the assessments charged against miscellaneous business corporations increased $295,000,000,1 those in respect of the tangible personalty of individuals increased $170,000,000, and those in respect of individually-owned intangible property increased $100,000,000.

The change in distribution of the tax burden among the owners of the various classes of property is, however, a more significant test of the results of the Smith law than the increase in valuations. Table II exhibits these changes.



[blocks in formation]

The significant changes in the immediate incidence of the tax burden which are brought out by the table are the increase in the share of taxes falling upon public utilities from 9.1 per cent of the total in 1910 to 15.7 per cent in 1913, and the decline in the share borne by individuals, whether in respect of the ownership of tangible or of intangible property. The increase in the

1 The valuation of miscellaneous corporations appears to be very low, when compared with their returns to the commissioner of internal revenue. The figures are of course not strictly comparable; but miscellaneous corporations having their principal place of business in Ohio reported in 1914 a stock capitalization of $1,679,000,000 with taxable income of $196,500,000, which is 11.7 per cent on the capital. The property of miscellaneous corporations in Ohio was valued in 1913 at $455,800,000.

share of taxes falling upon public utilities is to be attributed mainly to the activity of the tax commission in correcting the gross under-assessment which had prevailed prior to 1910. By contrast with the increase in the share borne by public utilities, the decrease in the share of taxes falling upon miscellaneous corporations and individuals from 21 to 16.2 per cent emphasizes the failure of self-assessment even under limited tax rates. The cherished hope that limited rates would avail to place a juster share of the burdens of government upon the owners of intangible property has been sorely disappointed, for such property has of recent years formed a smaller proportion of all property on the duplicate than ever before. The amount of taxes assessed to individuals in respect of their ownership of intangible property, computed at the average tax rate prevailing in the state, was 36 per cent less in 1912, and 27 per cent less in 1913, than in 1910, altho within the period the total amount of taxes levied upon property was increasing.

We may next inquire whether the relative decline in the valuation of the personalty of individuals and miscellaneous corporations can be viewed with satisfaction, as representing merely an equalization of assessments, or whether there continues to be under-assessment and evasion in the assessment of these classes of property.

It is, of course, not possible to estimate the amount of taxable personalty owned by individuals. The total amount of certain classes of intangible property may indeed be approximated, but its ownership is an unsolved riddle. Nevertheless, certain comparisons may be instituted which will throw some light on the relative efficiency of the assessment of different sorts of property.

The entire amount of intangible property listed for taxation by individuals and miscellaneous corporations

in 1912 was $306,756,000, of which $119,202,000 represented" moneys on hand or on deposit subject to order." Ten days after tax-listing day, incorporated banks in Ohio reported individual demand deposits aggregating $357,735,000. At the same date these banks reported time deposits of $331,321,000, and during the year building and loan associations reported deposits of $57,468,000. On June 14, 1912, private banks reported to the comptroller demand deposits of $11,168,000, and other deposits of $13,088,000. Demand deposits therefore aggregated $368,903,000; time deposits, $401,877,000. Time deposits are, under a ruling of the attorney general, taxable as moneys if they are actually paid on demand; otherwise they are taxable as credits and may be offset by debts. Probably most of them are in strictness taxable as moneys. If so, the true amount of moneys approximated $770,000,000. A considerable portion of these deposits must have stood to the credit of public utility companies; but since it is improbable that such concerns carry any large amount of time deposits, it seems fair to conclude that their deposits could at most account for the demand deposits in excess of the amount of moneys returned. The amount of bank deposits in Ohio which were legally taxable as moneys to individuals and miscellaneous corporations must therefore have been nearly $500,000,000.

The amount of other items of intangible property credits and investments - cannot be so readily estimated. Mortgages may be omitted from the estimate, because they are so largely held by banking institutions and insurance companies, and are thus taxed indirectly

1 The year 1912 is chosen for this comparison because the state department of banking issued no call in April, 1913. The returns of all classes of banks to the Comptroller of the Currency as of June 4, 1913, show deposits aggregating $821,331,000. The amount of moneys returned by individuals and miscellaneous corporations as of April 13, 1913, was $112,695,000, and the total amount of intangible property so returned was $301,537,000.

if at all. No doubt a considerable portion is privately owned and hence directly taxable; but the amount cannot be estimated. Neither is it possible to estimate the volume of credits arising to merchants and professional men of all classes, nor in any case, the extent to which credits are offset by bona fide debts. One clue to the amount of credits and investments may indeed be had: the statistics of corporate indebtedness compiled by the commissioner of internal revenue. For 1912, this amounted to $1,320,000,000. Some of this indebtedness is of course owned outside the state, and hence not taxable in Ohio; but in view of the great wealth of the state, it seems probable that this amount is more than offset by the indebtedness of foreign corporations owing to residents of Ohio. Some part of the debt is, again, not worth par. But when every allowance is made, it is evident that here is a vast mass of credits and investments legally taxable in Ohio, but actually untaxed.

This attempt to estimate the amount of intangible property in Ohio takes no account of taxable stocks of foreign corporations, nor mortgages, nor credits other than those owing by banking and other corporations in Ohio, not all of which can be reasonably supposed to have been offset by debts. In view of these omissions and of the large volume of bank deposits and corporate indebtedness, it seems unlikely that more than a fifth or a sixth of the amount of intangible property legally taxable to individuals and miscellaneous corporations

1 Banks are taxed on a valuation of their stock, in the name of the shareholders; building and loan associations are exempt from taxation on their mortgages, and domestic insurance companies commonly invest their legal reserve in mortgages, and may then deduct their reserve from their mortgages for purposes of taxation. General Code of Ohio, Sections 5404, 5411, 5412, 9357 and 9675.

Report of the Commissioner of Internal Revenue, 1912, pp. 81-84.

The shares of foreign corporations two-thirds of whose property is taxed in the state are, under certain further conditions, exempt from taxation in Ohio. The shares of all domestic corporations are exempt. General Code, Section 192.

was actually so taxed. The inadequacy of the assessment of intangible property is all the more apparent when contrasted with the assessment of real estate and the property of public utilities, both of which seem to be on the tax duplicate at substantially their true value in money. For example, the average value per acre of farm realty fixed at the quadrennial appraisal of 1910-11 was $67.86, which compares with $68.62, the value found by the census in 1910.2

The experience of Ohio has thus demonstrated the possibility of vastly improving the assessment, even of the more easily concealed sorts of property, under a listing system administered by locally elected assessors, supplemented by moderately limited tax rates.


it has equally demonstrated the futility of relying on that system to secure even reasonably complete returns of intangible property while the tax rate remains in the neighborhood of one or one and a half per cent. Moreover, in view of the constant expansion of public expenditure, under the stress of growing population and of even more rapidly growing demands upon the public service, and in view also of the enforced dependence of the local governments of the state upon a uniform tax on general property as their chief source of revenue, there can be little hope of any material reduction in the tax rate.

Already the heavy burden of debt charges and the increasing demands upon government threaten to break down the limitations imposed by the Smith law. A list has been compiled of thirty-six municipalities,

1 In its report for 1911 (p. 6) the tax commission holds that the amount of taxable intangible property in the state is commonly over-estimated. The only evidence offered in support of this conclusion is a reference to the extent of the exemption of securities and an assertion that inventories of estates under probate indicate that a majority of residents invest in non-taxable securities or in tangible property.

* Report of Auditor of State, 1911, p. 593; Census, 1910, vol. vii, p. 307.

« ForrigeFortsett »