UNIVERSITY OF ILLINOIS LIBRARY Class Book Volume My 08-1 5M Reform in Taxation FREDERIC T. GREENHALGE JOSIAH QUINCY JOHN D. LONG JONATHAN A. LANE JEROME JONES JOHN C. COBB WITH EDITORIALS FROM THE BOSTON PAPERS MERCHANTS’ MUNICIPAL COMMITTEE OF BOSTON ^^<51 l TAXATION. Governor Greenhalge, in his inaugural address, Jan. i, 1896, said in relation to taxation: 0 C P Our laws of taxation, which have for many years been the subject of constant discussion, should have careful consider- ation, as recommended in my first message. The sentiment seems to be prevalent that our present law is complicated, impracticable, and inequitable. If, as experience seems to have proved, it is impossible to fairly and efficiently collect our taxes under the present law, and if the method of assess- ing under the law is, as seems evident, so variable in differ- ent communities and in the same community at different times as to cause constant disturbance and an almost excus- able effort on the part of some of our citizens to evade pay- ment of the full legal levy, it is certainly time for a thorough investigation of the subject, with the definite purpose of enact- ing a clear and equitable law which can be enforced in a fair and just manner. I desire also to call especial attention to the fact that our laws seem to bear oppressively on our busi- ness and industrial enterprises, which should be especially fostered and encouraged, as the source from which most of our citizens derive their livelihood. Massachusetts must enter into competition with other States ; and experience has shown that there is no force more potent in bringing industrial development, with all its attendant advantages of labor for our people, business for our merchants, markets for our farmers, and traffic for our railroads, than wise and liberal laws of taxation. p 4 TAXATION. From address of John C. Cobb, on " Reform in Taxation,” at the Parker Memorial, March 5, 1896: It seems fitting at this time and in this hall to say a word in relation to the loss we have suffered in the death of our Governor. I but voice the universal sentiment in saying that few men in our history have impressed the people of the Commonwealth more generally as having clear, sound judgment, and we can point to few men who, even in the heat of a political contest, have excited less antagonism, and have commanded the respect of all citizens, regardless of party, than Governor Greenhalge. Personally, I knew him but slightly, and, in fact, never knew him until this winter, when our Merchants’ Municipal Committee appointed me to consult with him for assistance in formulating our views on this subject of taxation. My last interview with him was on the last day he was at the State House, when, with Hon. George G. Crocker, an hour was spent with him in going over the details of the proposed legislation. I was especially struck with his earnest desire for simplicity in the law, and his wish to accomplish the results with the least possible disturbance to existing condi- tions. We left him with an appointment for the following Monday, when he was to decide whether he would treat the matter in a letter to our committee, or later by a special message to the Legislature. When Monday came, he was stricken down, never to rise again. While it cannot be claimed that the ideas in our pro- posed system are original with him, yet as the first authorita- tive and official promulgation of the principles adopted by us came in his inaugural address, and as this was undoubtedly the last great question which received his consideration, I feel that it is no more than a just tribute to his memory to let it be known as the “ Greenhalge Tax Law,” and I am sure Mayor Quincy and the chairman of our committee, Hon. Jonathan A. Lane, as the only others who can fairly claim a part in formulating the system, will earnestly join me in the suggestion. To us who undertook this great reform, under his guidance and leadership, his loss comes as a severe and almost crushing blow. ADDRESS OF MAYOR QUINCY. 5 Portion of the inaugural address of Mayor Quincy relating to taxation, Jan. 6, 1896 : While our system of taxation is fixed by State legislation, the city of Boston should exert its influence in every proper way to secure such amendments to the tax laws as will bring them more into harmony with the needs of a large commer- cial centre, brought into daily competition with cities in which taxation is levied in a manner far less burdensome to business enterprise. The Governor of the Commonwealth, in his recent inau- gural address, has recognized the evils of our present tax system, and has forcibly pointed out its injurious influence upon the industrial development of the State. “ Our laws,” he says, “ seem to bear oppressively on our business and indus- trial enterprises, which should be especially fostered and encouraged as the source from which most of our citizens derive their livelihood.” He further points out that “ expe- rience has shown that there is no force more potent in bringing industrial development than wise and liberal laws of taxation.” These words have a very direct and important application to the city of Boston, and in such application I desire to give them my hearty endorsement. The city gov- ernment of Boston and the representatives of the city in the Legislature can in no way more effectively promote the development of the trade and the manufacturing and mechan- ical industries of Boston than by using every endeavor to secure more liberal tax-laws, and thereby enable our people to meet the competition of their commercial and industrial rivals in other States. As soon as the Merchants’ Municipal Committee, above referred to, is organized, I shall invite it to take up the subject of securing such needed changes in our tax-laws, and I trust that the influence of the Governor of the Commonwealth, of the Speaker of the House of Rep- resentatives, — who, in reassuming that position, expressed views similar to those of the Governor, — of the Mayor of the city of Boston, and of the business organizations of the 6 TAXATION. city, supplemented, as I trust may be the case, by the City Council, may be effectively united upon some practical and comprehensive plan which will secure general support. While I shall be ready to cooperate in any movement which may tend to mitigate the evils caused by our present unscientific and defective system, I desire to express my personal conviction that in order to accomplish any far- reaching benefits, false theories of taxation must be abso- lutely abandoned. I believe that a large majority of the business men of Boston are now ready to support a move- ment to place upon real estate all taxes other than those levied upon the franchises of quasi-public corporations, and upon the estates of deceased persons, and that the real-estate interests would support the same policy. Taxation levied upon real estate distributes itself through the community at least as equitably as it can be distributed under any system, while it has the great advantages of perfect simplicity, impossibility of evasion, and absolute freedom for business development. The wage-earners, who constitute such a large majority of our population, have every interest in favoring a system which would result in greatly stimulating enterprise, and enlarging the field for the profitable employment of labor in this city. That such a system of taxation is best adapted to the wants of a community such as ours is not only supported by theoretical reasoning, but demonstrated by the practical ex- perience of such great commercial and industrial cities as New York and Philadelphia. The importance of the