LOCAL OPTION IN TAXATION LOCAL OPTION IN TAXATION By Lawson Purdy Secretary New York Tax Reform Association With a draft of an Act to Amend the Tax Law by Providing for the Appor- tionment of State Taxes and for Local Option in Taxation New York Tax Reform Association No. Ill Broadway New York p'3'TKl THE TROW PRINT Nitv York N Act to Amend the Tax Law by Pro- n. viding for the Apportionment of State Taxes and for Local Option in Taxation will be found on page 43. Page Local Option in Taxation 7 Local Option is Exercised Without the Sanction of Law 7 An Illustration from Experience in the State of New York 9 Local Officials Should Not Assess Prop- erty for State Purposes 1 1 State Boards of Equalization Condemned 12 State Revenues Should Not be Raised Exclusively by Specific Taxes . . .13 Difficulty of Raising State Revenue by Specific Taxes in New York . . .15 A New Plan Having All the Merits and None of the Vices of Other Methods of Raising State Revenue . . . .16 A Statistical Investigation to Forecast the Effect of the New Plan on Cities and Rural Districts 17 Thinly Settled Districts Will Pay Less State Tax 19 An Incidental Advantage — Accurate Sta- tistics Made Necessary 20 [ 5 ] Page Local Option Does Not Require New Methods of Taxation 21 Exemptions Are Already Popular . .21 Under Local Option Taxation of Mort- gages Will Vanish 23 Why Local Option Is Right .... 23 Preamble and Resolutions of the League OF American Municipalities .... 24 Resolutions of the State Commerce Con- vention .... 27 Progress Toward Local Option in Taxa- tion ..... 29 New York Chamber of Commerce Fol- lows the League 30 Oregon Adopts Apportionment Recom- mended by the League 32 Texas Seeks Local Option 35 Colorado Legislature Adopts Local Op- tion 35 Ohio Business Men Demand Local Op- tion 38 British Municipalities Petition Parliament for Local Option 40 Conclusion 41 An Act to Amend the Tax Law by Pro- viding FOR THE Apportionment of State Taxes and for Local Option in Taxa- tion 43 Indorsements 47 [ 6 ] LOCAL OPTION IN TAXATION » A S actually administered, the general property tax no longer has a friend. The theory of it is also condemned by every student of taxation. The prob- lem is how we can most effectively assail the superstitious reverence with which it is still regarded in rural districts. Local Option is Exercised without the Sanc- tion of Law Our experience of the enforcement of the general property tax and of every in- quisitorial and coercive law points out clearly the attack on the line of least re- sistance. No law can be effectively en- forced which is inquisitorial or subversive of personal liberty and fails to have the support of the moral sense of the com- munity. By a local option, unsanctioncd by law, the evils of such laws are tempered 1 A paper read at the National Tax Conference, Buffalo, N. Y., May 23-25, 1901, in accordance with the sentiment of the community. Local option should be ex- ercised within the law, not in spite of it. It should be the rule, not the exception. We may think that we could devise a tax system which would suit every com- munity, but the community will not let us do it, and if we could impose it upon them by force they would apply it in such di- verse fashion that we would not recognize our own work. We cannot avoid local option of some sort, either with or with- out the sanction of law, no matter what we do. Local option in the liquor traffic has the sanction of law in this and many States, and where districts do not have law- ful local option they take it unlawfully. A few months ago I visited Charleston, S. C., and was much interested in the working of the State dispensary law. This law was enacted by the votes of rural members, and is not approved by the city of Charleston. The result is that liq- uor is sold openly all over Charleston, and the State authorities are powerless to pre- vent it. I was told by a man in charge of a State dispensary that no matter what the [ 8 ] evidence, no Charleston jury w^ould con- vict in a case of unlawful liquor-selling. State agents frequently raid illegal places and seize what liquor is on the premises, but no longer make any arrests. The bar of the Charleston Hotel was raided twice while I was at the hotel, but the business was disturbed for only a few minutes, and only a small quantity of liquor was seized. This is local option without the sanction of law. The same sort of thing is going on in Kansas, and in every State where we at- tempt to impose morality by force. An Illustration from Experience in the State of New York An examination of the statistics of as- sessment will disclose a similar condition in every State of the Union which has the general property tax. A somewhat ex- aggerated instance occurred in the State of New York a few years ago. A law was passed in 1896 conferring larger powers on the State Board of Tax Commissioners, and new commissioners were appointed. They made great efforts to secure the better assessment of personal property, and [ 9 ] procured the indictment of some assessors and scared the rest. In the town of Vol- ney there were three assessors, and they apportioned the work so that one assessor assessed the property in the large village of Fulton within the town, and the other two assessed the property in the town outside the village limits. The town assessors in- creased the assessment outside the village from about $25,000 to over $400,000, and most of the increase was on the cattle, horses, sheep, hogs, and implements of the farmers. The village assessor absolutely refused