REPORT OF MR. MANX
M
OX THE .SCnJECT OF
CANAL TOLLS ON EAILROAD FREIGHT,
JIAUE TO THE
SENATE, FEB. 28th, 1851.
The undersignei], one of the select committee of the senate to
which was referred the petitions of numerous citizens of the state,
for the passage of a law to equalize tolls on all the railroads leading
from the Hudson river to Lake Erie: and also sundry petitions to
'"exempt the central line of railroads from tolls, and also a bill to
impose tolls on the New York and Erie and the Ogdensburgh and
Lake Champlain railroads : not being able to concur in the con¬
clusions to which the other members of the committee have
arrived, respectfully submits for himself the following
REPORT.
That he regards the questions arising on the petitions and bill
referred to the committee as necessarily involving an inquiry into
a subject of great importance to the people of this state, as well
as materially affecting large private and local interests. These
questions deserve the most careful attention of the legislature, and
the whole field of investigation which the subject opens should be
thoroughly e.xplored, before the policy which is to govern the
future action of the government is established.
The questions which the subject naturally suggests are :
1. Can the state government raise a revenue to defray its annual
current expenses, to pay its state debt, and to complete or con¬
struct canals, by imposing a tax under the name of tolls on,the
transportation of the property of its own and the citizens of other
states, on railroads, without coming in conflict with those provi¬
sions of the Constitution of the United States, which have been held
by the court of last resort, to confer on Congress the exclusive
power to regulate commerce among the states, and which declares
that no state shall without the consent of Congress, lay any
imposts or duties on imports or exports, or any duty of tonnage?
2. If the power to raise a revenue by taxes on railroad trans¬
portation is conceded,, is it good policy in reference to the general
commercial and business interests of the state, to raise a revenue
by that mode of taxation?
3. Is the imposition of a tax on railroad transportation a just
and equitable mode, so far as citizens of our own state are con¬
cerned, of raising a revenue to defray the expenses of the state
government, to pay our existing debt, and complete ouj" works of
internal improvement already, commenced, or to construct new
works not yet begun?
4. Is it just or good faith on the part of the state to impose tolls
on transportation on railroads cbnstructed by private capital and
enterprise, under acts of incorporation granted by the government,
giving the right to transport property, and which did not impose
or contemplate the imposition of tolls, or give any notice to the
individuals who thus invested their capital, that the legislature
would exercise the power of imposing tolls under the right reserved
of repealing or altering their charters?
5. Is it just towards the central line railroads, or that portion
of our citizens whose location or business compels or induces them
to use the central line for transporting their property to and from
market, to continue the imposition of tolls on them, while other
roads and citizens in other sections of the state are exempted from
like burdens?
I shall consider these questions in the order they are stated.
3
I. Tolls imposed on property transported on railroads are to be
regarded either as a tax on transportation, to be paid, not by the
railroad corporation, but by the producers or consumers of the
property transported; or as a honvs exacted by the state from the
individuals composing the railroad corporation, for the grant to
them of the right of way and the other franchises and privileges
conferred by their acts of incorporation.
If tolls on railroads are regarded as a tax imposed by the stale
on transportation, to be paid by the [)roprietoi', producer, or con¬
sumer of the property transported, then it becomes a very grave
question whether a state government can thus tax transportation
in its own jurisdiction, without coming in conflict with the juris¬
diction and power of the general government to regulate commerce
among the states. The mode in which the tax is leyed on trans¬
portation cannot change the principle involved. Tolls tuid taxes
may and should be regarded, as far as the decision of the principle
in question is to be affected, as synonymous terms. When tolls on
railroad transportation are imposed, the railroad corporations are
made the tax collectors of the state, like collectors of the general
county and state taxes, to fill its treasury by exactions levied on
the producers and consumers who use that mode of transportation.
If the state government has the power to tax transportation on
railways, it is not easy to see why it does not equally possess the
power (saying nothing of the policy of exercising it) to tax trans¬
portation on turnpike and plankroads, and the common highways
and navigable rivers of the country. All are instruments or means
of commerce between the citizens of different states. Railways
and locomotives are but an improved mode of land transportation.
The state governments hold the right of way through their
jurisdiction in trust for the use and benefit of the jiublic ; and, in
the reason and nature of things, they possess no more power to
obstruct the use of the rights of way thus held, or to monopolize
their use, than they do to obstruct or monopolize Ihe natural high¬
ways, the navigable water courses of the country. Commerce
among the states is doubtless, by the provisions of the Constitution
of the United States, to be as free and unrestrained on land as on
water. No one would probably claim or insist that this state
4
could, by prohibitory laws, exclude from our borders the property
of citizens f^f other states or countries, brought here for the legiti¬
mate purposes of commerce, or prevent our own citizens from
carrying their property to other states or countries for market.
Such regulations would be a direct interference with the power of
Congress " to regulate commerce with foreign nations and among the
seeeral sta'es." Nor will it be claimed that the state government
has the power to tax. for the sole purpose of filling its treasury,
the transportation of property of citizens of other states through
or over any part of our jurisdiction, or the property of our own
citizens on its way to market in other states, in case the same is
transported on our common public highways. If the citizen of
Ohio comes to the line of our jurisdiction with his wagon-load of
wheat destined to market, the state government has no power to
meet him, as*he enters our borders, and demand of him the pay¬
ment of a toll or tax on each bushel of wheat in his wagon, for
the privilege or right of passing with his load over our common
public highways or through our jurisdiction. The Constitution of
the United States has given to the citizens of all the states the free
right of way into and tlirough toe ,severál states. It is expressly
adjudged by the Supretme Court of the United States, in the emi¬
grant passenger cases (7 Howard's U. S. Reports, page 464), "that
Congress has regulated commerce and intercourse with foreign
nations and between the several states, by willing that it shall he
free; and it is therefore not left to the discretion of each state in
the Union either to refuse a right of passing to persons or property
through her territory, or to exact a duty for permi,ssion to exercise
it." The court, also in the same case, say : "A right to exclude
is a power to tax ; and the converse of the proposition is also
true, that a power to tax is a power to exclude."
