from the income as above defined :
1. The necessary expenses actually paid in carrying on any
business, not including personal, living or family expenses.
218 STATE OF NEW YORK
2. Interest paid within the year except as provided in sub-
division eight of this section.
3. Taxes paid within the year upon or with respect to income
subject to this tax, including federal income taxes thereon when
separately stated in the return, and including also license taxes,
privilege taxes and other taxes upon business or property the
income from which is subject to this tax; but not including assess-
ments for local improvements, taxes imposed by article ten of the
tax law or other inheritance taxes wherever imposed.
4. The following losses when actually sustained during the
year and not compensated for by insurance or otherwise:
(a) Losses resulting from fire, storm or other casualty, and
from theft or property used in connection with the business or
profession of the taxpayers.
(b) Losses incurred in trade or transactions entered into for
profit, to the extent that a profit therefrom, if realized, would have
been taxable.
5. Debts due to the taxpayer arising in the course of business,
charged off within the year and not theretofore ascertained to be
worthless.
6. A reasonable annual allowance for the exhaustion, wear,
tear and obsolescence of property arising out of its use or employ-
ment in the business, and based upon its cost in cash or the
equivalent of cash ; but no deduction shall be made for any amount
of expense of restoring property or making good the exhaustion
thereof for which an allowance is or has been made; and no
deduction shall be allowed for any amount paid out for new
buildings, permanent improvements or betterments made to in-
crease the value of any property or estate.
7. Any salary received by a non-resident, the tax upon which
has been withheld and which has been paid or is to be paid by
an employer or payor under the provisions of section three hun-
dred and sixty-two of this article; and any income received by a
beneficiary which is taxed or taxable to his representative under
the provision of section three hundred and sixty-three of this
article.
8. No deduction shall be made for expenses chargeable to resi-
dence property occupied by its owner, nor for the depreciation
thereof, taxes paid thereon, nor for interest paid upon indebted-*
ness secured thereby; and the annual value or estimated rental
thereof shall not be included in the income subject to taxation.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 219
9. Dividends received from stock in any corporation and profit
received from an interest in any copartnership subject to this tax,
provided that when only part of the net income of the corporation
or copartnership from which such dividend or profit was paid
shall have been taxed under this article, only a corresponding part
of such dividend or profit shall be deducted.
345. Deductions to corporations. In computing the net
income of any corporation there shall be allowed as deductions
from the income as above defined:
1. All the ordinary and necessary expenses paid within the year
in the maintenance and operation of its business and prop-
erties including rentals or other payments required to be made
as a condition to the continued use or possession of property.
2. The following losses when actually sustained during the
year and not compensated for by insurance or otherwise:
a. Losses resulting from fire, storm or other casualty, and
from theft of property used in connection with the business or
profession of the taxpayer.
b. Losses incurred in trade or transmissions entered into for
profit, to the extent that a profit therefrom, if realized, would
have been taxable,
3. Debts due to the taxpayer arising in the course of business
charged off within the year and not theretofore ascertained to be
worthless.
4. When duly entered on the books of the corporation, a rea-
sonable annual allowance for exhaustion and depreciation by
use, wear, tear and obsolescence of property, based upon its cost
in cash or the equivalent of cash ; but no deduction shall be made
for any amount of expense of restoring property or making good
the exhaustion thereof for which an allowance is or has been
made; and no deduction shall be allowed for any amount paid
out for new buildings, permanent improvements or betterments
made to increase the value of any property or estate.
5. Interest paid within the year on its indebtedness to an
amount of such indebtedness not exceeding the sum of its paid
up capital stock and one-half of its interest bearing indebtedness
as both stood at the close of the year, or if no capital stock, the
amount of interest paid within the year on an amount of its
indebtedness not exceeding the sum of its net worth and one-half
of its interest-bearing indebtedness as both stood at the close of
the year; provided, that in case of indebtedness wholly secured
by collateral the subject of sale in ordinary business of such cor-
220 STATE OF NEW YORK
poratioB, the total interest secured and paid by such corporation
within the year on any such indebtedness may be deducted as a
part of its expense of doing business ; and provided that the above
limitation upon the interest deduction shall not apply to so much
of the interest paid by any corporation as is shown to be taxable
to other persons under the provisions of this act.
6. Taxes paid within the year upon or with respect to incomes
bubject to this tax, including federal income taxes thereon when
separately stated in the return, and including also license, privi-
lege and other taxes upon business or property the income from
which is subject to this tax; but not including assessments for
local improvements, taxes imposed by article ten of the tax law
or other inheritance taxes wherever imposed.
7. Dividends received from stock in any corporation subject
to this tax, provided that when only part of the income of the
corporation from which such dividend was paid shall have been
taxed under this article, only a corresponding part of such
dividend shall be deducted.
8. Any income received by a beneficiary which is taxed or
taxable to his representative under the provisions of section three
hundred and sixty-three of this article.
9. Amounts distributed to patrons in any year, in proportion
to their patronage of the same year, by any corporation doing
business on a co-operative basis, shall be returned as income by
said patrons but may be deducted by such corporation as cost, pur-
chase price or refund; provided that no such deduction shall be
made for amounts distributed to the stockholders or owners of
such corporation in proportion to their stock or ownership, nor
for amounts retained by such corporation and subject to distribu-
tion according to stock or ownership as distinguished from patron-
age.
346. Specific personal deduction. In lieu of all personal
or domestic expenditures and losses, persons other than copartner-
ships and corporations shall be allowed the following specific de-
ductions from net income :
1. To an individual fifteen hundred dollars.
2. To husband and wife living together eighteen hundred dol-
lars.
3. For each child under the age of eighteen years one hundred
dollars; but the total exemption to husband, wife and children
under eighteen years of age residing together as members of a
familv shall in no case exceed two thousand dollars.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 221
4. In computing said exemptions and amount of taxes pay-
able by persons residing together as members of a family, the
income of the wife and the income of each child under eighteen
years shall be combined with that of the husband or father, or
if he be not living, with that of the head of the family and taxed
to him. The tax thereon shall be payable by such husband or
head of the family, but if not paid by him may be enforced
against any person whose income is included in the assessment.
The member of the family who pays the tax shall have a legal
right of reimbursement against each other member of the family
in the proportion that the net income of such other member bears
to the combined net income. The wife may elect to make an
independent return of income, in which case she shall be entitled
to an exemption of nine hundred dollars, and the husband to an
exemption of nine hundred dollars plus an allowance of one hun-
dred dollars for each child under eighteen years of age who lives
with him ; but the total exemption to husband, wife, and children
living together shall in no case exceed two thousand dollars.
5. When part of the net income of any person entitled to a
specific deduction is excluded as being derived from sources with-
out the state, said deduction shall be proportionately reduced.
347. Income exempt. The following income shall be ex-
empt from taxation under this act :
1. Pensions received from the United States.
2. Compensation received for injury or incapacity under any
compensation law of this or any other state, or of the United
States,
3. Salaries, wages and other compensation received from the
United States by officials or employees thereof.
4. Interest upon the obligations of the United States or of its
possessions, and upon the obligations of this state or of its polit-
ical subdivisions.
5. Income received by the United States, the state, or any
political subdivision thereof.
6. Income of any corporation or association organized exclu-
sively for the moral or mental improvement of men and women
or for religious, Bible, tract, charitable, benevolent, fraternal,
missionary, hospital, infirmary, educational, scientific, literary,
library, patriotic, historical or cemetery purposes, or for the en-
forcement of laws relating to children or animals, or for two or
more of such purposes, if such income be used exclusively for
222 STATE OF NEW YORK
carrying out one or more of suck purposes. But no such cor-
poration or association shall be entitled to any such exemption if
any officer, member or employee thereof shall receive or may be
lawfully entitled, to receive any pecuniary profit from the opera-
tions thereof, except reasonable compensation for services in
eifecting one or more of such purposes, or as proper beneficiaries
of its strictly charitable purposes; or if the organization thereof
for any such avowed purposes be a guise or pretence for directly
or indirectly making any other pecuniary profit for such corpora-
tion or association or for any of its members or employees, or if
it be not in good faith organized or conducted exclusively for
one or more of such purposes.
7. Income of any officer of a religious denomination or of
trusts received for any of the purposes mentioned in subdivision
six preceding, subject to the same condition and exceptions as
control the exemptions according to the corporations or associa-
tions included in subdivision six preceding, but nothing herein
shall be construed to exempt the fees, stipends, personal earnings
or other private income of such persons.
8. Income of labor, agricultural and horticultural organiza-
tions, business leagues, chambers of commerce or boards of trade
and civic leagues or organizations, not organized or conducted for
profit and no part of the net income of which inures to the bene-
fit of the private stockholder or individual.
9. Interest received during the exemption period of five years
specified in chapter four hundred and sixty-five of the laws of
nineteen hundred and fifteen, from secured debts which have been
recorded and taxed under the provisions of said chapter.
348. Persons not liable to income tax. The following per-
sons shall not be liable to the income tax herein provided for :
1. Building and loan associations.
2. Banks whose stockholders are taxable under the provisions
of section thirteen of the tax law.
3. Persons liable to the taxes imposed by sections one hundred
and eighty-four, one hundred and eighty-five, one hundred and
eighty-six, one hundred and eighty-seven, one hundred and
eighty-eight, one hundred and eighty-nine and one hundred and
ninety-one of the tax law; but nothing herein shall be construed
to exempt income received by any such person as trustee or repre-
sentative.
349. Income within and without the state. For the pur-
pose of determining taxable income, income and deductions shall
be divided or allocated in accordance with the following rules :
JOINT LEGISLATIVE COMMITTEE ON TAXATION 223
1. Income from and deductions allowable with respect to ren-
tals, royalties and the operation of any farm, mine or quarry shall
follows the situs of the property from which such income was de-
rived.
2. In the case of individuals having a permanent office, or a
permanent place of business or employment at which their trade,
occupation, or profession is exercised, salaries, wages, fees and
compensation for personal service shall be allocated to the state in
which such office, or place of business of employment is located.
In the case of traveling salesmen and persons practicing itinerant
trades or occupations and having a permanent office or place of
business or employment to which they report or return, such in-
come shall be allocated to the state in which such office or place of
business is located. In the case of other individuals such income
shall follow the residence of the taxpayer. The provisions of this
subdivision shall not apply to income received by copartnerships
and corporations for personal service rendered to others by their
officers and employees.
3. Income from and deductions allowable with respect to stocks
and securities, and profit or loss from ownership thereof or
dealings therein, shall in the case of copartnerships be allocated
to that place of business of the taxpayer at or from which his
financial concerns and operations are transacted or directed. In-
come from any deductions allowable with respect to securities and
profit or loss from ownership thereof, or dealings therein, shall
in the case of corporations be allocated to that place of business
of the taxpayer at or from which its financial concerns and opera-
tions are transacted or directed. Income from and deductions
allowable with respect to stocks and profit or loss from ownership
thereof, or dealings therein, shall in the case of corporations be
allocated to the place where the physical property represented by
such stock is located. In the case of other persons such income
shall follow the residence of the taxpayer. The word " securities "
as used herein shall be deemed to include bonds, debentures, notes,
certificates or other evidences of indebtedness or obligation for
the payment of money or its equivalent, which obligation by its
terms is payable one year or more from its date.
4. Other income and deductions shall be allocated to the state
' where the property is located or the business transacted, from
which such income was derived. The tax commission shall pre-
scribe for different classes of taxpayers appropriate regulations!
for enforcing this rule. Until such regulations are issued and
224 STATE OF NEW YORK
in the case of any industry or class of taxpayers for which it may
be impracticable to allocate or localize income and the corre-
sponding deductions the following process of apportionment shall
be applied:
There shall first be excluded from the computation the income;
and deductions governed by the preceding subdivisions of th'.a
section and the property or assets from which such income was
derived. Of the remaining net income such a portion shall be
taxed as the remaining gross assets employed in any business
within the state bear to the remaining gross assets wherever em-
ployed in business.
5. Whenever by reason of loss or otherwise the entire net in-
come for the year is less than the taxable income only the smaller
amount shall be taxed.
350. Rate of taxation. Corporations shall pay annually a
tax of three per centum upon and with respect to the entire tax-
able income. Persons other than corporations shall pay annually
upon and with respect to the entire taxable income, the amounts
set forth in the following schedule :
When the taxable income exceeds The annual tax shall be
$0 but does not exceed $200 $1 00
200 but does not exceed 300 1 50
300 but does not exceed 400 2 00
400 but does not exceed 500 2 50
500 but does not exceed 600 3 00
600 but does not exceed 700 , . 3 50
TOO but does not exceed 800 4 00
800 but does not exceed 900 4 50
900 but does not exceed 1,000 5 00
1,000 but does not exceed 1,100 6 00
1,100 but does not exceed 1,200 7 00
1,200 but does not exceed 1,300 8 00
1,300 but does not exceed 1,400 9 00
1,400 but does not exceed 1,500 10 00
1,500 but does not exceed 1,600 12 00
1,600 but does not exceed 1,700 14 00
1,700 but does not exceed 1,800 16 00
1,800 but does not exceed 1,900 18 00
1,900 but does not exceed 2,000 20 00
f $20 plus two per centum upon and
2,000 -{ with respect to all taxable income in
excess of two thousand dollars.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 225
351. Administration and assessment. Except as otherwise
provided herein the state tax commission shall administer and en-
force the tax herein imposed, for which purpose it may divide the
state into districts, in each of which a branch office of the commis-
sion may be maintained in charge of an agent. Unless limited by
order of the tax commission, each such agent shall have power to
receive and audit returns of income and, when so designated by
the comptroller, to collect income taxes, and shall perform such
other services as are required by the tax commission.
352. When returns to be made. 1. On or before the first day
of March, nineteen hundred and seventeen, and annually there-
after, every corporation and copartnership subject to this tax and
every other person having a taxable income or having gross in-
come in excess of fifteen hundred dollars for the income year,
shall render to the tax commission a true and accurate report of
income for the preceding calendar year. Such returns shall so
far as may be set forth the same or similar items called for in
the blank forms of return prescribed by the United States com-
missioner of internal revenue for the enforcement of the act of
congress of October third, nineteen hundred and thirteen, together
with such other facts as may be necessary for the proper enforce-
ment of this act. There shall be annexed to such return the affi-
davit or affirmation of the president, vice-president, secretary, ou
treasurer of the corporation, of two members of the copartnership,
or of the person making the return, to the effect that the statements
contained therein are true. Blank forms of return shall be fur-
nished by the tax commission and its agents upon application, but
failure to secure the form shall not release any person from the
obligation of making the return herein required.
2. Corporations and copartnerships which customarily close
their annual accounts on a date other than B'ecember thirty-first,
or which customarily estimate their income or profits on a basis
other than of actual cash receipts and disbursements, may, with
the consent of the tax commission, return for taxation the income
earned during the business year for which the accounts of such
persons are customarily made up. In the case of persons author-
ized to make return on the basis of a fiscal year other than the
calendar year, the first return shall cover the income from Jan-
uary first, nineteen hundred and sixteen, to the close of his fiscal
year ending in nineteen hundred and sixteen; and such income
shall be returned and taxes paid upon and with respect thereto,
as in the case of other persons. Thereafter each such person shall
A.
226 STATE OF NEW YORK
make return within sixty days after the closing of his fiscal year,
and shall pay the tax to the state comptroller within thirty days
after receiving notice of the amount of tax assessed, in accord-
ance with regulations to be prescribed by the tax commission.
3. In case of neglect to make return occasioned by sickness or
absence of any person required to make said return, or for other
sufficient reason, the tax commission may allow such further time
for making and delivering said return as it may deem necessary.
353. Consolidated return from certain corporations. In thq
case of any corporation which owns all of the stock of another
or subsidiary corporation, or more than nine-tenths of such stock,
a consolidated return shall be made, including the income, de-
ductions and other required data for both parent and subsidiary
corporation or corporations, provided that such corporations con-
stitute a single business entity or enterprise, and provided further,
that in determining net income for their own purposes no recog-
nition in the accounts is made of the subsidiary corporations as
distinct operating units. In the case of any corporation which
distributes or sells its goods or products through another corpo-
ration, and such goods or products are sold or transferred to such
other corporation at conventional or fictitious prices or on terms
other than those which would ordinarily obtain between independ-
ent corporations, the tax commission shall require such corpora-
tions or either of them to furnish a consolidated return of income,
or to make such an accounting as shall accurately show the true net
income subject to the tax herein imposed.
354. Powers of tax commission; revision of accounts. 1.
If in the opinion of the tax commission any return of income is in
any essential respect incorrect it shall have power to revise such
return, or if any person liable to taxation under this article fails
to make return as herein required, the commission is author-
ized to make an estimate of the taxable income of such person
from any information in its possession, and to order and state
an account according to such revised return or the estimate so
made by it for the taxes, penalties and interest due the state
from such person. The tax commission shall also have power
to examine or cause to have examined, in case of failure to report
or in case the return is unsatisfactory to it, the books and rej-
ords of any such person, and may hear testimony and take proofs
material for its information. In case any return is revised 01
any taxable income estimated, the tax commission shall notify
JOINT LEGISLATIVE COMMITTEE ON TAXATION 227
the taxpayer of its action and of a time and place at which. oppor-
tunity will be given to be heard in respect thereof. Such notice
may be mailed to the postoffice address of the taxpayer. The
determination of the tax commission shall be subject to review
by certiorari in the manner prescribed in sections one hundred
and ninety-nine and two hundred of the tax law. Subject to the
rights of notice, appeal and hearing herein provided, the tax com-
mission may revise returns or make estimates of taxable income
and on the basis of such returns or estimates audit and state ac-
counts for taxes for a period of three years next preceding that in
which such revision or estimate is made.
2. The provisions of section one hundred and ninety-eight of the
tax law are hereby made applicable to the revision and readjust-
ment of accounts for income taxes; and credits in favor of any
taxpayer resulting from such revision may be assigned to any
other person subject to the income tax in the same way and with
the same effect as though the credit had originally been allowed in
favor of such assignee; provided that applications for such revi-
sion may be made within three years from the time any such ac-
count shall have been audited and stated.
355. Penalties. 1. Any person required by law to make re^
turn of income, who shall fail or refuse to make such return be-
fore the time at which accounts for income taxes are required
to be certified to the comptroller, shall upon conviction be fined
not less than twenty dollars and not more than five hundred dol-
lars, at the discretion of the court.
2. If any such person shall fail or refuse to make a return of
income at the time or times hereinbefore specified, but shall
voluntarily make a correct return of income before the time at
which accounts for income taxes are required to be certified to
the comptroller, there shall be added to his tax five per centum
of the amount otherwise due, but such additional amount shall
in no case be less than two dollars nor more than five hundred
dollars.
