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Eastman......
Exemption of evidences
of debt from taxation
A 58331 2
Szukam
University of Michigan.


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Exemption of Evidences of Debt from Taxation.
SPEECH
OF
SAMUEL C. EASTMAN,
SPEAKER OF THE HOUSE OF REPRESENTATIVES,
IN THE
LEGISLATURE OF NEW HAMPSHIRE,
AUGUST 22, 1883.
CONCORD, N. H.:
PRINTED BY THE REPUBLICAN PRESS ASSOCIATION.
1883.

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Exemption of Evidences of Debt from Taxation.
110053
SPEECH
OF
SAMUEL C. EASTMAN,
11
IN THE
SPEAKER OF THE HOUSE OF REPRESENTATIVES,
DIGT-
LEGISLATURE OF NEW HAMPSHIRE,
1
AUGUST 22, 1883.
CONCORD, N. H.:
PRINTED BY THE REPUBLICAN PRESS ASSOCIATION.
1883.
EXEMPTION
OF
EVIDENCES OF DEBT FROM TAXATION.
Mr. Speaker:
This bill provides that evidences of debt shall be exempt
from taxation. I desire to say a few words upon this sub-
ject. I am well aware that the mere suggestion of the
exemption of almost any species of property from taxation
is unpopular, and especially so if it is a suggestion that evi-
dences of debt shall be that species of property. But
notwithstanding that, I believe there are some reasons
which may be advanced in favor of this bill, and which
should be submitted to the house. It may be, and very
probably is, true, that the majority of this house will not
agree with me in the view that I take upon the subject. I
deem it none the less my duty, as well as my privilege, to
present the views which I entertain, and I beg that you will
at least give the reasons which I shall present a fair consid-
eration, whatever may be your final action.
If the present law in relation to this subject really works
satisfactorily, and produces the results that those who
framed it desired, I should say that there is no reason
to change the law, because any law in relation to taxation
which is permanent, which is fairly administered, which
really is administered effectually in every particular, will
probably work itself out in such a way that no practical
170980
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injustice will be done. It matters very little what the the-
ory of taxation is if it is really justly administered, because
it adjusts itself. The people on whom the burden is put
in the first place have the power, and will exercise it, to
thrust it off upon others, who in fact pay the tax. So, if
this law is found actually to work as it was intended to, and
bear with equal force upon all persons who are theoretically
subjected to it, even if it is unjust in theory, I should not
claim that in practice it would not work out an equitable
result, provided that time enough be allowed for the equal-
ization of the burden. Let us consider whether this is
actually the fact. The persons who pay any given tax are
not the persons who walk up to the collector's office and
put down the money, but the consumers or users of the
commodity or thing which is taxed. Provided, as I say,
that the law has been allowed to remain in force a sufficient
length of time, this is a rule of universal application. It is
illustrated by a tax which is not known in this country, but
which is very common in Europe,-what is called the
"Octroi" or "Gate tax." That is a tax which is imposed
by cities upon all articles of food that come within the
walls of the city. Take, for instance, the city of Paris,
which is and has been for ages past surrounded by a wall,
and to which entrance is obtained only by certain public
gates and avenues. At all those gates are stationed offi-
cers of the police, and it is their duty to collect taxes, of a
certain sum, upon all articles of food that pass through
those gates. This tax is in lieu of those taxes that are
imposed in this country for the support of the city govern-
ment.
Who pays the tax that is imposed on these articles when
brought to the gate of the city? Of course, in the first
instance, the tax is paid by the party who brings the article
there, and asks to have it brought into the city; but that tax
is invariably added to the price. No person can get an arti-
cle without paying the price of the article immediately out-
5
side of the city, then, in addition, the tax that is levied upon
it. That is what I mean when I say that the person who
uses the article taxed is the person who pays the tax.
I will not take up time at present in showing to you that
this law applies to all kind of taxes. It is taken into ac-
count in case of real estate. It is often in terms added to
the rent that the owner would otherwise obtain for his
property.
Now, gentlemen, does the present law taxing money at
interest, or evidences of indebtedness, bring about the re-
sults that the persons who drafted the law desired? Of
course the object of the law was, that all money at interest,
whatever may be its situation, unless it comes within the
offset that is provided by one clause of our statutes, should
be subject to taxation; that, in the first place, it should be
returned by the person who held that evidence of debt, and
in the next place that it should be added to the sum of per-
sonal property on which the taxes are assessed. Let us
examine briefly the statistics of this matter. I have tak-
en the returns that were made to the state in the years
1871-'2 by the selectmen of our towns for the purpose
of the apportionment of state taxes. I find the average
amount of money at interest in those two years, that was
returned by all the towns in this state, was $5,200,000.
They return the average town debt for the same two
years, the most of which was held by the citizens of this
state, at $7,900,000. The average state debt for the same
time was $2,250,000. There was deposited in the national
banks at one period during those two years, according to the
returns that were made to the United States government,
$2,200,000. So, from those three sources alone, $12,350,000
was the sum that was subject to tax under our law, when
only $5,200,000 was taxed, in 1871 and 1872. Now, if you
add to that the amount of money loaned by individuals,
whether in the state or out of it, because the law makes no
distinction in this respect, thus including all the money
6
loaned in the state of New Hampshire on Western mort-
gages, you reach a sum that I am unable to estimate, but
which is many times the amount actually taxed by the state
of New Hampshire. This was deemed to be an evil, and we
had a tax commission to investigate it. That tax commis-
sion did make their investigation, and they made their re-
port. In consequence of that investigation and report the
law was passed by the state of New Hampshire under which
we are now living, and that law required that returns
should be made, by every person liable to taxation, under
oath.
