THE STATE REVIEW. 



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(From the Michigan Investor.) 

 THE SUBJECT OF RAILROAD TAXATION. 



State Tax Commissioner Shields, in an inter- 

 view on the subject of railroad taxation, is quoted 

 as saying: 



"Some day the people of the state will appre- 

 ciate the honesty of purpose of the present board 

 of state tax commissioners. They will also real- 

 ize that we have been too harshly criticised and 

 abused for the honest performance of our most 

 onerous duties. 



"'Speaking for myself, I know what would be 

 the popular thing to do in the matter of railroad 

 .assessments. But I was taught by honest par- 

 ents that it was just as much a sin, or a crime, 

 to steal from the rich as from the poor, and so 

 I believe it is as much a crime to take advantage 

 of my present position to place excessive valua- 

 tions on railroad corporations in order to benefit 

 myself politically as it would to accept bribes 

 from such corporations in order to benefit myself 

 financially. I have done neither, and I shall con- 

 tinue to follow my honest convictions regardless 

 of my future political or financial welfare." 



Commenting upon which The Investor begs 

 leave to submit that if there is one honest and in- 

 telligent tax commissioner in Michigan his name 

 is Robert H. Shields. This paper has had occa- 

 sion from time to time to comment upon the ap- 

 parent policy of the people of the state of Mich- 

 igan in their dealings with the railroads. The 

 dishonesty of the policy began in the demagog- 

 erv of the late Gov. Pingree, who made railroad- 

 baiting popular with the people of this state. The 

 situation today, as expressed in the assessments, is 

 that out of every nine dollars of assessable prop- 

 erty in this state one dollar is represented by 

 railroad property. "Where is it?" is a question 

 which the inquiring citizen may well ask. Can 

 anybody go about this state and observe only 

 eight dollars' worth of property to every dollar 

 of railroad property? Yet, the blatent and dem- 

 agogical portion of the press isn't satisfied with 

 this. Last year the railroads of this state were 

 obliged to contribute unexpected millions to the 

 state treasury. The theory upon which this con- 

 tribution was legislated for and exacted was 

 that it would partly relieve the rest of the prop- 

 erty of the state from taxation. This year it ap- 

 pears that the policy has had that result, and, log- 

 ically, among the other property which hns been 

 relieved is the railroad property itself. It does 

 not pay so much taxes this year as it did last 

 year. Forthwith the railroad-baiters set up the 

 cry that the railroads are being favored by the 

 tax commission. Quite regardless of the logic of 

 their own premises that the increase of railroad 

 taxes would result in a proportionate reduction 



of all taxes they find fault that the result applies 

 to railroad taxes as well as all other taxes. By 

 inference they put railroad property on a sort of 

 outlaw basis, in the hope that it will not profit 

 cither by statute or economic law. 



This sort of thing may please the demagogue, 

 but it has its results in time. These results were 

 never better expressed than by James J. Hill, in 

 his famous interview concerning the lack of rail- 

 road facilities and the necessity for their increase. 

 It would do this state a lot of good if every 

 thoughtful citizen were to ponder over this para- 

 graph of Mr. Hill's interview : , 



"It is not by accident that railroad building has 

 declined to its lowest within a generation, at the 

 very time when all other forms of activity have 

 been growing most rapidly. The investor de- 

 clines to put his money into enterprises under 

 ban of unpopularity, and even threatened by in- 

 dividuals and political parties with confiscation 

 or transfer to the state. This feeling must be 

 removed and greater confidence be mutually es- 

 tablished if any considerable portion of the vast 

 sum necessary is to be available for the work." 



In his message to the legislature Gov. Warner 

 advises, among other things, that certain public 

 service corporations, not now subject to the ad 

 valorem tax, shall be so subjected. Among these 

 are the various telephone organizations operat- 

 ing in the state which pay a percentage of their 

 gross earnings into the state treasury each year. 