3. If any person liable to taxation under this article fails
to make a return as hereinbefore required, or if in any return
he wilfully omits or understates any item of income, or wilfully
overstates any deduction or loss, or makes any statement with
false or fraudulent intent, and an additional amount is discovered
to be taxable, the amount so discovered shall be subject to twice
the ordinary rate of taxation. The amount so added to the tax
shall be collected at such time and in such manner as may be
228 STATE OF NEW YORK
designated by the tax commission. This penalty shall be addi-
tional to all other penalties in this or any other act provided.
4. Any person required by law to make, render, sign or verify
any return, who makes any false or fraudulent return or state-
ment, with intent to evade any tax imposed by this act, shall
upon conviction be fined not to exceed five hundred dollars or
be imprisoned not to exceed one year, or both, at the discretion
of the court, with the cost of prosecution.
356. Certification of assessment to comptroller. On or
before the first day of September in each year the tax commis-
sion shall audit and state the account of each person reporting
income for the calendar year, shall compute the tax thereon and
forthwith certify the same to the state comptroller for collection.
357. Notice of assessment. Every return of income shall
contain the post office address of the taxpayer and lines or spaces
upon which the taxpayer shall enter the net income which he
believes to be taxable under the provisions of this article and
the amount of tax due thereupon or with respect thereto. If
such amount is accepted by the tax commission as correct no
further notice of assessment need be given, but in case of revision
the taxpayer shall be notified and given opportunity to be heard
as provided in section three hundred and fifty-four. Such notice
may be sent by mail to the post office address given in the re-
turn, and a record that such notice has been sent shall be pre-
served by the tax commission or its agent.
358. When payable. 1. The tax herein imposed shall be
paid to the state comptroller or to the authorized collecting agents
of such comptroller, and except as hereinbefore provided for per-
sons computing income on a basis other than the calendar year,
shall be paid on or before the first day of October of each year.
The comptroller is authorized at his discretion and with the con-
sent of the tax commission to designate the agents mentioned in
section three hundred and fifty-one as collectors for the purpose
of collecting income taxes, and may require bond from such
officers. The cost of such bond shall be audited and paid as are
the other expenses of such agents, but no such agent shall be
entitled to any additional salary, fee or compensation for service
rendered in the collection of such taxes.
2. If the tax imposed by this article be not paid on or before
October first, or in the case of additional taxes, at the time
designated by the tax commission, the person liable to such tax-
shall pay to the state comptroller in addition to the amount of
JOINT LEGISLATIVE COMMITTEE ON TAXATION 22*9
such tax ten per centum of said amount, plus one per centum
for each month the tax remains unpaid. Each such tax shall be
a lien upon and bind all the real and personal property of the
person liable to pay the same from the time when it is payable
until the same is paid in full.
359. Warrant for the collection of taxes. If the tax im-
posed by this article be not paid within thirty days after the
same becomes due, unless an appeal or other proceeding shall
have been taken to review the same, the comptroller may issue
a warrant under his hand and official seal directed to the sheriff
of any county of the state commanding him to levy upon and sell
the real and personal property of the person owing the same,
found within his county, for the payment of the amount thereof,
with the added penalties, interest and the cost of executing the
warrant, and to return such warrant to the comptroller and pay
to him the money collected by virtue thereof by a time to be
therein specified, not less than sixty days from the date of the
warrant. Such warrant shall be a lien upon and shall bind the
real and personal property of the person against whom it is issued
from the time an actual levy shall be made by virtue thereof.
The sheriff to whom any such warrant shall be directed shall
proceed upon the same in all respects, with like effect, and in
the same manner as prescribed by law in respect to executions
issued against property upon judgments of a court of record,
and shall be entitled to the same fees for his services in executing
the warrant, to be collected in the same manner. In the discre-
tion of the comptroller a warrant of like terms, force and effect
may be issued and directed to any agent authorized to collect
income taxes, and in the execution thereof such agent shall have
all the powers conferred by law upon sheriffs, but shall be entitled
to no fee or compensation in excess of actual expenses paid in
the performance of such duty.
360. Action for recovery of taxes: Forfeiture of charter by
delinquent corporations. Action may be brought at any time by
the attorney-general at the instance of the comptroller, in the
name of the state, to recover the amount of any taxes, penalties
and interest due under this article. If such taxes be not paid
within one year after the same be due, and the comptroller is sat-
isfied the failure to pay the same is intentional he shall so report
to the attorney-general, who shall immediately bring an action
in the name of the people of the state, for the forfeiture of the
charter or franchise of any corporation, joint stock company or
*
230 STATE OF NEW YORK
association failing to make such payment, and if it found that
such failure was intentional, judgment shall he rendered in each
action for the forfeiture of such charter and for its dissolution if
a domestic corporation and if a foreign corporation for the an-
nulment of its franchise to do business in this state.
361. Distribution of the tax. Of the revenue collected under
this article twenty per cent, shall he paid into the state treasury
to the credit of the general fund and the residue on or before
the first day of February in each year, shall be distributed and
paid by the state comptroller to the treasurers of the several
counties of the state, in proportion to the aggregate amount of
assessment for each county as found by the state board of equaliza-
tion in the last preceding state equalization of assessment. As to
any county included in the city of New York such payment shall
be made to the receiver of taxes in such city and be paid into the
general fund for city purposes. The county treasurer shall ap-
portion the amount so received among the several towns and cities
within the county in proportion to their valuations as equalized
by the board of supervisors at its last annual meeting, and shall
credit the amount apportioned to each city or town against the
county tax payable by it. If in a county not wholly included in
a city, the amount of such credit to a city or town exceeds the
county tax from such city or town, the excess shall be paid to the
supervisor of the town or fiscal officer of the city and be by him
credited to general town or city purposes.
362. The tax on salaries paid to non-residents to be with-
held by employers. 1. The word " salary " as used in this sec-
tion shall be deemed to include salaries, wages, fees, commissions,
gratuities, emoluments, perquisites and other compensation of
whatever kind and in whatever form paid, received, or earned
and subject to taxation under the provisions of this article.
2. Every employer or person (hereinafter called "payor")
who shall in the year nineteen hundred and sixteen or in any
subsequent year pay or become liable to a non-resident (herein-
after called " payee ") for a salary or salaries at a rate exceeding
fifteen hundred dollars a year, shall, on behalf of said payee de-
duct and withhold from the payment the following sums:
One-half of one per centum upon all amounts paid at a ra,te
exceeding fifteen hundred dollars but not exceeding twenty-four
hundred dollars a year.
One per centum upon all amounts paid at a rate exceeding
twenty-four hundred dollars, but not exceeding thirty-six hun-
dred dollars a year.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 231
Two per centum upon all amounts paid at a rate exceeding
thirty-six hundred dollars a year, and upon all salaries the rate
of which reckoned on a yearly basis is uncertain or unknown.
Said amounts shall be withheld at the first time of payment
after the approval of this act upon the salary previously paid in
the year nineteen hundred and sixteen, and thereafter shall be
withheld upon each payment when it is made.
3. Every payor required by this section to withhold any por-
tion of any salary shall, between the first day of March and the
first day of April of the next succeeding year, pay to the state
comptroller all sums required to be withheld which he has not
returned to the payee in accordance with the following subdivi-
sion of this section, retaining one per centum thereof for the
expense and labor of collection, and shall within the same period
make and file with the tax commission or its proper agent a return
under oath, in such form as shall be prescribed by said commis-
sion, setting forth the name of every payee from whose salary
he is required to make such deduction, the receipts of such payees
as have filed returns on their own behalf or satisfied the require-
ments of the law as hereinafter provided, and such other informa-
tion as shall be required by said commission.
4. Any such payee may between the second day of January and
the first day of March file with the tax commission or its proper
agent a full and complete return of income ; and upon the accept-
ance and approval of such return shall be furnished with a state-
ment that no tax is due or with a tax bill reciting the amount of
income and the tax due thereon, as the case may be. Such tax
shall be computed at the rates prescribed in section three hundred
and fifty of this article. Immediately thereupon said payee shall
be entitled to pay said tax to the state comptroller and receive his
receipt therefor. In the payment of such tax, said payee shall
be entitled to a deduction for prepayment of two percentum of
the amount of tax due. Upon the presentation and surrender of
said receipt or statement that no tax is due to said payor, the
payee shall be entitled to receive all the sums withheld by said
payor on his behalf ; and said statements or receipts shall be filed
with the tax commission or its proper agent, as hereinbefore
provided.
5. Any non-resident payee subject to state or local income tax
at his domicile upon any salary as herein defined, shall upon
proof thereof made in the manner and form prescribed by the tax
232 STATE OF NEW YORK
commission, be charged for only one-half the tax that would be
otherwise due under the provision of this section.
363. Persons acting in a fiduciary capacity. 1. The word
" representative " as used in this section shall be deemed to in-
clude guardians, trustees, agents, receivers, assignees, executors,
administrators, committees and all persons acting in any fiduciary
capacity, residing within this state or appointed by a court of this
state. The word " beneficiary " as used in this section shall be
deemed to include any and all persons whom such representative
succeeds or for whom he acts.
2. Every such representative shall make and render to the
tax commission a verified return of the income received by him in
his representative capacity together with all income, if any, re-
ceived during the year by a ward, deceased or incompetent person,
and shall be liable to taxation therefor subject to the deductions
and exemptions authorized in this article; provided that every
executor or administrator shall be allowed the deductions and ex-
emptions to which the deceased would have been entitled had he
lived, and provided further that in the case of any ward having a
parent living the specific personal deduction shall be limited to
one hundred dollars, and provided further that no deduction or
exemption shall be allowed which has been otherwise claimed by
or for any beneficiary. Income received by a trustee shall be
taxed or not according as the beneficiary resides within or without
the state; but nothing herein shall be construed to exempt from
taxation income derived from property located or business trans-
acted within the state.
3. The provision of this section shall not apply to trusts whose
property is represented by transferable certificates or by capital
stock divided into transferable shares, and such trusts shall make
return of income and be taxed as corporations.
364. Tax commission authorized to make such regulations
and to collect such facts as are necessary to enforce this article.
The tax commission is hereby authorized to make such rules and
regulations, and to require such facts and information to be re-
ported, as are necessary to enforce the provisions of this article.
Without limitations of the general powers herein conferred, said
commission is specifically authorized at its discretion: A
(a) To require every person within the jurisdiction of the
state, whether subject to this tax or not, to furnish or return at
prescribed intervals, a list of the payments for rent, interest,
JOINT LEGISLATIVE COMMITTEE ON TAXATION 233
wages and other specified purposes which he has made during
such intervals, or copies of receipts for such payments, particu-
larly when made to or to the credit of persons subject to this tax;
and
(b) To require every such person buying or accepting for col-
lection or deposit any coupon or interest order to secure from the
owner thereof and transmit to the tax commission at prescribed
intervals, an ownership certificate stating the name and address
of the owner, and such other facts as may be helpful or necessary
in determining whether such interest or income is subject to this
tax. Information required under the provision of this section
may, when authorized by the tax commission and at the option of
the respondent, be returned on copies or duplicates of the forms
prescribed by the commissioner of internal revenue for the en-
forcement of the act of congress of October three, nineteen hun-
dred and thirteen.
365. Secrecy required of officials. Penalty for violation.
1. It shall be unlawful for any tax commissioner, agent, clerk
or other officer or employee to divulge or make known in any
manner whatever not provided by law the amount or source of in-
come, profits, losses, expenditures, or any particular thereof, set
forth or disclosed in any return of income, or to permit any such
returns or copy thereof or any book containing any abstract or
particulars thereof to be seen or examined by any person except
as provided by law. Nothing herein shall be construed to pro-
hibit the publication of general statistics so classified as to pre-
vent the identification of particular returns and the items thereof,
or the publication of delinquent lists showing the names of tax-
payers who have failed to pay their taxes at the time and in the
manner provided by section three hundred and fifty-eight to-
gether with any relevant information which in the opinion of the
comptroller may assist in the collection of such delinquent taxes;
or the inspection by the attorney-general or other legal represen-
tative of the state of the income return of any taxpayer who shall
bring action to set aside or review the tax based thereon, or
against whom action or proceedings have been instituted in ac-
cordance with the provisions of section three hundred and fifty-
five or three hundred and sixty of this article.
2. Any offense against the foregoing provision shall be pun-
ished by a fine not exceeding one thousand dollars or by im-
prisonment not exceeding one year, or both, at the discretion of
the court; and if the offender be an officer or employee of the
234 STATE OF NEW YOEK
state lie shall be dismissed from office and be incapable of holding
any public office in this state for a period of five years thereafter.
366. Persons liable to income tax exempt from personal
property tax and from, the provisions of sections twelve, one hun-
dred and eighty-two and one hundred and ninety-two of the tax
law. After the first day of January, nineteen hundred and seven-
teen, persons liable to the income tax shall not be assessed for
taxation on personal property as defined in article one of the tax
law, but bank stock and rents taxable as personal property under
the provisions of section eight of the tax law, shall be assessed
and taxed as heretofore. After the fifteenth day of January,
nineteen hundred and seventeen, corporations liable to the income
tax shall not be assessed or taxed upon their corporate stock as
provided in section twelve, nor shall they be required to pay th<
franchise tax imposed by section one hundred and eighty-two, n(
to make the report called for in section one hundred and ninety-
two of the tax law. For the purpose of this section every person
shall be deemed to be liable to the income tax who is not specifi-
cally excepted from such liability by the provisions of section
three hundred and forty-eight. Nothing herein shall be con-
strued to impair the obligation to pay franchise taxes due on or
before the fifteenth day of January, nineteen hundred and seven-
teen, or taxes on personal property or corporate stock assessed in
the year nineteen hundred and sixteen, whether payable in that
year or not.
2. Invalidity of part of this act not to affect the remainder.
If any clause, sentence, paragraph or part of this act shall for
any reason be adjudged by any court of competent jurisdiction
to be invalid, such judgment shall .not affect, impair, or invalidate
the remainder of said act, but shall be confined in its operation to
the clause, sentence, paragraph, or part thereof directly involved
in the controversy in which such judgment .shall have been ren-
dered.
3. Except as otherwise provided herein this act shall take
effect immediately.
APPENDICES
[235]
APPENDIX All
REVENUE RECEIPTS OF STATES, COUNTIES AND INCORPORATED
PLACES (INCLUDING TOTAL REVENUE RECEIPTS, GENERAL PROP-
ERTY TAXES AND SPECIAL PROPERTY TAXES, BUT NOT THIR-
TEEN OTHER CLASSES OF REVENUE RECEIPTS LISTED BY
CENSUS) *
STATES
Population
Total
Per
capita
General
property
taxes
Special
property
taxes
Total
97,163,330
$1,845,901,128
$19 00
$1,082,971,468
$83,960,118
States
96 815 253
$367 585 331
$3 80
$139 750 303
$67 675 933
Counties
Incorporated places . .
85,738,717
45,682,236
370,043,046
1,108,272,751
4 32
24 26
282,077,069
661,144,096
805,419
15,478,766
Alabama
2,238,614
$16,675,494
$7 45
$9,410,110
$142,940
State
2 238 614
$5 966 208
$2 67
$3 500 148
$96 472
Counties
2,238,614
5,175,597
2 31
4 , 203 , 525
46 468
Incorporated places
410,707
5,533,689
13 53
1,706,437
Arizona
230,808
6,294,701
27 27
4,561,146
173
State
230,808
$1,539,147
$6 67
$1,252,573
$173
Counties
Incorporated places
230,808
70,021
3,398,239
1,357,315
14 72
19 38
2,741,182
567,391
Arkansas
1,659,859
10,579,487
6 37
7,306,567
221,115
State
1,659,859
$3,454,081
$2 08
$2,737,926
$221 115
Counties
1 , 659 , 859
4,037,669
2 43
3 , 293 , 668
Incorporated places
217,381
3,087,737
14 20
1,274,973
California
2,667,516
123,195,750
46 18
69,433,033
3 273 158
State
2,667,516
$19,775,003
$7 41
$1,361,887
$3 237 158
Counties ....
2,226,521
42,997,382
19 31
34,825,081
Incorporated places
1,689,400
60,423,365
35 77
33,246,065
Colorado
883,276
19,161,098
21 69
12,950,354
280 701
State
883,276
$2,727,954
$3 09
$1,578,697
$280 701
Counties
645,391
5,900,076
9 14
5,081,575
Incorporated places
442,586
10,533,068
23 80
6,290,082
Connecticut
1,181,793
25,545,578
21 62
13,531,984
5,072,233
State
1,181,793
$5,497,195
$4 65
$4 256 021
Counties
1,181,793
673,305
57
$261,368
Incorporated places
Delaware . . ...
1,058,117
208,036
19,375,078
2,790,438
18 31
13 41
13,270,616
1,494,235
816,212
27 494
State
208,036
$713,348
$3 43
$26,662
Counties . . .
208,036
735,223
3 53
$620,250
Incorporated places
District of Columbia
100,627
348,077
1,341,867
14,438,046
13 34
41 48
873,985
5,557,090
832
Incorporated places
348,077
$14,438,046
$41 48
$5,557,090
Florida
825,420
12,101,112
14 66
7,360,475
$31,681
State
825,420
$2,980,334
$3 61
$1,478,479
$2 295
Counties
810,899
5,071,256
6 26
3,916,582
29,386
Incorporated places
236,640
4,049,522
17 11
1,965,414
Georgia
2,736,737
26,293,393
9 61
16,269,128
State
2,736,737
$5,778,440
$2 11
$4,037,908
Counties
2,736,737
9,956,971
3 64
7,109,105
Incorporated places
573,057
10,557,982
18 42
5,122,115
Idaho
378,818
6,734,155
17 78
4,207,142
$97,887
State
378,818
$1,936,279
$5 11
$1,004,830
Counties
378,818
3,012,221
7 95
2,363 656
Incorporated places
81,718
1,785,655
21 85
838,656
237]
*
238
STATE OF NEW YORK
APPENDIX All Continued
STATES
Population
Total
Per
ca-pita
General
property
taxes
Special
property
taxes
Illinois
5,904,043
$118,579,747
$20 08
$67 821,281
$1 612 818
State
Counties
5,904,043
5,904 043
$14,025,769
15 873 765
$2 38
2 69
$8,091,832
12 374 734
$1,612,818
Incorporated places
3,710,769
88,680,213
23 90
47,354,715
2 760 792
43 767 765
15 85
27 906 304
170 585
State
2 760 792
$8 425 385
$3 05
$6 182 813
$170 585
Counties
2 , 760 , 792
11,652,870
4 22
8,698,167
Incorporated places
1,214 030
23,689 510
19 51
13 025 324
2,222,472
36,428,647
16 39
24,233 876
280,733
State
2,222,472
$6,098,459
$2 74
$3,658,488
$280,733
2 222 472
16 564 437
7 45
11 403 433
Incorporated places
711,662
13,765,751
19 34
9,171,955
Kansas
1,762,573
24,164,614
13 71
16,395,281
170,234
State
1,762,573
$5,379,229
$3 05
$3,310,048
$170,234
Counties
1,685,621
7,432,155
4 41
6,525,401
522 478
11 353 230
21 73
6 559 832
2 336 277
26 722 060
11 44
15 733 715
461,956
State
2 336 277
$7 688 194
$3 29
$4 318 990
$461,956
Counties
2,336,277
8,607,899
3 68
5 , 246 , 650
Incorporated places
574,890
10 425 967
18 14
6 168 075
1,745,658
22,739,066
13 03
14,515,346
207,004
State
1,745,658
$7,096,702
$4 07
$4,386,920
$207 , 004
1 389 700
6 013 822
4 33
4 187 527
523 214
9 628 542
18 40
5 940 899
Maine
757,936
12,966,150
17 11
7,366,586
275,318
State
757,936
$5,063,526
$6 68
$2,498,591
$275,318
757 936
879 012
1 16
674 172
389 364
7 023 61?