I have said that in 1871-'2 the average amount of mon-
ey at interest taxed was $5,200,000. In 1878, the year
before this law went into effect, the amount had shrunk to
$4,138,000. What was the effect of the law? The next
year the amount of money at interest taxed was almost
$15,000,000, nearly three times the amount in 1871-'2,
and more than three times the amount in 1878. The infer-
ence that would naturally be drawn from that is, that the
law is a good one; that it did produce the results that the
devisers of the law anticipated; and that a large amount of
money was brought within the taxable power of the state in
consequence of that law. The inference that I draw from
that fact is, by reason of certain other statistics that I shall
give to you in a minute, that the law caught people unpre-
pared. There are many devices for avoiding the application
of the laws for the taxation of personal property. This was
a new difficulty to the average tax-payer in New Hampshire.
He did not see his way out when it was first sprung upon
him; and a great many men made true and honest returns,
and actually gave in the amounts of property of that kind
that they held in their hands. That the assessors got all
the property of that kind that the law was intended to
reach that they even got one half of it-I don't believe.
They got but very little more than the town and state debts,
and the deposits in the national banks. When you add to
7
!
that, as I suggested before, the amount of money loaned on
mortgages and on personal security, both within and with-
out the state, it will readily be seen by any person who has
any knowledge of the vast sums loaned in the West that
they utterly failed to get the whole, or more than a small
fraction, of the vast amount of money at interest in the
state.
How is it with the return made for the present year on
which the board of equalization has made up an apportion-
ment of the state tax? This year the amount has shrunk
from $15,000,000 down to $8,400,000, and it has been a
constantly decreasing quantity ever since the law compelling
returns of this kind was passed. So that, in fact, while the
amount of money at interest, while the amount of personal
property, as it is generally called, of this country, has been
gradually increasing in the state of New Hampshire, it has
been rapidly going out of the state and vanishing from the
touch of the assessors. I claim, under these circumstances,
that this law does not produce the results which the makers
of the law designed and intended it should. I am asked to
give the figures for the intermediate years. The figures are
only returned once in four years now to the state depart-
ment, for the purpose of equalizing the apportionment of the
state tax; and there are no means that I am aware of by
which the figures for the intermediate years can be ascer-
tained.
Now there is another feature of this law which does not
commend itself to my approval,-the inquisitorial nature of
the law. It presents an inquiry into every man's private
concerns; it presents an inquiry which every man feels and
resents as a demand to know something about his personal
affairs that he does not like to make public, and that he
feels ought not to be given to the public.
If there is any system of taxation which will produce
equally just results and will avoid this inquisitorial feature,
I think that there is no person within the sound of my voice
8
:
whose commendation it would not receive. The inquisito-
rial part is not a desirable feature of the law.
Then there is another element in it which is more than
simply disagreeable,—it is positively objectionable,—and that
is, that it requires the oath of every individual.
Why should it be objectionable that every tax-payer in
the state is called upon to make oath to statements of his
liability to contribute to the public support? Perhaps if
the mere statement of a fact were all that was dependent
upon this administering of the oath, no objection could be
taken to the act. But please remember that every time you
place a temptation before a man to take a false oath, you
place a temptation that will not be resisted by a large num-
ber of people; and you do place such a temptation before
him whenever the taking of a false oath personally affects
his own interest. You place a temptation before him which
tends to the degradation of the oath. The administration
of the oath should be preserved in its purity. It should not
be treated lightly by the people of this state. It is neces-
sary for the administration of justice. It is much better
that every man who comes into a court of justice and steps
upon the witness stand, and there takes the oath to tell the
truth, should feel that it is not a light matter, and that he
has assumed an obligation which cannot be easily disre-
garded. We have all heard of "custom-house oaths." The
phrase is on every man's lips who has to deal with affairs
in all ports of entry. It is a notorious fact, that when oaths
of that kind are demanded with great frequency, persons
who take them come to regard them as a mere form, and
nothing stands in their way, or prevents them from swearing
to what is false, so far as fear of the consequences or their
consciences are concerned. A like temptation is placed
before every man in the state of New Hampshire. I don't
mean to say that every man in this state, when he takes this
oath, takes a false oath ;-far be it from me to suppose that
of the people of New Hampshire;-but I do say that there
9
are many instances, and many within the personal knowl-
edge of every man present, where persons take the oath,
and their neighbors believe that they state what is not
the truth, and that they under-estimate and conceal the
actual amount of property of this kind that is subject to
taxation.
Then, again, they are often drawn into this without actu-
ally intending to take a false oath. In the first place, there
are various subterfuges and devices by which men suffer
their consciences to lapse into disregard for truth. Take,
for instance, the very common device which I have heard
mentioned—and perhaps there are people here to-day who
believe that it is entirely proper to resort to this device to
avoid the law. People in March go into the markets and
buy a sufficient amount of United States bonds to cover the
amount of the indebtedness due them, and they buy these
United States bonds, as they easily can, upon credit; then
on the next day-they may do this on the 31st of March—
on the next day they make their return. They now say,
I have not debts due me that are not balanced by debts I
owe-meaning the debts they owe for the United States.
bonds. The day after they sell the United States bonds,
and the transaction is complete.