object is so great that, if the union of the necessary forces can be effected, even the necessity of securing an amendment to the Constitu- tion should not be allowed to stand in the way of making the effort. Such a movement should be based, not upon an effort to protect some of our citizens from double taxation, but simply upon the broad ground that a system of taxation laying the burden only upon property which cannot move away will prove a benefit to all classes in the community, give an absolutely free field for business expansion, and, most of all, help those who are dependent for their livelihood upon commercial, mechanical, and other industrial development. ADDRESS OF HON. JONATHAN A. LANE. 7 At a dinner to the mayors and the presidents of the boards of trade of the cities of the Common- wealth, on Feb. 29, 1896, Hon. Jona. A. Lane, Jerome Jones, Ex-Governor Long, and John C. Cobb gave the following addresses: Hon. Jonathan A. Lane, Chairman of the Merchants’ Municipal Committee, said: Your Honors and Gentlemen: It has been my fortune to face a good many bodies of public men, during the last ten years of my life, by virtue of my position as President of the Boston Merchant Association, but I do not know that I ever faced a body of men with a deeper sense of the responsibility which attached to the hour than I do on this occasion, both by virtue of the importance of the subject to be discussed and the character of the gentlemen whom I address. The real- estate valuation of this Commonwealth, as you know, is the round sum of $2,000,000,000. Of that amount, His Honor Mayor Quincy represents $800,000,000, and you other gentlemen, mayors of the thirty other cities of the Common- wealth, represent as much more; so that we have with us to- day representatives of $1,600,000,000 of real estate, out of the total $2,000,000,000 of real estate in this Commonwealth. This gathering, therefore, virtually represents Massachusetts on this occasion, for Massachusetts is a State of cities ; and not only do the cities represent the great bulk of the property, both personal and real, but they represent the industries and the trade of the Commonwealth. The condition of things at the present time is not what it was when Massachusetts was, to a considerable extent, an agricultural State ; and any system of taxation, it seems to me, which is worthy of our consideration should be one adapted to this changed condition of things. I suppose the agricult- ural interests of the Commonwealth may be said to represent 8 TAXATION. one-tenth of the valuation of the property of the Common- wealth, or hardly that. We do not propose, however, to inflict any injury upon that important interest. The scheme of taxation which we propose is one which will do as much for the agricultural people as for any other body of citizens. I am glad that this is so, for I have no doubt that most of you are the sons of farmers, and that you would not like to see any new system of taxation adopted which would be a hardship to them. None of us would like to see that. I desire to say, also, that we do not come here with any purpose to force upon you any scheme of our own. We have views on this subject which we believe to be sound, and which are in accordance with the best thought of our times, and about which we wish to confer with you ; but we do not wish to force it upon you. We come here, all of us, to confer upon this subject. If you should agree with us upon the principles embodied in our bill, the details can be very easily arranged. We desire to have the sympathy and cooperation of the cities of the Commonwealth, for without that we can do nothing. It seems that there can be nothing in the world conceived of wiser than to relieve the local assessors from the necessity of making efforts to find out the unsearchable and unknow- able in the matter of personal property. We believe, more- over, that the majority of the assessors will, when they really understand our plan, be enthusiastic at being relieved of a duty which no man, it seems to me, could take any satisfac- tion in attempting to perform. The next important feature — and this is one which you may wish to consider more carefully — is that by which we propose to make good the deficit or the difference which will result. We propose to make up for it partly by taxing cer- tain corporations, practically as we tax them to-day; but the main source of revenue from this bill is expected to come from the Probate Court by means of an inheritance or sue- ADDRESS OF HON. JONATHAN A. LANE. 9 cession tax. This may strike you as a novelty, and some- thing which will not yield such a return as you think will be necessary to make up the difference. We wish you to realize that the wealth of this State is flowing through that channel constantly and unceasingly, and that the entire wealth of the State reaches that point ultimately, and when it does there is no shrinkage. The government of Great Britain gets eleven million pounds sterling from that source — one-eighth part of its entire budget. It is a great problem as to what is the real wealth of Massachusetts. According to the returns of the assessors and the records at the State House, it would be about $3,500,000,000. How much more there is, nobody can tell ; but there is undoubtedly far beyond that amount, for we all know that there is a vast amount of property owned by the people of Massachusetts situated in other States, and which does not pay any tax here, but pays one where it is situated. In addition to the property which is situated here, all that property will finally be probated in the courts of the Commonwealth, and from that source a revenue will come which will surprise you. We have calculated that the amount which will be realized by the city from this method of taxing personal property will — not perhaps the first year, but cer- tainly the second — be equal to the entire State and county tax ; and I think you will find, gentlemen, that when the cities and towns are relieved of these two taxes, the addition to the tax on real estate will be comparatively trifling. At any rate, this movement on behalf of this system of taxation I have indicated proceeds from the real-estate inter- ests of the State. The real-estate men feel, and they feel it very strongly, that if you will contrive a system of taxation by which money will flow into this State and be invested in business, in mercantile interests, and in manufacturing inter- ests, — as we believe would be the case if we agreed that it should not be taxed until the persons who own it get through with it, — it will greatly promote the prosperity of the State IO TAXATION. and increase the value of the real estate ; and I believe they are right in that theory. Real estate has no value except by reason of its relation to personal property. That is the prin- ciple which I wish to strongly impress upon you — that the prosperity of Massachusetts can be promoted more by bring- ing personal property into the State in the manner in which we propose than in any other way. Our scheme is, there- fore, to relieve from taxation, just as they do in Pennsylvania the capital which men employ in their business. We believe that is sound policy for Massachusetts, just as much as it is for other States. We believe that if Massachusetts is to hold her own in competition with the other great States of the Union, she must look out for herself; and inasmuch as that is the case we must look the matter squarely in the face, and see what policy we can adopt which would bring about the best results in that line. Now, gentlemen, I have outlined the principles of our bill. As I said in the beginning, we are