to follow the example of the other town assessors, and did not add to his usual assessment of personal property. The town assessors said they rated everything — pianos, guns, and even fish-poles, and in one case they assessed a cow $20, the property of a widow who owned a few acres of land. They assessed a young man’s gun $10. In telling the story, the village assessor said : “ When they got through with that raid on personal property they made a great row because we found no pianos or guns in the village, which has 6,000 inhabitants.” When the Board of Supervisors of the [ 10 ] county met it was found that no other town in the county had followed this ex- ample, and as this town had not voted with the majority of the board they re- ceived no favors. As a matter of fact, the board had no authority to do anything for them, for our law does not provide for any equalization of personal assessments. The village assessor said that the town assessors would never again be induced to assess the live-stock, pianos, and fish-poles of the farmers until every other town in the State had done it for one year. The assessment for 1898 fully testifies to the truth of this assertion, as the assessment of personal property to the farmers was only about $25,000, instead of over $300,- 000, as the year before, and the number of persons assessed was loi, instead of 352. This is local option in taxation without the sanction of law. Local Officials Should Not Assess Property for State Purposes To make any real improvement in the systems of taxation of three-fourths of the States, the constitutions must be amended [ II 1 by striking out the provisions for uniform- ity and equal taxation of all property. The next step must be to devise a sys- tem of State revenue which will dispense with the taxation of property for State purposes, as assessed by local officials. So long as State revenue is obtained by taxing all property assessed locally, local option is almost impracticable ; but this is by no means the only reason for the change. State Boards of Equalization Condemned The general property tax for State pur- poses is a source of great evil wherever it is employed, and it has been condemned by tax commissioners in many States. In their last report the Tax Commissioners of Michigan say : “No feature of our tax system should receive more careful atten- tion by the legislature-elect than that of State and county equalization. There are few States having similar methods for the equalization of property, but that ascribe their gravest ills to the baneful effects re- sulting from such apportionments. The evils of undervaluation of property in Michigan may be traced almost invariably [ 12 ] to apportionments for State and county taxes. “The occasion for State equalization is generally one of days filled with woe and gloom. Messengers who are sent from the counties are those who can best picture the swamps, barren and unfruitful fields, and who can leave the deepest impression of great desolation.” State Revenues Should Not Be Raised Ex- clusively by Specific Taxes The Michigan Tax Commission shares the prevailing opinion that the only way to avoid State equalization is to raise suf- ficient revenue for State purposes by spe- cific taxes, as is done in New Jersey, Pennsylvania, Connecticut, and some other States. There are many and grave objec- tions to following the examples of these States. These States rely for revenue upon specific taxes levied upon certain selected forms of property. These taxes being im- posed at an unvarying rate sometimes pro- duce too much revenue, which the legis- latures promptly squander ; or produce too little, and proper expenditures have to be [ 13] curtailed ; or the State is forced to borrow. All three of these difficulties have been met in recent years by the States enu- merated. In times of excessive revenue the legislatures acquire habits of extrava- gance ; and in times of deficit the business community, especially in the cities, lives in daily dread that some new and oppressive tax will be laid to fill the coffers of the State. The system is utterly without flex- ibility and does more damage than the mischief that it was designed to remedy. Speaking of Governor Odell’s plan to do away with direct taxation in New York, the Hartford C our ant says: “We respect- fully invite the leaders of this reform scheme to call in Connecticut and make inquiry as to how the removal of the State tax has worked here. Every thoughtful man wishes the State tax had not been removed. Its presence, with the accountability that it enforces, is a mighty safeguard against ex- travagance. If New York drops that tax she will be sorry some day and probably find herself unable to put it on again.” [ Ml Difficulty of Raising State Revenue by Spe* cific Taxes in New York Whatever may be thought of this rem- edy for equalization, from an academic standpoint, it is often exceedingly difficult to carry it into effect, as is shown by the experience of New York. For twenty years the Legislature has been endeavoring to provide revenue for the State by specific taxes. It has succeeded in raising about $14,000,000 annually, and yet, at the end of twenty years, we still have to raise a sum by the general property tax nearly as great as the total expenses of the State when the movement began in 1881. Two obstacles will always be encountered — either large and important interests must be burdened with additional taxes, which they will vigorously resist ; or the local governments of the State must relinquish subjects of