Now I will not undertake to say whether this is an
evasion of the law or not; but I think you can see that
the moment a man starts on that career, he has taken a
step on the down-hill track; and the next time he will say,
It is not necessary for me to resort to this device; I may just
as well say that I have no such amount of property. This
is contagious. The result is, that the assessors in our va-
rious towns take an oath to appraise property at its actual
cash value; whereas the notorious fact is, that not one in a
hundred deliberately makes such assessment of real estate.
In many other respects they allow their obligations to be
evaded. We have as proof of this the report of the board
of equalization in this state, where they reduced the tax upon
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railroads, I do not remember the percentage, but a very
large one, because they say that the real estate, upon the
examination they have made, is found in this state to be so
much undervalued throughout the whole state.
Now I readily admit that no one can secure absolutely
correct results in regard to the valuation of property. We
use human instruments to do this. But does any one believe
that if the cause of this were simply errors in judgment,
they would all be on the one side, and that there would be
so large a percentage of undervaluation throughout the
whole state? I cannot draw such a conclusion. How is
it in other states? I find that in New York, some ten
years ago, they had a commission to investigate this subject
of the valuation of property and the assessment of taxes;
and their commission made this statement, that "in no
case had the assessors complied with the law as to the valu-
ation of real estate," and the result was that in the whole
state the valuation of real estate was only forty-two per
cent. of the real valuation.
How is it here in New Hampshire? A prominent manu-
facturing company in Manchester complained of the valua-
tion that was put upon their real estate, not that the amount
was in excess of its real value, but that they were over-val-
ued relatively to other real estate in the city; and they com-
plained because other real estate in the city was valued at
only fifty and one half per cent. of its real value, and their
real estate was valued, not at its full value, but at a per-
centage that was above that. That is not an exceptional
case. I do not speak of it as reflecting upon the assessors of
the city of Manchester in distinction from those of other
places. What I complain of is, that the disease is catching,
and it has spread over the whole state. The outcome of
the complaint was, in the case of the city of Manchester,
that the court reduced the valuation of that manufacturing
company to the average valuation of the real estate in the
city of Manchester, not pretending that the company was
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over-valued, but saying that in order to equalize their taxes
they must be brought down to a general level because they
could not raise the other up.
Now, if the tendency of the present system is to lower the
moral tone of the community, if it is repulsive to the feel-
ings of the community, if it fails to produce the desired
results, let us examine a moment and see on what it is
founded.
The bill of rights in New Hampshire, and also our consti-
tution, lay down the principle that protection is the correla-
tive of taxation, and that a man is taxed because his prop-
erty is protected and because his life is protected; and they
also lay down the principle that all taxation should be pro-
portional; that is, if a man's property is protected, he
should contribute in proportion to his property. Inasmuch
as his property is protected the same as that of others, then
his contribution should be proportional to the contribution
of other people. This is only a statement of what is gener-
ally recognized as law upon the subject. The supreme court
of the United States (19 Wallace 501) has laid down the
same principle, without regard to the enactment of the con-
stitution. They say, as a principle of general common law,
"the expenses of protection are very properly all appor-
tioned among the persons protected, according to the value
of their property protected."
There are three or four general principles of taxation
which I think every one will recognize. It may be, when
I come to apply some of those principles. you may not
go with me, and you may doubt about the correctness
of my application; but I cannot think there will be any
difference as to the statement of the general principles.
In the first place, I say, that, as stated by our constitution,
taxation, so far as principle is concerned, should be pro-
portioned to the property. Hence, second, there should be
no double taxation of the same property at the same time.
Of course the second principle follows inevitably from the
12
first. As our supreme court, by Chief-Justice Parker,
one of the most eminent jurists that the state ever had,
has declared, double taxation is "unjust, oppressive, and
unconstitutional." I say that this principle is just as plain
and binding as the other: No property should be subjected
to double taxation at the same time for the same purpose.
Third, the law should be so framed, if possible, as to pre-
vent the shifting of the burden, or the evasion of the just
liability to taxation.
What I said in the beginning, very early in my remarks,
may, perhaps, seem to conflict with this statement. That
is, I said no matter what the system of taxation is, if per-
sisted in, if properly administered, no man will be able to
escape his fair share of taxation, and no man will fail to
pay the part that belongs to him. But the trouble is, that
the law is liable to be evaded, and is not likely to be per-
sisted in, and in that case there may be evasion or shifting
of the burden. So the law should aim at preventing the
shifting of the burden and laying it on the shoulders of
another, and the evasion of the just liability that belongs to
each man.
Then I say, fourth, recourse to the oath of the person to
be assessed should be avoided, if it can be with justice to the
community.
In regard to my first proposition, which is perhaps that
on which my whole argument more especially hangs, having
suggested that all property should be subject to taxation, the
natural and first inquiry is, What is property? What do
you mean by the word? And on the definition of this word,
and from the different meanings that are applied to it by
people under different circumstances, arises a great part of
the confusion that exists upon this subject. I say that all
property should be taxed: that is a general principle.
My definition of property is, that it consists of those natural
agents which man has agreed shall be separated and set
apart for private ownership, and the products of human in-
13
dustry. If there is anything in the nature of property that
does not come within one of those two classes, I fail to find
it. Land is a natural product, and civilized communities all
over the world, with few exceptions, have agreed that it
shall be divided up and made a part of individual owner-
ship. That is the case in this state. Air is a natural prop-
erty which we cannot reduce to private ownership. Then, on
the other hand, there are the products of human industry.