18 04
4 193 823
Maryland
1,330,209
26,029,645
19 57
15,156,991
725,166
State
1,330,209
$5,294, >f6
$3 98
$2,129,364
$525,426
Counties
755 , 634
5,700,921
7 54
4 , 156 , 772
31,023
Incorporated places
677,147
3 548 705
15,034,448
124 350 892
22 20
35 04
8,870,855
69 173,958
168,717
12,278,551
State
3,548 705
$25 742 902
$7 25
$6 252,161
$5,056,514
2 761 574
3 435 938
1 24
2 727 983
Incorporated places
Michigan
3,294,319
2,936,618
95,172,052
52 979 446
28 89
18 04
60,193,814
36,461,096
7,222,037
889,621
State
2,936,618
$12,806,666
$4 36
$10,875,862
$628,831
2 936 618
8 642 466
2 94
6,045,366
253,527
Incorporated places
Minnesota
1,431,059
2,181,077
31,530,314
44,089,229
22 03
20 21
19,539,868
23,221,369
7,263
1,080,115
State
2 181 077
$14 033 962
$6 43
$4 201 828
$714,905
Counties
Incorporated places
Mississippi
2,181,077
914,301
1 876 987
8,245,936
21,809,331
14 612 702
3 78
23 85
7 79
5,843,122
13,176,419
8,383,108
241,788
123,422
44,907
State
1,876 987
$3 694 027
$1 97
$2,325,705
$44,907
1 876 987
7 719 846
4 11
4 308 549
217 561
3 198 829
14 70
1*748' 854
Missouri
3,353,983
58 555,630
17 46
30,825,369
1,141,124
State
3 353 983
$8 243 849
$2 46
$3 , 222 , 363
$479,517
Counties
2,630,636
11,051 008
4 20
7,830,979
Incorporated places
1,465,008
39,260,773
26 80
19,772,027
661,607
JOINT LEGISLATIVE COMMITTEE ON TAXATION
239
APPENDIX All Continued
STATES
Population
Total
Per
capita
General
property
taxes
Special
property
taxes
419,174
$12 803 151
$30 54
$7 864 865
$25 004
State
419,174
$2,642,075
$6 30
$905 746
$20 036
419,174
6 259 720
14 93
5 258 998
4 968
Incorporated places
141,253
3,901,356
27 62
1,700,121
1,233,122
17 998 117
14 60
12 194 263
137 131
State
1,233,122
$3,761,392
$3 05
$2 187 597
$71 872
1,233,122
6 597 146
5 35
5 757 843
65 259
Incorporated places
321,770
7 , 639 , 579
23 74
4,248,823
Nevada . ...
94 722
2 967,919
31 33
2 118 933
*
State
94 , 722
$970,540 1
$10 25
$601 948
Counties
94 , 722
1,692,809
17 87
1,331,012
Incorporated places
15,434
304 , 570
19 73
185,973
436 740
7 054 912
16 15
4 655 153
$483 344
State
436 740
$1 793 881
$4 11
$1 178 347
$220 601
Counties
436,740
756,701
1 75
552 , 535
Incorporated places
262,907
2 749 486
4,504,330
68 684 931
17 13
24 98
2,924,271
39 613 391
262,743
758 599
State
2 749 486
$15 425 547
$5 61
$9 877 039
$748 086
Counties
Incorporated places
New Mexico ....
2,749,486
2,056,856
370 185
11,653,749
41,605,635
3,104,833
4 24
20 23
8 39
9,108,329
20,628,023
2,232,145
10,513
32 503
State..
370,185
370 185
$797,423
1 765,421
$2 15
4 77
$529 , 143
1 408 799
$28,078
4 425
Incorporated places
48,124
541,989
11 26
294,203
New York
9 712 954
330 622 071
34 04
201 342 295
28 399 306
State
9 712 954
$52 013,706
$5 36
$6,187,819
$22 183 580
Counties . ,
4,514,066
17,721,855
3 93
12,694,846
Incorporated places
North Carolina
7,755,439
2,307,809
260,886,510
14,212,398
33 65
6 16
182,459,630
9,386,831
6,215,726
5,265
State
2 307 809
$3 294 223
$1 43
$1 969 056
$5 265
Counties
2,307,809
6,445,604
2 79
5,011,003
339 758
4 472,571
13 16
2,406,772
North Dakota
660 , 849
10,024,589
15 17
6,317,386
State
660 , 849
$3,251,350
$4 92
$1,240,338
Counties
660 849
5,010,319
7 58
4,122,970
66 620
1 762 920
26 46
954,078
Ohio
4 965 169
95 , 669 , 743
19 27
51,473,265
$1,922,998
State
4,965,169
$13,877,036
$2 79
$2,916,282
$1,895,094
4 965 169
28,812,212
4 80
15,646,094
27,904
2 864 526
57 980 495
20 24
32,910,889
1 938 761
18,391,968
9 49
12,252,427
5,572
State
1,938,761
$3,358,843
$1 73
$2,206,205
$5,572
1 938 761
6 920,032
3 57
5,429,713
366 947
8 113 093
22 11
4 616 509
Oregon
756,988
24,613,582
32 52
15,420,281
262,138
State
756,988
$3,847,371
$5 08
$2,541,696
$262,138
756 988
7 970,054
10 53
7,377,705
Incorporated places
350,709
12,796,157
36 49
5,500,880
Pennsylvania
8,107,942
137,280,510
16 93
70,197,242
18,876,538
State
8,107,942
$28,571,882
$3 52
$1,256,609
$18,876,538
6 475 986
17,640,063
2 72
12,552 663
Incornorated daces
4.878.522
81.068.565
18 67
56.387.970
240
STATE OF NEW YORK
APPENDIX All Concluded
STATES
Population
Total
Per
capita
General
property
taxes
Special
property
taxes
Rhode Island
579,665
$13,627,651
$23 51
$8,065,197
$535,032
State
579 , 665
$3 018 385
$5 21
$843 319
$534 825
Counties
Incorporated places
South Carolina
557,768
1,572,285
10,609,266
9,295 371
19 02
5 91
7,221,878
6 154 648
207
122 575
State..
1,572,285
1,572 285
$2,375,236
3 515 661
$1 51
2 24
$1,654,659
2 766 600
$122,575
Incorporated places
South Dakota
237,836
643,121
3,404,474
9,782,158
14 31
15 21
1,733,389
6,016,784
9,781
State
643,121
$3 151 538
$4 90
$1 547 545
$9 781
643 121
4 600 068
7 15
3 128 460
Incorporated places
80 , 789
2 030 552
25 14
1 340 779
2 238 128
22 191 231
9 92
12 794 563
91 268
State..
2,238,128
2 238 128
$4,639,769
9 210 586
$2 07
4 12
$1,733,782
6 888 484
$91,268
Incorporated places
467 , 588
8 340 876
17 84
4,172,297
Texas
4,171,997
44,015,367
10 55
28,780,156
541,971
State
4,171,997
$12,598,297
$3 02
$6,328,327
$541,971
4,171 997
13 100 016
3 14
11 063 779
Incorporated places
1,032,272
18,317 054
17 74
11,388,050
Utah
404 , 735
9,551,375
23 60
5,802,191
317,271
State
404,735
$2,715,919
$6 71
$1,883,377
$317,271
404 , 735
2 307 108
5 70
1 849 235
Incorporated places
189,769
4,528,348
23 86
2 069,579
Vermont
359,957
4,408,670
12 25
1,922,661
746,547
State..
359,957
359 957
$1,952,770
30 359
$5 43
08
$184,319
25 623
$746,547
Incorporated places
171,510
2,425,541
14 14
1,712 719
2,129,003
20,734,314
9 74
11,175 929
412,588
State
2,129,003
$7 , 176 , 220
$3 37
$2 , 539 , 343
$412,588
1,674 340
3 557 591
2 12
3 013 324
Incorporated places
511,324
10,000,503
19 56
5,623,262
1 344 686
44 984 021
33 45
23 701 723
186 231
State
1 , 344 , 686
$7,174,313
$5 34
$3,333,336
$186,231
1,344 686
13,152 882
9 78
11 833 558
Incorporated places
726,144
24,656,826
33 96
3 , 534 , 829
1 306 345
10 609 218
8 12
6 314 812
587 735
State
1,306,345
$2,772,722
$2 12
$304 , 756
$587,735
1,306,345
3 975 059
3 04
3 697 582
Incorporated places
252,095
3,861,437
15 32
2,312,474
2,419,898
40,352,935
16 68
25 , 857 , 592
1,003,771
State
2,419,898
$11,380,681
$4 70
$6,818,729
$924,736
2,419,898
8,319,451
3 44
6 006 871
79,035
1 066 688
20 652 803
19 36
13 031 992
Wyoming
163,325
3,125,248
19 15
2,041,191
11,436
State
163 325
$1 063 277
$6 51
$573 573
$316
Counties
163,325
1,250,566
7 66
1,112,196
11,120
45 455
811 405
17 85
, ; * . 355 422
' * f >' fr 0. '
* Abstract of Special Bulletins, Wealth, Debt and Taxation, 1913, pp. 36-42.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
241
APPENDIX A I 2
ASSESSED VALUE OF ALL PROPERTY, REAL AND PERSONAL, SUBJECT
TO AD VALOREM TAXATION IN STATES, 1912.*
GEOGRAPHIC
DIVISION
AND STATE
ASSESSED VALUATION OF ALL PROPERTY SUBJECT TO AD VALOREM
TAXATION
Total
Real property
and
improvements
Personal
property
Other
property
Total
$69,452,936,104
$51,854,009,436
$12,135,880,928
$5,241,114,687
New England
Maine
$416,891,264
439,683,132
221,530,142
- 4,803,078,625
619,010,208
1,041,334,019
11,131,778,917
2,490,490,534
5,068,802,988
6,481,059,158
1,898,307,218
2,343,673,232
2,317,561,634
2,466,636,793
1,474,585,315
992,092,597
1,860,087,956
293,048,119
354,278,413
463,371,889
2,746,900,291
93,814,011
1,235,457,607
359,932,253
864,962,621
1,168,012,658
747,500,632
291,531,003
842,358,342
212,887,518
1,031,174,033
625,686,792
566,807,488
411,551,004
427,473,108
550,517,808
1,193,655,846
2,532,710,050
346,550,585
167,512,157
180,750,630
422,330,199
72,457,454
140,338,191
200,299,207
101,087,082
1,005,086,251
905,011,679
2,921,277,451
$329,614,002
299 , 333 , 340
157,967,927
3,216,714,460
426,968,806
880,054,721
10,684,290,188
1,880,407,662
4,821,764,111
4,335,665,521
1,221,410,854
1,648,500,546
1,649,105,370
1,723,425,870
1,154,269,735
547,544,903
1,187,413,981
199,070,599
264,163,184
319,049,627
1,798,339,960
89,541,628
1,151,374,665
330,322,487
538,924,546
633,747,633
382,775,963
152,052,298
431,329,671
140,200,555
636,774,911
447,552,416
342,648,441
240,104,986
298,828,900
368,449,430
719,703,439
1,650,198,381
179,892,897
132,531,537
81,270,500
280,766,698
34,682,427
84,328,045
109,625,848
83,667,525
729,751,400
674,866,639
2,163,020,203
$87,277,262
80,314,189
63,562,215
1,032,985,395
192,041,402
161,279,298
447,488,729
291,003,421
247,038,877
2,145,393,637
676,896,364
473,402,700
429,589,039
356,629,923
320,315,580
282,536,401
481,443,865
93,977,520
55,917,277
88,937,396
517,350,932
4,272,383
New Hampshire
$60,035,603
Massachusetts
Rhode Island
Connecticut
553,378,770
Middle Atlantic
New York
"97!i48!398
New Jersey
East North Central
Ohio
Indiana
"22i;769;986
238,867,225
386,581,000
' 72!6iii293
191,230,110
'si,' i97] 952
55,384,866
431,209,399
""84;682;942
"isi 1689; 857
295,028,419
121,098,098
43,359,299
138,021,114
34,279,204
189,130,112
99,675,906
"'66,'i6i!652
Illinois
Wisconsin
West North Central
Minnesota
Missouri
North Dakota
South Dakota
Nebraska
South Atlantic
District of Columbia . .
29,609,766
194,948,218
239,236,606
243,626,571
96,119,406
273,007,557
38,407,759
205,269,010
78,458,470
224,159,047
111,344,966
128,644,208
119,595,699
214,142,358
527,552,200
98,176,389
West Virginia
North Carolina
South Carolina
Georgia
Florida
East South Central
Kentucky
Tennessee
Mississippi
West South Central
62,472,679
259,810,049
354,959,469
68,481,299
34,980,620
51,513,534
61,011,609
20,771,379
31,938,240
43,470,332
Texas
Mountain
Montana
Idaho
Wyoming
Colorado
47,966,596
80,551,892
17,003,648
24,071,906
47,203,027
17,419,557
117,949,520
118,228,542
313,534,205
New Mexico
Arizona
Utah
Pacific
Washington
157,385,331
111,916,498
444,723,043
Oregon
California..
* Abstract of Special Bulletins, Wealth, Debt and Taxation, 1913, page 16.
242
STATE OF NEW YORK
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243
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244
STATE OF NEW YOKK
APPENDIX A II 1
TABLE SHOWING THE ASSESSED VALUATION OF KEAL AND PER-
SONAL PROPERTY AND THE AGGREGATE STATE AND LOCAL
TAXES FROM 1840 TO 1914, INCLUSIVE *
YEAR
Real
Personal
including
bank stock
Aggregate
taxes levied
1840
$517,723,170
$121 447 830
$3 088 408 22
1841
531 987 886
123 311 644
3 173 355 97
1842
504,254,029
116 595 233
4 246 487 78
1843
476,999,430
118,602,064
3 965 180 14
1844
480,027,609
119 612 343
4 243 101 81
1845
486,490,121
117 988 895
4 170 527 95
1846
496,483,411
119,880 236
4 647 461 88
1847
509,496,855
121,162,201
4 843 575 60
1848
526,624,853
125,663 318
5 295 458 23
1849
536,162,901
129 926 625
5 548 981 28
1850
571,690,807
153,183,486
6 312 787 33
1851
888,237,812
196,538,263
6 759 438 26
1852
946,467,907
221,802,950
7 007 688 08
1853
,015,762,791
249 720 727
9 326 763 97
1854
,091,514,033
272,638,110
9 638 279 63
1855
,107,272,715
294 012 564
11 678 015 69
1856
,112,133,136
316,506,930
12 743 179 73
1857
,111,551,629
319,897 155
15 166 309 62
1858
,095,403,134
307,049,165
15 426 593 20
1859
,098,666,251
315,108,117
16 353 301 38
I860
,119,933,484
320,617,352
18,956 024 50
1861
,121,134,480
313,802,682
20 402 276 51
1862
,113,779,352
314,111,034
19,456 288 40
1863
,161,750,000
339 , 249 , 877
23 046 800 66
1864
,158,327,371
392,552,314
39,873,945 56
1865
,196,403,416
334,826,220
45 961 440 62
1866
,237,703,092
426,404,633
40,568,244 69
1867
,327,403,886
438,685,254
46 518 921 62
1868
,418,132,855
441,987,915
44,298,435 90
1869
,532,720,907
434,280,278
46 161 531 50
1870
,599,930,166
452,607,732
50,328,684 21
1871
,641,379,410
447,248,035
45,674 486 92
1872
1,692,523,071
437,102,215
63 511 936 12
1873
1,750,698,918
418,608,955
51,444 536 27
1874
1,960,352,703
407,427,399
57 811 381 92
1875
2,108,325,872
357,941,401
56,926 470 69
1876
2,376,252,178
379,488,140
52 148 368 37
1877
2,373,408,540
364,960,110
50,237,164 06
1878
2,333,669,813
352,469,320
48 047 241 97
1879
2,315,400,526
322,468,712
47 148 475 04
1880
2,340,335,690
340,921,916
49,117,782 18
1881
2,432,661,378
351,021,189
49,286,772 55
1882
2,557,218,240
315,039,085
47,573 820 07
1883
2,669,173,011
345,418,361
50,936,788 95
1884
2,762,348,218
332,383,239
52,372,707 00
1885
2,899,899,062
324,783,281
57,265,650 02
1886
3,035,229,788
335,898,389
58,110,078 96
1887
3,122,588,084
346,611,861
57,331,191 58
1888
3,213,171,201
354,258,556
60,639,806 72
1889
3,298,323,931
385,329,131
60,183,803 78
1890
3,397,234,679
382,159,067
60,624,473 09
1891
3,526,645,815
405,095,684
60,417,409 52
1892
3,626,645,093
491,675,158
63,795,261 80
1893
3,761,679,384
540,708,935
67,274,029 22
1894
3,841,582,748
562,193,379
66,977,889 35
1895
3,908,853,377
541,621,122
72,400,944 11
1896
4,041,826,586
544,311,557
79,193,647 07
1897
4,349,801,526
649,364,694
80,645,206 34
1898
4,413,848,496
758,581,839
63,950,072 98
1899
4,811,593,039
742,959,229
102,940,006 33
1900
5,093,025,771
672,715,703
100,099,372 77
1901
5,169,308,069
960,152,352
105,656,212 21
1902
5,297,754,482
926,871,017
104,107,361 08
1903
6,749,509,958
1,152,169,443
94,989,856 45
1904
7,051,455,025
1,104,370,798
103,676,463 63
1905
7,312,621,452
1,172,456,705
106,441,726 08
1906
7,933,057,917
1,069,967,682
111,340,919 44
* Report of the N. Y. State Board^of Tax Commissioners, 1914, pp. 53-54.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
245
APPENDIX A II 2
TABLE SHOWING AMOUNT OF MONEY RECEIVED DIRECTLY AND
INDIRECTLY FOR STATE PURPOSES *
YEAR
Direct State
tax levied
for State
purposes
Receipts
from indirect
sources for
State purposes
1867 . .
