Third National Convention of Railroad Commissioners.

dar year ending 31st of December was the most convenient, but if any change was to be made, the 30th of June would be the most satisfactory.

Mr. Adams said if the 30th of June was adopted, the commissioners would be able to have the reports in print and ready for distri-bution at the opening day of the various legislatures, which would be very acceptable over the plan now of necessity pursued.

Mr. Williams said the 31st day of December is the date adopted in Michigan, and some of the companies there had but just entered into that arrangement for their fiscal year. The assessment of the taxes of the roads is made in June, on the reports made for the year ending 31st of December, and for that reason he thought the 30th of June would not meet with a favorable reception in Michigan. Gen. Bonham exhibited the form now in use in South Carolina, which was very meager, and stated, the companies they are required to make their report on 31st of October, and as the legislature meets the fourth Monday in November, they should need more time if the proposed form was adopted. He favored the 30th of June.

After further discussion, in which that date was favored by Commissioners Carter, Oberly, Woodruff, and Bogue, the resolutions were adopted.

Commissioner Turner offered the following resolutions, which were unanimously adopted:

Voted, That the thanks of this convention be tendered to the several railroad accountants, who have attended the meetings of the committee and this convention, and assisted us by their experience and council in preparing a form for a uniform system of accounts

and returns.

Voted, That said accountants be invited to join in a recommendation of the new form to the railroad companies of the several states with the request that they keep their accounts in the manner prescribed, that they may be able to give the information contemplated by said form, adopted by this convention.

Mr. Adams, in behalf of the committee on taxation of railroads and railroad securities, presented the following report:

The committee appointed at the last convention of commissioners to examine into and report the methods of taxation, as respects railroads and railroad securities now in use in the various states of the Union, as well as in foreign countries, and further to report a plan for an equitable and uniform system for such taxation, at the next meeting of this convention, present the following preliminary report:

Shortly after the last convention of commissioners, your committee issued a circular and accompanying interrogatories, which were sent to all the state executives, and to a large number of the leading railroad corporations of the country. Through the courtesy of the State Department at Washington, the representatives of the

Third National Convention of Railroad Commissioners.

national government at the principal capitals in Europe were also called upon for information on the railway tax systems there in use. As a result, some sixty answers were, in all, received, covering the various states of the Union, Canada, England, Belgium, Holland, Germany, Russia, Switzerland, and Austro-Hungary. An answer is still to be received from France. The information contained in these answeas is much of it of great value, presenting a large body of facts bearing directly on a subject of general interest. Your committee therefore now present merely a preliminary report, giving the general results of their inquiry and the conclusions they have deduced from them, reserving a more elaborate presentation of the subject for another time.

As respects the systems of railroad taxation now in use, the answers received by your committee show very conclusively that they are more varied than had been anticipated, or than would be supposed to be possible. It may be said that there is no one principle running through the various systems described; and further, that there is no method of taxation possible to be devised which is not at this time applied to railroad property in some part of this country. So far as those now well recognized principles which should be at the basis of all systems of taxation are concerned, they would as a rule seem to have been utterly ignored. In two adjoining states, for instance, with roads belonging to one company operating in both, will be found on one side of the line a system simple, direct, equitable, imposing a moderate and fixed burden from which there is no escape, while on the other side of the line, the whole subject is still involved in that original crudeness, with guess-work for its only basis, which marks all those patch-work systems of taxation which have been improvised since 1835 to meet the growing needs of state and local treasuries, without any regard to principle or study of the subject, on the theory, popular but fallacious, that any one knows enough to impose taxes. In certain states, the railroads are apparently looked upon as a species of wind-fall from which everything which can be exacted in the way of taxation is so much pure gain. In other states they escape with very slight and wholly disproportionate burdens. The franchise tax, the gross and net earnings tax, the personal property tax, the realty tax, are all met with indiscriminately; applied sometimes by local boards, sometimes by boards of state equalization, but almost invariably in utter disregard of any principle. A more striking, and in some respects discouraging example of general confusion as regards an important matter of fiscal legislation could hardly be imagined. This will more clearly appear from the condensed statement of the several systems now in use, which the committee propose to incorporate in their complete report.

The conclusions reached by this committee as the result of their investigations can be very briefly stated. The requisites of a correct system of railroad, as of other taxation is, that it should, in so

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far as it is possible, be simple, fixed, proportionate, easily ascertainable and susceptible of ready levy. Very few of the systems now in use were found to have any of these features. So far from being fixed, they are most of them extremely arbitrary and fluctuating. Neither are they proportionate, as in some cases the measure of valuation is the market price of securities; in others, the arbitrary estimates of appraisers; in yet others, gross receipts; and in others, local assessment. That the tax should be almost impossible of ascertainment under these circumstances does not need to be said. As to being susceptible of ready levy, any tax assessed on and paid by the railroad corporation must be that, but it would appear that a large portion of the taxes now levied must either be evaded or else are in the nature of double taxation, for the securities on which they are levied are in the eye of the law personal property, assessable at the residence of the owner. Local taxes paid by the corporation in one state do not affect these securities if held in another, and they are thus subject to an additional levy, the amount of which must depend upon the honesty of the holder of property or the astuteness of local tax gatherers. The conclusion at which your committee arrived was that all the requisites of a sound system were found in taxes on real property and on gross receipts, and in no others, in fact that when these were properly imposed no other taxes were or could be necessary, as nothing would escape untaxed. Under this system the real estate of the railroad corporations held for corporate uses outside of their right of way would be locally assessed exactly in the same way as the real estate of private persons or of other corporations adjoining it was assessed. There would be no distinction made in regard to it. It is the ordinary tax on real property. Beyond that a certain fixed per centage, established by law and of general application should be assessed on the entire gross earnings of the corporations, and this should be in lieu of all forms of taxation on what is known as personal property. Under this system the rolling stock of the corporation would not be assessable in its own hands, nor its securities, whether stock or bonds, either indirectly through the corporation or directly in the hands of those owning them. The entire burden, be the same more or less, would be imposed in one lump on the corporation and levied directly. It does not need to be

