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Economy and responsibility in finance would require every measure carrying any kind of a charge on the funds of the state to be carefully scrutinized by a committee of the ablest men in each house; and, in addition, a detailed report of all carried and proposed public charges should be laid before the legislature at a reasonable time before adjournment. The introduction of no bill involving expenditures should be permitted within a certain period preceding adjournment, and thus the jobbery customary amid the rush and the confusion of the closing hours of the session could be avoided.

In connection with the problem of devising intelligent and economical appropriation measures, Governor Hughes, in his message of January, 1910, made important recommendations with regard to securing estimates and coördinating expenditures. In the first place, he recommended that departments, commissions, persons, and associations desiring appropriations for particular purposes should be required by law to file with the state comptroller their statements in detail, with reasons for their several demands. The comptroller should then be required to tabulate these requests for money from the state treasury, and have them all ready for the legislature at the opening of the session. “This,” says Mr. Hughes, "will insure desirable publicity with respect to the demands upon the state, will greatly facilitate the legislative committees in dealing with questions of appropriations, a work which constantly grows more laborious, and will tend to expedite the business of the session. It will also prepare the way for such further methods of examination, comparison, and criticism as experience may show to be advisable."

In the second place, Mr. Hughes made the following recommendations with regard to systematic appropriations:

In connection with outlays for public buildings, and for improvements and extension of institutional work, including education and charities, it seems to me that the effort should be made to provide a tentative programme for a series of years which, while of course not binding upon succeeding legislatures, would have an important influence in shaping appropriations in accordance with a comprehensive plan, and avoid, so far as possible, ill-timed or indiscreet allowances. The various demands could be classified so as to define (1) those relating to enterprises which are in progress or to which the state is already committed; (2) the further outlays that may be required to bring


existing institutions as units of state work to the highest available degree of efficiency, and such additional facilities as may be needed in connection with the expected increase in population; (3) such new institutions or lines of state activity as present judgment would approve in case there were means sufficient for their establishment.

The amount necessarily required each year for the purposes of the first two classes, and the order of requirement and the surplus of expected income available for the third class, should be ascertained. The necessary amounts should be so distributed that no more than that reasonably required by the proper progress of the work should be charged against the income of any one year. In this way a conspectus may be provided, say for a period of five years, showing the imperative demands upon the treasury of the state and the outlays deemed advisable. Those urging the state to undertake new enterprises would thus see the relative importance of the various requests, and there would be less risk of improvident or inopportune outlays.

I believe that special appropriations for roads, river improvements, and other purposes for the benefit of particular localities should be avoided so far as possible. All improvements of highways should be under the supervision of the Highways Commission, and any amendment of the law needed to give the Commission full jurisdiction should be supplied. Similarly, the law relating to river improvement should be amended, if necessary, so as to remove any question as to the power of the Water Supply Commission to provide for such improvement of waterways (outside of the canal system) and for such supply of ditches, dikes, and the like, as may be necessary, after due ascertainment by the Commission of the extent to which the expense should be borne by the localities benefited and the part, if any, to be charged upon the state. The practice of providing for such improvements by special acts, or by items in appropriation bills which place the entire cost upon the state without regard to the benefit derived by the cities, towns, and counties concerned, is unjustifiable, and should yield to a general method which will permit these matters to be dealt with in justice to all interests.

Another source of weakness in our state finances is the absence of effective supervision over the spending authorities by the legislature. Appropriations for departments and public institutions are made, in large part, on the basis of representations from the officers in charge, and they are quite properly detailed in many instances. Nevertheless, it is impossible for so large a body as the legislature, or even its overworked finance committees, to trace to the very ends the many-branched stream that flows from the public treasury. There is, accordingly, no such intimate touch between the spending authorities and the legislature as exists in England.

An attempt has been made, in Virginia, to remedy this obvious defect, for the constitution of 1902 provides that the general assembly shall at each regular session appoint a standing auditing committee consisting of two senators and three members of the lower house, charged with the duty of examining annually, or oftener, the books and accounts of the first auditor, the treasurer, the secretary, and other officers at the capitol, and reporting the results of the investigation to the governor, to be laid before the legislature. The report is also published in two newspapers of general circulation. This committee may sit during the recess of the general assembly and, besides being furnished expert service, its members are paid for their labors.