 Mr. Warner would be pleased to have these com- 

 panies pay an ad valorem tax, apparently upon 

 the supposition that such a tax would come out 

 of the companies rather than out of the users of 

 the service which they provide. It is the pecul- 

 iarity of certain politicians that they forget their 

 political economy, if they ever knew it, at the 

 time that they think they are making an appeal to 

 the people. The telephone service, like every 

 other form of public service, is one which costs 

 to the public the amount expended for its oper- j 

 ation. a proper depreciation cost, an income on 

 the investment, and whatever tax rate the state 

 seeks to impose. The total of these sums, di- 

 vided between the total number of users, repre- 

 sents the approximate cost to the individual 

 user. To increase either the amount of wages 

 paid, the rate of interest required or the invest- 

 ment, the speed with which the property depre- 

 ciates or the amount required to be paid into the 

 public treasury means that there must be a 

 greater sum paid by the individual user for the 

 service afforded him. 



There are a lot of tyros in political science 

 who hold that every public service corporation 

 should pay the maximum of taxes because the 

 service afforded is not participated in by the en- 

 tire community. These hold that only a select 

 number of the total composing the public use the 

 telephones, the telegraphs, the sleeping cars and 

 the other subjects of taxation upon the system of 

 a percentage of the gross earnings. They are 

 of the narrow school of political scientists who 

 forget that, outside the mere users of such public 

 conveniences, there are others who participate in 

 the added value of their existence. Every dol- 

 lar's worth of real property in this state is more 

 valuable because it is possible for the occupant 

 of it to communicate with any part of the coun- 

 try by telephone or telegraph, or to ride to or 

 from it in comfortable means of transportation, 



entirely irrespective of the fact that the owners 

 of some parcels may never use these facilities. 

 They arc there for them to use in case they need 

 them. It would be quite as idle for one to say 

 that the fire protective systems are of no value 

 to him because his house has not yet taken fire, 

 or that the police system has no merit commen- 

 surate with its cost to the individual because the 

 individual has never yet been arrested and put it 

 to his proportionate share of expense. 



The policy of taxing every which thing in this 

 state upon a false basis began with Gov. Pingree. 

 Every addition to the tax burden of the public 

 service corporations must, of very necessity, 

 come out of the users of the service, propor- 

 tionately to the extent which he uses it. So that 

 if Gov. Warner succeeds in increasing a few 

 more public service corporation assessments, he 

 will only succeed in making the cost to the con- 

 sumer the greater. 



The politician who is not a student of polit- 

 ical economy is exceedingly liable to make a 

 mess of things when he makes fatuous recom- 

 mendations. Some time, after the time-servers 

 have passed away, Michigan will adopt a ra- 

 tional and a logical scheme of taxation, which 

 will not inure to the swelling of funds already 

 swollen out of all reason, but will serve the pur- 

 pose of logically and equitably spreading the cost 

 of government economically administered, upon 

 all the objects of taxation which profit by the 

 existence of government. That distribution will 

 fall most logically upon real estate, and not upon 

 the institutions which make real estate valuable. 



LABOR AND CAPITAL PARTNERS. 



"Although many men in the unions may 

 readily become the prey of socialistic dema- 

 gogues and work with zeal in behalf of half- 

 baked conclusions, yet it may be put down 

 for a certainty that the less ignorant men in 

 general become the less apt they are to follow 

 blindly the lead of charlatans and knaves," 

 says David M. Parry. "All agencies that make 

 men think are entitled to encouragement, and 

 on this ground if for no other unions should 

 be upheld. Our aim should be not to destroy 

 unionism but to foster good unionism. 



"The Employers' Association should keep 

 this in mind. The Employers' Association 

 should not be anything more than a defensive 

 organization, seeking to protect the rights of 

 employers and of independent workmen when- 

 ever those rights are assailed. To assume the 

 offensive or to adopt the closed shop and boy- 

 cott methods of the unions is beyond its legiti- 

 mate purposes and cannot fail to do more 

 harm than good. 



"Labor and capital are partners in industry. 

 They cannot afford to war against each other. 

 It is far better for them to travel along peace- 

 fully than to try to annihilate each other. All 

 that the employer should ask is that the 

 unions be peaceful, that they discard the boy- 

 cott and the closed shop, and the employer 

 in turn should not seek to infringe on the 

 rights of the employes. It is not a game of 

 rule or ruin that should prevail between labor 

 and capital. The recognition of fundamental 

 rights must be insisted on, but beyond this 

 there should be a spirit of mutual good will 

 and a disposition to> reason over differences. 



