"The statute referred to is based upon the rule expressed by the supreme court that although all of the property of such corporations, including the franchises, should be assessed and taxed, the different kinds of property making up the plant should not be segregated, but should be treated for the purposes of taxation as an entirety. "The representatives of several companies of this class stated that they would prefer to be taxed like some of the other corporations, on the basis of gross earnings, and suggested that even if the percentage were so adjusted that the amount of taxation were somewhat increased over the amount paid under the present system they would prefer to bear it, in consideration of greater uniformity and their consequent ability to anticipate and prepare for the expense and fixed charges of their business. "There would seem to be no serious difficulty in arriving at the fair value of this form of property, and we do not recommend any change. These are local taxes, and the aggregate amount can not be given. TRUST, ANNUITY, AND GUARANTY COMPANIES. These companies pay to the State treasurer an annual license fee of $300, and in addition thereto 2 per cent of their net annual income. The whole of such tax is received by the State, this is in lieu of all taxes except those upon real estate. The tax paid by loan and trust companies in 1898 was $2,604.10. BANKS. No tax is assessed upon the capital of banks, but the stock of each stockholder is assessed to him at its value, as other taxable property, in the assessment district where such bank is located. The value of real estate owned by banks is not deducted from shares. Upon demand of the assessor the names of the stockholders and the number of shares held by each are required to be furnished by each bank. But accumulated profits and surplus over and above the capital stock paid in are assessed for taxation to such bank. The tax commission of 1898 says that a comparison of the assessed valuation of bank stock with the total par value, as shown by the official reports in 1897, disclosed the fact that the assessors' valuations ranged from nothing at all to over 200 per cent. The par value of the stock in National, State, and private banks in the summer of 1897 was $18,141.689.26. The surplus and undivided profits held by these banks amounted to $6,073,324, making a total of $24,215,013.26, while the total assessment of bank stock for the whole State was $7,588,890, or 31 per cent. Making certain corrections because of assessment of bank stock in one city under another head, it is made to appear that the assessed valuation of bank stock is 72 per cent of its par value, and 54 per cent of the sum obtained by adding the surplus and undivided profits to the par value. The commission says, however, that there is a great deal of bank stock in the State that pays very small dividends, if any, and is not salable at par. Notwithstanding this, the tax commission says that there is no form of property in the State that pays a larger tax relatively than the banks, and they give the familiar reasons for this statement-that full reports being required of bank officers and the value of the capital stock being easily ascertained by assessors, shares are generally assessed at a larger proportion of their real value than any other form of property except, possibly, real estate. The commission refers to the injustice done to banks in some cities by the failure of assessors to adopt a uniform method of determining the value of stock, an evil which it suggests might be remedied by a State board. TITLE GUARANTY COMPANIES. Corporations formed for the purpose of insuring or guarantying the title of real estate are required to pay to the State the same license fees required of fire insurance companies, and such fees are to be in lieu of all other taxes. BOOM COMPANIES, ETC. Persons or corporations owning or operating dams, booms, sluiceways, or other structures in any navigable stream within or forming part of the boundary of the State for the purpose of booming, driving, or otherwise handling logs and timber of any kind, having authority so to do under the laws of this State, are required to pay license fees of 2 per cent of the gross earnings of the business. Where the property and improvements of such person or company necessary for the transaction of his or its business have been taxed by the town, city, or village where the same are located, then the amount of such taxes may be deducted from the licenso fee above mentioned. PLANK AND TOLL ROADS. Owners of plank and toll roads are required annually to pay to the State a license fee equal to 3 per cent of the gross earnings of such roads, the same to be in lieu of all other assessments or taxes. The tax paid by these roads in 1898 was $683.59. FIRE AND NAVIGATION INSURANCE COMPANIES. Companies of these classes, except town, church, and mutual insurance companies in cities and villages, transacting business in Wisconsin are required to pay to the commissioner of insurance as a license fee "2 per cent of the amount of gross income, including cash, notes, receipts, or installment notes taken for premiums and assessments on premium notes received by such company during the preceding year in this State, as shown by the annual statement of its business required to be made by law." They also pay for the benefit