the United States, it "would be, under the name of taxation, an oppressive exaction, made without constitutional warrant, amounting to little less than an arbitrary seizure of private property.”

Agency companies require the premiums received by their agents for policies issued to be remitted monthly to the head office; hence this would seem to determine where they should, if anywhere, pay tax, because when premiums, even if they be classed as property, are out of the State, there can legitimately be no tax laid upon them by such State.

At best, the taxing of gross premiums is like taxing gross deposits of a bank, or the gross receipts of a railroad, manufacturer, merchant, or farmer; it is even more inequitable, for premiums are themselves a tax; hence a tax on them is the worst species of a tax-a tax on a tax. A tax on gross premiums extorts from the business a tax of from three to five times greater than that laid upon any other kind of property or business. It has been well said, if such legislation can be enforced, that investors in one kind of business will be compelled to surrender so much of their property as public clamor may require.

We note with pleasure, therefore, that some of our largest States have so altered their laws that a moderate tax only--not exceeding that levied upon personal property--is now charged upon net premium receipts, in lieu of all other taxes and licenses.

The principal object of insurance is protection; hence it should be entitled to a consideration it does not now generally receive.

No one, probably, will object to the requirement that the capital invested in insurance, wherever situated, shall pay a tax uniformly laid upon the class to which it belongs; and possibly but few, if any, object to a tax upon the aggregation of assets in the way of profits, whenever such profits shall be realized. But, if a tax be laid in such a manner as to more than absorb the profit, the revenue will cease, because the occupation of the capital invested will fail to be productive.

We beg to append herewith the following resolutions, which were unanimously adopted at the last annual meeting of the National Board of Fire Underwriters as an expression of the views of the most experienced underwriters in the country:

Resolved, That this board recognizes with pleasure the efforts of the officers in charge of many of the insurance departments in procuring wise and wholesome legislation in their several States, and that we pledge our hearty co-operation in securing such further reforms and legislation as shall give to the several States a just and fair equivalent for the privileges granted to companies from other States, and security to their citizens who seek from such companies protection for their property against loss by fire.

Resolved, That we deem that to be the only wise and rightful basis of taxation which is founded on the net value to the companies of the concession granted by the several States, and that while we must ever regard any such taxation as a tax on the prudence and forethought of the insured, we have a right to ask and demand, that if we are to be taxed at all, such taxation should be based on what we make and not on what we lose-our profits, not our losses.

Resolved, That taxes levied on gross receipts are unjust and oppressive, and are alike opposed to every consideration of justice and the dictates of common sense. Resolved, That we invite the co-operation of all State officials, and of all friends of sound underwriting to unite with us in securing uniform and just laws regarding this most important matter, to the end that these great interests so essential to the welfare of the State, may be relieved from the unjust burden to which they are now subjected.

On motion of Mr. Nye, the resolution (See page 11) offered the previous day by him on the subject of taxation was read.

Mr. Charlton T. Lewis, of N. Y., Sec. of the "Chamber of Life Insurance," by invitation addressed the Convention on the resolution as follows:

"MR. CHAIRMAN AND GENTLEMEN:

"The commissioners or superintendents of insurance are the proper advisers of the State legislatures upon questions of legislation affecting the insurance business. They have repeatedly met in convention, and passed resolutions giving formal expression to their advice on this subject; and have even gone so far as expressly to recommend to the legislatures a tax upon premium receipts, a recommendation which several States have adopted. If, then, I shall be able to show that such taxation is wrong in principle; is contrary to public policy, and oppressive to the interests of which you are the official guardians; you will perceive, gentlemen, that in asking of you the passage of this resolution, we are not asking any favor for the companies, nor any act which lies out of the line of your admitted duty; we simply ask that you will act in the spirit which evidently controls your whole course in this Convention, that of a faithful care for the interests confided to your protection.

