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CHAIRMAN LORD: The conference will be in order.

To expedite matters somewhat, we have thought it advisable to have the resolutions adopted by the committee on resolutions read at this time, but discussion and action will be deferred until two o'clock this afternoon. At two o'clock the resolutions will be brought up for final consideration.

Now, I dislike to make the suggestion that discussion be as brief and as much to the point as possible on these resolutions when they come up for final action this afternoon, but in order to adjourn the conference and association this afternoon, it will be necessary for everyone to be limited in his remarks.

C. J. TOBIN: May I ask a question? Will it be the first order of business at the afternoon session?

CHAIRMAN LORD: The first order of business at the afterncon session will be the consideration of the resolutions, and the final action of the conference on them.

(Resolutions as adopted by the committee on resolutions read) CHAIRMAN LORD: Are there any announcements, local or other


(Announcement of luncheon by the Rotary Club at the Radisson Hotel)

CHAIRMAN LORD: Gentlemen of the conference, we are very fortunate indeed in having with us at this conference an exgovernor of one of our southwestern states, who has given much study and attention to the problems which will be under discussion this morning, especially limitations on expenditures and taxes, and I am going to ask him to preside at the meeting this morning. I have pleasure in introducing to you ex-governor Hagerman of New Mexico.

H. J. HAGERMAN: Gentlemen of the conference: I am sure that the representatives of New Mexico feel very highly honored in having one of their number asked to preside at a session of this conference. New Mexico is one of the youngest and, I think, one of the poorest states in the Union, but from the experience of the

last eight or ten years I think our state has had samples of every kind of economic and tax and revenue problem to solve, and while quantatively they are very small, as compared with the older states, we have done a good deal towards solving them.

We have had a state taxpayers' association actively engaged in these problems for the last eight years, and three years ago the legislature appointed a special revenue commission, which went into all of these matters, and adopted a report which was acted upon by the last legislature. Many of the same conditions which seem to exist in the older states we have found to exist, especially the condition that our governmental expenditures are very rapidly exceeding our receipts. I think the spread between the two in our state is probably greater than in many of the Eastern states, and being a poorer community, it is harder for the taxpayers who have to pay the taxes to meet the burden.

I do wish to say that we all highly appreciate the great work that this association has done, and in many of the problems that we have already solved there, notably in mine taxation, we have been very greatly benefited by the deliberations of this conference.

I think throughout the West there has been considerable prejudice against commissions and experts, but the more we study these problems, the more we are convinced that it is only through the help of men who really know their business that we can find real solutions to these matters. We were fortunate in New Mexico in securing the help of Professor Haig, who was here yesterday, and later of Mr. Ralph Finlay, who is generally acknowledged as the greatest expert and authority on mine valuation in the country. We had a controversy over the taxation of mines which threatened to disrupt the state politically and every other way. Finally the matter was settled, and I think settled in a very reasonable way, satisfactory to all parties, and it has been definitely and clearly taken out of politics.

The day's discussion is in connection with limitations on public expenditures, and the outline as included in the program is so comprehensive that I think it will be open to almost any phase of discussion.

I am sorry that Professor Haig is not here. He has given this matter a great deal of attention, and he hoped to be here today to participate in the discussion, but he was unavoidably called back. He handed me a memorandum, part of which I will briefly read, which I think will help the delegates in concentrating on the subject in hand. In this brief memorandum he says:

"In my opinion the proposed committee on expenditures should approach the problem from a very broad point of view. A mere howl of protest about the amounts being spent will not

get us far beyond merely arousing an interest in the importance of the problem. The only fundamental solution of the problem lies in devising methods for securing really intelligent decisions regarding what the community desires to spend collectively out of the limited economic resources available, and methods of securing efficiency in the administration of public affairs. Such a committee would perform a real service if it could (1) direct public attention to the limitationspolitical and economic-which apply, and (2) give an authoritative pronouncement of the worth, in the light of American and foreign experience, of the various devices-administrative, political and legal-for making sure that the electorate decides intelligently and wisely what to spend collectively and is assured of getting what it pays for.

Such a program would lead immediately to the consideration of a great number of specific problems, the fiscal aspects of which the association can with perfect propriety discuss. Some of these would be:

(1) The quality of public administration and methods of improvement, including civil service reform, and the reorganization of the structure of government to secure a more businesslike distribution of functions - the adoption of modern budgetary procedure, etc.

(2) The quality of the political organization, from the point of view of its efficiency in meeting the financial problem. How can intelligent mandates on financial questions be secured from the electorate? Should mandates be specific or "blanket" in character. Methods of supplying the electorate with facts necessary to intelligent decisions - what are the fiscal implications of "the separate financing of schools" etc.?

