The conclusion at which your Committee arrived was, that all the requisites of a sound system were found in taxes on real property and on gross receipts, and in no others-in fact, that when these were properly imposed, no other taxes were or could be necessary, as nothing would escape untaxed. Under this system, the real estate of the railroad corporations, held for corporate use outside of their right of way, would be locally assessed exactly in the same way as the real estate of private persons or of other corporations adjoining it was assessed. There would be no distinction made in regard to it. It is the ordinary tax on real property. Beyond that a certain fixed percentage, established by law and of general application, should be assessed on the entire gross earnings of the corporations, and this should be in lieu of all forms of taxation on what is known as personal property. Under this system the rolling stock of the corporation would not be assessable; nor its securities, whether stock or bonds, either indirectly through the corporation or directly in the hands of those owning them. The entire burden, be the same more or less, would be imposed in one lump on the corporation and levied directly. It does not need to be pointed out that this system is, perfectly simple; that under it taxation is fixed by a general law and not by local valuations; that it is thoroughly proportionate, inasmuch as the amount levied depends on the volume of gross receipts; finally, it can be ascertained by any one, and can by no possibility be evaded. The apportionment of a levy on gross receipts among the several States through which a single railroad may run is in this country undoubtedly attended with much difficulty, and the Committee have given careful consideration to the subject. The conclusion at which they have arrived is that it should be made a matter of mutual understanding among the States, and that, as the levies must be independent, they should be apportioned according to mileage. That is, real estate owned by each corporatinn, outside of its right of way, should be locally assessed where it is situated, without regard to the fact that it belongs to a corporation and is used for railroad purposes. The vast and costly terminal grounds in New York, Chicago and all the other great trade-centres would thus be locally taxed at those centres, and on the basis of valuation for similar adjoining land there in use. Real estate in the country, on the other hand, would be taxed at the country or agricultural valuation. The realty outside of the right of way being thus disposed of for purposes of taxation on fixed principles easily understood, the entire gross earnings of the corporations should be subject to assessment by each State through which its road might run, in the proportion which the miles of the road in that State bear to its whole number of miles. The percentage of the levy would then be greater or smaller according to the law of the state, but the proportion of the whole amount upon which the levy was to be made would be fixed and always easy of ascertainment. The disposition to be made of the tax thus levied when paid into the hands of the State authorities-whether it should be retained in the State treasury or distributed among localities, either those through which the road might run, or those in which the holders of its securities reside-would be matter for adjustment by legislation. It could either be retained in the State treasury or paid back into the local treasuries of the counties or towns in which the roads are located on mileage proportions, or ratably distributed among all the municipalities of the State. It is a tax on transportation, whether of persons or property. It is very possibly as equitable a method of raising money by taxation as can be devised. If it could, therefore, once be uniformly and properly adjusted, the distribution of the results of the tax would present very few difficulties. All communities and every part of each community are dependent more or less directly on railroad transportation. A general tax upon it, if properly imposed, would be felt not unequally by all, and might perhaps not unjustly be shared by all. Where the tax on railroads is now levied as an entirety by the State government, the most usual method of distribution is to divide it among the counties and municipalities through which each road runs in proportion to the length of it therein. In Massachusetts the tax is paid over to the place of residence of the individual stockholder, and any undistributed balance is paid into the treasury of the State. In Michigan the whole amount of the tax is paid to and retained by the State, being devoted to special purposes. In Mississippi, where there is a franchise tax, onehalf of it goes to the counties through which the road runs, the balance to the State. In New Hampshire, again, one-fourth of the tax is paid to the towns through which the road passes, in proportion to the amount expended in each town for right of way and taxes. The other three-quarters is divided among the towns in proportion to the stock owned therein. In this respect, therefore, as in all others, the existing State systems afford every variety of precedent. The disposition to be made of a tax after it is collected, in no way, however, affects the question of the proper method of collecting it. It must so largely depend on local exigencies that no general rule regulating it would seem to be possible. Finally, the Committee will say that, of all the systems of taxation examined by them, those in use in England, among the countries of Europe, and in Michigan and Wisconsin, among the States of the Union, seem to them most intelligent, and in conformity with correct principles. The Michigan and Wisconsin system would seem to be especially commendable. The systems in use in