Referring to the foregoing table it will be seen that groups three and four contain a slightly smaller population and show, relatively, only a slightly larger total assessment of all property than Milwaukee city; yet the assessment of credits in these two groups, is nearly double that of Milwaukee. Groups four and five with some less population and $10,000,000 less total assessment of all property than Milwaukee shows nearly double the assessment of credits; while groups six, seven and eight with still less population and a materially smaller total assessment shows nearly four times the amount of credits. And group eight alone with only 57,211 people and a total assessment of less than $37,000,000 shows credits assessed to an amount nearly equal to the whole city of Milwaukee with its population of over 285,000 and total assessment of nearly $172,000,000. It will be borne in mind also that these are figures for the year 1902, in which there was much greater, more general, and more nearly successful effort upon the part of assessing officers than in any previous year to secure the full assessment of all credits liable to taxation.

It should be stated, however, that the wide variations in results indicated in the statistics under discussion are not wholly due to varying degrees of efficiency on the part of assessing officers in the various districts showing marked contrasts in results. For instance, it is noticeable that in Milwaukee city the assessment of credits has been more uniform in recent years and increased less, relatively, in 1902 than in most other parts of the state; and as already observed, the total assessment of credits in that city has been relatively less than in most other parts of the state in recent years, especially in 1902, except Superior. This last mentioned city seems to be exceptional in a marked degree in many ways and at nearly all times.-Yet the assessments made in Milwaukee have been for years under the personal supervision of a very competent and efficient officer and it is believed that the assessments in that city have been more accurately made than in most other parts of the state. In general all credits shown by public records to be held by residents of Milwaukee have been assessed except insofar as they

have been reduced by "bona fide debts" owing by the holders thereof; and this has been the practice for years. As a result, a very large proportion of credits secured by mortgages are carried, on the public records at least, in the name of some nonresident,1 and other evasive methods are employed to avoid assessment. This accounts very largely for the relatively small assessment of credits in Milwaukee. As previously shown, a reverse condition of affairs existed in many other parts of the state prior to 1902, which made possible the large harvest of that assessment season in such other localities. The relatively large showing made in cities and villages under 5,000, may be accounted for, in part, by the fact that in these smaller districts the assessors have much more knowledge of the business affairs of their neighbors than in the larger districts. The poorer showing made by the towns-the country districts-is presumably due, largely, to the fact that most of the persons who have considerable amounts of money to loan do not reside on the farms nor in the smaller villages but in the cities and larger villages. But notwithstanding these and other explanatory circumstances the fact remains that, as regards results, the laws for the assessments of credits have operated very unequally in different sections of the state.

III. Fundamental Principles.

As already shown the laws of the state require the taxation of credits of every kind due from solvent debtors and the taxation also of all kinds of property other than credits, unless exempted for special reasons, without deduction or diminution in value on account of debts .owing. In this respect the Wisconsin system is substantially the same as that of most of the other American states. In recent years the subject has been given careful consideration by economists and others well fitted by education and training to ascertain facts and reach correct conclusions. Their verdict is practically unanimous in condemnation of all laws requiring the taxation of credits as property at least we have not learned of any fairly capable, un

Tax Commission's Report, 1898, p. 112.

biased investigator who has given such laws substantial approval. The primary conclusions upon which the general verdict of condemnation is predicated may be summarized in the following propositions:

(1) Laws requiring the direct taxation of credits as property without corresponding reduction in the assessment of the property of debtors necessarily result in duplication of values and double taxation, and cannot fail to produce inequality and injustice, so far as such laws may be enforced.

(2) Such laws are incapable of enforcement, except partially. (3) When partially enforced, the injustice to those who are taxed is much greater than if all credits were taxed alike; and this whether the burden is borne by the few who are taxed or is shifted to their debtors.

(4) Incidentally, the deceptions and other practices resorted to in evading the attempted enforcement of such. laws have a degrading moral effect in the community.

(5) Laws permitting the amount of credits assessed to be deducted from the valuation of the property of debtors do away with the evil of double taxation and for that reason are infinitely preferable to laws which do not permit such deduction.