Everything that a man makes, or can induce these natural
agents to confer upon him by the result of other natural
agents and that he can reduce to his own possession, is
property. And when you have got that, you have got all
that is properly meant by the use of the word "property "
in the constitution.
Now I come to what I suppose is the dividing line be-
tween me and some other gentlemen in this house. I say,
in regard to the next proposition, that title-deeds are not
property in any sense of the constitution: they are merely
the evidence by which you show that you have the right to
the particular thing. Therefore a title deed is not subject
to taxation under this clause in the constitution. I suppose
no one questions this when it is in regard to a deed of a
farm or a house-lot that he holds or occupies. There is not
a person here who would not say that if he were taxed for
the house and lot which he occupied as his homestead, he
should not also be taxed an equal sum for the value of the
title-deed, the piece of paper by which that title was trans-
ferred to him from some previous holder. The intrinsic
value of a title-deed is nothing: it is a mere scrap of paper
that has no real value in itself; it may be lost and entirely
disappear; there may not even be a copy of it on the face
of the globe; and yet he may be able to maintain his right
to that piece of land. All the advantage of it is, that the
possession of it enables him to prove his case, if any one.
contests his right, with greater facility than he otherwise
could. Now, then, title-deeds of all kinds are subject to one
14
and the same rule. If they are not taxable in one case, they
should not be in another; and if the effect of a given piece
of paper is simply to enable the holder to assert his claim to
some species of property, some particular thing that exists
somewhere, then that is all that it is good for, and it is all
that it should be regarded for, and it should not be taxed
as property. Yet a title-deed may be the subject of a suit at
law. It is protected by the law, and every man has the
right to the custody of his title-deed; and if it is taken from
him, he may vindicate his right in the court; and the court
exists for the purpose of protecting his right to that piece
of paper just as much as it does for the purpose of protect-
ing his right to the land; but it should not be lost sight of
that it is merely as an incident to the piece of land. And
while the court does not say because the thing is of a trifling
value he may not invoke the intervention of the court, yet
because the thing is of a trifling value, so small that we can
not estimate it for the purpose of valuing it as property, it
should not be subject to taxation.
I say all property should be taxed. To this there are
a few exceptions. Of course it will readily occur to any
one that it is useless to tax a man for those articles that are
necessary for his daily support, articles which the policy of
the state has declared shall not be taken from him to pay
his debts. The same reason applies that applies in the case
of exemption from attachment. One means of collecting a
tax is, by levying on the thing taxed or on the person who
owns it. Now, of course, it does no good to go and levy on
those articles that a man owns, and sell them for the pur-
pose of paying a tax, when the effect of that operation is
that he will turn around and demand contribution from the
public for his support because he has not the means for his
own subsistence. Therefore, of course, the law universally
regards those articles as exempt from taxation which are
necessary to a man's existence and to the existence of his
family, and which the law exempts from attachment for the
15
payment of his debts. It may possibly be that the law, in
its liberality, has exempted a larger amount in some cases,
as, for instance, a homestead, than the state ought to
exempt from taxation, but the general principle that gov-
erns is the same. Then there is another exception, and that
is, articles that are so small in size, and which may be so
easily secreted, that they cannot be got at for the purposes
of taxation. With these two exceptions, it seems to me
that the rule should be universal, and that all property
should be taxed.
There are two ways of arriving at this result: One way
is, to take each individual and balance his account with the
world; that is, call upon every man to say how much prop-
erty he has in his hands of every kind and description, and
what debts he owes of all kinds and descriptions, and strike
the balance. That, of course, if persisted in and applied to
every person through the whole state, would give the whole
of the property of the citizens of the state accurately; and if
such a law could be administered there is no doubt it would
produce entirely just results. But it would be absolutely
impossible to administer such a law. with justice and equal-
ity. Though the state has attempted to apply such a law
to money at interest, or cash on hand, we never have at-
tempted its application to any greater extent; and if a man
owns other things, like horses, he must pay a tax on them,
although he owes all they are worth. The fact is, that you
cannot apply the principle, and its application would lead
us into greater evils than the present law.
The only way is to tax every species of property wher-
ever you find it, and in the custody of any person who
may happen to have it. Tax it to the man who holds
it. Tax it to the man who sets himself up to be the pos-
sessor thereof. The state cannot spend its time in de-
termining the question of title. It is a difficult one for
the courts to solve, much more for the assessors. There-
fore tax the property in the hands of the man possessing
16
it; and if he does not wish to be taxed for it, if it is not
his, he can easily place it in the hands of the true owner,
and no injustice is done. If he owes for it so that it actu-
ally is not his, it is his own fault, for which the state should
not be punished. The state cannot forego its right to con-
tribution on that property simply because some one has
taken it into his custody as a speculation, or for his own
convenience, or for his own support, even; because the state
has the right to say that all property, wherever it is and in
whosesoever hands it shall be, shall be subject to taxation.
No one questions but that real estate should be taxed.
The four principles can be successfully applied to it. It is
proper to tax it. It is easily done, and when you have taxed
it you know it, and there is no danger of subjecting it to
double taxation, as land. It can be discovered without re-
sort to any inquisitorial device of an oath. There is no
need of compelling a man to swear what it is: every one of
his neighbors knows sufficiently well, if he puts it on paper
without oath, whether he has undertaken to deceive. The
sanctity of his oath would add nothing to the mere listing
of his property. It is not inquisitorial, because every one
knows who possesses and claims to own it. It answers all
the requirements of the general principles I have laid down.