many of the older States, on the contrary, and notably in the States of Massachusetts, New York, Pennsylvania, and Ohio, are very cumbersome, and present hardly any features worthy of study or imitation. That of Massachusetts, for instance, is based upon no recognized principle, would admit of evasion in a most obvious way, and is impossible of any general application. The fundamental idea with it is, that the capital stock represents the property, and that its market value will, therefore, approximately measure it for purposes of taxa A heavily bonded road, under this system, practically escapes taxation; and, again, where the stock is owned outside of the State in which the road is sitiuated, the tax levied on it inures not to the State of the owner's residence but to that in which the property is located. Under such a system it hardly needs to be said that the taxation fluctuates widely in amount, and that the amount of debt behind the capital stock being disregarded, the burden bears little or no necessary relation to actual earning capacity, whether net or gross. Clumsy and devoid of scientific merit as it unquestionably is, however, the Massachusetts system would seem to be preferable to that still in use in New York, concerning which the State assessors in their annual report for 1873 expressed the opinion that under it there was "no uniform rule for any road, in any county, each assessor being governed entirely by his own views." In certain towns the railroads appear to pay about one-third of the entire taxes, while the assessed valuation now (1878) varies from $400 per mile to $100 per rod. "The difference in the assessment of the New York Central & Hudson River Road, where, for all the purposes that the road can be used, it is of the same value to the company, is $24,000 per mile. In short, it is scarcely an exaggeration to say that the assessments are as unlike as the complexion, temperament and dispositions of the assessors." It does not need to be pointed out that a system such as this-and it is the system in most general use-compels the corporations, in self-defence, to an active participation in local politics. Indeed, it is not too much to say, that, as a system, it is open to almost every conceivable objection. It does not seem necessary to proceed in the enumeration of States, as the objections to which the system of each is open, will readily suggest themselves to any one at all familiar with the principles of correct taxation on reference to the accompanying abstract of these systems. It is very, very apparent that the subject of railroad taxa tion is one which, in this country, has as yet received very little mature consideration. With a view to affording some basis for better legislation, the committee submit, with the accompanying documents, the following form of law in which the phraseology of the Michigan statute has been very closely followed. C. F. ADAMS, JR., of Massachusetts. December 1, 1879. . Committee. DRAFT OF LAW. SEC. I. Every corporation, person or association owning or operating any railroad or any portion thereof in this State, shall, on or before the day of in each year, pay to the State Treasurer an annual tax upon the gross receipts of said railroad, computed in the following manner, viz.: Upon all gross receipts not exceeding thousand dollars in amount per mile of road actually operated, per cent. of such gross earnings; upon such gross receipts in excess of thousand dollars per mile so operated, per cent. thereof, which shall be in lieu of all other taxes upon the property, capital stock or evidences of indebtedness of such corporations, except such real estate as lies outside of the location for a right of way exclusively, not exceeding rods in width. SEC. II. The real estate lying outside of such location, shall be liable to taxation in the same manner as other real estate in the same place. SEC. III. When a railroad lies partly within and partly without this State, there shall be paid into the State Treasury such proportion of the tax imposed by the first Section of this Act, as the length of its operated road in this State bears to the whole length thereof. APPENDIX. Reports on the systems of railroad taxation in use in the following LEGATION OF THE UNITED STATES, SIR: In obedience to your instructions under date of February 18, 1879, requesting information touching the system of taxation of railroads in this Empire, I have now the honor to make the following report. The system of the two halves of the Empire being established independently, as of two independent States, I give first that of Austria. I. "On what general, recognized principle, if any, is the railroad taxation of Austria-Hungary based?" A. On that of absolute assimilation to the system of taxation applied to individuals. The corporation is treated as if it were an individual owning the same property. II. "In how far are the railroads taxed as owners of realty?" A. All their realty is taxed. Their land, which is taken for the line from the adjoining agricultural lands, continues to be taxed as land at the same rate as the lands adjoining it. Their town real estate is taxed in the same manner as the neighboring private real estate is taxed. There is for all owners of realty a ground tax, distinguishing between the value of the land and of the buildings erected thereon. The same rule and rate apply to railroad real property in the town. III. "In how far as holders of personalty?" A. They are considered as having no personalty which is not either produced or represented by franchise or income, or net earnings of some sort. And all these are taxed on the same principle as those of individuals. In Austria all enterprises [Erwerbe, business undertakings,] are taxed, whether undertaken by an individual or a share company, from that of a shoemaker to that of construction of a |