taxation from which they now derive a considerable revenue ; and it is always difficult to convince them that they will gain as much by the remission of State taxes as they lose by abandoning these sources of revenue. [ IS ] A New Plan Having all the Merits and None of the Vices of other Methods of Raising State Revenue The plan of apportioning State taxes, in- dorsed by the New York Chamber of Com- merce and by the last convention of the League of American Municipalities, has also been indorsed by the State Commerce Convention of New York and by more than fifty labor organizations. It has all of the merit and none of the vices of the plan of raising revenue by specific taxes. It is simple, flexible, and has a tendency to fix responsibility and check extravagance. It is really the application to political divisions of the principle of income taxation without the inquisitorial features which render the tax upon private incomes obnoxious to so many. This method is simply to ap- portion the State tax to the several counties of the State in proportion to local revenue. For example, if the State requires $ 1 , 000 ,- 000 and the total local revenue is $ 10 , 000 ,- 000 , each county will be required to pay to the State ten per cent, as much as its own local revenue; if a county and the towns [ 16 ] and cities within it are extravagant, it will pay more State tax than if it is economical. The amount of the State tax will be defi- nitely known, and any State extravagance will be immediately felt and the legislators called to account. The board which ap- portions the State tax will have merely min- isterial functions, and the apportionment will be based upon a sum in proportion. There is no more opportunity for friction between counties, and, to a certain extent, any locality can determine whether its share of State taxes shall be large or small. The same system of apportionment should be fol- lowed for raising county revenue. A Statistical Investigation to Forecast the Ef- fect of the New Plan on Cities and Rural Dis- tricts There are no statistics available to show the precise effect of this change in the apportionment of State taxes upon all the counties of this State or of any State in the Union, but in 1899 ^ legislative committee was appointed in New York to investigate the subject of taxation, and compiled some useful statistics. The committee made a [ 17 ] very careful investigation of the amount of money raised for all public purposes by the three counties of Oswego, Chenango, and Cattaraugus, and by all the taxing districts within these counties. The amount raised for all public purposes in the city of New York, which comprises four counties, is also known, and as the city of New York represents over two-thirds of the taxable property of the State, and pays over two- thirds of the taxes, we are able to de- termine the effect of the change upon the city of New York and the three counties investigated by the committee, with sub- stantial accuracy. For the year in which these statistics were compiled the city of New York paid $8.20 to the State for every $ 1 00 it raised ; Oswego County paid $ 1 0.42; Chenango, $ 1 2.82 ; and Cattaraugus, $10.- 13. If the apportionment had been made on the basis of revenue, it appears, there- fore, that the city of New York would have paid slightly more and the other three counties considerably less. These three counties are all distinctly rural counties, there being only one city in the three, and the combined population is [ 18] only 170,000. Chenango has the smallest population, and Chenango would save most in State taxes by an apportionment on the basis of revenue. If the same system were applied to the raising of county revenue, the saving which would be effected by the smallest rural places becomes still more ap- parent. There are some towns in the county of Chenango which paid more than one-fifth of their total revenue to the State, whereas the large village of Norwich paid only a little more than the city of New Y ork, the amount being $ 8 . 3 5 in every $ 100 . Thinly Settled Districts Will Pay Less State Tax A little reflection will convince anyone that this plan of apportionment must always work to the advantage of thinly settled rural districts, just as it would in the State of New York. From the standpoint of expediency and justice this is as it should be, and from a political standpoint it renders the adoption of this system comparatively easy. The cities would be very great gainers by being allowed to exempt certain classes of property from taxation, and could well afford to pay a little [ 19 ] more to the State for the privilege. The rural districts are not generally so anxious for changes in the system of local taxation, but would be compensated for the privilege granted the cities by a very considerable saving of State and county taxes. An Incidental Advantage — Accurate Statistics Made Necessary An incidental advantage of this system will be the necessity for an annual publi- cation of accurate statistics, showing the amount of revenue raised in each political division of the State, and the sources of such revenue. At the present time we have no such system, and we are trying to carry on the business of the State in ignorance of our income and the manner in which we ob- tain it. No private business could be run in this fashion for a year. Whether we adopt apportionment in proportion to reve- nue or not, we ought to have such knowl- edge of our govermental affairs as these statistics will give us. [ 20 ] Local Option Does Not Require