state or otherwise. And this is demanded not only as a matter of simple justice to individual residents of this state holding such shares, but also upon the most weighty considerations of interstate comity. All will agree that it would be monstrous to attempt to tax in Wisconsin a citizen of this state upon land or other tangible property actually located and fully taxed in another state. But manifestly the case stated is not different in principle from a case in which the same property is held by a corporation of such other state and shares of stock therein are held by residents of this state. The situation and the true policy is stated by "a distinguished law writer" as follows:

It is undoubtedly within the constitutional power of the legislature of a state to enact a statute that persons residing in that state, who are stockholders in a corporation created by another state, shall be taxed on their shares of stock at their residence within the former state. This principle of law is based on the fact that shares of stock are personal property; that they are distinct from the corporate property, franchises and capital stock; that they follow the domicile of their owner like other personal property, and that consequently he may be taxed therefor wherever he may reside. It accordingly is a question of policy and expediency with a state whether or not it will tax its citizens who are stockholders in foreign corporations. A few of the states levy such taxes. But New York pursues the more broad and liberal policy that shares of stock should not be taxed where the corporation is already taxed; that the state which furnishes facilities to the corporation for the earnings of dividends should have the sole benefit of taxes on such corporate interests; that a tax on resident stockholders in non-resident corporations would generally result in a double taxation of stockholders not residing in the state creating the corporation; and that interstate comity, interests, and financial investments are promoted best by taxing corporations directly, and not levying a tax on either resident stockholders in nonresident corporations or resident stockholders in resident corporations where the corporation itself is subject to taxation. The injustice of a tax on resident stockholders in foreign corporations is at once apparent when it is considered that the state creating the corporation nearly always taxes the corporation itself or all its stockholders, resident and non-resident; and that if stockholders residing elsewhere are taxed again where they reside, they are taxed both in the state of the corporation,

directly or indirectly, and also directly in the state where they reside. No reduction need be allowed in the latter state for taxes levied upon the corporation in another state.1

The Supreme Court of Michigan quotes the above language with approval, adding:

New York has long recognized this rule. Pennsylvania has adopted a similar rule. New Jersey imposes no tax upon shares except of banks. Texas does not tax shares where the corporate property is taxed. In California the legislature relieved domestic corporations by the following enactment: "Shares of stock in corporations possess no intrinsic value over and above the actual value of the property of the corporation which they stand for and represent, and the assessment and taxation of such shares and also of the corporate property would be double taxation. Therefore all property belonging to corporations shall be assessed and taxed, but no assessment shall be made of shares of stock, nor shall any holder thereof be taxed therefor.'

There is reason to believe that the consensus of opinion in Michigan is in accord with the views expressed in the quotation for the provision requiring shares of stock to be assessed was quite generally disregarded, if not practically obsolete, until brought into prominence through the recent agitation of the subject of "equal taxation" and the efforts of the authorities to see that all property is listed in obedience to law. The effect is double taxation of such shareholders, as they are taxed at home and abroad2.

It should be observed that the last remark of the Michigan Supreme Court is peculiarly applicable to the present situation in Wisconsin. The legislature cannot reasonably expect assessors and their supervising officers to succeed in securing a full assessment of all property legally liable to taxation and at the same time retain upon the statute books laws which if enforced will produce manifest wrong and injustice. The tax on shares of stock in corporations, foreign as well as domestic, which are once fairly taxed on their "capital" or property, either directly or indirectly, should, like the tax on credits, be no longer tolerated.

1 Cook on Corporations, 4th Ed., Sec. 565. Stroh vs. Detroit, 90 N. W. Rep., 1031.

CHAPTER VII.

TAXATION OF RAILWAYS.

A review of the laws in the American states for the taxation of corporate property will show that few of them have systems which are entirely satisfactory to the railroad corporations or the owners of private property.