not particular as to details; all we care for is to have you agree to the general principles. The present system is unsatisfactory to every one. It is a humbug and a fraud, and it is time that we devised a better system. We need to carry into our system of taxation the principles of simplicity, honesty, and common sense; and we can do it. We can do it by a long pull, a strong pull, and a pull all together. Let me say right here that the people of other States are looking on, and watching this movement in Massachusetts with a great deal of interest. We are constantly in receipt of information which shows that to be the case. Somehow the people have found out that there is a progressive move- ment on foot here. It is challenging the attention of all, and many people are intensely interested in it. I believe that the times are favorable for this change. His Excellency the Governor of this Commonwealth has used language upon this subject, in his inaugural address, which I ADDRESS OF HON. JONATHAN A. LANE. I I desire to repeat. The people of Massachusetts have always entertained a profound respect for the opinions of their gov- ernors. They have a great deal of respect for their views* not only as men who have the interest of the State at heart, but they have an affectionate regard for them personally as well. Living or dead, we honor the governors of the Com- monwealth. The fact that we have an ex-governor with us to-night makes me apologize for my remarks to a certain extent, but I do not feel like apologizing very much. (Applause.) In his last inaugural, Governor Greenhalge said : “I desire also to call especial attention to the fact that our laws seem to bear oppressively on our business and industrial enterprises, which should be especially fostered and encour- aged, as the source from which most of our citizens derive their livelihood. Massachusetts must enter into competition with other States, and experience has shown that there is no force more potent in bringing industrial development, with all its attendant advantages of labor for our people, business for our merchants, markets for our farmers, and traffic for our railroads, than wise and liberal laws of taxation.” That is what we are undertaking to do. We are proceed- ing in this movement in accordance with the recommen- dations of His Excellency the Governor. We are also supported by earnest and hearty recommendations in the same line by His Honor Mayor Quincy. There is no poli- tics in this movement whatever — not the slightest. We are in it for the good of the old Commonwealth, and nothing else. (Applause.) We know that we shall have to encoun- ter a great deal of prejudice and a good deal of suspicion ; but we all believe it to be right. We propose to give you something better than you have, something which will do more for Massachusetts than any man here can conceive of, and certainly more than any poor words of mine can express. (Applause.) 12 TAXATION. Mr. Jerome Jones said: Mr. Mayor and Gentlemen: I am glad to see a meet- ing of this sort, as I believe it tends to better government. I believe that it is wise for the representatives of the trade and industrial interests of the State to meet and compare ideas, and to discuss reforms that can be and should be dis- cussed. I do not mean by that to infer that we are not well governed under the present condition of affairs in Massachu- setts. I think that Massachusetts is the foremost State in respect to good government. It has been customary for her to take up great problems, and to discuss and solve them for the benefit of all. At the present time we find our mercantile, commercial, and industrial enterprises heavily taxed in comparison with other States, and to such an extent that it has reached the friction point. This is wrong; because in conducting our business we encounter competition from other localities and commu- nities that have an advantage over us. It may be claimed that the theory of the present law is a good one, — and I do not say but what the theory is fair, — but theories and prac- tice are two quite different things. You charge the assessor of a town with the duty of assessing the real and personal property of his town, and require him to do his work under oath. It may be proper in theory that real and personal property should both bear the burden of taxation, but, with human nature constituted as it is, the assessor is not able to perform that duty which you have assigned him properly, for, on account of the nature of personal property, on ac- count of its being so portable, so fugitive, and so capable of evasion, experience has proven that he will not get one- quarter of the personal property of his town assessed. Now, if that is so, — and I challenge any man to disprove it, — the theory may be good, but when reduced to practice it is bad. Such being the case, if we cannot have it as we would, let us have it the very best we can. We believe that the reform in taxation suggested by the ADDRESS OF MR. JEROME JONES. 13 Governor and the Mayor, while it would place the local bur- den on real estate, would result in making the State attractive to business enterprises to an extent which would make real estate more in demand and more useful, and in producing greater prosperity for the wage-earner and the manufacturer, because of the improved conditions. Some one will say that the slight difference recommended by us would not produce such a result as this ; but it does. If you investigate the matter, you will find that in New York, in Philadelphia, in Chicago, and in many other cities, thousands of industries, I might say, have been attracted there because in those places they are not taxed to any extent on the raw material, the fin- ished product, and the movable plant. Here, he knows that he must pay taxes on them unless he makes a false oath, or is able to hoodwink the assessors. Instead of this unsatis- factory method, we propose that personal property shall be taxed only for State purposes as named in the bill, and that it shall be taxed by a method which cannot be made evasive, thereby enabling us to relieve from taxation those enterprises which may desire to locate here. I remember that James M. Beebe once said that there was but one per cent, of difference between success and failure. When I first heard that, I thought that it didn’t signify any- thing, but it really does mean much; and the taxon merchan- dise, the tax on the raw material and on the finished product, in short, the personal-property tax, constitutes that difference. This was fairly demonstrated in the non-taxing of mortgages. Contrary to the contention of those who opposed the removal of the tax from mortgages, it resulted in the rate of interest being dropped about one per cent. ; and the borrower gets the benefit, and the full benefit. If that law had gone into effect ten or twenty years earlier, it would have kept millions of Massachusetts capital at home, instead of its being invested in Atchison and other far-off enterprises, which brought ruin to the investors who were tempted to evade local taxation. 