$12 647,218 71
1868
10,243,317 01
1869
10,463,179 33
1870. .
14,285,976 55
1871
11 613 943 51
1872
19,850,882 30
1873 . . .
14,800,903 38
1874
15,727,482 08
1875
14,206,680 61
1876
8,529,174 32
1877
8,726,511 01
1878.
7,941,297 94
1879. . .
7,690,416 34
1880
9,232,543 33
1881
6,032,826 31
1882
6,820,023 29
1883
9,334,886 31
1884
7,762,572 78
1885. .
9,160,405 11
1886 . . .
9,512,812 91
1887
9,075,046 81
1888
9,089,303 85
1889
12,557,352 74
1890. . .
8,619,748 17
$3,237,575 31
1891 . .
5,196,666 40
5,593,968 69
1892.
7,784,848 16
4,797,209 73
1893. ..
10,418,192 08
5,887,706 55
1894
9,600,231 79
4,817,250 80
1895
13,906,346 22
5,411,654 50
1896. .
11,751,837 71
9,262,884 89
1897..
12,033,651 80
9,204,395 44
1898
10,189,110 93
9,749,688 52
1899. .
12,640,228 09
10,463,265 71
1900. . .
10,704,153 39
13,226,849 80
1901
6,824,306 01
15,611,498 62
1902
748,072 05
16,051,353 90
1903
761,085 02
22,341,802 97
1904
968,041 89
23,473,046 23
1905
1,191,677 51
23,869,423 44
1906. . .
32,077,393 48
1907
34,474,999 76
1908
33,253,796 17
1909
30,828,532 08
1910
37,130,151 19
1911
6,072,766 48
35,400,611 10
1912...
11,022,986 91
43,707,582 95
1913
6,460,093 12
43,971,846 54
1914
42,588,417 81
* Report of the State Board of Tax Commissioners 1914 (N. Y.) p. 54
246
STATE OF NEW YORK
APPENDIX A II 3
RATIO OF PERCENTAGES USED IN STATE EQUALIZATION TABLES
EROM 1896 TO 1915 *
COUNTIES
Ratio?
of per-
cent-
age,
1896
Ratio
of per-
cent-
age,
1897
Ratio
of per-
cent-
age,
1898
Ratio
of per-
cent-
Ratio
of per-
cent-
Ratio
of per-
cent-
age,
1901
Ratio
of per-
cent-
age,
1902
Ratio
of per-
cent-
age,
1903
Ratio
of per-
cent-
age,
1904
Ratio
of per-
cent-
age,
1905
.75
.70
.75
.70
.78
.73
.78
.73
.78
.73
.78
.73
.80
.75
.80
.75
.80
.75
.81
.75
Allegany
Broome
.73
.70
.69
.68
.68
.73
.66
.67
.55
.60
.71
.70
.78
.70
.60
.60
.72
.92
.58
.80
.68
.60
.70
.67
.70
.70
.73
.73
.69
.69
.69
.73
.60
.72
.55
.70
.71
.70
.82
.70
.60
.63
.72
.92
.58
.83
.68
.60
.70
.67
.70
.70
.73
.80
.74
.90
.70
.73
.60
.78
.80
.76
.72
.70
.83
.75
.73
.71
.73
.92
.93
.83
.68
.80
.70
.70
.80
.70
.74
.78
.74
.90
.70
.73
.55
.78
.82
.75
.71
.69
.81
.74
.73
.71
.72
.90
.91
.83
.68
.79
.70
.68
.80
.72
.65
.64
.81
.81
.85
.75
.67
.77
.73
.73
.77
.80
.78
.63
.81
.85
.70
.70
.80
.72
.76
.80
.82
.74
.75
.77
.75
.80
.75
.69
.90
.72
.80
.74
.78
.74
.90
.70
.73
.52
.78
.82
.75
.71
.68
.81
.74
.73
.71
.72
.90
.91
.83
.68
.79
.70
.68
.80
.72
.65
.67
.81
.81
.85
.75
.67
.77
.73
.73
.77
.80
.78
.66
.81
.85
.70
.70
.80
.72
.76
.80
.82
.74
.75
.77
.75
.80
.75
.69
.90
.72
.73
.74
.78
.74
.90
.70
.73
.50
.78
.82
.75
.71
.68
.81
.74
.73
.71
.72
.90
.91
.83
.68
.79
.70
.68
.80
.72
.65
.67
.81
.82
.85
.75
.67
.77
.73
.73
.77
.80
.78
.67
.81
.85
.69
.70
.80
.72
.76
.80
.82
.74
.75
.77
.75
.80
.75
.69
.90
.72
.73
.74
.78
.74
.90
.70
.73
.50
.78
.82
.75
.72
.67
.81
.74
.73
.71
.72
.88
.91
.83
.68
.79
.72
.68
.80
.72
.65
.67
.81
.82
.85
.75
.67
.77
.73
.73
.77
.80
.78
.70
.81
.85
.69
.70
.80
.72
.76
.80
.82
.74
.77
.78
.75
.80
.75
.69
.90
.74
.73
.74
.78
.74
.90
.70
.73
.50
.78
.82
.74
.72
.67
.79
.74
.70
.71
.72
.83
.90
.83
.68
.79
.72
.68
.80
.71
.62
.67
.81
.80
.84
.75
.68
.77
.73
.73
.77
.81
.78
.75
.80
.85
.68
.70
.78
.72
.76
.80
.80
.74
.77
.78
.75
.80
.75
.69
.90
.74
.73
.74
.78
.74
.90
.70
.73
.50
.78
.82
.74
.72
.69
.79
.74
.70
.71
.72
.83
.90
.84
.89
.79
.72
.68
.79
.71
.62
.89
.81
.80
.83
.75
.70
.77
.73
.73
.77
.89
.78
.90
.80
.85
.68
.70
.78
.72
.76
.80
.80
.74
.77
.78
.75
.82
.75
.69
.90
.74
.73
.74
.78
.74
.90
.70
.73
.50
.78
.82
.74
.73
.70
.79
.74
.70
.71
.72
.81
.90
.84
.89
.77
.74
.68
.79
.71
.52
.89
.81
.79
.85
.76
.70
.77
.71
.73
.77
.89
.79
.90
.79
.85
.68
.70
.78
.72
.76
.80
.80
.69
.77
.78
.75
.80
.75
.69
.90
.74
.73
Cattaraugus
Cayuga
Chautauqua
Chemung
Chenango
Columbia
Cortland
Delaware
Dutchess
Erie
Essex . .
Fulton
Greene
Herkinaer
Kings
Livingston
Madison
Monroe
Montgomery
New York
.63
.75
.60
.85
.78
.62
.78
.71
.59
.72
.50
.80
.50
.58
.84
.60
.69
.80
.65
.79
.80
.62
.70
.75
.55
.71
.80
.75
.71
.51
.65
.65
.63
.75
.60
.85
.78
.66
.80
.71
.62
.72
.65
.80
.50
.58
.84
.60
.70
.80
.70
.79
.80
.55
.70
.75
.55
.71
.80
.75
.71
.51
.70
.70
.63
.83
.86
.85
.75
.67
.77
.73
.70
.80
.80
.79
.62
.85
.85
.70
.70
.80
.72
.77
.80
.90
.75
.75
.75
.75
.80
.75
.71
.90
.70
.73
Niagara
Oneida . .
Ontario ....
Orleans
Otsego
Queens
Richmond
Rockland
Saint Lawrence
Saratoga
Schenectady
Schoharie
Schuyler
Seneca
Steuben
Suffolk .
Sullivan
Tioga
Tompkins
Ulster
Warren
Washington
Wayne
Westchester
Yates :::
* Ratio of percentages adopted for Equalization Tables are based upon Assessments of previous
years.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
APPENDIX A II 3 Concluded
247
COUNTIES
Ratio
of per-
cent-
age,
1906
Ratio
of per-
cent-
age,
1907
Ratio
of per-
cent-
age,
1908
Ratio
of per-
cent-
age,
1909
Ratio
of per-
cent-
age,
1910
Ratio
of per-
cent-
age,
1911
Ratio
of per-
cent-
age,
1912
Ratio
of per-
cent-
age,
1913
Ratio
of per-
cent-
age,
1914
Ratio
of per-
cent-
age,
1915
Albany
.85
.75
.85
.75
.90
.75
.90
.75
.90
.75
.90
.75
.90
.72
.90
.70
.90
.65
.91
.83
.70
.75
.74
.76
.74
.50
.80
.80
.58
.80
.77
.56
.60
.68
.72
.70
.70
.66
.80
.91
.71
.75
.80
.75
.75
.55
.91
.70
.75
.82
.71
.62
.61
.80
.77
.75
.89
.86
.89
.61
.77
.72
.82
.80
.65
.77
.75
.62
.45
.80
.80
.75
.50
.78
.72
.81
.70
.71
.87
.70
.92
.83
.70
.75
.72
.77
.72
.50
.78
.77
.58
.80
.75
.58
.60
.65
.74
.65
.65
.70
.80
.92
.71
.75
.80
.78
.70
.52
.93
.68
.75
.82
.73
.60
.80
.79
.77
.71
.89
.89
.89
.68
.77
.68
.75
.77
.65
.77
.75
.65
.40
.80
.77
.73
.60
.78
.75
.75
.74
.71
Bronx
.78
.78
.76
.90
.73
.73
.50
.80
.84
.74
.80
.72
.80
.76
.71
.72
.72
.81
.90
.84
.89
.77
.78
.76
.80
.75
.62
.89
.81
.81
.88
.76
.70
.77
.80
.76
.79
.89
.79
.90
.79
.85
.68
.73
.78
.72
.80
.80
.80
.69
.85
.78
.75
.80
.75
.72
.90
.76
.77
.78
.78
.76
.90
.73
.73
.50
.60
.84
.68
.85
.74
.60
.65
.75
.72
.72
.85
.90
.84
.89
.77
.82
.76
.82
.75
.62
.89
.81
.81
.88
.76
.70
.77
.80
.75
.79
.89
.79
.90
.79
.85
.68
.78
.79
.74
.80
.80
.75
.60
.85
.78
.83
.67
.73
.72
.90
.76
.77
.78
.78
.78
.90
.73
.73
.55
.84
.86
.68
.85
.76
.60
.65
.75
.77
.72
.85
.90
.84
.89
.77
.82
.85
.85
.77
.62
.89
.81
.81
.88
.76
.75
.77
.84
.75
.79
.89
.83
.90
.79
.85
.68
.78
.82
.74
.85
.80
.75
.60
.85
.83
.83
.67
.73
.75
.90
.76
.80
.78
.78
.78
.85
.73
'.77
.55
.84
.86
.68
.85
.76
.62
.65
.75
.77
.74
.75
.90
.84
.89
.77
.82
.85
.85
.77
.65
.89
.81
.81
.88
.76
.75
.77
.84
.77
.79
.87
.85
.88
.80
.85
.70
.78
.85
.75
.85
.82
.70
.60
.85
.83
.83
.65
.78
.75
.90
.76
.80
.80
.78
.78
.80
.74
.77
.55
.84
.82
.68
.85
.76
.62
.65
.75
.77
.74
.75
.85
.80
.89
.77
.82
.83
.85
.77
.65
.89
.75
.81
.88
.76
.72
.74
.81
.77
.79
.87
.85
.88
.80
.80
.75
.78
.85
.75
.82
.82
.70
.60
.82
.83
.83
.65
.78
.75
.85
.76
.80
.83
.74
.78
.80
.74
.74
.55
.84
.82
.68
.85
.80
.62
.65
.75
.77
.70
.75
.85
.80
.91
.77
.82
.83
.85
.77
.65
.91
.75
.81
.88
.76
.75
.74
.81
.77
.79
.89
.90
.89
.88
.80
.75
.82
.80
.70
.82
.82
.70
.55
.82
.83
.80
.60
.78
.75
.85
.76
.80
.83
.74
.78
.80
.76
.74
.55
.82
.82
.68
.85
.80
.62
.65
.75
.75
.70
.75
.82
.80
.91
.77
.82
.83
.85
.75
.65
.91
.75
.81
.88
.76
.70
.74
.80
.77
.79
.89
.90
.89
.88
.80
.75
.82
.80
.70
.82
.82
.70
.55
.82
.80
.80
.60
.78
.75
.85
.74
.75
.83
.70
.78
.77
.76
.74
.50
.82
.82
.62
.82
.80
.60
.62
.70
.75
.70
.75
.64
.80
.91
.75
.78
.83
.80
.75
.60
.91
.75
.81
.85
.76
.70
.70
.80
.77
.79
.89
.90
.89
.88
.80
.75
.82
.80
.70
.82
.80
.67
.50
.82
.80
.80
.55
.78
.75
.85
.74
.75
Cayuga
Chenango
Clinton
Cortland
Dutchess
Erie
Essex
Franklin
Fulton
Greene
Herkimer
Lewis
Nassau
New York
Oneida
Ontario
Oswego
Richmond
Saratoga
Schoharie
Schuyler
Steuben
Suffolk
Sullivan
Tioga.
Ulster
Warren
Washington
Wayne
Westchester
Wyoming ,
Yates
248
STATE OF NEW YORK
APPENDIX A IV 1
STATEMENT OF PERCENTAGE OF PERSONAL TO TOTAL ASSESSMENT
FOR THE YEARS 1840, 1845, 1850, 1855, 1860, 1866, 1870,
1875, 1880, 1885, 1890, 1895, AND 1900 *
COUNTIES
Percentage of 1
personal to
total, 1840
|i
Percentage of
personal to
total, 1850
Percentage of
personal to
total, 1855
Percentage of
personal to
total, 1860
ss
IS*
Percentage of
personal to
total, 1870
Percentage of
personal to
total, 1875
Percentage of
personal to
total, 1880
Percentage of
personal to
total, 1885
Percentage of
personal to
total, 1890
Percentage of
personal to
total, 1895
Percentage of
personal to
total, 1900 N
Albany
Allegany
Broome
Cattaraugus...
Cayuga. .
26.36
3.48
17.23
4.03
12.37
25.29
2.51
10.07
2.50
13.57
21.44
5.90
9.74
4.44
16.20
19.40
7.52
12.53
5.56
14.75
21.17
9.55
11.76
6.62
18.90
19.39
10.09
13.00
8.52
21.41
16.34
9.80
10.34
7.42
19 99
10.25
7.05
7.29
8.08
12 18
7.37
7.75
6.87
8.82
10 32
8.09
8.35
10.09
7.83
10 89
7.46
8.25
8.56
9.40
12 39
8.34
10.48
8.27
9.11
11 45
9.39
12.09
8.46
8.61
9 21
Chautauqua...
Chemung
Chenango
Clinton.
Columbia
6.99
12.20
12.97
15.91
26 36
7.30
9.85
11.86
4.48
25 14
11.86
13.37
13.09
3.68
OQ OK
11.77
14.55
15.73
10.75
29.33
12.64
13.82
14.62
12.08
30.86
15.89
18.90
15.59
15.33
24 35
11.62
12.36
12.66
12.86
20 22
8.47
8.63
11.11
11.80
29 36
10.54
3.63
14.18
11.30
17 95
9.53
5.44
11.07
12.52
16 26
9.20
8.54
10.50
10.96
13 42
fc8.76
7.10
10.16
10.20
12 27
7.69
5.37
12.54
10.89
11 02
Cortland
Delaware
10.90
11.27
6.63
9 36
8.54
17 43
9.02
13.26
10.15
13.52
15.19
16.71
12.16
13.18
9.75
13 54
11.91
12 34
10.98
10 94
9.52
10 59
8.11
9 55
9.73
11 21
Dutchess
Erie.
26.72
8.49
26.67
4.79
26.03
9 15
25.95
13.54
26.77
12.70
28.48
18.43
27.25
15.82
18.18
10.97
16.15
7 99
14.88
7 28
16.27
6 55
11.27
5 95
12.17
4 16
Essex
Franklin
Fulton
Genesee
Greene
10.49
2.01
18.39
5.64
18.20
5.82
10.13
14.77
7.53
19.92
14.42
8.78
17.12
11.38
24.36
11.93
8.37
16.87
11.41
16.84
10.65
9.22
14.08
14.75
17.57
9.85
13.66
16.85
17.19
19.27
9.16
12.94
13.40
15.72
17.28
7.43
12.09
11.72
14.93
11.37
6.49
14.07
9.60
14.75
9.92
7.13
14.38
6.99
12.39
12.62
7.06
11.58
8.03
12.32
10.12
7.75
10.17
7.74
11.64
10.26
8.33
10.15
11.21
13.08
11.22
Hamilton
Herkimer
Jefferson
Kings
.35
14.91
8.82
12 25
.13
12.63
12.21
13.13
1.14
13.99
15.43
11.23
.93
18.08
18.86
11 31
.79
20.68
18.76
11.20
2.07
16.55
17.67
16.47
2.02
15.70
18.36
9.24
.44
12.38
17.10
7 36
.17
10.77
12.73
4 82
.14
9.87
10.94
S3 46
.37
10.22
9.57
3 14
.10
9.25
11.40
14 18
.69
10.19
10.94
6 31
Lewis
Livingston
Madison
Monroe
11.85
6.94
11.09
8 91
13.35
9.34
10.78
10.65
6.96
12.57
14.45
11 12
12.25
13.12
16.94
11.28
11.81
16.62
20.02
15.95
10.08
14.82
22.01
16.08
10.06
14.61
16.11
10.61
10.51
8.99
13.75
5.53
11.02
10.22
12.24
4 44
fS.98
10.31
10.21
5 17
7.88
11.42
9.10
5 84
17.82
12.07
8.07
5 34
12.14
11.15
9.74
6 93
Montgomery. . .