Mr. Justice McLean, giving the opinion of the court, holds the
following language : "If persons migrating to the Western states
may be compelled to contribute to the revenue of Massachusetts
or New York or Louisiana, whether for the support of paupers or
penitentiaries, they may with equal justice be subjected to the
same exactions in every other city or state' through which they
are conqjelled to pass and thus the unfortunate immigrant, before
5
lie arrives at his destined home, may be made a pauper by oppres¬
sive duties on his transit. Besides, if a state, may exercise this
rigiit of taxation or exclusion on a foreigner, on n pretext that he
may become a pauper, the same doctrine will applj' to the citizens
of other states of tiiis Union, and thus the citizens of the interior
states who have no ports on the ocean, may be made tributary to
those who iiold liie gates of exit and entrance to commerce."
In the steamboat case of Ogden vs. Gibbons (9 Wiieaton, 200),
Chief Justice Marshall says, in speaking of the extent of the power
to regulate cottimerce atnong the states, '• It is almost laboring to
prove a self-evident proposition, since the sense of mankind, the
practice of the world, the contemporaneous assumption and con¬
tinued exercise of the power, and universtil acquiescence, have so
clearly established the right of Congress over navigation and the
tra7ispor/(ifio>i of both men and their goods as not only incidental to,
but actually of the essence of the power to regulate commerce."
If a state government has no power to tax commerce or trans¬
portation carried on within her borders on the common public
highways and navigable rivers within its jurisdiction, does the
power exist to tax the same commerce or trade when carried on on
our railroads, plank roads and turnpikes, constructed for the public
use by the government, or in other words does the state, by
authorizing the right of way over its soil, to be improved by pri¬
vate capital and enterprise, for the purpose of facilitating the
operations of commerce and intercourse, acquire a monopoly of
the right of way thus improved, for " a power to tax is a power
to exclude," and a.power to exclude confers the power of making
the right of way a monopol}', and thus subjecting the right to use
rail, plank and turnpike roads, so far as they are the instruments
of carrying on or regulating commerce between the states, to the
absolute and unrestricted control of the state governments.
Railroads are a new and improved mode of land transportation,
not unlike in their effect upon the trade and business of the coun¬
try to the application of steam power to the propelling of vessels
on water. When this state granted the right to the exclusive use
of steam power for propelling vessels on the Hudson river to
6
Fulton and Livingston, it did not take away, impair or in terms
interfere with the rights of navigation which existed prior to the
invention of steamboats in the methods theretofore used. Yet the
supreme court held in the case of Ogden vs. Gibbons (9 Wheaton,
200), that the grant to Fulton and Livingston, of the exclusive
right of transporting persons or property by steam power was an
interference with commerce between the states, and was therefore
unauthorized by law and void.
By modern improvements in the construction and use of rail¬
ways, they have become quite as important instruments of com¬
merce and transportation on land, as steamboats are on water, and
if the state governments have the power to tax trade carried on
on railroads, or to lay protective or discriminating duties or tolls
thereon for the purpose of raising a revenue or controlling the
course of trade and business for the benefit of particular sections
or localities, it is not difficult to see that the power of regulating
commerce among the states is transferred in a degree from the
national to the state governments, and that the country may
sooner or later suffer all the evils which the framers of the con¬
stitution intended to guard against when they gave power to the
federal government " to regulate commerce among the several
states." The power to tax transportation on turnpike and plank
roads, for the purpose of paying our state debt or constructing
canals, would perhaps hardly be claimed by any one; and yet it
is clear that such power if it exist at all may be exercised in re¬
spect to turnpike and plank roads as well as railroads. The state,
by authorizing the right of way to be improved by the capital of
private individuals associated for that purpose under an act of in¬
corporation, cannot thereby acquire any greater right to tax the
use of the improved right of way than it possessed before the
improvement was made. The right of way remains free, subject
only to the payment of a reasonable sum in shape of tolls to "com¬
pensate the company for the use of their capital in making the
improvement and maintaining it in repair; such sum or. tolls to
be fixed by the government according to its judgment of what is
right and just under the circumstances. Imposing reasonable
tolls to pay for the capital invested, and the risk incurred in im-
7
proving a right of way eitiier by laying down iron rails or plank
of pounded stone, or other mode of constructing and improving
roads, rests on a différent principle from what is acted on when
the government imposes a tax on the transportation carried on
over the improved right of way for the purpose of defraying its
expenses or constructing canals. The difference between tolls for
the nsc of the improved mode of transportation and a tax in the
sense in whicii that word is ordinarily used is adverted to by Jus¬
tice l\IcLean in the emigrant passenger cases (7 Howard U. S.
Rep., 40-3), where he uses the following language : "An enquiry
is made whether Congress under the power to regulate cominerce
among the several states can impose a tax for the use of canals'
railroads, turnpike roads and bridges constructed by a state or its
citizens. I answer that Congress has no such power. The United
States cannot use any of these works without paying the cus¬
tomary tolls. The tolls are imposed not as a tax in the ordinarij
sense of that term, hut as compensation for the increased facilitij af¬
forded hij the improvement."