So it is with stocks of goods, as they are plainly in sight;
so it is with cattle; so it is with horses; so it is with car-
riages; so it is with all mechanical instruments; so with
furniture over and above that which is necessary for a
man's support and exempt from attachment. It is a wise
and necessary result of the constitution and the principle
that I have stated here, that those species of property should
be subject to taxation without any exception. So it is with
machinery, and doubtless so it is with any species of visible
and tangible property. And when you have got them, what
I say further is, you have got everything that the state has
any right to lay its hands upon, and so should contribute to
the support of the government; and the moment you step
17
beyond that you are trenching upon the second principle,
and doing what our supreme court has said is unjust and
unconstitutional-you are subjecting something to double
taxation.
Mr. Stevens-I would inquire of the gentleman from
Concord, if he believes in taxing money on hand or on de-
posit, as a species of taxable property; if his theory of taxa-
tion will permit the taxation of money on hand, that is,
money in a man's pocket, or money on deposit in the bank?
Mr. Eastman-I am very glad the gentleman has asked
the question, for it calls to mind an omission I have made,
and a statement I had intended to make. Gold and silver
are property. There is no shadow of question about that. If
a man owns a stock of hardware, what is it but iron, to
which a certain amount of value has been added by means
of industry? Does it matter whether that iron is simply in
the ore, or has been converted by labor into a more valuable
product? The stock of hardware and the iron are equally
subject to taxation. Now, what are gold and silver, whether
coined by the government or in bullion, but just the same
species of property as iron or copper ore? They are equally
the subjects of taxation, they are equally property, and they
should equally come within the law taxing property.
Mr. Stevens-Now, if the gentleman will allow a further
question. Suppose a man takes a thousand dollars in gold,
places it in my hands in trust that I will repay it to him
some time, and takes in the place of it a promissory note to
establish the contract: I ask you the practical question,
whether the law may not with just as much propriety treat
that piece of paper in his hands as property for the purposes
of taxation as it may the gold itself? I am speaking now of
the practical question. I will admit the theory-the ques-
tionable theory-of whether or not a note of hand or evi-
dence of indebtedness,-for instance, a government bond,-
is property, and yet still for a hundred years or more they
have been property in this state; but I put it only as a prac-
2
18
tical question, admitting the theory, even, that the gentle-
man, in common with writers upon this question of taxation,
has claimed, that all the taxation should come upon tangi-
ble property. But as I don't propose to say anything more
about this, I ask the gentleman to make the distinction
between the note in his possession as property, and the gold
which he has parted with, and which is in my hands to be
repaid him hereafter.
Mr. Eastman—If the gentleman will pardon me, I will not
answer his question just at this moment, because I am com-
ing to the consideration of the very problem he has pre-
sented. It is, of course, the essence of the question I am
discussing; and if he will allow me to take it up in the man-
ner in which I had planned, I think I shall answer, before I
get through, both of his inquiries; and if I do not, I shall be
very glad if he will call my attention to it.
I was just about to say, there are claims upon others that
are generally regarded as property,―as, for instance, my
neighbor, Mr. Mann, has a farm, and he raises hay, and he
sells to me a certain quantity of that hay. I am not ready
at the time of the sale to pay him, and he sells it to me upon
credit. Now he has parted with his hay, and it has gone
into my barn, and perhaps my horse has eaten it up, but he
has a claim upon me for a certain sum of money that I am
bound to pay him. Now that debt is recognized by law.
The courts of the state can be invoked to enable him to col-
lect that debt of me. It is subject to the protection of the
law, and it can be sold by him to another person; and if I
have at any time so adjusted the amount with him, and
agreed to pay it in the shape of a written piece of paper
commonly called a note,-which, by the way, does not in-
crease my liability in the least: it merely enables him to
have a greater facility in the collection of the debt, he can
take that note and sell it to some other person: it has all
the properties of a vendible thing, as I might say. It can be
bought and sold, it can be transferred from one person to
19
another, and it constitutes a claim that people generally
have been in the habit of calling by the word property; and
in a certain popular sense the application of the word prop-
erty to it is not improper. But I claim and maintain that
under the distinction that is laid down in the constitution in
regard to the taxation of property, it is not property,—that
is, it is not property subject to taxation. Now, it is true
that a man who has a large number or amount of these
claims upon others is ordinarily called a man of property.
That is a popular use of the term. It is a proper use of the
term in general parlance. And here arises the confusion,—
and here arises the trouble which I understand very well
I have got to meet,—that in the minds of the community and
of people generally it seems to be an injustice if a man of
property, as he is called, who possesses a large amount of
claims upon others, who, perhaps, in the country towns pos-
sesses more wealth than all the others together, who has
loaned his money to his neighbors, and has claims upon all
their farms, should be allowed to escape from direct taxa-
tion. It seems to be unjust. And, gentlemen, if it is un-
just, of course it ought not to be tolerated. And there is the
very point to which I desire to direct my arguments. I
will state the principles on which I depend, and will show
you why I say it is not unjust.
:
I will take some illustrations, and some of them, I
think, will answer the inquiries of my friend from Nashua.
