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*Reports for years 1891, 1892, and 1897 missing from state records.

**Until 1897, moneys of banks were also assessed. This accounts for the large returns prior to that year.

On the preceding page of this report will be found a table showing the bank deposits and the monies assessed since 1890. It will be seen that, while the number of banks and the bank deposits have steadily increased, the former from 37 to 733 and the latter from $4,022,356 to $70,000,000, monies assessed have decreased from half a million to a quarter of a million.


In the matter of stocks and bonds, the loss is even more exaggerated. In 1912 the entire state only returned $49,284 under this item, while the report for June 30, 1911, of the internal revenue commissioner reports the capital stock of the corporation other than public service, of the state, at $55,569,094.

The law governing the taxation of this class of wealth is entirely ignored and the real and personal property of corporations is assessed the same as the property of individuals.

Credits, other than those of banks, were assessed this year at $510,498. As this class includes mortgages and notes not held by banks, book accounts and all like evidence of wealth, there is no question but that it reaches an enormous sum and in the aggregate probably totals many times the personal property of the state returned for taxation. The 1910 Federal Census shows that the mortgages on the farms owned by the actual operators, alone, aggregated $47,841,587. The shares of capital stock of foreign corporations is another class which remains persistently in hiding, only $22,110 being returned in 1912. Franchises, annuities, royalties and patents undoubtedly exist in North Dakota and are valuable, but the assessors found only $8,795 for this item.


North Dakota's experience is no exception to the general experience of those states which have attempted to tax intangibles at their full value. Tax literature teems with the reports of special tax commissions, regular tax commissions, taxing experts and taxing officials bewailing the failure of the tax on intangibles. In most of the states under the uniform ad valorem system the percentage of monies and credits returned by the assessors to the true value of the property is a fraction of one per cent. As the commercial life becomes more and more complex the percentage of intangible personal wealth continually increases; yet, at the same time, the amount returned for assessment decreases. In many of the states the taxation of mortgages has been abolished altogether, the contention being that this class of property almost entirely escapes taxation, while the danger that the tax might

be enforced raises the rate of interest to the borrower from 11/4 to 112 per cent. In other states the determined attempt at listing and taxing at its true value mortgage wealth resulted in money leaving the state and a sharp increase in interest rates. Many laws have been enacted by state legislatures to force this class of wealth to bear an equal burden of taxation, but they have all proved inadequate. Tax ferrets and the most drastic laws have failed to bring it out of hiding. In despair, during the past dozen years, taxing officials have been turning away from the theory of the uniform ad valorem tax to a classified tax; that is, they believe that the particular rate that will return the greatest revenue to the state should be placed upon a given class of property.

It is unnecessary to continue the discussion of the failure of taxing officials to list and tax intangible property. The fact that it almost altogether escapes taxation is too generally known to be controverted. We believe the assertion will stand without contradiction that, more intangible property escapes taxation in North Dakota than the aggregate assessment of every description of property, including real estate and public service corporations,



It would be difficult to conceive of a system of taxation which would work greater injustice or one under which the burden of taxation would be less uniform than the uniform ad vaolrem system. In the past, tax officials have bewailed the depravity of human nature and have sought by tax ferrets and drastic laws to enforce a uniform tax on all property. Today tax experts are beginning to realize that there is cause for this condition.

It has been the experience of administrative officials since the dawn of government, that unjust and unreasonable laws cannot be enforced. The trouble of the tax official lies with the illogical and unscientific provisions of our state constitution, which requires that all property be assessed at a uniform rate. Since mortal man never succeeded in levying a uniform tax on all classes of property, it is a natural corollary that no taxing official ought to be required to attempt it. The first rule of taxation is that the burden should be distributed according to the ability to bear it; the second is that the uncollectable tax should be abolished.


A concrete illustration of this is to be found in the individual who has his money in the bank. It is there largely as a matter of safety and accommodation and also because of the interest paid. Supposing that “tax-payer A” has $10,000 in the bank on which he is receiving four per cent interest; the local rate of taxation, we will say, is six per cent; the bank is required under the law to list this deposit for taxation. What is the result? Plainly, taxpayer A will not submit to taxation, if he can help it, which absorbs all of his income and a portion of his principal each year. He will withdraw his money from the bank and invest it where it will either escape taxation or where he will only sacrifice a portion of his income in taxes. If, instead of 6 per cent, taxpayer A had only been required to pay 30c on each $100 of his deposit, he would probably have paid it and the state would have been ahead the revenue. As the law exists, enforce the tax and you destroy the banks, with all the entailed disasters to the state.


Many progressive states have discarded the doctrine of the uniformity of taxation and have accepted the theory of a diversified tax which allows them to place a rate upon each particular class which will return the largest revenue without injury to business or injustice or hardship to the individual. The placing of a light tax upon intangibles has been tried in several states of the union and by many foreign countries. The City of Baltimore

one of the pioneers in this experiment of taxation and achieved satisfactory results. In 1896 the City returned $58,700,000 of securities, upon which was imposed a tax of 1734 mills for state purposes and 30 mills for city purposes. In 1900 a law was enacted which provided that credits should be assessed 30c on $100. During the ten-year period from 1898 to 1908 the taxable basis of intangible wealth in the city increased from $58,700,000 to $150,000,000, or roughly 150 per cent.



In Switzerland personal property yet remains a substantial basis for taxation. As it is a confederation, it affords a most favorable opportunity for a comparison with the United States cd the operation of the personal property tax. The systems of taxation vary in the various cantons, but it is safe to say that far better results are obtained under their worst conditions than under the most favorable in the United States. Not so much dependence is placed upon the personal property tax as a source of revenue. The systems are more varied and a larger class of objects fall under taxation. Roughly speaking, the cantons divide themselves into four classes.

In class one the operation of the personal property tax is very successful. Property is listed by the declaration of the taxpayer, and the evasions are on the part of the small, rather than the large estates. In the second class the laws are stringent and vigorously enforced, but the results are varied and unsatisfactory. In the third class the laws are efficient but laxly enforced, but the taxation of personal property is highly successful. In the fourth group conditions prevail much like those in the United States at the present time. The laws are drastic and most stringently administered, and yet the results approach the nearest to a complete failure to any of the four classes.

The question naturally arises, “why are better results obtained in cantons where the law is less drastic and less stingently administered than in cantons where it is closely administered and most drastic?" It clearly shows that arbitrary laws are not

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