USA > Rhode Island > Providence County > Providence > State of Rhode Island and Providence Plantations at the end of the century : a history, Volume 3 > Part 26
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In this contest between the towns and the state over the enforce- ment of a tax statute some fundamental constitutional questions were raised. The sovereignty of the general assembly in matters of taxa- tion had not been questioned since its claim to that power in 1678. The assembly had not expressly declared that the law of valuation
1By this scheme also trading stock at sea in the form of vessels and cargoes at sea was in fact only taxed one-sixth of its value.
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PUBLIC AND PRIVATE FINANCE.
and apportionment of 1762 should be the basis of future taxes until a new valuation was made, but such was the general interpretation of its contents. There was nothing to prevent a succeeding session of the assembly from exercising its sovereign power in repcal- ing the act and making a new apportionment; nor did the towns deny such a claim. They asserted, however, that a new apportionment must be just, and that to be just it must be based on a complete revaluation of the state and not be subject to change at the caprice of every session of the general assembly. Their successful protest virtually decided that one general assembly could bind the method of action of its suc- cessor, that the intent of a law must be observed until the law is ex- pressly repealed, and that the towns and not the courts were the final judges of the equity of a law. This was something of a legal revolu- tion. It erected a law defining the method of apportionment of taxes into the nature of a contract between the state and the towns. It raised a statute into the realm of constitutional law. It made the towns supreme judges of the powers of the general assembly, and to that extent limited the sovereignty of the latter.
The effect of these events would doubtless have been more marked and far reaching had they not been so intimately associated with the political excesses of the Hopkins-Ward contest. Protests were made to nearly every tax assessed by the state from 1759 to 1796, and in the latter year Providence itself refused on much the same grounds as before to levy a tax, stating in its protest to the general assembly that it was "unconstitutional", but in no case except in 1767 did the pro- testing town ultimately fail to acquiesce. The incident may there- fore be looked upon as illustrating political as well as constitu- tional development. A new valuation of the state in 1766-67 was the result of the controversy.
During this period the enactment of laws defining specific objects of taxation and fixing their values was abandoned and in their stead was substituted the custom of taxing all forms of property, the law specify- ing only the exemptions. Not what was, but what was not taxable became the subject of legislation.
The first law, that of 1744, specified very low values for livestock and slaves, four years old cattle and horses being rated at £10, and sheep at 15s., when paper money was depreciated to at least 5 for 1. Trading stock was rated at one-half value, and real estate at ten years' rental. In personal estate was included "money, bonds or other estate that lies concealed". This was to be rated at full value. The law was peculiar in providing that those who made profit by their faculties were to be taxed accordingly.
The features of the law was its leniency toward most working capi- tal; accumulated savings in the form of intangible property and
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
faculty being alone taxcd at full value. A table will clearly illustrate the changes in the form of valuations, beginning 1744 and ending 1796.
1744 1762
1767 1796
Improved lands 10 yr's. rental 12 yr's. rental 20 yr's. rental full value
Unimproved lands
1/ value full value
Live stock nominal
full value
Manufacturing plants 10 yr's. rental 12 yr's. rental 15 yr's. rental
Trading stock 1/2 value
12 value full value
66
Other personality full value
12 value
66
66
Vessels and cargoes at sea.
13 value
3% value 2% value
The members of the valuation committee of 1766 were instructed to deduct personal indebtedness from the individual ratings if they saw fit. In 1769 religious and educational property was exempted from taxes, and during the Revolutionary period debts due from debtors in Great Britain were excluded from personal assets. These debts, as we have seen, were subsequently assumed by the state. In 1784 they were again included in taxable property. The act of 1795 exempted farming and mechanics' tools, household furniture and one-third of property at sea.
The abandonment of the attempt to specify the various kinds of taxable property was accompanied also by the abandonment of the attempt to discriminate in favor of certain kinds of property, and doubtless the unsettling of values during the Revolution tended to that end. A tax assessment law of 1779 was the first to specify that all property should be rated at its full value. Perhaps also the unsettling of all industry was the cause of the exemption of certain necessaries of life in the form of household goods and tools already mentioned. The faculty tax of 1744 was not re-enacted in any subsequent laws. The tendency of these changes in tax laws was to leave more and more in the hands of local assessors the determination of the scope and methods of local taxation.