"You are aware that several of the States you represent levy by law a tax upon the premiums collected by insurance companies within their territory. This tax, in the first place, is collected by the wrong government. If a man or a company, residing in Massachusetts or Wisconsin, sells anything to citizens of Ohio or Michigan, he may be taxed on his business by Massachusetts or Wisconsin, where he lives, and under whose protection his business is carried on; but on what principle can he be taxed by Ohio or Michigan? It would be a precisely parallel case if this, or any Western State should attempt to tax merchants of New York on their sales of dry goods or groceries to citizens of the taxing State; or if New York should assume to tax citizens of Illinois on sales of breadstuffs to New Yorkers. True, such a tax as this is forbidden by the constitution of the United States, which will not permit any State to discriminate, in its taxation, against citizens of other States. Wherein, then, do the cases differ? How comes it that some States can and do impose on insurance companies burdens which the constitution itself prevents them from imposing on the business of private citizens? Simply in this, that the constitution, as at present interpreted by the courts, does not extend the same protection to citizens who are associated in corporations as to citizens who act individually; it does not prevent the States from oppressing corporations, from imposing burdensome and unjust taxes upon them. The States even have the power, to a large extent, to confiscate the funds saved by the heads of families for the deliverance of their children from poverty and ignorance, if these funds are held in trust by incorporated societies. But there is something above power, and that is what I ask you to consider. Even if there were no constitutional hindrance in the way, no sensible man would ask the States to tax the merchants of Boston and New York upon sales to their citizens: nor can a reason be suggested for tolerating such a tax on sales of insurance which would not apply as well to sales of clothing or machinery.

"Nay, any such reason would apply better to all other articles than to insurance. For what other article is there, heavy taxation on which would do such injury to the community imposing it? Not merely that the burden must fall at last on the citizens of the State levying the tax, and on the most provident and useful class of these citizens, as I shall presently show; but that it is a tax which directly discourages all the best habits and characteristics of civilized industry, and tends to retard every form of progress. It is not necessary, before this audience, to explain how intimately the business of insurance is interwoven with the entire fabric of society, and how essential a part it is of the system by which wealth is produced and accumulated. You are at once students of political economy and men of practical business; and in each capacity you are familiar with the universally admitted theory, on one side, and the universal experience on the other, which prove that, if the insurance business were suppressed, a large part of the motive and the energy of men, in producing and saving, would be taken away. It is uncertainty as to the rewards of labor and abstinence that discourages men; and the institution which enables them to make it certain that all the fabric of their industry will not be swept away suddenly by a calamity which cannot be foreseen, is a chief power in promoting the habit on which all prosperity depends. This is so true that the extent to which fire and life insurance prevail in any community is to-day a fairly exact measure of their rate of

progress in wealth and civilization. These institutions are essential to the people, and no more unwise legislation can be devised than that which discourages their growth, or increases their cost.

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Again, the taxation of premium receipts is a tax of the most odious kind in respect to the basis upon which it is levied. It is analogous to the old plan of a tax, on sales," which is the scorn of every economist. The only scientific principle on which taxes can be levied is admitted to be the distribution of them according to the profits which each tax-payer enjoys under the protection of the Stave. Productive business is expected to yield to business men, not only a return of the capital put into it, and their necessary cost of living, but a surplus as profit; and it is for the sake of this profit that it is carried on. It is universally admitted that the gross amount of business done is no fit measure of taxation, but only the profit it yields. To tax the man who sells a million of dollars' worth of goods at one per cent. profit, and the man who sells one-tenth of that amount at twenty per cent. profit, according to their sales, would be gross inequity. Hence the object in adjusting tax laws is to cause the burden to fall as nearly as possible in proportion to profits. It has, indeed, been found by the experience of several nations, that the taxation of gross sales is the most destructive and wasteful form in which commerce can be oppressed by a government.

To apply this rule to insurance, what are the profits of this business, and what is, therefore, the proper measure of the taxation to be laid on it? I am not speaking of the incidents and relations of the business, of the salaries of officers, the fees and commissions of agents, and the like. These are individual incomes that must bear their share of the common burden, and have no claim to exemption. But the business of insurance in itself, being the business of mitigating individual losses by distributing them, is in its nature without profits. A manufacturer produces clothing or rails which are worth more than the raw material he uses and the wages he pays; and the difference is his profit. A merchant sells goods for more than they cost him, including the expenses of transporting and of caring for them, and the difference is his profit. But when two or three or ten men agree together, that, if a certain calamity befall one of them, the others will help him or his family bear it, nothing is produced that can be sold, there is no profit. And this is the insurance business in its integrity.

