Scrapbook and diary: Mary Magruder,1886-1887

1886

Some Views on Taxation

BY HENRY C. HALLOWELL.

A keen observer has said that the world is governed as well as it wishes to be. Lafayette put the same idea in another form when he said: "For a nation to be free, it is sufficient that she wills it." To accomplish any reform therefore, the first step requisite is to enlighten the great body of the population, and to show that the changes sought are founded on reason and justice. The people at large do not interest themselves very deeply in abstract or theoretical rights, but if convinced that certain measures are injurious or beneficial to their prosperity and happiness, they will soon arouse themselves to repeal the one or enforce the other. Far be it from me to awaken animosity against any class or corporation, particularly such powerful aids to civilization as railroads, telegraphs and the like. My only aim is to endeavor to see in what manner they may bear an equitable portion of the burden of taxation. In their early days when success was uncertain and the risk of pecuinary [pecuniary] loss was great, it was wise in Legislatures to give them aid. When in our own State this aid took the form of exemption from taxation, a railroad was simply a line of rails between two points with an office and epot at either end. Their wonderful growth was never dreamed of, and there was no intention of extending the exemption to all the vast paraphernalia now claimed as free "under charter." Senator Peter in some recent remarks stated for example, that the palatial building on Baltimore street erected by the B. & O. R. R. at a cost of a million of dollars is free from taxation although the ground and buildings on it, when private property were assessed and taxed.

A corporation which is adding to its sinking fund, ramifying in every direction and can still from its earnings, pay 7 per cent dividends in semi-annual instalments to its stockholders, ought surely to bear a large portion of the burden of taxation, even if it results in paying somewhat smaller dividends to stockholders, most of them already affluent. The farmer is scarcely at present laying aside money for buying more land (his sinking fund) extending his field of operations, and at the same time investing 7 per cent in bonds and stocks, (his dividend from earnings,) yet no property of his "plant" escapes the assessor! Nor is it better with the mechanic, storekeeper or professional man.

A recent writer in the Popular Science Monthly, Mr. Henry James TenEyck, has stated some facts so forcibly and brought the subject so clearly into view, that I cannot do better than quote from his article, on "Recent Experiments in State Taxation."

"To growl is the privilege of the taxpayer. To secure the entire amount of the necessary revenue with the smallest growl is the aim of the legislator. Probably there is no more unpopular official than the tax-gather. Among persons of property the idea seems to prevail that taxation is a kind of robbery which is to be evaded if possible. It is true that the public treasury has often benefited simply that thieves might plunder it, or that worthless citizens might be supported at public expense, as a reward for their political work. This is the case particularly in the administration of municipal affairs. The national and State governments have been conducted, in spite of the observance of the odious spoils system, with an efficiency and economy unequaled by but few great business houses. Even better service would undoubtedly be obtained if the public had a fuller appreciation of the truth of the old paradox that the dearest labor is the cheapest. More liberal salaries for positions of trust and executive control would tend to elevate decidedly the standard and ability of the men in the public service. But, unfortunately, propositions of this character do not meet with general approval. The vulnerable spot of the American is his pocket book. When an official lays his hand on that, the victim resents the attack with indignation, and submits, after loud protestations and threats, to the demand for his money, only out of respect for the superior power of the law. The dominant party, in attempting to carry on the government satisfactorily, and at the same time, not arouse the voter who pays the taxes, has a difficult problem to solve. In the United States, where the voter is the ruler, political managers find it essential to continued success to make drafts on the ruler's pocket book as light as possible. All parties would be happy if the public treasury could be filled by the touch of a magician's wand, so that taxes might be abolished. But, as they are a necessary evil, a scheme of taxation without lamentation is what is wanted. In the law laid down by Professor William G. Sumner, that taxation tends to diffuse itself, but on the line of least resistance, is found a limit for the basis of this scheme. Turgot, the great French financier, expressed the politician's idea very tersely when he said that the science of taxation is to pluck the goose without making it cry. In hunting for the line of least resistance, and the most scientific methods of plucking, several interesting experiments had been made of late in different States, where new sources of revenue had been sought from special taxes on corporation, railroads, telegraph, telephone, and insurance companies, collateral inheritances, and other classes of property which can be plucked without producing a cry liable to strike a chord of sympathy in the popular heart. In most in-

