DIVISION XII TAXATION TAX LEGISLATION BY WILLIAM E. HANNAN LEGISLATIVE REFERENCE LIBRARIAN, NEW YORK STATE LIBRARY Constitutional Proposals. While motor vehicle common carriers. this review of tax legislation is for Minnesota defeated a proposed forthe year 1925 it must, for proposed estation amendment. Mississippi constitutional changes, take a back-voted down an amendment providing ward as well as a forward look. For for a classified property tax and a a period of three years, beginning tax on incomes and inheritances. November, 1924, and ending Novem-Wyoming defeated a severance tax on ber, 1927, eighty-eight measures on certain minerals. the subject of taxation and state Certain initiative and referendum finance will have been before the vot-measures were also defeated Novemers of thirty-three states. Eighty-one ber, 1924. Massachusetts voted down of these measures are constitutional; the bill levying a two cent tax on and seven, initiative or referendum each gallon of gasoline, and Oregon measures, not affecting the constitu- approved the bill repealing the intion. come tax law. Constitutional Amendments Passed Constitutional Amendments Pendupon in 1924. The most important ing in 1925-1926. Five states voted amendments, adopted in 1924, are as on twelve amendments in 1925. Maine follows: California, Florida and adopted two relating to bond issues. Kansas approved a classified tax on New York approved three, two relatcertain intangibles. Florida added a ing to bond issues totaling $400,000,new section to its constitution which 000 for public improvements and provides that no tax upon inherit elimination of grade crossings, and ances or upon income of residents or one concerning the reorganization of citizens of the state shall be levied the state government. Ohio proposes by the state. Minnesota authorized a two amendments: one, a classified tax gasoline tax. North Carolina limits on intangibles and the exemption of the state debt to 7.5 per cent. of the motor vehicles from the uniform rule; assessed value of the taxable property the other limits the borrowing power of the state; and North Dakota in- of local government units. Pennsylcreased its bond issue for state pur-vania would regulate exemptions in poses from $200,000 to $2,000,000. the case of inheritance taxes, and Wisconsin provides a tax for the de- would provide bond issues totaling velopment of forests. $38,000,000 for public improvements and forest purposes. Of the amendments defeated, in 1924, the most important are as fol- Twenty-eight constitutional amendlows: California disapproved amendments will come before the voters of ments exempting state, municipal, fourteen states for consideration in county and public-utility district 1926. The most important of these bonds and federal aviation fields from amendments are as follows: Calitaxation and one levying a 4 per fornia would levy a tax of 44 per cent. tax on the gross receipts of cent. on the gross receipts of motor vehicle companies transporting per- | Nebraska, for certain counties, ausons and baggage, and a tax of 5 per thorized the county board to appoint cent. on companies transporting prop- a real estate classification board of erty by trucks; a second amendment three members to classify land outwould levy a tax of 54 per cent. side cities and villages. The county upon the gross receipts of separately assessor is to base his valuation and operated steam railroads of a cer- assessment upon the classification tain length; forestation is to be en- made by the board. New York procouraged by exempting from taxation|vided, in towns over a certain popuall immature forest trees on certain lation, for the appointment of one aslands. Illinois proposes the principle sessor and the creation of a board of the classified property tax. Indi- of review. Ohio abolished the office ana would provide an income tax. of township assessor, made the Minnesota seeks to encourage for county a unit for taxation purposes, estation. Oregon would follow Flor- and named the county auditor the ida in its proposal to prohibit the assessor. levy of an inheritance and income tax. Income Tax.-Nine states amended their income tax laws. Arizona reForty-two states held legislative pealed its gross income tax law. sessions in 1925. The most impor- Massachusetts will tax the net intant changes made in the various tax codes are noted under their proper subject headings. come as returned to the federal government and also the business income of a deceased person. New York State Tax Administration.-Con- made a 25 per cent. rebate on the necticut placed emphasis upon the personal income tax. North Carolina need of centralized control over local made a substantial increase in the tax officials by increasing the powers income tax rates. South Carolina exof the state tax commissioner. Kan-empts from income tax all income sas abolished the state tax commis-earned by domestic corporations from sion and the inheritance tax commis- property and business owned and sion and created a public service operated outside the state. Wisconcommission of five members with the sin increased the exemption allowed powers of the former commissions. husband, wife, children under 18 Michigan, also, abolished the board years of age and dependents. This of state tax commissioners and state, also, established a formula for created a state tax department with apportioning income received by perthe powers and duties of the former sons engaged in business within and commission. without the state. Inheritance Tax.