$10,000 per mile. A State crushing plant would probably reduce this cost in the long run.

The New Jersey Plan.-The New Jersey system is one of the most highly developed of all the methods adopted. A State commissioner of public roads, appointed by the Governor, enforces the laws. Improved roads are constructed jointly either by the State and the counties or by the State and the townships. Under the county aid act the State pays one-third, the county the remainder; under the township aid law, the abutting property holders 10%, the State 23/3%, and the township 662/3%. In both cases the application of the owners of two-thirds of the lands abutting is necessary, as is also the consent of the board of freeholders in the county, or the township committee in the township, respectively. Privately owned turnpikes or toll-roads may be purchased upon the application of the owners of two-thirds of the abutting property. The State in this case pays a full third, the property holders ten per cent and the county the remainder. All new roads built under State subsidy acts are constructed under the direction of the State commissioner of roads, and are maintained and repaired by the counties and townships respectively.

Connecticut.-In Connecticut also a State commissioner of highways, appointed by the Governor, administers the law. Improved roads are constructed jointly by the State and the towns, the town paying one-third the cost and the State two-thirds. If the town is small, having a property assessment list of less than one million dollars, the State pays three-fourths. The State subsidy is divided, while it lasts, proportionately among the towns making application by a certain date each year. Not more than $4,500 may be expended on one town in any one year under the Act. The work of construction is carried on jointly by the town selectmen and the State highway commissioner. Maintenance and repairs are town affairs, but if the town neglects them, the highway commissioner may perform necessary duties and charge to the town.

Constitutional Regulation of Finances.-All of the State constitutions have devoted much space to the limiting of the financial powers of the legislature. They set forth in much detail a long list of powers over which the legislatures shall exercise only the most restricted powers. The more important of these are:

-Appropriations to charitable institutions; these must not be made for any denominational or sectarian purpose, and in some of the States they require a two-thirds vote of each House for their approval.

Each tax must be uniform; there must be no exemptions except the property actually used for religious and charitable purposes. Ordinary corporations may not have their property exempted from taxation, nor may corporation debts to the State be cancelled by any official. A surrender of the power to tax corporations is forbidden. But a few of the States allow special exemptions by local

communities for manufacturing corporations for a limited time in order to induce them to settle in such localities.

An indebtedness

State debts are limited to certain purposes. which is contracted to cover a casual deficit in revenue must not exceed a certain amount fixed in the State constitution. Larger amounts may be contracted to suppress insurrection or repel invasion. Few of the States have any large debts; some have none whatever. Massachusetts has $117,000,000; New York, $108,000,000; Pennsylvania has none. The larger State obligations usually represent productive enterprises such as canals, roads, etc., which are in the best sense dividend paying, and are not burdens upon future generations. Most of the limits on State debts were imposed by the constitutions adopted since the Civil War. They have had a marked effect in reducing State obligations, until recent years when the demand for expenditures on public works has again increased materially the debt of most of the States.

Local debts; the debts of cities or communities, townships, school districts, etc., must not exceed a certain proportion of the value of their taxable property. This varies from 5% to 7%. But they may exceed this amount in borrowing funds for the purchase and operation of public utilities, such as gas, water works, etc. Some States even provide a further limit that any increase of debt beyond 2% of the value of taxable property must be approved by the voters at an election. All the States provide a certain time ranging from 25 to 30 years within which such local debts must be extinguished and require the localities at the time of contracting the debt to levy a tax providing for interest and principal of the loan.

The money borrowed by the State must be used for the purpose specified in the loan, and a sinking fund must be provided for each loan. The State's credit may not be given or pledged to any person or corporation, nor may the State subscribe to stock of a corporation.

State Taxation.-The new services which the State has undertaken mean much greater expense. This has induced many of the legislatures not to rely only upon the older forms of taxation but to seek new revenues, arranging these in such a way as to burden the masses of the people as little as possible. Among the older, more usual sources of State revenue are-

(a) The general property tax which covers both real and personal property and yields the largest single item of revenue in the State system. The personal property tax has also been tried in most of the commonwealths. In all it is a complete failure, leading to concealment of property or false returns, and to serious injustice. It has been found so easy to escape this form of taxation that the holders of bonds, stocks, securities, etc., seldom make any declaration of their ownership, and when asked to do so usually make a false return. It is the failure of taxes on personalty that has led to the adoption of the other forms of levy described below.

(b) Liquor licenses. These are very heavy in many of the States, and are productive of a goodly share of the revenue. In some instances they mount as high as $1,500 for a retail license. As a result of this and of other high expenses in the business, most of the saloons are now in the hands of large brewing companies.

(c) Mercantile licenses. These yield but little revenue and are unpopular with the business community, because of the high cost of collection as compared with the amounts secured.

The newer forms of revenue which are now finding favor are: (d) The inheritance tax, which has lately been adopted by a number of States; some have levied as high as fifteen per cent upon collateral inheritances, that is, property left to heirs who are not in the direct line of family descent; while still others, notably in Wisconsin and California, have adopted a progressive scale of rates, higher upon the larger inheritances.

(e) The corporation tax. This in many States yields such a large revenue as to make other heavy forms of taxation unnecessary. It is extremely popular because it supposedly falls upon capital, but it is ultimately paid in part at least by the consumers in the form of higher prices. A vigorous and successful attempt has been made in some States to force corporations to pay, not a special corporation tax, but their full share of the general property tax upon the real estate and personalty that they own.