stances these experiments have surpass ed in their results the expectations of proposers. Large revenue has been obtained without provoking even a murmur of disapproval from the voting classes. In Vermont for example, no direct tax was levied in 1883 and 1884, the receipts under the corporation tax law paying the expenses of the State government. The Comptroller of New York received $9,569,161.35 in 1884 of which $1,908,612.75 were paid by corporations. Last year 1884, although the Wisconsin Legislature authorized a levy of $240, 000, the State Treasurer was not obliged to collect any direct tax, as the license tax from railroads, insurance, telegraph, and telephone companies was sufficient to meet the current expenses. The Treasurer of Minnesota states that the revenue from the corporation tax is steadily increasing, and if it should continue to increase, and the probabilities are that it will as it has done for the last four years, it bids fair to pay all the expenses of the State government. In New Jersey there is no regular tax except for schools, as the new railroad and canal tax law and the tax on miscellaneous corporations maintain the government. These are striking illustrations of the workings of a new system of imposing special tax on special classes of property, which was only first tried about ten years ago. The idea of treating rail roads and corporations generally in a different manner in the tax levies from other kinds of property was a development, perhaps, of the granger and anti monopoly movements. It is founded on the theory that parties enjoying special privileges from the State should share with the State, to some extent, the profits of their enterprises. If the government gives certain individuals peculiar advantages and protection in the inauguration and prosecution of their schemes and business, it is held that they should make a return for the favors granted in proportion to the success of their undertaking. In every State where the plan has been tried it has worked admirably. After a slight resistance on the part of the corporations, resulting in a judicial interpretation of all the provisions of the statute, the execution of the new law goes on smoothly in each State. The largest corporations naturally fight every encroachment on their sources of income, but when the law is once in full operation they submit gracefully. The various Legislatures adopting the system have endeavored not to make the tax too heavy. If the rate is moderate it inflicts no serious burden on the corporations, and yet brings a handsome sum into the public treasury. The benefits of this new plan have so far, been appreciated only in the New England, Middle and Northwestern States. Twelve states now impose special taxes on railroads and other corporations. An examination of the

tax laws of eight of the thirty-eight Commonwealths indicates, however, a steady development of the idea of taxation without lamentation. The attack is not confined to corporations. There is a reaching out in every direction for special subjects for taxation. If one State finds an object that can pay special rates without suffering materially, and without raising a popular outcry, other States follow in the line of discovery. A glance at the laws of a few States which have secured the most notable re sults in the direction of special taxation will show the scope and bearing of the movement. Pennsylvania may, perhaps, be called the pioneer. It has tried more experiments and probably reaches more special classes than any other state. The tax on the capital stock of all corporations, which yielded to the State $1,535,727.56 in 1884, is one half mill for each one per centum of dividend declared provided the annual dividend amounts to six per centum; if the dividends are less than 6 per cent, or if there are no dividends, the tax is three mills upon each dollar of the appraised valuation, or market value of the stock. A further tax of eight-tenths of one per centum is imposed on the gro s earnings of transportation and telegraph companies. This brought in last year $787, 929.20. Insurance companies are assessed eight-tenths of 1 per centum on gross premiums and bank stocks, mortgages, and loans of different kinds pay four per centum on every dollar of the value thereof. These special classes paid $664,843.50 in 1884. Collateral inheritances of over $250 are taxed three mills on every dollar. From this source $461, 465.43 were derived. Tavern-licenses amounted to $426,429.19 and retailers' licenses to $301,393.42. Nothing illustrates better how effectively this system of special taxation can oe applied than the fact that while the total receipts of the Pennsylvania State Treasury in 1884 were $6,226,930.38, only $602,025.45 were raised by a direct general tax. In Wisconsin where special taxes have also worked well, the plan is somewhat different. The license tax, as it is called there, applies to railroads, insurance, telegraph and telephone companies. Railroads are taxed from five dollars per mile of operated road to four per centum of gross earnings, as follows: If the road earns less than $1500 per mile, it is taxed five dollars per mile; on those earning more than $1500 and less than $3,000 per mile, the tax is five dollars per mile and two per centum on the excess over $1500 per mile; on those earning $3,000 or more per mile the tax is four per centum on the gross earnings. Telegraph companies pay one dollar per mile for the first wire, 50 cents per mile for the second, twenty-five cents per mile for the third, and twenty cents per mile for the fourth and all additional. Telephone companies pay one per centum on gross receipts, and insurance companies two per centum on gross earnings. This tax or

