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chusetts income tax law, devised as I said, as a remedy for certain people only, and not as a general remedy, has met with the approval of the people. I do not recall, in all my six years' experience in the administration of the law, a single individual who has been willing to say definitely that he would like to go back to the general property tax methods, in spite of the fact that the well-to-do are paying bigger taxes than they ever paid before.

The law has been productive. From the best figures we can make, it seems a fair statement that intangible property has contributed more than double what it did under the old general property tax system, so that I should like to reiterate, with the utmost emphasis, the suggestion by Mr. Ivins that any state contemplating an income tax law, be careful to get an accurate, good law, if it means a wait of a year to do it, and also one with fair and adequate rates, so that the rates won't be figured with difficulty and confuse the investor with the feeling that he is never quite sure what the rate is going to be. Keep the rates level, keep the law intact and stand pat. Thank you.

CHAIRMAN BULLOCK: Before recognizing any further speakers, I want to announce that a resolution has been handed in at the desk, which I suppose is still open for consideration by the committee on resolutions. I will read it and then pass it to the chairman of the committee.

(Reading) Resolved, That the secretary invite the important real estate organizations of the country to become members of this association.

OSCAR LESER of Maryland: Isn't that rather a question for the tax association?

CHAIRMAN BULLOCK: Well, it has to go to the committee, and they can decide what to do with it.

Now, gentlemen, we have heard from three income tax states. There are more, and I hope we shall hear from them later, but before getting around to that, it seems to me well to hear from about three of the states that have experimented with the classification of property.

The first state, as far as I recall, to try significant experiments along these lines was Pennsylvania. There, for a long while, they have had a four mill tax on intangible personal property. Mr. Lewis, the Auditor General of Pennsylvania, is here, and I wish Mr. Lewis would tell us briefly something about the present status of the Pennsylvania tax on intangible property.

Is Mr. Lewis present?

(No response)

CHAIRMAN BULLOCK: We will pass on to the next state that

-embarked on this branch of classifying intangibles, which is Maryland, and I will ask Judge Leser to tell us something about the tax on intangible property in Maryland.

MR. LESER: Mr. Chairman, I have told about this so often that I am afraid it is a rather stale story. Maryland did follow the example of Pennsylvania. The act was passed in 1896, and passed, I may say, without very much consideration. They had a way of passing bills in Maryland in those days so that even the members of the legislature did not know they had passed them until afterwards.

The particular bill in question was inspired largely by the trustee corporations, which found it impossible to make truthful returns under the general property tax and survive. I made inquiry once from an older officer as to just what his method of dealing with this tax question was in the old days; whether he made any effort or any pretense of reporting in full all of the investments held for beneficiaries. He said their practice was to come to an agreement with the local taxing authority upon an amount which they considered fair, and to pro-rate the tax then paid at the full legal rate among their various estates, and it opened my eyes to a truth which I think everyone of us recognize; that the greatest amount of taxdodging is not done by taxpayers, but that it is done by tax officials. No assessor with a heart and with a desire to continue to live in his own neighborhood would undertake to list and to value at their full value the intangible investments of his own people, knowing that only a very small fraction was being reached, and knowing that it was practical confiscation.

Pennsylvania, I think, started in the 80's-I believe the first act was about 1885. A rate was then imposed of four mills on so-called moneys and credits, but curiously enough in practice it does not apply to moneys. I cannot find that in Pennsylvania they tax bank deposits under that act. There was a rate of five mills in Pennsylvania on bonds of domestic corporations, and collected at the source, the presumption always being that the bond was held by a resident of Pennsylvania unless the corporation affirmatively established the fact to the contrary.

The figures available in Maryland, certainly back twenty-five years ago, are mostly those of Baltimore city, which has a population now of over one-half of that of the whole state, so you get a pretty fair idea of the way this thing works, by taking the figures for that city. In round numbers the amount of intangible property on the books in 1896 was $6,000,000. Under the new law, which reduced the rate to three mills, or thirty cents per hundred dollars, plus the state rate, which at that time was about 11⁄2 mills, amounted to around $60,000,000 in the first year, and it has grown progressively since that time, until for the present year the figures are

about $267,000,000. You can figure for yourselves just how much of an increase there was in the yield. I am rather surprised to hear that in Massachusetts the introduction of the income tax has only resulted in doubling the yield, because if that were so, then it would seem that better results could be obtained under a classified system, although I will admit, as claimed very often by my New England friends, that their administration under the general property tax was better than it was elsewhere. CHAIRMAN BULLOCK: Judge Leser, we intangible property under the old system. stantially nothing, we may have gotten ten to twenty percent of it. MR. LESER: That is the point I am making.

got a large amount of Instead of getting sub

CHAIRMAN BULLOCK: So when we exempted it from taxation, we exempted from two hundred to two hundred and fifty millions of perfectly good property from local taxation. We had to work harder to double it; to increase it three or four times, because you were getting nothing.