-Eighteen states amended their inheritance tax laws. Four states, Connecticut, Massa North Carolina consolidated the tax collecting forces. Taxes formerly collected by the secretary of state and the insurance department are trans-chusetts, New York and Pennsylvania, ferred to the department of revenue. South Dakota enacted a new civil administrative law. A department of finance is created in which a taxation division is established. The state tax commission, in its present form, is abolished, and a director of taxation appointed. Washington abolished the department of taxation and examination and the state equalization committee, and established a state tax commission of three members with broad centralized powers. enacted provisions for reciprocity by which they agree not to tax the personal property of non-resident decedents if a like exemption is made in their favor. Georgia repealed its own inheritance tax law and provided for the collection of such a tax under the federal estate-tax act. Nevada repealed its inheritance tax law. Michigan increased the exemption for lineal descendants, and New Hampshire made a change in the rate of tax. Local Tax Administration.--Kan- New York enacted an estate tax sas created, for certain counties, a law which affects the net estates of board for the approval of plats and resident decedents in excess of maps of land for taxation purposes. $1,000,000. The rates are graduated. New York, also, in lieu of the pro- companies from 4 of 1 per cent. to gressive rates, laid a flat rate tax of 34 of 1 per cent. Wisconsin will tax 2 to 3 per cent. on the clear market unauthorized insurance companies on value of the property of non-resident the same basis as authorized insurdecedents. North Carolina increased ance companies. will the tax rates on all classes of bene- Public Utilities.-Montana Banks and Insurance Companies.Eleven states made changes in the taxation of banks. Massachusetts will tax national banks and trust companies on their net income as returned to the federal government, at the same rate as that of other financial corporations. New Hampshire beginning in 1926 will levy an excise tax of 1724 of 1 per cent. on savings deposits on which interest is paid; in 1931 and annually thereafter the rate will be 1224 of 1 per cent. Pennsylvania repealed the 10 mills tax on bank stock. South Carolina provided that state and national banks shall be taxed alike. Iowa bases the auto transportation tax on per ton mile and increases the tax; and Kansas and South Dakota levy an additional tax on like companies. Massachusetts bases the fee on weight, and Michigan changes from a horse power and weight basis to a weight base alone. Massachusetts' Eight states effect changes in the fee is 50 cents and Michigan's 55 taxation of insurance companies. and 65 cents per 100 pounds weight. Connecticut reduced the tax on mu- Minnesota levies a tax on the base tual domestic insurance companies value of trucks and, on passenger from 3 to 3 per cent. The tax cars, a tax based on weight. Missouri, on domestic insurance companies is South Dakota, Oklahoma, Utah and reduced in two particulars: the state Wyoming increased and Nevada, New franchise tax is reduced from 5 to 2 Hampshire, Ohio and South Carolina mills and the ad valorem stock tax decreased fees. Oregon divides auto from 10 to 4 mills. North Carolina transportation companies into six increased the tax on certain insurance classes, the fee varying. Vermont changes the fees for trucks to a grad- Assessment. Nebraska provides uated rate based upon weight. Gasoline Tax. Every state but four, Illinois, Massachusetts, New Jersey and New York, levies a gasoline tax. Four states levy a tax of 1 cent a gallon; twenty states and the District of Columbia a tax of 2 cents; one state a tax of 21⁄2 cents; eleven states a tax of 3 cents; three states a tax of 311⁄2 cents; four states a tax of 4 cents, and one state, South Carolina, a tax of 5 cents. The trend is toward an increase in the gasoline tax rate. Seventeen states have made an increase in the rate of tax this year. of for а quadrennial assessment property, formerly biennial. Ohio requires the county auditor to assess real estate once every six years. Forestry Tax.-Michigan provides for the establishment of commercial forest reserves and for their administration and taxation. New Hampshire encourages the planting and perpetuation of forests by providing for a rebate in taxes of 50 to 90 per cent. Ohio requires forest land, devoted exclusively to timber growing, to be taxed upon the actual value of the land, the value of the timber to be included. PROPERTY TAXES BY JENS P. JENSEN PROFESSOR AT UNIVERSITY OF KANSAS The Classified Property Tax.- since limited the power to classify While property taxes continue to chiefly or entirely to intangible propyield the bulk of revenue for state erty. Under the Florida amendment, and local treasuries, certain changes which apparently contains no restricare taking place in the character of tive provisions, no legislation has such taxes, of which the most con- been enacted. spicuous is the movement for the In Kansas the power to classify is classification of property for differ- limited to intangibles and "mineral ential taxation. The November elec-products." The law enacted under tion of 1924 modified the constitu- the amendment did not extend to the tional uniformity rule in Florida, latter type of property, but it estabKansas, and California, so that in lished for intangibles the following these states the legislatures may now taxes: for domestic real estate mortclassify all or some of the