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CLASSIFICATION OF PERSONAL PROPERTY. Under these circumstances, the difficult question presents itself: How, in a system of taxation arranged to meet the necessities of the State of New York for revenue, shall personal property be dealt with? And, as preliminary to attempting an answer, it is important to consider, in the outset, how the personal property of the State, in respect to taxation, classifies itself. - The facts already presented show:

First. That a very large portion of such property, through the laws of the United States and the decisions of the federal courts, is absolutely or inferentially beyond the control of the State authority for taxation; such as United States securities, imported goods in the original package, money obligations of other States, and property owned by citizens whose situs is unquestionably beyond the territory of the State, and consequently beyond its jurisdiction, processes or protection. The commissioners take it for granted that they would not be justified in recommending the legislature to instruct their law officers to reopen all these questions in the courts, with the expectation of obtaining a reversal of former decisions, as preliminary to revising the existing system, and that, pending such action, all efforts for reform be suspended. And if not, then the personal property of the State, included under the above heads, cannot be considered in any new system of taxation.

Second. Another large proportion of the personal property of the State is of the most intangible character, and in great part invisible and incorporeal. As such it fluctuates in value in the hands of any one individual continually; it is measured by indebtedness which may never be the same one hour with another; it is easy of transfer, and as essential to using is in fact continually transferred from one locality to another, and from the jurisdiction of one State to the jurisdiction and laws of another and a different State. Now, how is personal property of such a character to be reached, valued and assessed for taxation ? Every effort heretofore made in every country to tax it has proved wonderfully uncertain and unequal, and therefore every country that has ever attempted it, with the exception of Holland *

* Holland, by reason of her immense national debt, the largest comparatively of any country, has been obliged to maintain a most rigorous and extensive system of taxation in order to raise revenue sufficient to the wants and requirements of the State. But it has been prominently brought out during the past year in the discusgions which have taken place in France on the revision of the French fiscal system, that the decadence of Holland dates almost from the hour when taxes were imposed on manufactories, commerce, fishing industry, and moneyed capital. Business went elsewhere, and with the decline of business the ability to pay taxes diminished, and the burden of taxation augmented. (See Journal des Economistes, November, 1871; also, Principles of Political Economy. J. R. Mc Culloch, pp. 470-71.)

and the States of the Federal Union, have abandoned the project as something wholly impractical.* Nevertheless the idea is entertained, and during the past year has been publicly expressed by men whose opinions are entitled to respect, that all such property, or rights to property can be assessed as uniformly and efficiently as real estate or rents of buildings; and that it is the business of the commissioners to devise a way for so doing, and not to create difficulties, but to remove them. But to all such as entertain these opinions the commissioners would propound the following questions: How can you devise a law to tax the incorporeal, invisible property of non-residents? How will you tax the owners of mortgages on real estate in New York, who reside in Pennsylvania and certain counties in New Jersey? How will you tax negotiable instruments, if owned by residents or non-residents, secured by property in New York, if the negotiable instruments are located out of the State, since the court of appeals has decided that New York cannot tax property having a situs or location beyond its jurisdiction? How can you tax the $1,000,000,000 of products and manufactures sent to New York annually from other States in the hands of consignors and agents, and now exempt from taxation? How can personal property be reached while debts are permitted to reduce the assessment ? What system can be introduced that will enable assessors to see things which cannot be seen, or examine things that are intangible ?

And finally in respect to so much of the personal property of the State as is visible, tangible and clearly within the territory and jurisdiction of the State: How shall we deal with such of this property as by the laws of contiguous and competing States is free from taxation? Can we afford to put manufacturing industry, capital employed in improving real estate and in building, shipping engaged in commerce, bonds and mortgages and other evidences of debt, under disadvantages from which they can readily relieve themselves by simply moving across our borders ?

