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Washington, D. C., January 15, 1903. To the Ilonorable Members of the Interstate Commerce Commission.

Sirs: I have the honor to submit a report upon “State Taxation of Railways and Other Transportation Agencies,” being Part V of a general report entitled “Railways in the United States in 1902.” This special report includes a tabular classification and textual exhibit of the taxing laws in each State and Territory so far as they pertain to railways, sleeping-car companies, and other agencies of transportation, showing the condition of law as it was in 1890 and the changes that have taken place prior to 1902.

The manner in which this information is presented is fully explained in the text of the report. This text includes also such comments upon State railway taxation and upon the changes in the system of taxation since 1890 as are especially pertinent and worthy of notice.

The compilations and tabulations here presented, as well as certain portions of the text, are the work of Mr. Harold M. Bowman, while a graduate student at the University of Michigan. It seems proper that this formal recognition should be made of his efficiency and ability, for it is upon him that reliance is placed for the accuracy of the information here presented. Respectfully submitted.

HENRY C. ADAMS, Statistician.







The problem of State railroad taxation, whether it be regarded from the point of view of corporate administration or governmental organization, is a fundamental one. The amount of taxes paid by railroads during the fiscal year 1890 was $31,202,469; in 1901 it was $16,707,835. Of more significance than the amount, however, is the confusion and uncertainty which attend the assessment, the levy, and the collection of this tax, a result which follows naturally, though not necessarily, from the large number of taxing jurisdictions to which this species of property is exposed. Not only is a line of railroad which extends through two or more States liable to be taxed by different and possibly unsympathetic methods, but the municipalities and minor civil divisions of each of the several States exercise an independence in administration which occasions yet further confusion and uncertainty. To the railroads this means exposure to double taxation; to the agencies of government it means liability to tax evasion. No one who has familiarized himself with the situation can avoid the conclusion that reform in railroad taxation lies in the direction of the substitution of simplicity for complexity, of an harmonious system of legislation for conflicting laws.

It is no part of this report, however, to discuss methods or principles of reform. Its purpose will be fully realized by presenting a simple, yet comprehensive statement of the facts in the case; and all that is necessary in a note of introduction is to indicate the scope of the investigation, to explain the plan adopted for presenting the details of the various methods by which the States, the municipalities, and the minor civil divisions undertake to tax the property and instruments of transportation by rail, and to call attention to some of the more significant facts and tendencies which a study of the details contained in the body of the report naturally suggests.


It is of some importance that one who desires to make use of this report in the study of State railroad taxation, should familiarize himself at the outset with the method of treatment adopted, for any method which designs to present so confused a situation in a systematic manner must be more or less arbitrary. The information contained in this report is presented in two forms: that of tabular statements and that of textual statements. It was at first attempted to reduce all the information gathered to tabular form, but it was soon discovered that the trend toward uniformity, either in the character of the laws or in the use of the terms employed by the law had not proceeded far enough to render such an attempt feasible. As an illustration of the difficulties encountered, reference may be made to the fact that no established meaning exists for such terms as “corporation tax," "specific tax," "franchise tax," "privilege tax," or, indeed, any other kind of tax that might be named. Such fundamental phrases as "assessment of taxes” or “levy of taxes” can not be interpreted independently of the details of the laws


which make use of them, and even the line which distinguishes real from personal property is rendered dim and uncertain by the laws of the several States which provide for the taxation of railroad property. Under such conditions classification which, from the nature of the case, , must rest upon some fundamental conception of the facts classified and a conception uniform throughout the entire field, is out of the question. There is, consequently, substituted for a tabular statement in this report, a concise description of the laws of each State, arranged, however, upon a uniform plan to the end that any particular fact for any particular State may be easily ascertained.


The tabular statements contained in this report are three in number and are presented under the following titles:

Table I.--Analysis of Railroad Taxation, Showing the Kinds of Taxes Used.
Table II.- Analysis of Statutory Provisions for the Administration of the Taxation of Railroads and of

Allied Transportation Agencies.
Table III.-Analysis of Statutory Provisions for Reports Relative to Taxation Required from Railroads

and Allied Transportation Agencies. The first of the above-mentioned tables is designed to show the nature of the tax employed by each State according to the most simple and generally accepted classification of taxes. It is the classification according to which the carriers make annual report of taxes paid, to the Interstate Commerce Commission. The following is a transcript of the boxing provided for these reports; it is also the boxing followed in Table I, with the exception that this table makes no special reference to Federal taxes or to “ fees and assessments:")

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The idea which underlies the above classification of railroad taxation is adequately indicated by the Instructions issued to the carriers for making report of taxes paid. These Instructions are as follows:

Taxes are classified according to the basis used for computing the amount to be paid. From this point of view, taxes are either ad valorem or specific. Fees and assessments which are not constant from year to year are not taxes within the strict meaning of this classification, and should be returned as “Miscellaneous.”

