National Tax Association

TAXATION IN CALIFORNIASource: The Bulletin of the National Tax Association, Vol. 2, No. 1 (October, 1916), pp. 25-27Published by: National Tax AssociationStable URL: http://www.jstor.org/stable/41787599 .

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BULLETIN OF THE NATIONAL TAX ASSOCIATION 2&

lation which it was directed to do, and also failed to pass any law to continue existing tax legislation in effect. It did provide, however, by act passed in 1916 that the " uniform plan for the assessment of prop- erty which shall be formulated by the state tax commission " shall be followed strictly by boards of county commissioners in the several counties of the state. This act was passed in order to remove any doubt which there may have been among the powers of the state tax commission, to provide a uni- form plan or method for the assessment of property. The court held that as the legis- lature has passed no general law as directed by the provision of the constitution, that there were no provisions for the assessment of property and that the state tax commis- sion could not order a re-assessment.

It was believed by the state tax commis- sion and others that if the opinion of the Frederick County Court had been affirmed, there would remain no laws on the statute- books concerning the assessment and valua- tion of property nor any provisions for ths levying and collection of taxes. The case was considered of sufficient importance for the commission to petition the Court of Appeals of Maryland to hear it in special session. The special session of the court of appeals was accordingly held on Septem- ber 7 th, and the unanimous opinion of that body was handed down on September 16th. The three points in controversy made by the plaintiff were decided in favor of the state tax commission. The action of the Frederick County Court in deciding that in the absence of legislation to put into effect the constitutional amendment, no power existed in the tax commission to order a re-assessment of real estate in the counties of the state, was denied by the court of appeals when it stated that :

" The general assembly neglected to discharge that duty, but it does not follow as a result of its. failure of duty in this respect that any valid laws relating to assessments, not in conflict with the: amendment, may not be availed of for that pur- pose. The authorities appear to be uniform in support of the proposition that the failure of the legislature to discharge a duty of the character imposed by this amendment leaves the valid and existing laws, not in conflict with any of its pro- visions, in full force and effect."

The opinion quotes copiously from text- writers and from adjudicated cases in sup- port of this proposition.

After disposing of this controversy, the court in passing upon the powers of the state tax commission stated in unequivocal terms that it was clear that the duties and powers conferred upon the commission were those to bring about an equal assess- ment of taxable property in the state, and that these powers conferred upon the com- mission the power to order an assessment^ and if in order to bring about an equaliza- tion a general re-assessment were necessary, it had the power to order a general re- assessment. As stated by the court, these were the powers for which it was created.

In regard to the ruling of the lower court that the act of 1916 was an attempt to delegate authority that the people had expressly conferred on the legislature and which could not be delegated to the state tax commission, the court of appeals re- versed the opinion of the lower court and held that the power to formulate the uni- form plans mentioned in the Act of 1916 " may reasonably and properly be referred to such administrative methods or proce- dure as the commission might adopt for making the assessment in accordance with and in conformity to existing laws on the subject/'

TAXATION IN CALIFORNIA The special State Tax Commission of

California has published an interesting pamphlet entitled, " Foreword on Taxa- tion in California," * in which some very striking conclusions and proposals are ten- tatively advanced, upon which the com- mission invites criticism and suggestions.

The commission first considers the clas- sification of agricultural land, and recom- mends that such land " be thoroughly studied by experts placed in the field to gather data on all of the physical condi- tions entering into the matter of land values. This should include classification of the specific soil and water conditions, definite summary of the typography and actual survey of the crop covering, of acces- sibility, and, in many regions of the state*

* i6 pp. May be secured from the Secretary, William V. Cowan, Sacramento, CaL

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26 BULLETIN OF THE NATIONAL TAX ASSOCIATION

a districting as to climatic conditions." The commission believes that the first cost of such a survey " would average around six cents per acre," and that the subsequent cost of keeping the records up to date would be negligible.

A similar system of scientific assessments for urban properties is also recommended; and a vigorous criticism launched at the absurd California practice of having two sets of assessed, valuations in cities, " one for municipal and one for county purposes, under a law providing for a full, cash- value assessment for both." The commis- sion also believes that " whenever a trans- fer of realty is made and recorded, the actual consideration in dollars and cents should be made a matter of record along with the transfer of ownership."

Owing to the existence of the federal in- come tax, the commission opposes " an in- come tax for the purpose of supplementing the present tax system, but is inclined to believe that if it were substituted for the tax on certain kinds of personal property, it would be more equitable than is the present levy of tax on personal property. Particularly is this so in regard to intan- gible personal property." It is evident, however, that in the minds of the commis- sion the main path of reform lies in the fundamental modification of land taxation, and on this topic we quote the report ver- batim and at some length :

Tax on Excess Land Values " Our problem of the land in California

is becoming more and more a real danger. It is one which should be attacked at once in a manner adequate to relieve the tension and at the same time to safeguard the sta- bility of our economic conditions. In so far as this problem may be approached from the standpoint of revenue and taxa- tion, this commission wishes to suggest an outline under which a forward step may be taken, and presents it at this time with the hope that there may be the fullest public consideration given the question. Large Land Grants Make Problem

Difficult in California " The land problems in California un-

doubtedly are made much more difficult than in many states of the Union for a number of reasons, among which are the conditions growing up because of large

Mexican grants which were accepted and recognized by the federal government at the time this territory was annexed to the United States; because of the slowness with which the agricultural development of the state as a whole has grown, and also because of the vast acreage of land, which, on account of the lack of natural crop conditions and undeveloped water, was considered in the earlier days practically worthless, but which now is undergoing a rapid development because of the intense usefulness of the land where water is ap- plied.