New Methods of Taxation With the adoption of this plan the way is clear for any county or city to adopt its own system of raising revenue, without dis- turbing the system of the State. This local option should not be an option to devise new methods of taxing ; it should be exer- cised within the general statutes of the State and should be confined to the right to ex- empt any class or classes of property from taxation. If the power were granted to in- dependent divisions of the State to inaugu- rate new systems, it would lead to serious confusion. The courts would have many laws to interpret, and uncertainty and costly litigation would result. As nearly every- thing is now subject to taxation, the power to exempt is all that we require. Exemptions Are Already Popular The power to exempt will certainly be exercised, for the sentiment is strong in many cities for the exemption of mortgages and other securities, and the labor unions and business men are practically a unit in [ 21 1 favor of exempting merchandise and capital engaged in manufacturing. In the States of New Hampshire and Vermont and in Delaware and several Southern States, towns are permitted to exempt new industries for a term of years. This local option is gen- erally popular and much exercised. In the States of New York and Michigan, where this practice is not allowed by law, it has, nevertheless, been common for towns by vote to exempt new manufacturing plants. They have done this in spite of the fact that to exempt a new industry is the worst kind of discrimination, for it gives special advantages to favored persons. The ex- emption of a class of property is not a special favor, as competition between per- sons owning property of the class exempted reduces prices, and the benefits are distrib- uted. At the same time these experiments show that the people, in a blundering way, have been trying to go in the right direc- tion, and that, with the legal right to ex- empt classes of property, exemptions would be generally and promptly made. [ 22 ] Under Local Option, Taxation of Mortgages Will Vanish Mortgages remain taxable in many States, because the members of the Legislature are afraid of the supposed sentiment of their constituents, although they are generally fully aware of the injustice of such taxa- tion. With the power to exempt mort- gages, mortgage taxation in the cities would be abolished at once, and would speedily be a thing of the past in every State that had local option. Why Local Option Is Right Local option is expedient because it is the quickest and surest way toward progress, but it is not only expedient, it is right; it is that system of government under which questions are decided by those who have the fullest information, who have the best opportunity to know, and who have the greatest interest in a wise and just decision. PREAMBLE AND RESOLUTIONS OF THE LEAGUE OF AMERICAN MUNICI- PALITIES FAVORING LOCAL OPTION IN TAX- ATION 1 HEREAS, About one-twelfth of the whole population of this coun- try is domiciled in cities of more than 8,000 inhabitants ; and Whereas, There is scarcely a State in this Union which does not have within its bor- ders one or more cities the government of which requires the solution of more difficult and important questions than the govern- ment of the States in which they are sit- uated ; and Whereas, The fundamental principle of ^Adopted at the Fourth Convention, Charleston S. C., De- cember 12-15, 1900. [ 24 ] our free institutions is local self-govern- ment ; and Whereas, Improvement in municipal tax- ation is practically impossible so long as tax- ation must be equal and uniform through- out each State ; and Whereas, The constitutions of most of the States demand the uniform taxation of all property, and State revenue in excess of that derived from specific taxes is now raised by an effort at uniform tax on all property, which in practice is grossly unequal and unjust. Now, therefore, be it Resolved, That all provisions in State con- stitutions should be abolished which restrict the power of the Legislature to regulate assessment and taxation. Resolved, That so much State revenue, as may be required in excess of that derived from specific taxes should be apportioned to and paid by the counties or towns in pro- portion to county or town revenue. Resolved, That every county or town and every city be granted the right to regulate the assessment and taxation of property at its discretion, provided any increase or reduction of assessment must be uniform [ 25 ] throughout such county, town, or city, and not made on the ground of ownership. Resolved, That the executive officers of this league be instructed to co-operate with other like-minded associations or persons to secure the enactment of measures in har- mony with these resolutions. [ 26 1 RESOLUTIONS OF THE STATE COMMERCE CONVENTION^ Resolved, That the State Commerce Con- vention reiterates its resolution that the best way to reform the system of local taxation is to grant local option in taxation to the cities and counties of the State, and to carry this resolution into effect recommends the passage of the bill for the apportionment of State taxes and for local option in taxation, prepared by the New York Tax Reform Association and unanimously indorsed by many organizations, some of which are mem- bers of this convention. Resolved, That this convention indorse the following resolution on taxation, unan- imously adopted by the National Tax Con- ference : “ This conference recommends to the States the recognition and