14 TAXATION. I believe that the State of Massachusetts is well adapted to manufacturing enterprises. We have an admirable system of transportation by railroads, by which we are enabled to take our freight and ship it from tide-water to the great West as cheaply as can be done from New York. We have also an effective system of steamship lines. I do not know that it is generally known that the amount of Liverpool freight com- ing to this port is as large as that which goes from Liverpool to New York. We have favorable transportation facilities, both by sea and by land, we have a good climate, and we have a good State government. We have all these facilities which are required to make a community healthy, wealthy, and prosperous, but our unequal and burdensome laws of taxation constitute the “ one per cent, of difference between success and failure” spoken of by Mr. Beebe. Under our unequal and unjust tax-laws, the assessor is compelled to punish a business enterprise which seeks to invest and locate in Massachusetts. I have no doubt that this reform will be attacked at the State House as severely as the Australian ballot-law was. When that was first proposed, countless objections were raised against it. They said that it was an invasion of our rights, and that they could not think of giving up our old system of peddling out votes at the town-house; but when they came to understand it thoroughly, it was adopted quickly, and we wouldn’t give it up now. I believe, gentlemen, that the more you study this question of taxation, the more you will be con- vinced of the simplicity, the practicability, and the fairness of it. Personal property is so fugitive, so portable, and the tax on it is so easily evaded, that we are compelled to legislate according to the nature of things. Put your tax upon real estate, upon quasi-public corporations, and upon successions and inheritances, — the last two going into the State treasury, — and thus leave personal property free to engage in enter- prises here on as favorable terms as in any other part of the nation, and I do not think any man will say that we are going to regret it. (Applause.) ADDRESS OF HON. JOHN D. LONG. 15 Hon. John D. Long, the next speaker, said : I do not care to indulge in compliments, but I rejoice that our Mayor is taking a forward step in all these matters. I do not know why I was invited to be here or to speak, be- cause I am not an expert on the subject of taxation. I had intended to sit at the feet of some of these other gentlemen and gather information from them. We want them to give us information that we can carry back to our country dis- tricts and distribute. We want you to furnish us with answers to questions which will be put to us by hard-headed, intelligent, sensible men, who will raise very grave questions with regard to your new plan. It seems to me that in starting on this new project we should not indulge in generalities, but get right down to the root of the matter, and understand the elementary things con- nected with it. I notice that all these great reforms finally come down to one or two elementary principles. The danger, it seems to me, is that people will get the idea that this is a contest between personal property, on the one hand, and real estate, on the other; that it is an attempt of rich men, who have notes, mortgages, bonds, stocks, and securities, to get rid of a tax, and to have it put on the farmer and the holder of real estate, who cannot conceal his property. Let us understand, therefore, in the first place, that there is no contest of that kind, and that there is no desire on the part of anybody to select real estate to be taxed or personal estate to be relieved from taxation, on the ground that one is to be favored and the other not. I am heartily in favor of this scheme, but when I say that, I want it to be distinctly understood that if you could carry out a scheme of a fair, simple, straightforward tax by plac- ing it on personal estate instead of placing it on real estate, I would just as soon have you do it as to place it on real estate. There is no magic in either name. But why do we not advocate putting it on personal prop- erty? Simply because it has been the experience of every 1 6 TAXATION. man who has had anything to do with the matter, that you cannot put the tax on personal property. We have been trying to tax it for years and years, under the most thorough and complete system that could be devised, and we have failed. We cannot do it. Why? Because personal prop- erty is of such a nature that it eludes taxation. The theory may be right, but you must take into consideration human nature as much as anything else, and with human nature as it is, a large part of the personal property of the State does escape taxation, and always will escape taxation. It does not all escape, but some of it does — and there is where the injustice comes in. If it all did, it would make no difference. The wrong, injustice, tyranny, and falsehood of the present system consist in the fact that a large part of it escapes while the rest does not. You thereby violate the spirit of our tax-laws, which is that taxation should be uniform and fair. The first trouble in taxing personal property is that you cannot tell what it is. Suppose I paid $2 for a ticket to this dinner. If I had done so, and had decided not to come, suppose I had sought out some belated mayor, and sold him that ticket for $1.50. Now, in that case, what would I have sold him, the ticket or the dinner? If I sold him the ticket, it was worth $1.50, and the dinner was worth nothing. (Laughter.) You laugh, for that is ridiculous; but that is all there is to a certain class of personal property — stocks, certificates, etc. You are first, therefore, met with the diffi- culty of telling what personal estate is. But the fundamental difficulty is that it is elusive. In imposing taxes, we should place the tax on something which is tangible — which is not elusive — something on which it can be uniformly and fairly assessed and uniformly and fairly collected. That is why we say that we better put the tax on real estate. Real estate is plainly visible ; a tax can be imposed upon it with absolute uniformity, and when you impose a tax on it, no man can escape. It will be fairly assessed, and it will be fairly and uniformly collected. We put it there as a matter ADDRESS OF HON. JOHN D. LONG. 17 of principle. We put it there in the interest of honesty. We put it there because by so doing you get the two elements which make a tax system perfect, and those are the elements of absolute honesty and absolute simplicity. If we were to land upon some island, were to start a new govern- ment, were to institute a system of taxation there, there is no question that we should adopt this system. Let us adopt it now. You can do it just as easily as you did the Australian ballot. Let us take some of the objections which will be urged : It will be said that this will suddenly shift a large part of the tax upon real estate. The answer to that is that it will not do so. It will add something, but not much ; and the figures in regard to the exact amounts we shall probably get from Mr. Cobb and the other speakers. In the town of Hingham, for instance, our tax is now $16. Of the taxes assessed, possibly one-quarter is assessed upon personal property. Removing the tax on that property and eliminat- ing the State and county tax, which would be taken care of by the other bills which the committee has recommended, we find that our tax on real estate would be increased about $2.50 per thousand. But what of that, if our personal prop- erty would be relieved from taxation to a substantially equal extent. But the farmer may say : “ My property is mainly in real estate, and it will work a hardship upon me by increasing the tax on that.” The answer to him is this : To be sure, the tax upon his real estate will be enlarged somewhat, but he will be relieved from the tax upon his hay, upon his wagons, upon his stock, upon his tools, and upon all articles of per- sonal property ; and the practical result will be that the bur- den will be shifted — not increased to any considerable extent. Then the owner of real estate on the seashore may say that real estate is valuable