The

If a tax is laid on this agreement, it is a tax upon the funds brought together to mitigate the calamity; there are no other funds out of which it can come. money is taken, in life insurance, out of the provision made for the widow and orphan; and the honest, manly, equal way to levy it would be to lay the tax directly on the policy when paid.

"This is always done indirectly, no matter how the tax is levied, but the real effect of it is only increased by the indirection. A tax that should take away

from the funds left by every provident man for his family two or three per cent. of the whole amount, while no one has ever proposed it or is likely to propose it, would be less oppressive and less inequitable than the tax now levied by many States on premiums.

Another fatal objection to this method of taxation is the excessive amount of it wherever it is resorted to, and the facility with which it is increased upon the slightest temptation. Some of you are familiar with the tax of three per cent. on the so-called dividends of Life Insurance Companies, imposed by Congress during the war. These dividends," or return premiums, in the Mutual Companies, amount on the average to about one-tenth of the premiums; and the tax, therefore, was equal to about three-tenths of one per cent. on the premiums. But as soon as the attention of Congress was properly called to the real nature of the business, it was admitted that no tax ought to be collected from it, since these returns were not profits or income, but merely a reduction in the cost of insurance. Although the needs of the country were then extreme, and every possible source of revenue was sought for, Congress did not hesitate to exempt return premiums of life insurance from taxation, and while the general tax on profits and income was necessarily raised to five, and then to ten per cent., this exemption was steadily maintained. The principle that the business whose sole aim is to enable men to bear one another's burdens ought not to be discouraged by law, was consistently upheld, and Congress refused to take even three-tenths

of one per cent. from these premiums during the nation's struggle for life. Yet some of our States, under no such pressure, are now exacting from this business a tax ten times as great as that which Congress would not maintain because it was unjust and oppressive. It requires careful reflection to comprehend the extent of this burden. You well remember the excitement and remonstrance stirred up in the financial centres of the country by the tax of one-twentieth of one per cent. on sales of stocks and bonds-how bankers and brokers cried that their business was ruined; how Wall Street referred its duliness and decline to the tax; how even political economists of note demonstrated that the impost on exchanges was unwise; and how Congress took the first opportunity of a full treasury to repeal it. But here is a tax sixty times as great, levied to-day, not upon the investments of capitalists, but upon the savings of husbands and fathers; not upon the speculations of the rich, but upon the barrier which industry is striving to erect against poverty. And the example set by such States as Pennsylvania and Michigan in this direction is improved on by counties, cities, and towns, until there are places which I could name in which the working-man cannot insure his wife against being left destitute by his death, without paying in taxes almost a year's interest on every dollar he pays in premiums.

"The worst of these evils evidently lies in the adoption of the premium as the basis of taxation. There is no principle to justify it, and therefore there is no rule by which the amount of such taxation can be regulated. Admit the right to tax premiums, and there is no limit short of confiscation that can be imposed upon legislatures and municipal councils in their levies upon this business-and the taxation now practised by many of them is confiscation. We therefore respectfully ask you, gentlemen, as the official and authorized advisers of the States in insurance matters-not to commit yourselves to any theory of taxation or of exemption; but simply to declare that-whether insurance ought to be taxed or not, whether taxes upon it ought to be levied in one way or in another-the premium receipts of the companies are not a proper basis of taxation. This is a point on which we cannot differ, however far apart we may be on other topics; and that it is important enough to demand an expression of opinion from you is obvious, not only because this erroneous and burdensome method of taxation has been adopted in many States, but because this Convention was called upon to discuss and decide upon it at its very first session; and did utter a decision which, I am sure, you all now regard as incorrect."

Mr. A. F. Harvey, Actuary of the St. Louis Life Insurance Company, agreed with the last speaker that taxation of premium receipts is wrong and should be abolished altogether. He had succeeded in demonstrating this fact to the satisfaction of the Missouri Legislature, which had thereupon abolished such tax. He knew it would be a delicate, and perhaps difficult, matter to wipe out such taxes. But there should certainly be an effort to that end, and the commissioners can do much to accomplish that end.