enforcement of the principles of inter-State comity in tax- 1 Adopted at the Third Convention, Buffalo, N. Y., October 16-17, 1901. [ 27 ] ation. These principles require that the same property should not be taxed at the same time by two State jurisdictions, and that if the title deeds or other paper evi- dences of the ownership of property or of an interest in property are taxed, they shall be taxed at the situs of the property and not elsewhere. These principles should also be applied to any tax upon the transfer of property in expectation of death or by will or under the laws regulating the distribu- tion of property in case of intestacy.” [ 28 ] PROGRESS TOWARD LOCAL OP- TION IN TAXATION 1 Mr. Chairman and Gentlemen : The league of American Municipalities, at its last convention in Charleston, S. C,, unan- imously adopted certain resolutions, outlin- ing the changes which should be made in the constitutions and statutes of our States, in order that progress in taxation may be possible. It is less than nine months since that convention was held, yet action has already been taken in several States in accordance with the recommendations of the league. The resolutions adopted by the league, which have had such approval, are as fol- lows : “ Resolved, That all provisions in State constitutions should be abolished which re- strict the pow.er of the Legislature to reg- ulate assessment and taxation. ^ Paper read at the Fifth Annual Convention of the League of American Municipalities, Jamestown, N. Y., August 23, 1900. [ 29 ] “ Resolved^ That so much State revenue, as may be required in excess of that derived from specific taxes, should be apportioned to and paid by the counties or towns in proportion to county or town revenue. “ Resolved, That every county or town and every city be granted the right to reg- ulate the assessment and taxation of property at its discretion, provided any increase or reduction of assessment must be uniform throughout such county, town, or city, and not made on the ground of ownership.” New York Chamber of Commerce Follows the League Three weeks after the adoption of these resolutions the Chamber of Commerce of the State of New York, one of the most influential and conservative organizations in the country, unanimously approved the re- port of its committee, on State and muni- cipal taxation, and the bill presented by the committee, “ For the Apportionment of State Taxes and for Local Option in Tax- ation.” Following the action of the Cham- ber, the bill was indorsed by the Merchants’ Association, the Board of Trade and Trans- [ 30 1 portation, the West End Association, the United Real Estate Owners Associations, the Central Federated Union, the Building Trades Council, fifty labor organizations in the city of New York, and a number of commercial and reform associations through- out the State. This bill follows precisely the plan out- lined by the league, except that no amend- ment to the Constitution of the State of New York is necessary. The bill provides, first, that the city of New York, through its municipal assembly, or any county of the State by its board of supervisors, may ex- empt from all taxation or reduce the assess- ment of any class of property, provided such exemption shall have uniform operation throughout the city or county, and shall not be made on the ground of ownership. That is to say, that no exemption shall be made which would be in the nature of a special privilege to favored persons or corporations, and that it must apply to all property of the character designated within any city or county. In the next section of the bill provision is made for the gathering of statistics by [ 31 ] the State Board of Tax Commissioners, so as to show the gross revenue of every tax district in the State by counties, and the sources of such revenue. In the third section, an amendment is made to that section of the tax law which provides for the equalization of assessed values, and the apportionment of the State tax, so that the State Board of Equaliza- tion has merely the ministerial duty of de- termining the proportion of State tax which each county shall pay, by dividing the gross revenue of each county, including all the tax districts within it, by the sum of the gross revenue of all the tax districts of the State, for the preceding calendar year. Oregon Adopts Apportionment Recommended by the League Although the bill recommended by the Chamber of Commerce did not become a law in New York this year, the plan of apportionment found favor in Oregon and became a law in that State by the approv- al, on February 27th, of House Bill No. 68. The principle of the Oregon law is in harmony with the League’s resolution, but [ 32 ] the law differs somewhat from that pro- posed for New York, in that the appor- tionment is only made every five years in- stead of annually. The directions for ap- portionment are contained in Section 4 of the Oregon law, and are as follows : “ In order to ascertain the proportion of such taxes to be paid by the several coun- ties, said State officers shall ascertain, from the reports of expenditures of the several counties on file in the office of the Secre- tary of State, the average amount of ex- penditure in each county during a period of five years, and each county shall pay such proportion of said State taxes as its average expenditure for said period bears to the total amount of expenditures in all of the counties of the State, such computa- tions to be made by said State officers in January, 1905, and in January in each fifth year