* Within the past two years the local taxation of Great Britain has been made the subject of special inquiry and investigation by a committee of Parliament; and in addition to several official reports, two prize essays on the same subject have been published by the Statistical Society of London: (i. e., On the Local Taxation of Great Britain and Ireland.First and second Tayler Prize Essays, by R. H. Inglis Palgrave, and John Scott, of the Inner Temple.) During the past year, also, the necessity of raising increased revenue in France has also drawn especial attention to the subject of local taxation in that country; but it is particularly noticeable, that in neither England or France, has any prominent speaker or writer advocated the direct taxation of personal property; or even alluded to the subject, except to scout the very idea of such a proposition.







Is not the small increase of the population of New York during the last decade, 12.94 per cent, as compared with Pennsylvania, 21 per cent, and New Jersey 34 per cent, sufficiently significant to satisfy that the occasion for temporizing has gone past, and that of practical, sound action has come ? *

EFFECT OF INJUDICIOUS TAXATION ON BUSINESS DEVELOPMENT. The following incident, taken from a recent report of the chairman of the board of tax revision for the city of Philadelphia. Hon. Thomas Cochran, affords a striking illustration of the influence of injudicious local taxation upon business interests within the sphere of its execution. Thus, during the first quarter of this century, the auction business of Philadelphia in respect to teas, coffee, indigo, drugs, dry goods, etc., was the most important in the country, and attracted to that city merchants from widely different localities. In 1826 the legislature of Pennsylvania, looking for new sources of revenue, increased the taxes on auction sales in Philadelphia to such an extent as to make them one per cent higher than in New York on East Indian goods and three-quarters of one per cent higher on most descriptions of other goods. The result was that merchandise in a great measure ceased to be consigned to Philadelphia, and went to New York, and with the merchandise and sales went also a very large proportion of the foreign shipping owned in

* Heretofore it has been considered a particularly happy idea by many tax officials in New York, and especially in New England, to endeavor to throw as much as possible of the burden of local taxation upon the manufacturing enterprises included within their jurisdiction; and with this view the valuation of the real and personal property pertaining to such industries-especially if the same are incorporated,-is placed for taxation at the very highest admissible figures, and above the average of other property; old swamps and bogs, for example, originally having no appreciable tax valuation, becoming in the eyes of the assessors first-class real estate the moment the same have been flowed with water and made available for a mill privilege. In the State of Connecticut the legislators have even made a point of going out of their way, to make sure by a special statute, that “mills and buildings used for manufacturing purposes," shall not enjoy the advantages of other property in being rated at less than their real value; but shall be especially assessed at their full value; and so in fact discriminated against rather than in any way favored. Now what has been the result? Why Vermont and Maine having tried this practice for an indefinite period have at last come to a realizing sense, that manufacturing capital has ceased to come or remain within their borders, and prefers to go to Pennsylvania where it is more liberally dealt with; or seeks investment in invisible, intangible securities, representing property in other States, and which, from the very necessity of the case,

tax officials. And having made the discovery, these States are now endeavoring to entice back such capital by promising an exemption from all local taxation; while in Connecticut, although no legislative remedies have been yet proposed, the people of many towns and cities have become fully conscious that the value of their real estate, of their trade, and the aggregate of their population would have been very much greater to-day than it actually is, had a policy of local taxation, more liberal and intelligent than now exists, been heretofore adopted. “We can point,” says one of the leading journals of this State in a recent article on this subject, “to more than one town in Connecticut where manufacturing enterprises have been actually abandoned of account of the policy pursued by town authorities relative to taxation."

Philadelphia, and which formerly sailed from that port. After the mischief was done and the business of Philadelphia seriously injured, the legislature of Pennsylvania modified the law, and during the past year, with a wise regard for the State's interest, swept all such taxes from her statute books.*

The legislature of Pennsylvania, during the last year (1871), also repealed all existing taxes on trades, professions and employments, thus taking a still further step in the direction of concentrating taxation to the fewest and simplest elements.

The commissioners would also call attention to the following resolution, embodied during the past year, as part of the platform of one of the great political parties of Pennsylvania:

Resolved, In the judgment of this convention the time has come when the State tax on personal estate may be safely abolished."