pointed out that this system is perfectly simple; that under it taxation is fixed by a general law and not by local valuations; that it is thoroughly proportionate, inasmuch as the amount levied depends on the amount of gross receipts; finally, it can be ascertained by any one, and it can by no possibility be evaded.

The apportionment of a levy on gross receipts among the several states through which a single railroad may run, is in this country undoubtedly attended with much difficulty, and the committee have given careful consideration to the subject. The conclusion at which they have arrived is that it should be made a matter of

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mutual understanding among the states, and that, as the levies. had to be independent, they should be apportioned according to mileage. That is, the real property of the corporations being assessed where situate the terminal grounds at New York and Chicago at those points and on the basis of valuation there in use, and other grounds also where located and at the valuations, whether business or agricultural, of those locations- the realty being thus disposed of, the entire gross earnings of the corporations should be subject to assessment by each state through which its road might run in the proportion which the miles of road in that state bear to its whole number of miles. The percentage of the levy would then be greater or smaller, according to the law of the state, but the proportion of the whole amount upon which the levy was to be made would be fixed, and always easy of ascertain

ment.

The disposition to be made of the tax thus levied when paid into the hands of the state authorities whether it should be retained in the state treasury or distributed among localities, either those through which the road might run, or those in which the holders of its securities resided - would be matter for adjustment by legislation. The disposition to be made of a tax in no way affects the question of the proper mode of levying it. In their full report, however, the committee will present the methods now in use on this subject, and offer some suggestions as to any improvements which might be made in them.

Finally, the committee will say that of all the systems of taxation examined by them, those in use in England, among the countries of Europe, and in Michigan and Wisconsin, among the states of the Union, seem to them most intelligent and in conformity with correct principles. The Michigan and Wisconsin systems would seem to be especially commendable. The systems in use in many of the older states, on the contrary, and notably in the states of Massachusetts, New York, Pensylvania and Ohio, are very cumbersome and present hardly any features worthy of study or imitation. The subject is one which evidently has in this country received very little mature consideration. It is one also which, in view of the influence and direct interest of the railroad corporations, ought not to be difficult of adjustment on correct principles. To such an adjustment your committee have hopes that the more elaborate report they now have in preparation, and of which the points only are here submitted, will materially contribute. They would, therefore, ask that the conclusions thus generally stated may be accepted by the convention, and that permission be given them to report hereafter more at length and in print.

C. F. ADAMS, JR.,
W. B. WILLIAMS,
J. H. OBERLY,

Committee.

Third National Convention of Railroad Commissioners.

On motion of Mr. Bogue the report was accepted and, at its request, the committee was given time to make a detailed report, which Mr. Adams said he would try to have printed by November 1st.

On motion of Mr. Oberly the Commissioner of Michigan was appointed a committee to print in pamphlet form the proceedings of the conventions of 1875, 1878, and 1579 the number to be furnished each commission to be determined by the action of each.

The secretary was instructed by vote to furnish a copy of the proceedings of this convention to each of the railroad journals of the country.

Adjourned till 4 P. M. to await the arrival by mail of a report from Commissioner Marmaduke of Missouri, on "The true status of the railroad corporation in the body politic," but on reassembling at 4:50 P. M., the document had not been received, and it was voted that when received it be delivered to the executive committee subject to the order of Gen. Marmaduke.

Adjourned to meet again at the call of the executive committee Commissioners A. D. Briggs of Massachusetts, James Harding of Missouri, and Wm. Bell, Jr. of Ohio.

(Attest.)

HARTFORD, June 14, 1879.

W. B. WILLIAMS, Chairman,
GEORGE T. UTLEY, Secretary.

Following is the draft of law recommended by the committee:

DRAFT OF LAW.

SEC. I. Every corporation, person or association owning or operating any railroad or any portion thereof in this state shall on or before the day of in each year pay to the State Treasurer an annual tax upon the gross receipts of said railroad, computed in the following manner, viz.: Upon all gross receipts not exceeding thousand dollars in amount per mile of road actually operated, per cent. of such gross earnings; upon such gross receipts in excess of thousand dollars per mile so operated, per cent. thereof, which shall be in lieu of all other taxes upon the property, capital stock or evidences of indebtedness of such corporations, except such real estate as lies outside of the location for a right of way exclusively, not exceeding - rods in width.

ŠEC. II. The real estate lying outside of such location, shall be liable to taxation in the same manner as other real estate in the same place.

SEC. III. When a railroad lies partly within and partly without this state, there shall be paid into the state treasury such proportion of the tax imposed by the first section of this act, as the length of its operated road in this state bears to the whole length thereof.