Nassau
11.83
10.26
12.15
11.37
7.56
13.47
7.93
5.42
7.03
6.14
10.70
11.24
10.93
6 93
New York
Niagara
Oneida
25.78
3.49
18 36
26.16
6.77
19 66
27.58
7.57
22 97
30.80
8.48
17 71
30.95
14.51
18 15
35.00
15.14
14 14
29.14
13.55
12 93
19.73
6.99
11 10
17.59
6.59
10 51
14.78
7.30
9 39
13.61
8.09
8 65
i8. 39
7.71
9 16
15.35
5.01
19 10
Onondaga
Ontario
Orange
Orleans
11.86
14.20
18.01
5 30
11.28
13.67
19.89
7.73
11.68
16.96
21.56
10 58
14.62
16.19
23.61
12.10
13.32
19.65
23.83
11.43
14.83
19.08
27.94
10.34
13.55
19.46
24.50
10.84
10.90
11.58
20.94
7.21
10.62
10.85
15.79
9 73
8.98
11.06
14.13
10 24
8.03
10.75
12.06
9 35
6.36
10.19
10.70
8 78
9.13
10.16
9.92
9 97
Oswego
Otsego
9.82
15 79
6.95
13 64
10.10
16.68
9.94
19.23
13.03
18.91
16.00
18.22
10.53
14.54
9.64
11.60
5.54
12 46
3.81
10 29
5.96
9 77
5.62
10 28
11.91
12 96
Putnam
Queens
Rensselaer
Richmond
Rockland
Saint Lawrence
Saratoga
Schenectady . . .
Schoharie...
Schuyler
Seneca
Steuben
Suffolk
Sullivan
Tioga
Tompkins
Ulster
Warren
Washington....
Wayne
16.38
29.51
27.88
13.69
19.23
2.67
16.28
24.64
8.08
n.ii
5.41
19.09
5.46
17.04
21.29
16.15
3.74
16.58
7 62
15.37
30.32
29.92
13.24
21.57
9.53
15.95
18.28
8.70
6^87
20.29
4.49
15.67
17.53
14.80
2.42
13.40
4 77
21.97
32.32
29.74
14.06
20.65
4.02
19.03
24.14
16.35
8^47
20.44
9.40
17.15
18.61
16.25
4.25
17.13
8 56
16.09
26.57
26.41
17.59
16.43
9.30
20.01
15.68
12.91
7.36
14.40
16.34
22.78
11.56
13.73
11.57
14.53
15.94
17.59
29 00
19.46
24.80
27.64
10.64
18.45
10.06
23.53
14.02
14.02
7.05
15.22
15.70
19.32
11.32
16.07
19.09
15.82
16.43
20.39
12 29
27.92
26.55
21.40
9.66
24.67
11.13
22.60
11.55
12.65
14.75
15.04
11.44
19.16
6.81
20.06
20.74
24.07
20.47
20.29
15 65
22.26
22.17
26.41
8.74
17.85
9.41
22.57
10.54
12.06
10.63
13.94
10.95
18.32
5.15
12.94
18.73
17.97
17.82
20.61
11 90
17.12
13.50
18.23
7.17
9.79
8.78
12.32
9.22
11.55
10.81
12.29
9.15
15.81
6.56
7.71
10.99
14.38
18.88
17.99
10.15
18.08
6.24
14.45
4.67
20.35
7.45
8.44
10.46
10.96
9.76
11.83
8.82
13.00
3.97
6.66
12.40
13.96
17.00
13.71
7 71
18.32
7.49
12.59
2.79
11.31
8.36
7.12
6.43
11.11
7.33
12.27
7.97
11.79
2.85
6.66
11.26
11.58
16.44
13.36
8 45
13.47
4.67
10.20
2.17
9.20
8.93
7.28
5.87
11.37
10.12
12.28
8.10
10.89
2.50
7.20
10.97
10.10
15.00
11.92
9 35
11.44
4.08
9.17
.64
6.98
8.23
6.16
8.35
10.38
8.91
11.12
7.66
9.25
2.41
7.87
8.60
8.69
20.05
16.56
8 80
14.88
5.00
9.61
12.78
5.23
9.87
6.38
8.98
11.66
9.38
10.84
7.40
6.97
4.37
9.70
11.61
8.55
19.18
12.67
8 54
Westchester...
Wyoming
27.05
30.33
4 77
38.84
7 31
17.56
11 32
16.57
10 37
16.16
12 78
14.46
12.60
9.93
9.11
6.42
9 45
4.96
10 64
3.52
10 76
3.03
10 31
8.79
12 07
Yates
4.57
7.59
11.62
10.48
13.10
13.36
11.60
10.41
9.42
9.49
9.14
8.45
7.68
State
18.93
19.48
21.05
20.95
22.24
25.50
22.05
14.86
12.70
10.98
10.12
12.16
11.66
* Report of the N. Y. State Board of Tax Commissioners, 1914, pages 51-52.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
249
APPENDIX A IV 1 Concluded
STATEMENT OF PERCENTAGE OF PERSONAL TO TOTAL ASSESS-
MENT FOR THE YEARS 1913 TO 1914, INCLUSIVE
COUNTIES
SScc
P s
|t!
3S*
|15
2 3
3*5
}l!
g5
I* 2
Percentage ot
personal to
total. 1906
Percentage of
personal to
total, 1907
Percentage ot
personal to
total, 1908
Percentage of
personal to
total, 1909
Percentage of
personal to
total, 1910
SB-
|1|
3
Percentage of
personal to
total, 1912
'S-Sc*
||S
ill
N
Percentage of
personal to
total, 1914 |j
Albany
7 87
6.81
6 15
6 65
5 65
5 44
5 42
5 15
4 30
4 42
5 71
5 86
Allegany
8.25
8.29
7.55
7.84
6.62
5.77
5.221
4.90
4.14
3.95
3.68
2.69
Bronx
Broome
5 62
'5.52
4 93
5.50
5 ii
4 75
!
'4 36!
4 20
3 JJl
3 63
2 92
.86
2 70
Cattaraugus
6.24
6.09
5.58
6.03
5.03
4.49
4.16
3.57
2.85
11.21
2.68
2.16
Cayuga
6.97
6.97
6.40
6.12
5.23
4.73
4.32
4.12
3.47
3 19
2 98
2 75
5 57
5 47
5 28
5 15
4 71
3 77
3 26
2 84
2 54
2 37
2 35
1 99
Chemung
Chenango
Clinton
2.81
7.81
15 96
3.84
7.70
6.35
4.28
7.01
5 89
5.62
6.93
4 78
5.28
5.99
5 08
5.16
5.47
4 13
4.79
5.25
3 64
5.63
4.64
3 19
5.28
4.36
2 87
5.38
4.00
2 60
3.26
3.80
2 46
1.53
3.50
2 47
Columbia
Cortland
'7.23
5.66
12 13
6.97
5.20
12 21
7.00
4.61
8 21
7.19
4.52
8 66
7.15
3.78
6 58
5.85
3.33
5 89
5.29
3.08
5 09
4.53
' 2.60
4 25
4.07
2.19
3 88
3.72
1.91
3 38
3.63
1.87
2 99
3.34
1.59
2 75
Dutchess
Erie
Essex
8.89
2.79
8.49
7.50
2.97
8.38
7.93
2.77
5.36
8.61
2.61
5.22
8.52
2.39
4.53
8.23
2.30
4.39
8.46
2.16
4.19
7.69
2.15
3.87
6.26
1.98
3.58
5.92
1.90
3.68
5.60
1.85
3.34
5.59
1.90
2.89
Franklin
Fulton
6.43
13 33
6.14
13.10
5.94
5 75
5.83
5 64
5.15
5 00
4.41
4 75
4.24
4 99
3.79
4 53
3.68
4.17
3.49
3 99
3.06
3.32
2.75
4 88
Genesee
Greene . . .
12.43
6.88
9.27
6.44
9.04
6.18
8.67
5.58
6.74
5.15
5.94
4.71
6.07
4.23
5.92
3.82
5.49
3.44
3.66
3.06
3.51
2.83
4.72
2.49
65
55
61
53
68
49
42
19
.16
44
.15
16
Herkimer
Jefferson
6.29
8.40
5.66
7.99
5.66
7.38
5.32
6 78
5.43
5.89
4.40
5.29
4.10
4.86
3.50
4.44
3.40
4.20
3.17
4.41
3.04
4.22
2.79
4.11
10 48
8 94
8 81
7 56
7 28
5 88
6 22
4 05
3 20
2 82
2 68
2 29
Lewis
Livingston .
11.48
8 83
11.15
8.92
9.80
8 73
8.79
8 52
6.84
7 72
6.12
7 36
5.78
7.02
5.28
6.49
4.87
6.00
4.79
5 62
3.96
5.44
3.77
5.10
Madison
6.91
6.58
6.35
6.63
5.81
5.45
5.26
4.84
4.77
4.32
3.96
3.59
Monroe
Montgomery
4.86
5 82
4.99
5 68
4.79
5 12
4.65
4 72
4.54
4 37
4.20
3 76
3.99
3.25
4.31
2.90
3.96
2.73
3.65
2.28
3.50
2.37
3.15
2.51
Nassau
7.70
7.48
8.22
10.97
8.29
7.62
6.70
3.59
3.27
2.74
2.42
2.24
New York ...
13.14
11.72
12.49
9.44
8.53
6.32
6.81
5.51
4.96
4.81
4.48
5.29
3 47
3 44
2 93
3 17
2 33
1 95
1 77
1 87
1 53
1.42
1.39
1.22
Oneida
Onondaga
10.51
5.26
12.03
5 74
8.78
5 13
9.03
5 15
9.15
4.54
9.29
4 37
9.46
4.28
9.06
3.94
7.84
4.11
7.65
3.48
7.70
3.30
7.20
3.11
Ontario
Orange
Orleans
10.94
6.25
7 74
9.27
5.98
7 13
8.64
6.67
5 26
8.23
6.49
5 11
7.38
5.75
4 14
6.92
5.63
3 33
6.69
5.33
2.84
6.20
5.23
2.66
5.61
4.97
2.26
5.13
5.04
1.86
4.67
4.65
1.65
6.12
4.54
1.23
Oswego
Otsego
6.35
9.06
6.79
9.39
5.67
9.14
5.63
8.99
4.53
8.08
4.48
7.67
4.61
7.01
10.81
6.40
3.34
5.98
5.57
5.35
3.77
5.07
4.71
4.83
9 47
9 21
9 69
8 39
7 86
8.36
10 02
9 57
8.16
7.17
7.53
6.53
Queens
7.59
5.38
6.08
5.73
4.89
3.23
3.13
1.57
1.18
1.38
1.39
1.19
Rensselaer
5.84
12 27
5.63
11 58
5.46
10 96
5.47
9 24
5.16
7.12
5.03
4.48
4.80
4.69
4.80
3.14
4.33
2.37
3.97
2.18
3.88
2.13
3.86
1.85
Rockland
Saint Lawrence
Saratoga
3.44
11.42
4 24
2.74
8.16
3 53
2.99
7.81
3 26
2.56
7.86
2 87
2.67
6.90
2.47
3.50
6.38
2.64
2.60
5.86
2 54
3.32
5.36
2.08
2.17
5.06
1.91
2.87
5.01
1.62
2.67
4.82
1.32
1.76
4.34
1.25
Schenectady
Schoharie
Schuyler
6.42
11.86
8 12
7.42
11.21
7 61
5.59
7.68
7 53
5.00
8.43
6.87
5.21
6.55
6.23
4.76
5.81
5.85
4.43
5.41
4.29
4.29
4.57
3.57
4.04
4.51
2.76
4.42
3.92
2.45
4.01
3.46
2.29
3.70
2.93
2.09
Seneca
Steuben
Suffolk '
Sullivan
Tioga
7.83
6.46
6.68
2.93
8.43
7.18
6.24
6.32
2.73
8.04
6.16
5.69
6.37
2.53
8.34
6.15
5.76
5.86
4.05
7.84
5.33
5.0
4.78
1.93
7.05
4.72
4.23
4.29
1.68
6.41
4.19
4.08
4.10
1.45
15.07
3.97
3.68
3.53
1.59
4.07
3.56
3.90
5.14
1.69
3.67
3.13
4.12
3.30
2.18
3.25
2.66
3.33
3.01
2.15
3.07
2.54
3.07
2.26
1.82
2.76
Tompkins
8.02
7.49
7.24
6.68
5.82
5.00
4.44
4.20
4.82
4.86
4.65
3.99
Ulster
Warren
3.39
13 96
3.1
13 63
2.83
13.71
2.89
10.89
2.82
9.3
2.46
5.39
2.36
4.93
2.20
4.61
2.32
4.16
2.07
3.94
1.68
3.69
1.50
2.73
Washington
Wayne . .
8.52
7.03
8.10
6.74
8.00
6.54
7.55
6.18
6.84
4.40
6.32
3.85
5.84
3.51
5.43
3.12
5.18
2.73
5.05
2.66
4.62
2.17
3.46
1.74
Weetchester
6 82
6
5.85
5.12
4.1
3.82
3.53
2.98
2.93
2.76
2.21
2.01
Wyoming
Yates .
9.43
8 58
8.94
7.1
9.02
8.22
8.62
6.92
6.9
5.44
5.77
4.87
5.38
4.58
4.68
4.76
4.18
4.55
4.33
4.70
4.33
4.63
3.51
3.63
State
10.82
9.7
10.04
8.07
7.3
5.6S
5.65
4.76
4.19
4.01
3.73
3.77
1 Report of N. Y. State Board of Tax Commissioners, 1914, pp. 49-50.
250
STATE OF NEW YORK
APPENDIX A IV 2
TOTAL ASSESSED VALUE OF PERSONAL PROPERTY AND ASSESSED
VALUE OF PERSONAL PROPERTY NOT TAXABLE LOCALLY FOR
STATE PURPOSES, 1914 *
COUNTIES
Total assessed
value of personal
property,
1914
Assessed value
of personal
property, not
taxable locally
for State
purposes, 1913
Albany
$15,535,573
$7 112 237
Allegany
2,170,165
1 581 656
Broome
3 021 108
1 626 868
Cattaraugus
3 657 088
2 879 600
Cayuga
2 414 094
1 241 260
Chautauo.ua
4 141 603
2 896 354
Chemung
1 743 950
1 204 605
Chenango
2 229 284
1 631 010
Clinton
1 435 485
1 181 130
Columbia
2 314 499
1 393 967
Cortland ...
1 248 591
973 596
Delaware . . . .
1 977 678
1 532 441
Dutchess ....
7 096 777
3 186 327
Erie
27 968 682
20 051 456
Essex
993,262
550 160
Franklin
1,699,670
1,332,910
Fulton
3,188,265
2,342,492
Genesee
1,965,728
575,000
Greene
1,084,666
748,541
Hamilton
8,199
Herkimer
3,493,105
2,488,655
Jefferson
3,621,202
1,629,997
Lewis
710,190
279,957
Livingston
2 078 081
611 836
Miadison
1 544 808
753,008
IMonroe
15 821 817
6,977,492
IVtontgomery
3,120,755
2,351,005
Nassau
4,394 545
1,982,345
New York (Greater)
703,006,714
362,711,154
Niagara ....
3,187,587
2,252,982
Oneida .
13,969,952
7,656,711
Onondaga .
11,452,925
5,570,175
Ontario .
3,520,759
1,184,759
Orange .
6,190,799
3,623,189
Orleans
1,032,997
681,962
Oswego
2,760,984
1,100,989
Otsego
3,290,342
2,059,017
Putnam
1,268,129
309,529
Rensselaer
7,038,300
3,694,650
Rockland
1,417,094
820,622
Saint Lawrence
4,314,935
2,235,845
Saratoga
1,484,807
1,125,452
Schenectady . . .
3,133,534
631,642
Schoharie. .
892,418
538,001
JOINT LEGISLATIVE COMMITTEE ON TAXATION
APPENDIX A IV 2 Concluded
251
COUNTIES
Total assessed
value of personal
property,
1914
Assessed value
of personal
property, not
taxable locally
for State
purposes, 1914
Schuyler
$315,611
$171 651
Seneca
865,825
427 100
Steuben
2,941,109
1 559 799
Suffolk
4 427 854
2 293 729
SullivRn
628 502
500 689
Tioga
1,201,814
807 974
Tompkins
1,871,486
1,012 886
Ulster
2,924,144
2,421,074
Warren
1 894,593
1 444 598
Washington
2,092,694
1 358 669
W^ayne . .
- 1,783,345
1;201 880
Westchester
12,230,281
4,211,609
Wyoming
1,408,551
688,268
Yates
922,920
484,390
Total
$924,149,875
$485,987,900
* Report of the New York State Board of Tax Commissioners, 1914, page 547.
252
STATE or NEW YORK
APPENDIX A V 1
TABLE SHOWING THE PERCENTAGE OF TENTATIVE PERSONAL
PROPERTY ASSESSMENT RETAINED ON BOOK IN BOROUGHS OF
MANHATTAN, BRONX, BROOKLYN, RICHMOND AND QUEENS,
FROM 1907 TO 1914
MANHATTAN TAXES OF 1907
Tentative
assessment on
annual record
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident corporations .
$1 171 685,000
$1 118 643 620
95 4
$53 041,380
4 5
Nonresident corporations
Resident personal
219,152,500
554 511,305
192,044,325
366 033 222
87.6
66
27,108,175
188 478 083
12.3
33 9
Nonresident personal
Estates .
223,229,615
356,505,905
157,518,105
258,190,895
70.5
72 4
65,711,510
98,315,010
29.4
27 5
Totals
$2,525,084,325
$2,092 430,167
82 8
$432,654,158
17 1
MANHATTAN TAXES OF 1908
Resident corporations
$133 829 525
$79 871 030
59 6
$53 958 495
40 3
Nonresident corporations
Resident personal
58,723,800
469 401 150
31,745,000
331 294 298
54.0
70 5
26 ,978, '800
138 106 852
S.1
29 4
Nonresident personal
Estates
136,240,955
287 984 880
108,091,600
212 808 255
79.3
73 8
28,149,355
75,176 625
20.8
26 1
Tax Law, Sec. 7, Subdv. 2
34,152,150
28,711,645
84.0
5,440,505
15.9
Totals
$1 120 332 460
$792 521 828
70 7
$327 810 632
29 2
MANHATTAN TAXES OF 1909
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident corporations
Nonresident corporations. . .
Resident personal
Nonresident personal
Estates
Tax Law, Sec. 7, Subdv. 2..
$135,443,200
55,924,750
370,695,507
77,423,975
278,962,905
18,581,255
$1,589,200
108,275
1,324,075
136,615
7,610,000
383,000
$70,467,325
26,477,150
241,373,523
52,231,695
211,360,570
14,069,860
51.4
47.2
64.8
67.3
73.7
74.1
$66,565,075
29,555,875
130,646,059
25,328,895
75,212,335
4,894,395
48.5
52.7
35.1
32.6
26.2
25.8
Totals
$937,031,592
$11,151 165
$615 980 123
64 9
$332 202 634
35
MANHATTAN TAXES OF 1910
Resident corporations ....
Nonresident corporations. .
