the property itself, such as give it necessarily a local character; and secondly, those of "positive or customary law of the country where they are situate." Proceedings in rem against personal property may be had only in the country of actual situs, and the disposition of those courts is everywhere recognized.* In any case, no contract concerning such property contrary to the prohibitions of the lex situs will be valid anywhere.3 Turning now to intangible personalty and obligations, we find the accepted doctrine is that they have "no situs or locality; and they follow the person of the owner in point of right (mobilia inhaerent ossibus domini) although the remedy on them must be according to the law of the place where they are sought to be enforced." In regard to this doctrine, the following is an often quoted passage of the same distinguished authority: "Although movables are for many purposes to be deemed to have no situs, except that of the domicile of the owner, yet this being but a legal fiction, it yields whenever it is necessary for the purpose of justice that the actual situs of the thing should be examined. A nation within whose territory any personal property is actually situate has an entire dominion over it while therein, in point of sovereignty and jurisdiction, as it has over immovable property situate there. It may regulate its transfer, and subject it to process and execution, and provide for and control the uses and disposition of it, to the same extent that it may exert its authority over immovable property. One of the grounds upon which, as we have seen, jurisdiction is assumed over non-residents, is through the instrumentality of their personal property, as well as their real property, within the local sovereignity. Hence it is that whenever personal property is taken by arrest, attachment or execution within a state, the title so acquired under the laws of the state is held valid in every other state, and the same 1 Story, Conflict of Laws, § 383. • Ibid., § 362. rule is applied to debts due to non-residents, which are subjected to the like process under the local laws of the state."" The doctrine in regard to personal property has constantly tended to lay more and more emphasis on the actual situs. In a note to Story's Conflict of Laws, the editor says: "The exceptions to the maxim mobilia sequuntur personam have become so numerous that it cannot be safely invoked for the decision of any but the simplest cases at the present day; if indeed a case can ever be safely decided upon a maxim. exceptions would probably be less frequent if the maxim were lex situs mobilia regit. . . . Of course for the purpose of taxation the lex situs will prevail." The Apart from the actual power of a state to regulate such matters for all kinds of property, if it undertakes to do so, certain particular forms of obligations have (as has been already stated of personal property generally) in a special degree an independent situs. That is, in the legal view there is a marked distinction between credits of various sorts. Story cites Lord Mansfield as holding that this may be affirmed of " contracts respecting the public funds or stocks, the local nature of which requires them to be carried into execution according to the local law," and he continues: "The same rule may properly apply to all other local stock or funds, although of a personal nature, or so made by the local law, such as bank stock, insurance stock, turnpike, canal and bridge shares, and other incorporeal property owing its existence to or regulated by peculiar local laws. No positive transfer can be made of such property except in the manner prescribed by the local regulations." The question of negotiability is important. Choses in action, such as shares of stock, that have only a restricted negotiability may be given an independent situs, but this would be impossible where mere endorsement or manual delivery passed the ownership. Other forms of property which might be sus1 Story, Conflict of Laws, § 550. 2 Ibid., § 383. 3 3 Cf. Tax Collector vs. Insur. Co., (1890) 42 La. An., 1172. 2 ceptible to similar treatment under appropriate conditions are corporation bonds, bank deposits and mortgages. The third consideration, in respect to taxable jurisdiction of property, is the economic one. The economic principles are the foundation, in a large measure, of politics and law, but the positive institutions of the latter also react to modify and even to control in many details the economic conditions. No system of taxation can be founded and long endure on a fundamentally unreal economic basis; yet if in the main part real, an immense amount, positively considered, of divergence therefrom may be tolerated, though, to a corresponding degree, it forms an element of weakness in the state. Philosophically, the taxation strength of a state is dependent on its powers of production. This is applicable to any conception of the state or community, whether we consider its external relations or its inner constitution. An "isolated state" finds its taxing power measured by its annual income; a communistic state looks to the same source for its expenditures.' There are in the conditions of modern