part of its property, or rather that the corporate property is one of the elements that contribute to the value of the capital stock. If this be true, then an increased tax on the corporation on account of its stock is pro tanto duplicate taxation of an unjust character. If other persons are taxed only once on their property, corporations should not be taxed again on what is at all events a part of their property.

Unfortunately there is no absolute uniformity in our legal decisions on this point. While the majority of the commonwealths hold taxation of this kind to be unjust duplicate taxation, Pennsylvania has pronounced it perfectly valid. In a celebrated case the court used this language:

Double taxation has never been considered unlawful in this state. The real and personal property of a corporation may be taxed, although it pays a tax on the stock which purchased it. The power of the legislature is as ample to tax twice as to tax once, and it is done daily as all experience shows. Equality of taxation is not required by the constitution.1

Such a decision may be correct legally, but beyond all doubt it is unsound economically. Equality of taxation may not be required by the constitution of Pennsylvania, but it is one of the first and most cardinal laws in the whole science of finance. Abandon equality, and you throw the door wide open to all kinds of glaring abuses. The Pennsylvania view cannot possibly be upheld from the scientific standpoint.

Far wiser are the Maryland courts, which hold that all laws must be so construed as to avoid double taxation of this kind; and that, since in their opinion the capital stock of a corporation represents the corporate property, the payment by the corporation of a tax on capital stock necessarily exempts all the corporate property. In this broad form the decision is perhaps open to criticism because of the complete identification of capital stock with corporate property. But as regards the point at

1 Pittsburgh etc. R.R. Co. vs. Pennsylvania, 66 Pa. State, 77. Cf. Lackawanna Iron Co. vs. Luzerne County, 42 Pa. State, 424.

2 County Commissioners vs. National Bank, 48 Md. 117. Cf. State vs. Stirling, 20 Md. 520; State vs. R.R. Co., 40 Md. 22.

issue here, it is perfectly correct. To tax corporations simultaneously on their stock and on their property is wholly indefensible. And a few commonwealths, like Maryland, Illinois, Alabama and (for local purposes) New York, have now recognized this principle in their statutes, deducting from the value of the capital stock the value of the realty or of both the real and personal property taxed.1

On the other hand, the apparently similar statute of Massachusetts, which taxes corporations on their capital stock less the value of the real estate and machinery,2 is indefensible for quite another reason. According to the Massachusetts law, corporations are taxable locally only on their real estate and machinery, while they are taxable for commonwealth purposes only on the value of the capital stock deducting the value of the real estate and machinery. Corporations are therefore taxed only once on their total property. Individuals on the other hand pay not only a tax on general property for state purposes, but another general property tax for local purposes, not to speak of the income tax. Corporations thus are treated more leniently than individuals. According to the theory developed in the preceding essays corporations should always be locally taxable on their realty. But the commonwealth tax should be levied on the total income or, if the states will still persist in the property tax, on the total property without any deductions (except those arising from considerations of interstate comity and equity, to be discussed below). My whole treatment of double taxation is based on the assumption that the double tax is levied by administrative units of the same grade, whether states or local divisions. It manifestly does not apply to cases where one tax is levied by the commonwealth, and another similar or different tax is levied by the county or city, as in Massachusetts. Otherwise we should be forced to the conclusion that our property tax always involves a duplicate,

1 Md. law of 1878, in Pub. Gen. Laws, art. 81, §§ 84, 85, 141-144; Ill. Rev. Stat. chap. 120, § 3, sec. 4; Ala. Code, § 453, sec. 8; New York, Laws of 1857, chap. 456, $ 3, vol. 2, p. 1. In New York, as we know, corporations are locally taxable on their realty, and also on their capital stock, deducting the amount invested in real estate. 2 Mass. Pub. Stat. chap 13, § 40.

triplicate or quadruplicate taxation in so far as state, county, town and village levy different rates on the same property. But this is only a juggle with words. scientific sense double taxation. the Massachusetts principle while

correct.

Such taxation is not in the Strictly speaking, therefore, ostensibly sound is really in

In Switzerland, the only other country in which the property tax exists, we find, in the few cases where both tangible property and capital are assessed, that the value of the taxable property is deducted from the corporate capital. Thus the new constitution of 1885 in Aargau provides for the taxation of the corporate real estate for both commonwealth and local purposes. The value of the realty is then deducted from the capital stock.1 So also in Schaffhausen.2 The Swiss tendency, like the American, is gradually coming to be in accord with the sounder principles.

We come now to the most important aspects of double taxation - the fourth and fifth forms. Here we have the benefit of a wide European experience. In the phases of duplicate taxation hitherto treated we can learn very little from Europe, because in no European state except Switzerland are the corporations taxed on their property as a whole; and in Switzerland the whole question of corporation law is in a far more inchoate condition than in the more developed industrial states. But the problems that we take up now present themselves in Europe as well as in this country, and have there received in some points an extended consideration, although not a completely successful solution.

