The taxes now levied by the states upon automobiles represent the sort of taxes which the committee has in mind. Taxes upon amusements, on non-alcoholic as well as alcoholic beverages, on hunting licenses, and a few other things, have been brought to our attention; but we have decided to make no recommendation upon the subject at this time. It is perfectly evident that, with the exception of automobiles, none of the taxes which have been suggested will ever be likely to constitute an important source of revenue; and we have preferred to concentrate attention this year upon the problems of chief practical importance. It may well be, however, that at some future time the National Tax Association will do well to appoint a committee to canvass carefully the possibility of supplementing existing sources of state and local revenue by taxes levied upon what may be fairly classified as luxurious consumption. X. THE SEPARATION OF THE SOURCES OF STATE AND LOCAL REVENUE SECTION 41. The proposal to separate the sources of state and local taxation has played a sufficiently important part in previous discussions of tax reform to justify a brief consideration of that subject. We may first observe that the plan we propose does not require any separation whatever of the sources of state and local revenue, but that it is not inconsistent with the adoption of a thoroughgoing scheme of separation. Under our plan, it would be possible for many states to raise from the personal income tax a sufficient sum to defray the entire expense of the state government, so that the taxation of property could be turned over wholly to the local authorities; while the revenue from the business tax, although collected by the state, could either be retained by the state or distributed to the local governing units. We refer to this fact merely to emphasize our remark that the plan we have proposed will neither prevent the states from adopting the plan of separation, if they so desire, nor compel them to do so, if they prefer not to experiment with that plan. The committee is of the opinion that a partial separation of the sources of state and local revenue is desirable, but that complete separation, by cutting the connecting cord between the state and local governments, tends to destroy the states' sense of responsibility in the matter of local taxation. There is no experience to justify the belief that, if the states turn over to the local governments independent sources of revenue, and adopt the theory that local taxation is an affair of purely local interest, we shall ever have a satisfactory administration of the tax laws by local officials. Experience abundantly shows that such officials need constantly the expert advice, intelligent guidance, and, when necessary, the effective control of a state tax commission composed of experts and keenly alive to the need of just and efficient administration of tax laws by local officials. Total separation of the sources of state and local revenue, at least in the forms in which it is usually presented, seems to the committee to be distinctly a backward step, especially at this moment when the need is for greater emphasis upon state control over the taxation of property for local purposes. A further difficulty of complete separation is that the abolition of the direct state tax upon property tends to remove a desirable check upon state expenditures. The committee believes, however, that a partial separation of the sources of state and local revenue is desirable. The inheritance tax is obviously a proper source of state revenue. Taxes upon insurance companies and upon automobiles may very properly be allocated to the state rather than the local governments. Under special conditions it may be better that railroad taxes should be retained in the treasury of the state than utilized as a source of local revenue. From the taxes thus enumerated, it is obvious that states can, and should, derive revenues that are independent of local taxation; but we believe that it is desirable that a state tax on property should be retained as the regulator of the state finances and a reminder to the state of its responsibility for the proper assessment of property in every locality within its jurisdiction. We have recommended that a part of the personal income tax, corresponding to the proportion which state expenditures bear to the total of state and local expenditures, be allocated to the state treasury. Such an arrangement will tend to lighten the direct state tax, but will not make such a tax un necessary. We have pointed out that the distribution of the proceeds of the proposed business tax may well vary from state to state. We here suggest that whether the state should be assigned a share may well depend upon the comparative revenue needs of the state and the local governments. If the state tax is light, the entire revenue from the business tax may well be assigned to the local political units; and if the state tax is heavy, it would follow that the state might well retain a share of the business tax. Here, as elsewhere, the system we propose permits of different adjustments to suit the varying conditions of our several states. XI. AMENDMENT OF STATE CONSTITUTIONS SECTION 42. As has been repeatedly set forth in the publications of the National Tax Association, it is certain that no important departures from the system of the general property tax are possible in many states under constitutional restrictions which provide that taxation must be uniform, equal, and proportional. That such constitutional limitations have, in fact, tended to secure neither uniformity nor equality in taxation, is also fully set forth in the Proceedings of the annual conferences of the National Tax Association and in various reports of special committees. Upon this subject the committee needs only to say that in states which are now limited by constitutional restrictions prescribing a uniform rule or method of taxation, no satisfactory adjustment of tax problems can be reached until such limitations are removed, or at least modified. There may be room for difference of opinion concerning the form which constitutional amendments should take. Some states have preferred to adopt amendments authorizing specific departures from the uniform rule, while others have eliminated wholly the requirement of uniformity. The committee has concluded that it is unnecessary at this time to say more than that the plan of taxation which it recommends will require no more, and probably no less, amendment of state constitutions than any other plan adequate to the needs of the case. CHARLES J. BULLOCK, Chairman, I regard this report as one of the wisest and most helpful statements ever published concerning the proper structure of the tax system of the American state. It is so admirable that credit for its production should be confined to those who participated in its production. Pressure of work at Washington made it impracticable for me to do any real work on the report, and for this and other reasons I have asked to have my name omitted from the list of members.-T. S. ADAMS. [Adjournment of the Session.] EIGHTH SESSION, THURSDAY AFTERNOON, JUNE 19, 1919 PERMANENT CHAIRMAN ARMSON: I have the pleasure of introducing as chairman of the afternoon session Mr. William Bailey of Utah. CHAIRMAN BAILEY: Gentlemen, it affords me a lot of pleasure to preside over this meeting this afternoon. I have always had a great interest in this institution and it is very gratifying, particularly on this occasion, to see so many present. I can see that the association is growing. It is very gratifying. The first matter this afternoon will be the report of the Committee on the Taxation of Mines, by Judge Howe. PRELIMINARY REPORT OF THE COMMITTEE OF THE NATIONAL TAX ASSOCIATION ON MINE TAXATION When the Model Tax System committee of the National Tax Association was in session during the last week of January, 1918, discussion developed the proposition that some of the subjects of taxation were so important and so difficult of treatment as to require their reference to committees for special investigation and report, and especially was it thought that the question of the taxation of mining interests should be handed to such a committee. The executive committee of the National Tax Association later authorized President Bullock to appoint a committee on mining. It was generally agreed that the American Mining Congress should be represented on the committee. Some time was consumed before President Bullock was able to secure the names of members to represent the mining congress and thus there was delay in naming the full membership of the committee. On June 24, 1918, the President appointed as members of the committee: Samuel T. Howe of Kansas, Chairman, C. P. Link of Colorado, C. M. Zander of Arizona, and, Professor E. L. Bogart, University of Illinois. On September 16, 1918, the membership of the committee. |