STATISTICS OF RAILWAYS IN THE UNITED STATES. EXPLANATION OF THE PLAN OF REPORT. INTRODUCTORY STATEMENT. The problem of State railroad taxation, whether it be regarded from the point of view of corporate administration or governmental organization, is a fundamental one. The amount of taxes paid by railroads during the fiscal year 1890 was $31,202,469; in 1901 it was $46,707,835. Of more significance than the amount, however, is the confusion and uncertainty which attend the assessment, the levy, and the collection of this tax, a result which follows naturally, though not necessarily, from the large number of taxing jurisdictions to which this species of property is exposed. Not only is a line of railroad which extends through two or more States liable to be taxed by different and possibly unsympathetic methods, but the municipalities and minor civil divisions of each of the several States exercise an independence in administration which occasions yet further confusion and uncertainty. To the railroads this means exposure to double taxation; to the agencies of government it means liability to tax evasion. No one who has familiarized himself with the situation can avoid the conclusion that reform in railroad taxation lies in the direction of the substitution of simplicity for complexity, of an harmonious system of legislation for conflicting laws. It is no part of this report, however, to discuss methods or principles of reform. Its purpose will be fully realized by presenting a simple, yet comprehensive statement of the facts in the case; and all that is necessary in a note of introduction is to indicate the scope of the investigation, to explain the plan adopted for presenting the details of the various methods by which the States, the municipalities, and the minor civil divisions undertake to tax the property and instruments of transportation by rail, and to call attention to some of the more significant facts and tendencies which a study of the details contained in the body of the report naturally suggests. METHOD OF TREATMENT. It is of some importance that one who desires to make use of this report in the study of State railroad taxation, should familiarize himself at the outset with the method of treatment adopted, for any method which designs to present so confused a situation in a systematic manner must be more or less arbitrary. The information contained in this report is presented in two forms: that of tabular statements and that of textual statements. It was at first attempted to reduce all the information gathered to tabular form, but it was soon discovered that the trend toward uniformity, either in the character of the laws or in the use of the terms employed by the law had not proceeded far enough to render such an attempt feasible. As an illustration of the difficulties encountered, reference may be made to the fact that no established meaning exists for such terms as "corporation tax," "specific tax," "franchise tax," "privilege tax," or, indeed, any other kind of tax that might be named. Such fundamental phrases as assessment of taxes" or "levy of taxes" can not be interpreted independently of the details of the laws 9 which make use of them, and even the line which distinguishes real from personal property is rendered dim and uncertain by the laws of the several States which provide for the taxation of railroad property. Under such conditions classification which, from the nature of the case, must rest upon some fundamental conception of the facts classified and a conception uniform throughout the entire field, is out of the question. There is, consequently, substituted for a tabular statement in this report, a concise description of the laws of each State, arranged, however, upon a uniform plan to the end that any particular fact for any particular State may be easily ascertained. DESCRIPTION OF TABULAR STATEMENTS. The tabular statements contained in this report are three in number and are presented under the following titles: Table I.--Analysis of Railroad Taxation, Showing the Kinds of Taxes Used. Table II.-Analysis of Statutory Provisions for the Administration of the Taxation of Railroads and of Table III.—Analysis of Statutory Provisions for Reports Relative to Taxation Required from Railroads The first of the above-mentioned tables is designed to show the nature of the tax employed by each State according to the most simple and generally accepted classification of taxes. It is the classification according to which the carriers make annual report of taxes paid, to the Interstate Commerce Commission. The following is a transcript of the boxing provided for these reports; it is also the boxing followed in Table I, with the exception that this table makes no special reference to Federal taxes or to "fees and assessments:" The idea which underlies the above classification of railroad taxation is adequately indicated by the Instructions issued to the carriers for making report of taxes paid. These Instructions are as follows: Taxes are classified according to the basis used for computing the amount to be paid. From this point of view, taxes are either ad valorem or specific. Fees and assessments which are not constant from year to year are not taxes within the strict meaning of this classification, and should be returned as "Miscellaneous." Under ad valorem taxes should be returned all taxes computed on the basis of value, no matter by whom the appraisement is made, in what manner the appraisement is made, or to what grade of government the payment is made. Under specific taxes should be included all taxes computed on some arbitrarily selected basis, as the amount of stocks and bonds issued or outstanding; the gross or net earnings or dividends paid; the number of passengers or amount of freight carried; the length of line operated or owned; the rolling stock; or any other selected quality or fact pertinent to the operation of railway property. No