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road will diminish greatly, just as the value of the realty through which it runs diminishes.

I am perfectly well aware that as Chief Justice Marshall says: “ The power of taxation is the power of destruction”. But this applies to every species of property. If demagogues or ignorant enthusiasts who are misled by demagogues could succeed in destroying wealth, they would of course simply work the ruin of the entire community; and first of all, of the unfortunates for whom they profess to feel an especial interest. But the very existence of unreasoning hostility to wealth should make us all the more careful in seeing that wealth does nothing to justify such hostility. We are the true friends of the men of means, we are the true friends of the lawful corporate interests which do good work for the community, when we insist that the man of means and the great corporation shall pay their full share of taxes and bear their full share of the public burdens. If this is done, then sooner or later will follow public recognition of the fact that it is done; and when there is no legitimate basis for discontent, the American public is sure sooner or later to cease to feel discontent.

The Legislature passed, and there is now before me, a bill for the taxation of franchises by treating them as realty. After watching the progress of this bill I became convinced that the opposition to it was less to its particular features than to the general principle of taxing franchises in any way; in other words, I became convinced that any really effective measure of taxation aimed at franchises would be vigorously opposed. It therefore became of the utmost importance to secure this year some statu

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tory enactment which would distinctly recognize the principle which we seek to establish. Toward the end of the session it became evident that the influences against the taxation of franchises would be content with nothing save the defeat of any measure of substantial relief; and a measure of less than substantial relief I would not accept. Finally it became evident that the Legislature could pass only one bill and that without amendment. I therefore sent in a special message asking for the passage of this bill. It was passed on the last day of the session. It represents a long stride in the right direction, and one from which there must be no retrogression.

Nevertheless, it can be greatly bettered if amended in two important particulars. In its essential principle, that of taxing franchises as realty, it is right and proper. After much study of the question, I am convinced that in this way we can come nearer to doing justice than in any other which has as yet been proposed. It is no new thing to treat franchises as realty. They are so treated in Washburn's work on real property, and by Chancellor Kent; but under the laws of New York as they are now a franchise cannot be taxed except by special statute, and as a matter of fact this extremely valuable species of property is in very many, if not in most cases, untaxed or taxed far below its value in comparison with other kinds of real estate. Local franchises are granted for various purposes and under varying conditions; sometimes by special statute and sometimes by the municipal authorities under a general statute. The value of the franchise of course varies widely in different localities, depending upon a variety of circumstances; but a great part of its value is dependent upon the same causes which operate to make other kinds of real estate more valuable in one locality than in another. The franchise is inseparable from the property of the corporation in the street, whether this property consists of poles, pipes or tracks, above the ground, under the ground or on the ground. The right to lay a railroad track and operate a railroad in a public street cannot be separate or dissociated from the railroad itself. This is equally true of the right to lay water and gas mains and the like. The franchise is a necessary and inevitable element of value and is a proper subject of consideration in determining the taxable value of the real property of the corporation enjoying it. The right to occupy a street should not be classed as an intangible something, distinct from the other property of the company, but should be treated as a necessary incident to the tangible property and one to be considered in measuring the value of the whole property. The Nichols law in Ohio which provides for the taxation of certain kinds of corporations such as telegraph and telephone companies and the like, doing business in the public streets, proceeds along these lines, and has in practice been found to work admirably. It is possible that further experience may enable us to find some better method of taxing franchises, but with our present knowledge it is certainly wisest to tax them as realty.

Under the bill before me the assessment will be levied by the local authorities. This would result in many cases in a dozen different sets of local authorities assessing the value of different parts of the same franchise. It is on every account far better that this assessment should be delegated to the State authorities who will necessarily ascertain all the conditions affecting the franchise and obtain information which will enable them to judge of the value of the franchise in the different localities in which it is exercised. The Board of State Tax Commissioners can collate the facts, compare conditions and determine values as a result of a wider range of observation and experience than can be obtained by local officers, and under them the system of assessment will tend to produce justice, harmony and uniformity. This is the system adopted under the Nichols law and it has worked well in practice.

Furthermore, the bill before me fails to take account of the fact that, in a very unequal and irregular way, many corporations do already pay a certain, though usually an utterly inadequate, sum in taxes. Some pay nothing at all to the local municipalities; but others pay sums varying from one to five per cent. on their gross earnings. The amounts have been determined in the most haphazard manner and bear no proportion whatever to the value of the franchises or to their earning capacity. It is obviously unjust, when introducing a system under which we believe that these franchises will for the first time be fully and fairly taxed according to their respective values, not to allow for this existing and inequitable taxation. Accordingly it should be provided that from the sum assessed by the State authorities as the tax which a corporation must pay because of its local franchise, there shall be deducted the amount already annually paid by it to the locality for such franchise. In no other way is it possible to tax these corporations with uniformity and equity. It is contended by the advocates of the bill that in reaching the value of the franchise under the new law the amount thus paid away in taxes must be allowed for and deducted anyhow; but it is not certain that this would be done, and in any event the principle should be definitely established in the law itself. There can be no possible opposition to putting it in the law by any man who is anxious to tax corporations as other property is taxed, and who believes that this end can be attained by taxing them as realty. Either by taxing them as realty we shall tax them at their full value, or we shall not; if, as we hold, the former is the case, it would be unjust to tax them for more than their full value, and this would happen were not these existing taxes deducted.

If it is claimed that the particular method of assessment by the State Tax Commission may be improper or unjust, provision can be made for the same appeal to the courts that now lies in the case of any assessment on other kinds of property.

Accordingly, I recommend the enactment of a law which shall tax all these franchises as realty, which shall provide for the assessment of the tax by the Board of State Tax Commissioners and which shall further provide that from the tax thus levied for the benefit of each locality there shall be deducted the tax now paid by the corporation in question to the locality. Furthermore, as the time for assessing the largest and wealthiest corporations, those of New York and Buffalo, has passed for this year, and as it will be preferable not to have the small country corporations taxed before the larger corporations of the cities are taxed, I suggest that the operation of the law be deferred until October first, of this year.


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