taxable gages, a recording tax of 2.5 mills; property and tax the several classes for other intangibles, an annual propdifferently. At the present time the erty tax of 2.5 mills. Apparently legislative power to classify exists through an oversight on the part of more or less completely in approxi- the legislature, manufacturers' and mately three-fifths of the states. merchants' money and credits were Though the movement for classifica- not included, but remain subject to tion has not been very rapid there the general property tax rate (119 is no effective backward tendency, and Kansas 1), the taxation of such in the states still subject to the uni- money and credits being "otherwise formity rule more or less effort is provided for." For the same reason, exerted for its modification. Thus and as decided in the same case, corOhio, the stronghold of uniform taxa-porations holding domestic real-estion, again submitted a proposal for tate mortgages on which the recordclassification to popular vote; and a ing tax has been paid may deduct the similar proposal will be voted upon value of such mortgages in determinin Illinois in 1926. ing the value of their property. Until recently the amendments per- In California the amended constitumitted the classification of all prop- tion provides that the legislature erty; but Maine (1913), New Mexico may in its discretion provide for a (1914), Nebraska (1920), Kansas different method of valuation or a (1925), and California (1925) have different tax on intangibles, provided that the tax on intangibles shall not be greater than the tax on other property; and provided that such a method, once established, cannot be changed except by a two-thirds legislative majority. Under the amend ment it was enacted that intangibles generally be assessed at 7 per cent. of the market value and taxed at the local rate, as other property. only of the assessors but also of the taxpayers. Exemptions.-Pressure for exemptions is always exerted somewhere, and breaks out here and there. At the November election, 1924, Georgia voted to exempt the property of certain industries from all local ad valorem taxes for a period of five years after erection, for the purpose of encouragement. Included are es Nebraska, which state in 1921, under its 1920 amendment had estab-pecially the plants erected to manulished a classification similar in form facture or process cotton, wool, linen, to that of California, found it un- silk, rubber, clay, wood, oil, and mesatisfactory and in 1925 established tallic or non-metallic mineral; milk the following classification: money, or cheese plants; and plants to proin bank and elsewhere taxed annually duce electricity. The exemption is at the rate of 21⁄2 mills; other in subject to approval of a majority of tangibles, generally, at the rate of the voters in the local district pro5 mills; bank stock to be assessed at posing the exemption. 70 per cent. of the value of personal tangible property and subject to the local rate. Less extensive was the 1923 law of Wyoming which granted similar exemption to beet sugar plants for a It cannot be said that, administra-period of ten years. It was repealed tively, the new classified property in 1925, which suggests that such extaxes have been as effective as their emptions are often passed by interadvocates had hoped, that is, the amount of property listed for taxation does not so increase as to yield more revenue at the lower rate. In Kansas it is estimated that the amount of property subjected to the New Jersey enacted a law to exlower rate increased from 300 to 400 empt all personal property stored in per cent. The best that can be public warehouses. The law was claimed for the new law is that under passed over the veto of the goverit no owner of intangible property nor, who in his veto message aswas made to pay confiscatory taxes. serted that the policy of the state Besides, the amount of intangibles ought to be to deny exemptions exreached prior to the new law was so cept to "such property as shall small, and the revenue from it so in- clearly meet the test of giving to the significant that no appreciable loss general public an equivalent for the would have been sustained had in- immunity from taxation." tangibles been exempt entirely. ested minorities in the absence of vigilance of the general body of taxpayers, whose interest must be to prevent the persistent "nibbling away" of the tax base. On the other hand, Missouri in the November, 1924, election defeated a churches and educational and charitable institutions. Evidently the more effective claim for exemption at present is that which offers encouragement to the location and operation of industries. For the mediocre success-as compared with the experiences in Minne-proposal to exempt the property of sota and elsewhere-several reasons can be given. Kansas has the most decentralized system of assessment in any state. The township trustees are ex officio the local assessors. They did not understand the law, which went into effect only a few days be- Central Tax Administration.— fore the assessment day. To make What may prove to be significant matters worse, the tax commission changes are taking place in the charhad just been abolished, leaving no acter of the central state agency sucentral authority, for the time being, pervising and administering property in charge of the administration. To taxes, and often other taxes as well. secure effective administration a For several decades the evolution approcess of education is necessary, not pears to have been in the direction |