As to methods of assessment: a peculiar law was enacted as the result of war exigencies in 1778, when in the absence of the owners of lands, the tenants of farm lands who had occupied them one year were taxed for the lands they occupied. In 1782 the idea was expand- ed into a general law taxing all leased and rented real estate to the occupier, and the provision continued in force nearly fifty years.
There were a few other sorts of income during the few years subse- quent to the Revolution, but they were not important.1
Of expenditures during the Revolutionary period little need be noted. The contributions of Rhode Island and her citizens, in the
'The rental and sales of confiscated estates, the latter sum amounting in 1781 to 1792 to £15,931. Such funds should have been used to redeem the bills of credit issued upon them in 1780, but they were diverted to other uses. The interest on the bank of 1786 was not regularly paid, the receipts for the first six years being only £15,611 10s. The income from fines was very irregular during the war years. In 1796-97 the amount collected was $615.27.
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PUBLIC AND PRIVATE FINANCE.
form of money loaned to congress, taxes paid and loans made to the state, were about $2,600,000. These figures include interest to 1790, and the principal sum at the close of the war in 1783 may be calculated at about $1,830,000, or nearly $230,000 annually. Had the whole sum been raised by taxes during the war it would have amounted to a per capita charge of $4.30. The amounts advanced to "invalids" for pensions to April, 1786, were £3,334 2s., and from 1786 to 1792 £18,075 2s. 5 1-2d.
The normal expenditures of the peace period were still confined to a small salary list and a few thousands for internal improvements. In 1795 the ordinary expenses were about $5,000 annually, and for the previous few years about $8,300 had been expended chiefly on the court houses and prisons. In 1800 the ordinary expenses had risen to about $6,000, estimated by the treasurer as follows: Governor's salary and fees for signing commissions, $675; lieutenant-governor's salary, $300 ; attorney-general's fees, $300 ; five justices of the supreme court, $1,900; general treasurer, printing and stationery, $250; other expenses, $1,375.
PART III-1800-1900.
A Century's Expansion.
The sources for this period are the acts and resolves and reports of the general assembly, reports of the treasurer and auditor, and the newspapers of the time.
The finances of the nineteenth century present points of marked difference from those of earlier date. Questions of taxation no longer involved the constitutional relations between the local and central government, the supreme authority of the latter being fully recog- nized. The development of manufacturing and the shifting of popu- lation from the country to the towns-Providence having had 11 per cent. of the state's inhabitants in 1800, 28 per cent. in 1850, and nearly 43 per cent. in 1900-has been attended by wholly new problems in finance. The increased duties and functions of local government have increased the expenditures of the cities and towns so much beyond those of the central government as to almost overshadow them. The following table will illustrate the comparative growth of the expendi- tures of the state and the city of Providence :
Expenditures
1800
1825
1850
1875
1900
of State
$6,200
$18,300
$92,000
$595,200
$1,351,600
of City
10,400
38,000
163,100
3,771,200
4,965,500
The legal aspect of taxation since 1825 has been directed to an ever
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
increasing mass of intangible personalty, and toward the proper methods of assessing legal persons in the form of corporations.
