under discussion (are titles and credits property, and as such proper subjects for taxation?) came up before the Supreme Court of the State of California for decision, and was decided almost unanimously-only one out of five dissenting - in accordance with the views above taken. The Constitution of California, in common with the Constitutions of most of the other States, provides "that taxation shall be equal and uniform throughout the State," and "that all property in this State shall be taxed in proportion to its value, to be ascertained by law." The Hibernia Savings and Loan Society of San Francisco resisted, under these constitutional provisions, the taxation of mortgages given to secure the loan of property, on the ground that to tax a certain property, and then to tax a mortgage on it, which mortgage is not in itself property, but like a deed or lease, is a species of conveyance or acknowledgment of a conditional interest or right in the property, was not equal and uniform taxation, but an unequal and double tax on the property mortgaged. The Court met the case fairly and squarely, the language of the Chief Justice (Wallace) being reported as follows: "Mere credits are a false quantity in ascertaining the sum of wealth which is subject to taxation as property, and in so far as that sum is attempted to be increased by the addition of those credits, property taxation based thereon is not only merely fanciful, but necessarily the unconstitutional imposition of an additional tax upon a portion of the property already once taxed." That the practical effect of the taxation of loans and credits is to impose a double tax on the debtor has never been disputed by any who have taken pains to investigate the subject, but as the point is one that even tax-officials and law-makers generally do not admit, if indeed they comprehend it, the following further language of the Chief Justice is worthy of attention. He says:

"The taxation thus imposed nominally upon credits having resulted in the double taxation of the money, the additional tax must of course be paid by some one. And here all human experience, as well as the settled theories of finance concur that it is not the lender who pays, but the borrower. The borrower is the consumer. The interest which he pays to the lender is the prime cost of the delay for which he has contracted. If the government, by the imposition of addition

al taxes, increase the cost, the borrower, being the consumer, must pay for it."

There is another portion of this California decision that should not be overlooked. The California code, in defining personal property as a subject for taxation, in common with the tax codes of most of the other States, specified "money, goods, chattels, evidences of debt, and things in action " as personal property, which definition would, at first sight, certainly seem to include mortgages as proper subjects for State taxation. But the Court, through Justice McKinstry, who delivered its opinion (the Chief Justice's opinion being in concurrence), referred to this clause of the code as "an attempt" merely to include choses in action in the definition of property, and declared that to make it the duty of assessors "to assess all things in action is to give a construction to the Constitution which must lead to the grossest absurdities." He then enumerates at length many of the absurdities* to which this construction would tend, and concludes by affirming it to be a princi

* "Supposing that the necessities of government required a tax of one hundred per cent on all values, or, what would be the result of such a tax, an appropriation of all the property in the State, it is plain that the State would receive no benefit from evidences of debt due by some of her citizens to others, and payable out of the tangible property which the State had already taken."

"The legislature may declare that a cause of action shall be taxed, but a cause in action cannot pay the tax; and this because it has, and can have, no value independent of the tangible wealth, out of which it may be satisfied."

"It may not be possible in every case to show that the debtor has paid the tax assessed to his creditor. But it admits of mathematical demonstration, — if other property in the State has been assessed at its value, that the money which shall ultimately satisfy the debt (if it ever is satisfied) has paid the tax. If it were practicable to assess all the property in the State at the same moment of time, it would be clear to every mind that an assessment of a credit was an attempt to transfer to it a value elsewhere assessed. If a debtor was found to be the owner of one thousand dollars, and is assessed for that sum, and his creditor is found to be the owner of his note for one thousand dollars, and is assessed for a like sum; and if the day after the visit of the assessor to the creditor the debtor shall pay his note, it is clear that this same value has been twice taxed; since the debtor has parted with his money, and received only that which is certainly not taxable property in his hands, and which can never afterwards be assessed. When a debtor pays his debt, he does not abstract or destroy any portion of the taxable property of the State; the aggregate of values remains the same."- Opinion of Justice McKinstry.

Suppose, "were such a thing possible, that the entire tax-rolls exhibited nothing but indebtedness. Taxation under such circumstances would of course be wholly fanciful, as having no actual basis for its exercise."- Opinion of Chief Justice Wallace:

ple in taxation, that "it is property in possession, or enjoyment, and not merely in right, which must ultimately pay every tax."

California, therefore, in this decision leads off in a matter of tax reform, which every other State sooner or later must adopt, if it would give to its citizens the maximum advantage to be derived from the obtaining and employment of credits.

