England, were or are all of them indefensible in theory, all mischievous in practice. But none of them did so much harm as a philosophical observer would have predicted, because other causes were at work to mitigate and minimize their evils.

During the last few years there has been a distinct change for the better. Some States which had vested the appointment of judges in the legislature, like Connecticut, or in the people, like Mississippi, have by recent constitutional amendments or new Constitutions, given it to the governor with the consent of the legislature or of one house thereof.1 Others have raised the salaries, or lengthened the terms of the judges, or, like New York, have introduced both these reforms. Within the decade ending December 1886, though twenty-eight States altered their Constitutions, no one, except Florida, took appointments from legislature or governor to entrust them to popular vote. In this point at least, the tide of democracy which went on rising for so many years, seems to have begun to recede from the high-water mark of 1840-1860. The American people, if sometimes bold in their experiments, have a fund of good sense which makes them watchful of results, and not unwilling to reconsider their former decisions.

1 In Connecticut the change was made at the instance of the Bar Association of the State, which had seen with regret that the dominant party in the State legislature was placing inferior men on the bench.

CHAPTER XLIII

STATE FINANCE

THE financial systems in force in the several States furnish one of the widest and most instructive fields of study that the whole range of American institutions presents to a practical statesman, as well as to a student of comparative politics. It is much to be wished that some person equipped with the necessary special knowledge could survey them with a philosophic eye, and present the results of his survey in a concise form. From such an attempt I am interdicted not only by the want of that special knowledge, but by the compass of the subject, and the difficulty of obtaining in Europe adequate materials. These materials must be sought not only in the Constitutions of the States, but even more in their statutes, and in the reports presented by the various financial officials, and by the special commissions occasionally appointed to investigate the subject or some branch of it. All I can here attempt is to touch on a few of the more salient features of the topic, and to cull from the Constitutions some illustrations of the dangers feared and the remedies desired by the people of the States. What I have to say falls under the heads of—

Purposes for which State revenue is required.
Forms of taxation.

Exemptions from taxation.

Methods of collecting taxes.

Limitations imposed on the power of taxing.
State indebtedness.

Restrictions imposed on the borrowing power.

I. The budget of a State is seldom large, in proportion to the wealth of its inhabitants, because the chief burden of administration is borne not by the State, but by its subdivisions, the counties, and still more the cities and townships. The chief expenses which a State undertakes in its corporate capacity are (1) The salaries of its officials, executive and judicial, and the incidental expenses of judicial proceedings, such as payments to jurors and witnesses; (2) the State volunteer militia; (3) charitable and other public institutions, such as State lunatic asylums, State universities, agricultural colleges, etc.;1 (4) grants to schools; (5) State prisons, comparatively few, since the prison is usually supported by the county; (6) State buildings and public works, including, in a few cases, canals; (7) payment of interest on State debts. Of the whole revenue collected in each State under State taxing laws, a comparatively small part is taken by the State itself and applied to State purposes. In 1882

2

1 The Constitutions of Louisiana and Georgia allow State revenue to be applied to the supplying of wooden legs and arms to ex-Confederate soldiers.

2 All or nearly all States have set apart for the support of schools and of other educational or benevolent institutions, sometimes including universities, a considerable fund derived from the sale of Western lands granted for the purpose by the Federal government about twentyfive years ago, and derived in some cases also from lands appropriated originally by the State itself to these objects.

3 In the State of Connecticut (population in 1883 about 650,000) the total revenue raised by taxation in 1883-84 was $8,524,776 (£1,800,000), which was collected by and for the following authorities and purposes :

only seven States raised for State purposes a revenue exceeding $2,000,000. In that year the revenue of New York was $7,690,416 (pop. in 1882 about 5,200,000). In 1886-87 the revenue of Pennsylvania was $7,646,147 (pop. about 4,700,000). These are small sums when compared either with the population and wealth of these States, or with the revenue raised in them by local authorities for local purposes. They are also small in comparison with what is raised by indirect taxation for Federal purposes.

II. The Federal government raises its revenue by indirect taxation, and by duties of customs and excise, though it has the power of imposing direct taxes, and used that power freely during the War of Secession. State revenue, on the other hand, arises almost wholly from direct taxation, since the Federal Constitution forbids the levying of import or export duties by a State, except with the consent of Congress, and directs the produce of any such duties as Congress may permit to be paid into the Federal treasury. The chief tax is in every State a property tax, based on a valuation of property, and generally of all property, real and personal, within the taxing jurisdiction.

The valuation is made by officials called appraisers or assessors, appointed by the local communities, though under general State laws. It is their duty to put a value on all taxable property; that is, speaking generally, on all property, real and personal, which they can discover or trace within the area of their authority. As the contribution, to the revenues of the State or county, leviable within that area is proportioned to the amount

1 Stamp duties were also resorted to during the Civil War, but at present none are levied by the National government.

2 The account in the text does not, of course, claim to be true in all particulars for every State, but only to represent the general usage.

and value of taxable property situate within it, the local assessors have, equally with the property owners, an obvious motive for valuing on a low scale, for by doing so they relieve their community of part of its burden. The State is accordingly obliged to check and correct them by creating what is called a Board of Equalization, which compares and revises the valuations made by the various local officers, so as to secure that taxable property in each locality is equally and fairly valued, and made thereby to bear its due share of public burdens. Similarly a county has often an equalization board to supervise and adjust the valuations of the towns and cities. within its limits. However, the existence of such boards by no means overcomes the difficulty of securing a really equal valuation, and the honest town which puts its property at a fair value suffers by paying more than its share. Valuations are generally made at a figure much below the true worth of property. In Connecticut, for instance, the law directs the market price to be the basis, but real estate is valued only at from one-third to two-thirds thereof. Indeed one hears everywhere in America complaints of inequalities arising from the varying scales on which valuers proceed.

2

1 See, for a specimen of the provisions for equalization boards, the Constitution of California, Art. xiii. § 9, in the Appendix to this volume.

2 The special commission on taxation in Connecticut in their recent singularly clear and interesting report (1887) observe :-" One great defect in the practical execution of our tax laws consists in inequalities of assessment and valuation. This shows itself especially as between the different towns. . . It is notorious that in few, if any, towns do the assessors value real estate at what they think it is fairly worth. On the contrary, they generally first make this appraisal of its actual value, and then put it in the list at a certain proportion of such appraisal, varying from 331 to 75 per cent. Similar reductions are made in valuing personal property, though with less uniformity, and so perhaps with more injustice" (p. 8). "Household furniture above $500 in value constitutes an item of only $9500 in one of our cities, while a neighbouring town of not more than half the population returns $12,900" (p. 16).