The total assessed valuation of property in 1886 was $793,563,498. It is a matter of common knowledge that the actual value of even real estate and tangible property in such a growing State as Illinois has greatly increased since 1886, while intangible property has been enormously augmented during that period. Manifestly, this general property-tax system is in effect a tax upon real estate and tangible property, while intangible forms of property, in which a large portion of the wealth of the State undoubtedly consists, apparently largely escape direct taxation under the methods employed. Where large masses of property escape, in consequence other large classes of property must be excessively taxed.

The assessed valuation of tangible property and capital stock of corporations of the State except railroads is only about one-third of the assessed valuation of all the personal property of the State, which clearly indicates that such property is greatly undervalued as compared with the assessed valuation of other personal property. It must be remembered that this is a flourishing and industrial State full of large and growing cities, and, like other States of its class, a large portion of the business is conducted by corporations.

The whole system, so far as shown by the reports, clearly illustrates the grave inconsistencies, inequalities, and injustice which almost inevitably result from the ineffectual attempt to raise the income of the State by a tax assessed at a uniform rate on all the manifold species of property existing to-day; a system productive of great injustice unless substantially all property, personal and real, tangible and intangible, is brought upon the tax rolls.

The practical results of such a system as this are characterized by the Supreme Court of the United States in the case of the Pacific Express Company v. Seibert, 142 U. S., 351, as follows: "This court has repeatedly laid down the doctrine that diversity of taxation, both in reference to the amount imposed and the various species of property selected, either for bearing its burdens or from being exempt from them, is not inconsistent with a perfect uniformity and equality of taxation in the proper sense of these terms; and that a system that imposes the same tax upon every species of property, irrespective of its nature or condition, or class, will be destructive of the principle of uniformity and equality of taxation, and of a just adaptation of property to its burdens."

Some interesting observations may be drawn from the foregoing schedule of personal property assessed. It is largely made up of assessments of different classes of tangible property. The amount of moneys of banks, bankers, brokers," etc., assessed is no larger than the assessed valuation of the "hogs, sheep, and mules" of the State; while the assessed valuation of both moneys and credits of banks, bankers, brokers, etc., is not equal to that of either "horses,"" cattle," or "household goods" of the State. It may be conclusively assumed that all of these divisions of property are greatly undervalued in assessment, but it is altogether probable that horses, cattle, and hogs and similar forms of tangible property are more fully valued and that a much greater portion of such property is assessed.

Many other inconsistencies are apparent in this schedule. The value of shares of stock in State and national banks is about equal to the value of horses, while the value of all moneys, credits, bonds, and stocks is ridiculously low, even allowing for the method provided by statute of assessing at one-fifth actual valuation. The total assessed value of personal property for 1899 was $183,526,987, about one-third greater than that of 1896 and 1897, while the valuation of real estate in 1899 was $688,251,604, more than three and two-thirds times that of personal property. In Cook County, including the city of Chicago, the following values

appear:

Total assessed value of

Personal property, 1899-
Lands.

Town and city lots

Total property, 1899.

$73, 611, 662 17, 164, 987 285,717,467

376,494, 036

Among the divisions in the schedule of assessed personal property for Cook County appear the following:

From these statements it is difficult to escape the conclusion that personalty is greatly undervalued or escapes taxation as compared with real property, and that corporate property is even more glaringly undervalued or omitted than personal property in general.

From the statement of Cook County, it appears that the personal property is only about one-fifth of the whole property and about one-fourth of the value of the real estate of that county.

It is shown that the general property tax system of the State as applied to all species of property is in effect a tax upon real estate and a portion of the tangible personal property, while the intangible forms of property, in which a large part, sometimes estimated at one-half, of the wealth consists, successfully evade taxation of a direct character.

The aggregate amount of taxes charged on the tax books in the year 1897 was:

State taxes.

Local taxes

Total..

$5,316, 764.08 41,820, 326.87

47, 137,090.95

The average rate of taxation in the several counties, compiled by the State auditor from the returns received from the various county clerks, was, for 1896, $4.20 on the $100, and in 1897, $4.41.

Dr. Ely refers to an essay of Dr. Simon N. Patten on the finances of the States and cities, published in Jena, Germany, in 1878, which deals chiefly with taxation in Illinois, and which he says reveals a state of things in that Commonwealth precisely like that described in other States. The assessed valuation of Illinois in 1875 was as follows:

Real estate and railroads paid 78 per cent of the taxes, cattle 7 per cent, leaving only 15 per cent for all other property, which is, of course, absurd.

Attention is called to the fact that assessors and collectors of taxes are elected for 1 year only, by a system of rotation, and that they are devoid of that experience which is an indispensable condition of a faithful performance of duty. The fact that one has enjoyed office for a year is regarded as a good reason why some one else should have a chance. Voters good-naturedly consider a special misfortune which has befallen one of their number, or any special need, as a sufficient reason why he should be elected, and from motives of pity weak and inefficient men are elected. This appears, as far as the author's observation has extended, to be common everywhere in the United States.

