The nationa. current bill was finally passed in the Senste or May 26, 1864-30 vers & mes The House disagreed with some of The Senate amendments and asked for & conference which, was held

On June 2. 184. Senator Sherman. reported the results of the acdons of the Conference Committer, the major disagreements to be ironed out being those relating to State and local taxation, of nations. banks & T The Committer reban on this matter is as follows:

The House reset from ther disagreement to the forty-first amentment of the Senate and agree to the same with the following amendment: strike om al afer the word provided' in line fortyseven of suit Senait amendment down to and meluding the word located in line sxsx, and user in het thereof the following:

That nothing in this art shall be construed to prevent all the shares in BET of the salt associations heid by Sy person, or bodycorporate from being mauded in the Valuation of the persons, property of such person of corporation. In the assessment of taxes imposed by or mader Stuit authony, an the place where such bank is located, and not elsewhere: but noi si a greater rate than is assessed upon citer moneyed capital in the hands of individual citizens of such State: Prorided “Che”. That the tax so imposed under the laws of any State upon the shares of any of the associations authorized by this act stall pot exceed the rate imposed upon the shares in any of the banks organized under the authority of the State where such association is located, and the Senate agree to the same."

Sezator Sherman explained the report. This is what he said about the State taxation problem:

55

The last amendment, which was the only material one upon which there was disagreement, and the only one upon which there was much trouble, was the forty-first amendment, reserving to the States the power of taxation. We have slightly modified the Senate amendment, but the legal effect is very much the same as the Senate amendment, in my judgment. The slight difference between the Senate amendment and the amendment proposed by the committee of conference will be very readily seen. These were the only points of disagreement.”

Mr. HALE. Will the Senator be kind enough to inform me how the matter of taxing the State banks and national banks relatively is left by the bill.

"Mr. SHERMAN. This bill says nothing about taxing the State banks. It provides for a tax of one per cent on the circulation of the national banks, one half of one per cent on their deposits, and one per cent on their capital above the amount invested in United States bonds. It reserves to the States the right to levy a tax on national banks not exceeding the rate that they assess upon their own banks, and it is to be levied at the place where the bank is located."

The report was concurred in.

The President signed the bill on June 3, 1864. The long and historie struggle had ended. The Congress had continued the national banking system; it had a national currency; the right of the States to tax the banks had been assured.56

53 Ibid., p. 2207 (May 10, 1864), p. 2458 (May 25, 1864). The House Committee was composed of A Hooper, Washburne, and Mallory; the Senate Committee was Sherman, Foster, and Johnson

Ibid., p. 2621 (June 1, 1864).

5 Ibid., p. 2622.

56 Ibid., p. 2651 (June 2, 1864), p. 2727 (June 4, 1864).

Just what rights had been given the States? They were (1) the right to tax the shares at the place where the bank was located, "but not at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State," nor should the tax on shares exceed the rate imposed upon the shares in any of the banks organized under the authority of the State where such association is located; and (2) bank real estate was to be taxed for State, county or municipal purposes "to the same extent, according to its value, as other real estate is taxed."

These provisions as to real estate and personal property (bank shares)—conformed to the property taxes in vogue in most of the States at the time (1864). Current practices were reflected in the permissions extended to the States and their subdivisions. In spite of a few contradictory statements, it would seem that Congress meant exactly what it said: States shall not tax national banks at a greater rate than is assessed "upon other moneyed capital in the hands of individual citizens of such State." They did not say, nor intend to say, "at a greater rate than State banks." So indicates the preponderance of evidence.

C. State taxes in 1922

Between 1864 when the National Currency Act was amended to permit State taxation of national banks on their real estate and shares and 1922, profound changes took place in the basis of life and in all facets of society in the United States. The economy of the country shifted from primarily agricultural to an expanding industrial civilization. In the 1860s corporations were small and few, most of them created by special acts of legislatures, whereas in 1922 they were numerous, organized under general laws, and stimulated by growing opportunities for profit. Their financing by issuance of stocks and bonds multiplied greatly the volume of intangible personal property which tax collectors were desperately trying to reach. Great networks of railways had replaced the few trunk lines of the earlier period. Goods and materials moved freely and cheaply from sources to factories to markets. The automobile, now coming into its own, had made obsolete the toll roads, turnpikes, and macadam trails of earlier years. An ever-expanding network of interstate high-speed highways was under construction, financed largely by user-service charges in the form of gasoline taxes (first adopted in 1919 but spreading rapidly) and annual vehicle licenses, supplemented by ton-mile and other levies on motor trucks and carriers. Grants-in-aid for road construction had begun. Higher education, stimulated by the Morrill Act of 1862, had been expanded with the founding of many new institutions and the further development of others. State aid to common schools had grown. Hospitals, charities, and correctional institutions had been improved. The functions and the cost of government as a consequence had greatly increased. The interferences of World War I with normal activities of State and local governments were followed by increased demands for service and capital outlays when the war was over. Methods for raising governmental revenue likewise had greatly improved in this period.

TABLE 5-STATE AND LOCAL GOVERNMENT TAXES BY TYPE OF GOVERNMENT AND TAX 1922

Includes receipts from taxes or stocks of banks and other corporations, or the valuation of life insurance policies on mortgages at time of registry or vessels at a specified amount pe registered tonnage, and on grain at a specified amount per bushel. (Source cited below, p. 10.)

