§ 14. Special taxes on transportation. Another great group of businesses whose taxation has been especially com plex, because they are distributed throughout different taxing districts, are agencies of transportation and communication, especially railroad, sleeping-car, express, telegraph, and tele phone companies. A state tax on railroad tonnage (Pennsyl vania, 1860) was declared unconstitutional by the United States Supreme Court. But many other plans have been tried to compel the railroads to contribute, the chief being by taxes on dividends, gross earnings, equipment, and valuation of capital stock, taxed either to the company or to the stock holders, (Connecticut since 1849). About a third of the states no longer make the physical plant the basis of taxation, ex cept that in most of them some part or kinds of real estate are taxed Telegraph companies are still locally assessed in most states, but in more than a third of the states are taxed either on gross receipts or on mileage of wire. Telephone companies are sim ilarly taxed, but sometimes on the number of transmitters, or of subscribers, or on each plant, or otherwise. In a similar manner, express and sleeping-car companies are taxed, in the same group of states, on mileage, or on capital stock propor tional to mileage, or by license and privilege taxes.
In the case of these corporations, and also of various other miscellaneous kinds of companies, no clear-cut principles serve to guide. The result is "a chaos in practice—a complete ab sence of principle." 10 § 15. Alternative policies in corporate taxation. If the taxation of corporations is not to continue to be treated in a mere hit-or-miss manner, with every possible kind of incon sistency among the various states, some general principles must be recognized and some clear policy be formulated. But there is no general agreement to-day among jurists and econ omists upon a definite and consistent plan in this matter.
Two alternative policies appear. The first is to make the scheme for taxing corporations quite different in principle and plan from that for taxing natural persons. The assump tion in this is that the "general property tax" is an irreme diable failure, and is particularly inapplicable to corpora tions. This plan goes along with the separation of state and local An unfortunate result of this is to relieve the great mass of taxpayers of the state from any apparent 9 E. R. A. Seligman, "Essays on Taxation" (1895), p. 150.
10 Seligman, op., cit. p. 136.
11 See above, 7.
and measurable part of the tax burden for state purposes, and thus to separate responsibility and power in state government. This policy nevertheless is favored by some of the leading au thorities on finance.
The other policy is to tax the wealth and business of cor porations (excepting those enjoying special privileges) in essentially the same way as other wealth and business. The improvement of corporate taxation would thus be but a part of the transformation of the "general property tax" into a general tax on tangible If first there is recognized the error of assessing the equitable ownership interests in ad dition to the body of wealth, and secondly there is created an efficient agency of assessment, the taxation of corporations can be logically and easily brought into accord with a harmonious system of state and local taxation.
The assessment feature of this proposal is exemplified more nearly than anywhere else, though still imperfectly, in the "Indiana plan." By this all the wealth of the corporation is assessed as a whole, but the shares of corporations are not taxed in the hands of the shareholders.
§ 16. General plan for corporate taxation. The main features in such a plan of reform would be as follows: (a) State assessment: assessment of all wealth by state agency, with expert non-local assessors, appointed and serv ing only under the merit system.
(b) Unit rule: the assessment of the value of each enter prise and body of wealth as a unit for the whole state, and apportioned to the minor divisions as the basis for levying local taxes.
(c) Mileage rule: apportionment of the total value in the state among the localities by general rule, in the case of trans portation and transmission companies, by mileage with due regard to the presence of local real estate and of special in dustrial equipment such as repair shops and power plants.
12 See above, § 5.
(d) Interstate comity: taxation of interstate enterprises only in due proportion to the whole business, by mileage or other rules; interstate comity to be further developed in this matter.
(e) Intangible factors in unit valuation: account to be taken, in assessment, of various factors determining the earn ing power, such as good-will, patents, and other monopolistic elements, pertaining to and helping to determine the value of the tangible plant of the enterprise.
(f) Securities not separately taxable: account to be taken of the market value of securities and notes owned by a cor poration, in determining the taxable value of the whole busi ness, but these not to be treated as a separately assessable "property" (in addition to the tangible plant).
(g) Investors exempt on normal tax : exemption of the holders of securities and evidences of indebtedness of corpora 1 though this need not prevent a supplementary system of graduated taxation on incomes )1' (h) Special franchises: treatment of special privileges granted to public-service corporations for the use of streets and public highways on the principle of rent-payment to the community rather than by levying a percentage on an assess ment.
13 See ch. 19, II 11. REFERENCES.
Bullock, C. J., Selected readings in public finance. Bost. Ginn. 1920.
Compton, W. M., Recent tendencies in the reform of forest taxation. J. P. E., 23: 971-979. 1915.
Hamilton, W. H., Readings in current economic problems. Univ. of Chi. Press. 1914. Pp. 560, 581.
Jorgensen, E. 0., One hundred Reasons for the Single Tax. Chicago. The Chicago Single Tax Club. 1920.
Post, L. F., The taxation of land values. Bobbs-Merrill. Indian apolis. 1915.
United States Bureau of Corporations, Report on the taxation of corporations. Pts. I-IV. 1909-1912.
Young, A. N., The single tax movement in the United States. Princeton Univ. Press. 1916.