and the chairman of the finance committee declared "that in the country and the towns and cities in the interior of the State, the rule is almost universal for persons to get up an indebtedness of some kind or other, so that their property may escape taxation.” One of the most common and successful methods now resorted to is the taking of an unfair, but apparently strictly legal, advantage of the law exempting the securities of the United States from taxation. Thus, for example, an individual desiring to evade taxation on capital invested in general mercantile or speculative business, first purchases U.S. bonds, we may suppose, to the amount of $100,000. He then borrows on his promissory note, using the bonds as collateral, $100,000, or some smaller sum, and invests the money so obtained in the business in question. When the day of assessment comes round, a return is made, under oath, if need be, of $100,000 business capital;

officers holding places of trust at the hands of the people, either locally or as State officers. Such officers find no difficulty, in the positions which they occupy, in not only getting a number sufficient for their purpose, but in absolutely having persons ask the privilege of getting on these official bonds; and then these persons, by a sort of conscience which I do not understand, when the assessor shall come around, in their minds consider this a liability which they may possibly be under the necessity of meeting in dollars and cents, and thus calming their consciences in regard to the matter-swearing off their personal liabilities to taxation.

"I will take another case. The State of New York, in its operations, is in the habit of receiving large amounts by way of canal tolls, and is under the necessity of making the deposits in the locality where they are received. And they ordinarily select banks of good standing, with abundant surplus beyond their capital. But under the rule which governs, they require, in addition to the bonds of the bank itself, in its corporate capacity, the bonds of individuals, for the purpose of securing the State against any possible loss or deficit. And, sir, you will find very many of the banks in the interior, where the entire of the directors become jointly and severally holden in a specific sum, by way of penalty, to protect the State from any loss that might be occasioned. And, in very many instances, I know that these men, each of them, although the bank is abundantly good and able, both in its capital and in its assets beyond its capital, and each and every one of the individuals is able, three or four times over, to pay the amount he has thus become quasi-security for, uses that as one of the items of their liability to reduce their taxation upon personal property. I take it that they have no real ground of law for this purpose; but they acquit their conscience in regard to the matter, and get rid of taxation in that way. I know a case in my own county where an individual, unquestionably one of the wealthiest men in the county, and that wealth largely consisting of personal property in bonds and mortgages, having a large family of children who had grown up to years of discretion, and who had become workers in the world, who kept his day-book in this way: As he received money from A, B, and C, upon mortgages, he first credited to the parties who had executed the mortgage, and then he gave credit on the book to the individual son or daughter, from time to time, for the money received from that mortgage; but never, in any one instance, does he make the assignment that the law contemplated for the purpose of passing the mortgage; and never, in any one single instance, does he pay over to his children the identical moneys thus received. But when the tax-gatherer comes around he has no personal property."--Hon. Thomas G. Alvord, Proceedings and Debates, vol. iii., pp. 1936-'7.

$100,000 just debts and liabilities; no personal property subject to taxation. If inquiry is made further respecting the U.S. bonds purchased, the answer is made legitimately, that in respect to these the State authorities have no jurisdiction. Since the commencement of the present year, moreover, a case involving this very principle of exemption has been brought before the Supreme Court of New York (general term, Jan. 3, 1871) by the tax commissions of the city of New York, and a decision given in favour of its legality; thus illustrating how difficult it is, holding on to a system of universal taxation, to once exempt any description of intangible, incorporeal property from assessment, without at the same time opening a door to innumerable opportunities for fraud and evasion. And it should be further borne in mind that this door has been most effectually opened, both by national and State authorities, and that it is now entirely beyond the power of any individual State to close it.

