of the Superintendent of Insurance and of the Auditor, are not all assessed; and if those that are assessed, are improperly assessed by the Board even after a severe castigation by the Supreme Court; what may be concluded as to its efficiency in general as an assessor of corporations? After giving the Board the benefit of every doubt in the statistical discussion, these facts together with those brought out in the discussion of the mandamus action against the Board in 1901, force a conclusion in the negative. The board has not proved to be an efficient body for the assessment of corporations. Before venturing to suggest a remedy, it may be well to summarize the legal decisions and the deductions from the investigation of the workings of the system. 1. We have seen that the capital stock, within whose valuation are considered bonds and franchise, is in the ag gregate held to be personal property taxable to the corporation. 2. We have seen that national banks cannot be taxed on their capital stock. 3. We have seen that certain classes of corporations are taxable on both their tangible property valuation and a "corporate excess" valuation which is determined by deducting the value of locally assessed tangible valuation from the assessed and equalized capital stock, debt and franchise valuation; also that shares of stock of such corporations are not taxed to the holders thereof. 4. We have seen that for years certain classes of corporations have been exempt from taxation on their capital stock on the supposition that it is constitutionally allowable thus to favor certain business enterprises. 5. The decisions of the Supreme Court, however, hold that no capital stock can be by law exempt from taxation. And if the case came up no doubt the Supreme Court would hold that no shares of capital stock can be exempt from taxation even though the capital stock be assessed by the Board of Equalization. For the Court has held that the aggregate of capital stock is distinctly property of the corporation; while shares of stock are distinctly property of individuals. The constitution does not provide that any such property can be exempted by the legislature; and the courts have overruled every other consideration in holding that no property may be exempted by the legislature which is not specifically permitted by the exemption clause of the constitution. The situation in the state to-day, then, stands as follows. The capital stock and franchise of every business corporation (except national banks) is, under the present revenue system, as construed by the courts, assessable either by the Board of Equalization or by the local assessor. Of those that are left to the local assessor, we have seen that while banking corporations with an admirably well worked out system of listing their property, are in recent years assessed more than other classes of corporations, the heretofore exempted classes of corporations, the "purely manufacturing, mercantile, coal mining and selling, printing, publishing and stockbreeding" companies, are especially difficult for the local assessor to assess on capital stock, as no provision in the revenue law gives him power to command information from the companies. Of those corporations which still remain subject to the assessing power of the Board, it has just been shown that they are more or less inefficiently assessed. The main causes of this failure of the system that have been brought out in this study are two, namely, (1) the failure of the Board to secure data for the valuation of corporations, and (2) the failure of the Board to do its whole duty. Finally, the general conclusion of the whole study of the taxation of corporations in Illinois, other than railroads, since 1872, is that they are not properly taxed under the present system. Now the writer ventures to suggest a remedy. It is not advocated that revolutionary measures must be taken. But as long as the value of property is held to be the test of ability for sharing tax burdens, and as long as state and local revenues are levied on the same assessment basis, this "corporate excess" method must be improved. Properly worked it would bring all competing corporations before the same assessing body, where each could be taxed as a going concern by the same rules. If the Board we have were at work the year round, with power to assess the tangible property of corporations, and with power to compel the production of corporation books and papers, no doubt the present plan might work more effectively. But the number of members makes the Board unwieldly; while the method of election by districts gives no assurance of either special qualifications or of any real responsibility, which are necessary to secure efficiency. A small body of experts appointed by the Governor would occupy such a position, especially if their term of office were that of "good behavior". The work and the reports of such an assessing body must be an open book to the public. To provide for this, the general forms and procedure in the collection of data, the use of the same and the statistical reports of the same as well as all the reports of the special proceedings of the state assessing body, must be mapped out for that body. The general assembly is not the agency to work out such detailed regulation. It is a special work for a commission made up of masters in the theory of taxation and of experts in the business methods of corporations. Such a small board of experts as is here proposed, has been recommended by the Special Tax Commission, in its report submitted to the general assembly by Governor Deneen in 1911. Governor Dunne in his inaugural address has also urged the abolition of the State Board of Equalization, and the creation of a permanent State Tax Commission, to exercise its functions and to have general supervision over the administration of the revenue laws. PRIMARY SOURCES Constitutions of Illinois, 1818, 1848 and 1870. (Hurd's Revised Statutes). Debates and Proceedings of the Constitutional Convention, 1869-1870, Springfield, 1870. Laws of Illinois, Public and Special, 1843-1909. Springfield. Hurd's Revised Statutes of Illinois. Chicago, 1908. House Journal, 1830-1903. Springfield. Senate Journal, 1830-1903. Springfield. Reports to the General Assembly, 1840-1897, including governor's messages, state officers' reports, special committee reports and reports of various boards. Springfield. Auditor of Public Accounts, biennial reports, 1873-1907. Insurance reports, 1869-1893. Springfield. Superintendent of Insurance, annual reports, 1894-1911. Springfield. Proceedings of State Board of Equalization, 1867-1911. Springfield. Illinois Appellate Court Reports, 1877-1902. Chicago. Northeastern Reporter. Wealth, Debt and Taxation, Special Report of U. S. Census, 1907. Washington. Report of the Special Tax Commission, Springfield, January 15, 1911. Finances of Chicago in 1907, Comptroller's report. Chicago. 1908. Letters; Secretary of State, April 23, 1909; Superintendent of Insurance, Feb. 13 and March 23, 1909. SECONDARY SOURCES Bureau of Labor Statistics, Report on Illinois Taxation, 1894. Springfield. 1906. Cooley, T. M., A Treatise on the Law of Taxation including the Law of Local Assessments. Chicago. 1886. Ely, R. T., Outline of Economics. (Revised edition) N. Y. 1908. Fairlie, John A. Report on the Taxation and Revenue System of Illinois. Danville, 1910. Merriam, C. E., Report on the Municipal Revenues of Chicago. Chicago, 1906. Phillips, J. B., Encouragement to Industry by Exemption from Taxation, in Quarterly Journal of Economics, XIX, 498. Seager, H. R., Introduction to Economics. (third edition revised and enlarged) N. Y. 1906. Seligman, E. R. A., Essays in Taxation. N. Y., 1895. Pending Problems in Public Finance. N. Y. 1904. Pamphlet. Franchise Tax Law in New York, in Quarterly Journal of Economics. XIII, 445. Altgeld, Governor, 42, 92, 100. American Biscuit and Manufacturing Company, 70. Assessment of corporations by local assessors, 10-11; by State Board of Assessment of banking corporations, 55-62; bank stock tax, law of 1857, Assessment of business corporations exempt from jurisdiction of State Assessment of inter-state corporations, 22, 23, 54. Assessments by State Board of Equalization, tabulated, 93-96. Auditor of Public Accounts, 17, 26, 48, 58, 68; member, ex-officio, of State Banks, 55-62, 73-75. See Assessment of banking corporations. Bonds, or funded debt, 24. "Blank No. 5," 24. Building and Loan Associations, 70-72. Bureau County Board of Supervisors, 32. Bureau of Labor Statistics on bank taxes, 60-61; on efficiency of State Board of Equalization, 98. Capital stock tax defined, 8, 52. Capital Stock Committee of State Board of Equalization, 27, 28-29, 43-46, 38-39, 41, 42, 44, 46, 66. See State Board of Equalization. Colburn, on undervaluations, 35. Collection of corporation taxes, 47-53; local collectors, 47; county collec- Collection resisted by attacking validity of law, 48; use of injunction, 48; See also Court Decisions. |