The tendeney of taxation from a sole reliance on general property was foreshadowed in 1798 by the first of a series of laws imposing special taxes on occupations and trades. In June an act was passed taxing every attorney $20 on his admission to the bar and $8 annually. A tax of twenty-five eents was laid on every writ, and the proceeds of all the taxes were devoted to paying the salaries of the judges of the supreme court. These three sourees produeed an income of $1,165.50 in the two years 1797-99, not quite a third of the annual salaries of the judges.1 Lieense taxes were gradually extended and inereased in amount. Lieenses were charged for shows, exhibitions, billiard tables, shooting galleries, bowling alleys, liquor selling, peddling and the sale of goods by auctioneers. They were, however, received by the town eouneils and seemed to have been wholly used for loeal purposes. In 1822 a state law was passed imposing a duty on lieensed persons and bodies corporate as follows: On every person lieensed by the town council of the several towns, $2; on every officer aeeepting a civil commission, $1; on every elerk of the supreme court or elerk of com- mon pleas, ten per eent. of all fees over $400; on every money broker, money ehanger and vender of foreign lottery tickets, $100; on banks, exeept the United States bank, fifty cents on every thousand dollars of eapital stoek actually paid in; on every insurance company, except mutual fire insurance companies, one per eent. of the amount of their dividends ; and on agents of foreign insurance companies, $200. In the same year hawkers and peddlers were subjected to a lieense fee of $25. Auctioneers paid a duty of one per cent. of sales. In 1826 a duty of one per eent. was imposed on each and every elass of lottery which might be drawn in the state and upon any amount sold by any bearer or vender of lottery tickets. Many changes have been made in these laws. At the present time hawkers and peddlers pay a state lieense varying aeeording to the character of goods vended from $200 to $60 for the whole state and from $50 to $15 for one of the small counties. Itinerant venders pay both a state and local lieense of $25 and $5 each, and under existing statute the towns pay to the state one- half of the lieense fees on bowling alleys, pool and billiard tables and on exhibitions. Auctioneers pay a duty of one-tenth of one per cent., one-eighth for the use of the town and the remainder for the use of the state.
Lieenses were issued by the towns to agents of foreign insurance companies until 1844. The taxes on insurance companies in general have been frequently modified by laws imposing specific taxes on agents of foreign insurance companies of from $200 to $350 each, and taxes on companies incorporated in the state at a rate of $300 for stock
1The annual tax was abolished in 1812.
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PUBLIC AND PRIVATE FINANCE.
companies and $200 for mutual companies annually. All such taxes. however, were superseded in 1881 by a tax of two per cent. on pre- miums and assessments. The taxes and fees of the clerks of court have been abolished by the introduction of the salary system. In 1872 the tax on civil commissions was increased to $2.
Of the special taxes that on lotteries was one of the most productive. Lotteries had been introduced by private parties early in the eiglit- eentli century; they had been forbidden by law of 1732 but were licensed in 1744, and just one century afterward the last one, granted in 1839 for five years, expired. They were prohibited by the constitu- tion of 1842. They were a prolific source of income, but though used to some extent to procure funds for public improvement, they were used even more for private purposes, and the receipts from them sel-
14605 No. 5870 Providence First Congregational
Meeting Houle Lottery.
This Ticket entitles the Dof-
feffor to fuch Prize as may be drawn againft its Number, agreeable to an Act of the Legiflature, paffed at January Seffion, 1795 ; fubject to a De- duction of Twelve and an Half per Cent. Đ
Sand wi Girare
TICKET IN THE PROVIDENCE FIRST CONGREGATIONAL LOTTERY. From the original among the Providence Town Papers.
dom appear as a part of the state income. They reflect the moral standard of their time and were a fitting accompaniment to the whole- sale issue of paper money. The economic ills which they caused were incalculable, but they had the sanction of the well-to-do and educated classes until far into the present century. The objects to which they were devoted were varied. ] Introduced first for building Weybosset bridge, they were granted for building churches, parsonages, furnish- ing funds for educational institutions, building the market house in Providence and constructing roadways, repairing public buildings and building piers. Those who had become bankrupt by paper money and could not dispose of their property to advantage platted their land and issued lottery tickets against it. Those who suffered by fire on
16-3
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
land or by storm or pirates at sea rceouped their losses from their fellow citizens by a lottery. Brown University profited by a lottery scheme, and the steeple of the First Congregational mecting-house is a monument erected by an appeal to the gambling spirit of lotteries.
