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corporations are excused from all local taxes on property which is used in the operation of their business.

2. A tax on franchises. The word franchise is used here in its widest sense, including not only the right to use a public highway for a special purpose, but any special privilege granted by law to private individuals. For example, when a group of men form a corporation, they acquire certain privileges from the state. Thus the right to be a corporation is a franchise. All corporations, except those referred to in the preceding paragraph, must pay a corporation franchise tax. Franchises cannot be taxed for local purposes, but this does not prevent cities from compelling corporations to pay for their franchises. Such a payment is not a tax, even though it may consist of a certain percentage of the annual income.

3. A corporation license tax. This is a tax collected by the secretary of state from all corporations doing business in the state, and is in addition to the franchise tax just mentioned.1

4. A poll tax of $2 is imposed annually on every man in the state from twenty-one to sixty years of age, except insane persons, paupers, and Indians not taxed. This is collected by county assessors. ($ 45.)

5. An inheritance tax. This is a tax imposed upon the property of deceased persons, when it passes by inheritance or will, to others. The rate of the tax depends upon the degree of the relationship existing between the deceased and the person to whom the property passes. There are certain exemptions in the law. For example, property equal in value to $10,000 may pass to the widow or a minor child of the deceased without the payment of any tax ($ 190).

1 Discontinued after June 30, 1914.

6. Fees collected by state officers. Fees are collecteri by the secretary of state, the surveyor-general, the clerks of the higher state courts, the controller, the superintendent of state banks, the building and loan commissioner, the insurance commissioner, and others.

7. Fees for licenses, such as automobile, fishing, and hunting licenses.

8. Receipts from state institutions. The largest amount from this source is derived from the sale of the products from the jute mill at the San Quentin state prison. Smaller amounts are received from the state prison at Folsom, the various state hospitals, the reform schools, the veterans' home, the home for the blind, and other institutions. None of these institutions are self-supporting. The money received from them is turned into the treasury, but larger amounts must be taken from the treasury for their support.

9. Receipts from state property and investments. The ferry building in San Francisco belongs to the state, and the harbor commissioners collect rents from corporations and individuals who occupy the building. The state also receives considerable amounts as interest on state money deposited in banks. The money received from the sale of the state school lands is invested in bonds of various kinds, and the interest from these investments is annually added to the state school fund (S$ 137, 190).

10. Miscellaneous sources. The state receives small amounts from various miscellaneous sources. One of these is from the sale of furniture, lumber, machinery, or other unnecessary material which the various state officers and boards may have on hand. Other sources are the amount paid by each county into the state treasury to aid in meeting the expenses of children from the county in the state reform schools and the state home for feeble-minded children; the amount received each year from the sale of escheated estates,

that is, estates of deceased persons who have no heirs; the yearly payment made to the state by the United States government, of 25 per cent of the receipts from the national forests in the state. This money is distributed by the state to the various counties on the basis of the area of each county embraced in each national reserve from which the money is collected.

In case these sources of revenue fail to meet the

expenses of the state government, a tax may be imposed on all taxable property in the state, “in the manner to be provided by law” (article XIII, sec. 14, e, of the constitution). The state may borrow money in accordance with article XVI of the constitution.

131. Summary of State Revenues. — In order to present to the eye the relative importance of these various sources of income, the amount received from each source during the fiscal year from July 1, 1911, to June 30, 1912, is indicated below.

$8,767,617.68 1,619,588.98

802,01 2.50

843,664.00 1,083,243.87

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1. Tax on Corporations
2. Tax on Franchises
3. License Tax on Corporations .
4. Poll Tax
5. Inheritance Tax
6. Fees and Collections:

Secretary of State
Surveyor-General
State Land Office
Clerk of Supreme Court
Clerks of District Courts of Appeal.
Insurance Commission
Superintendent of Banks

Building and Loan Commission 7. Fees for Licenses :

Automobile

327,510.89

8,626.95 3,581.50 6,500.00 8,591.10 49,623.14 73,285-43 8,527.63

62,805.80

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Fishing

$17,955.00 Hunting

145,595.04 8. From State Institutions : San Quentin Prison

453,705.05 Folsom Prison.

20,210.30 State Hospitals

186,262.19 State Normal Schools

16,424.66 State Polytechnic School

38,451.45 Veterans' Home

8,952.62 Reform Schools

114,131.63 Home for the Adult Blind

26,993-56 9. From State Property and Investments :

Rent from Ferry Building, Wharves, etc., S. F. .1,254,287.32
Interest on State Deposits.

157,199.44 Interest on School Bonds

311,862.45 Interest on University Bonds .

49,845.00 Interest from School Lands

56,126.17 Sale of School Lands .

119,306.91 Sale of School Textbooks ?.

201,701.95 10. Miscellaneous Sources: Sale of Property by State Engineer.

62,973.58 From Counties to aid in Support of Children in Reform Schools, etc. .

95,360.00 Escheated Estates .

13,870.63 From United States Government

157,650.38 Many items of income are not included in this summary. The total receipts for the year amounted to $21,445,956.99. Of this amount $2,005,040.89 was derived from the sale of state bonds for the benefit of the San Francisco water front, and the state highway ofund; and $1,270,297.01 was collected as a tax for the support of the Panama-Pacific Exposition.

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132. The State Board of Equalization.? — The state board of equalization consists of the state controller and four other members elected each for four years at the general

1 Since 1913 textbooks have been distributed free of charge. ? See state constitution, article XIII, section 9; also Statutes of 1911, page 530.

state election. One member is elected by each of the four equalization districts into which the state is divided. The office of the board is in Sacramento. Its most important duties are as follows:

1. To determine the amount of tax due the state from corporations according to the provisions of section 14, article XIII of the constitution. This must be done each year “ between the first Monday in March, and the third Monday before the first of July.”

Blank forms are sent to all corporations mentioned in subdivision (a) of the section referred to, on which reports must be made to the board not later than the first Monday in March. The most important items included in each report are as follows: the name of the corporation, the amount of its capital stock, its debts, the market value of its stocks and bonds, its gross receipts during the year, its operating expenses, the improvements made, and the dividends paid during

the year.

Appropriate blank forms are sent to all the banks to obtain from them reports as to their capital stock, profits, dividends, and other items. Similar reports are collected from insurance companies by the state insurance commissioner, who embodies the information thus obtained in a report to the state board of equalization. Owners of taxable franchises 1 must report to the board on blanks furnished by the board complete information as to the nature and value of each franchise, as well as the capital stock, debts, gross receipts, dividends, etc., of the corporation using each franchise. The secretary of state must report to the board the name, place of business, capitalization, and other specified items, of every corporation whose articles of incorporation are on file in his office; and city and county assessors must report in detail the assessments which they have placed on real estate belonging to banks and insurance companies. From these various reports, and from any additional information it may collect, the board determines the amount that each corporation must pay.

1 Banks, insurance companies, and corporations that pay taxes on their gross receipts pay no additional franchise tax.

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