MR. LESER: That is the point I was trying to make; complimenting you to that extent. I have never been able to make up my mind whether at the present time it would be a wise thing to recommend the introduction of a state income tax for our state. Conditions may arise when that would be the wise thing to do, but the law is working fairly satisfactorily. I think the outstanding virtue of the income tax is this, that it compels an annual listing. We don't have that under our classified system. The virtue in the annual listing is that once you find a man has an income in the taxable class, you proceed on the presumption that he continues to be a taxable subject each year. There is not the same sort of an inference if a man should happen in a particular year to show up a small amount of taxable intangible property, so I think that feature, in addition to the fact that under the improved and the only effective state income tax systems, the administration is centralized, is largely responsible for the popularity of the income tax.

We had an income tax in Maryland nearly one hundred years ago. They had one in Virginia. They had one in Massachusetts, as you have heard, and I believe there are a dozen or more states that had income taxes years ago.

Mr. Kennan wrote a book on that subject about ten years ago— a most interesting treatise-giving the history of the state income tax movement in the Unied States from the beginning. All of the old income tax systems were, however, ineffective, for two reasons, as I view it; one was that they did not provide for a centralized administration, and the other was that the tax was imposed on top of the general property tax. Wisconsin was the first state in modern times to get away from that, introducing at the same time

another very important improvement, which was that of applying the merit system and the indefinite tenure for tax officials.

CHAIRMAN BULLOCK: The gentleman has about a minute more. MR. LESER: I shall take my one minute more to tell you that we have at last come into the Wisconsin class, at least in this feature. We now have, at least in the city of Baltimore, the merit system in the appointment of assessors. I had the privilege, first of participating in the decision of the question of whether the merit system should apply, and later also in the formulation of questionnaires for testing out the assessors. I think that will cover all I have to say.

A DELEGATE: May I ask Judge Leser a question: I should like to know whether your classification is restricted or whether it is left entirely to the discretion of the legislature?

MR. LESER: Under the constitution existing in 1896, classification was not permissible. That was another thing they did; they passed a law not only that they knew nothing about, by that was absolutely unconstitutional. Not until 1914 was the constitution of Maryland amended to permit the classification of property, and notwithstanding that, the law was absolutely enforced and never questioned, because it was to the advantage of the public in the matter of revenue and to the advantage of the taxpayer in the amount he paid.

CHAIRMAN BULLOCK: You mean the rate he paid, not the amount?

MR. LESER: The rate.

CHAIRMAN BULLOCK: He had a reasonable rate.

H. S. VAN ALSTINE: I should like to ask Judge Leser a question. I should like to know what has been the effect of the Richmond decision upon your income law, or what you anticipate will be the effect?

MR. LESER: You mean upon our classified law?

MR. VAN ALSTINE: Yes, sir.

MR. LESER: No effect at all. Our banks are entirely satisfied, and I doubt whether a half-dozen bankers in the state know there is a Richmond decision.

MR. VAN ALSTINE: Are your banks taxed on the same basis?

MR. LESER: Our banks are taxed at the one per cent rate for local purposes, plus the state rate, and they are allowed deductions in the assessment of their shares in the form of real estate and certain securities, and they are entirely satisfied with that law.

MR. VAN ALSTINE: Isn't there an opening for litigation any time that any bank chooses to do it?

MR. LESER: There may be an opening, but we are not afraid of it. MR. VAN ALSTINE: You are fortunate.

MR. LESER: May I say one word more on that? One good reason we are not afraid of it is this; the courts have decided that bank deposits are not subject to taxation, and if the banks start anything, we have our recourse.

CHAIRMAN BULLOCK: There is one other state which has had considerable experience over a considerable period of years with the classification of property, and that is Minnesota, and I should like to ask President Lord, if he is present, to tell us something about Minnesota's experience.

CHAIRMAN LORD: Mr. Chairman, this conference has heard from me sufficiently. I don't care to have Minnesota take up all of the time of the conference. We have been getting into most everything since it opened. The money and credit tax, and I presume that is the subject to which I am expected to address myself, has worked very well in Minnesota. We tax money and credits at the low rate of three mills on the dollar, and our experience under this law is that instead of reaching a few extremely honest people and the few people who have their property so exposed that it is impossible for them to hide it, we now reach a very large number of the taxpayers. About one out of every four, I think, on the lists return money and credits in some amount, so that at the present time we have about 425 millions of money and credits on the tax rolls, 118,000 people assessed for it, whereas under the old general property tax we had a little over 6,000, and a very small assessment of that kind of property, $5,000,000 or $6,000,000 I think, all told.

The money and credit tax, however, reveals one fact very clearly. It does not come quite up to the presiding officer's idea of what taxpayers will do if they are given a fair chance. We meet with the assessors each year and go over their problems with them, and take especial pains to explain this law and its reasonableness, and try in every way to impress upon them the fact that they should explain the law to taxpayers so that they may understand it fully and be able and willing to list their property-yet I am sure that we do not get on the lists under the three mills tax to exceed from 45 to 50 per cent of the property that might properly be listed under that head.

I realize that this is a rather sad commentary on the honesty of many of our citizens, but I suspect that we are just as honest in Minnesota as people are in other states. It is a regrettable fact, possibly the outgrowth of very poor systems of taxation, that the

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