thereafter. Until the January, 1905, computation, the proportion of the State taxes to be paid by the several coun- ties shall be as set out in the following table, which is based on the assessments of the several counties for the past five years, to wit.” [33 ] The principle of apportionment on the basis of revenue is applied in this Oregon law, but unfortunately it is not perfectly applied. The apportionment is based on expenditures made for county purposes ex- clusively, instead of on the expenditure for county purposes and for all other purposes within the county. In Oregon this may make very little difference, but in the State of New York and in many other States it would operate to the advantage of counties containing large cities, and throw an undue burden upon the rural counties. It would oppress the rural counties because county expenditures do not everywhere bear the same relation to the total of local expendi- tures within the county, being frequently smaller in proportion to local expenditures in counties which contain large cities than in the rural counties. I fear that the Oregon law will be found defective also in the definition of terms. In the New York bill the words “gross revenue ” are carefully defined, and the def- inition excludes money borrowed, whereas the word “ expenditure ” is used in the Oregon statute without definition and would [ 34 ] appear to include the expenditure for pub- lic works paid for with borrowed money. This would unfairly increase the propor- tion of such counties as had made extensive and permanent improvements. Texas Seeks Local Option The Houston Manufacturers’ Association has for some time been urging the adoption of an amendment to the Constitution of Texas to permit local option in taxation. At the last session of the Texas Legislature a bill for this purpose was introduced and passed the Lower House, but too late in the session to be passed by the Senate. Colorado Legislature Adopts Local Option Amendment The most notable action in harmony with the resolutions of the League has been taken by the State of Colorado. The res- olutions were sent to each member of the Colorado Legislature, and I am informed that they had an influence in determining the favorable vote on an amendment to the Colorado Constitution. The amendment is as follows : Section 9. Once in four years, but not [ 35 ] oftener, the voters of any county in the State may, by vote, at any general election, exempt, or refuse to exempt, from all tax- ation for county, city, town, school, road, and other local purposes, any or all per- sonal property and improvements on land ; but neither the whole nor any part of the full cash value of any rights of way, fran- chises in public ways, or land, exclusive of the improvements thereon, shall be so ex- empted. Provided, however, that such question be submitted to the voters by virt- ue of a petition therefor, signed and sworn to by not less than i oo resident taxpayers of such county, and filed with the county clerk and recorder not less than thirty nor more than ninety days before the day of election. “ Section 1 1 . The rate of taxation on property for State purposes shall never ex- ceed four mills on each dollar of valuation, but the provisions of this section shall not apply to rights of way, franchises in public ways, or land — the full cash value of which may be taxed at such additional rate, not exceeding two mills on each dollar of as- sessed valuation, as shall be provided by law, after exempting all personal property [ 36 ] and improvements thereon from such ad- ditional rate of taxation.” In 1899 the Senate of Colorado appoint- ed a committee to investigate the subject of taxation and suggest amendments. Senator James W. Bucklin, of Grand Junction, Col., was made chairman of the com- mittee, and, on behalf of the committee, visited the Australasian colonies of Great Britain. On his return he submitted an exhaustive report, setting forth the condi- tions as he found them in Australia and New Zealand, and recommended the adop- tion of the Australasian tax system, and, as a step in that direction, he proposed the amendment to the Constitution which I have just read. The experience of New Zealand with local option in taxation covers a period of five years. In September, 1896, a local op- tion act was passed, but it imposed such severe restrictions as to render action by any municipality extremely difficult. Only di- rect taxpayers were allowed to vote, and the majority in favor of any change was re- quired to be equal to a third of the voters. In spite of these restrictions, fourteen local [ 37 ] bodies had adopted changes in their local systems up to February, 1 900. At the Par- liamentary session of 1 899 and 1900, amend- ments introduced by the Premier, Mr. Sed- don, were adopted which gave tenants the right to vote, abolish plural voting, and pro- vided further that a simple majority was sufficient to make changes in the system of local taxation. Since the act was amended, nearly fifty local bodies have voted to abol- ish taxes on improvements. The testimony of the Premier and other officials in New Zealand, as quoted in Sen- ator Bucklin’s report, shows that the Local Option Act has been a great success and that there is no thought of its repeal. The amendment passed the Colorado Senate by a vote of 26 to 6, and the House by a vote of 50 to ii. If this vote is at all indicative of public sentiment in Colo- rado, there should be little doubt of the rat- ification of the amendment when it is sub- mitted to the people