Dr. Patten draws the justifiable conclusion that the failure of the system of taxation in Illinois is accounted for by the nature of the system itself, and that there must be a change to produce any considerable improvement. The practice of confining one's self to the one direct tax on the assessed value of property must, he thinks, be abandoned.

The statements of valuation and taxation we have given from the reports of public officials indicate that there is little or no improvement in the taxing system in Illinois since the examination by Dr. Patten.

ILLINOIS TAX COMMISSION.

In 1885 a tax commission was appointed by Governor Oglesby, which made a very careful examination of the revenue laws of Illinois, and in 1886 filed its report recommending some radical changes. The report was written by Milton Hay, an eminent lawyer of that State, and is entitled to high rank in the literature of the taxation of American States.

Some of the defects set forth and changes recommended are of especial interest to all interested in the subject of State taxation:

"First. The gross inequality in the assessments of different pieces of property of the same kind, owned by different individuals in the same community, and of different kinds of property regardless of ownership; as, for instance, real estate and personalty, a large proportion of the personalty escaping taxation."

It is alleged that realty of different individuals is assessed from two-thirds or even the whole of its actual value down to one twenty-fifth of its value, the owner of one piece paying 5 or 6 per cent of the whole capital invested, while the owner of another pays one-fourth or one-fifth of 1 per cent, distinctions too invidious to be meekly borne.

Equally glaring and unjust discriminations are shown as between personal property and realty in favor of the former, amounting in some species of that class to almost total escape from taxation.

The system of equalization dealing with the aggregate assessment of different classes of property, raising or lowering each class in equal proportion by a fixed and arbitrary percentage, further discriminates against the higher assessments and in favor of the lower.

The liability to inequitable assessments is further increased by a system of undervalution or low-rate assessments. Inequalities that would be so suggestive as to be almost self-corrective as between full values escape change when fractional value obtains, and the low rating virtually acts as an estoppel of complaint on the part of the property owner, though rated higher than his neighbor.

It is said that no remedy for this improper valuation seems possible unless some method be devised for divorcing the collection of State and local revenues. "Without such a divorcement, no provisions of the law, however stringent, and no penalties which would be possible or desirable as sanctions of the law, would produce the desired result."

Hence the revenue system constructed and proposed by the commission is based upon the separation of State and local taxes.

Another defect pointed out is in the methods employed under the present system in the assessment of corporate and intangible forms of property.

It is suggested in substance that there are now vast aggregations of capital of such a nature that their value can hardly be measured by methods applicable to other kinds of property. That corporate property can not be estimated in like manner as farm acres, cattle, or a stock of goods. That the separation in such cases of tangible property from intangible, and the assessment in parts by different assessors or boards, can not be rationally or successfully made. "The two elements of value belong together. If torn apart the township assessor deals with a dead body and the State board with a departed spirit.

Railroad, telegraph, telephone, express, and insurance companies should be treated for taxation as units, and estimated or valued by some method consistent with their nature and the extent and complexity of their affairs.

Another defect in the existing system is the want of a competent body having a general oversight of the entire business of assessment and the collection of $30,000,000 of annual revenue of the State.

The commission recommends the abolition of the office of township assessor and the substitution of county assessors, elected for 4 years and to be ineligible for reelection, with sufficient pay to command the services of competent and reliable men, who shall be provided with offices at county seats and accessible there throughout the year, and who, with deputies throughout the county appointed by them, shall assess the property of their respective counties.

Also, that better instrumentalities for ascertaining the value of property be provided, and to that end that each county be divided into small assessment districts, and detailed maps, plats, and assessments be kept open for inspection by taxpayers, so that they can see their own and other assessments.

That adequate means be provided for the correction of any injustice or inequality that may arise in assessment, and that a competent board of review be provided in each county.

The commission adheres to the existing system of assessment of corporations local in character, such as manufacturing, agricultural, or publishing companies,

by local assessors, on the same basis and in the same manner that individuals are taxed, and also recommends that the capital-stock tax be limited to corporations of a quasi-public character, and that of such corporations those local in character, such as street railways, gas companies, etc., be assessed by the county assessors instead of by a State board.

In regard to the assessment of personal property of individuals, the commissioners recommend that schedules be required and a substantial penalty be imposed for false schedules, but that the requirement of the oath to such schedules be abandoned. They believe such requirement to be “debauching to the conscience and subversive of the public morals.”

To railroad property, they say, the ordinary rules of valuation have little application, the true criterion of value and the best basis of taxation being found in their receipts.