Other attempts to secure correct and efficient disbursement of public funds take the form of centralization and systematization in commonwealth and local accounting. For example, in 1909, the Indiana legislature passed an important statute providing for a uniform system of public accounting and for the supervision of all accounts — central and local — by a state examiner appointed by the governor and removed by him at will. The law requires the establishment of a state-wide system of uniform accounts "for every public office and every public account of the same class, of the state, counties, townships, cities, towns, and school corporations and all state institutions. The accounts of every office must show in detail the receipt and expenditure of public funds and the receipt, use, and disposition of public property. Separate accounts of every appropriation or fund of the municipality or institution showing date and manner of payment and the name, address, and vocation of the parties to whom any moneys are paid, and the authority authorizing such payment are required to be kept and verified. Separate accounts for each department, undertaking, and institution, and for every public service industry owned by the municipality, and detailed reports of such public service industry showing the actual condition and cost of service are required.” 2

" 2

1 For the recent Ohio law, see Readings, p. 565.

For a complete statement, see the survey by Mr. J. A. Lapp in the Political Science Review for May, 1909, p. 206.


Sources of Revenues · The state usually derives its revenues from four main sources: (1) public property, such as lands and canals; (2) fees charged for licenses, franchises, charters of incorporation, etc.; (3) fines and penalties imposed for violation of the criminal laws; and (4) taxation.

1. For almost a century the chief source of state revenue was the tax imposed at a certain rate upon all property, real and personal, evaluated by local assessors. This state tax, consisting of a certain number of cents on each dollar of valuation, was added to the local rate, collected by the local authorities, and forwarded to the state treasury. Although several states have abandoned in part, or altogether, this general property tax, it still constitutes the main reliance of a majority of the commonwealths, more than eighty-two per cent of the state and local taxes in 1902 being drawn from this source.

The method of laying and collecting the general property tax is practically the same throughout the United States. The property is valued by a local assessor of the town, township, or county, as the case may be. The assessor is furnished with printed blanks containing long lists of every conceivable kind of property — houses, lands, notes, stocks, bonds, pianos, watches, live stock, etc.; and he secures, usually by personal visits, the total value of each class of property possessed by every resident in his area.

From these lists the total value of the general property in the township or county is obtained, and the amount due the state is readily discovered by applying the rate imposed by the legislature. If the township is the unit of the assessment, there is generally a county board charged with the duty of equalizing the values of property in the different units. When it was found that the county authorities habitually undervalued property in order to reduce the burden imposed by the state, the legislatures resorted to the expedient of creating central boards of equalization to impose uniform values for the same classes of property throughout the state, thus connecting the work of the assessors and making each county pay its proper quota into the treasury of the commonwealth.

Agger, op. cit., p. 123.


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As the country passed from an agricultural into a commercial and manufacturing stage, there arose serious difficulties in connection with this general property tax. When property consisted of tangible things, lands, houses, live stock, etc., or mortgages on real property recorded at the county seat, it was easy for the assessor to secure a fairly complete and accurate list of the property of each resident within his district. However, when joint stock concerns and corporations came into existence, and persons could invest their wealth in the bonds or stocks of some corporation organized in a distant state, or even in a foreign country, and could lock their papers in a strong box, the assessors could no longer keep track of the property within their local units. There were many other reasons, too, why the states were forced to cast about for some other sources of revenue, but they cannot be discussed here. The result has been a revolution in the tax system of many states, New York having gone so far as to abandon altogether the general property tax for state purposes in favor of inheritance, corporation, excise, and other special taxes.

2. The inheritance tax," though long employed in Europe, has found favor in America only within recent years — practically since 1890, but it has now been adopted in some form by more than three-fourths of the states, and its principles are everywhere receiving extended development. The rates are being raised; the progressive rule increasing the rate with the amount of the inheritance is more frequently applied; the exemptions allowed to direct heirs are being lowered; and there is a tendency to apply it equally to real and personal property. In 1907, the highest rate collected was fifteen per cent imposed on collateral heirs in California, Idaho, and North Carolina; the highest amount exempted for direct heirs was $20,000 in Illinois and West Virginia; and the highest amount exempted for collateral heirs was $10,000 in Connecticut, Minnesota, and Utah.

In New York, property of less than $10,000 passing to a father,


1 See Readings, p. 597.

* See Readings, pp. 592 ff., for extracts from state tax reports on this whole subject.

3 See Readings, p. 603.

* S. Huebner, The Inheritance Tax in the American Commonwealths. Quarterly Journal of Economics, Vol. XVIII, 1904, p. 529.

* Inheritance Tax Laws (Govt. Printing Office, 1907), p. 47.

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