The lottery taxes of one per cent., imposed in 1826, yielded, during the four years 1827-31, sums varying from $7,000 to $16,000 and averaged about $12,000 annually. Beginning in 1831 it became eus- tomary to pay a specific bonus in lieu of the tax, the usual sum being $10,000. The state's ineome under this system averaged about $9,400 a year until lotteries were prohibited. The appropriation of the income from lotterics to the establishment of a permanent school fund in 1828 was a peculiarly fitting use for the state's share of the pro- ceeds of a system sanctioned by ignoranee and productive of vice.
Another tax, more important and equally easy to collect, but not now produetive, was the tax on banks. It was first levied by a law of 1804 and imposed a duty of one-third of one per eent. on their eapital stock. The representatives of Providence, Bristol and Newport coun- ties opposed the passage of the aet vigorously and attempted to have the rate reduced to one-fourth of one per cent., but failed. The ground of objeetion was that it unjustly diseriminated against a pecul- iar form of business, but its advocates elaimed that incorporated institutions like banks, by terms of their eharters, possessed peculiar advantages and privileges and should bear a share of the publie bur- dens proportionate to the speeial privileges thus granted to them by the state.1 Opposition was powerful, however; the banks delayed returns and tax payments were deferred. The law was repealed in the following year. It was revived in 1822, but with the tax fixed at a much lower rate of fifty cents on every thousand dollars of capital stock. The rate was inereased from time to time until in 1853 it reached thirty-three eents on eaeli one hundred dollars. Both because of the inerease in the rate and the increase in banking eapital, the income increased from a little over $2,000 at first to an average of nearly $70,000 in 1860. In 1831 an additional tax of two and one- half per cent. on every inerease in eapital stoek was imposed, and during some years a bonus of one and one-half to two and one-half per cent. on the capital stoek was paid for the grant of a eharter. In 1849- a tax was also levied on all reserved profits over four per cent. of the eapital stock. Opposition to the tax of 1822 was more vigorous but less sueeessful than in 1804. The banks claimed that their charters were contracts between themselves and the state, that the vested interests of their stockholders and customers were inviolable, that tlicy were legally and fully performing their part of the contraet by offer- ing eertain advantages arising out of banking facilities to the publie. The supreme court, however, decided that as the charters contained no
1The extraordinary nature of those privileges will be discussed later.
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PUBLIC AND PRIVATE FINANCE.
clause conferring on them immunity from taxation they were not exempt.
Taxes under this law ceased to have any importance after the national banking act. In 1860, however, a tax of fifteen cents was imposed on each $100 of deposits and reserved profits of savings banks. The rate has been increased to forty cents and now yields over $350.000 annually-being about one-fourth of the state's total income.
Licenses for the sale of spirituous liquors were, as we have seen, early regulated by the state. In 1709 the rate of license was fixed at £10, and in 1728 the distinction between retail and wholesale seems to have been for the first time clearly made, the restrictions on the sale of intoxicants having previously, and indeed for many years after- ward, applied rather to the classes of persons who were allowed to buy than the quantity sold. The license question was therefore rather social and local than financial and state, and in the enforcement of the laws much was left to the discretion of the town councils. The social aspects of the question were strongly emphasized in a proposed bill submitted to the towns for approval in 1753. In this interesting instance of the survival of the referendum stringent clauses were proposed in regard to illegal selling and more efficient methods of meting out justice to violators of the laws were provided, but as in the case of the reference to the towns of the question of the repudiation of the state debt in 1787, we have no record of specific action having been taken. The purely local scope of license is further illustrated by the facts that until 1822 the whole of the license fees inured to the town, and the fines for breach of the law were devoted, one-half to the use of the poor of the town and one-half to the complainant, until 1826. In the former year $2 was paid to the state on every license granted, and in the latter year one-half of the fine was taken by the state.
Much of the discretionary power lodged in the town councils had been directed also toward the selection of the proper persons and the determination of the number who should be licensed. The state had aided them in this respect to some extent, but the last state restrictive enactment bears the date of 1806. Retail selling by the law, that is, the sale of less than a pint to be drunk on the premises, was confined to tavern-keepers. The law was repealed in 1817 and licenses could be granted to any onc.
