CHAPTER XI. SALES METHOD OF ASCERTAINING VALUES OF Tax officials have long been embarassed by a lack of facility for determining the true valuation of real property for purposes of assessment and equalization. It is the experience of every lawyer, who has anything to do with condemnation litigation that the judgment of real estate experts will differ very widely as to the valuation of specific tracts of real property after full opportunity to observe all the surrounding conditions. That a line could be drawn somewhere between the estimates of the optimist and the pessimist which would form a safe guide for all purposes of just assessment and equalization is not seriously doubted, but the problem of devising means by which to discover that line is not a simple one. We are fortunate, however, in being able to fall back upon the experience of the tax commissions of Wisconsin and Minnesota in these matters. For more than ten years the tax commission in the state of Wisconsin has used what is known as the sales method of determining the land and lot values and the same method has been in use in Minnesota for several years. In brief, this method consists in obtaining information concerning every sale in every part of the state, and it is done in this way. Field agents of the tax commission go into the various counties and transcribe from the records to cards memoranda of all the sales by warranty deed, and by inquiry they discover the nature of the transaction, as to whether it is a sale or a trade. If a sale they learn the true consideration from reliable sources. If they fail to obtain satisfactory information in this manner the sale is eliminated from their future calculations. By taking all of the transfers for which reliable information has been obtained an annual average is struck, which when considered in connection with the annual averages covering a period of several years affords the highest evidence obtainable of actual values in a particular county or municipality. This method has proved highly satisfactory where it has been tried, and the information obtained in the manner above described has been of inestimable value in the equalization of tax burden. The gathering of information relating to the sales of real property could, we believe, be greatly facilitated by statutory provisions requiring confidential information to be furnished to the tax commission at the time the instruments are recorded. A bill making provision for such will be prepared by the tax commission and presented to the legislature for consideration. CHAPTER XII. SCHEDULE OF ITEMS USED IN LISTING PERSONAL PROPERTY FOR ASSESSMENT. The experience of officials having to do with the administration of taxation and revenue laws, teaches that a hard and fast schedule fixed by statute does not produce the best results in the assessment of personal property. The chief reason why this is so is that a classification of various species of property which seems highly desirable at one time, may, in the course of a very short time, lose its value and will come to be productive of inequalities in assessment. Section 1496 of the Code of North Dakota for 1905 provides for a schedule of twenty-seven items intended to set forth the number and value of items of personal property of various descriptions. It is well to require the listing of property in such a manner as to insure that no property will be over-looked and at the same time to present a schedule so classified that property of a given description will readily be placed under the proper heading. If this is not done all attempts at equalization will fail and instead of the equalization operating to distribute the burden of taxation more equitably, it is likely to exaggerate the inequalities already appearing. We believe that better results will be obtained by an amendment to Section 1496 which will preserve the section intact, and at the same time provide that the schedule may be changed by the tax commission whenever in its judgment, founded on experience, a change in the schedule is deemed advisable. For recommendation in this matter see page 158. CHAPTER XIII. INHERITANCE TAX HISTORY. We hear much discussion today of the plan of taxation upon inheritances, and we are apt to gather the impression that the idea of the inheritance tax is modern. Nothing could be farther from the truth. The inheritance tax goes back to the early civilizations. Gibbons, in his History of the Roman Empire, tells us that the Emperor Augustus suggested the use of this tax for the support of his army. This form of taxation has been used from early times in those countries of continental Europe that have borrowed their legal and fiscal systems from the Romans. The use of this tax has grown with the growth of democracy until today it is in use not only in the principal states of continental Europe, and in England, Australia and Canada; in fact, generally throughout the English Colonies, and in a large number of the American states. Its use in England dates from about 1780 and its first recognition in the American states was in Pennsylvania, in 1826. So general is the use of the inheritance tax now that it may well be considered an established part of our revenue system. THEORIES OF THE INHERITANCE TAX. There are three main theories advanced by economists in support of taxation of inheritances. They are: the back tax, income without toil or service, and accidental income, theories. Those who support the back tax theory of inheritance taxation do so on the ground that under our revenue systems the common experience is that taxation falls heaviest upon those least able to bear it and that the wealthy escape a large portion of the tax burden that they should bear. Consequently, they contend that a system that will take from the estate at the time of its descent or distribution a sum that will compensate for a loss of revenue during a period of years is just. It will at once be seen that it is impossible under this theory to draft an inheritance tax law upon any principle that will mete out justice between the inheritance and the state. If the inheritance is taxed on the back tax theory there should be no exemption and the rate should be. such as to insure the taxing of only sufficient to make up for the taxes that have been evaded. However impossible it may be to mete out justice in this situation through the medium of an inheritance tax, it is nevertheless true that the popular demand for |