W. G. Wallace, Ass 't Counsel, Federal Reserve Bank, Richmond. "Prior to 1915 a general property tax was levied upon all property, which was supposed to be assessed at its fair market value. Bank stock was thus assessed, but in the same manner as now, and other securities were generally assessed at their par, or market value, but real estate and intangibles were in practice assessed, especially in the counties, at only a small fraction of the real value. The objection to the inequalities which this produced, resulted in 1915 in the adoption of a partial segregation system, which proposed to segregate the taxes upon intangibles for general state purposes and the taxes upon real estate and tangible property, for local purposes, but, as will be seen, the system was very imperfectly carried out. Both classes of property are taxed for both purposes, but the intangibles are now generally taxed at a lower rate. Net capital employed in business, other than banking, is taxed as above stated, and it will, therefore, be seen that shares of bank stock, being taxed at a rate of $1.60 per hundred, are taxed more heavily than money invested in other forms of business, and, in view of this and the fact that, on account of lax methods of assessment, other property frequently escapes taxation, while bank stock may not, there is a general feeling among the owners of bank stock, that they are being called upon to bear more than their fair share of the burden of taxation. But, I believe on the whole, most people favor the classification of property for purposes of taxation, although the present method of classification with us is far from equitable.

The state levies an income tax of 1 per cent upon the incomes of all individuals, and upon corporations except banks and certain other corporations which pay franchise taxes, based upon income or receipts. I believe most people favor the retention of the income tax, although there has been little discussion of this particular question. WASHINGTON: G. G. Hannan, Ass 't Tax Commissioner, Olympia.

"Question of submitting the constitutional amendment eliminating the general property tax, was defeated by the legislature of 1919 but a legislative committee was appointed to investigate question. This will be a matter of considerable interest in this state during the next two years. At the present time it is hard to state what the general feeling in regard to the matter is, as there has been no movement inaugurated to give the question publicity. There is a general feeling in the state that a change is needed and we believe that a constitutional amendment will be submitted by the next legislature. WISCONSIN: Thos. E. Lyons, Commissioner, Tax Commission, Madison. "Frequent complaints about the general property tax, but no disposition to abandon it, nor any positive demand for a classified property tax. Wisconsin has had an income tax since 1911, but it does not apply to the income of banks nor to the dividends declared therefrom, because of inability to apply a state income tax to

national banks. See National Banks v. Owensboro, 173 U. S. 664, and subsequent cases. The income tax is generally popular and quite satisfactory."

WYOMING: H. B. Henderson, Secretary, Wyoming Bankers Association, Cheyenne.

"Our properties are taxed as "general" but of course classified as to kind-have no certain levies on certain classes of property-not favorable to state income tax-we have enough of that to pay to the federal government, plus excess railway, telephone and telegraph rates. The tax item is now sufficiently large.

CHAIRMAN LESER: The next subject on the program is an address on Recent Tax Legislation in Missouri by Isidor Loeb, of the University of Missouri. I might say by way of prelude that although I now hail from Maryland I am from Missouri.

ISIDOR LOEB OF MISSOURI: Members of the National Tax conference: Missouri as a patient, suffering from financial disease, is in much the same situation as her sister state of Illinois, and I doubt not of many states in the union. The able paper presented this morning by Mr. Abbott served as a diagnosis of Missouri's symptoms as well as the cause of their existence. The paper which I am to read, as was Mr. Abbott's, was scheduled for the conference to be held during the winter of 1918 in St. Louis. As the 50th General Assembly has met since that time, I have made the necessary changes in the paper to indicate legislation enacted by that body.

RECENT TAX LEGISLATION IN MISSOURI 1

ISIDOR LOEB

Professor of Economics, University of Missouri

The acts relating to taxation enacted by the forty-ninth general assembly of Missouri, which met in January, 1917, are of more importance than all of the tax laws of preceding Missouri legislatures, since the adoption of the Constitution of 1875.

1 This paper was prepared during 1918 for the conference announced for St. Louis. It has been revised so as to include references to the legislation of 1919.

Before indicating the nature and scope of these acts it will be desirable to consider briefly the conditions which led to their enactment.

In Missouri, since the adoption of the Constitution of 1865, the general property tax has been the chief source of revenue for state and local purposes. It was believed that the taxation of all property at the same rate would secure equality in the distribution of the cost of supporting the government. Experience has shown, however, that as in other states, the general property tax has been a failure and in its actual operation has resulted in gross inequalities and unjustifiable discriminations.