It may well be cpiestioned whether in any case it would be in
the power of a state, under the constitution of the United Statés,
to impose discriminating tolls for the use of the improvement or
taxes on any of her improved rights of way. Would it not be a
direct interference with the free commerce between the states as
established by the federal Constitution, and affirmed by the decision
of the Supreme Court of the United States, for this state to enact
that the citizens of other states should pay double the tolls on all
our canals, turnpikes, plank and railroads, that are exacted from
citizens of our own state? or that citizens of other states should
be prohibited altogether the use of our railroads, turnpikes and
plank roads? for the power to tax includes the power to exclude.
If such enactments could be maintained, no one can fail to see
that the practical regulation of our inland trade, and transporta¬
tion and commerce among the states, would be transferred from
the national to the state governments, and that the country would
be in danger of having entailed upon it all the evils suffered by the
people of the different states prior to the formation of the federal
Constitution.
8
The states possess the same power over the rights of way on
land that they do to authorize the consti'uction of bridges or. the
maintenance of ferries over navigable streams. It has been held
that the state governments may provide for the erection of bridges
and the establishment of ferries over navigable rivers in such way
as, in the whole, to aid and facilitate, rather than to obstruct or
hinder, commerce and intercourse ; but it probably would not be
allowed or tolerated for a moment that Massachusetts should
derive a revenue for the support of its government by a toll or tax
levied on persons or property passing over the Charles river bridge.
The true rule doubtless is, that bridges, ferries, turnpikes, plank
and railroads, when luade or improved under the authority of a
state government, are to be equally free to all the citizens of the
United States, on payment of the customary or reasonable toll or
charge for the use of the improvement.
Chief Justice Taney, in the case before referred to (7 Howard,
492), says: "We are all citizens of the United States, andas
members of the same community must have the right to pass and
repass through every part of it, without interruption, as freely as
in our own state; and a tax imposed by a-state for entering its
territories or harbors, is inconsistent with the rights which belong
to citizens of other states, as members of the Union, and with the
objects which that Union was intended to attain. Such a power
in tlie states could produce nothing but discord and mutual irrita¬
tion, and they very clearly do not possess it."
Chief Justice Marshall, in the steamboat case (9 Wheaton, 235),
says : " As to laws affecting ferries, turnpike roads and other sub¬
jects of the same class, so far from meriting the epithet of com¬
mercial regulations, they are in fact commercial facilities, for which,
by the consent of mankind, a compensation is paid, upon the same
principle that the whole commercial world submit to pay light
money to the Danes."
If citizens of all the states possess the right to pass and repass
through each state, without interruption, and to carry on trade
freely between the states, is it in the power of a state to exclude
those having this right from the use of all or any of our intproved
9
modes of travel and transportation, on payment of the customary
toils exacted " as a compe?isalio7i for the increased facililij afforded
htj the improvement V The power to tax in such cases, includes
the power to exclude ; and if the doctrines laid down by the
Supreme Court of the United States are sound—and no one
will dispute tiiem—the undersigned cannot see what right or
authority the state government has to impose taxes, m the ordi¬
nary sense in which the term is used, on transportation on our
railroads, plank roads or turnpikes ; and the power clearly exists
to tax transportation on one as the other of such roads.
But it is contended that although the state has not the right or
O O
the power to impose taxes directly on the use of the right of way
through its territory, or on transportation over its territory, that it
can impose the tax or tolls for the use of the government, and not
as a compensation for the use of the improvement on property
transported on railroads as a honus for the grant to the corporation
of the right of way, and the other corporate rights and franchises
given to the corporation that constructs the road ; or rather, as far
as most of the railroads in the state are concerned, that the state
can exact a honus for the permission or privilege of continuing to
enjoy the rights, franchises and privileges heretofore freely granted
to them by the legislature, and without exacting a bonus at the
time of making the grant.
One answer to this argument is, that you cannot do that indi¬
rectly which it is not legal to do directly. Under whatever pretense
the tolls or taxes are imposed, they are still taxes on transportation
to be paid in fact to the state treasury, not by the railroad cor¬
porations, for the grant of the franchise, but by the owners,
producers or consumers of the property transported. The rail¬
road corporation adds to its charge for freight, the sum which it
is compelled to pay for tolls to the state treasury. The nature
of the exaction is not changed by a change of the name by which
it is called. It is still in ftict a tax on transportation. But if it
is in fact a ho7ius to the state for a grant of the right of way to a
corporation, it may well be asked, can the] state justly demand a
bonus for the grant of a right of way. The state holds the right
of way over its territory, in trust for the use of all the citizen
2
10
of our common country, and has no right to exclude any of those
citizens from its use. The power given to the railroad, turnpike
or plank road company to take private property for the making
of a road is given only on the ground, and can be defended only
on the ground that it is taken for the public îise, and not for the
use of the corporators. The corporators in such cases are put in
the place of, or represent the sovereign power of the state, and
in that way are authorized to take the private property of the
citizen and convert it into a road for the use of the public, and
then to demand and take from those who use the improvement, a
reasonable compensation, to be fixed by the government if neces¬
sary, for the capital invested and the risk incurred in making and
maintaining it. Subject to that limitation and such other restric¬
tions and regulations as are necessary to make it most beneficial,
the improvement belongs to the public, and should be free to all
the citizens of all the states who choose to use it in the customary
manner of its use.
Bonuses or gratuities at one period were exacted in this state
for the grant of banking charters, but they became so odious that
the practice was soon abandoned. Nothing of the kind has ever
been demanded for the grant of railroad, turnpike or canal com¬
panies ; and since railroad corporations have now no monopoly
character under the operations of the general railroad law, and no
special railroad charter can, as long as that law remains, be
granted by the legislature, under the provisions of the Constitu¬
tion, it can hardly be claimed with truth that tolls on transporta¬
tion are exacted as a bonus or gratuity for a grant by the state of
corporate rights and franchise, or for permission to continue to
enjoy those previously and fully granted.