The history of railroad taxation commences with the application of the general property tax to those corporations, administered by local officers. The taxation of the general mass of property according to value beginning with the early settlements of this country was continued and in force at the time railroads were first constructed and began their operations in the United States. The laws designed and framed for the taxation of the property of the citizen were consequently applied to the assessment of railroad property, and although inadequate to reach the taxable capacity of those corporations, the practice has not disappeared in all of the states. The progress away from the original plan has been difficult and exceedingly slow in development.

The strong attachment to local self-government in the New England town and the control of local finances by the voters at the annual meeting have spread to the new industrial states in the west, which have borrowed and adopted the ideas of the township system of government. One dominant thought pervading local government is that as all persons and property within the jurisdiction of the district must be protected by the local authorities, the corresponding right of taxation of all property must exist to enable that duty to be performed. The power to locally tax one species of property once acquired is held with great tenacity and reluctantly surrendered. This view is not peculiar to towns, but has extended to the cities and villages throughout the country where advocates are found for

the local taxation of every species of property without regard to its complex or interstate character.

The love of local self-government among the people and the adherence to the primitive method of the general property. tax have been persistent and stubborn in defense of the privilege of local officers to tax railroads and other corporate interests in like manner and by the same method as the property of the individual in the town or city is taxed. This sentimenť has been so powerful and influential that in many states there still remains the local taxation of some parts of railroad property actually used in their operation as carriers of traffic.

The opposition to giving up sources of local revenue has blocked the attempt to secure more rational and scientific laws for the taxation of corporate property and stood in the way of a complete severance of corporate taxation from the general property tax on real estate and tangible personalty. The disinclination of legislatures to antagonize local interests or disturb the existing order of things has frequently led to permitting taxing districts to retain their hold on such property of railroads as they had been accustomed to assess and to supplement the local tax by new and special forms of taxation on franchises, earnings, etc. Instead of cutting the old method out by the roots and establishing a new and comprehensive system for railroads as entireties, there have been grafted upon the general property tax various kinds of other taxes which together are deemed the equivalent of all the public burdens the railroads ought to bear.

The patchwork thus produced is exhibited in the laws of some of the states, and the situation on the whole is confused and chaotic when the systems of all the states are analyzed and the relative merits of the various systems are attempted to be compared for the purpose of ascertaining the best and most approved method of railroad taxation for Wisconsin.

The practice in the states is uniform in subjecting real estate not connected with the railroad tracks or outside of the right of way or depot grounds and not necessary to railway operations to local assessment in the district of location in the same manner as the property of individuals.

The variety of methods appears when the laws of the different states for the taxation of the property and franchises of railroad corporations are examined. These laws, often of the same general scope, have received divergent judicial construction so that states with statutes in similar language may be different in important particulars in their actual administration, in measuring the values, and apportioning and collecting the taxes. A mere summary of the statute law without reference to the opinions of the courts in each state for the interpretation of the language and phrases in the law of such state, might fail to give an exact view of the system as practically administered.

A law treatise would be necessary to furnish a complete summary of existing laws for the taxation of transportation companies and to point out the precise methods in vogue in all the states.

The total inadequacy of the general property tax when applied to corporate property was early recognized, and as other elements in corporate organization and unity possessed additional value they were seized upon for taxation to make up the deficiency.

By far the most important of these elements was the franchise to be a corporation, to acquire and possess property, to take the lands of private citizens by the sovereign right of eminent domain for corporate use upon making just compensation and to fix and collect charges for receiving and carrying traffic.

The origin of the franchise tax is traceable to the evils and insufficiency of the property tax and has been sustained as a tax on the privilege of doing business and not as a tax on property, thereby avoiding the constitutional provisions of uniformity or equal and proportionate taxation of property found in nearly every state.

The definitions of a franchise, what it really is and how its value shall be measured vary from state to state, and an elaborate presentation of the questions relating to the taxation of franchises would fill a volume. There is no common standard of valuation and for our purpose it seems useless to study the numerous methods, for we are untrammeled with conditions that require separate assessment of franchises.