Another point preliminary to reform, in respect to which it is important that there should be a clear understanding on the part of the public is, that there is a broad and philosophical distinction between "taxation" and "arbitrary taking." It is often assumed that a State, because of its sovereignty may, through form of law and delegated authority, deal with the persons and property of its subjects as it may see fit; and repugnant as is this assumption to the principles which are assumed to constitute the foundation of all free government, it is not to be denied that previous to the adoption of the Fourteenth Amendment, it would be difficult to show what restraint existed upon the complete sovereignty of the States of the Federal Union over persons and property within their unquestioned jurisdiction; the right to hold a certain class of their population in slavery, and the right to take private property for public purposes without making any compensation (Baron v. Mayor of Baltimore, 7 Peters, p. 243: 1833), being illustrations of the exercise of such arbitrary powers in the utmost extreme. But the most recent expression of opinion of the U. S. Supreme Court on this point, as given in the case of Loan Association v. Topeka (20 Wallace, 658), is as follows: "There is no such thing in the theory of our government, State or National, as unlimited power in any of these branches. The executive, the legislative, and the judicial departments, are all of limited and defined powers. There are limitations of power which arise out of the essential nature of all free governments, implied reservations of individual rights, without which the social compact could not exist, and which are respected by all free governments entitled to the name. Among these is the limitation of the right of taxation."

An inquiry now as to the nature and extent of this limitation in the case of free governments (for the court further added in the above case, that "a government which held the

lives, liberty, and property of its citizens subject at all times to the absolute disposition and unlimited control of even the most democratic depository of power is but a despotism ") may be answered (at least in part) by saying, that from the time of Montesquieu down to the time of the Report of the Massachusetts Tax Commissioners in 1875, no writer of repute (jurist or economist) has ever taken any other ground, than that taxes are the compensation which persons or property pay the State for protection, or in other words, that taxation is the correlative of protection; and that the act of a State, in levying upon that which its processes cannot reach persons or property- and which, therefore it cannot protect, is not entitled to the name of "taxation," but is simply arbitrary taking or spoliation. Taxation, to quote from only one recent law writer," is in any view taking private property for public use; and it cannot be so taken without an equivalent, both as to the government or the citizens. It is not competent to convert private property to public use, by way of taxation, and without compensation, any more than by any other mode."-Redfield. That the principle as thus stated is the supreme law of the land, so far as the U. S. Supreme Court can make it so, must be further apparent from the following extracts from its decisions, which in substance have been again and again repeated :—

"Governments are organized for the protection of persons and property, and the expenses of the protection may very properly be apportioned among the persons protected, according to the value of their property protected."- Chief Justice Waite, Tappan v. Merchants' Bank, 18 Wallace.

"Where there is no protection, there can be no claim to allegiance or obedience." -Justice Story, United States v. Rice, 4 Wheaton, 246. "It is an eternal principle of justice, that jurisdiction cannot be justly exercised by a state over property not within the reach of its process; that is, property which it cannot protect."― Miles v. Duryee, 7 Cranch, 481.

And if these citations in the way of authority are not sufficient to establish the principle in question, we have the Fourteenth Amendment of the United States Constitution, which prohibits any State from depriving any person of property "without due process of law"; and taxation without jurisdiction, and therefore without the possibility of the correlative

return of any protection as compensation, is, it would seem, an arbitrary exaction on property, and not "due process of law"; and also not giving that full faith to the public acts and judicial proceedings of other States required by a previous clause of the Constitution. It must, however, be stated, that by many this reasoning is not regarded as conclusive; and more especially is this the case in Massachusetts, which taxes her citizens in respect to visible, tangible property, acknowledged to be within the territory and jurisdiction of other States. In the recent report made by the commission appointed by the legislature of Massachusetts to inquire into the expediency of revising the tax-laws of that State, the commissioners at the outset evidently felt impressed with a feeling that they must vindicate the practice of their State in this particular, and that unless they succeeded in doing so, the whole theory of arbitrary, infinitesimal taxation, of whose continuance they are advocates, might be seriously broken in upon. They accordingly set about it in the following amusing manner. With the Declaration of Independence before them, maintaining it to be in the nature of a self-evident truth, that "all men are endowed by their Creator with certain inalienable rights"; and "that among these are life, liberty, and the pursuit of happiness," the commissioners gravely announce that "the individual person" (in Massachusetts) "has no inalienable rights except that to his own righteousness." They next

That Massachusetts assessors in practice really act on the theory of Massachusetts State Tax Commissioners, that a man in Massachusetts has no inalienable rights except "to his own righteousness," has found a striking illustration in a communication recently made to the Boston public by one of its leading capitalists. In this the writer makes known the following extraordinary facts. In 1872-3, the writer (Nathan Mathews) purchased a large amount of mortgages of an incorporated company, known as the "Water Power Company," supposed at the time to be a good investment. In 1873 the company failed, and put off their creditors with mortgage bonds in exchange for their notes, but it was necessary, in order to make this arrangement work, for Mr. Mathews, who was a heavy indorser of these notes, to give new notes and the bonds as a collateral for them. No interest is now paid on the mortgage bonds, and the property is taxed three times. First, the lands are taxed for more than they will sell for; second, the creditors are taxed on the mortgage of the property; and Mr. Mathews, who only passed over the bonds to these creditors as collateral, is taxed as the owner of them. In view of such a state of things, it may not be impertinent to suggest, that stimulus to any other kind of righteousness than that of self-righteousness is not as great in Massachusetts as would seem to be desirable.