for summer residences alone, and that increased tax on it will be a hardship upon him : “ I have two or three houses, which I let to summer people. The 1 8 TAXATION. real-estate tax will be larger, and consequently the tax on each of those cottages will be larger; so that I will lose just so much.” But he won’t. On the other hand, it will not add one penny to his expense. Why? Simply because he will charge his Boston friend, who comes down and hires his cottage, enough more to cover the increased tax. “ Yes, but doesn’t that shift the burden upon the Boston friend, and will he be willing to pay it?” Certainly! Why? Because all these Boston merchants will be relieved of the tax upon per- sonal property, their business will be improved, and they can pay more rent. In the meantime, the fact that personal prop- erty is relieved from taxation will bring more manufacturing and commercial men into this vicinity, and increase the num- ber of manufacturing enterprises in the State, and I shall not only be able to rent my cottages, but there will be more of a demand for them, owing to the increased number of people who want to hire them. But the farmer, distant from the shore, may say : “ I admit that this doesn’t trouble you, because the merchants of Boston will be relieved from taxation on their personal prop- erty, and they will be willing to pay you more rent ; but it doesn’t help me. The fact that all the taxes are placed on my little farm, where no summer residents ever come, only increases the burden of taxation on my real estate, subject- ing it to a larger assessment while it really depreciates its value.” What is my answer to him. That the assessors of his town have common sense, and that if the shifting of this tax has had the effect of increasing the value of real estate on the seashore, the assessors will take note of that fact, and put the increase of the tax on the real estate which has increased in value. In other words, gentlemen, if you will follow this matter out you will find that this change not only adds very little, even if things remain as they are, to the taxes on real estate, but that whatever it does add is counter- balanced by some set- off. In other words, if you get the first principle of taxation, which is to secure fairness and ADDRESS OF HON. JOHN D. LONG. 19 simplicity, and put your taxes where they will be equally distributed, the result will take care of itself. Now, gentlemen, what will be the result? The result of such a change will be that a man can come here, and, instead of hiding and evading taxation, put his personal property out, build his large manufacturing establishments, and dis- play his wares without being afraid that some assessor will find out that he has them. (Laughter.) And, as a result, you will find that trade, commerce, and manufactures will be irresistibly attracted here. I do not mean to overstate this matter, but, as Mr. Jones has well said, such matters are deter- mined by the fraction of one per cent, of advantage which one place offers over another. The great bulk of capital is exactly like water confined in a reservoir — it seeks every outlet, and wherever it can find an opportunity a little more advantageous than anywhere else, it will irresistibly drift toward it. And the minute that you increase the manufact- uring and trade enterprises of the community, you benefit not merely investors, but the whole community, for the advantages derived therefrom flow back upon the whole com- munity. As has been said, the minute that you pile up per- sonal property on State street, you increase the value of real estate. But I hate to dwell upon this feature of the case, — the advantage and profit to be derived from a change in the system, — because I feel so deeply the principle involved. I feel the shame thrown upon us all by our present tax-laws, and the evasion of them in which all join. Shame upon us all ! I believe it is a fact that while the real estate in Boston on which taxes have been levied has been doubled, and trebled, and quadrupled, there has been but a small percent- age of increase in the amount of personal property taxed. On the other hand, we know that it has actually increased more than real estate, and that simply means that the tax has been evaded. Some one told me that in Somerville the personal-property tax is less than it was fifteen or twenty 20 TAXATION. years ago ; yet there is a great deal more there. We all know that there is a shameful hiding of personal property. Therefore, I say, let us adopt this new method : first, because it is right; second, because it will be productive of good results; and third, because it will not injure the hair of a single man’s head. There may be a little difficulty at first, but we can adapt ourselves to it very easily. I approve of the bill presented by the committee, because I do not wish to see property escape taxation, but only to have it taxed fairly. Let us have a succession tax — not on small estates, but upon estates of a reasonable size. Where a man who has lived in this community, who has been pro- tected by it, and who has gained a fortune of $150,000 or a million, dies, let us set aside a proper sum to pay for the opportunities under which he has acquired it, and for the advantages which he and his family have enjoyed. When a man dies, his property goes into the Probate Court. There will be no evasion there. You will get it all. . I believe, also, in the taxation of quasi-public corpora- tions. Such taxation is not really taxation at all, but is simply a payment for a franchise. Great corporations which are given the use of our public streets and the right of emi- nent domain should pay for the advantages which they receive. I am told that those two sources, the succession tax and the quasi-public corporation tax, will meet the entire expenditures of the State and county. This will enable the different cities and towns to meet their local expenditures by a local tax upon their real estate alone. I believe that the advantages that come from having a simple and honest system will more than counterbalance any disadvantages which it may possess. (Applause.) ADDRESS OF MR. JOHN C. COBB. 21 John C. Cobb, Vice-Chairman of the Merchants’ Municipal Committee, was the next speaker. He said : Mr. Mayor and Gentlemen: When the Merchants’ Municipal Committee took this matter up, we had been appointed from various organizations, representing entirely different occupations; and came together, many of us total strangers to each other — I, personally, came from the Real Estate Exchange. I have practically no property except real estate, which is situated in different cities, some inside of this State, and some outside of it, and I have therefore, perhaps, had an unusual opportunity to judge of the workings of the tax laws in different places. As the representative of the Real Estate Exchange on the Merchants’ Municipal Committee, I sought the views of the large real-estate owners in Boston upon this subject, and of the Real Estate Exchange in general, and it probably will strike you with surprise when I tell you that, as a result of the opinions which I heard expressed by them, the representatives of the merchants and manufacturers upon the committee were a great deal more timid about the burden which would be placed on real estate than I was. And the system which we have agreed upon does not go to the extent which I, personally, and, I think I may say, a majority of the real-estate owners in Boston are willing that it should go. The Governor of our Commonwealth, in the part of his inaugural address relating to taxation, has shown a wonderful grasp of this subject, and I want to