property, but in attempting to tax it twice.

Suppose, however, that the tax is capitalized, that does not justify the taxation of the shareholder.

We have considered this question of the taxation of the shareholder and the corporation on the supposition that the shareholder is an individual. If, however, the shareholder is also a corporation, even though shares themselves are not directly taxable, the investment of corporations in such property, with a system of taxation on capital stock, would involve double taxation. The shares, of course, should be deducted from the value of the stock.'

The almost universal practice in this country is to exempt the shares of stock to the stockholder, if the corporation is taxable on its stock or property. In some states property and shares are both taxable to some extent without causing double taxation; first, in case the shares are taxed, all property not included in the value of the shares may be taxed also; and, second, where the property is originally taxed, all value of the shares in excess of the assessed value of the property may be also taxed. These provisions are just, at least so far as the question of property and shares is concerned. Only a few states allow the taxation of property to the corporation and shares to the shareholder. North Carolina permits this form of double taxation, and also Wyoming. Apparently shares of corporations are taxable in Virginia, although the property is likewise taxed. Shares are taxable in Iowa, whether the corporation is taxed upon its property or not, except in the case of manufacturing corporations. In thirty-five States, however, this kind of double taxation has been expressly prohibited by statute. The United States income tax law makes a similar provision in declaring that the dividends of corporations which are taxed upon their income shall not be taxed to the share

1 An astonishing case of quadruple taxation as a result of such a method of taxation is given in the preliminary report of the Pennsylvania Tax Conference on the "Valuation and Taxation of Railroads in Pennsylvania," p. 17.

holders receiving them. A like exemption exists under the Virginia income tax law.

Generally corporations, with the exception of banks, are taxable upon their property or capital stock, or in some equivalent manner, so that the individual is not taxed upon his shares. Sometimes, however, the shareholders are taxed and the corporation is exempt. The Massachusetts tax on corporate franchise may be viewed more correctly, perhaps, as a tax on the shareholders than on the corporation. The tax is assessed in the aggregate to the corporation, it is true, but, with the exception of the shares of non-residents, the amounts assessed to the shareholders are credited in due proportion, for local taxation, to the place where the shareholder resides. In Maryland the tax is assessed against the shareholders, and the amount due is deducted by the officers of the corporation from the dividends. In both Massachusetts and Maryland the realty is taxed at its actual situs, but the value so assessed is deducted from the aggregate value of the shares, and the remainder, in the proportion of their shares, is taxed to the shareholders. In Vermont a method prevails somewhat similar to that in Massachusetts. The shares are listed and taxed to the individual. The non-residents' shares in domestic corporations are taxed by means of a deduction from his dividends. From the actual value of the shares all realty which is taxed is deducted, and, in the case of the manufacturing corporations, all personalty which has been otherwise taxed. Connecticut taxes a few corporations in this way, and, until recently, all Louisiana corporations were taxed in the same manner.

Special methods are generally provided for the taxation of banks. This is due to the requirements of the Federal law that national banks located in states shall be taxable only on their shares and real estate. It is required that the shareholders shall be assessed on the shares, and not the corporation, and that the rate of taxation shall not be greater than that on other moneyed capital. The states have been careful to observe

these restrictions, and generally have taxed their own banks, and sometimes similar moneyed insititutions, in the same

manner.

The judicial decisions are far from unanimous in declaring the taxation of shares and property to be double taxation, or in disallowing it. This may be explained, apart from the conservatism of most courts, to the fact that the older decisions often represent a period of financial development now passed, when the statutes also may have expressly required such double taxation. The primary legal question is, of course, as to the identity of shares and corporate property. In the leading case of Van Allen vs. Assessors' the United States Supreme Court denied their identity. This has been frequently confirmed. On the other hand, recent decisions have pronounced the contrary view. Sometimes the courts have declared that such taxation is not not double taxation. Again they have admitted that double taxation existed, but have held that it was within the legislative power. They have very frequently held that it is double taxation, and unlawful. the same State there are often found decisions on both sides of the case, as, for example, in Iowa, Kentucky, Indiana, Ohio, Pennsylvania and New Jersey. But the general tenor of judicial opinion appears to be against such taxation in most States,

1 Van Allen vs. Assess. (1865), 3 Wall., 573.

In

2 State of Tenn. vs. Bk. of Commerce (1893,) 53 Fed. R., 735; San Francisco vs. Mackay (1884), 21 Fed. R., 539.

* Danville Bk. Co. vs. Parks (1878), 88 Ill., 170; St. Ry. Co. vs. Morrow (1888), 3 Pickle (Tenn.), 406; Lee vs. Sturges (1889), 46 O. St., 153.

▲ Cf. Conwell vs. Connersville (1860), 15 Ind., 150; Cook vs. Burlington (1882), 59 Ia., 251; Whitesell vs. Northampton Co. (1865), 49 Pa. St., 526; State vs. Collector (1874), 8 Vr. (N. J.), 258.

5 Vallee vs. Zeigler (1884), 84 Mo., 214; State vs. Haight (1884), 2 Vr. (N. J.), 399; Tallman vs. Treas. (1861), 12 Ia., 531; R. R. Co. vs. Barbour (1888), 88 Ky., 73; Hoadley vs. Essex Com'rs. (1870), 105 Mass., 519; McIver vs. Robinson (1875), 53 Ala., 456; Burke vs. Badlam (1881), 57 Cal., 594; Jones vs. Davis (1880), 35 O. St., 474; Gillespie vs. Gaston (1887), 67 Tex., 599.

viz., Alabama, California, Illinois, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Maine, Minnesota, Missouri, New Jersey, Ohio and Texas. The opposite view appears to be approved in North Carolina, Pennsylvania and Tennessee.

CHAPTER IV.

PROPERTY AND INCOME.

THE taxation of property and income does not itself predicate double taxation. Accepting broadly the principle that income is the criterion of ability, it follows that a general income tax is in itself complete. Property taxes do not reach all sources of income. Hence, if both property and income taxes exist together, so much of the income as is derived from taxable property should be exempt, or else the income which is not derived from property should be taxed twice. In the latter case there would be no double taxation, but repetition merely. The only difficulty here is in determining to what extent property may be considered the source of income. Where property is used in business the income does not necessarily depend on the property alone. Special income taxes may be levied in addition to a property tax, therefore, without producing double taxation or inequality, if the incomes of property are not also taxed. With a general income tax, however, the addition of special income taxes would always produce double taxation.

There are some special taxes which vary considerably in their methods of assessment and rating, but which sometimes take the form of income taxes. Such are certain taxes on privileges and occupations. Often these are aimed at sources of income not affected by property taxes. They may be quite free, therefore, from the imputation of double taxation. Often they have the appearance of license taxes. Sometimes difficulties are experienced in clearly discriminating income taxes from property taxes. Where certain kinds of prop