Such a claim is inconsistent with the idea of general laws for
the formation of corporations, and is abhorrent to all our notions
of equal rights and privileges. The idea of the state exacting a
bonus to be paid into its treasury for the right of corporate fran¬
chises, either by general or special laws, to be expended for the
support of the government, or to construct canals, will not, I
trust, be insisted on as tenable or just. Such an idea is better
adapted to the times of James the First, than to this period of
11
higher laws and a more advanced knowledge of the civil rights of
mankind.
11. If the power to raise a revenue by taxes on railroad trans¬
portation is conceded, is it good policy in reference to the general
commercial and business interests of the state to raise a revenue
by that mode of taxation ?
If this question is considered only in its general bearing upon
the interests of our trade and commercial transactions, no one can
hesitate as to the answer to be given to it. It cannot be insisted
that it is wise to make internal improvements to cheapen trans¬
portation and facilitate intercourse, and then tax them to make it
dear. No country, except perhaps Spain, under the despotism of'
her kings, and New Jersey, under the rule of a monopoly jsarty,
has ever levied contributions on the right of way, or on internal
intercourse, expressly to defray the expenses of its government.
Even England, while she has sought out every device that the
ingenuity of her wisest statesmen could invent, to find sources of
revenue to meet the oppressive demands of her expensive govern¬
ment, which taxes the very light from Heaven, as it enters the
windows of the poor man's dwelling, has never yet trammeled
her internal commerce by a tax on transportation on her railroads
and canals constructed by private capital and enterprise.
The true policy and interest of the state is to invite trade from
other states, and not to repel it by the imposition of taxes in
its transit through our territory. The western merchant who
purchases his merchandise in our commercial emporium will
transport some portions of it towards its place of destination on
our railways, even at greater cost than it could be carried on our
canals, for the reason that his customers want their spring supplies
before our canals are or can be open for navigation. If we impose
a toll or tax of from S4 to S7 per ton, as the bill referred to your
committee proposes to do, in its transit to Lake Erie, over the
New York and Erie railroad, or at the same rate for like distances
over the other railroads, leading from the Hudson river to the lake ;
the natural effect will be to drive the business from our own
12
thoroughfares into Pennsylvania, or into Maryland from the Ohio
river, in case it can be done at less cost through those states.
The time has come when we want low freights in order to go into
more successful competition for the transportation business of the
west.
But further arguments or illustrations cannot be necessary To
show that the general, commercial and business interests of tlie
people of this state, would be injuriously affected by taxing
transportation on our railroads, for the mere purpose of raising a
revenue to support the government. Commerce flourishes most
where its course is left free and unobstructed.
If this subject is considered without any regard or reference to
the necessity of providing revenues to complete the enlargement
of the Erie canal, no one would probably be found to contend
that the imposition of taxes on railroad transportation, was either
wise or just. There can be no doubt or question that the reve¬
nues of the Erie and Champlain canals at the present rate of tolls
will be amply sufficient to maintain the canals in repair, and to
discharge our state debt of twenty-two and a half millions of
dollars, as fast as contemplated by the financial provisions of the
constitution. There is no probability that any diversion of busi¬
ness from our canals, by means of the railroads constructed, or to
be constructed in this or other states, can ever so reduce the
revenues of our canals (and it is not conceded that such diversion
will ever reduce them below the average of the last three years)
that they will not be amply sufficient to pay our State debt with¬
in the period contemplated.
Property can be transported on our canals at the present rates
of toll, at a much less price than it can be carried on railroads
freed from tolls, and as long as that fact remains unchanged, a
large bulk of the transportation business will be done on the
canals, and the revenue of the canals for future years, will, judg¬
ing from the past, be increased by the natural increase of business
rather than be diminished by the diversion of business by means of
railroads, even if they cany free of tolls.
The question then recurs, will the general, commercial and
business interests of the state be promoted by taxing railroad
13
transportation, for the purpose of raising revenues for the enlarge¬
ment of the Erie canal, sooner than it can and will be enlai'ged
by the annual surplus of canal* tolls, applicable to that purpose
under the provisions of the Constitution. When the whole of the
enlargement is completed and the cost of freight reduced to the
lowest figure at which tiie business can be done on the enlarged
canal, there can be no doubt that a considerable amount of freight
will still continue to be carried on railroads. The moreTrapid
conveyance on railroads, connected with the fact that our canals
are not and cannot be navigable quite two-thirds of the year, will
be a sufficient inducement for merchants, ffirmers and manufac¬
turers to use that mode of transportation for certain articles, such
as the lighter descriptions of merchandise, manufactured goods,
fresh meats, fish, live stock, butter and eggs, and many other
articles of farm produce, even at a higher cost than canal trans¬
portation.
So far, therefore, as that description of freight is concerned, no
benefits will be conferred on its owners by the enlargement of
the canal, unless the enlargement is to have the effect to cheapen
railroad transportation, which is not pretended.
But it is insisted that the Erie canal enlarrcement must be
speedily completed, to enable us to retain the great and growing
trade of the west.
In 1835, when the enlargement was recommended by the Canal
Commissioners, the great object sought to be accomplished by it,
was to give sufficient capacity to the canal to do the business
that would come to it. Now the great object sought to be at¬
tained appears to be to prevent the business going from it to
other and more advantageous channels of transportation. But
there is no necessity of adopting the more speedj' enlargement
policy of the canal to save it from becoming a solitude. By the
work already done on the enlargement and what can be done by
the surplus tolls, applicable to that object under the Constitution,
within the ne.\t two or three years the capacity of the canal will
be amply adequate, if it is kept in good repair, so as more efiectu-
ally to guard against detentions by breaks, to do all the business
that will come to it from our own and the western states, up to
14
the time that the work of the enlargement can be fully completed
by the application of the surplus tolls, as contemplated by the
Constitution. The capacity of a canal with double sets of locks
and sufficient water to supply them to do the business upon it,
can scarcely be estimated.
