The final period for comparison is 1969, the date of the latest amendment. Ample statistical and descriptive data are now available to indicate the patterns, scope, and details of State and local tax systems, as well as of governmental services provided. Moreover, the nature of State and local taxation at this time is a matter of quite general knowledge.

B. State taxes in 1864

The equalitarian sentiments of nineteenth century America were reflected in most tax systems of the States at that time. All property, real and personal, was to be taxed at the same rate in the jurisdiction imposing the tax. Universality and uniformity were the cardinal principles enshrined in constitutions and statutes. The general property tax, of course, was not the sole source of State and local revenue, but it was the major one.5

4

For some governments, such as school and road districts, it was almost the only source of funds. The smaller the unit of government the greater the dependence on the property tax. One writer called it "the American system" and said it was "the only direct tax known in most of our commonwealths.' ."6 Save for one reference to classified property taxes, the only State tax mentioned in the debates in Congress on the National Currency Act of 1864 giving States the right to tax national banking associations was the tax on real estate and personal property.7

The aggregate assessed and true valuation of all real and personal property taxed and the per capita amounts for each series are shown in table 1.

4 Among State constitutions which at the time required uniformity in property taxation were: Illinois (1818, 1848, 1870), Missouri (1820), Arkansas (1836), Florida (1838), Indiana (1851), Maryland (1851), Louisiana (1845), Texas (1845), California (1849), Virginia (1850), Oregon (1851), Ohio (1851), Minnesota (1857), Michigan (1850), West Virginia (1863), Virginia (1864), and Nevada (1864). A number of states had constitutions so broad that the legislatures were free to adopt such tax measures as were deemed "just." Many of them had adopted general property taxes. See Jens P. Jensen, Property Taxation in the United States, University of Chicago Press, 1931, pp. 38-40; Leland, op. cit., pp. 99-104.

In general, statutory uniformity preceded constitutional provisions, Jensen, op. cit., p. 35. In Maryland statutory values were applied to land 1834-1888, then to personal property and slaves. The general property tax was adopted in 1841; Leland, op. cit., p. 71. Uniformity seems to have been the rule in local taxation since 1776; Ely, op. cit., p. 137. Connecticut, which had experimented with differential taxes (classification) from colonial days, adopted uniformity in 1850 with property assessed at 3 percent. In 1860, 100 percent assessments were adopted: Leland, op. cit., pp. 65-69. Ohio which had a classified land tax prior to 1825 adopted the uniform rule in 1816; ibid., pp. 78-79; Ely, op. cit. p. 136. Vermont adopted listing according to true value in 1841; Leland, op. cit., p. 74. Mississippi had a classification system in 1857 but adopted the general property tax in 1876; ibid., p. 80.

5 Among the other taxes to be noted was the poll tax-termed "unworthy of a civilized nation in the nineteenth century," by Ely, op. cit., p. 209. It was well known in New England, used extensively in southern States and in the Midwest: ibid., pp. 209-13. There were numerous licenses and occupation taxes. Special charters granted to such corporations as railroads often provided for special taxes or payments to the States for privileges granted. The gross receipts tax provided in the charter of the Illinois Central Railroad in 1851 is such an example. In 1886 it provided 15 percent of the State's revenue; ibid., p. 214. There were also numerous corporation taxes in other states, particularly Pennsylvania and Massachusetts. See E.R.A. Seligman, Essays in Taxation, 9th ed., MacMillan Co., New York, 1921, ch. VI for numerous examples of these early taxes. There were also income taxes; see Seligman, The Income Tax, MacMillan, New York, 1941, part II, ch. II, especially pp. 406-14. A few States had inheritance taxes. See T. S. Adams, "Taxation in Maryland,' pp. 61-62: Barnett, "Taxation in North Carolina," pp. 108-109, in Studies in State Taxation, edited by J. H. Hollander, Johns Hopkins University Studies, series XVIII, nos. 1, 2, Baltimore, Maryland, 1900. See also, Seligman, Essays in Taxation, p. 137. The evolution of the revenues of Providence, Rhode Island is shown in an interesting table in Stokes, The Finances and Administration of Providence, 1636-1901, The Johns Hopkins Press, 1903, pp. 404-13.

Ely, op. cit., p. 131.

7 Cf. Mr. Francis Kernan (N.Y.), in Congressional Globe, vol. XXXIV, 38th Congress, 1st Session, p. 1271, hereafter referred to as 34 Globe 1271 (March 24, 1864).

