*

When taxes are properly levied and governments are efficiently administered, taxation will not be a burden; it will be a benefit. The money invested in government, by taxes paid, ought to be as productive as the capital invested in any business. When this stage of ideal development is reached the taxation question will be settled. Mr. Lawson Purdy, in his introduction to Mr. Ensley's letter, very forcibly and correctly says: "There is no reason why different principles should be advanced to justify payments to the state from those who justify payments in business dealings between man and man. * * Each taxpayer should be called on for the full equivalent of the pecuniary benefits he receives from the state-no more, no less." When every taxpayer receives an equivalent for the tax paid, taxation is not a burden. But more than this will be accomplished by causing taxation systems to conform to the principles laid down by Mr. Ensley. The state will confer benefits of greater value than their cost. Taxpayers will receive more than an equivalent for the taxes they pay. The administration of governments should contribute to the prosperity of the people, as well as their individual industries.

UNEARNED INCREMENTS.

Real estate owners do not always reap as rich a harvest from unearned increments as has been popularly supposed. The assessments they pay for public improvements, in addition to their portion of taxation for local and state public purposes, are usually lost sight of by those who compare the value of a piece of real estate-say twenty years ago— and now. To ascertain the value of an unearned increment, the value of the property at a given time must be taken as a basis for calculation. To this value there must be added all sums paid as special assessments, general taxes and interest upon the full original value. These sums must be added and computed annually. The difference between the amount so obtained and present value may be taken to represent the unearned increment. When the value of real estate is dealt with in this way there will be many surprises to see that unearned increment has entirely disappeared. This result may cause a different attitude on the part of many toward real estate owners when questions of public improvements are being considered.

A CORRECT COST STATEMENT.

F. E. Saward, honorary special agent, department of mines and metallurgy of the United States commission to the Paris Exposition, published in the New York Herald for September 2, 1900, a carefully studied article on the ability of the United States to supply the world with coal. In showing the cost of coal at the mines in several countries and the cost of transportation to the larger consuming markets, he gives a compilation of the cost of operating a seven thousand ton steamer to carry coal from the United States to Gibraltar. Calculating the length of the voyage and time for unloading at fifteen days, he states the costs of operation as follows:

We call attention to this statement because it contains all the elements of cost, rightly classing "interest on cost," the amount invested in the steamer, as a part of cost, thus, separating the wages of capital

which some erroneously class as profit-from profit. This is in exact harmony with our contention that interest on the entire investment is a part of cost and must be provided for in statements of cost before a profit can be shown. Many business failures are caused by managers not knowing how to calculate cost. STABILITY OF VALUE FOR CORPORATION SECURITIES.

Two factors are of prime importance in giving stability of value to corporation securities. First, the value of the property must be so maintained that it will sell at any time for the full amount of the investment made in it. This requires a fixed per cent on investment, to be charged annually as an item of cost, and the amount to be set apart as an "investment insurance account," to be expended in betterments and minor extensions. By adhering to this policy the value of the investment may not only be maintained at par with the amount of the actual investment, but an ever-increasing earning capacity may be acquired without a corresponding increase in capitalized investment.

Second-The net earnings of any business will show fluctuations in a comparison of years due to causes which no human foresight can discount or control. To a permanent value of the property must be added certainty of income, to give stability to corporation securities. Investors must be satisfied that their prin

cipal is safe and they must know that a dividend, though small, will certainly be paid annually upon the amount they have invested. These two factors made certain will give stability of value to the securities of any corporation.

The influences that work against the conservative management indicated have two sources. But few corporation managers, especially those managing small corporations, really know how to compute the costs of the business they are managing. They deceive themselves and their stockholders by taking into account only a part of the true costs. Through an understatement of costs they overstate their profits. This leads to one of two results, either of which in the long run will bring a disaster to the business. It tends to an undue reduction of prices, induced by the pressure of competition or public demand. It also tends to an exhaustion of the resources of the corporation through the withdrawal of capital by the payment of excessive dividends. If managers and stockholders are selfdeceived as to the true profits of their business, caused by an unintelligent accounting of costs, they are very likely to suffer from both causes of exhaustion, a yielding in the price secured and drawing out more money via dividends than the true conditions of the business will warrant.

When a business is managed speculatively the course above indicated will be pursued. All costs of ownership and operation, such as interest on investment, in