international life, certain facts which plainly modify this view. But, before proceeding to consider them, it is desirable to notice that one other great basis for taxation exists, which is, however, not wholly independent of the primary one, i. e., consumption. Consumption, is not a rational basis of taxation in any large sense. It represents neither the capacity of the state nor the ability of the individual with any high degree of truthfulness. But it is, nevertheless, an important practical form; it may also be, in view of the imperfections of administration of the laws, and of certain other complications, 1" Die Steuergewalt findet ihr Genüge innerhalb des eigenen Territoriums; die Güter, die aus diesem hervorgehen, sind zum principalen Steuerfond gestempelt; das ist der Bereich, wo die Zwangs- und Kontrollmittel am wirksamsten sind, das ist der Bereich, über welches auch sonst der Gemeinschaftswille in der Regel nicht hinausgreift, innerhalb dessen er sich aber möglichst voll und ganz geltend macht."-Schanz, Finanz-Archiv, 1892, ii, s. 9. a useful and relatively just one. The complications which afford a reason for the partial use of consumption taxes are those arising from the international confusion of productive agencies, and the local concentration of creditor classes, the same which, in some degree, make expedient a modification of the productive basis of taxation. Let us make a more particular analysis of this subject. First, as to the productive capacity; what does that include? Reconsidering the discussion of the questions of double taxation as they arise in a particular state, it is maintained that the total positive wealth, tangible and intangible, or the total income, is the proper basis; that debts are in no sense an addition to this, but merely represent an interest of the creditor in such wealth; that the creditor is properly taxable thereon, as on any other property value. It will also be remembered that from the view of political justice, it was held that the nonresident holding property therein was rightly taxable. The logical consequence of this is that a non-resident creditor of one state is not taxable on such credits in the state of residence. That it may be impracticable, or even impossible, to tax the non-resident creditor is no refutation of the theoretical value of the argument. That an approximation to justice, a partial avoidance of double taxation is desirable, any improvement, in fact, on the present system, will not be disputed. But, as a matter of fact, there is a vast amount of this indebtedness which can be taxed to the non-resident creditor, beside which the part which would escape would be, under a proper system, of minor importance. The great examples are stocks, bonds and mortgages. Another matter, not yet specially considered, demands attention here. Income has been used as a term more or less convertible with property, and it has been insisted that such incomes as are not derived from property are taxable. But the question of their situs has not been discussed. From its nature, income from services is associated with or attached to The the person; there is no separation in an economic sense. same is undoubtedly true in both the political and legal view. When, however, such a person shall perform his services in different places, he is liable at each one on the same grounds. Agents are subject to the same rule as principals. This brings us to the proper point to consider certain. incomes which may be dependent on property values in one place, yet might be said to be derived also, to a certain extent, at a central administrative place in another jurisdiction than the property. For example, a corporation whose wealth is directly invested in material wealth producing property, as a railroad, may have its property in one state and its principal office of administration in a great commercial center in another jurisdiction, on account of the business advantages derived therein. New York City is the headquarters of many corporations doing business in other states. Of course the service incomes of its officers, who are engaged there, including perhaps its directors, president, etc., are there taxable, and this would not in any way affect the general propositions advanced. The question is whether a foreign railroad, for example, is doing business there in a degree sufficient to make it taxable. Perhaps a slight tax on franchise is justified, and in that case a deduction, theoretically, should be made from the taxation of franchise value, where the road is situated; but this is, evidently, very vague and quite unsatisfactory. The exemption from taxation, on their property situated in other states, of wealthy residents of a city, may appear to be, to some extent, an unfair limitation on the state of residence, and in a still greater degree as respects the municipality of residence. The resident, it may be presumed, finds there greater benefits and enjoyments and, it may be claimed, should pay for them as well as the rest of the community. The claim 1 In the tax systems of the several states, however, this method is often quite completely carried out as respects the property of its citizens within its borders. |