provision is made for "franchise" taxes, because this word has no distinctive meaning as employed in State enactments. Most franchise taxes are taxes on the valuation of the whole or a part of the property, arrived at by some method prescribed in the statute; or they are current payments for a privilege. Such taxes find their place in the classification provided as specific or ad valorem. Taxes which accrue on property not used in operation are to be returned separately from taxes on property used in operation, in the column provided for that purpose. This general statement of the kinds of taxes used by the several States in securing contributions from railroads, which appears in Table I, is put forth with some degree of confidence, inasmuch as the table has been tested by the reports which the railroads in all parts of the country have made of taxes actually paid. In most cases where a discrepancy appears between the table, which was prepared after a careful survey of the laws of each of the several States, and the report of a carrier, inquiry was made of the railroad whose report showed this discrepancy, respecting the law under which the taxes in question were paid. This correspondence served as a test of the classification as originally made. It also elicited the fact that in quite a number of cases railroads are paying taxes under the conditions of old charter provisions or of rights acquired under former State constitutions, or for other reasons, which failed to conform to the accepted reading of the law. Exceptions of this sort, however, can not be noted in the table. The second table contained in this report pertains to the classification of the Statutory Provisions for the Administration of the Taxation of Railroads rather than to the classification of taxes. The items which have been selected for this analysis are: Basis of valuation. Method of assessment. Apportionment of assessed value for purpose of taxation. Determination of the tax. Payment of the tax and apportionment of receipts. Procedure in default of payment. Remedies. Significant provisions unclassified, and taxes on sleeping-car and allied companies. The table gives for each State and Territory a concise description of the statutory provisions respecting the several items named, as they were on January 1, 1900. Changes since that date have been slight. Under "Basis of Valuation," for example, the following is found in the statement for the State of Connecticut: "Taxable valuation for State purposes is the appraised value of capital stock and funded and floating indebtedness less sums paid on real estate not used for railroad purposes which is assessed like other real estate." Under the head of "Payment of the Tax and Apportionment of Receipts" for the State of Massachusetts, one reads the following: "Taxes are paid to the treasurer of the Commonwealth. Of aggregate receipts a sum apportioned to the amount of stocks held in the State is distributed to the towns, such distribution being in proportion to stocks held by citizens of the towns. The sum remaining is covered into the State treasury." Under the head of "Procedure in Default of Payment," Minnesota shows the following: "Gross-receipts tax constitutes a paramount lien. Penalty for default is an additional five per cent and there is provision for distraint to enforce the tax." These illustrations indicate that the purpose which the table has in view is to bring together in concise form the systems of railroad taxation followed by the several States. It may be regarded as a partial condensation of the textual statement. The figures which appear refer to the pages of the textual statement where the law itself, or a condensed statement of the law, may be read in detail. The table may be used as an index to information desired, as well as a means of conveying information. The third table is entitled "Analysis of Statutory Provisions for Reports Relative to Taxation." It enters into greater detail than either of the other tables. The information sought lends itself easily to classification and the report is by this means enabled to curtail its textual statement in a very marked degree. The scope of this table may be learned by inserting at this point an analysis of the information which it contains. This analysis follows the subheadings which appear in the boxings of the table itself. These are as follows: A. GENERAL FACTS RELATING TO REPORTS. General characterization of tax. Classification of laws by codes, compiled laws, or dates of acts. What corporations or persons engaged in transportation are required to act? By whom must the report be rendered? To whom must the report be rendered? When must the report be rendered and for what period? How must the report be subscribed? Miscellaneous. B. REQUIREMENTS OF REPORTS RELATIVE TO DESCRIPTION OF TANGIBLE PROPERTY, FOR PURPOSE OF VALUATION OR TAXATION. Tangible property other than right of way and rolling stock. Does report call for localization of property described? Does report call for description or statement of ownership of property operated but not owned? C. REQUIREMENTS OF REPORTS RELATIVE TO ASSETS OR LIABILITIES FOR PURPOSE OF VALUATION OR TAXATION. What statements relative to "Cost of Road" and "Cost of Equipment" are required by report? Liabilities. Capital stock. Does report call for amount authorized, issued, or outstanding? By what rule is value assigned to stock? What information is called for relative to owner or ownership of stock? Bonds, funded debt, and other liabilities. D. REQUIREMENTS OF REPORTS RELATIVE TO INCOME AND EXPENDITURE FOR PURPOSE OF VALUATION OR TAXATION. Gross earnings and income. Does report call for gross earnings on entire line? Does report call for gross earnings on line within the State; if so, by what rule determined? Net earnings and income. Does report call for income from lease of corporate property? Operating expenses. Does report call for