of organized fire departments in cities and villages where they are maintained 2 per cent of the premiums received in such municipalities, make certain contributions to the expense of maintaining fire patrols and fire departments in cities and villages under certain conditions, and pay various items of fees to the insurance commissioner. While these exactions are not imposed by the exercise of the taxing power of the State, but under the police power of the State, they considerably add to the burdens of such companies, and should be mentioned in this connection. The amount of this 2 per cent tax in 1898 was $87,029.61. LIFE INSURANCE COMPANIES. Under an act of 1899, life insurance companies, excepting fraternal insurance societies, organized under the laws of the State, not purely assessment companies, pay to the State treasurer an annual license fee of 1 per cent of their gross income, excepting therefrom the rents of real estate upon which such company has paid taxes assessed as upon other real estate similarly situated, and excepting income from interest on United States bonds. Such insurance companies organized without the State pay to the State treasurer an annual license fee of 1 per cent of all premiums collected from residents of the State during the preceding calendar year. The entire premiums collected, including premium notes and dividends paid to the insured, are so taxed. All other insurance companies except fraternal societies, including assessment companies, pay to the State treasurer an annual license of $300. Prior to 1899 life insurance companies paid an annual license fee of $300, and domestic insurance companies paid in addition 2 per cent of their cash receipts for premiums. This tax was in lieu of all taxation except on real estate. Foreign assessment companies paid an annual license fee of $25. Domestic assessment companies paid no tax. The amount of taxes from these companies in 1898, under the old law, was $35,747.19. CASUALTY COMPANIES. Casualty companies pay to the commissioner of insurance an annual license fee of 2 per cent of their gross premiums, which in 1898 amounted to $22,249.27. SUMMARY. The total income of the general fund of the State for 1898 was $2,971,140.72. Of this, $1,429,179.69 was received from license fees, as shown by the following table: Telephone companies. Licenses. Street-railway companies and electric-light companies. I C-VOL XI-38 $1,247, 357.03 852.69 10,882. 15 15,477.59 4, 131.90 Of the balance of general fund receipts, amounting to $1,541,961.03, $1,149,300.70 was received by State levies on general property and from special charges and taxes upon civil actions, $332,660.33 being received from charitable and penal institutions and from sundry and miscellaneous sources. REPORT OF THE WISCONSIN STATE TAX COMMISSION. Since the foregoing report of the Wisconsin tax system was prepared, we have received the first biennial report of the Wisconsin State tax commission, an able, conservative, and valuable contribution to the modern literature of taxation, containing some matter of special interest at this time. The preliminary work of this commission in 1899 was largely devoted to the examination of the tax laws in the several States, the publications of leading economists and financiers, the reports of tax commissions in different States under various systems of taxation, and recommendations for improvement in universally unsatisfactory conditions. During the year 1900 the commission limited the scope of its original work largely to ascertaining the actual and assessed values of the different kinds of taxable property of the State taxed under different systems, for the purpose of comparing the taxes paid by these several classes and ascertaining the relation of taxes paid under the general-property tax and under the license system in vogue in that State, or, in other words, of determining the proportionate burdens imposed upon different classes of property. From a careful examination of the reports of sales of real estate and assessments of the same property filed each year by the registers of deeds of the several counties of the State with the secretary of State, and other data and information from various sources, the approximate actual value of the taxable real estate of Wisconsin, based upon a 5-year average of sales, was found by the commission to be $1,192,867,499, and the total average assessed value for the corresponding 5 years was $518,824,553, and from these two respective sums the average of assessed value was found to be 43.4 per cent of the aggregate actual value. At the time of the compilation of real estate sales the commissioners also made an investigation for the purpose of comparison between agricultural property and interests represented by railroad and other quasi-public corporations. For this purpose an attempt to find the actual values of property based upon sales was made, although they point out the difficulty and complexity of the problem of making comparison of properties differing so widely in product. In the compilation of data of farm properties they sought simply to find some basis for comparison. The method pursued was through inquiry among 6,000 representative farmers fairly distributed throughout the State. A series of questions was propounded calculated to discover: First, the ratio of expense to gross