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CHAIRMAN LORD: The resolution will be referred to the resolutions committee. Since I made the appointment of Mr. Douglas Sutherland as chairman of the committee on resolutions, he has informed me that he is not attending as a delegate, and it will therefore be impossible for him to serve as chairman of the committee; therefore, much to my regret, it has become necessary to make a change and I have decided to appoint Mr. Harry P. Sneed of Louisiana as chairman of that committee.

Now, I want to supplement the request made by the secretary, that the different states canvass the matter at once and select their member of the committee on resolutions and hand the names either to Mr. Sneed or to the secretary, Mr. Holcomb. Either will be all right.

I have selected the following gentlemen to serve as a committee on nominations:

Professor C. J. Bullock, of Harvard University,
Hon. Nils P. Haugen, of Montana and Wisconsin,
Mr. F. N. Whitney, of New York,
Mr. C. P. Link, of Colorado, and

Mr. W. G. Query, of South Carolina. In compliance with the rules, I appoint the following committee on credentials: Mr. W. S. Linton of Michigan, Mr. William Bailey of Utah, Mr. Alexander Holmes of Massachusetts, Mr. J. Enos Ray of Maryland, and Mr. G. C. Hanna of New Mexico. I think those are all of the committees that under the rules we need to appoint.

I have here a resolution handed in by Captain White relating to tax-exempt securities. I think we are all familiar with what that means and it will not be necessary at this time to read it. It will be referred to the committee on resolutions for their consideration. Are there any other resolutions ?

MR. S. S. KALISHER of Pennsylvania : I have a resolution I wish to read that is very short. I might say in presenting this resolution, that while we are concerned with the assessing of properties and ways and means of collecting taxes, the matter of raising money to pay a tax sometimes confronts a taxpayer, and I have in mind the federal act of 1921, which has to do with the carrying forward of losses against the income of the next succeeding year or the second succeeding year, with respect to state income taxes or state franchise taxes based on income.

(Resolution read by Mr. Kalisher)

CHAIRMAN Lord: The resolution will be received and referred under the rules.

It is my pleasure to call to the chair to preside this morning Judge Leser of Maryland. He needs no introduction to most of you, but to those of you who are attending a tax conference for the first time I might say that the Judge is probably the dean among the tax commissioners in this country; one of the ablest men connected with the service in the United States. I have pleasure in introducing Judge Leser of Maryland.

JUDGE Oscar LESER, of Maryland, presiding.

CHAIRMAN LESER: It is rather a dangerous thing to put me over the Lord, or even to make me a substitute for the Lord! I was thinking last night as we were talking about the rivalry between the two cities, that at least even if Minneapolis is the largest city in the state we ought to have some sense of modesty when we consider that St. Paul only is mentioned in the Bible.

Now, it is not part of the function of the presiding officer, much less a temporary presiding officer, to bore the audience. The committee on arrangements has provided that that will be done by other speakers; so we will start the procession by hearing from our good friend Judge Armson of the Minnesota commission on the subject of tax limitations and other current tax problems, with especial reference to Minnesota- Judge Armson.

JUDGE J. G. ARMSON, of the Minnesota tax commission: Mr. Chairman and gentlemen, as preliminary to the paper I am going to read, perhaps I should explain that I am not going to adhere very closely to the subject assigned me. I am going to address myself more particularly to the tax problems and tax burdens of Minnesota. In other words, I am going to present propaganda for consumption of the people of Minnesota. I endeavored at the outset, at least my original purpose was, to analyze tax limitations, in the various western states more particularly, and I began corresponding with tax commissions and tax officials of other states, asking them about their tax limits and debt limits, and they very kindly responded with information, but usually they sent me a copy of their laws governing tax limits and debt limits, but you know life is too short to study the laws of every state and find out what the tax limits are of other states, and frankly, it would not be easy for me today to tell you what our tax limits are in Minnesota. I want to explain that a little later; and I didn't feel that I would try to state the laws of other states and to summarize them in a digest to present to you this morning, so I am going to deal principally with the Minnesota situation. In order to keep reasonably within the twenty-minute limit referred to last evening, you will excuse me if I read rapidly here and there, because I am afraid that unless I do I shall exceed the limit placed upon papers.

TAX LIMITATIONS AND OTHER CURRENT TAX PROBLEMS WITH ESPECIAL REFERENCE TO MINNESOTA

J. G. ARMSON

Member Minnesota Tax Commission No subject has been more frequently discussed at the conference of the national tax association than that of tax limitations. It has been one of the interesting topics at each recurring conference, and while the discussions disclosed a wide difference of opinion as to how far tax limitations should go, as well as to the best method of applying them, the preponderance of sentiment has been decidedly in favor of some limitation on the power of the different governmental units to levy taxes. Unfortunately nothing of a constructive nature has been developed by these discussions, due perhaps in part to the difficulty of finding a common basis of limitations that would fit into the widely divergent governmental units of the different states, and in part to the varying industrial, social, and economic conditions prevailing in the different commonwealths of the nation.

It is not my intention to enter into any extended discussion of the abstract principle of tax limitations. Originally I was opposed to any restriction on the right of a municipality to levy a tax for any public purpose in such amount as it might determine. I felt that tax restrictions had no place in a democracy; that the right to tax was inherent in the people, and that any abridgment of such right savored of autocracy.