1886

ther, the tide of immigration, which hitherto has been flowing into the more accessible but less healthy sections along the main branch of the Baltimore and Ohio railroad, is beginning to set in this direction, and there is a constantly increasing demand for property along the route of the Metropolitan branch railroad, which needs only to be encouraged to still further increase. In view of this state of things, there is an element in the county, many of whom, however, are honest in their opinions, which would undo all the good that Local Option has done. But the petition which has just gone before the legislature must be so appalling to the resubmissionists that for a time at least the good people of Montgomery may rest assured that local option will not be disturbed.

MR. DAVIS’ ADDRESS

The following is the address prepared by Mr. Davis, Chairman, in behalf of the Local Option Committee: Mr. Chairman:—I am doubtless indebted to the frosts of many winters for the honor of being made Chairman of this large and respectable Delegation.

It represents every interest, district and neighborhood in the county. These gentlemen have left their homes, their families and their business to bear to you, in person, a petition upon a subject of deep and absorbing interest to the people of Montgomery, as well as to the adjoining county of Howard. A subject, the germ of which was planted more than fifty years ago, whose fructification and growth, though slow at first, has taken deep root and spread to every valley and hillside from the Patapsco to the Potomac. It is just fiftytwo years, when, as the youngest and now only surviving member of the Board of Trustees of the Brookeville Academy, I signed the first petition for a Local Option law for the benefit and protection of that Academy that I had then ever heard of, or had any knowledge of being in existence. I now believe it to be the oldest strictly Local Option law in the United States. The Maine liquor law was enacted in 1851, while the Brookeville law dated back to 1834. I feel proud of that, as one of the best acts of my life; for while it greatly benefitted the Academy, it furnished

an example for many similar exemptions throughout the State. In 1862 I had the honor of being a member of this body. In looking over the Code, I discovered that the limits of the Brookeville exemption had been cut down from one and-a-half to one-half a mile around the village. I immediately wrote to my friend, Dr. Magruder, my immediate senior in the Board, apprising him of the fact, and suggested that if he would send me a petition I would try and restore the original limit. In a short time the petition came, signed not only by the Trustees of the Academy, as by them alone in the first instance; but by every voter in the village. Among the latter were two signatures which astonished me. They were the names of two very worthy and useful citizens, who could not go beyond the limits of the prohibited district without falling under the influence of the intoxicating bowl. In presenting the petition, I called attention to that fact, and stated that to my mind it was an irresistible appeal from human weakness and frailty to the strong arm of the law to protect us even against our own personal infirmity. No sooner was the presentation of this petition published, than I received a letter from the late William Thompson, of R., for several years printer to the House of Delegates, informing me of a death in his neighborhood, under very distressing circumstances, and that he wished I would include the village of Goshen, near which he lived, in the proposed prohibition. My reply was, “send me a petition upon which to found a bill.”