TABLE 1.-ASSESSED AND TRUE VALUE OF PROPERTY IN THE UNITED STATES, 1850-90

Source: U.S. Bureau of the Census, report on Wealth, Debt, and Taxation, at the 11th Census: 1890, pt. II, Wealth and Taxation; Washington, D.C., 1895, p. 9.

The defects of these aggregates both true values and assessments can be seen from the following remarks by Francis A. Walker, Superintendent of the Census. They were as true of 1864 (or almost other time) as in 1872: 8

"... the customs of assessment vary greatly in different States, and oftentimes in the several counties of the same State-in some the taxable value of the property not exempted by law being fixed at no more than a third of its recognized selling-price; in others, at fifty, sixty, seventy, eighty or ninety percent-it will be seen that the result of the first two inquiries [assessed value of real and personal property] is not to obtain wealth of the several States and Territories, but to present merely the actual basis of State or local taxation:** * The utter want of uniformity in this matter of assessment for purposes of taxation can not be too strongly insisted on."

TABLE 2.-ASSESSED VALUATION OF REAL AND PERSONAL ESTATES, 1860-90
[In millions of dollars]

Source: U.S. Bureau of the Census, preliminary report of the 8th census, Washington, D.C., 1862; report on valuation, taxation, and public indebtedness in the United States, as returned at the 10th census, June 1, 1880, Washington, D.C., 1884; report on wealth, debt, and taxation, pt. 2, Valuation and Taxation, final report, 11th census, 1890, decennial census publication 217, Washington, D.C., 1895.

TABLE 3. RANKINGS OF SELECTED STATES IN ESTIMATED PER-CAPITA WEALTH, 1850-80

The Statistics of the Wealth and Industry of the United States, June 1, 1870, Ninth Census, vol. III, Washington, D.C., 1872, p. 3. No attempt will be made to discuss the defects of the general property tax or of property taxes. They have been discussed many times by scores of writers. See, e.g., Leland, op. cit., ch. I; Jensen, op. cit., chs. III, IV, VI and elsewhere; Seligman, Essays in Taxation, 9th ed., ch. 1I; Ely, op. cit., pr 141-45, 149-59.

The division of assessments between real and personal property in 1850 to 1890 can also be indicated, as in table 2. These data show clearly one of the several defects of the general property tax-the difficulty of securing adequate assessments of personal property. Complaints on this score were voiced repeatedly at the time. The decline from 1860 to 1880 in the aggregate assessment of personaltyin a period when the stock of personal property was rising substantially-emphasizes this failure.

Estimates of wealth were based primarily on "true value" estimates derived from property valuations for tax purposes. As table 3 illustrates, the several States show interesting variations from 1850 to 1880 in their rankings in per capita wealth. These variations resulted largely from shifts in the economic development of the States and regions during these years. The composition of assessments in Connecticut is worth noting, for assessments in that State were fairly typical of the way the property tax operated.

Schedules on tax return forms used by assessors and individuals in listing personal property for taxation have always been detailed inventories, presumably on the supposition that the more items enumerated, the fewer items were likely to be omitted. And when a taxpayer did not file an inventory with a statement of values, it was generally filled in by assessors with appropriate penalties added." While no actual schedules or lists are available to the writer, the "grand list" of Connecticut for 1864 names the items which taxpayers were supposed to return and the total of such valuations for that year. This "grand list" is shown in table 4.

Source: Richard T. Ely, Taxation in American States and Cities, New York, Thomas Y. Crowell & Co., 1888, pp. 503-6, (Ely gives similar data for each year from 1864 through 1885. The amount shown for poll tax presumably is erroneous. since it implies payments for more than 7,000,000 persons annually, but similar amounts are reported for 1865 and 1866.)

9 Cf. Jensen, op. cit., pp. 346-50.

Categories of property named in the Connecticut list illustrate the scope of personal property taxes prevalent at the time and show what was included in the tax return expected of each individual. Intangibles, particularly bank stock and other securities, are designated by capital letters. Bank stock was treated exactly like bridge stock, turnpike stock, insurance stock, money at interest, etc. Assessments presumably were limited to State bank stock, since it is doubtful that many States tried in 1864 to tax the stock of any national banking associations which had been formed under the National Currency Act of

1863.

The Connecticut "grand list" for 1864 also indicates that next to dwellinghouses and land, the largest assessment category was "bank, insurance, etc., stocks”—$28,376,000, nearly $6,800,000 more than "mills, stores, etc." This tends to bear out contentions that bank assessments were generally more complete and closer to true value than assessments of other personal property.10

While the National Currency Act of 1864 was being debated in Congress, Representative Kernan (N.Y.) said: "1

11

"All our banks in the State of New York are put upon the assessment rolls, and they pay a tax upon the real estate which they occupy for bank purposes and pay a tax upon their personal property paid in, deducting the value of the real estate."