income of agriculture; second, what percentage of gross income and income from operation the farmer pays in taxes; third, what relation the assessment of personal property, comprising implements and live stock, bears to his total assessment, and, lastly, the opinions of farmers as to the ratio which the assessed value of their farm real estate bears to the real value of the property. From 1,124 replies, sufficiently clear and reliable to be used for the purpose, in which all but 5 counties of the State were represented, the value of the lands of these farmers was estimated to be $5,507,036, and the assessment of the same property in 1899 was $2,109,927, being an average ratio of assessment to actual value of 38 per cent. A smaller number, 954, representing 64 counties, made a statement of the gross earnings of their farms and the amount of taxes paid upon the assessments of 1899, showing gross earnings $871,351 and taxes $37,297, or about 4.2 per cent of gross receipts. Six hundred and fifty-six farmers, representing 58 counties, gave their gross income as $687,469, and income less expenses $204,152, the ratio of gross expenses to gross income being 70.3 per cent. The taxes paid by these 656 farmers averaged 13 per cent of their income from operation or net income. Of the 592 farmers who reported their assessments on the value of land, implements, and live stock, the average ratio of assessment to actual value was the same as in the case of land, 38 per cent, the ratio of assessment to actual value in case of implements being 23.7 per cent, and in case of live stock 45.2 per cent. Reduced to brief form these results are as follows: Ratio of assessed to true value of land Ratio of assessed to actual value of implements Per cent. 38 28.7 45.2 4.2 13. Ratio which assessed value of farm implements bears to total assessment of farmer 3.46 Ratio which assessed value of live stock bears to real estate of farmers. 17.4 While these returns are crude and uncertain as compared with the returns of manufacturers and kindred industries, the commission expressed the belief that even on so limited a scale they indicate in some degree the actual conditions. After all is said, however, the comparison of this farm property upon this basis with that of manufacturing plants, railroads, and kindred business properties must be regarded as in a very great degree guesswork against comparative accuracy, although for popular use not devoid of substantial value. A similar inquiry among manufacturers showed the average assessed value to be 37.2 per cent of the actual value in 1900. The results of inquiries concerning this class of properties were, however, admitted to be very meager and unsatisfactory. The representatives of the railroad companies of the State who were invited to appear before the commission, in presenting their views of the relative burdens of taxation on different classes of property, presented statistics of data collected by them in 16 of the 70 counties, showing the average ratio of assessed to true value of real and personal property of all classes to be 35.5 per cent, or as they claimed about one-third. A somewhat similar inquiry by the commission as to business and residence property showed the assessed valuation to be 57.5 per cent of the actual value, and that the business property reported upon pays taxes to the amount of 18 per cent of gross income and 24 per cent of net income. PERSONAL PROPERTY. The ratio of the assessed value of personal property in the State, exclusive of railroad property, to the assessed value of real and personal property was 19.62 per cent, based upon the assessors' returns for 1898. Referring to the personal property, especially that of an intangible character, which escapes the tax rolls, the commissioners say that in the practical administration of tax laws it is apparent that calculations must be confined to that actually finding a place upon the rolls. "Speculation as to how much escapes will not make up the deficiency, nor can it be contended that the evasion is ground for lessening the just burdens on property that can be reached." They come to the conclusion that the ratio of assessed to real value of personalty on the rolls is substantially the same as in the case of real estate, 35.5 per cent. A like inquiry as to the value of merchants' stocks shows the assessed value to be 45.5 per cent of the actual values, although it is admitted that the actual values given are, to some extent at least, the mere opinions of merchants, and that the difference may be less than indicated. These methods, based upon mere opinions, are estimates of owners, and render results of very doubtful value and reliability as a basis for taxation as compared with the values of classes of property obtained through more accurate and comprehensive methods based upon more certain principles and elements. It is shown that the banking capital of the State is assessed at 77.7 per cent of the actual value of the paid-up stock, at 63.1 per cent of the actual value of the paid-up stock and surplus, and 58 per cent of the actual value of paid-up stock, surplus, and undivided profits combined. The report also contains an interesting account of a laborious and painstaking effort to ascertain the value of the properties of quasi-public corporations of the State, for the purpose of comparing the