Governor Bailey of Kansas in his message [13 Ja '03 p.10-11] says, "I also find that the state has a contract with the State Fiscal Agency whereby the agency pays the state 2% on the average daily balances of state funds in said agency, which for 1902 would amount to $1027.80. . . I also find from the records of said board, that the average amount of money in the state treasury and in the Topeka banks as state depositories for the year 1902 amounted to $768,811. This amount at 2% on average daily balances would net the state $15,376.22 per annum."

The situation in Idaho has been corrected by an act ['03 p.375] which creates a board of deposits to select public depositories. The act regulates the rate of interest to be paid on current balances, making 2% the minimum. It fixes the allotment of interest, when accrued, to various state purposes, and defines the bond of surety companies required of all such depositories unless they prefer to deposit certain specified securities with the state treas

Under the conditions prescribed, a preference is given to banks within the state. Wisconsin by statute ['03 ch.233] allows state depository banks to offer as an alternative to the bond or security for public deposits hitherto required, bonds of the United States or state, county, or municipal bonds, or the bond of a surety company, provided always that in value said guaranties exceed by 50% the state funds to be intrusted to the depository bank. Interest on current state funds yielded West Virginia $34,379.57 according to Governor White's message [14 Ja '03 p.7-8], and a New Jersey statute exacting 2% on current state funds on deposit; though in force but part of the fiscal year, yielded $28,000 according to Governor Murphy's message [13 Ja '03 p.8].

So far as permanent or trust funds are concerned, it is to be noted that Montana ['03 ch.12] requires the investment of state educational funds in the bonds of that state, or its counties and local divisions, or "in any bonds now issued, or to be hereafter issued against any of the state land grants," which in the judg ment of the State Board of Land Commissioners is a safe investment. Utah ['03 ch.62] provides that funds from the sale or rental of public lands may be invested in United States bonds

or in state (Utah), county, city, or school district bonds or notes, "or in first mortgages on improved farms within the state," provided such mortgages do not exceed two thirds of the assessed value of the same, exclusive of the improvements. Furthermore, "said farm loans are to be preferred," and are to bear 6% interest. Utah also ['03 ch.110] directs the investment of the redemption fund for the redemption of certain territorial bonds in state, county, municipal, or school district bonds of Utah. Wyoming ['03 ch.30] requires the investment of funds arising from the sale of state lands in United States bonds, bonds of Wyoming, or in bonds issued by school districts within the state or in registered coupon county or municipal bonds issued by Wyoming counties or municipalities, or in interest-bearing warrants of the state; but where the interest of funds is devoted to public school purposes, investments are restricted to Wyoming school district bonds, or registered county bonds of the state, or in state or United States securities. New Hampshire ['03 ch.125] allows the investment of its funds in the securities of the United States, of the state of New Hampshire or its local divisions, or in the securities of any city in New England whose net debt does not exceed 5% of the last valuation for tax purposes.

0

State financial powers-taxation and indebtedness. A proposed amendment to the Constitution of Georgia ['03 p.21] to be submitted to popular vote in October 1904 delimits the levy of state taxes to 5 mills on the dollar of valuation per annum except to repel invasion, suppress insurrection, or defend the state in time of war. Missouri ['03 p.257] reduces the annual state tax required to pay interest on the state debt from 1 mill on the dollar of valuation to mill for 1903 and to mill thereafter. This reduction was due to the extinction of the state's funded debt except certificates of indebtedness for the school fund and the seminary fund. Arkansas ['03 p.484] submits to popular vote in November 1904 an amendment to the Constitution prohibiting the future loan of the public credit by the state, or its local divisions, except to provide for existing indebtedness, and except in the case of municipalities of the first and second class which may issue bonds only for purposes approved by the popular vote of said

municipalities. The amendment even forbids the state to issue any interest-bearing treasury warrants or scrip. North Carolina ['03 ch.750] augments the state debt by $300,000 to pay off indebtedness arising from appropriations previously made for educational, charitable, and other purposes. Nevada ['03 ch.72] extends certain state loans for a period of 10 years. Kansas ['03 ch.71] authorizes the refunding of state bonds held by the state permanent school fund and the State University fund, the new bonds to run for 10 years and bear interest at 4%. Similarly New Mexico ['03 ch.67] provides for refunding at 4 maturing bonds which bear a higher rate of interest. Mention has already been made of the authorized issue of $100,000 of bonds by North Dakota for the extension of the capitol and for the executive mansion. In New York ['03 p.1451] a constitutional amendment is to be submitted to popular vote in November 1905, allowing the interest and principal of the state debt to be paid out of any money available in the state treasury. When this is possible, there need be imposed no direct annual tax for this purpose. Another amendment to the Constitution of New York state ['03 p.1454] is to be submitted to the Legislature in 1905, providing that when a state debt is created, a direct annual tax shall be levied to pay the annual interest charge, and the principal within 50 years. At present the principal must be paid within. 18 years.