To assume, as has been done, that the work already performed
on the enlargement has been of no utility, and cannot be until the
whole enlargement is finislped, is an assumption that does not ap¬
pear to he warranted by facts. Since 1835, when the enlargement
was commenced, the Rochester aqueduct, which was then in a fail¬
ing condition, has heen rebuilt in a permanent and substantial
manner, at a cost of over half a million of dollars. All the locks
between Syracuse and Albany have been enlarged and doubled,
and all west, with the exception of six, descending each way to
the Montezuma level, have been rebuilt of the enlarged size ; the
trunk of the canal has been widened and deepened through all
the cities and large villages on its line, and other points, where
navigation was before obstructed, have been improved, and 175
miles of section work on the enlarged plan will be completed by
the opening of navigation in 1S53.
With these improvements the average tonnage of the boats has
been increased, since 1835, from about 40 to SO tons and the aver¬
age length of trips has been reduced to nine and a half days ; and
the cost of transportation reduced about twenty-five per cent.
With these increased facilities, all well-grounded fears as to the
capacity of the Erie canal to do the business have ceased.
The number of tons of freight transported on the Erie canal
have more than doubled since 1835 ; the lockages, at the lock
three miles cast of Schenectady, have increased from 25,911, in
1835, to 03,957, in 1847 ; the tolls, although much reduced in
rate, have grown from $1,430,546, in 1835, to $3,055,078, in
1S50.
It is now estimated that by an expenditure of about seven
hundred and fifty thousand dollars more, the remaining old line of
canal, not yet enlarged, can, as a part execution of the general
15
plan of enlargement, be enlarged to 36 feet width at bottom, the
depth of water be increased to five feet, and the remaining six old
locks of the original size can be lengthened, and the tonnage of
boats then be increased to 150 tons, and the cost of transportation,
exclusive of tolls, be reduced one-third below the present charge.
In view of tijese facts would it not be worse than madness to re¬
peal the financial provisions of the Constitution for the purpose of
increasing our state debt, which nowi^j the necessity it creates for
high tolls) constitutes the greatest obstacle m the way of the forwarder,
by borrowing nine or ten millions of dollars for the more speedy
enlargement of the Erie canal, and thereafter tax transportation
by continuing high tolls for years to come to pay the interest on
the debt thus contracted.
The wise foresight of our former state officers, who recom¬
mended the policy of paying rather than creating debt is, as the
pressure of the debt on our transportation interests is being felt,
becoming each year more and more apparent. Sixteen millions
of dollars from the commencement have been expended on the
work of the enlargement, ten millions one hundred and ticcnty-eight
thousand dollars of which was borrowed in nine years, from 1S3S
to 1S46, inclusive, and the sum so borrowed now constitutes a
part of our state debt, and on which sum so borrowed for the
enlargement, there has been paid out of the canal revenues five
millions two hundred and two thousand dollars for interest ! If
the policy recommended in 1S35, by the Canal Commissioners, of
enlarging the canal out of the surplus canal revenues, had been
rigidly adhered to, and no debts contracted, charged on these reve¬
nues, the enlargement could now have been completed out of the
surplus revenues, which, under the borrowing system, have been
largely absorbed for the payment of interest.
From 1S35 to 1S50, inclusive, the canal revenues received into
the treasury, have amounted to thirty-seven millions, sixty thou¬
sand, four hundred and fifty-one dollars; of which 810,012,873
have been paid for repairs and collection, leaving over 27 millions
that might have been applied to the enlargement, if it had not
been appropriated to other uses.
16
From the experience of the past let us learn wisdom for the
future. From the foregoing statements respecting the increased
facilities for business afforded by the work already done on the
enlargement, it maybe seen how unjust and unfounded is the
allegation that the state is not realizing any benefits from the
money already expended on the enlargement, and that we are los¬
ing at least a million of dollars in interest on the money invested,
" to which," in the language of the Governor's message, "must
be added another million in the needless cost of transportation
which would have been saved by the completion of the enlarge¬
ment and "that the amount ' already lost under these heads
cannot be less than ten or fifteen millions." (See Governor's
Message, page 7, Assembly Doc. No. 2.)
But it is insisted that there is danger that the business of the
canal will be diverted, and its revenues be diminished by the supe¬
rior facilities of railroads for doing the business of transportation ;
and that, therefore, the trade of the Erie canal must be retained
and aided by the imposition of protective duties on railroads, and
the canal be placed in the attitude of a monopolist of all the
carrying trade that would seek its channel if no preferable
mode of transportation vvere provided. But in the judgment of
the undersigned, the Erie canal needs no protective duties to
ensure to her a just share of the western as well as our own
trade. Cheapness in price will control the great bulk of the busi¬
ness, and from the rapid increase of population and production in
our own and the western states, judging of the future by the past,
there will be ample business both for the canal and railroads;
and with the lines of railroad in this state freed from tolls, the
future revenues of the canal will, by the natural increase of busi¬
ness, be still increased from year to year, notwithstanding the
small comparative diversion that may be made in the freighting
business by the railroads.
The whole amount of tolls received for the last year, on all the
railroads subject to tolls, was $136,424, while the tolls received
on the Erie and Champlain canals during 22S days of navigation,
amounted to three million forty-five thousand seventy-eight dollars.