After a careful study of railroad statistics and much attention to the subject of the average proportion between gross receipts, expenditures, and the capitalized value of railroads, they deduce the conclusion that a rate of taxation equal to the average rate throughout the State of Illinois, imposed upon five times the amount of the gross receipts of a railroad in that State or upon the Illinois portion of the gross receipts of an interstate road, would be just and more flexible than an arbitrary percentage, provided that such rate of taxation should not exceed 5 per cent of such gross receipts.

It is proposed to determine the average rate of taxation in the State by adding together all the taxes levied in the State and dividing the amount of the tax by the total assessed value of all the property in the State.

It is suggested that this rule would be fair and just if all the property in the State were assessed at its full cash value, as the law requires, but that if in any portion the assessment should fall below the full value (a result quite possible in Illinois) the average rate would be increased in proportion, and railroads would be held to the same rate on full valuation that other property pays on partial valuation; to guard against which injustice the limitation of 5 per cent of gross receipts is proposed.

In reviewing this proposed method for the taxation of railroads, the suggestion occurs that in all cases of divorcement of incompatible or irreconcilable elements or systems it is always advisable to make the separation complete and avoid any lingering conflict or misery.

The proposition for the taxation of other quasi-public corporations is as follows: Telegraph, $2 on each instrument.

Express, 24 per cent of the gross receipts.

Public warehousemen, one third of 1 cent for every bushel of capacity of each elevator or granary.

The commissioners also recommend certain limitations upon the various classes of taxes for the protection of "taxpayers from the rapacity of unprincipled tax consumers."

They finally recommend the appointment by the governor of a State board of tax commissioners for general supervision of the taxation system of the State.

It is apparent that this commission was more or less influenced and felt somewhat handicapped by the desirability of retaining, so far as practicable, the machinery of existing laws for taxation so as to avoid friction in bringing about changes, and to propose only such changes as would not involve changes in the organic law of the State.

Unfortunately for the State, the legislature as yet has not adopted the changes recommended by the commission, and any substantial change in the existing system appears to be difficult to bring about because of political and sectional considerations, although public opinion seems to be favorably affected by the work and agitation of such men as composed this commission.

I C-VOL XI-37

WISCONSIN.

The primary method which obtains in this State for raising the greater portion of public revenue is the general property tax upon assessed valuations; the greater portion of the property in the State, real and personal, including general corporate property, being subject to such direct tax through local assessment.

Few important changes or modifications in the general property-tax system have been made. There has been no systematic effort to make the system "worse" by "improving it," as Professor Ely might say.

The other distinctive method of taxation is a system of license fees, so called, in lieu of taxes by the valuation method. The interests coming within this method are chiefly corporations of the class commonly designated as public service or quasi-public corporations, and include railroad, street-railway, telegraph, telephone, electric light and power, sleeping-car, boom, trust, and guaranty companies, and life, fire, and navigation insurance corporations, which will be considered separately.

Certain constitutional restrictions are imposed upon the legislature with reference to the subject of taxation, the principal ones being that it is prohibited from enacting any but general laws for the assessment or collection of taxes, and that such laws shall be uniform in their operation throughout the State; and that "the rule of taxation shall be uniform, and taxes shall be levied upon such property as the legislature shall prescribe."

Under these constitutional limitations it has been held that the legislature can not authorize the valuation for taxation of one class of property on a different basis or ratio to true valuation from that applied to other property in the same taxing district. But it has also been held that the constitutional requirement of uniformity is not violated by the taxation of a particular class or kind of property by a different method from that employed in taxing other property, provided the law is uniform in its operation throughout the State.

Thus the existing method for the taxation of the property and franchises of railroads and other corporations, by a fixed percentage of gross earnings paid wholly to the State in lieu of all other taxes, is constitutional.

GENERAL PROPERTY TAX.

Under the general property-tax system, State taxes, except those raised by other methods, hereinafter set forth, are levied by legislative enactments, and apportioned to the several counties according to the value of taxable property therein, as fixed by the State board of equalization; and these taxes, together with taxes for county, township, city, and village purposes, are based upon assessments on real and personal property, in the several local taxing districts, by local assessors who are elected except when otherwise provided in special city or village charters, the township or ward constituting, as a rule, a single assessment district. In the general property-tax system, here as elsewhere, the assessment is the foundation for the entire structure.

PROPERTY LIABLE TO ASSESSMENT.

All property in the State not specially exempt by statute is liable to assessment for taxation, real and personal property being for that purpose specifically and comprehensively defined, the latter including all debts due or to become due from solvent debtors, however evidenced or secured, and "all goods, wares, merchandise, chattels, or effects of any nature or description having any real or marketable value."

There are the usual exemptions of public property, the taxation of which would serve no useful purpose; exemptions in aid of religious, benevolent, industrial, and other institutions deemed to be beneficial to society; special exemptions designed to promote certain industries, which include property devoted to the manufacture of beet sugar for a limited period, property invested in the manufacture of oxide of zinc or metallic zinc from native ores, for limited periods,