burden of taxation thereon under the license system with that on property of other kinds under the general property tax, and of determining whether it is advisable to readjust the existing system, or change to the assessment of the property of corporations upon an ad valorem basis, with a view to taxing it upon an approximately equal basis with other property. With this end in view, a hearing was given to the counsel and representatives of the railway companies operating within the State and an opportunity afforded for the presentation of their views of the questions involved, viz: Whether the present system of license fees on gross earnings should be abolished and railroad property valued and assessed by the ad valorem system or general property tax. If the ad valorem method is adopted, what mode should be prescribed for the ascertaining of the value of such property and the proportion it bears to the value of other taxable property in the State? If the license system is retained, what mode should be adopted to determine the percentage of gross earnings to be paid which would make the tax paid equal to the taxation imposed upon other property? There was shown to be substantial agreement between counsel for the companies represented upon the following propositions: 1. That the license-fee system is certain, simple, inexpensive, self-executing, and affords a fairly reasonable method of determining the relative tax obligations of the different railway properties. 2. That the local assessment of railroad property by men unfamiliar with such property is expensive, impracticable if not impossible, and works satisfactorily neither to the public nor to the railway companies. 3. That in case the ad valorem basis is adopted for the taxation of railroad property, the valuation shall be made by a central authority. 4. That under the existing license-fee system the railroads are now paying their just and full share of taxes or more. The commission early in its investigation reached the conclusion that the old method of local taxation of railroads should not be restored, and eliminated it from consideration. It then proceeded to consider the ad valorem system administered by a State board and the license or earnings system, and concluded that taxation by either method should be imposed upon the entire property of the corporation according to value or earning capacity, and that no division of the elements constituting the unit of value or ability to pay should be permitted. In considering the ad valorem method, the fact was recognized that the "valuation of railroad property at full value and other kinds at one-half value or less, when the same rate of taxation is laid on both, is so grossly inequitable and unjust that the constant effort and inclination will be to bring the former down to the common level, or supposed equality." It seems to be further assumed that the leveling process must, to a greater or less extent, depend upon the discretion of the assessing body, and that if complete and accurate statistics of the true value of all classes of property in the State were obtained and the board "comprised of able, experienced, and skillful members of approved integrity, holding a continued tenure of office," the valuation of such property might be held in proper relation to other classes of property and the valuation and taxation made with approximate justice and equity, thus clearly indicating the inherent difficulty and weakness of the ad-valorem system as applied to this class of property. This result, says the commission, would have the advantage of preventing fluctuation in the revenue in times of depression or prosperity, which is one of the objections urged against the earnings system. Recognizing the obvious advantages of the earnings tax, the commission says it has been so long established in the State that a change should not be made unless a better substitute is shown. The distinguishing defects in the earnings tax, such as fluctuation in earnings and taxes, its relation to expenditures, and the validity of such a tax on interstate earnings, are discussed with clearness and intelligence. The commission industriously attempted to discover some reliable method for ascertaining the actual value of railroad property in the State, which was deemed essential to the just and adequate taxation of such property under the ad valorem system, or to determine the rates to be fixed upon gross earnings to make the tax proportional to the tax imposed upon other property. It is declared that the argument of railroad counsel failed to point out any practical method for a reliable valuation. Several methods were suggested by railroad counsel, none of which were admitted to be even approximately correct, while one went so far as to contend that there is no criterion for the valuation of railroad property that can be absolutely relied upon. The conclusion of all these arguments was that there is no mode of determining the value of railroad property which can be relied upon. It was contended that when terminals and facilities of great value at railroad centers, connections, contracts, and traffic arrangements with other railroads enter into the calculation, the value of through lines presented a problem so complex as to be incapable of solution by any method, investigation, research, or exercise of human judgment. |