All the tolls received in the last six years on railroad transporta-
17
tion in this state, from the commencement of railroad tolls in
1845 to 1850, inclusive, amount to only 8433,726, being less by
8131,722 than was received for tolls on the canals in the single
month of October, 1850. And although the railroad tolls have by
law been paid to the Canal F und they do not necessarily belong to
that fund, as they are not embraced in the " revenues of the state
canals," mentioned in the 7th article of the Constitution, but may
be appropriated for any object that the legislature may deem
necessary or proper. There has yet been no rival channel of
transportation in other states or the Canadas, that has been able
successfully to compete with the Erie canal in the cheapness and
facilities of its transportation.
More than one-half of the actual transportation charges on the
Erie canal, during the last season were for canal tolls, so that the
cost of freight is now less that the tolls. The average charge for
freight on a barrel of flour last year from Buftalo to Albany, was
56 cents ; 31 of which was toll and 25 cents freight—thus showing
that a barrel of flour is carried 360 miles on the canal for the same
price formerly charged for carrying in the United States mail a
single half-ounce letter a little over the same distance. During
the same time, the average freight on a barrel of flour on the
Hudson river from Albany to New York, 150 miles, was 7J cents,
or at the rate of 18 cents for 360 miles, showing that the charge
for freight now on the Erie canal, exclusive of tolls, is for like
distances a little less than one-third higher than on a river which
affords greater facilities for cheap transportation than any other in
the world. When the tonnage of boats on the canal can be
increased to 150 tons by making improvements, in part execution
of the general plan of enlargement, as hereinbefore suggested, and
the cost of freight be reduced one-third from what is now charged
exclusive of tolls, it will not exceed the cost of transportation on
the Hudson river, and no enlargement can probably ever make
the actual cost of freight, exclusive of tolls, on a canal of 7 feet
by 70, less than Hudson river transportation, unless the works of
art can be made to excel the finest works of nature.
If these positions are well taken, it is indisputable that it will
not be good policy to borrow money to hasten the enlargement
3
18
faster than the surplus revenues will warrant, or to tax transpor¬
tation on railroads to increase the amount of such sui-plus.
It would also seem that the forwarders on the canal who have
an investment of not less than two millions of dollars in the five
thousand boats on the canals of this state, do not approve the
more speedy enlargement policy. During the present session, the
Canal Board directed the six remaining locks of the original size
on the Montezuma level to be lengthened so as to enable the for¬
warders to increase the length and tonnage of their boats and thus
diminish the cost of transportation, but preparations for doing the
work had scarcely been commenced before the Canal Board, on
the earnest petition of forwarders, rescinded the order. What the
reason of this change of policy was, has not yet been precisely
stated ; but the suggestion has been made that the owners of
boats of the present size, did not desire to encounter the com¬
petition in the freighting business of boats of greater length and
tonnage. The large amount of capital invested in boats forms
one reason of some weight in favor of gradually enlarging the
canal and thus giving those who are engaged in freighting an
opportunity of accommodating their business to the changed con¬
dition of navigation to be produced by the completion of the
enlargement.
III. Is the imposition of a tax on railroad transportation a just
and equitable mode, so far as citizens of our own state are con¬
cerned, of raising a revenue to defray the expenses of the state
government, to pay our existing debt, and to complete our works
of internal improvement already commenced or to construct new
works not yet begun?
It is a general and just principle that all who enjoy the pro¬
tection and privileges which the government gives should also
bear their just share of the burdens which it imposes. A tax
imposed ratably, on all the taxable property in the state, has
generally been regarded as the most just and equitable mode of
apportioning the exactions which the government makes of the
citizen to pay the expenses of its administration, and when the
government expenditures are restricted to purposes of a general
19
nature, such as concern the welfare of the whole community, and
the government is well administered, the taxes levied for its sup¬
port are cheerfully paid.
If these taxes are levied on railroad transportation, the burdens
of government cannot by that mode of raising revenue be equally
or equitably distributed. Only those who own, produce or con¬
sume the property thus transported will contribute to the support
of the government while all other classes of citizens entirely
escape its burdens, in case the whole government expenses are
thus paid.
There can be no just reason why the citizens living on a line of
railroads constructed by individual capital and enterprise should
be ta.xed, for the advantages they derive from the improvement,
to support the government or to pay the state debt ; while the
citizen living on the banks of the Hudson, enjoying better and
cheaper facilities to market, should be exempted from taxation.
If the state possessed the power, there would be quite as much
justice and equity in taxing the transportation of persons and
property on the Hudson river or the Delaware and Hudson canal,
to pay our state debts and the expenses of our government, and
to finish our canals or construct new ones, as there is in le\'ying
contribution on railroad or turnpike transportation for similar
purposes.
If the expenditure of public money had always been confined
to the proper and legitimate purposes for which goverment was
established, no indirect mode of raising revenue would be required.
But when it is appropriated to private or local purposes ; to benefit
individuals, or particular localities in which persons connected
with the government are interested ; or squandered by a profli¬
gate and corrupt administration of the government, then it is
unsafe to call on the people directly for payment. In such cases
the money must be borfowed, and its payment thrown on some
succeeding generation, or some indirect mode resorted to, by which
it can he drawn from the people in such infinitesimal quantities
that they will not know how or when it is abstracted from them.
One of these modes is the imposition of a tax on transportation.
20
A distinguished member of the late constitutional convention, in
his remarks on the subject of finances, well illustrated this idea
when he said : " I might dismiss this branch of the subject, but I
never can consent that the current expenses of the state and all its
great expenditures should be charged on the right of way, which
the sovereign should hold, not as property for revenue, but in
trust for the million—to promote travel, transportation and com¬
merce. To the extent that the state makes advances, and incurs
a reasonable risk in making a road or canal, the state from the
tolls should fully indemnify herself for those expenses and that risk.