(3) The quality of the legal structure, including the tax system itself, from the point of view of its consequences with respect to expenditures. What is the truth regarding the effectiveness and desirability of tax and debt limitations under American conditions? Is the tax system so organized as to assist the electorate in making intelligent fiscal decisions on the basis of economic costs and benefits, in giving a definite notion of burden involved?"

I believe there is a strong feeling throughout the country that many of the problems connected with the machinery of taxation which are presented to the federal government and state governments could more easily be solved if the actual burden of taxation were not so great. Those of us who in one way or another come in contact with taxpayers and legislators find that we often run up against the difficulty presented by the fact that the burdens

are so great that many of our principal citizens and legislators feel that it does not matter very much what measures are resorted to in the legislatures as long as taxes are so high.

Bearing these points in mind, I will now ask a few gentlemen who have made a particular study of this matter to talk, and then open it to a round table discussion. Mr. Zoercher of Indiana, we shall be pleased to hear from you.

PHILIP ZOERCHER of Indiana: Mr. Chairman and gentlemen of the conference: Those of you who have been following the work in the state of Indiana remember that in 1919 Indiana had a new tax law. When this tax law was framed, the question of tax control or the control of expenditures was considered. We had before us a recommendation, made by a special commission that had been appointed by the governor in 1915, which advocated the limitation of tax rates. We remembered that our neighboring state, Ohio, had what was known as the Smith one per cent law. We got in touch with the Ohio commission, and other authorities on the question of taxation there, and they advised us against the Smith law and against adopting the principles of that law. We realized that if the property in the State of Indiana was to be assessed at its true and full cash value, something had to be done in the way of limiting expenses. The old law had the full value provision in it, but property was being assessed all the way from ten cents on the dollar to full value, and the average in the state was about 33%, but we had enough machinery in the new law so that we could bring about a full value.

One section of the new law provided that no more taxes should be collected than in the preceding year, but if any taxing unit was in need of revenue which would bring the total tax rate for all purposes in excess of $1.50 on the $100, the taxing officers were authorized to file a petition with the state board, and on a showing that board could then fix the levy. There was, however, another provision that the state board, on its own initiative, could examine into the tax levy and the amount of money proposed to be collected by any taxing unit, and if we found that they were proposing to collect more money than government economically administered would warrant, we had the right to reduce the levy to such an amount as we thought they ought to get along with.

There was another provision that as the valuations went up all fixed levies would be automatically reduced, so that the state rate, which was 45.5 cents on $100, under the new valuation was automatically reduced to eighteen cents on the $100.

There was another provision that if the officers of any municipal corporation in the state desired to issue any bonds or certificates of indebtedness, they were required to file a petition with the state board and get the consent of that board, before such bonds or

certificates of indebtedness could be issued. You can readily see that with these two provisions we had absolute control of expenditures in the state of Indiana. The total valuation in the last year of the old law was two and one-quarter billions; the total value last year, under the new law, was five and three-quarter billions. Now then, if you will look at the state revenues-if anybody wants the figures, I have the figures with me-you will see that as far as the state taxes were concerned, absolute faith was kept. As far as local levies are concerned, if we had passed the levies as they were fixd by the local officers, there would have been an enormous increase; in other words, they would have raised over $11,000,000 of taxes, but we greatly reduced them.

As to the suggestion made by Dr. Adams yesterday, that during the war, schools and possibly some improvements were not made, we were compelled to and did grant an increase in the total revenue in the state of about $7,000,000, mostly for local taxes and most of that was for schools. We also approved a good many bond issues for school purposes.

Now then, what did the local units do? We made one mistake, when it was provided that all hearings should be held at Indianapolis, but at the beginning of the year 1920 we corrected that mistake by adopting a set of rules providing that all hearings on bond issues should be held in the locality, and also provided that a budget must be prepared. We had no budget law at that time, but one section of the tax law provided that where a power was given, and there was no provision in the law as to how the power should be exercised, the state board had the right to adopt rules and regulations to carry out that power; therefore we adopted rules requiring the publication of a budget before the next levy was to be made. This check on expenditures and on tax levies enraged the contractors and the fellows who wanted to get their hands in the public treasury for the reckless expenditure of money, and the cry was raised that a board of three, sitting in Indianapolis, were dictating how much tax should be collected, and some small peanut politics were mixed in with it to create a sentiment in the state of Indiana. We had also a very unfortunate decision of the supreme court in reference to horizontal increases that had been made, which required the calling of a special session of the legislature in July, 1920. In July, 1920, that special session of the legis'ature repealed that section of our tax law that provided that no more should be collected than in the preceding year, and that a'l levies should be automatically reduced as the valuation went up. The power of the state board over levies and over bond issues was taken away. That provision as to tax levies went into effect at once and within thirty days thereafter new levies were made.

There was a provision in the new law, that twenty or more tax

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