SOME SUGGESTIONS TOUCHING STATE AND LOCAL TAXATION.

BY D. C. WESTENHAVER, ESQ.

Very little attention on the part of the people in general has been given to the question of State and local taxation, and the sum total of knowledge on their part, respecting the nature and effect of such taxation, is exceedingly small. During the past fifteen years the battle of national politics has been waged in the main around the Federal taxing system. Into these battles have been thrown a tremendous expenditure of energy, time and money, with the result that everybody feels that he knows all that there is to know on the subject, even though the system itself may fall far short of what expert opinion pronounces to be the best. On the other hand no public discussion of any importance has been had of State and local taxation; and as the latter touches the business and enterprise, the comfort and wellbeing of the people in all their industrial relations, no question calls for more immediate and thorough study, or will repay more liberally for the time thus spent.

The most noteworthy phase of all modern governments is the increasing call for more revenues. E. L. Godkin, the acute and discriminating author of the Problems of Modern Democracy, observes with much force, that this increasing expenditure threatens to land, at no distant day, many of them in bankruptcy. This tendency is noticeable in the United States at the two extremes of our political systems, in the budgets of the Federal government at the one end, and in the budgets of the counties and municipalities at the other, while for reasons peculiar to themselves, and much regretted by many sound political thinkers, the States of the Union have not participated, except in a lesser degree, either in the increase of expenditure, or in the increase of debts. The anger of the people at the

failure of the internal improvement policy undertaken by the States between 1830 and 1845, led to the general adoption of a constitutional provision, forbidding the contracting of State debts, except in small sums, or in certain emergencies. These constitutional limits, coupled with the immunity from suit and compulsory process, enjoyed by a sovereign State, have effectually destroyed the credit of the States, crippled their usefulness, and prevented the growth of the governing functions; and, in consequence, the States have sunk into comparative insignificance, while the Federal nation and the municipalities have grown steadily in importance, extended the sphere of their activity, and increased their expenditures and rate of taxation.

That my remarks with respect to the increasing burden of debt and taxes may not seem the language of exaggeration, I shall descend briefly into details. The increase of local debts is the most significant fact, for it shows the extent to which the public is spending in excess of its income from all sources. The indebtedness of cities, that is of towns having a population in excess of 7,500, in 1870, was $352,800,000, in 1880 it was $698,270,000, and in 1890, as shown by the census of that year, it was $724,463,060 divided among 7,719 cities. The debts of the counties in the decade from 1880 to 1890 had grown $20,943,018, and aggregated at the end of the period $145,048,045.

The one bright side to this record may be found in the fact that during the last two decades the States reduced their debts more than $100,000,000, but this was done, as already explained, as the result of conditions that leave little cause for congratulation results that endanger the just balance of powers, between State and nation, which our constitution implies as necessary to our dual system of government.

Accompanying this increase of local indebtedness is an increase in the local tax rate equally marked. The city of Baltimore has just levied a tax of $3.00 to each $100 of the valuation. The census of 1890 shows the rate in Chicago to have been $6.42 on the $100.00 and the average in the

cities of the State, with a population above 4,000, to have

been over $5.00 on the hundred.

The States of Iowa, Kan

The State of Colorado The general average of

sas and Nebraska are quite as bad. averaged nearly as high as $4.00. municipal taxation in the East and South in cities with a population over 4,000 is much more conservative, but as shown by the census of 1890, the average would appear to reach nearly if not $2.00 on the hundred, and in large cities a rate of $2.50 and $3.00 is not unusual. The returns of the rate of taxation for the year 1880 are too meager to make any general comparison as to the increase during the period, but wherever figures are given, they almost uniformly show an increase in the local tax rate as well as in the extent, of the indebtedness. The Pennsylvania Tax Commission, however, made a report in 1878, in which it gives the relative increase of population, wealth debt and tax rate in fifteen of the principal cities of the country between 1860 and 1875; thus population increased during that period 70.5 per cent, taxable value, 156.9, debt, 270.9, and the rate of taxation 363.2.