quote a little more fully from it than Mr. Lane has done. He opens up the subject by saying: “ Our laws of taxation, which have for many years been the subject of constant discussion, should have careful con- sideration as recommended in my first message.” We have considered the subject, and I think we are of the unanimous opinion that it has had “ constant discussion ” for 22 TAXATION. a good many years, that it has been discussed just about long enough, and that it is time that something should be done about it. He says : “ The sentiment seems to be prevalent that our present law is complicated, impracticable, and inequitable. . . . ” On that point, I think I can safely say that the other mem- bers of the committee, as well as myself, have yet to find the first man who says that is not so. "... If, as experience seems to have proved, it is impossible fairly and efficiently to collect our taxes under the present law, and if the method of assessing under the law is, as seems evident, so variable in different communities and in the same community at different times as to cause constant disturb- ance and an almost excusable effort on the part of some of our citizens to evade payment of the full legal levy, it is certainly time for a thorough investigation of the subject, with the definite purpose of enacting a clear and equitable law which can be enforced in a fair and just manner.” Here is, practically, the whole meat of the question which is now before us. We find that every man who is thinking of building a factory or choosing a residence takes the tax list and goes over it to see where he will have to pay the least taxes. He finds he can go to one town and pay six or seven dollars a thousand, or he can go to another and pay eighteen or twenty dollars per thousand. He finds that if he builds a factory in one place in the Commonwealth he will have to pay one rate of taxation, while if he builds it in an- other he will have to pay another rate. That is one of the results of our present system of taxation of personal property. In looking into this subject, we also find that the taxes on corporations are divided throughout the State in a manner which seems to us manifestly unfair. We find Nahant and Milton with sixty per cent., and upwards, of personal property, and Somerville with only seven per cent. Now that is the point at which we have directly aimed, namely, to equalize this per- sonal property tax, and spread it over the State as it should ADDRESS OF MR. JOHN C. COBB. be. There is no possible justice in the tax on the Boston & Albany Railroad going to the town of Nahant. That rail- road is chartered by the people of the Commonwealth, is supported by a very large proportion of the people of the Commonwealth, but has no more to do with Nahant than it has to do with Chicago ; therefore we say that the tax on the Boston & Albany Railroad should be divided as nearly as possible among the communities which created and support it, and that the easiest and best way to accomplish that result is to pay it into the treasury of the Commonwealth, and let the State government apportion it among the towns and cities of the State by applying it to the State and county expenses. The result of this change in the system of taxation is quite striking. It improves and helps the condition of our most burdened towns, and takes away from the surplus in towns which have been’growing more and more, year after year, to be spots towards which personal property flows ; this is a problem which I think you will all agree with me must be met. I do not know that you all appreciate the extent to which personal property has been moving away from the heavily taxed towns and cities into towns where there is a low tax-rate. There is a distinct and ever-increasing current flowing toward those towns which now have the most of it; and this we want to stop. We have made up some figures in regard to the cities in the Commonwealth, and I have classified them by their per- centage of personal property, with the following results : In the first class we have two cities — Everett and Somer- ville. Now, the proposed change will unquestionably be a benefit to the cities of Everett and Somerville, for the effect of it will be that they will be entirely relieved from all per- sonal-property tax, and will have their tax on real estate reduced. That is a surprising statement, but it is true. Ex-Governor LONG. — Won’t you explain why that is? Mr. COBB. — It is on account of the very small percentage 24 TAXATION. of personal property that those cities have, and their being relieved from the State and county taxes, which, in these two cases, would undoubtedly exceed the amount collected from personal property. We next come to class two, which takes in the cities of Brockton, Chelsea, Malden, Marlboro’, Medford, Quincy, Woburn, and Worcester. They all come within a narrow range of percentage. These cities will practically arrive at the result of being relieved from any tax upon personal property, and will have little or no increase in the tax on real estate for the same reason — because of their small per- centage of personal property. The next class, class three, is the large class. It takes in the cities of North Adams, Pittsfield, Taunton, Beverly, Gloucester, Haverhill, Lawrence, Lynn, Newburyport, Chico- pee, Holyoke, Springfield, Northampton, Cambridge, Lowell, Newton, Waltham, Fitchburg, and Boston. These cities present to us the real problem, which is to so adjust the tax as fairly to meet the needs of those cities which contain the bulk of the property of the State — because the cities which I mentioned in the first and second classes are a small item, and those in the fourth and fifth classes are a very much smaller item. We have made figures in regard to Boston which will sub- stantially apply to all these cities. We have figured it out, and find that the change in Boston will result in an increase of about two dollars per thousand, making the rate in Boston about fifteen dollars, with the result that the citizens of Bos- ton will be absolutely freed of the burdens of taxation in all other forms, except when a person dies and his estate goes through the Probate Court, at which time his property pays a succession tax. Now, gentlemen, the whole question is, are you willing to add a couple of dollars a thousand to your tax-rate for the sake of deriving the advantages which this law is going to give to the Commonwealth of Massachusetts? If you are willing to do that, the problem is solved, and we can go ADDRESS OF MR. JOHN C. COBB. 25 ahead on the lines we have laid down. I will go one step further, gentlemen, and say that if you are not willing to do that, we will fix this law so that it will suit your ideas. We want to readjust this question of taxation upon a fair and proper basis. We want your ideas and assistance in our efforts. We have made up our own ideas upon a basis which seems to us fair, and will give marvellous results with a very slight change in the present burdens. The next class of cities is class four, which takes in Fall River and New Bedford. As you all know, those cities are distinctively manufacturing cities. Almost all of their manu- facturing is done by corporations, the stock in which is owned by persons in their own localities, and therefore they get their own tax from their own corporations for them- selves. The tax on real estate will be more largely increased in these two cities than in those cities in the previous classes ; but on the other hand there will be no two cities in the Com- monwealth which will feel the direct benefits and results of the change in an encouragement to their special