in the autumn of 1902. Ohio Business Men Demand Local Option The business men of Ohio have become aroused to the necessity for making great [ 38 ] changes in the tax system of that State, and the Ohio State Board of Commerce has en- tered upon a campaign of education to se- cure the passage by the next Legislature of an amendment to the Constitution. The State Board, in its statement of principles, declares : “ For an amendment to the Constitution to permit local option in taxation and a simplification of our system of taxation by means of which gains of great and perma- nent value to every business interest can be secured.” The State Board has engaged Mr. Allen Ripley Foote, of Chicago, to conduct their campaign, and at once provided for sending Public Policy weekly to the managing edi- tors of 534 newspapers in the State. This movement in Ohio is not confined to business men. On July 12th the Ohio State Bar Association adopted a resolution: ‘‘That the Constitution of Ohio should be so amended as to completely separate State and local taxation ; that each city and county of the State be vested with the power of taxation for the purposes of such city or county, subject to the authority of the Leg- [ 39 ] islature to limit local indebtedness and fix a maximum rate of taxation which the city or county may levy.” The State platforms of both great political parties devoted unusual space to taxation, and while somewhat vague, as political platforms generally are, they did not antagonize local option in taxation. The Miami County Republican platform declared that: “We favor the principle of home rule or local option in taxation, whereby each city and county may raise its own taxes, in its own way, for its own purposes, subject to the authority of the General Assembly to limit local indebtedness and prevent any abuse of power by the local governing bodies.” British Municipalities Petition Parliament for Local Option The movement for local option in tax- ation goes on in Great Britain with con- stantly increasing force, and unless we has- ten in this country Great Britain is likely to be ahead of us. The councils of Glasgow, Liverpool, London, and over 300 municipalities have [ 40 ] petitioned Parliament for local option, and a few weeks ago the Urban District Coun- cils Association of Great Britain, represent- ing 400 towns, likewise petitioned Parlia- ment for this reform. Conclusion I do not propose at this time to present an argument for local option in taxation. You have aleady adopted resolutions which could not be made any stronger, and the action of other countries and many of our States show such a strong tendency in this direction as to make such an argument al- most superfluous. Our nation, made up as it is of independent States, is a magnificent example of the blessings of local self-govern- ment, and the movement for local option in taxation is merely an extension of the principle which has made this country great. In a democracy where the enforcement of law is in the hands of elected officials, law can only be enforced in accordance with the prevailing sentiment of each commu- nity. Y ou are all familiar with the practi- cal nullification of restrictions upon personal [ 41 ] liberty which do not commend themselves to the citizens in many cities. It is the rule, and not the exception, that taxation laws are enforced in the same spirit, and the practice in most of the cities of the United States is so different from what one would expect from a reading of the State statutes, that the author of the statutes could not recognize his own law in practice. This is local option without the sanction of law. It is better than no local option at all, but it is always an evil. Laws on the statute books which are not enforced or enforce- able breed contempt of law. This leads to unlawful acts subversive of individual rights. Anyone can see that a tax law which may work fairly well in thinly settled rural communities will be productive of fearful injustice in a great city. The attempt to legislate by one rule for great cities and country villages has everywhere proved a failure. It is time that we learned from bitter experience to allow such latitude to each homogeneous community as may en- able it to adapt its tax laws to the condi- tions of its own life. [ 42 ] AN ACT To Amend the Tax Law by Providing for the Apportionment of State Taxes and for Local Option in Taxation The People of the State of New Torky repre-- sented in Senate and Assembly y do enact as follows: Section i. The Tax Law is hereby amended by adding thereto, after Section 4, the following section: § \a. Other property may be exempted from taxation, or the assessment upon the same reduced, as provided in this section, but such exemption or reduction of assess- ment shall have uniform operation throughout the county or city in which it is made, and shall not be made on the ground of ownership. Within any county such property shall be exempt from taxation, or the assessment upon the same reduced in such manner, as the Board of Super- visors of such county shall from time to time prescribe. Within any incorporated city, extending over the whole of any one county or over more than one county, such property shall be exempt from taxation, or the assess- ment upon the same reduced in such manner, as the Com- mon Council or Municipal Assembly of such city shall from time to time prescribe. Nothing contained in any special act, or the act incorporating any city or village, shall [ 43 ] affect the validity or operation of any such