state purposes in half.1 A better test of the law's results, however, will be found in the relative increases in the valuation of different classes of property. These increases are presented in the following table, together with the per cent distribution of property in 1913 and 1914.2

TABLE III

PROPERTY VALUATIONS BY SPECIFIED CLASSES, 1914,

PER CENT INCREASES OVER VALUATIONS OF 1913, AND PER CENT DISTRIBUTION OF PROPERTY, 1913 AND 1914

The most significant fact brought out by the table is that the principal increases have occurred in those classes of property whose valuation has heretofore been determined almost exclusively by the owner's return,

1 This was one of three laws enacted at the extraordinary session of the legislature which convened and adjourned July 20, 1914. The original and revised levies for the several funds are appended:

For furnishing me these figures in advance of publication, I am indebted to Hon.

A. B. Peckinpaugh, vice-chairman of the tax commission.

the property of miscellaneous corporations and of individuals. Moreover, the improvement due to centralized assessment is shown to be most marked in the case of intangible property, the valuation of which has been increased by a round half billion dollars. For the first time in many years the share of the property tax falling upon intangible property has been materially increased.1 What limited tax rates alone could not do has been accomplished with the assistance of centralized assessment. The assessment of intangible property is still, however, much less efficient than that of other forms of property. Less than three weeks before taxlisting day in 1914, state and national banks alone reported demand deposits of $416,409,000, and time deposits of $375,042,000, while the amount of moneys listed for taxation aggregated $148,600,000 and the total valuation of intangible property was $808,000,000. In view of these figures and of those cited above, it can hardly be contended that more than half the taxable intangible property in the state has been reached.

2

Yet even this limited success of the Warnes law in enforcing the constitutional mandate that all property shall be taxed at a uniform rate is to be welcomed, tho less perhaps because it has, at least for the time, somewhat reduced inequalities among the owners of intangible property, than for other reasons. In the first place, the possibility of great improvement in assessment work has been demonstrated. This is an important step toward removing the fear of a declining revenue, which has so often stood in the way of effective tax reform in Ohio, as elsewhere. In the second place,

1 Not since 1870 has intangible property formed so large a proportion of all property on the grand duplicate.

2 Cf. p. 500.

• It will be recalled that an ineffective system of administration stood in the way of the success of the Iowa five mills tax on intangible property.

Local Taxation, vol. vi, pp. 407-418.

See Brindley, State and

the results of the first year's operation of the new law emphasize anew the difficulty of securing even a reasonably complete assessment of intangible property so long as we attempt to tax it uniformly with tangible property, at a rate which - even tho limited — still takes one-fourth or more of the income from investments. For it is not to be expected that the assessments of subsequent years will show much improvement over those of 1914. The new broom has probably swept about as clean as it will sweep.

It is reported by brokers that the unexpected resourcefulness of the tax commission in procuring lists of stockholders in foreign corporations has already resulted in a considerable shifting of investments to those which are not taxable in Ohio. There are many such securities: the stock of all Ohio corporations, the stock of foreign corporations two-thirds of whose property is taxed within the state, and bonds of Ohio municipalities issued prior to 1913. For the investor who desires to avoid stocks and yet gain a higher rate of income than municipal bonds ordinarily yield, and who does not scruple to conceal his investments, there are ample opportunities in fields of which there is no public record, such as coupon bonds and promissory notes. Nor is it ordinarily difficult to evade taxation by investing in foreign mortgages, or through non-resident investment agents, or by a number of less common devices. In sum, the door is by no means closed to the tax-dodger, nor is the tax rate in Ohio low enough (if indeed any rate is low enough) to remove the inducement to evasion. This is merely to say that the assessment of intangible property under the existing system remains

1 In practice, this means that the stock of most foreign corporations doing business in the state is deemed to be non-taxable. See Report of the Tax Commission, 1911, p. 6. But the power of the tax commission is now ample to determine the question of taxability, and to place taxable stocks on the list.

and must remain largely haphazard. Concealment and evasion have been made less easy for some classes of intangible property, but they are not difficult in cases where "information at the source " is not an available method.1

It is to be remembered that under the lax assessment methods previously obtaining, the tax on intangible property was at most only partially and very irregularly shifted. More rigorous assessment will, therefore, by reducing the net yield of investments, lead to the withdrawal of investors from those fields in which the tax can be most unfailingly assessed, as has been noticed in the case of foreign corporation stocks. The reduction in the supply of capital in these fields will then tend to increase the rate of return to capital which still braves the tax-gatherer. To be sure, the extent of this influence depends upon the scope of the market for the taxed investments. It will be inconsiderable in the case of the stocks of large and well-known foreign corporations, but it will probably be quite important in the case of mortgage loans upon Ohio real estate. It is true that a considerable portion of such loans is made by banking institutions not directly taxable on their mortgages, but it is probable that the rate of interest paid on deposits is influenced somewhat by the fact that deposits are taxable at the full property rate as moneys or credits.2 The loan rate is of course directly related to the rate of interest paid on deposits. Loans by nonresidents probably have little influence in depressing the rate of interest, as might on first view be expected, both

1 This method is specifically prohibited in the case of bank deposits generally (tho not in specific cases) by an amendment which the banking interests succeeded in attaching to the Warnes bill. (103 Ohio Laws, 786, Section 52.) A similar section in the tax commission act of 1911 was vetoed by Governor Harmon. (102 Ohio Laws, 224, Section 162.)

Such is the view of some of the more thoughtful and well-informed of Ohio bankers. See note by the writer in American Economic Review, December, 1914, pp. 965, 966.

because of their limited amount and because such loans are in most instances taxable in the state of residence.

The ultimate influence of the act upon the popular attitude on the taxation of intangible property is not altogether clear. On the one hand, as interest rates on mortgage loans rise in response to more certain assessment, the argument from the purse will tend to convert into tax reformers many of those who in the past have been the staunchest defenders of the uniform rule.1 And if, as seems likely, the proportion (if not the actual amount) of intangible property on the duplicate declines in future, attention will again be directed sharply to the intrinsic unsatisfactoriness of the general property tax. On the other hand, it is not unthinkable that these forces may only result in renewed antagonism to the "money kings " and in a determination on the part of the rural element in the legislature to force intangible property to contribute taxes in proportion to its value. If so, the plan promulgated by the tax commission in 1913 may be revived, or yet more drastic legislation be enacted, before the dawn of a brighter day for tax reform in Ohio. But whatever the popular verdict on the uniform rule, it cannot be gainsaid that the principle of centralized assessment has amply justified itself.

IV

By way of summary, the two main conclusions which flow from Ohio's recent experience in taxation may now be restated: first, centralization is an important, if not an indispensable, aid to effective assessment, particcularly of intangible property, whatever the policy

That the shifting of the tax on mortgages is understood by many farmers was shown in the constitutional convention of 1912 by the proposals introduced by rural members to exempt mortgages from taxation, while continuing the tax on other forms of intangible property.

By reason of the county system of representation, the rural population has a disproportionate voice in the legislature.