PROPERTY. During the past year, the subject of the direct taxation of personal property being agitated in Philadelphia, the common council of that city requested its law committee (consisting of nine members), to consider the subject, and prepare a bill “for the taxation of all personal property as now enforced in some of the States of the Union.” This committee, in February, 1871, submitted a report, declining, in fact, to report any such bill, on the ground that, after careful examination, they were satisfied that it would “injure the business interests of the

* The report of the poor law commissioners of Great Britain for 1843 also gives another interesting illustration of the effect of injudicious taxation in causing the permanent diversion of a great branch of industry from one section of England to another and less favorable section. It says: "The practice of rating stock in trade never prevailed in the greater part of England and Wales. It was with comparatively few exceptions confined to the old clothing district of the south and west of England. It gained ground just us the stock of the wool staplers and clothiers increased, so as to make it an object with the farmers and other rate payers, who still constituted a majority in their parishes, to bring in a considerable property within the rate. They succeeded by degrees, but when the practice of rating stock in trade was fully established in this district the ancient staple trade rapidly declined, and withdrew itself still more rapidly into the northern clothing districts, where no such burden was ever cast upon the trade. Whether this transfer of business was in any way aided by the imposition of other taxes in the district and the exemption in the other, cannot now perhaps be distinctly proved; but it is undeniable that the operation must have been in effect a discriminating tax of a very considerable amount against the trade of the one district, and therefore proportionably in favor of the trade of the other. In both districts the trade was of ancient growth, but hitherto the southern had the advantage, for the natural and acquired advantages of the two districts are in most respects such as rather to have favored the southern district; i. e., in respect to density of population, possession of coal beds, proximity to London, and almost unlimited capital.” The same report also brought out another very curious fact in respect to the experience of this English district, namely, that the success in raising money which attended the taxing of the woolen industries led to great improvidence and expenditure; and relief under the poor rates being increased and distributed injudiciously, “produced most conspicuous effects in deteriorating the habits and depreciating the wages of the agricultural laborer."

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city, and stop or retard the growth of our industrial establishments." Discussing the effect of the proposed change on the real estate property of the city, the committee say :

“Will the owners of real estate be relieved of any of the weight of local taxation, by imposing a part of the levy on the business of the city ?

“Capital, business and industrial establishments alone give value to city real estate. With it the real estate can be made to produce revenue, maintain or increase in value ; without it comes depreciation in values and want of occupation for large classes of people. If, therefore, a tax imposed on the business interests of the city would have an unfavorable effect upon its growth and prosperity, the transfer of a part of the tax levy to property in business would, in effect, be an injury to the owners of real estate. This, we think, would be the result. Of the capital in business in this city, the largest interest is in manufacturing. Through the prosperity of our industrial and manufacturing establishments, we have grown and maintained our position as the second city in the union in the last decade. Thousands of families are maintained by that interest, and whilst we may attribute our advance in this respect, in part, to our favorable location, well-housed population, and the fine agricultural country surrounding us, yet the ability of the manufacturer to compete in other mar. kets with the manufacturer of Massachusetts and Connecticut, is more largely owing to the fact that here the capital of the manufacturer is untaxed, than has been generally supposed.”

“A careful examination of the facts show that, in New England, private capital is taxed, and being at about the same rate as corporate stocks, has probably induced the formation of manufacturing companies, the corporate form having some seeming advantages in the exemption in part of individual liability and facility to aggregate a large capital at the start.”

“In the city of Philadelphia, private capital in manufacturing being untaxed, except for the value of the real estate occupied (machinery not being estimated in the valuation), the business has been encouraged in the hands of individuals and firms, many of whom, with but limited capital at the start, have been enabled to enlarge until they give employment to great numbers of our people.”

“ The aggregate of the establishments of these enterprising men bas made our city the largest center of manufactures in this country. The business which they have concentrated here, gives employment to and sustains an important part of our population, and materially

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