and practically only industry, manufacturing, than these two cities. For that reason, we believe that no possible injustice will result to them from our adjustment of this matter. I am sorry to say that in the fifth class there is one city. That city is Salem. There is very little to be said about that fifth class. Salem, gentlemen, comes right in with Nahant and my town of Milton. Salem collects forty-one per cent, of her tax on personal property, and Milton collects sixty. All we have to say about them is that they must look at this question for the good of the Commonwealth of Massachu- setts, and not for their own personal and private interests. (Laughter.) In closing, I want to say just one word. I want to ask each and everyone of you to look at this question in a broad way, considering not only what is best for your own locality, but what is best for the Commonwealth ; we want every man of you to take sufficient interest in this subject to consider it 26 TAXATION. seriously and fully, to communicate with us in regard to it, to bring it before your city governments, and if we are not right to tell us why we are not right. If you have ideas that differ from ours, do not say that ours are bad, but give us your ideas, and help us to a conclusion which will suit the majority of the people of the Commonwealth, and will be for the inter- est of the whole State, which is all we are aiming at. Our whole idea is simply to encourage the development of Massa- chusetts, and to enable it to compete with the other States of the Union which are working on these lines. If the State of Massachusetts can lead in solving this question of tax reform, it will not only receive business benefits of the first importance as a result of this law, but it will stand where it belongs, as the leader of public opinion and the prominent factor in solv- ing great questions of this sort for the people of the United States. (Applause.) EDITORIALS. ( From the “ Boston Herald February 19, 1896.) THE PROPOSED TAX REFORM. The tax bill which the Merchants’ Municipal Committee — that is, the committee representing the various trade organi- zations of Boston that Mayor Quincy has called upon to advise him — has recommended to the favorable action of the Legislature is one of the greatest importance. We doubt whether the Legislature has had under consideration for years a subject of more vital interest, or one which, if favor- ably acted upon, would result in larger or more general benefit to all classes of the people in the State. It has been evident to all who have looked into the matter that the system of taxation in force in the State of Massa- chusetts is an exceedingly unsatisfactory one. Not only those who may be called, or who call themselves, scientific tax reformers have condemned it, but the local assessors, the common country people, the merchant and the laborer, have all found, from time to time, reason to condemn, not only the laws as they stand, but the method in which they are exe- cuted. The Constitution requires that a tax shall be levied upon all classes of property without discrimination ; yet, in certain instances, this law is construed so that it taxes prop- erty twice, and even three times over. On the other hand, in a great majority of cases, personal property is not taxed at all, and in this respect we have an illustration given of the biblical saying that “ whosoever hath, to him shall be given,, but whosoever hath not, from him shall be taken away even 28 TAXATION. that which he hath ; ” as the burden of the tax falls upon those in humble circumstances who are eminently conscien- tious, and upon the little trust estates of widows and orphans. In other words, the ones who should be taxed escape the burden, while those who might fairly be exempted are called upon to bear an entirely unwarrantable load. When one takes into account that on the best evidence obtainable not more than a fifth, and possibly not a tenth, of the personal property in the State of Massachusetts pays any tax whatsoever, the folly of continuing our present method, — which is simply oppressive and restrictive in its character, discouraging instead of encouraging trade and manufacture, — the injustice, we say, of this present method becomes too apparent to need argument. There is, how- ever, one period when it is possible to get an accurate state- ment of personal property, and this is when this form of per- sonal estate passes by succession from its former dead owner into new hands. At such a time it comes up for legal certi- fication and valuation under conditions which do not lend themselves to evasion, as it is ordinarily the interest of some one in probating an estate to see that the amount probated is fully inventoried and valued up to its true value. Expe- rience, not only in this country, but also in Europe and Australia, has made it evident that a succession tax can be collected with the minimum of trouble, and with hardly any possibility of evasion. It is true that a man might make gifts before his death to children or to friends, and to this extent exempt his estate from the payment of a succession tax ; but human nature is such that men almost invariably hold to what they have as long as they have life, and it would be a rare indi- vidual who, expecting his decease, sought to evade a post- mortem tax by an anticipatory division of his wealth. As experiences of this kind do not occur in the States and countries where this method is in use, it may be assumed that human nature in Massachusetts would not be pro- EDITORIALS. 29 ductive of results altogether different from those found else- where. The plan which the committee suggests of having all distinct local taxes assessed upon real estate, and of having the State collect franchise taxes and succession taxes, and, after paying State expenses out of these, remitting the balance first to the counties, and from these, if there is any to remain, to the municipalities, seems to us an exceed- ingly sensible proposition. The only changes that we would suggest in the bill that has been presented would be to have the succession tax of, say, five per cent, apply both to direct and indirect inheritances, so that there would be no discrim- ination whatsoever in this respect; and, second, that in dividing the tax after State expenses had been defrayed, the basis of division be that of population, rather than the assessed value of real estate. The plan of division, under any circumstances, is an arbi- trary one. The money collected from successions and fran- chises would come into the State treasury, and if there is any surplus it would seem fairer to have this given both to the counties and the municipalities on the basis of numbers. Of course, this would be of distinct advantage to the poorer towns and cities where the real-estate valuation was not par- ticularly high; but it is our opinion that those localities where the real-estate valuation was large — that is, the ^business centres of the State and the towns and cities im- mediately around them — would benefit so tremendously, by improvements in trade and manufacture, in consequence of this tax reform, that they could well afford to give this advantage in the way of distribution to their poorer munic- ipal neighbors. Such a change, it seems to us, would popularize the measure with the country members, as it would constitute for them a distinct financial gain, while it would also tend to encourage in their minds ideas of State and county economy, since the smaller the annual expendi- tures of the State or the county, the larger the amount that 30 TAXATION. would be left over from the succession and the corporate tax, to