"In all our States we levy a tax upon property

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in the city where I reside the wealth, the personal wealth of the whole country, is gathered there in our banks. They pay a considerable portion-about one-fourth-of the city or municipal taxes, being rated like others. A great portion of our population is composed of mechanics who own their own houses and lots, and there are a few men who own stores."

Words to the same effect were spoken by Mr. Giles W. Hotchkiss (N.Y.) a few days later: 12

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there is no existing law that exempts the banking business in any State from taxation.

"The State banks now pay in all of the States, in most of the large towns, at least one-fourth of the State and county, the corporation, and school tax."

They were listed the same as other corporations and individuals on lists similar to the one used in Connecticut. The New York law of 1865 assessed shares of stock in national banks at full value and taxed them as personal property.13 There was no change in the method of taxing State banks.

1. Property tax and section 5219.-The general property tax with which members of Congress were familiar had its impact on the tax provisions of the Act of 1864. Nothing in the act was to interfere with

10 Cf. "The New York assessors say in their report for 1881 that 'banking capital is assessed fully eightyfive percent of its nominal value, while it is quite evident that other personal property is assessed at an average of less than ten percent.' Ely, op. cit., pp. 176-177.

11 34 Globe 1271 (March 24, 1864).

12 34 Globe 1393 (April 5, 1864).

13 Law declared invalid. Van Allen v. The Assessors, 3 Wall 573 (1865).

66-236-72-pt. 3-19

the traditional method of taxing real estate. Even in McCulloch v. Maryland (1819), Justice Marshall had said: 15

"This opinion does not deprive the States of any resources which they originally possessed. It does not extend to a tax paid by the real property of the bank, in common with the other real property within the State, . . ."

The tax on real property, however, was only one part of the almost universal property tax. The other part was the personal property portion which applied alike to individuals, firms, businesses, corporations, and banks with listings or declarations similar to the one used in Connecticut described above. The writer believes it is this familiar tax which was in the minds of members of Congress when they inserted into the Act of 1864 the often litigated proviso "that nothing in this act shall be construed to prevent all the shares in any of the said associations, held by any person or body corporate, from being included in the valuation of personal property, . . . but not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such state." 16

Congress has been criticized for not making plain what it meant by "other moneyed capital" and "in the hands of individual citizens.' ." 17 Undoubtedly other words could have been used, but in the light of common practice at that time and earlier, perhaps Congress said what it meant to say. As was pointed out in connection with the amendment of 1923, many State tax officials and some others had been under the impression that "in the hands of individual citizens" really was intended to refer to State banks, so that if national and State banks were treated alike the permission of section 5219 was not violated.18 This interpretation was also arrived at by Professor Lutz in his careful review of the debates and amendments to the Act of 1864. He concluded: 19

'... there is no finally conclusive evidence as to what was meant by the expression 'other moneyed capital in the hands of individual citizens,' but to the writer the evidence is persuasive in favor of the construction that the reference was to the stocks of State banks, and not to personal investments."

Mr. Ronald Welch in his definitive study, State and Local Taxation of Banks in the United States, came to the opposite conclusion: 20

"Professor Lutz finds the evidence 'persuasive in favor of the construction that the reference [in the term "moneyed capital"] was to the stocks of State banks, and not to personal investments' (loc. cit., p. 211). The writer is persuaded to the contrary. For one thing, some members of Congress still expected national banks to completely displace State banks, though this expectation was far less prevalent in 1864 than it was in the preceding year. In the second place, there existed at that time no such multiplicity of financial organizations as

14 The second proviso in the Act of 1864 read: "And provided always, That nothing in this act shall exempt the real estate of associations from either State, county, or municipal taxes to the same extent, according to its value, as other real estate is taxed."

15 McCulloch v. Maryland, 4 Wheaton 316 at 436 (1819).

16 Italics added. See appendix 1-C, p. 3 above for the entire section.

17 Lutz, "The Evolution of Section 219, United States Revised Statutes," Bulletin of the National Tax Association, vol. XIII, no. 7, pp. 205 ff. (Ápril, 1928). Cf. also, Welch, op. cit., p. 17.

18 See discussion of the Richmond case, supra, pp. 195–202.

19 Lutz, loc, cit., p. 211. He bases his conclusions as to what was meant in 1864 in part on statements of Messrs. Paine and Pomeroy in the Congressional Globe in connection with the 1868 amendment; pp. 210-11. 20 Welch, op. cit., p. 17 note.