2

The situation in Missouri has been further complicated by the severe restrictions imposed by the present Constitution upon the rate of taxation and amount of indebtedness for state and local purposes. As indicated in a paper presented at a former conference of this Association, Missouri's experience in the matter of state and local aid to railroads, led to the adoption of drastic provisions limiting the financial powers of the legislature and of counties, cities, township and school districts. Thus, for example, the tax rate upon property for state purposes could not exceed two mills on each dollar of assessed valuation and when the total assessed valuation of the state reached nine hundred millions of dollars, the maximum rate became automatically one and one-half mills on the dollar.

The legislature is further prohibited from contracting any debt in excess of $250,000 for any one year except where the act for such purpose is submitted to the voters and ratified by a two-thirds majority.

Finally, it should be noted that while there is no special state tax for public schools, the Constitution requires the legislature to appropriate not less than one-fourth of the general revenue of the state for this purpose, and tradition and public sentiment have influenced successive legislatures to make this amount one-third. Hence 33% per cent of all the revenue derived from the state tax on property and from

2 State and Local Taxation, 1907, p. 75.

all special taxes and other sources, is automatically set aside in a special fund, from which it is distributed among counties and school districts in accordance with the rule of apportionment fixed by the general assembly. While this contribution from the state for the support of public schools, is inadequate it constitutes a serious drain upon the available resources of the treasury. In 1915 the general assembly proposed a constitutional amendment abolishing this compulsory apportionment from the general revenue and substituting in lieu thereof a state tax of one and one-half mills on each dollar of assessed valuation for public school purposes; but this failed of ratification along with eight other proposed amendments.

If the provisions of the law requiring all property to be assessed at its "true value" had been observed, the difficulties would not have been so serious. With locally elected assessors, however, there were great differences in the rate of assessed value among different individuals and classes of property in the same county and among the several counties of the state, with a general tendency to keep the assessments much below the true value. While certain classes of property in a few counties were assessed at full value, the average for all kinds of property throughout the state was probably less than one-third of the real value.

The facts clearly indicate that Missouri's system of taxation was not only characterized by gross inequality and injustice in its administration but also failed to conform to the most fundamental purpose of taxation-the securing of adequate revenues for governmental purposes.

This situation had been appreciated for many years and numerous attempts had been made to secure reform. In 1865, an act of the legislature constituted the state senate a state board of equalization. The Constitution of 1875 changed this by providing that the state board of equalization should consist of the governor, auditor, treasurer, secretary of state and attorney general. This board, because of its ex-officio character and lack of power and information, has failed to equalize valuations or to materially increase the assessments made by the local authorities.

Governors in their annual messages and otherwise, have

repeatedly called attention to the lack of uniformity in assessments among the different counties and the complete failure to enforce the statutory provisions regarding assessment at full value. Similar testimony is to be found in the biennial reports of state auditors and in a report of the Commissioner of Labor Statistics for 1896.

In 1899, the legislature enlarged the powers of the state board of equalization by authorizing and requiring it to equalize separately the value of each of the fourteen classes into which the real and personal property of the state was divided for purposes of assessment. As the board was not provided with the facilities for securing the necessary information, it would have been unable in any event to secure the uniformity required by law. Some degree of uniformity was secured in the classes of railroad property and the property of other public service corporations, which were assessed directly by the state board. It was also possible for the board to establish a uniform rule for the assessment of shares of stock in banks. It is noteworthy, however, that in all of such cases the board recognized the general failure to enforce the law regarding assessment at full value, by providing for the assessment of such property at much less than its real value.

The general situation had become complicated by the fact that in 1894 the total assessed value of property in the state exceeded nine hundred millions of dollars, with the result that the tax rate for general state revenue was automatically reduced from two to one and one-half mills on the dollar. This caused an actual decrease in state revenue for several years. As the needs of state departments and institutions were increasing, the legislature and administrative officials experienced great difficulty in providing the necessary revenue.

In 1901, Governor Dockery, in a special message, called attention to the lack of uniformity in assessments and the need for additional state revenue. Upon his recommendation, the legislature provided for a state tax commission to investigate existing conditions and to submit a report for the next general assembly. The report of this state tax commission contained statistics regarding assessments which confirmed the state