Suppose I have a piece of land which is worth ten thou-
sand dollars it is unimproved; there is nothing upon it;
it brings me in no income; and, of course, under the law it
being property that I have the beneficial use of, because I
make all the use I see fit to make of it, I am bound to pay,
and should and do pay, the taxes upon it. My friend Gen.
Stevens has ten thousand dollars in gold coin,-I trust it is
not an impossible supposition either, and he is making no
use of his gold coin, and he has it locked up in a box, and
he is very anxious for fear thieves will break in and steal it,
K
20
:
and he equally with me lets it be known to the assessor. I
pay the tax because I cannot help it: he pays it because he
honestly makes the return to the assessors. We are foolish
men he is liable to have his gold stolen, and I have not
the means of improving my land. If he would let me have
his ten thousand dollars in gold, I could transform it into.
buildings upon that land that would produce me twelve hun-
dred dollars per year and the taxes that I should have to
pay on that land. Gen. Stevens has confidence in me, and
lets me take the money, and I employ a person in Massachu-
setts to bring materials from Massachusetts that were not
here before, and put them upon that land, and I give him
the ten thousand dollars in gold, and he carries it out of the
state. Now the ten thousand dollars in gold is gone. I
should like to know how any New Hampshire assessor could
lay his hands on it. Upon that piece of land stand build-
ings worth ten thousand dollars. The assessor comes around
and says, "You have buildings on your land?" "Yes."
"What did they cost?" "Ten thousand dollars." "Are
they good buildings?" "Yes, they are worth all they cost
me. The land is worth as much as before; perhaps I might
think it is worth a little more on account of improvements,
but we will say it is worth just as much." Now he says,
"I must tax you on ten thousand dollars more."
Of course,
and in accordance with the principle I lay down, it should
be so taxed, and I should pay a tax on twenty thousand
dollars. He goes to Gen. Stevens and says: "You have
your gold still ?" "No, I let Mr. Eastman have it."
did not give it to him did you?" "No, I merely loaned it
to him. He is going to pay me some time or other, and he
has put it into his building there." “He owes it to you?"
"Yes." "Well, then, we must tax you for ten thousand
dollars." The gentleman cannot object as the law is, and
he has to pay his tax on the ten thousand dollars. Now
tell me, is there thirty thousand dollars in the state of New
Hampshire where before there was twenty thousand? The
"You
21
ten thousand dollars in gold has gone out of the state. All
that remains is the lot of land with the buildings thereon.
It makes no difference whether the note is secured by mort-
gage or not. The ten thousand dollars which Gen. Stevens
loaned me is just as much in that building as it is possible
for any power to put it there. Now, then, supposing I had
given him a mortgage. There are some people who would
say that he owned an interest in that real estate. But the
law says all he has is the right to resort to that piece of
property for his security; and that is all a mortgage means.
And I think that if the law is perfectly sound and correct I
hold the real estate, and I hold the buildings, and I should
pay the taxes on them. I am paying $100 tax on my real
estate and buildings. Gen. Stevens is paying $200 on the
gold that he loaned me that has gone into Massachusetts.
Now suppose we get together, and Gen. Stevens, as a shrewd
man, naturally enough would say, "It is perfect folly for
us to pay $600 taxes; we ought to pay but $400;-tear
up that note and give me a deed of one half of that real
estate, and let us own it together." I do it. I give him a
deed of one half, and we become joint owners of that prop-
erty. Now what has been done, gentlemen? Has ten thou-
sand dollars' worth of property been destroyed in New
Hampshire? Is there a man here who pretends to say that
by tearing up bits of paper, and sitting down and writing a
deed, we have destroyed ten thousand dollars' worth of prop-
erty? Is that property which can be created, or annihilated,
by the stroke of a pen? Is that what the constitution means
when it says that property shall be taxed proportionately?
I say, No. I say that the ten thousand dollars in gold has
gone from the jurisdiction of the state the moment it was
converted into that other species of property, and that all
the property there is is what you see, and that Gen. Stev
ens's loan to me creates no property, and that until the in-
dustry of man has created some new value the twenty thou-
sand dollars is all there is.
22
Gen. Stevens-I have lost my income of $600 when I de-
stroyed my note.
Mr. Eastman-No; from your interest in the land you
get more than $600.
(Gen. Stevens shakes his head.)-I thought I made it
sufficiently plain. Let me try again. I supposed that piece
of property was going to pay a rent of $1,200 and the
taxes, which makes $1,600. I said I should pay to Gea.
Stevens $600 when he made the loan. I retain $1,000 of it,
which is enough to give me $600 and to pay my taxes.
What has the gentleman got? He has got $600, but he has
to pay $200 in taxes, which leaves him $100. He becomes
joint proprietor with me, and we pay $400 in taxes; we
divide the balance that is left, and he has $600 and I have
$600, and the state has $100, which is its just due. That is
my answer to his last suggestion.
Let me take another case. I say this at the risk of weary-
ing you; but I promise not to trespass on your patience
very many times during the session. I take another case;
because somebody may say it applies to real estate but not
to personal property. Suppose there is a person who de-
sires to engage in trade, and has a capital that is insufficient
for his purpose, and he goes to a friend and asks him to
lend him the ten thousand dollars in gold that he has, and
that friend having confidence in the man makes the loan,
and the man invests his own capital and his friend's capital
in a stock of flour. Before he made the loan, even if he
had been in trade, if he had merely invested his own capital
in flour he would have been only liable to a tax on that
amount. When he borrowed that ten thousand dollars and
sent it to Milwaukee and bought flour, he became liable to
a tax upon ten thousand dollars' worth of flour in addition
to what he had before. His friend is liable in like manner
to a ten-thousand-dollar tax on the gold, or the loan, as the
law is. The flour is the only property that there is in the
state; and to tax it once to the person in trade and once to
23
!
the lender is taxing the same thing twice. Can he evade
the tax? For the purposes of illustration, I think it is per-
fectly fair to say that the person to whom the money is
loaned has no property except the capital that he put into
the trade. The lender knows if he loans him his ten thou-
sand dollars it is subject to the vicissitudes of trade, and if
the man loses the money in his business he can never be
repaid.
