MICHIGAN ACADEMY OF SCIENCE. 
99 
to apply tlie local rate by which neighboring property is taxed and 
which in some degree is within the control of local residents. 
Again, this plan would escape any objections which might arise over 
the attempt to have the state appropriate the taxes for its own use. 
Unless the state should adopt the policy of segregation of taxes, it 
would doubtless invite trouble from the local tax payers to attempt 
the plan of removing these corporate properties from the local rolls. The 
devotion of this income to the defrayment of state expenditures would 
decrease the state tax on all property, but without segregation it would 
mean reduction at the expense of localities possessing public utility 
property. 
Furthermore, leaving the funds to the locality avoids the inevitable 
question of what use the state could make of the income. Present con- 
stitutional limitations would direct the tax to the Primary School Inter- 
est Fund, and the only way to make it available for general purposes 
would be through amendment. The futility of this expedient is apparent 
to all. Granting that our citizens might consent to modify the school 
fund clause of the constitution, the state might then find it necessary 
to segregate its taxes. A few years ago such a prospect would have 
been welcome as a highly acceptable reform in state finance, but today 
we view it with hesitation and are scarcely ready to accept it as a part 
of our financial policy. 
In submitting these proposals, the writer is fully conscious that he 
is not wholly in accord with the modern trend in taxation, which is 
toward a gross earnings form of tax. ^Herbert Knox Smith, Commis- 
sioner of Corporations, writes in a governmental report : “There is a 
tendency toward an abandonment of property as a basis of taxation in 
favor of a tax levied upon gross receipts.” 
** Allen E. Foote, in an address before the Providence Conference for 
Good City Government, said : “Upon a properly devised and admin- 
istered system of state regulation, the basis of taxation for public ser- 
vice corporations will be shifted from valuation to earnings.” 
These statements are based upon facts which can not be evaded. We 
must acknowledge in the gross earnings tax certain advantageous 
features. For instance, it is easy to apply ; it avoids the necessity of 
adjusting the relative values of tangible and intangible property; it is 
presumed to reflect ability to pay upon the part of the tax payer. On 
the other hand, all of us are equally conversant with certain well known 
defects of this tax. It does not measure ability to pay with exactness ; 
it never is the equivalent of the general property tax because the rate 
is arbitrarily fixed and can not be coordinated with other rates. 
As for the only other plan we need note — the corporate- ex- 
cess — it seems that the Michigan plan possesses the one essen- 
tial virtue, of that which is to bring intangible values within the 
domain of effectual taxation. 
Finally, for Michigan to adopt another plan would mean to establish 
within our state two different methods of treating the same type of 
property. This is objectionable. Our hope for the achievement of 
desirable reforms and the attainment of a satisfactory system lies in 
keeping close to a single policy. Thus do we justify the suggestions 
presented in this paper. 
^Bureau of Corporations, Reports; Vol. 1, p. 14. 
**Providence Conference for Good City Govt.; 1907; p. 267. 