Resident personal
Nonresident personal
Estates
Tax Law, Sec. 7, Subdv. 2.
Totals...
$127,801,800
47,218,600
407,801.322
86,024,045
282,887,810
7,252,895
$522,650
193,300
166,810
139,900
962,367
$56,797,250
20,749,950
291,311,331
67,262,955
223,408,430
3,411,100
44.2
43.7
71.4
78.0
78.7
47.0
$71,527,200
26,661,950
116,656,801
18,900,990
60,441,747
3,841,795
8:
28.5
21.9
21.2
52.9
$958,986,472
$1,985,027
$662,941,016
68.9
$298,030,483
31.0
JOINT LEGISLATIVE COMMITTEE ON TAXATION
253
APPENDIX AVI Continued
MANHATTAN TAXES OF 1911
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Percent
retained
on book
Resident corporations
Nonresident corporations. . .
Resident personal
Nonresident personal
Estates
Tax Law, Sec. 7, Subd. 2...
Totals
$118,129,600
30,344,500
299,469,091
27,401,215
178,368,250
4,272,295
$212,500
74,400
68,600
16,000
219,800
2,000
$43,720,500
6,049,600
182,202,944
12,612,215
122,896,040
705,700
37.0
19.9
60.8
46.0
68.9
16.5
$74,409,100
24,294,900
117,266,147
14,789,000
55,472,210
3,566,595
62.9
80.0
39.1
53.9
31.1
83.4
5657,984,951
$593,300
$368,186,999
55.9 $289,797,952
44.0
MANHATTAN TAXES OF 1912
Resident corporations
Nonresident corporations.. .
Resident personal
Nonresident personal
$124,989,300
37,959,000
267,603,527
19,755,050
135,804,695
3,939,595
$24,800
106,000
9,569,390
$48,505,500
12,188,450
142,139,360
6,005,030
99,600,905
144,800
38.8
32.1
53.1
30.3
73.3
3.6
$76,483,800
25,770,800
125,464,167
13,750,020
36,203,790
3,794,795
61 1
67.8
46.8
69.6
26.6
96.3
Estates
Tax Law, Sec. 7, Subd. 2...
Totals
11,800
348,000
$590,051,167
$10,059,990
$308,584,045
52.2
$281,467,122
47.7
Resident corporations ....
Nonresident corporations. .
Resident personal
Nonresident personal
Estates
Tax Law, Sec. 7, Subd. 2..
Totals
Resident corporations
Nonresident corporations. . .
Resident personal
MANE
$145,944,000
43,342,200
302,902,280
47,527,500
154,064,500
4,096,200
[ATTAN TA]
$170,000
22,200
404,300
4,300
348,900
27,000
tES OF 1913
$55,367,700
13,704,300
201,162,945
31,187,700
130,430,000
511,700
37.9
.31.6
66.4
65.6
84,6
12.4
$90,576,300
29,637,900
101,739,335
16,339,800
23,634,500
3,584,500
62.0
68.3
33.5
34.3
15.3
87.5
$697,876,680
$976,700
$432,364,345
61.9
$265,512,335
38.0
MAN
$153,216,900
34,872,000
260,727,120
38,600.200
131,308,700
4,100,900
[ATT AN TA
$76,400
109,000
271,200
11.000
556,400
27,200
XES OF 1914
$53,105,800
8,458,700
151,137,250
20,030.200
101,702,300
623,300
34.6 1
24.2
57.9
51.8
77.4
15.1
$100,111,100
26,413,300
109,589,870
18,570,000
29,606,400
3,477,600
65.3
75.7
42.0
48.1
22.5
84.8
Nonresident personal
Estates ...
Tax Law, Sec. 7, Subd. 2...
Totals. . . .
$622,825,820
$1,051,200
$335,057,550
53.7
$287,768,270
46.2
BRONX TAXES FOR 1907
Tentative
assessment on
annual record
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Percent
retained
on book
Personal
$29,611,697
3,294,025
36,347,450
$17,875,473
2,233,695
35,028,305
60.3
67.8
96.3
$11,736,224
1,060,330
1,319,345
39.6
32.1
3.6
Estates
Corporations <
Total
$69,253,172
$55,137,473
79.6
$14,115,699
20.3
BR
Resident personal
ONX TAXES
$24,518,688
. 3,511,116
3,932,790
FOR 1908
$15,553,540
2,308,642
2,560,730
63.4
65.7
65.1
$8,965,146
1,202,474
1,372,060
36.5
34.2
34.8
Estates
Resident corporations . .
Totals
$31,962,592
$20,422,912
63.9
$11,539,680
36.1
254
STATE OF NEW YORK
APPENDIX AVI Continued
BRONX TAXES OF 1909
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per ceni
retained
on book
Resident personal
Estates
$42,088,686
4,568,429
$117,455
$30,493,990
3,569,924
72.4
78 1
$11,594,696
998 505
27.5
21 8
Resident corporations
Nonresident corporations. . .
2,937,940
196,200
9,330
1,681,880
105,790
56.5
53.9
1,276,060
90 410
43.4
46
Totals
$49 791 255
$126 785
$35 831 584
71 9
$13 959 671
28
BRONX TAXES OF 1910
Resident personal
Estates
Resident corporations
Nonresident corporations.. .
Totals
$16,500,599
4,111,498
2,446,860
148,410
$11,047,284
3,247,563
1,137,120
58,850
66.9
78.9
46.4
39.6
$5,453,315
863,935
1,309,740
89,560
33
21
53.5
60.3
$23,207,367
$15,490,817
66.7
$7,716.550
$2,539,225
978,070
1,395,600
74,000
33.2
44.7
21.9
54.9
76.6
Resident personal
B
$5,678,475
4,461,235
2,541,300
96,500
RONX TAXE
$16,600
3,800
17,600
S OF 1911
$3,139,250
3,483,165
1,145,700
22,500
55.2
78.0
45
23.3
Estates
Resident corporations
Nonresident corporations.. .
Totals
$12,777,510
$38,000
$7,790,615
60.9
$4,986,895
39
BRONX TAXES OF 1912
Resident personal
$2,760,325
$665,710
24.1
$2,094,615
75.8
Estates
4,395,570
3,486,387
79.3
909,183
20 6
Resident corporations
2,548,400
1,034,600
40 6
1,513,800
59.4
Nonresident corporations
81 400
3 800
4 6
77 600
95.3
Totals
$9,785,695
$5,190,497
53
$4,595,198
46.9
Resident personal
Estates
Resident corporations ....
Nonresident corporations. .
Totals.
BRONX TAXES OF 1913
$5,200,115
3,980,183
2,665,500
146,000
$31,700
10,500
2,500
$2,850,790
3,070,848
923,100
53,000
54.8
77.1
34.6
36.3
$2,349,325
909,335
1,742,400
93,000
45.1
22.8
65.3
63.7
$11,991,798
$44,700
$6,897,738
57.5
$5,094,060
42.4
BRONX TAXES OF 1914
Resident personal
$7,793,600
$10,200
$5,305,300
68
$2,488,300
31.9
Estates .
4,448,900
4,100
3,451,600
77.5
997,300
22.4
2 896 400
738 400
25 4
2 158 000
74 5
Nonresident corporations. . .
127,000
2,000
9,400
7.4
117,600
92.6
Totals.
$15,265,900
$16,300
$9,504,700
62.2
$5,761,200
37.7
BROOKLYN -TAXES OF 1907
Tentative
assessment on
annual record
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Percent
retained
on book
Personal
$195 152,905
$124 213 130
63.6
$70,939,775
36.3
Estates
41,775,220
26,798,810
64.1
14,976,410
35.8
Resident corporations
201,565,300
195,619,368
97
5,945,932
2.9
Nonresident corporations
Nonresident individuals .
4,275,000
1,420,000
3,534,670
1,155,900
82.6
81.4
740,330
264,100
17.3
18.6
Totals
$444,188,425
$351,321,878
79
$92,866,547
20.9
JOINT LEGISLATIVE COMMITTEE ON TAXATION
255
APPENDIX AVI Continued
BROOKLYN TAXES OF 1908
Tentative
assessment on
annual record
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident personal
Estates
$192,343,855
42,117,955
$126,380,285
31,227,163
65.7
74.1
$65,963,570
10,890,792
34.2
25.8
11,716,750
5,887,580
50 2
5 829,170
49 7
Nonresident corporations
Tax Law Sec 7 Subd 2 . .
898,870
264,100
288,930
109,500
32.1
41.4
609,940
154,600
67.8
58.5
Totals
$247,341,530
$163,893,458
66.2
$83,448,072
33.7
BROOKLYN TAXES OF 1909
Tentative
assessment on
annual record
Additions
Canceled
Percent
canceled
Receiver's
book or final
assessment roll
Percent
retained
on book
Resident personal
Estates
$192,745,180
39,328,510
$221,535
$125,684,600
28,942,210
65.2
73.5
$67,060,580
10,386,300
34.7
26 4
Resident corporations
Nonresident corporations. .
Tax Law, Sec. 7, Subd. 2.
12,751,135
921,700
225,000
41,850
12,900
6,617,325
323,700
71,500
51.9
35.1
31.7
6,133,810
598,000
153,500
48.1
64.8
68.3
Totals
$245,971,525
$276,285
$161,639,335
65.7
$84,332,190
34.2
Resident personal
Estates
Resident corporations ....
Nonresident corporations. .
Tax Law, Sec. 7, Subd. 2.
Totals.
Resident personal ,
Estates ,
Resident corporations
Nonresident corporations. . ,
Tax Law, Sec. 7, Subd. 2.,
Totals. . .
Resident personal
Estates
Resident corporations
Nonresident corporations. .
Tax Law, Sec. 7, Subd. 2.
Totals.
Resident personal .
Resident corporations
Nonresident corporations. .
Tax Law, Sec. 7, Subd. 2.
Totals. . .
BROOKLYN TAXES OF 1910
$196,524,830
39,264,415
13,650,550
1,061,250
$62,100
98,300
210,800
$152,910,810
30,877,960
6,909,550
523,400
77.8
78.6
50.6
49 3
$43,614,020
8,386,455
6,741,000
537 850
22.1
21.3
49.3
50 g
153 500
101 000
65 8
52 500
34 2
$250,654,545
$371,200
$191,322,720
76.3
$59,331,825
23.6
BROOKLYN TAXES OF 1911
$106,895,800
38,905,805
10,533,150
811,500
$18,050
2,500
105,400
$67,309,455
30,652,934
3,151,400
219,800
62.9
78.7
29.9
27
$39,586,345
8,252,871
7,381,700
591,700
37
21.2
70
72 9
52,500
9,500
18.1
43,000
81.9
$157,198,705
$125.950
$101,343.089
64.4
$55,855.616
35.5
BRO(
$90,173,995
38,084,771
11,362,100
731,800
45,000
DKLYN TAX
$15,850
500
25,800
ES OF 1912
$56,568,700
30,869,181
4,095,400
110,400
62.7
81
36
15
$33,605,295
7,215,590
7,266,700
621,400
45,000
37.2
18.9
63.9
84.9
100
$140,397,666
$42,150
$91,643,681
65.2
$48,753,985
34.7
BRO<
$63,190,195
37,708,890
13,351,100
1,228,000
45,000
DKLYN TAX
$64,000
300,000
16,300
45,000
ES OF 1913
$32,671,840
31,265,595
5,152,000
562,200
51.6
82.2
38.5
44.1
$30,582,355
6,743,315
8,215,400
710,800
45,000
48.3
17.7
61.4
55.8
100
$115,523,185
$425,300
$69,651,615
60
$46,296,870
39.9
256
STATE OF NEW YORK
APPENDIX AVI Continued
BROOKLYN TAXES OF 1914
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident personal
Estates
$63,975,710
38,740,340
$26,250
3,200
$40,776,235
31 945 350
63.7
82 4
$23,199,475
6 794,990
36.2
17 5
Resident corporations
Nonresident corporations. . .
Tax Law, Sec. 7, Subd. 2..
13,809,000
856,900
45,000
15,000
1,900
5,231,400
167,900
10,000
37.8
19.5
22.2
8,577,600
689,000
35,000
62.1
80.4
77.7
Totals
$117,426,950
$46,350
$78,130,885
66.5
$39,296,065
33.4
RICHMOND TAXES OF 1907
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Personal . . .
$7,799,950
$4,939,890
63 3
$2,860,060
36.6
Estates
1 279,350
414 315
32 3
865 035
67 6
Corporations . ...
10,210,000
9,872,890
96 7
337,110
3.3
Totals
$19,289,300
$15,227,095
78.9
$4,062,205
21
Resident personal
RICE
$4,873,000
[MOND TAX
ES OF 1908
$2,755,055
724,128
358,370
56.5
53.6
52.5
$2,117,945
626,272
323,180
43.4
46.3
47.4
Estates
1,350,400
681,550
Resident corporations
Totals
$6,904,950
$3,837,553
55.5
$3,067,397
44.4
RICHMOND TAXES OF 1909
Resident personal
Estates
$4,756,500
1,720,750
$1,900
$2,805,815
863,075
58.9
50 1
$1,950,685
857,675
41
49.8
599 500
254 700
42 4
344 800
57 5
Totals
$7,076,750
$1,900
$3,923,590
55.4
$3,153,160
44.5
RICHMOND TAXES OF 1910
Resident personal
$22,530,275
$8,375
$18,409,500
81.6
$4,129,150
18.3
Estates
4,298,500
3 866,120
89.9
432,380
10
Resident corporations
1,464,950
23,000
22,200
693,200
20,000
46.6
86.9
793,950
3,000
53.3
13
Totals
$28,316,725
$30,575
$22,988,820
81.1
$5,358,480
18.9
RICHMOND TAXES OF 1911
Resident personal
Resident corporations
Nonresident corporations. .
Totals...
$2,000,740
2,207,450
549,500
60 000
$4,000
2,500
1,500
$985,200
1,664,705
233,000
$4,817,690
$8,000
$2,882,905
49.1
75.3
42.2
0.0
59.7
$1,019,540
545,245
318,000
60,000
$1,942,783
Resident personal
Estates
Resident corporations
Nonresident corporations. .
Totals. . .
RICB
$1,161,200
1,909,835
500,500
65,000
MOND TAX
ES OF 1912
$286,500
1,454,050
141,000
4,500
24.6
76.1
28.1
6.9
$874,700
455,785
359,500
60,500
::::::::::::
$3,636,535
$1,886,050
51.8
$1,750,485
JOINT LEGISLATIVE COMMITTEE ON TAXATION
257
APPENDIX AVI Continued
RICHMOND TAXES OF 1913
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident personal
Estates
$2,240,400
2,921,485
$1,395,650
2,390,010
37.7
81 8
$844,750
531 475
62.2
18 1
Resident corporations
Nonresident corporations. . .
447,500
72,500
111,500
7,500
24.9
10.3
336,000
65,000
75
89.6
Totals
$5,681,885
$3,904,660
68.7
$1,777,225
31.2
RICHMOND TAXES OF 1914
Resident personal
$1,368,450
$650,150
47.5
$718,300
52 4
Estates
1 390 275
977 700
70 3
412 575
29 6
Resident corporations
Nonresident corporations.
465,000
60,000
101,000
21.7
364,000
60,000
78.2
100
Totals
$3,283,725
$1,728,850
52.6
$1,554,875
47.3
QUEENS TAXES OF 1907
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Personal
$16,979,400
$8,449,700
49.7
$8,529,700
50.2
Estates
5,382,323
3,866,876
71.8
1,515,447
28 1
Corporations
40 303 150
39,157,035
97 1
1,146,115
2 8
Totals
$62,664 873
$51,473,611
82.1
$11,191,262
17.8
QUEENS TAXES OF 1908
Resident personal
Estates
Resident corporations . . .
Totals...
$13,912,325
2,993,547
$5,935,505
1,901,272
42.6
63.5
$7,976,820
1,092,275
57.3
36.4
2,262,500
1,422,765
62.8
839,735
37.1
$19,168,372
$9,259,542
48.3
$9,908,830
51.6
QUEENS TAXES OF 1909
lesident personal
Estates
lesident corporations. . .
Nonresident corporations.
Totals...
$15,650,375
6,088,800
2,044,800
20,000
$735,275
2,550,000
73,925
$8,151.500
4,783,450
1,175,925
20,000
52
78.5
57.5
100
$7,498,875
1,305,350
868,975
47.9
21.4
42.5
0.0
$23,804,075
$3,359,200
$14,130,875
59.3
$9,673,200
40.6
QUEENS TAXES OF 1910
lesident personal
Cstates
lesident corporations
Nonresident corporations.
Totals. . .
$22,538,650
4,298,500
$8,375
$18,409,500
3,866,120
81.6
89.9
$4,129,150
432,380
18.3
10
1,487.150
23 000
22,200
693,200
20,000
46.6
86.9
793,950
3,000
53.3
13
$28,347,300
$30,575
$22,988,820
81.1
$5,358,480
18.9
QUEENS TAXES OF 1911
lesident personal
Estates
leaident corporations. . .
Nonresident corporations
Totals...
$17,152,000
3 085 880
$13,300
$13,470,425
2,500,280
78.5
81
$3,681,575
585,600
21.4
18 9
1,502,200
129,000
20,000
500,500
58,000
33.3
44.9
1,001,700
71,000
66.6
55
$21,869,080
$33,300
$16,529,205
75.5
$5,339,875
24.4
258
STATE OF NEW YORK
APPENDIX A V 1 Concluded
QUEENS TAXES OF 1912
Tentative
assessment on
annual record
Additions
Canceled
Per cent
canceled
Receiver's
book or final
assessment roll
Per cent
retained
on book
Resident personal
$10,732,250
$1,000
$6,752,500
62.9
$3,980,750
37
Estates
2,680,000
1,400
1,596,700
59.5
1,085,300
40.4
Resident corporations
Nonresident corporations.. .
1,807,000
146,000
14,500
616,800
20,000
33.8
13.7
, 1,204,700
126,000
66.1
86.3
Totals
$15,385,850
$16,900
$8,986,000
58.4
$6,390,750
41.5
QUEENS TAXES OF 1913
Resident personal
Estates
$13,953,700
6,230,300
$1,800
$9,562,300
5,48$, 050
68.5
88
$4,391,400
744,250
31.4
11.9
Resident corporations
1,953,800
190 000
1,800
474,600
64,000
24.2
33.6
1,479,200
126,000
75.7
66 3
Totals
$22 327 800
$3 600
$15,586,950
69 8
$6,740,850
30.1
QUEENS TAXES OF 1914
Resident personal
Estates.
Resident corporations .