operating expenses on entire line? Does report call for operating expenses on line within the State; if so, by what rule determined? Does report call for dividends declared or paid? E. REQUIREMENTS OF REPORTS RELATIVE TO. VALUATION, FRANCHISE, AND STATISTICS OF OPERATION. Does report call for statement of value; if so, what form of statement is required? Does report require statement of value to be assigned to particular part of line or particular civil division of Does report call for return of franchise or franchise valuation? What statistics of operation does report call for? Miscellaneous. The figures which appear in this table refer to the sections or chapters of codes or laws cited as authority for the statements made. The authorities used in this table are the same as those used in making up Table I and are clearly indicated in the third column of this table. By referring to the table itself, it is further to be noted that the condition of the law is given as it was in 1890 and as it has been modified by subsequent enactments. In all cases these changes have been brought down to include the enactments to January 1, 1900; in Table I the years 1900, 1901, and 1902 to July 1, are also included. DESCRIPTION OF TEXTUAL STATEMENT. The reason for introducing a textual statement into this report has already been explained. The purpose is to give a complete analysis of the laws pertaining not alone to the taxation of railroads, but also of sleeping-car and similar transportation companies. It shows the character of these laws as they existed on January 1, 1890, and as they have developed down to January 1, 1900. A uniform plan of presentation is adopted and is followed for each State, so far as the peculiarities of the statutory provisions in the several States will permit. This plan provides for three general divisions, as follows: A. General Considerations: System and Development from 1890 to 1900. B. Taxes on Railroad Companies. C. Taxes on Sleeping-Car and Similar Car and Transportation Companies. Under the heading "General Considerations” are presented the limitations imposed by the constitutions of the several States upon the employment of the taxing power; and a résumé of the nature of the taxation of railroads and sleeping-car and similar transportation companies, stating briefly the chief characteristics of the law. The amendments during the decade are also noted as well as the effect which these amendments have had in modifying the taxing system. One who is in search of general information rather than detailed statements relative to the taxation of railroads by the several States need proceed no further in his study of the text than the reading of these "General Considerations." Under "B" and "C," as above indicated, will be found a detailed statement and analysis of the laws of railroad taxation presented according to a uniform plan. Use is made of marginal indentations as a means of chronological classification. Each branch of the law as it is taken up is set forth as operative at the beginning of the decade covered by this report. Such statements appear flush on the left-hand side of the page. A description of any amendments or changes since 1890 is then inserted with an indented margin, so that the eye can readily note the modifications of the law and distinguish all amended or suspended laws from those which have remained unchanged during the decade. If there be an amendment to an amendment, or further modification of the law as it stood January 1, 1890, such changes are not presented with further indentation, but the date of these changes is noted in the margin so that by following down to the last noted change, the reader can discover the conditions of the law as it stood January 1, 1900. Modifications subsequent to 1900 may be read from the footnotes. The plan according to which the details of legislation for the several States are uniformly presented is as follows: Each particular tax, whether it refers to the taxation of railroads or of sleeping-car and allied transportation companies, is taken up separately and presented under the three following headings: I. General property tax on railroads. II. State tax on privilege of franchise. III. Tax for the support of railroad commissions. Each of these taxes is then analyzed, in so far as the subject-matter of the law allows, under subheadings as follows: 1. Nature. 2. Assessment. 3. Apportionment of valuation. 4. Determination of the tax. 5. Payment of the tax. 6. Default of payment. 7. Remedies. It will be noted that these subheadings are the bases of the classification which appears in Table II, already described. The above represents the general treatment that is followed, but the headings are not applied with uncompromising rigor. Wherever the law seems to require, and deviation from the plan conduces to greater clearness, such deviation is allowed. For instance, in the case of certain taxes on gross earnings the assessment and determination of the tax are by one and the same authority and so interwoven as to be practically indistinguishable; both are treated under the one heading, "Assessment and Determination of the Tax." So far as possible, also, and such uniformity generally is possible, the subtreatment under each of these main headings is the same, and answers to the following analyses of the topics presented: 1. Nature: Nature of the tax; its application; roads or property exempt, if any; treatment of leased property. 2. Assessment: By whom; functions and duties of the railroad company in the making of the assessment, returns, etc.; penalty for failure of return; procedure upon failure of return; time and place of assessment; rules governing the assessment; powers of the assessing body; record; and report of assessment, if any. 3. Apportionment of valuation: Apportionment to counties, by whom and how made apportionment to lesser districts, by whom and how made; record of apportionments. |