Now, the borrower is paying a tax on twenty thousand
dollars on the ten thousand that he owned and the ten
thousand that he borrowed-and the lender is paying a tax
upon ten thousand dollars; and thirty thousand dollars is
taxed, the same as in the case of the real estate. How can it
be avoided? How can they accomplish the same result that
was suggested in the other case of real estate? All they
have to do is to sign an agreement by which the lender be-
comes special partner in that business, and puts in ten thou-
sand dollars, subject to the chances of trade, on such terms
as may be agreed upon between the two parties, and the thing
is done. No assessor can then tax the lender for his ten
thousand dollars in gold, or his loan, and at the same time
tax the stock in trade: the stock in trade being taxed once
to the partnership, all his interest in it is taxed. He has
created for himself no greater liability than he had before,
and he has assumed no greater portion of the debts of that
concern. In the case of the personal property as well as in
the case of the real estate, property is annihilated by a mere
stroke of the pen and the use of a simple piece of paper, if
the law for the taxation of evidences of debt is sound.
A law that produces such a result is not based on sound
principles of equity or justice.
I do not know whether I ought to weary you by supposing
other instances. [Cries, go ahead! go ahead!]
The same thing may be shown in every case of a note for
money, and it can be traced back to its ultimate results.
The fact is, that all loans and debts create merely the right
24
of the particular person to whom the debt is due to claim a
certain amount of tangible property from some person or
other somewhere in the community.
Gen. Stevens-And the current income.
Mr. Eastman-My friend Gen. Stevens says the current in-
come also. The current income is simply an attribute and
part of the tangible property to which that evidence of debt
entitles him, and it springs out of the property on which it
ultimately rests, just as much and just as truly as it does
when that property is in a man's own custody.
Let me take another illustration. Suppose a man owns a
hundred horses, and he lets them to a neighbor for use:
does not an income come to him from the use of those
horses, and is there not a liability on the part of the hirer
of those horses just as much as there would be if it were a
hundred gold dollars? and when the hirer pays over to him
the money for the hire of those horses, is it not paid out
of the income of those horses, the earnings of those horses,
just as much out of the use of the thing loaned in the one case
as in the other?-and yet no one thinks of saying that be-
cause of the obligation of the hirer of those horses to return
them at a certain time to the owner, therefore you should
tax the horses or their value at the same time both to the
owner of the horses and to the hirer. But if you can point
out to me the distinction to be made between that and
note for it might be put into the shape of a note, a note
for the horses and for the use of horses; if you can dis-
tinguish between that and the note for money, it is a dis-
tinction that has escaped me. The cases are precisely alike;
and every case of a loan of money can be referred and traced
to its ultimate result, just like those cases I have stated and
illustrated before you.
I suppose there are a great many here who will say, that,
notwithstanding all I have said is true, still the money-
lender should be taxed, and he should not escape the pay-
ment of what is conceived to be his fair share of the burden.
25
I cannot take your time. I do not think it is right for me to
take your time to go over, as I should perhaps be obliged to
do, some portions of the argument I have used already to show
what would be the fallacy of that. But if the horses should
not be taxed to two persons,-please bear in mind that illus-
tration,-if the horses should not be taxed to both the bor-
rower and the lender, why should the money be taxed to
two-the money which produces the income, and the con-
tract which creates the obligation to return the money or
value thereof, which creates the right of one person to call
upon another for certain tangible property? Both cases
stand on the same basis.
Then I make the further suggestion, which may be ques-
tioned, but which I think is founded upon truth and the ex-
perience of mankind, that the minute you exempt this species
of property from taxation, just the same as you repeal the
usury law, which in my judgment ought to be repealed, you
render it easier and less expensive for persons who have
occasion to borrow money to borrow it. They, in fact, pay
the double tax themselves. It is a burden that falls in the
first instance upon their shoulders, and, unless it is distrib-
uted around by the general law, to which I have alluded in
the beginning, it remains on their shoulders in the rate of
the increased interest they have to pay. It costs just as much
more to borrow money as it does when a borrower has poor
credit. The lender charges for the risk, and also he charges
for the tax that he is liable to pay. Worse than this: it is
made a means by which he adds the tax when he never
pays it over to the tax-receiving power, and thus it becomes
a double burden on the borrower. How was it a few years
ago, when the United States government levied a fraction of
a cent upon each five-cent fare paid in the horse-cars? Did
the horse-railroad companies pay that tax? They not only
did not pay that fraction of a cent out of their income, as
was the design, but they levied it upon the community by
the addition of one cent to their fares. So, instead of its
26
being made an instrument for the collection of money from
their property, it was made a vehicle by which they extorted.
an additional profit from the public. And the same result
follows in many cases, at least where a tax is imposed upon
money that is loaned, and subject to double taxation in the
way in which it is by our law.