Of other methods by which U. S. bonds or notes are made available for the purpose of evading taxation, the following may be also mentioned: Thus, in the case of savings banks, it would seem most reasonable, if any moneyed capital is to be subject to taxation, that the surplus of such institutions, which practically is "nobody's property," should be; especially since the deposits in any savings bank which are due to depositors are by law not liable to taxation. Yet in 1867 the following

*SUPREME COURT OF NEW YORK, Jan. 3, 1871-(before presiding Justice Ingraham and Judges Barnard and Cardozo)-Assessment of Personal Property-The People ex rel. Beniamin T. Babbitt v. The Commissioners of Taxes and Assessments for the City of New York, Respondents.—The relator in this case was, in April last, assessed by the commissioners of taxes of this city on his personal property on $250,000. He claims that, on the 1st of January, 1870, his personal property and assets, other than certain bonds of the United States Government, amounted in the aggregate to $345,895.97; and that his debts on that day were $356,084.49; that between Jan. 1 and April 1, 1870, the liabilities and debts of the petitioner increased, and that at the end of April the excess of debts over his assets was greater than on Jan. 1. On the 29th of April, 1870, he addressed to the respondents a written notice, duly verified, to the effect that he was not liable to taxation in any amount for personal estate, and requested them to strike his name from the assessment rolls. From this statement, it appeared the relator was the owner of $250,000, commonly known as five-twenties, which had been purchased by him in the years 1865, 1866, and 1867, for permanent investment, which bonds he claims are by law exempt from taxation. The petitioner, therefore, insisted that as his debts exceeded the amount of his personal property, aside from the bonds mentioned, he was not liable to be assessed or taxed in any amount for personal estate, and that those bonds could not be taken into consideration for the purposes of taxation, either as a part of his capital, or for the reduction of his debts and liabilities. The respondent declined to accede to this, but gave the relator notice that they had reduced his assessment to $200,000. From such decision an appeal was taken to this court, which after hearing gave judgment in favour of Mr. Babbitt.-Press Report.

ingenious law was enacted: "The privileges and franchises granted by the Legislature of this State to savings banks or institutions for savings are hereby declared to be personal property, and liable to taxation as such in the town or ward where they are located to an amount not exceeding the gross sum of their surplus earned (after deducting the amount of such surplus invested in United States securities.)" It seems unnecessary to add that after this the amount derived from the taxation of the surplus of savings banks was very inconsiderable.

The commissioners have received letters from various parts of the State pointing out instances of inequalities or evasions of taxation, as in the case of the savings banks above noticed, and asking that remedial measures may be devised and presented to the Legislature. As an illustration of these the following may be quoted :-" A. B. is worth over $1,000,000. He is what is called a 'banker.' His deposits are supposed to be not less than $1,000,000 in easy times. For many years he has discounted no paper except the city's, and for this exceptional favour he has the city's deposits. Instead of loaning money to help business here, he keeps all, save enough money to pay checks, invested in governments. Then he states, on oath, if required, that all his money is in governments, and that the few hundred thousands in his vaults belong to depositors. Thus, last year, he paid taxes on less than one twenty-fifth part of the real value of his property. I do insist that such cases should be reached, and I fearlessly affirm that the oppression occurring from fraud and official laxity in this place in the matter of taxation, and this place is but a (perhaps bad) sample of the municipalities of the State, is abundantly sufficient to justify combined and forcible resistance on the part of the aggrieved."

Now the commissioners have given the above extract from one of the numerous letters addressed to them, omitting names and places, although not so requested to do, because they believe that in the discussion of questions of this character the attention of the public can be more certainly secured by specific and actual illustrations rather than by abstract reasoning. But at the same time, after examining the case referred to in all its relations, they must, while acknowledging the grievance, frankly say they are at a loss to know what remedial measures are practicable. The bonds and the notes of the United States, in which the individual in question may claim that his capital and deposits are invested, are by national law made free from taxation, and in respect to this the State of New York can do nothing; while the attempt to go back of an oath and investigate would involve such an amount of personal inquisition, litigation, expense, and the exercise of arbitrary power that

although practicable in isolated instances, it would not, as a general thing, be tolerated for one moment by the public.

Another circumstance which does not seem to have generally commanded attention is the fact that, since the war and its entailed burden of debt and taxation, the savings banks of the country have in a degree changed their original character. It is very true that they continue, as before, to be the depositories and custodians of the savings of the poor; but they have also, to a very great extent, become the depositories of those who are not poor; and this for the purpose, on the part of such depositors, of escaping taxation. Thus, during the past year, a year in which the remunerations of industry have been notoriously unsatisfactory; a year of falling prices, small sales, numerous strikes, and an unusual suspension of manufacturing operations by reason of an unprecedented drought, the deposits of the savings banks of the country have been in excess of those of almost any former year-in New York to the extent of about $40,000,000, and in Massachusetts to nearly $24,000,000. It is obvious, therefore, on the very face of this statement, to use the words of the Governor of Massachusetts in his recent message, "that a large share of this increase is not the savings of labour," and that "each year shows more deposits by capitalists."