Mr. E. A. Hewitt, of New York, editor of the Chronicle, thought the resolution of Commissioner Nye covered as much ground as the Convention should properly attempt to cover. The insurance companies have been taxed beyond all justice, and this tax has come out of the policy-holders in the end. That insurance companies should pay some tax on their investments, and for the protection afforded to them by the several States, there is no doubt. The question is how to distribute this taxation equitably. This, in the matter of a mutual life insurance company, is a question of great difficulty. His own view was, that the proper basis of taxation was the measure of the value of the privilege conceded by the State. The State has an undoubted right to demand pay for the privilege of doing business within its borders. On this point he was a State rights man. To find out the exact measure of the value of this privilege is a question for wise legislators.

J T. Liggett, of the Michigan Mutual Life Insurance Company, deemed it an injustice that insurance companies should be taxed to maintain the office of Insurance Commissioner. If this office is established for the protection of the people, and not in the interest of the insurance companies, then the people should pay the cost of maintaining the office. This, among other things, he deemed an important item of taxation worthy of consideration in connection with the whole subject.

Mr. Row, of Michigan, suggested some difficulties in the way of the removal of the taxation of the gross receipts of life insurance companies. If a citizen of this State makes an investment herein, his property is taxable. He adds to the wealth of the State, and year after year pays his proportion of the expenses of maintaining government. If he deposits money in a savings bank for his prospective widow and orphans, he is bound to give it in to the tax-gatherer, and pay taxes upon such a deposit. But if he invests in life insurance in a New York company, his money goes to New York, is there invested and taxed, while Michigan loses all present taxation benefit from such investment by its citizen. These are the questions which reach us, and whether practical or not, must be answered to the satisfaction of western legislators before they will favor the removal of taxes. The unwisdom of the laws of New York restricting investments to that State is apparent, and has had a full share in influencing the taxation legislation of the West. This question of taxation is one of the most difficult when the laws of the different States are analyzed. Take, for instance, Connecticut and some other States that does not tax life insurance premiums. The policy holder in such non-tax-charging State pays no tax to his own commonwealth, neither does the company in which he invests his money-but he pays (through his company) to the State of Connecticut a large tax each year. During the year 1874 there was paid into the Treasury of the State of Connecticut, by the Life Insurance Companies organized under the laws of that State, the large sum of $322,891.55, being a tax of one-half of one per cent, on the gross assets of the companies. How are these assets accumulated? They are the premiums paid in by the policyholders of every State in which these companies do business; and the policyholders pay this tax-year after year the same premium is taxed. Reference is made to these States because they furnish the most of our insurance. They are old States, and moneyed centres. These remarks are not made in any spirit of hostility to the resolution, but to show the difficulties surrounding the subject; also to suggest that not only are barriers in the West to be removed, but that the laws of the East must be levelled up to the high plane on which you would have the West to stand.

The Secretary (Mr. Pillsbury) sympathized with Mr. Rowe in his perplexities, but believed the practice of taxing corporations where they are located was wellnigh universal, and not a subject of criticism unless they were discriminated against, or made to bear more than a just share of public burdens. He had no doubt the gentleman's own State taxed her home corporations, that are largely, and some of them very largely, owned by the eastern States. There was certainly propriety in taxing property where you find it, although the justice of Connecticut's taxing trust funds held by her corporations might be questionable. But the practice of the Western States, as well as some of the Eastern, of going beyond their limits to where the companies are located, after premium receipts collected among them, and for which a fair equivalent has already been rendered, to impose taxes is quite a different affair. Why may not a State just as well go beyond its limits to tax interest received for the use of money, or the profits arising from any species of inter-State commerce? Premium receipts are not profits even, but simply compensation for a fair equivalent left in the State where they were collected. He contended that States had no more right to pursue premium receipts beyond their limits for taxation than they had to pursue money received of their citizens in exchange for any useful merchandise. If, as has been intimated by Mr. Lewis, the life companies deduct from their dividends the amount of the tax assessed by the State where the policy-holder resides, the effect of the State taxation of premiums will be equivalent to a direct assessment upon its own citizens, who may be impelled by love and a prudent forecast to invest in life insurance, not only to prevent their families from becoming a burden to the State, but to rear them for usefulness and respectability. Could a more short-sighted policy for raising revenue be invented? The basis of life insurance was fixed and the calculations made, certainly in all the older companies, before this scheme of taxation was conceived. The companies therefore can easily justify themselves in this contemplated movement as a necessity to enable them to fulfil their contracts. Fire insurance companies may protect the nselves against taxation by discriminating in some similar manner.

Will