(f) The Income Tax. Over twenty attempts have been made to enforce a State income tax. With the exception of Virginia and Wisconsin, however, these have all ended in failure, because of the small amount of revenue yielded, the serious administrative difficulties involved and the wholesale evasion and frauds which the levy has encouraged. Until recently the State income tax has been regarded as a most unhappy experiment, but, because of the failure of the personal property tax and the general evasion which is practiced to escape its payment, the mind of the legislator is now turning once more toward a levy on incomes, which it is admitted, if it could be made practical, would be the most equitable of all the taxes. In Virginia $100,000 annually is raised by this means, but the most notable, substantial success has been scored by Wisconsin. A valuable description of the State's experience was presented by Governor Francis E. McGovern at the Governors' Conference of 1912. It shows some remarkable conditions in the evasion of personal property levies in that State which are probably duplicated in many other commonwealths where the personal property tax has been tried. The Governor shows that an investigation of 473 estates by the Wisconsin Tax Commission, "revealed taxable securities, such as stocks, bonds, etc., worth $2,266,105, which had been assessed the year before at only $74,995,

1 Prof. E. R. A. Seligman who has written an authoritative work on The Income Tax, favors a National rather than a State tax for the reasons given above.

or less than 32% of their true value." "An investigation recently conducted in the city of Milwaukee showed that 200 persons had $12,000,000 invested in assessable mortgages, stocks and bonds in other States and thus cut them entirely off the tax roll." The Governor also set forth startling inequalities in the assessment of personal property in different counties of the State, producing a vicious system of discrimination which worked largely against the poor in favor of the richer classes. It was this highly unjust, inequitable system of personal property levies which led to the adoption of the Wisconsin income tax. The basis of this law is of course net income. This applies to both individuals and corporations and allows a new corporation, which is getting on its feet and producing at first no dividends whatever, to escape the income levy until it has a real profit on which to pay. The exemptions are: $800 for a single individual, $1,200 for man and wife, and $200 additional for each child under 18 years of age which is dependent upon the parents for support. The rate of taxation is graduated, being 1% for the first $1,000 of taxable income and amounting to 6% for the highest incomes. The proceeds of the tax are distributed by the State as follows: 70% to the city or village or town; 20% to the county and 10% to the State. The funds, therefore, revert directly to the locality in which they were collected, and are used for schools, roads, health and local administration. The assessment of incomes is under the direction of the central State tax commission of three members appointed by the Governor. The commission appoints local assessors and has power to transfer them from one district to another or remove them from office. assessors require a statement of income from taxpayers and in case of mistake or fraud, a re-assessment is made by the officials, from which an appeal may be taken to a county board appointed by the State tax commission and finally from the decision of this board to the commission itself. Corporations are assessed directly by the commission. It has been found that the tax is paid chiefly by persons who have hitherto escaped taxation very largely, although possessed of the bulk of personal property in the State. As a revenue producer also the tax is notably successful. In the first year, 1911, it raised $3,500,000, of which $1,100,000 was paid by individuals and $2,390,000 by corporations.

The

The rising expenses of State government are due to three main causes. (a) The natural growth in the State's work and its service to the people; better roads, schools, health measures, better protection of property and the necessary regulations of corporate enterprise. All these increase the cost of government. To this increase no reasonable objection can be raised.

(b) The dishonest use of public funds is responsible for a large amount of the increased cost; recent revelations in New York and several other large commonwealths show the incredible extent to which this may go when aided by partisan connivance.

(c) The extravagance of the charity system which has already been briefly outlined and which also depends for its existence largely upon partisan motives.

The State's taxes and appropriations are made in a hit-or-miss fashion. As a rule the legislatures at the beginning of a session appropriate the funds necessary for the various administrative departments and the judicial and legislative expenses, and only at the end do they finally make the heavy appropriations, for socalled charitable purposes. These latter are so large as to exceed the revenues of the State. In two of the commonwealths the legislature regularly appropriates sums from twelve to twenty millions in excess of the State income and leaves to the Governor the work of paring them down.

For these reasons a number of the States,-Oregon, New York, Ohio, Illinois, North Dakota and Wisconsin, have attempted to establish a State budget along the lines proposed for the National Government by President Taft's Commission on Economy and Efficiency. The Oregon Act provides that all departments and institutions receiving State funds shall file every two years with the Secretary of State, an account showing the amount appropriated for the two-year period, the amount required for the next period and estimates of probable receipts or revenues for the coming two years. These accounts are to be summarized by the Secretary and placed at the disposal of the Governor and the legislature. The New York Act establishes a State Board of Estimate in which the Governor and other officials are members, together with the chairman of the chief legislative committees. This board examines all requests for appropriations from departments of the State government and from charitable and other institutions, and makes up a budget as a basis for the action of the legislature. The purpose of all such legislation is to offer some foundation for a modern system of accounting in State affairs, but it is only the first step in this direction. There is urgently needed to-day a complete plan of State, county, city and township accounts which will enable both the official and the voter to ascertain exactly what each service costs. No such plan exists outside of those cities which have active, privately supported municipal research bureaus.

If it were established in our State and local governments, it would be impossible to conceal the present waste, extravagance and fraud, and on the other hand it would become easily possible to direct public attention to the advantages of productive expenditures. A simple, clear method of stating the uses to which the public funds are devoted would enable the people of each commonwealth to grasp the relative importance of each group of expenses, and would immediately lead to sweeping changes in the State appropriations. When State funds are misused the cause is usually some special interest which has fastened itself upon the party Any proposed appropriation is judged by the standard

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