I have faith not only in the right of petition, but also in the power and influence of petitions; and when this petition came from the land of Goshen, I had no difficulty in including Goshen within the mystic bounds of prohibition. Immediately succeeding this petition, came one from Sandy Spring, a place now well known to fame, for a twomiles’ circuit around that prosperous and flourishing village; and then came one for a four-miles’ circuit around the school and church at Emory. I incorporated them all into one bill, and so it came to pass that in a part of the District of about 160 square miles the lines overlapped two or three deep, and, as the County Surveyor would say, ran foul of each other; but not with clashing claims and interests, for all here was harmony, peace and concord.

So we went on until 1880, when petitions began to circulate for a submission of the question of license or no license, to the whole county, containing about six hundred square miles. These petitions, with 1,600 signatures, asked that the vote might be taken at a special election; but our Delegates thought best to hold the election on the same day with the Presidential election. The friends of Local Option, although regarding this as unfavorable, did not complain; but went to work with a will. They disclaimed any interference with the party questions of the day or the rights of individuals. They simply claimed the right to regulate the police power of the county, district and neighborhood, as the case may be—that power, of which the late lamented Horatio Seymour said, "that every neighborhood and district and county, however unlearned and illiterate the inhabitants might be, understood its own wants much better than the President or Members of Congress in Washington could possibly do." Upon that issue they won every district in the county, and the whole county, by fifteen hundred and thirty majority. The result is that we have since enjoyed a peace and quiet and thrift and prosperity heretofore unknown in the county.

But, like Banquo's ghost, rum and whiskey will not down; and we are now menaced with another submission to the ballot. Recognizing the truth and power of the maxim, "that eternal vigilance is the price of liberty," the friends of Local Option are here again bearing a petition with 3,850 signatures, over double the former number of names and showing an increase of more than regular geometrical proportions. Under these circumstances we come not for legislation, but respectfully to ask, and we think we have a right to ask, that we be let alone—left to enjoy the fruits of a great moral and peaceful victory, and not again plunged into the strife and expense of another campaign.

If there be any question more strictly democratic than another, it is this question of Local Option. It is simply the right of the people to choose, and when exercised by a community under authority of law and with ample time for discussion and deliberation, its decision ought to be as final and conclusive as the Constitution of the State.

License, as opposed to Option, is an individual privilege, withheld from the community in favor of the individual. Who ever heard of a town or a county being licensed? The idea is absurd and cannot be entertained. A resubmission for license, after a county has fairly and deliberately voted "no license," would not only savor of vacillation in legislation, but also give to the individual a preference over the community— a sanction subversive of the great principle of Home-rule and Local self-government.

The committee were unanimous in their selection of Mr. Laird for presenting the petition to the Legislature; and on Friday he secured the floor and laid before the House this petition, which is said to have been the largest ever presented to the Maryland Legislature on any previous issue. In presenting it, Mr. Laird stated that he desired to place himself on record upon the Local Option question, which he did in the following neat and manly address:

MR. LAIRD'S ADDRESS.

Mr. Speaker:—"In the autumn of 1890 the citizens of Montgomery county voted upon the question of liquor license, and by a majority of 1,530 decided against it; and in the intervening period have reaped many benefits from the operation of the local-option law. Shortly after the last general election a movement for the resubmission of the question was started, and to counteract the effect of any petitions for the resubmission that might be addressed to the General Assembly, the friends of local option have commissioned me to present a counter petition, although that in favor of resubmission has not yet found its way here. It gives me pleasure, Sir, in presenting this petition, signed by 3,850 citizens of my county, to say that its object meets my unqualified approval, and I can bear personal testimony to the blessings that have flowed from the law as it is."

At the conclusion of his address Mr. Laird was heartily congratulated by a large number of his fellow-Members and others for having the courage of his convictions, in openly expressing his sentiments on the subject and bearing "testimony to the blessings that have flowed from the law as it is"