$14,078,200
3,208,850
2,257,000
$8,400
38,600
$10,706,100
2,445,100
627,700
76
76.2
27.8
$3,372,100
763,750
1,629,300
23.9
23.8
72.1
150 000
150,000
100
Totals
$19 694 050
$47,000
$13,778,900
' 69.9
$5,915,150
30
APPENDIX A V 2
SUMMARY OF MANHATTAN PERSONAL PROPERTY ASSESSMENTS, 1907
TO 1914
YEAR
Tentative
assessment
Amount
canceled
Per cent
canceled
Final
assessment
roll
Per cent
retained
1907
$2 525,084,325
$2,092,430,167
82 8
$432,654,158
17.1
1908
1,120,332,460
792,521,828
70.7
327,810,632
29.2
1909
948,182,757
615,980,123
64.9
332,202,634
35.0
1910
960,971,499
660,941,016
68.9
298,030,483
31.0
1911
657,984,951
368,186,999
55.9
289,797,952
44.0
1912
590,051,167
308,584,045
52.2
281,467,122
47.0
1913
697,876,680
452,364,345
61.9
265,512,335
38.0
1914
622,825,820
335,057,550
53.8
287,768,270
46.2
JOINT LEGISLATIVE COMMITTEE ON TAXATION
259
APPENDIX A VI 1
TABLE SHOWING AMOUNT OF PERSONAL PROPERTY ASSESSMENT,
AMOUNT OF TOTAL PROPERTY ASSESSMENT AND PERCENTAGE PER-
SONAL ASSESSMENT Is OF TOTAL ASSESSMENT, FOR THE CITIES
AND TOWNS OF THE STATE. ClTIES AND TOWNS ARE ARRANGED
ACCORDING TO THE PERCENTAGE OF PERSONALTY TO TOTAL AS-
SESSMENT, THE HIGHEST PERCENTAGE RANKING FIRST
ClTY
Personal
property
assessment
value
Total
property
assessment
value
Percentage
former
is of
latter
Rank of
city
Johnstown
$1,237,317
$4,982,681
24.5
1
Hudson
1,305,277
6,321,686
20.7
2
Ogdensburg
1,440,149
5,635,896
20.3
3
Plattsburg
908 461
4,461,271
20 3
4
Norwich
876,217
4,378,823
19.9
5
Port Jervis . . .
521,091
2,669,271
19.5
6
Utica
10,777,686
57,678,518
18.7
7
Olean
2,088,803
11,513,711
18
8
Gloversville
Geneva
1,834,324
1,502,500
10,127,999
10,503,701
17.8
14.3
9
10
Little Falls
1,139,134
7,897,409
14.1
11
Oswego
1,821,411
13,415,483
13.4
12
Rome
1,470,947
11,271,515
13
13
Middletown
172,163
1,311,334
13
14
Oneonta
787,100
6,268,972
12.8
15
Newburgh
1,802,122
14,204,094
12.7
16
Beacon
967,348
7,468,300
12.6
17
Glens Falls
1,398,400
10,462,925
12.5
18
Hornell ...
918,726
7,378,278
12.3
19
Canandaigua
607,509
4,929,187
12.2
20
Watertown
2,060,650
16,853,970
12.2
21
Batavia
1,298,537
9,939,843
12.1
22
Albany
13,883,272
109,857,472
11.9
23
Ithaca . . ...
1,337,675
11,181,732
11.7
24
Amsterdam
1,600,277
13,457,056
10.7
25
Oneida
Jamestown
524,908
1,975,388
5,064,149
18,800,052
10.3
10.1
26
27
Kingston
1,649,235
16,731,354
9.6
28
Poughkeepsie . . .
2,614,027
27,032,935
9.6
29
Trov
5,637,669
58,240,189
9.6
30
Tonawanda
431,138
5,254,320
8.2
31
Lockport
937,644
11,771,573
7.9
32
North Tonawanda
770,932
9,795,407
7.8
33
Cohoes . . .
1,101,862
13,248,573
7.7
34
Buffalo
26,199,127
365,053,595
7.1
35
Fulton
458,140
6,463,628
7.0
36
Binghamton
Dunkirk
2,656,576
699,765
34,703,037
10,165,927
6.9
6.8
37
38
Rochester
14,842,409
220,669,819
6.7
39
Syracuse
9,771,210
146,898,597
6.7
40
Auburn. .
1,508,813
22,539,280
6.6
41
260
STATE OF NEW YORK
APPENDIX A VI 1 Concluded
CITY
Personal
property
assessment
value
Total
property
assessment
value
Percentage
former
is of
latter
Rank of
city
Elmira
$1,680,700
$26,857,606
6.0
42
Schen.6ct8.dy
3 081 392
58,264,632
5.3
43
Corning
442 284
9,272,522
4.7
44
Cortland
867,599
19,259,265
4.5
45
Salamanca
206,656
4,826,842
4.2
46
Rensselaer
171,089
5,935,643
2.9
47
Niagara Falls
1,157,684
37,300,349
2.9
48
Yonkers
3,351,672
117,432,358
2.9
49
Watervliet
157,890
5,850,392
2.7
50
Lackawanna
115,450
7,568,669
1.4
51
New Rochelle
394,661
41,231,942
.95
52
Mount Vernon
342,780
39,921,272
.86
53
APPENDIX A VI 2
TABLE SHOWING NUMBER OF CITIES, THE PERSONAL PROPERTY
ASSESSMENT OF WHICH is LESS THAN ONE PER CENT, THREE
PER CENT, ETC., RESPECTIVELY, OF THE TOTAL PROPERTY
ASSESSMENT.
1. Number of cities the personal property assessment of which is
less than 1 per cent of total assessment ....
2. Ditto from 1 to 3 per cent
3. Ditto from 4 to 6 per cent
4. Ditto from 6 to 8 per cent
5. Ditto from 8 to 11 per cent
6. Ditto from 11 to 13 per cent
7. Ditto from 13 to 18 per cent
8. Ditto from 18 to 20 per cent
9. Ditto from 20 to 21 per cent
10. Ditto greater than 21 per cent
2
5
5
10
7
12
5
3
3
1
Total.
53
JOINT LEGISLATIVE COMMITTEE ON TAXATION
261
APPENDIX B I
PER CAPITA COST OF STATE GOVERNMENT IN THE STATES, 1912'*
Per
State capita
Alabama $2 77
Arizona 6 20
Arkansas 1 87
California 7 98
Colorado 3 46
Connecticut 5 58
Delaware 3 15
District of Columbia 35 45
Florida 3 41
Georgia 1 96
Idaho 7 81
Illinois 2 21
Indiana 2 92
Iowa 2 69
Kansas 2 96
Kentucky 3 33
Louisiana 3 92
Maine 5 84
Maryland 5 27
Massachusetts 7 02
Michigan 4 30
Minnesota 6 66
Mississippi 2 29
Missouri 2 27
Montana . . .... 6 66
Per
State capita
Nebraska $2 90
Nevada 10 45
New Hampshire 3 41
New Jersey 4 88
New Mexico 3 09
New York 693
North Carolina 1 46
North Dakota 4 84
Ohio 2 63
Oklahoma 1 89
Oregon 4 17
Pennsylvania 3 71
Rhode Island 6 32
South Carolina 1 46
South Dakota 4 60
Tennessee 1 84
Texas 2 97
Utah 6 09
Vermont 6 51
Virginia 3 22
Washington 4 47
West Virginia 2 14
Wisconsin 5 27
Wyoming 5 20
Abstract of special bulletin?, Wealth, Debt and Taxation, 1913, pa?os 44-50.
262
STATE OF NEW YORK
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265
APPENDIX B II 4
PEE, CAPITA MUNICIPAL, INDEBTEDNESS FOB MUNICIPAL PURPOSES
(LESS SINKING FUND ASSETS) OF THE REMAINING CITIES
CITY
1913
1902
1890
Batavia
$35 33
$1 96
$4 85
Cohoes.
32 18
30 73
11 30
Corning
33 98
18 88
9 45
Cortland
58 03
32 71
3 75
Dunkirk
24 48
28 93
14 31
Fulton
46 78
57 78
38
Geneva
36 56
39 93
Glens Falls
24 42
29 78
15 25
Gloversville
34 97
19 81
11 00
Hornell
39 47
40 63
Hudson
30 66
28 31
28 31
Ithaca
96 98
20 96
4 05
Jamestown
20 75
25 68
7 79
Kingston . .
37 91
43 29
21 59
Lackawanna
27 39
Little Falls
30 51
39 93
34 73
Lockport
37 33
13 59
15 40
Middletown
30 99
33 30
12 81
Newburgh
44 00
25 63
14 47
North Tonawanda . ....
49 52
75 27
Ogdensburg
27 22
16 11
10 80
Olean
30 86
20 62
13 79
Oneida
28 65
35 12
5 10
Oneonta.
33 69
14 55
6 86
Ossining
72 78
23 91
24 06
Oswego. . .
31 85
47 22
39 83
Peekskill
53 11
26 57
14 97
Plattsburg
28 86
25 35
27 51
Port Chester
53 45
15 35
14 41
Port Jervis
14 24
10 03
Poughkeepsie
67 36
72 60
79 74
Rensselaer ... . '.
30 57
34 04
13 60
Rome
42 44
33 84
10 67
Saratoga Springs
40 26
36 34
25 97
Tonawanda
60 55
56 88
17 63
Watertown
41 15
33 78
15 48
Watervliet
23 65
22 89
15 19
White Plains
140 47
155 55
25 48
SUMMARY
(The above includes all the remaining cities except Geneva, Hornell, Lackawanna
North Tonawanda and Port Jervis, for which data is lacking for certain years.)
Average for 1913 ... $43 . 21878
Average for 1902 33.999
Average for 1890 17.2887
Per cent increase for 1913 over 1890
Per ecnt increase for 1902 over 1890.
149.98
96.65
266 STATE OF NEW YORK
APPENDIX B II 5
PEE CAPITA TAXES FOR MUNICIPAL PURPOSES LEVIED ON GEN-
ERAL PROPERTY IN REMAINING CITIES
CITIES 1913
Batavia $11 85
Cohoes 7 89
Corning : 8 09
Cortland 9 95
Dunkirk 7 98
Fulton 10 07
Geneva 10 42
Glens Falls 10 48
Gloversville 8 76
Hornell 10 47
Hudson 7 55
Ithaca 14 12
Jamestown 11 68
Kingston 11 57
Lackawanna 8 69
Little Falls 6 64
Lockport 14 17
Middletown 11 20
Newburgh 12 29
North Tonawanda 13 11
Ogdensburg 5 46
Olean 10 04
Oneida 8 79
Oneonta 9 47
Ossining 12 03
Oswego 12 31
Peekskill 9 55
Plattsburg 7 15
Port Chester 14 93
Port Jervis 9 75
Poughkeepsie 13 35
Rensselaer 9 65
Rome 8 36
Saratoga Springs 15 34
Tonawanda 13 88
Watertown 12 72
Watervliet 8 45
White Plains. . 21 12
NOTE. Data for the years 1890 to 1912 is lacking.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 267
APPENDIX B II 6
PER CAPITA EXPENDITURES FOR MUNICIPAL PURPOSES IN REMAIN-
ING CITIES
Cities 1913
Batavia $15 78
Cohoes 11 79
Corning 11 42
Cortland 15 09
Dunkirk 15 03
Fulton 28 34
Geneva 18 75
Glens Falls 14 38
Gloversville 14 50
Hornell , 20 49
Hudson 11 31
Ithaca \ . 20 47
Jamestown 13 17
Kingston 15 71
Lackawanna 19 51
Little Falls 13 93
Lockport 19 29
Middletown 19 46
Newburgh 19 63
North Tonawanda 19 62
Ogdensburg 15 39
Olean 18 51
Oneida 14 58
Oneonta 13 26
Ossining 20 31
Oswego 14 64
Peekskill 14 91
Plattsburg 14 95
Port Chester 18 68
Port Jervis 12 89
Poughkeepsie 30 09
Rensselaer 13 90
Rome 13 43
Saratoga Springs f 18 98
Tonawanda 18 13
Watertown ' 17 13
Watervliet 14 60
White Plains 30 16
NOTE. Data for the years 1890 to 1912 is lacking.
268
STATE OF NEW YOEK
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JOINT LEGISLATIVE COMMITTEE ON TAXATION
271
APPENDIX D II
DOMESTIC CORPORATIONS ASSESSED UNDER SECTION 12 OF THE TAX
LAW, IN TOWN OF ESOPUS, COUNTY OF ULSTER, WITH THE
AMOUNT OF CAPITAL STOCK AS OBTAINED IN THE OFFICE OF THE
SECRETARY OF STATE, AND THE PERSONAL PROPERTY ASSESS-
MENTS PLACED ON SUCH DOMESTIC CORPORATIONS BY THE ASSESS-
ORS OF THE TOWN
Capital stock
E 100 $5,000
E 101 10,000,000
E 102 300,000
E 103 30,000
E 104 150,000
E 105 150,000
E 106 201,870
E 107 100,000
E108 200,000
E 109 100,000
E 110 40,000
Bill 15,000
E 112 30,000
E 113 200,000
E 114 300,000
E 115 25,000
E 116 120,000
E 117 200,000
E 118 20,000
E 119 1,000,000
E 120 100,000
E121 250,000
E 122 50,000
E 123 50,000
E 124 85,000
E125 1,000,000
E 126 400,000
E127 5,500,000
E 128 160,000
E129 1,500,000
E130 5,000,000
E131 150,000
E 132 1,200,000
E 134 200,000
E135 150,000
E 136 100,000
E137.. 100,000
Assessment
under
Section 12
$500
1,800
1,500
400
800
3,000
800
800
500
500
500
300
500
4,000
400
400
500
300
300
8,000
800
800
2,000
1,000
1,500
1,000
1,000
2,000
250
500
500
500
500
500
000
300
1,000
272 STATE OF NEW YORK
APPENDIX D II Concluded
under
Capital stock Section 12
E 138 $30,000 $500
E 139 500 500
E 140 100,000 500
E 141 350,000 1,200
E 142 100,000 500
E 143 500,000 1,500
E 144 150,000 1,000
E 145 10,000 500
E 146 250,000 1,000
E 147 150,000 300
E 148 200,000 750
E 149 135,000 800
E 150 100,000 200
E 151 2,000,000 1,500
$33,257,370 $60,700
SUMMARY OF ABOVE TABLE
Number of corporations 51
Aggregate capital stock $33,257,370
Aggregate assessment $60,700
Aggregate assessment as per cent of aggregate capital stock . 18%
or less than
1/5 of 1%
JOINT LEGISLATIVE COMMITTEE ON TAXATION
273
APPENDIX D III
DOMESTIC CORPORATIONS ASSESSED UNDER SECTION 12 OF THE TAX
LAW, IN TOWN OF WASHINGTON, COUNTY OF DUTCHESS, WITH
THE AMOUNT OF CAPITAL STOCK AS OBTAINED IN THE OFFICE
OF THE SECRETARY OF STATE, AND THE PERSONAL PROPERTY
ASSESSMENT PLACED ON SUCH DOMESTIC CORPORATIONS BY
THE ASSESSORS OF THE TOWN
Assessment
Designation of
under
corporation
Capital stock
Section 12
D 101
$2,000,000
$100,000
D 102
50,000
1,000
D 103
120,000
3,000
D 104
16,000,000
50,000
D 105
1,000
500
D 106
17,500,000
150,000
D 107
300,000
500
D 108 :...
100,000
5,000
D 109
1,000,000
5,000
D 110
50,000
2,500
D 111
30,000
1,000
D 112
10,000
500
D 113
150,000
1,000
D 114
50,000
1,000
D 115
1,000,000
50,000
D 116
100,000
1,000
D 117
100,000
1,000
D 118
No record
2,000
D 119
1,750,000
30,000
D 120
250,000
5,000
D 121
1,000,000
1,000
D 122
250,000
500
D 123
200,000
5,000
D 124
500,000
500
D 125
1,500,000
500
D 126
100,000
1,000
D 127
50,000
1,000
D 128
180,000
3,000
D 129
i 100,000
10,000
D 130
** 25,000
500
D 131
50,000
1,000
D 132
400,000
1,000
D 133
1,200,000
500
D 134
1,125,000
500
D 135
1,500,000
15,000
D 136
100,000
10,000
D 137
500,000
3,000
274
STATE OF NEW YORK
APPENDIX D III Concluded
Designation of
corporation
D 138
D 139
D 140
D 141
D 142
D 143...
Capital stock
$400,000
2,000,000
1,000
60,000
400,000
100,000
Assessment
under
Section 12
$10,000
500
1,000
1,000
500
500
SUMMARY
Number of corporations 43
Aggregate capital stock $52,302,000
Aggregate assessment $477 , 500
Aggregate assessment as per cent of capital stock . 91%
or less
than 1%
JOINT LEGISLATIVE COMMITTEE ON TAXATION 275
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APPENDIX D VI 1
BONDED DEBT OF THIRTY-SIX DOMESTIC MANUFACTURING CORPORA-
TIONS TAKEN AT EANDOM
Designation of
Bonded
Capital stock
corporation
debt*
outstanding
B.D. 1
$2,000,000
$3,896,000
B. D. 2
433,000
500,000
B.D. 3
3,164,000
9,325,000
B.D. 4
12,067,500
101,485,700
B.D. 5
500,000
500,000
B.D. 6
17,426,234
20,359,000
B.D. 7
.21,399,834
39,849,500
B. D. 8
640,000
789,500
B.D. 9
3,414,500
4,907,000
B.D. 10
41,313,000
34,756,000
B.D. 11
7,743,728
10,000,000
B.D. 12
375,000
500,000
B.D. 13
1,785,000
15,000,000
B.D. 14
822,000
4,000,000
B.D. 15
851,612
500,000
B.D. 16
125,000
500,000
B.D. 17
3,800,000
2,500,000
B.D. 18
3,000,000
7,924,700
B.D. 19
1,038,277
2,000,000
B.D. 20
600,000
600,000
B.D. 21
95,000
328,300
B.D. 22
11,335,100
6,000,000
B.D. 23
500,000
500,000
B. D. 24
614,550
3,135,161
B.D. 25
4,000,000
15,000,000
B.D. 26
225,000
600,000
B. D. 27
2,765,000
1,000,000
B.D. 28
2,080,000
6,800,000
B.D. 29
740,200
2,300,000
B.D. 30
1,497,963
1,600,000
B.D. 31
1,500,000
1,250,000
B. D. 32
5,123,350
8,554,425
B.D. 33
1,500,000
1,000,000
B.D. 34
6,850,000
2,410,000
B.D. 35
100,000
1,011,000
B.D. 36
273,048
571,000
SUMMARY
Aggregate bonded debt
$161,697,896
Aggregate capital stock outstanding
311,952,286
Bonded debt as per cent of capital stock
51.8%
In some cases notes payable are included.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
283
APPENDIX D VI 2
BONDED DEBT OF THIRTY-EIGHT DOMESTIC MERCANTILE AND MIS-
CELLANEOUS CORPORATIONS SELECTED
Designation of
Bonded
Capital stock
corporation
debt*
outstanding
B. M. 1
$2,700,000
$5,000,000
B. M. 2
19,593,900
10,084,00
B. M. 3
3,550,000
4,000,000
B. M. 4
2,500,000
2,000,000
B. M. 5
5,000,000
5,000,000
B. M. 6
700,000
750,000
B. M. 7
7,540,072
10,457,200
B. M. 8
2,969,500
3,665,800
B. M. 9
1,900,000
1,357,500
B. M. 10
2,000,000
2,000,000
B. M. 11
4,027,000
3,500,000
B. M. 12
10,000,000
2,000,000
B. M. 13
9,200,000
6,000,000
B. M. 14
1,500,000
2,942,750
B. M. 15
1,100,000
9,800,000
B. M. 16
4,193,000
3,000,000
B. M. 17
1,004,871
740,200
B. M. 18
3,025,000
22,755,000
B. M. 19
4,809,958
2,000,000
B. M. 20
2,960,141
248,103
B. M. 21
1,200,000
1,000,000
B. M. 22
2,720,000
2,250,000
B. M. 23
954,633
1,000,000
B. M. 24
446,500
300,000
B. M. 25
3,000,000
1,700,000
B. M. 26
1,857,781
6,900,000
B. M. 27
352,000
375,000
B. M. 28
3,700,950
10,500,000
B. M. 29
750,000
1,000,000
B. M. 30
380,375
565,600
B. M. 31
75,750
198,500
B. M. 32
156,500
249,600
B. M. 33
4,797,215
7,395,100
B. M. 34...
769,000
1,180,400
B. M. 35
487,500
400,000
B. M. 36
3,649,871
6,000,000
B.M.37
220,000
900,000
B. M. 38
2,277,690
3,977,000
SUMMARY
Aggregate bonded debt
$118,069,207
Aggregate capital stock outstanding
143,191,753
Bonded debt as per cent of capital stock
82.4%
* In some cases notes payable are included.