In Massachusetts Governor Bates said in his message [8 Ja '03 p.48-50], “. . . that there are some evils [in the sinking fund system] is apparent today when our bonded indebtedness . . . is over $84,000,000, and the sinking funds are piled up in our vaults to the extent of nearly $19,000,000 and are rapidly increasing... I am informed that computations most carefully made indicate that there would be an immense saving under the serial payment plan." Accordingly the Legislature passed an act ['03 ch.226] authorizing the state treasurer with the approval of the governor and council to issue bonds or scrip on the serial payment plan, instead of establishing sinking funds for said bonds or scrip. This act does not apply to bonds issued by the state for metropolitan districts.

TAXATION1

FRANK A. FETTER PH.D. PROFESSOR OF POLITICAL ECONOMY AND FINANCE, CORNELL UNIVERSITY

As nearly three times as many legislative sessions were held in 1903 as in 1902, the volume of legislation on taxation was much larger. Some 260 legislative enactments or judicial decisions are noted in the Comparative Summary and Index of Legislation 1903 on this subject. Many of these are of minor importance, referring to such administrative questions as changes of date for the making of assessments, but about a hundred of them reflect some policy, and despite some contradictory evidence, most of these indicate some trend. The state of sentiment likewise is shown by the Digest of Governors Messages, and the two groups of evidence will be considered together in reference to each subject in the following review.

General property tax

Evidences of failure. Evidences of the failure of the general property tax appear in the statements of several of the governors. It is said [Wy.] that the valuations have increased in a gratifying manner, but that the whole law of taxation needs revision; [N. M.] that the assessment is increasing, but it is still far too low; [Tenn.] that the assessment is somewhat improved, but that a very large amount escapes taxation. Less favorable still are other opinions: [Tex.] that the amount of property escaping taxation increases yearly; [Neb.] that property is assessed at scarcely 10% of its value; [Or.] that the aggregate values have decreased in most counties and an entirely new assessment law is needed; [Cal.] that the assessed personal property is less in value in 1902 than in 1872. Other governors [Mon., N. C.] complain of the gross inequality of assessments; [Or.] of the escape of real estate through the failure to record deeds of public lands sold by the state. The governor of Tennessee, despite his feeling of the need of improved tax laws, protests against the practice of biennially enacting new revenue and assessment laws, a course which, 'See also Governors Messages and Summary of Legislation, 800.

he says, results in confusion, uncertainty, litigation and delay in the collection of taxes.

Amid these adverse signs must be noted one slight evidence of a return to the general property tax in the abandonment by Wisconsin ['03 ch.315] of the gross earnings tax on railroads for the ad valorem tax at the average rate for state and local purposes. This, however, is the improved type of general property tax, virtually a corporation tax with central assessment.

Improvement of general property tax. Only one recommendation [R. I.] is made for the appointment of a joint special commission to devise improved tax legislation, and in but one state was a special tax commission authorized. In Utah ['03 p.207] the governor was instructed to appoint three persons who are to cooperate with the attorney general in drafting a bill for a uniform system of taxation and to report to the Legislature in 1905.

The improvement of the general property tax is attempted, however, in a number of ways. The most naïve and ineffective measure for the improvement of tax laws is a resolution requesting the assessors to make stricter assessments. The Legislature of Utah, after lamenting the "well known fact that a large proportion of the taxable property of the state is inadequately assessed, or not placed upon the assessment rolls at all, the statement being made that in one county not 10% of certain classes of property is assessed," and after declaring that this is "inimical to the best interests of the state, subversive to good government, prejudicial to public morals, and a gross injustice to all honest taxpayers," urges the assessors to greater vigilance and the county commissioners to the use of their best endeavors to secure a true and impartial assessment. The governor of Wyoming put faith in an equally effective measure, urging stricter questioning of the taxpayer under oath in order to get an honest assessment. The governor of Louisiana urged an amendment to make possible a stricter taxation of credits and obligations assigned to third parties. Colorado ['03 ch.157] sought by stricter measures to enforce the assessment of merchandise brought into a county for temporary lodgment and sale. Nevada ['03 ch.44]