So far as we can tell from the census reports the foregoing rates include the State, county and other local tax rates. In West Virginia, notwithstanding the constant complaint one hears, the rates are, by comparison, low. In the city of Martinsburg, the burden on all accounts including State and county, is $1.95 on the $100; in the city of Wheeling, $1.42; in the city of Parkersburg, $2.45, of which $1.10 is wholly for municipal purposes; in the city of Charleston, the rate is $3.45, of which $1.25 is wholly for municipal purposes. We have no rate from Huntington for the current year, but that given in the census report of 1890 places the rate at $2.93 which it is not likely has since grown less.

In view of these facts we may take it as true that these mortgages of the future in the shape of bonded indebtedness have been assumed at a time when the revenues from taxation have been enlarged by a greatly increased tax-rate

The superficial observer, who glances over these figures,

is quite apt to say that the money has been squandered by the cities; that the remedy lies in a suffrage restricted to property holders, or at least to such as have a personal stake in the welfare of the municipality; that cities should be prohibited from contracting debts, and restricted in the rate of taxes they may impose. As an understanding of the cause of this increased debt and tax-rate is essential to a clear comprehension of the problem to be dealt with, let us examine hastily these views.

To restrict the suffrage is an impossibility, for no people can be found willing to surrender by their voluntary action the privilege of participating in all the functions of government a privilege gained by long years of struggle. Nor, indeed were such restriction possible, do we regard it as wise or expedient; manhood suffrage, with all its blunders, is so valuable as a safety valve for discontent, that there is no alternative between it and government by the repressive force of absolutism. One may accordingly dismiss from consideration any idea of narrowing the base of popular institutions, as being both unwise and impracticable. I desire, however, to record my dissent from the time honored notion that the ignorance of the mass, or the willingness of the poor and thriftless voters to spend the money of the rich, or to tax them, has in any appreciable way contributed to the increase of the tax rate and local indebtedness. In making this statement, I merely give expression to what I believe is the general conclusion of modern investigation. The Pennsylvania Tax Commission of 1878 says: "The undue accumulation of debt in most of the cities of Pennyslvania has been the result of a desire for speculation on the part of the owners of the property themselves." In explanation of this statement, the Commission adds: "Large tracts of land outside the built-up portions of cities have been purchased, combinations made by men of wealth, and councils besieged, until they have been driven into making appropriation to open and improve streets and avenues in advance of the real necessities of the city. In many of these cases, owners of property need

more protection against themselves, than against the nonproperty holding class." H. C. Adams of the University of Michigan, in his "Public Debts," said by competent authorities to be the ablest book on Finance written in English, expresses the same opinion. Prof. Richard T. Ely, who is too well known to need an introduction to any circle of educated readers in the United States, in speaking to the same point, said: “Universal Suffrage is alleged to be the cause, and it is said the poor vote away the property of the rich. The facts do not tally with the theory. I have looked into the matter with care and I think I have had some facilities for so doing. I know of no American city, which is not controlled by wealth. The truth is this: Unscrupulous wealth uses vicious poverty as a tool; not that all wealth is unscrupulous, nor all poverty vicious." And in many places in his published works, he expresses the view that the wasteful expenditures in city governments and the debts of cities so far as they are not honest, may be traced to the influence of speculative schemes of property holders.

The simple truth is and herein lies the chief fact of the whole subject that this increase of indebtedness and in the rate of taxation is not due in the main, or even in the large part to jobbery or corruption, or wasteful extravagance, but is due to an extension of the sphere of governmental activity, calling for larger revenues, which our antiquated systems of State and local taxation are inadequate to produce. I repeat, governments as now organized are expected, nay, compelled by the wishes of the people, to assume new functions and undertake new duties. The industrial development, or the genius of the age, or what is the same thing, the prevailing belief of thinking people, has set new tasks for governments, which they must assume and perform, and which, in this era of Democratic self-government, cannot be shirked. Our property tax-for such in the main, is our system of State and local taxation was built up under a condition of things, when society and industry and government were not complex; and while it was sufficient as a producer of revenue, for a