Source: U.S. Bureau of the Census, "Wealth, Debt, and Taxation: 1922, Taxes Collected," pp. 12, 146.

Nevertheless the general property tax still was the principal source of State and local revenue. This may be seen from table 5, which shows taxes collected by various types of government. About threefourths of all State and local collections came from the general property tax, but the smaller the unit of government the greater its dependence on the property tax.1

The growth in national wealth since the 1860s, of course, was reflected in assessments and in the estimated true value of property, as compiled by the Census Bureau. This increase can be seen from table 6. From the beginning, assessments seldom reflected the true value of property. The assessed value of all property subject to the general property tax in 1922 was $124,617,000,000. This was composed of $92,369,000,000 in real estate and improvements; $27,400,000,000 of personal property; and $4,847,000,000 of other property 2 The relative amount of personal property assessed compared with total assessments had been declining over the years as had been pointed out over and over again.3

Source: U.S. Bureau of the Census, Wealth, Debt, and Taxation, 1907, 1013, 1029, Leland, op eff, p. 11.

2 Wealth, Debt, and Taxation: 1922, Assessed Valuation and Tax Levies, p. 34. Cf. Ely, op. cit., pp. 165-16, 180 81, Seligman, op. cit., pp. 22 26.

Year

1850

1860

1970

1880

1890

1200.

1904.

1912. 1922

TABLE 6.—ESTIMATED TRUE VALUE OF ALL TAXABLE PROPERTY, 1850-1922

: Data for 2350–1570) are for taxable property only. Thereafter total includes exempt property of iDE INLOWing amore (in milions): 190). $3.33: 100, $6.213; 104, 88.831; 1912, $11314: 127, SALĀK.

Currency basis. Gold basis, $24,165 million.

Socme: .3. Bureau of the Census, Wealth, Debt and Taration: 1913, vol. 1, pp. 4K H. 22 Te mated National Wealth. p. 15.

The property tax of this period was a locally-administered centrallyshared tax. Assessments were made by local officials practically without supervision or instruction. Collections were made by county and other officials, usually locally elected. They remitted the proper portion of the taxes collected to the various units, including the State. This was the opposite arrangement from what is now customary for other types of taxes State-administered taxes with revenues shared with localties. As property tax levies began to rise during and after the Civil War, there were increasing incentives to competitive local undervaluation as a means of reducing the weight of State taxes, just as similar competition among townships and districts was used in efforts to reduce local shares of county taxes. County boards of equalization were first created to reduce inequalities in assessments within counties. Later State boards of equalization, first ex officio, then appointed or elected, were created to provide greater assessment equality among counties with respect to State levies. These measures had little success. Seldom could defective local assessments be made equitable by the equalization process so generally applied, nor could the boards overcome tendencies for individual members to try to favor their own localities at the expense of others.*

In due time the State equalization boards were replaced by State tax commissions, full-time officers (some of professional calibre) whose duty it was to supervise original assessments, make equalizations, and assess for all purposes intercounty properties, railroads, public utilities, and other corporations-duties local assessors had not been able to perform satisfactorily. They also were made responsible for the direction and improvement of State tax systems. They helped lead the States away from the general property tax and sponsored the development of new taxes, such as gross receipts taxes on public utilities, low-rate taxes on intangibles, personal and corporate income taxes, the sales tax, and the like. They also spearheaded the movement of State officials to amend section 5219, as has been related.

See Lutz, The State Tax Commission, Harvard University Press, 1918, chs. II and III. Leland, op. cit. pp. 19ff, 34. 5 Lutz, op. cit., ch. IV and following.

This table enumerates on those States to which a catapon a Tom sex da namadı » A, ya supay Combitation.

* Includes receipts of all States, including those na: naman

Source: US. Bureau of the Densus Financia. Statistics a Stats 1927 a 12

The general property tax was the important tax upon banker in 1921, banks were taxed by this method in $8 Sision with 3o 6 por ont of the banking capital of the nation. Ton stato anched bank rock through low-rate taxes, applicable to $8.3 percent of bank capital Only the District of Columbia taxed banks on the hang of my receipts. In all the general property tax Staton except New Hampsh and Vermont, the tax was levied at the location of the bank In the two States, the law provided for taxing bank stock at the redenen of the owner. Under the low- or special rate taxes in California, Delaware, New Jersey, New York, Pennsylvania, and Virginia, the hwntion of the bank was made the situs for taxation. In Maryland and Whob Island the situs of shares owned by residents was at the redom of the

In general these taxes were based on capital stock, author lend and pabd ja, Abbon 4 H earned surplus. When made applicable to banks, among other componathing, tha dut and ba banks. Special license taxes were imposed on banka muly in Phabla o quittali,

and undivided profits), Nevada (capital) Authoriend empilial tone this kings of

Idaho, Oregon, Rhode Island, Utah, and Wet Viphila, Dilni trga Bin.

ital), Arkansas (capital subscribed, Issued, and oiftmoling, troph and surplus), Missouri (par value capital and amplio, Gila caps (authorized or paid-in capital, surplus, and idlybled modify whb le or deposits), Washington ($15 each corporation) Ark Rimmet, # given.

66-236 O 72 pt. 8

t