We have recognized the existence of the principle that I
have just been speaking of in the legislature this session.
We have authorized the Nashua Iron & Steel Company to
amend its charter so as to issue preferred stock, as it is
called. It probably is preferred stock in fact, but it has
many of the attributes of a loan, and I cannot help thinking
that one object of the manner in which the law was framed
was for the purpose of meeting this very question of
the taxation of money loaned. That corporation, I con-
clude, though I know nothing about it, is in difficult circum-
stances, and I conclude that their funds are running low,—
at any rate, they have a large debt, and they find it difficult,
undoubtedly, to borrow money in their present condition,
and they turn to their own stockholders. Now, their own
stockholders of course are interested in raising the money,
and making the contribution, or some of them are, and when
they apply to their own stockholders for the money, those
stockholders say, We should be glad to make the contribu-
tion to this concern, to furnish the capital that is needed to
relieve it, but if we do we shall be subject to tax upon it,
and that tax would make such an additional burden as
would destroy the profit we should receive from the invest-
ment. What was the device in the bill? It was that pre-
ferred stock should be issued to stockholders that advanced
the money, and then at some subsequent date that debt
should be paid off, and the stock cancelled when they recover
from their present embarrassments; and the law by which
that stock is created contains a provision by which the corpo-
ration may pay off this stock at it own option whenever it has
the ability, and reduce the capital down to the original common
M
27
stock. The result of that device is simply, I don't mean
to say it has no other characteristic about it-it does have
some others,—but one of the chief of its features is, that it
enables a person to contribute and make a loan, for it is in
fact little more than a loan, and to escape from taxation
upon that loan, because the court has decided that you can-
not tax stock that is owned in a manufacturing corporation,
because the property of the corporation is taxed to the cor-
poration itself, and, as Chief-Justice Parker said, to tax it
twice would be "oppressive, unjust, and unconstitutional."
We recognize this principle in the taxation of other cor-
porations; we recognize it in the taxation of railroad
corporations, which certainly pay as large a tax under the
present administration of the law, as a whole, as any other
species of property in the community. And I think, now we
have become accustomed to it, that it would shock the moral
sense of the community to say that stockholders should also
pay taxes for their interest in that stock. Yet by the law
of Massachusetts to-day, if a person holds stock in a New
Hampshire railroad he is liable to pay taxes upon it, though
the railroad is taxed to New Hampshire by the law of New
Hampshire. On the other hand, and here we do better than
they, our law is more consistent and reasonable. If one of
our citizens owns stock in a railroad out of the state that is
there taxed, no tax can be assessed upon it in New Hamp-
shire.
Mr. Mann-Suppose I should be lucky enough to have
one thousand dollars in greenbacks the first day of April in
my drawer, would it be taxable property?
Mr. Eastman-The gentleman raises a question there which
is a little outside the discussion I desire to make, and it in-
troduces another topic, and that is, about the right and the
power of a state or the expediency of a state's taxing its own
instruments of financial operation. My impression is, if you
wish me to answer the question, that that is merely a prom-
ise to pay by the United States, and is exempt from taxa-
3
3
28
tion on another principle; and I need not apply the princi-
ples for which I have been contending to that case.
Mr. Mann-I would like to inquire how the gentleman
says that he can avoid double taxation in the case of those
poor farmers and mechanics all over our state who have
borrowed money on their homes of the savings-banks, on
which they have already paid one tax. When they borrow
their money, how can they avoid double taxation in that
case?
->
Mr. Eastman-I am not sure that you can under the ex-
isting state of the laws. Perhaps there is another question
that needs to be considered further, and presents another
problem that I should desire to consider. As Mr. Bell sug-
gests, that is already met by a bill that is before the house,
and was reported to the house this morning.
Now, gentlemen, I will not detain you any longer. I have
presented somewhat at length, but as briefly as I was able,
the reasons which exist in my mind why double taxation
should not be applied to property in this state, and why the
passage of the present bill before the house is desirable.
If you pass this bill you take from the taxable property of
the state a very small portion of what is taxed in the state.
The whole amount of taxable property in this state is, by
the last report of the board of valuation, $228,000,000, and
the amount that was taxed as money at interest was only
about $8,000,000. If it all were taxed the amount would be
many times increased-the $8,000,000 would be many times
increased.
Mr. Briggs-In that classification where do you put the
$42,000,000 in the savings-banks?
Mr. Eastman-I have not included that: some portion of
it is double taxation, and some portion may not be.
The removal of the tax on money at interest would sim-
plify our law. It would remove the necessity of a resort
to the inquisitorial feature; it would remove the necessity
of the resort to the individual oath; it would remove double
29
taxation of property, and place it upon a sound system of
the taxation of every species of property once for its full
value, and only once.
In conclusion let me say, No person should mix up this
question with the consideration of the fact that all our laws
are administered by men. In consequence of our being
obliged to employ men to administer them, many cases of
injustice will be done, sometimes by deliberately violating
the law, which of course cannot be avoided always, and
sometimes by mistakes in judgment on the part of men
employed to administer them; and I know of no device that
would remove that defect from any system of taxation, or
from any system of administering the laws. We are always
liable to fail in doing exact justice in the appraisal of prop-
erty by the selectmen, in consequence of the inability of man-
kind always to do exact justice. But the principle that I
contend for is sound: it will tend in the direction of procur
ing equality; it will tend to prevent even a shifting of the
burden; and it will prevent many cases of injustice that now
exist.

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