Theoretically, perhaps I was right, but unfortunately, theory and practice do not always go hand in hand. In theory, the people levy the taxes and should pay them cheerfully, whether the rates are high or low. But in practice, the levy is made by a comparative few, the majority giving but little heed to the amount until confronted with a demand for payment. Then the majority awake to the painful fact that they slept while the comparative few were active in imposing burdensome levies for some things of doubtful utility or not urgently needed by the community. The protest is loud and emphatic for a short time, but it quickly subsides, and then gentle slumber again overtakes the majority, to be rudely awakened at the end of another year with a demand for still more taxes.

After more than a dozen years' experience in tax administration I am forced to the reluctant conclusion that my original pet theory that the people themselves levy the taxes is a beautiful fiction. They pay the taxes, but the interested few levy them. The fault is not with the few, but with the many, for it is almost the universal experience of tax administrators that the majority of taxpayers give but little attention to the thing that makes taxes necessary-public expenditures. If a majority of the people who pay the cost of governmental activities could be aroused to the importance of a careful scrutiny of the amount and purpose of public expenditures, they would not need a guardian in the form of either constitutional or statutory tax limits.

As expressed by the courts, the power of the legislature, unrestrained by constitutional limitations, is absolute in the imposition and apportionment of taxes. In the state, the power to tax is not a statutory right, but an incident of sovereignty.

Most state constitutions contain some restrictive provision on the power of the legislature over taxation. Nearly all of the state constitutions provide that taxes shall be uniform, either on all property or on the same class of subjects, and that they shall be levied for public purposes only. In a few states there are constitutional limitations on either the rate or amount of taxes that may be imposed in any year.

The constitution of Minnesota contains no restrictive provisions on the amount of taxes that may be raised by the state, except that they shall be levied and collected for public purposes. It also provides that they shall be uniform on the same class of subjects. There is a conditional restriction on the power of the legislature over the taxation of railroads, the constitution providing that any law changing either the method or rate shall be submitted to a vote of the people for ratification before taking effect.

The power to levy taxes is not inherent in a municipality, is delegated to it by the legislature. As expressed by the highest court of our own state in the case of State ex rel. v. City of Ely, 129 Minn. 140, “ The state, by virtue of its sovereignty, has an inherent power to tax, limited only by the restrictions imposed by the constitution, but municipal corporations have no such inherent power, and can tax only in the manner and to the extent authorized by law.”

Most of the states restrict municipal taxation to a maximum number of mills that may be levied, either in total or for specified objects, although a few base the limitation on the percentage of increase over the previous year or some specified year. As a supplement to tax limitations, nearly all of the states impose a limitation on the amount of public indebtedness that may be incurred by a municipality

In Minnesota four different official bodies exercise separate powers in determining the amount of taxes to be raised each year for county and local purposes, the county, the town, the city or village, and the school district. There are certain statutory limitations, however, on the tax levies of the counties and municipalities of the state. Minnesota early in its history conceived it to be in the interest of sound public policy to place a limitation on the

amount of taxes that might be imposed on property by the local subdivisions of the state, the first restrictive laws being enacted in 1860.

From the enactment of our first law on the subject, now more than sixty years ago, and up to about a year ago, limitations on the taxing powers of the subdivisions of the state were based on certain maximum millage levies that might be imposed on property for certain specified purposes. In the earlier years of our history as a state, and up to a comparatively recent time, the principle of a millage limitation on tax levies proved to be a reasonably effective and equitable method of curbing extravagant expenditures of public revenues. The original maximum rates were sufficiently high at that time to permit of the carrying out of needed public improvements and the efficient administration of public affairs.

In later years, however, because of the expanding functions of government, the maximum rates were found to be too restrictive in many of the subdivisions of the state to permit of the carrying out of public improvements demanded by the people, so the policy of expanding the limitations to meet local conditions was inaugurated. That such expansion was necessary in many cases will not be denied. On the other hand, the policy of expansion has been permitted to run riot in many cases, until today there is but slight check on the power of municipalities to levy taxes in such amounts as may be determined locally. Since the original tax limitation law was adopted, more than two hundred amendments have been enacted into law, most of which, either directly or indirectly, permit of higher levies, and in a few cases, entirely remove all restrictions on levies. Today it would be difficult for the proverbial Philadelphia lawyer to accurately define tax limitations in Minnesota because of our conglomeration of limitation laws.

Under the general laws of the state, counties are limited to al maximum rate of five mills for county expenses, and ten mills for roads and bridges.

Township levies are made by the voters at the annual town meeting, subject to a maximum rate of two mills for general town expenses, fifteen mills for roads and bridges, one mill for dragging roads, and five mills for support of the poor. In case of emergency, the town board may levy an additional five mills for roads and bridges.

The maximum village rate is fixed at twenty mills, exclusive of certain special levies. The maximum per capita levy in villages, however, cannot exceed one hundred dollars.

There is no statutory millage limitation on tax levies in cities, but there is a per capita limitation of one hundred dollars. The charters of practically all of the cities, however, limit the amount of taxes that may be levied in any year, as well as the amount of bonded indebtedness,

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