Under ad valorem taxes should be returned all taxes computed on the basis of value, no matter by whom the appraisement is made, in what manner the appraisement is made, or to what grade of government the payment is made.

Under specific taxes should be included all taxes computed on some arbitrarily selected basis, as the amount of stocks and bonds issued or outstanding; the gross or net earnings or dividends paid; the number of passengers or amount of freight carried; the length of line operated or owned; the rolling stock; or any other selected quality or fact pertinent to the operation of railway property.

No provision is made for “franchise” taxes, because this word has no distinctive meaning as employed in State enactments. Most franchise taxes are taxes on the valuation of the whole or a part of the property, arrived at by some method prescribed in the statute; or they are current payments for a privilege. Such taxes find their place in the classification provided as specific or ad valorem.

Taxes which accrue on property not used in operation are to be returned separately from taxes on property used in operation, in the column provided for that purpose.

This general statement of the kinds of taxes used by the several States in securing contributions from railroads, which appears in Table I, is put forth with some degree of confidence, inasmuch as the table has been tested by the reports which the railroads in all parts of the country have made of taxes actually paid. In most cases where a discrepancy appears between the table, which was prepared after a careful survey of the laws of each of the several States, and the report of a carrier, inquiry was made of the railroad whose report showed this discrepancy, respecting the law under which the taxes in question were paid. This correspondence served as a test of the classification as originally made. It also elicited the fact that in quite a number of cases railroads are paying taxes under the conditions of old charter provisions or of rights acquired under former State constitutions, or for other reasons, which failed to conform to the accepted reading of the law. Exceptions of this sort, however, can not be noted in the table.

The second table contained in this report pertains to the classification of the Statutory Provisions for the Administration of the Taxation of Railroads rather than to the classification of taxes. The items which have been selected for this analysis are:

Basis of valnation.
Method of assessment.
Apportionment of assessed value for purpose of taxation.
Determination of the tax.
Payment of the tax and apportionment of receipts.
Procedure in default of payment.

Significant provisions unclassified, and taxes on sleeping-car and allied companies. The table gives for each State and Territory a concise description of the statutory provisions respecting the several items named, as they were on January 1, 1900. Changes since that date have been slight. Under “Basis of Valuation,” for example, the following is found in the statement for the State of Connecticut: “Taxable valuation for State purposes is the appraised value of capital stock and funded and floating indebtedness less sums paid on real estate not used for railroad purposes which is assessed like other real estate.” Under the head of “Payment of the Tax and Apportionment of Receipts” for the State of Massachusetts, one reads the following: “Taxes are paid to the treasurer of the Commonwealth. Of aggregate receipts a sum apportioned to the amount of stocks held in the State is distributed to the towns, such distribution being in proportion to stocks held by citizens of the towns. The sum remaining is covered into the State treasury. Under the head of “Procedure in Default of Payment," Minnesota shows the following: “Gross-receipts tax constitutes a paramount lien. Penalty for default is an additional five per cent and there is provision for distraint to enforce the tax.” These illustrations indicate that the purpose which the table has in view is to bring together in concise form the systems of railroad taxation followed by the several States. It may be regarded as a partial condensation of the textual statement. The figures which appear refer to the pages of the textual statement where the law itself, or a condensed statement of the law, may be read in detail. The table may be used as an index to information desired, as well as a means of conveying information.

The third table is entitled "Analysis of Statutory Provisions for Reports Relative to Taxation.” It enters into greater detail than either of the other tables. The information sought lends itself easily to classification and the report is by this means enabled to curtail its textual statement in a very marked degree. The scope of this table may be learned by inserting at this point an analysis of the information which it contains. This analysis follows the subheadings which appear in the boxings of the table itself. These are as follows: A. GENERAL Facts RELATING TO REPORTS.

General characterization of tax.
Classification of laws by codes, compiled laws, or dates of acts.
What corporations or persons engaged in transportation are required to act?
By whom must the report be rendered?
To whom must the ort be rendered?
When must the report be rendered and for what period?
How must the report be subscribed?

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