284 STATE OF NEW YORK
APPENDIX D VII
SELECTED LIST OF DOMESTIC CORPORATIONS WITH GOOD WILL OF
GREAT VALUE
Designation of
Capital stock
corporation
Good will
outstanding
Total assets
G. W. 1
$15,000,000
$19,300,000
$21,623,840
G. W. 2
600,000
1,000,000
2,115,563
G. W. 3
7,500,000
9,800,000
12,202,852
G. W. 4
5,664,000
9,145,000
14,081,332
G. W. 5
1,000,000
3,000,000
3,937,286
G. W. 6
5,000,000
7,850,000
9,080,957
G. W. 7
15,525,310
22,755,000
31,314,167
G. W. 8
12,000,000
17,000,000
19,084,009
G. W. 9
7,451,448
9,875,000
10,446,802
G. W. 10
500,000
945,000
1,461,654
G. W. 11
7,000,000
10,000,000
10,809,428
G. W. 12
3,874,965
5,800,000
6,002,213
G. W. 13
7,499,600
10,500,000
14,686,162
G. W. 14
3,000,000
7,395,100
12,960,426
G. W. 15
600,000
1,000,000
1,413,786
G. W. 16
4,000,000
6,800,000
8,994,505
G. W. 17
50,000,000
64,000,000
74,444,730
G. W. 18
878,792
1,010,000
1,047,131
G. W. 19
1,080,258
900,000
1,158,728
G. W. 20
386,138
3,034,070
3,651,142
G. W. 21
2,637,309
3,450,000
4,541,708
G. W. 22
3,023,983
8,000,000
10,045,729
G. W. 23
1,524,752
1,000,000
3,937,911
G. W. 24
4,966,365
9,900,000
14,144,547
G. W. 25
9,786,065
14,647,200
19,236,468
G. W. 26
18,000,000
26,000,000
21,936,638
G. W. 27
17,947,142
10,457,200
21,511,644
G. W. 28
1,794,342
2,075,000
3,109,241
G. W. 29
8,025,000
10,250,500
14,980,831
G. W. 30
2,800,000
3,656,526
G. W. 31
1,575,000
7,480,000
8,308,073
G. W. 32
500,000
900,000
2,006,331
G. W. 33
3,000,000
5,000,000
7,188,292
G. W. 34
5,100,000
6,200,000
7,270,292
G. W. 35
58,380,902
89,100,000
94,936,954
SUMMARY
Aggregate good will. . .
$287,651,371
Aggregate capital stock
outstanding
405,569,070
Aggregate total assets. .
497,327,898
Aggregate good will as
per cent of capital stock
70.9%
Aggregate good will as
per cent of total assets
57.8%
JOINT LEGISLATIVE COMMITTEE ON TAXATION
285
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JOINT LEGISLATIVE COMMITTEE ON TAXATION
287
APPENDIX E IV
TABLE SHOWING THE AMOUNT OF THE $38,000,000 INCOME TAX
THAT WOULD BE RETURNED BY THE STATE TO EACH COUNTY,
IF THIS TAX WERE APPORTIONED TO EACH COUNTY ACCORD-
ING TO THE RATIO OF THE ASSESSED VALUE OF REAL ESTATE
IN THE COUNTY TO THE AGGREGATE ASSESSED VALUE OF
REAL ESTATE IN ALL THE COUNTIES.
COUNTIES
Assessed value
of real estate,
including village
property, real
estate of cor-
porations and
special fran-
chises
Percentage
such assess-
ment for each
county is
of the entire
assessment
for the State
Amount of the
$38,000,000
yield of the
income tax
allocated to
each county
Albany
$135,306,349
Per cent
1 2
$456 000
21 229 483
19
72 200
50 121 967
44
16 720
Cattaraugus
35,174 263
31
117 800
41 389 501
37
140 600
Chautauqua
61,185,310
54
205 200
Chemung
34,595,626
31
117 800
16 472 864
14
53 200
Clinton
10,018,340
08
30,400
26,561 393
23
87 400
Cortland
17 012 221
15
57 000
Delaware
15,738,848
14
53,200
66 010 836
59
224 200
Erie
407 595 886
3 65
1 387 000
Essex
14,851,302
13
49,400
Franklin
13,050 904
11
41 800
Fulton
16 456 624
14
53 200
Genesee
28,040,502
25
95,000
12 737,958
11
41,800
Hamilton
4,916,732
044
16,720
Herkimer . .
34,877,231
31
117,800
46 354 589
41
155,800
Lewis
10,970,233
0.09
34,200
Livingston . .
27,240,601
24
91,200
21,234 613
19
72,200
Monroe
Montgomery
271,783,213
29 , 857 , 687
2.43
26
923,400
98,800
105,222 041
94
357,200
New York (Greater) [including Bronx, New
York, Kings, Queens and Richmond coun-
ties]
8,049,859 912
72 22
27,443,600
Niagara
75,606,856
81,264,851
0.67
72
254,600
273,600
182 864 850
1 64
623,200
Ontario
35,792,695
0.32
121,600
53,978,477
48
182,400
28,078 172
25
95,000
Oswego
33,521,007
0.30
114,000
Otsego
24,256,890
0.21
79,800
Putnam
13,707,606
0.12
45,600
Rensselaer
83,081,895
0.74
281,200
Rockland
33,302,423
29
110,200
Saint Lawrence
45,787,133
0.41
155,800
Saratoga . . . .
28,178,422
0.25
95,000
64,953,520
0.58
220,400
Schoharie
11,724,504
0.10
38,000
Schuyler
6,723,745
0.06
22,800
17,078,374
15
57,000
Steuben
43,480,842
0.39
148,200
Suffolk
92,063,939
0.82
311,600
Sullivan . .
7,119,881
0.06
22,800
288
STATE OF NEW YORK
APPENDIX F IV Concluded
COUNTIES
Assessed value
of real estate,
including village
property, real
estate of cor-
porations and
special fran-
chises
Percentage
such assess-
ment for each
county is
of the entire
assessment
for the State
Amount of the
$38,000,000
yield of the
income tax
allocated to
each county
Tioga .
$13,860,147
Per cent
12
$45 600
Tompkins
20,641,257
18
68 400
Ulster
32,904,296
29
110 200
Warren
16,012 611
14
53 200
20,462,596
18
68 400
Wayne
32,654,979
29
110 200
Westchester
389,896,028
3 49
1 326 200
19,795,811
17
64 600
Yates
11,610,176
0.10
38 000
Total
$11,146,271,012
99,734
$37 898 920
.
JOINT LEGISLATIVE COMMITTEE ON TAXATION
APPENDIX F V
ESTIMATE OF POSSIBLE YIELD OF STAMP TAXES ON CHECKS,
NOTES, BILLS OF EXCHANGE AND OTHER LEGAL INSTRUMENTS
IN NEW YORK STATE
For the purpose of estimating the possible yield of stamp taxes
in New York State the Committee caused to be made a study of
the following : first, the stamp taxes in France, Germany and the
United Kingdom; and second, the Federal stamp taxes in the
United States (a) during the Civil War, (b) during the Spanish-
American War and (c) under the present Federal Emergency
Revenue A,ct.
With few exceptions, the data obtained concerning France,
England and Germany was of little value for purposes of estimat-
ing the possible yield of such taxes in the United States. The taxes
in these countries are levied upon many miscellaneous sources, and
a number of these important sources is already reached in the State
of New York by other forms of taxation. With the exception of a
few of the German figures the Committee found it impossible to
use the foreign figures for even an approximate estimate. Out
of the complexity of the German system we may select the follow-
ing figures as offering the easiest basis of a comparison.
The total revenue receipts from bills of exchange, promissory
notes, etc., in all Germany (Federal Tax) are as follows:
1909 $4,661,250
1910 4,684,250
1911 4,670,250
1912 4,865,250
1913 4,780,500
The total revenue receipts from the tax on checks in all Ger-
many (Federal Tax) was as follows:
1909 $751,000
1910 890,000
1911 777,250
1912 779,500
1913 784,000
10
290 STATE or NEW YORK
Because of the complexity of the German rates it is impossible
to estimate even with rough accuracy what such a tax might yield
in New York State.
In considering the above tables it should, of course, be borne in
mind that the amount of revenue in each case represents the aggre-
gate for the entire German Empire. In any case New York State
could not hope to obtain an amount representing anything like the
yield of the German tax upon these particular sources.
CIVIL WAR STAMP TAXES
During the Civil War, the Federal Government levied stamp
taxes upon the following fifteen miscellaneous sources :
First: Agreement of contract, 5c.
Second: Bank checks, 2c.
Third: Bills of exchange, inland, varying from 5e, upon bills
of $100, to $1.50 upon bills from $2,500 to $5,000.
Fourth : Foreign bills of exchange at approximately same rates
as inland.
Fifth: Bills of lading, lOc.
Sixth: Express company receipts, Ic and 2c.
Seventh: Bonds, 50c.
Eighth: Certificates of stock from lOc upward.
Ninth: Charter party $3.00 to $10.00.
Tenth: Broker's note, lOc.
Eleventh: Conveyance of deed varying from 50c when con-
sideration is less than $500 to $20, when consideration is $20,000.
Twelfth: Telegraphic dispatch from Ic to 3c.
Thirteenth: Lease, 50c to $1.00.
Fourteenth: Power of attorney, 25c.
Fifteenth: Probate of will, 50 cents to $1.00.
In addition to the above taxes we also levied upon entry of
goods at customs house, life insurance policies, marine insurance
policies, protest and other legal documents.
The yield of these taxes from 1863 to 1870 is given below, in
round numbers, and, for purposes of comparison, the yield of the
Federal Income Taxes for the same years:
JOINT LEGISLATIVE COMMITTEE ON TAXATION
291
Year Stamp Taxes Income Taxes
1863 . . . . $4,100,000 $455,000
1864 5,900,000 14,900,000
1865 11,200,000 20,600,000
1866 15,000,000 60,900,000
1867 16,100,000 64,900,000
1868 14,900,000 34,100,000
1869 15,000,000 34,600,000
1870 15,600,000 36,600,000
No record has been kept of the yield of the stamp taxes by
states. However, a very rough idea of this yield in New York
State may be obtained by comparing it with the yield of other
federal taxes in New York State.
The following table shows the percentage of the total yield of
the Federal Income Taxes and of the Internal Revenue Taxes
collected in New York State;
Year Income Taxes
1864 33 per cent.
1865 30 per cent.
1866 30 per cent.
1867 31 per cent.
1868 30 per cent.
1869 31 per cent
1870 28 per cent.
Internal Revenue
Taxes
24 per cent.
24 per cent.
24 per cent.
24 per cent.
22 per cent.
25 per cent.
22 per cent.
Average 31 per cent. 24 per cent.
From the above it would seem fair to assume that New York's
share of the total amount raised by the Federal Government from
stamp taxes would be not less than 24 per cent, at that time. This
percentage is, of course, of no importance except as it may be used
to check up later estimates of the percentage of the Spanish War
taxes collected in New York State.
292 STATE OF NEW YORK
STAMP TAXES LEVIED DURING THE SPANISH-AMERICAN WAR
PERIOD
During the Spanish-American War, the Federal Government
levied stamp taxes on the following twenty-one miscellaneous
sources; bonds, certificates of stock, sales or agreements to sell,
bank checks, certificates of deposits, bills of exchange, bills of
lading, telephone messages, indemnity bonds, certificates of pro-
test, brokers' contracts, conveyances, telegraph dispatches, various
forms of insurance, leases, manifests for customs house entry,
mortgages, foreign steamship tickets, power of attorney, protests
and warehouse receipts.
With few exceptions the sources taxed, as well as the rates, were
substantially the same as the Civil War taxes. In a few cases the
Civil War taxes were higher than the Spanish-American War
taxes.
The total yield of these taxes for the entire country for the
years 1898 to 1901 were as follows:
1898 $724,073
*1899 38,618,081
1900 36,416,082
1901 34,998,836
As in the case of the Civil War stamp taxes, no record has
been kept of the yield of the stamp taxes for this period by states.
We may, however, roughly approximate the yield of these taxes
in New York.
In the following tables we give the total internal revenue col-
lected in the United States, the amount collected in New York
State, and the percentage of the total collected in New York State
for the years 1895 to 1903:
Internal Revenue Internal Revenue Per cent collected
Year United States New York in New York
1895 $143,246,077 $19,090,723 13 per cent.
1896 146,830,615 21,620,471 15 per cent.
1897 146,619,593 18,420,767 13 per cent.
1898 170,866,819 21,058,569 12 per cent.
* The taxes went into effect July 1, 1898.
JOINT LEGISLATIVE COMMITTEE ON TAXATION 293
Internal Revenue Internal Revenue Per cent collected
Year United StaUs New York in New York
1899 273,484,573 46,634,981 17 per cent.
1900 295,316,108 46,475,135 16 per cent.
1901 306,871,669 49,789,698 16 per cent.
1902 271,867,990 38,694,831 14 per cent.
1903 230,740,925 26,749,648 12 per cent.
An examination of the above table discloses the fact that the
total internal revenue receipts increased after the imposition of
the war taxes by approximately $100,000,000. . This increased
yield was due not only to the stamp taxes, but also to the increased
rates upon the normal sources of internal revenue. At best we
can attribute not more than $75,000,000 of the increase to the
federal stamp taxes.
The percentage of the total revenue taxes collected in New York
from 1895 to 1903 averaged about 13 per cent. If we assume that
this percentage would hold for that part of the internal revenue
taxes collected from the stamp taxes the yield of stamp taxes in
New York State during the Spanish-American War period would
have been about $10,000,000. This estimate is probably too high,
and at best it can be said to be only very rough.
STAMP TAXES UNDER THE FEDERAL EMERGENCY REVENUE ACT
The present Emergency Revenue Law imposes stamp duties on
the following fifteen miscellaneous sources :
I. Documents Subject to Stamp Duties and Rates
1. Bonds, debentures or certificates of indebtedness on
each $100 face value or fraction thereof 5c
2. Sales or agreements to sell per $100 face value. ... 5c
3. Sales of products at exchanges per $100 Ic
4. Promissory notes:
Not exceeding $100 2c
Each additional $100 2c
5. Express or freight shipments on manifest or bill of
lading Ic
6. Telegraph and telephone messages :
Where charge is over 1.5 cents Ic
294 STATE OF NEW YORK
7. Indemnity bonds 50c
8. Certificates of profits per $100 face value 2e
Of marine damages. . . 25c
Of any other description lOe
9. Contract, brokers' note or memorandum of sale of any
goods or merchandise, stocks, bonds, etc lOc
10. Conveyances of real property, when consideration is
greater than $100 and less than $500 50c
For each additional $500 50c
11. Custom house entries when value of goods is less than
$100 25c
Between $100 and $500 50e
Entry or withdrawal of any goods from bonded ware-
house 50c
12. Foreign Passage Tickets:
Exceeding $10 in value $1 00
Between $30 and $60 300
Greater than $60 5 00
13. Power of attorney or proxy lOe
General power of attorney 25c
14. Protest 25c
15. Seats in palace or parlor car le
The yield of these taxes for the period beginning December 1,
1914 and ending June 20, 1915 was $20,494,475. This covers
of course only seven months. Assuming that the tax will continue
to yield at the same rate we should receive for the entire year
approximately $35,000,000. Assuming that the New York per-
centage of the total internal revenue receipts during the Spanish
War period would hold for the present Federal Emergency
Revenue Tax, namely 16 per cent., we may estimate that stamp
taxes equivalent to the present federal stamp , taxes would pro-
duce approximately $5,600,000.
CONCLUSIONS TO BE DRAWN FROM THE ABOVE.
In attempting to use the statistics of the yield of stamp taxes
of France, England, Germany, and the Civil War period in the
United States we found so many conditions substantially different
from those in New York at the present time that it was necessary
JOINT LEGISLATIVE COMMITTEE ON TAXATION 295
to make so many assumptions as to vitiate the value of our esti-
mates based upon these sources. We must fall back, therefore,
upon the results of the Spanish- American War taxes and the pres-
ent Federal Emergency taxes. We find that in 1898, under one of
the most drastic stamp duties ever imposed, New York's share of
the total collection could not have exceeded $10,000,000. Since
stamp duties imposed by the State could never hope to cover such
a broad range of items, it would be too much to hope that the State
of New York could raise as much as $10,000,000. Should the
State duplicate the present Federal Emergency Revenue Act it
could not hope to raise more than $5,600,000.
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UNIVERSITY OF CALIFORNIA LIBRARY