In short, the recent increase of the deposits in the savings banks of New York and New England does not constitute proof, as is often averred, that the country is in a highly prosperous and satisfactory condition, but the tendency of its showing is rather the other way. Formerly the deposits in these institutions represented in great part the hard-earned accumulations of persons who were entirely dependent for support upon the wages received for the performance of daily routine labour, such as operatives in factories, day-labourers, mechanics, needlewomen, clerks, and small traders. Now however, in consequence of the exemption of these institutions from taxation, or their subjection to a reduced rate, they are made use of by a class of persons for whom savings banks were never designed, and who have, in fact, no moral right to avail themselves of their eleemosynary character; and, therefore, the single fact of a recent rapid accumulation of deposits in these institutions "does not," to quote from the report of the bank commissioners of Massachusetts (1867), "afford any evidence that they are performing the beneficial work expected of them.”* It was in

*As further illustrations of the correctness of this position, an instance may be given of one savings bank in Massachusetts, which having some years ago but about $200,000 of deposits, was taken in hand by a retired capitalist, anxious to develop its possibilities, and in a short space of three

recognition of this state of affairs that the Legislature of Massachusetts, in 1868, increased the State tax on savings banks from one-half of one per cent to three-quarters of one per cent; and the Governor of the State, in his recent message (January, 1871), suggests that this rate be even further increased.

The anomalous character of the deposits of the savings banks of New York is also well illustrated by the following extract from a letter addressed to one of the commissioners, under date of Rochester, November 21, 1870 :

"The stocks of corporations legally taxable in this city aggregate over $1,300,000. The aggregate assessment of 'personal' in 1869, the latest figures in my possession, was $1,568,300. Assuming that these stocks were (although they, in fact, were not) assessed according to law, there would remain $268,300 as the taxable 'personal' of our whole population, aside from their investments in local stocks! The savings bank

years carried up to a capital of $700,000, the accumulation being all drawn from the population of an agricultural district. This result was accomplished by a process of active solicitation, through the press and by printed circulars, calling on the people to bring in their money, and promising to pay 7 per cent for it, free of taxes. The whole neighbourhood was absolutely drained; mortgages, loans to mechanics and small manufacturers were called in, and an extreme stringency occurred in the local money market.

In the year 1868 the statistics of the savings banks of the manufacturing city of Lawrence, Mass., showed 7,568 depositors, out of a population of 28,000, of whom 9,000 were operatives directly employed in the mill. But of this number of depositors only one-fourth were operatives.

The report of the Massachusetts bureau of labour statistics (March, 1870, pages 307-'8), makes also this statement concerning the character of the depositors in that State :

"A gentleman whose official position gives him a knowledge in the premises, which entitles what he says to credit beyond question, testifies that the ordinary depositors in savings banks (in Massachusetts) are, as a general rule, from the lowest class of labourers, and are mostly Irish, who starve themselves that they may acquire. The better educated and informed American workmen do not, and cannot save; because their education, their manner of life, their home requirements, their sense of responsibility to wife and child and home, make demands, and by no means unreasonable ones, which their sense of duty in every relation justify them in meeting."

Another circumstance which has recently tended abnormally to increase the capital of savings banks is the dearness of real estate, and of such stocks as were generally within the reach of this class of investors. Once a few hundred dollars would purchase for a mechanic or labourer a decent house, but such has been the increase of prices resulting from a depreciated currency and high taxation, that a far larger sum is now required to purchase a home, and when it is obtained the taxes and repairs on it are a heavy burden. Thus the savings bank has become the depository of funds waiting for the return of better times-of lower prices and settled values. It certainly cannot be regarded as a symptom of healthy social condition, when the labourers of the country are in this manner prevented from acquiring homes for their families, and an established interest in the country and its prosperity.

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