(6) But under laws permitting such deductions the tax imposed upon the creditor is ordinarily shifted to the debtor in the form of higher interest or otherwise, with something added to cover the creditor's risk.

(7) Laws designed to prevent such shifting are impracticable and serve to injure rather than to benefit the debtor, the only person for whose protection they are intended.

The first proposition is fundamental and goes to the very foundation of the system as it exists in this state. If such proposition is substantially true, the continuance of the system is manifestly unjustifiable and it becomes unnecessary to consider the objections stated in propositions 2, 3 and 4. The fundamental proposition should therefore receive first consideration.

Laws requiring the direct taxation of credits without corresponding reduction in the assessment of property of debtors assume that credits are property and may be considered as prop

erty apart from and in addition to the property of debtors. This is shown by the statutory declaration that "the term 'personal' property shall be construed to mean and include all debts due from solvent debtors," and the omission to provide for any reduction in the assessment of the property of debtors on account of debts owing. The primary question would therefore seem to be whether credits, apart from the means of the debtor, are property in any true economic sense. This question is not presented for the purpose of a dissertation on the technical meaning of the word "property," but to get at the substance of the matter and direct attention to what is deemed to be a vital part of the whole discussion.

A credit is merely a right on the part of the creditor to receive and enforce payment of an obligation due from some other person. It may be evidenced by some writing, as a promissory note for instance, and may be secured by conditional conveyance or pledge of property evidenced by some written instrument, as a mortgage, or the creditor may have only the general security of his debtor's financial means. But the credit itself, the essential thing that which gives it value and which the present assessment laws recognize and treat as property-consists, not in the written instruments or other evidences of the creditor's right or security, but in the right itself-the creditor's right to receive and enforce payment of his demand.2 This right of the creditor is admittedly a thing of value assuming always that the debtor is solvent. In many of its forms, with its evidences, it may be freely transferred from one person to another and often performs the office of a medium of exchange more efficiently than money. But the person who holds credits and nothing else possesses no part of the moneys, lands or goods of society except in a potential way. He possesses only the right to receive some of these things. When he receives payment the credit is extinguished; money or property has changed hands in order to accomplish such payment; but no one will contend that the sum of the world's actual wealth has been diminished or that any one has grown poorer by such extinguish

1 Sec. 1036, Stat. '98.

2 State ex rel. Dwinnell vs. Gaylord, 73 Wis., 316.

ment. A credit represents the result, in whole or in part, of one side of a business transaction. The other side of such transaction is represented by an indebtedness in an equal sum. For every credit there exists an indebtedness of equal amount. The sum of all credits in the world is exactly equal to the sum of all indebtedness. The aggregate of each amounts to thousands of millions of dollars. But let us suppose that by transfer of property or by some method of exchange like clearing house transactions, all these debts are paid and with the corresponding credits become wholly extinguished; or even suppose that every creditor has gratuitously forgiven his debtor and legally cancelled his debtor's obligation. The result would be a great shifting of property or changing of financial resources among individuals; but would there be any less actual property? Would the world be the poorer to the extent of these thousands of millions? It is too plain for argument that there would be no loss whatever. One more illustration: A bank receives deposits of money aggregating $100,000 and thereby credits in favor of the depositors to the amount of $100,000 come into existence. The money so deposited has merely changed hands, but the credits are a new creation. Has $100,000 been added to the total property or wealth of the community? Now, suppose the $100,000 be loaned by the bank to divers other persons. By such action the money has changed hands again and further credits to the amount of $100,000 are created. Is this a further addition to the wealth of the community? Later, the depositors ask for their money; the bank calls in its loans and pays the depositors; $200,000 worth of credits have been extinguished. Is the community the poorer by that sum by reason of the transaction? These arguments and illustrations could, of course, be multiplied and extended indefinitely, but it is deemed unnecessary to pursue the subject further. It seems, beyond all controversy, that credits are not property in any true sense, but represent in the creditor merely some right or interest, potential or otherwise, in the property of the debtor. It follows, of course, without argument, that to treat credits as property and to count also as property all the goods and lands of society is in substance and effect a duplication of values.