X. Double Taxation arising from Interstate, Intermunicipal or Foreign Complications.

This fourth form of duplicate taxation appears in connection with almost every method of corporate taxation. It is so comprehensive that it will be advisable to discuss the subject under four chief headings:

1 Schanz, Die Steuern der Schweiz, II, 239.

2 Ibid. II, 170 (note 1).

A. Double taxation of corporate property.

B. Double taxation of stock and bonds or of dividends and interest.

C. Double taxation of non-resident stockholders or bondholders.

D. Double taxation of corporate receipts or income.

A. Interstate double taxation of corporate property. The difficulty here arises in connection with the taxation of personal property. In the case of real estate the rule universally adopted in the United States is that the property should be taxed where it is situated. There is accordingly no chance for interstate complications. But in the case of personalty the great problem is that of situs. Should the personalty be taxed where it is situated or should it follow the domicile of the owner? The legal conditions in the United States are chaotic. As a general rule the personalty of individuals, if actually located in a state, is taxable there. Yet in most commonwealths the legal fiction prevails that personalty follows the owner mobilia personam sequuntur. This rule is certainly applicable to choses in action and all other intangible personalty. Accordingly, if the owner is a non-resident, the result will be a double taxation of his personal property, once by the state where it is located and again by the state of his residence. A few commonwealths indeed have provided by statute for the exemption of a resident's personalty if permanently located and taxed in another state. Such is now the law in Connecticut, Indiana, Maine, New Jersey, Rhode Island, South Carolina, Vermont and West Virginia.2 The same rule has been extended by judicial interpretation to Illinois, Kansas,

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1 Cooley on Taxation, 2d ed. (1886), 373, 374. See especially Coe vs. Errol, 116 U. S. 517, where the court terms this an elementary point."

2 Conn. Gen. Stat., secs. 3828-3830 (applies only to property actually invested in merchandising or manufacturing); Ind. Rev. Stat., sec. 6287; Me. Rev. Stat., tit. i, sec. 14, § 10; N. J. Rev. Stat. [1877], p. 1151; R. I. Pub. Stat., chap. 42, sec. 9 (applies only to machinery, machine tools, stock in trade, merchandise, lumber, coal and stock in livery stables); S. C. Rev. Stat., chap. 12, sec. 1; Vt. Rev. Laws, sec. 270; W. Va. Code, chap. 29, sec. 48. Cf. on this point Moore, Corporate Taxation, in American Law Review, 1884, p. 766.

Missouri, New York and Ohio.1 In other commonwealths the rule is applied only in part. Thus in Arkansas, South Carolina and Virginia a similar exemption is made for all personalty except in so far as money, credits or investments in business are concerned.2 Again in Delaware only so much of the personalty is exempt as consists of non-productive securities of other commonwealths. Finally in Michigan all the personalty of a resident is taxable except that which is invested in another commonwealth. But in most of the commonwealths the legal fiction still prevails, and the individual is taxed on all his personalty irrespective of its location. The obvious result, of course, is double taxation of a nature which cannot possibly be justified.

In the case of corporations, we are confronted by precisely the same difficulties. For corporate property is treated in the main like that of individuals. It is entitled to the same exemp tions and subject to the same conditions. It will be readily perceived, however, with what difficulties the problem is beset when, as is usually the case, the personalty of a corporation is assessed at its place of business as the legal situs. In Michigan, indeed, it has been held not permissible to tax corporations for property outside the state. And in South Carolina the tax is specifically limited to corporate property within the state. But in general the rule is the same as in the case of the property of individuals — a rule leading to double taxation with all its attendant injustice.

6

Manifestly, if the commonwealths will still cling to the policy of taxing the actual corporate property, the only logical and

1 Mills vs. Thornton, 26 Ill. 300; Fisher vs. Commissioners of Rush County, 19 Kan. 414; State vs. St. Louis County, 47 Mo. 594; People ex rel. Hoyt vs. Commissioners, 23 N. Y. 224; Carrier vs. Gordon, 21 Ohio, 605. Cf. for the practice and cases up to 1871, (First) Report of the (New York) commissioners to revise the laws for the assessment and collection of taxes (1871), pp. 130-147.

2 Ark., Mansfield's Digest, sec. 5048; S. C. Gen. Stat., chap. 11, sec. 149; Va. Code, sec. 492.

3 Del. Laws 1879, chap. 2.

4 Mich. Laws 1885, no. 153, sec. 2.

5 State Treasurer rel. vs. Auditor General, 46 Mich. 224.

6 S. C. Rev. Stat., chap. 12, sec. 28.