exemption or reduction of assessment. The provisions of this section shall not affect Section four nor Articles nine and ten of this chapter, nor any other general law of the State. [Note. — Section four of this chapter provides that certain property shall be exempt from taxation. Articles nine and ten deal with the taxation, for State purposes, of corporations and transfers of property by will, by the intestate laws of the State or in expectation of death.] Section 2. Section 171 of the Tax Law is hereby amended by adding thereto the following : Ninth. Obtain annually from the financial officer or other of- ficer or person charged with the custody and disbursement of any funds of each tax district of the State a report of the amount of gross revenue of each tax district for the preceding calendar year and the sources of such revenue ; and for this purpose such local officer of each tax district, at the expense of such district, shall furnish such information in such form as may be required by the State Board of Tax Commissioners. Neglect or refusal to file a true and correct report in the office of the State Board of Tax Commissioners at the time and in the form required by the Board is a misdemeanor, the making and filing of a report containing a wilful misstatement is a felony. T <;nth. Classify and file, according to tax districts, the reports of gross revenue which they obtain from local officers. Eleventh. Examine the reports of gross revenue filed with them, and tabulate the results of such examination, so as to show summarily, and in separate tables, for each tax district, for each county and for all the counties of the State, and for each calen- dar year, (i) the gross revenue, (2) the sources of such reve- nue, ( 3 ) any other results which they think it for the public in- terest to exhibit. They shall present a report of the results of [ 44 ] such examination to the State Board of Apportionment at its meeting on the first Tuesday in September, <^Tax district,’’ as used in this section and in Section 173 of this chapter, means a political subdivision of the State, having a board of assessors, or an assessor or officer, authorized to assess property therein for taxation for State, county, city, village, school, highway, or any other purpose whatever, or having an officer or officers authorized to sign warrants for the collection of taxes. Gross revenue,” as used in this section and in Section 173 of this chapter, means the total sum of money received by any tax district for public purposes, and the value, at the rate of commutation allowed by law, of work performed for the tax district without compensation under a requirement of law. But it does not include assessments for local improvements, money borrowed, money received as interest on any obligation of the tax district owned by said district or held in trust for it by any board or officer, or so much of the revenue from sales to private users of water, gas, electricity, or other industrial service as rep- resents the cost thereof. For the purpose of this section, and of Section 173 of this chapter, the city of New York shall be deemed to be one county. Section 3. Section 173 of the Tax Law is hereby amended so as to read as fol- lows : § 173. State Board of \Equali%ation\ Apportion- ment powers and duties. The commissioners of the Land Office and the three commissioners of taxes shall constitute the State Board of \Eqmli-z.aUon\ Apportionment. The State Board of \Equali%ation\ Apportionment shall meet in the city of Albany on the first Tuesday in September in each [ 45 ] year \J'or the purpose of examining and revising the valua^ tions of real and personal property of the several counties as returned to the Board of 'Tax Commissioners^ and shall fix the aggregate amount of assessment for each county^ upon which the comptroller shall compute the State tax. Such board may increase or diminish the aggregate valuations of real property in any county by adding or deducting such sum as in its opinion may he just and necessary to produce a just relation between the valuations of real property in the State, But it shall^ in no instance,^ reduce the aggregate valua- tions of all the counties below the aggregate valuations thereof as so returned~^ and, at such meeting, shall ascertain and determine the percentage of State tax each county shall pay, by dividing the sum of the gross revenue, for the preceding calendar year, of each county including all the tax dis- tricts within the county, by the sum of the gross revenue of all the tax districts of the State for the same year. The Comptroller shall immediately ascertain from this \assessmeni\ determination of the percentage of State tax which each county shall pay, a copy of which shall be transmitted to him, the \firoportiori\ amount of State tax each county shall pay, and mail a statement of the amount to the County Clerk and to the Chairman and Clerk of the Board of Supervisors of each County. Section 4. This Act shall take effect October first, 1902. EXPLANATION,— Matter underscored is new; matter in brackets [] is old law to be omitted. [ 46 ] INDORSEMENTS ^HE foregoing bill has been specifically indorsed by : The Chamber of Commerce of the State of New York. The State Commerce Convention. Board of Trade and Transportation. Merchants^ Association. West End Association. United Real Estate Owners' Associa- tions. Business Men's Association of Cohoes, and other associations of Business men. The Central Federated Union. The Building Trades Council, and many other Labor organizations.