" But when the citizen, at his own expense, makes the road or
the canal, I can think of no worse or more oppressive course than the
Bourbon one which we have commenced of taxing the transporta¬
tion on it for the benefit of the state. The revenues will be col¬
lected in small sums, from everybody in every quarter, and no
one can afford to resist or make efiectual complaint. But the
moneys, when they go out of the treasury, will go in large sums
for families, interests, or localities, to reward followers and pur¬
chase supporters. Such a course must engender the worst oppres¬
sion and the worst corruptions, and soon realise the worst vices,
of the most corrupt governments — taxation on all we consume,
which will allow nothing to move to or from the market without
tribute to the state." Again he says : " The salt and auction
duties resemble, in character and impolicy, the tax on transporta¬
tion, and I think you will not long be able to maintain either.
They are both strictly local taxes; and it is as unjust to defray a
general expense by a local tax, as it is impolitic and dangerous to
make expenditures for local improvements out of a general reve¬
nue. To be safe, local expenditures must be met by local taxes.
To be just, general expenses should be paid from general revenues.
If a particular tax can be collected in a locality, the peculiar cir¬
cumstances which enable it to be raised will expose that locality
to peculiar charges, which render such tax necessary to be ex¬
pended where it is collected."
TV. Is it just or good faith on the part of the state, to impose
tolls on transportation on railroads constructed by private capital
and enterprise, under acts of incorporation granted by the govern-
21
ment, and giving the right to transport property, and which did
not impose or contemplate the imposition of tolls or give any
notice to the individuals who invested their capital, that the legis¬
lature would exercise the power of imposing tolls, under the right
reserved of repealing or altering their charters?
All the railroad corporations in this state, whether created by
special acts or formed under the general law, were authorized to
transport property and persons, free of toll or tax for the use of
the state, with the exception of those companies whose roads are
in the immediate vicinity of and parallel with the Erie, Cham-
plain or Oswego canals. Under these laws 12S4 miles of railroad
have been within eighteen years constructed and put in operation,
and 4S4 more miles are now in process of construction, on which the
total expenditure to the 30th September last, has been sixty mil¬
lion and seven hundred thousand dollars. The individuals who
have invested their funds in the construction of these roads, with
the exceptions before mentioned, have done so,-relying lipon the
good faith of the government not to do any act which would pre¬
vent their realizing a fair return for the use of the capital invested
and the risk incurred.
Funds to construct the New York and Erie and the Northern
roads, on which the bill referred to your committee now proposes
to imposé the same tolls as are paid on the canals, were obtained
only by the greatest exertions on tiie part of those who had under¬
taken or were interested in their construction. The capital in¬
vested in all these roads is very properly subjected to taxation like
other corporate property in the state, and thus contributes its
proportion with other taxable property, to the general support of
government.
Under these circumstances, there does not appear to be any jus¬
tice or propriety in imposing taxes on transportation on these roads,
the direct effect of which will be to diminish the value of the
investment by diverting business to other and cheaper routes in
Pennsylvania or in Canada. The government could, with the same
justice and propriety, levy special contributions on all the banks
chartered by special acts or formed under the general law, for the
22
payment of its debts, the completion of its canals, or the support
of its government.
But it is said these roads on which it is now proposed to levy
tolls will divert business from the canals, and thereby diminish
our canal revenues, and that the state is bound to protect itself
by taxing the property transported over them, and which would
probably have gone on the canal, in case the railroad had not
been constructed. The legislature knew, when these charters for
the New York and Erie and the Northern roads were granted,
that such would be the effect of their construction, and yet they
did not at the time impose any condition as to the payment of
tolls. The section of the state through which these two roads
run, had for a longtime been deprived of advantages in the trans¬
portation of their property to market which other sections of the
state enjoyed, and they claimed, with justice, that they were
entitled to liberality at least in granting charters for the incorpo¬
ration of railroads to be constructed for the purpose of facilitating
and cheapening their intercourse and trade with other sections of
the country. To change the charters of these companies now,
so as to impose tolls on those who use these roads for transport¬
ing their property, for the purpose of completing our public
works or supporting the government, would be greatly unjust on
the part of the state.
But it is urged by the chairman of the select committee that
the state has given to the New York and Erie railroad three millions
of dollars to aid in its construction, and that such grant now
forms a good reason for making reprisals on the road for the pur¬
pose of repaying the money, or some part of it, thus taken from
the state treasury.
The grant of three millions was made, whether justly or not it
is now needless to inquire, to aid in making the road, and thus
benefiting that section of the state, and no condition, as to refund¬
ing any part of the money to the treasury was at the time made.
Such grants from the state formed an inducement for individuals
to invest their capital in the enterprise ; and now, just on the eve
of the completion of the road, it does not seem just for the state,
23
in her sovereign power, to turn highwayman and demand the
repayment of the three million or any part of it in the shape of
tolls or otherwise, before the people to be benefited by the dona¬
tion shall have the right to pass on the road.
But the chairman of the select committee, with a view as it
would seem of mitigating the apparent injustice of the measure,
proposes to make, what he doubtless deems an equitable division,
which is to put tolls on all property coming on the road west
of Deposit, in Delaware county, destined for the east, and on all
that is to be sent to any point west of Deposit, and that all pro¬
perty caming on east of Deposit, and going east or going west
not beyond Deposit, shall go free.
The reason assigned for this discrimination is, that the Che¬
mung, Chenango and Genesee Valley canals were constructed by
the state to give the people living west of Deposit, in the south¬
ern tier of counties, an outlet for their productions to the Erie
canal; and he therefore infers it as just on the part of the state to
impose a tax upon them to pay for these canals. A direct tax to
raise the same amount of money on the counties for whose benefit
these canals are assumed to have been constructed, would seem,
to the undersigned, to be equally just.