"As usual, there was practically no rec- ognition of the fact that there was a prob- lem until it became apparent that the evils of the present system had developed many difficulties. " There are the two extreme ideas which must be placated in any settlement of the trouble. On the one hand is the old idea of unqualified private ownership and con- trol, without any interference which would check the speculative features of land ownership, and on the other side those ex- tremely radical views that would disregard altogether property rights and confiscate all land values regardless of the equity of private ownership. Large Holdings of Unimproved Land

against Public Interest " This commission desires to suggest

some means by which an equitable adjust- ment of the trouble may be had without allowing either of these two extremities to exist. We start with the following state- ment:

"First. The private ownership of large holdings of land unimproved and unculti- vated is recognized by the constitution of this state as being against public interest, forcing, as it does, the purchaser who wishes to improve his land to pay to the holder the speculative and socially in- creased value of such land.

" Second . The holding of large interests in improved land and the consequent accre- tion of value thereto because of its situa- tion, and not because of the efforts of the owner, is also against public interest.

"Third. Fundamentally, every man has the right through his labors to a reason- able living from the land, and there should be recognized a maximum value of land which he is entitled to obtain and hold at

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BULLETIN OF THE NATIONAL TAX ASSOCIATION 27

a minimum cost as long as he makes bene- ficial use of the same.

Tax Suggested to Discourage Such Holdings

" Assuming the above statement to be correct, we suggest an additional, or excess, tax on increased land value as follows:

" A maximum excess tax on the future increase in value of all unimproved land or land not put to any beneficial use.

" A lesser rate of tax in the case of land improved or being put to beneficial use. " The exemption from such tax for each individual of a reasonable holding of im- proved or beneficially used land. " This commission does not at this time wish to propose any definite value for ex- emption, but purely as a matter of discus- sion we would suggest that the value of the exempted homestead right, namely $5,000, be considered as a starting-point, it being accepted tentatively that this would be the proper equitable allowance. " With these figures as a base, our sug- gested plan would mean that every person owning improved land or land being put to some beneficial use, up to the value of $5,000, should be exempt from an excess tax on the increased land value; that all land not in use should be subject to a max- imum tax of such character ; that all prop- erty in use in excess of the exemption should be liable to a lighter tax than the unused property; that the tax should be levied so that at definite periods a substan- tial proportion of the value which has been added to the land because of site or social conditions would be collected and paid into the treasury of the state.

Revenue from this Source to be Put in Permanent Fund

" The money collected from this source, we would suggest, should be kept in a per- manent fund to be invested in securities issued for the building of roads and other similar public improvements; the develop- ment of reclamation or irrigation districts ; for rural credits, or in any other way that would bring about an increase in social value which would in turn be returned to the fund. We further suggest that the in- terest would be collected from the invest- ments and loans of the fund should be used

in support of public* schools or other gen- eral governmental purposes, thus being utilized to reduce uniformly the tax burden throughout the commonwealth.

"This commission deems this matter of vital importance to the future welfare of the state. Complete details of the pro- posed innovation should be worked out only after the fullest public discussion as to the merits of the fundamental idea.

Commission Asks for Criticism and Suggestions

" We ask for criticism and suggestion in order that a proper and equitable start may be made, not only toward controlling the great speculative features of our land ownership, but also toward building up small land holdings and developing our unused land, together with what must necessarily follow- the protection of legiti- mate land investment and stable land values, and a more equitable distribution of the burden of taxation.

THE JOINT ASSESSMENT IN LOS ANGELES

The statistical results of the joint ap- praisal in Los Angeles, described in pre- vious issues of the Bulletin, are now known. Excluding for purposes of com- parison with the preceding year those sec- tions of the city recently annexed, the figures for Los Angeles City, as adopted by the Board of Equalization, show an in- crease of 11.1 per cent for all forms of taxable property. This is the resultant, however, of an increase in land and a de- crease in improvement values (assessed) : the assessed value of land in the city, ex- cluding the 1915 annexations, being in- creased 28.96 per cent, while that of im- provements was lowered 17.56 per cent. There was practically no increase in taxes (only $34,158), so that tax rates fell in inverse proportion to the increase of as- sessed values. The readjustment of assess- ments affected the various sections of the city very differently. Land valuations in- creased 19 per cent in the " Old City " and 90 per cent in Hollywood; improvement valuations decreased 12 per cent in Holly- wood and 37 per cent in the 1899 Annex.

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