be divided among the various municipalities. {From the “ Boston Transcript February 19, 1896 .) UP-TO-DATE TAXATION. Massachusetts has been notoriously an assessor-ridden State — the favorite hunting-ground of local officials in- vested, after the antiquated methods of the days of small things, with the power of digging out as many dollars’ worth of property as they could find subject to taxation. Instead of depending on taxables that cannot be concealed, the Com- monwealth has offered a premium on fraud and false swear- ing, giving such men the choice between lying and taking their possessions into localities where better treatment would be accorded. Thus has grown up a system of taxation anomalous, exasperating, and really ineffective. It forms a subject worthy of the attention of enlightened business men and merchants, who believe that the State and city have a right to call upon them to devote a portion of their time to the improvement of methods which have been here- tofore deemed indispensable to raise the means to keep in motion our State and municipal machinery. The Merchants’ Municipal Committee, appointed at the request of Mayor Quincy to act, in certain specified cases, as an advisory board for the City Government, has moved in the matter of revising the system of taxation in vogue in this State, and formulated a scheme of general taxation for the whole Commonwealth, which, if it should be adopted, would almost mark an era in the changes it will produce. What the committee has sought to accomplish finds fit expression in the committee’s own words : “ We claim that the law embodied in the bill now presented can be easily and equitably administered, and that it will prevent favoritism to one locality over another by its execution. It changes EDITORIALS. 31 and equalizes the division of the corporation and personal- property taxes by turning them into the State treasury to provide for State and county expenses, thereby distributing them to the entire Commonwealth.” Other reforms sug- gested will render it easy to collect the full amount of the taxation laid, and leave capital, while employed in active business or industrial enterprises, free from taxation. The bill imposes a succession tax, and describes just how it shall be levied. But the great feature of the proposed legislation is in its exemption of quick capital from taxation, and taxing visible property in the shape of real estate to defray public ex- penditures. The committee estimates that this would only increase the tax on real estate in Boston $2.26 per thousand, or 17^ per cent., and this increase would be offset by the immediate rise of values through expanding business. The committee forcibly states that this is not an untried experi- ment. It is substantially the system adopted in Pennsylvania by law and in New York and Chicago by custom, with the results witnessed in the concentration of capital in those cities. Governor Greenhalge showed his progressive tend- encies in calling attention to the fact at the opening of this session of the Legislature by saying, “ It is impossible to fairly and efficiently collect our taxes under the present law,” and he suggests an investigation “ with a definite purpose of enacting a clear and equitable law which can be enforced in a fair and just manner.” The municipal committee, appointed at Mayor Quincy’s request, has acted upon these considerations offered by Governor Greenhalge, and its bill is now before the public. It will tend to produce such a unity of interest between different sections of the Common- wealth, so far as taxation is concerned, as will be salutary in every respect. The regulations upon which the practice of assessment and valuation of property are concerned should no longer remain contrary to common sense and dictated by the most super- 32 TAXATION. ficial knowledge of the laws which govern trade and finance. If Massachusetts is not to fall far astern in the competitions which now characterize business, it should cut clear of the old tradition that where you see something of value, tax it, — even if it will only stand one year’s taxation, — and adopt the liberal policy of inviting capital into the State, so that our citizens may obtain the advantage of its being used in the locality where destiny has fixed their residence. Every additional thousand dollars retained within the State, which would have been driven out of it by a harsh system of taxation, is a testimonial to the growth of liberal and enlarged sentiments on the question of taxation in the Commonwealth. (. From the “ Springfield Republican” February 19, 1896.') CANNOT BE TOO HIGHLY PRAISED. We cannot too warmly commend the general features of this proposed local taxation reform plan of the Boston Merchants’ Municipal Committee. It is as simple and practicable and just as the present tax-system is complex, burdensome, in- equitable, and impracticable. It sweeps away the thousand petty restrictions and complications and burdens and harass- ments which the present cumbersome system throws upon the business activities of citizens, and still does not materially change the incidence of the general tax-burden. We have lately called attention to the fact that the tax reformers would have to make some concession to the personal-prop- erty taxationists in order to achieve any progress ; and in providing a fairly high tax on personalty passing at the death of the owner, the committee has met this condition in the way we have proposed. The succession taxes may have to be made higher, and perhaps graduated, to win any considerable support to the plan from the opposition, but nothing should be left undone consistent with the general principle involved, and justice to EDITORIALS. JJ all interests, to win success for the measure. Its enactment into law would mean much for the progress and welfare of the State. It will be seen that the plan is very simple. Taxes for local revenue are to be confined to real estate. The State is to collect the whole of its revenue from independent sources — from the corporation and franchise taxes, and from succes- sion taxes on personal property as it passes through the probate courts. These latter taxes are provided for as an offset to the exemption of such property during the life of the owner. (From the “ Boston Post ,” Febriiary ig, i8g6.') TAX REFORM. The bill drafted by the Merchants’ Municipal Committee for the reform of taxation in Massachusetts goes very close to the bottom of things. It exempts personal property from taxation, except at the time when it passes through the Probate Court — which is the only time, indeed, when it can be reached with certainty. It levies city and town taxes on real estate alone, and it imposes a franchise tax upon cor- porations which enjoy the use of public property, and it leaves capital free when employed in industrial enterprise. These are the lines on which the “ Post” has urged the revision of the tax laws ; and they are practical lines. The gain through the imposition of an inheritance tax will alone go far to make up the loss of the personal-property tax as now assessed, while the increase of the burden on real estate, on which it is proposed to assess all local taxes, is consid- ered to be more than offset by the addition to its value con- sequent upon the operation of the system as a whole. The manner of distribution of the State taxes, derived from inheritances and franchises, is probably as equitable as could be devised. If some of the small towns find their income likely to be cut, they should be content to accede to what is shown to be equitable. 34 TAXATION. DOUBLE TAXATION. {From the “ Boston Traveller February iy, i8