This particular mode of equalizing tolls will not, probably,
strongly commend itself to the localities which are to be affected
by it.
The same principle of equalizing tolls on the Northern road is
also recommended by the chairman of the committee. He pro¬
poses that tolls shall only be imposed on that road on all property
transported east from Ogdensburgh to Rouse's Point, and west
from Rouse's Point to Ogdensburgh ; and that all freight sent for
or by the inhabitants of that part of the state, living intermediate
those places, shall go free, or, in other words, that all property
going from lake Ontario east, and destined for Boston or any part
of New England, or down Lake Champlain to the Hudson river,
and all that shall be sent from any place east of Rouse's Point to
Ogdensburgh, or any place west, shall pay the same tolls as if it
were transported the same distance as the length of the road on
24
the Erie canal. To carry out the principle of equalization and
non-diversion from the Erie canal contended for, the same tolls
should be charged on property thus transported as it would have
paid if transported through the Erie, or the Erie and Oswego
canals, to the places of its destination.
Another reason urged in favor of the imposition of tolls on the
Northern railroad is, in effect, that it is the duty of New York to
protect her trade and commerce against the rivalry of Boston, by
protective duties on property transported through our borders on
a railroad mainly constructed by Boston capital under and in
pursuance of an act of the legislature of this state, for the pur¬
pose of bringing through that route a portion of the western trade
to Boston, and sending their manufactured goods and other mer¬
chandise in return to the west.
I imagine such kind of protective duties, imposed by New
York, under the circumstances stated will not be as satisfactory
to Boston capitalists and manufacturers, as are the protective duties
imposed by Congress on cotton and woolen fabrics imported from
abroad; and in my judgment such kind of protection against theen-
terprise and capital of Boston is unworthy of this great state, and
the principle should be repudiated by the legislature in case she
had the right and power thus to legislate. A policy so narrow
and unjust can never advance-the true and lasting interests of any
people.
V. Is it just towards the central line railroads, or that portion
of our citizens whose location or business compels or induces
them to use the central line for transporting their property to or
from market, to continue the imposition of tolls on them, while
other roads and citizens in other parts of the state are e.\empted
from like burdens ?
It is scarcely disputed by any one who has reflected on this
question, that all the lines of railroads competing for the business
of transporting persons or property, should, so far as they are to
be afiected by the policy or action of the government, be placed
on terms of perfect equality. The competition which naturally
25
arises between rival routes for the same business, will necessarily
reduce the charge for transportation to the lowest figure at which
it can be done ; and justice to those who have invested their means
in the construction of the roads, as well as justice to those who
wish to avail themselves of their use, seems to require that all
should enjoy a free and unmolested field of competition.
It is a conceded principle that one class of citizens should not
have conferred on them by the government, privileges or facilities
in the transaction of their lawful business, which are denied to
others.
If tolls are continued to be exacted on transportation of persons
or property on the central line, they should, on the principle of
equal rights and privileges, be imposed on the other lines that go
into competition for the same business. In this, as in other mat¬
ters, equaViUj is equity. If the interests of the canal are alone to
be regarded in the discussion of this question, no one can fail to
see that all the roads leading from the Hudson river to the lakes,
may equally affect their interests, and if toils are to be imposed
on one line to protect the revenues of the canal, they should, for
the same reason, be imposed on the other, so far at least as busi¬
ness coming from or going to the western states is concerned. If,
therefore, it is unjust, under the circumstances, as I have attempted
to show, to levy tolls on the northern and southern roads, it neces¬
sarily follows that the central line should also, in justice, be
exempted from their payment.
But this question more concerns the people in our state who
desire to use the central line to transport their property to mar¬
ket, than it does the railroad corporations. Those who transport
their property on the roads in fact pay the tolls, rather than the
owners of the capital invested in the road, and it is difficult to see
why those citizens living on the central line should be taxed on the
transportation of such articles as they desire to send on it to mar¬
ket, while all who use other railroads in the state for the same
purpose, are exempted from the payment of like charges. It can
only be upheld on the ground that those on the central line have
derived greater benefits from the construction of the Erie canal
4
26
than those residing in other sections of the state. If the princi¬
ple is adopted, that those localities which have derived the greatest
benefits from the Erie canal are to be specially taxed for these
benefits, the city of New York should certainly be compelled to
share the burdens in common with the sections of country lying
on either side of the canal.
But if the tolls are to be continued on the central line of rail¬
roads, and the others to remain exempt, other important interests
than those of the people in the interior who use that line for the
conveyance of their property, or the persons who own the capital
invested in the roads, will be injuriously affected. If tolls on the
central line have the effect of diverting business, as they will, from
that line to the northern roads, if they are left free, then the towns
along the roads, as well as the transportation interests on and along
the Hudson river, are deprived of a portion of the business which
would come to them if left free to take its natural course. No
system of partial, instead of general, taxation can, from the intrin¬
sic difficulties of the thing itself, ever produce other than its legiti¬
mate fruit—wrong and injustice. But I have already extended
the discussion of this subject much beyond what I designed when
I entered upon it. It involves the examination of great and
important principles of political economy, as well as of constitu¬
tional law ; and it has been my aim only to find the true principle
which should guide the legislature in this matter, regardless of the
effect which its practical application may produce on particular
interests or localities ; being confident that an adherence to cor¬
rect and sound principles cannot, in the end, be otherwise than
beneficial to the general interests and the welfare of the state.
For the reasons herein stated, I have come to the conclusion
that the bill referred to the committee to impose tolls on the New
York and Erie, and the Ogdensburgh and Lake Champlain rail¬
roads, ought not to be passed into a law, and that the prayer of
the petitioners for a law to exempt the central line railroads from
tolls, should be granted.
All of which is respectfully submitted.
CHARLES A. MANN.