The license fee was small, being $4 to $20 by the law of 1798. The assumption by the state of $2 for every license and a share of the fines, together with the increase of the rate of license to $5 and $50-the result of the wave of temperance agitation in 1830-mark the begin- nings of the fiscal importance of liquor selling.
The public attitude toward liquor licenses has resulted in various laws affecting the traffic since 1830. Thus, from 1838 to 1841, and from 1845 to 1852, local option prevailed. From 1841 to 1845, from
244
STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS.
1852 to 1863, and from 1874 to 1875 legislative prohibition prevailed. From 1886 to 1889 constitutional prohibition was in force, and since that time license with a modified form of local option has been pro- vided for. During the periods of license the state and indeed the local income was of relatively little importance, as until 1867 the retail license fee was only $50. But beginning in 1863 the state took a por- tion of the license money. The amount then by law appropriated to the state treasury was three-fourths of the local receipts. This law may be looked upon as a war measure. Soon after the war, namely, in 1867 the state's share was reduced to one-half, but at the same time the first reasonably high license law was enacted. The distinc- tion between a wholesale and retail business was determined by the value of the liquors sold, $30,000 of business being the dividing line ; all dealers doing over that amount of business paid $500 and retailers $350. The receipts from the city of Providence, owing to these two changes in the law, increased from about $5,000 to $34,000 in one year. The state's share was again reduced in 1889 to one-fourth of the local receipts, and the wholesale license fixed at from $500 to $1,000, while the first-class retail was only advanced to $400. The state income from liquor licenses in 1900 exceeded $109,600 and that of the towns $338,000.
Owing to the large income from the various special license taxes and the receipts from the United States deposits, in 1837 and a few years thereafter, the state levied no general property taxes on the towns from 1824 to 1849. Taxation was, however, still maintained by the towns for local purposes, and the law governing it developed almost wholly along the line of exemptions and the classification of corporate property. On its administrative side taxation has made but slight advance within the century. The old form of a personal return under oath, required by the law of 1704, is still relied upon as a means of reaching all kinds of property, although returns ceased to be made to any great extent about the year 1830. The personal returns occa- sionally made since that time, especially those of recent years, have been in most cases only made as a means of escaping taxes imposed by the assessors. The taxpayer has no redress from over assessment unless he has previously made a sworn return. Responsibility for the enforcement of the law rests, therefore, upon the assessors.
The law of 1748, authorizing the towns to 'assess taxes for defraying incidental expenses and for paying local indebtedness "on real or personal estates or both, and on polls", was interpreted as giving to the town the option of levying a poll tax in connection with a prop- erty tax, or levying only property taxes. The town of Providence ceased to levy a poll tax in 1792. The state, however, continued to levy poll taxes until 1811, when they were prohibited by law. A registry tax, or a tax for the privilege of exercising the franchise, was
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PUBLIC AND PRIVATE FINANCE.
imposed by a law of 1844, but no poll tax was subsequently levied in Rhode Island until 1889, when a tax of $1 was levied on all, "who if registered would be qualified to vote". This law, however, is of local importance only because the state taxes are levied upon general prop- erty only, and since 1849 the towns have generally assumed the pay- ment of the sums levied upon them by the state and taken the funds to pay them with from their general income.
Except for the abandonment of the poll tax in 1811, exemptions have related to property devoted to religious, charitable and educa- tional purposes. The indefinite law of 1769 was made more specific in 1829 by limiting the exemption of religious and educational prop- erty to the buildings devoted to such purposes and the land on which they stood. About the year 1850 the rapid increase of the foreign population of the state and the consequent growth of the number of those who were members of the Roman Catholic church added to the importance of the question of tax exemptions of religious and educa- tional property, while at the same time the rapid development of the state increased the value of such property. Exemptions were then limited to three acres of land, so far as such land was used exclusively for religious and educational purposes. The subject of exemptions became a political question, and a few months after the enactment of the above law, a state election having intervened, it was repealed, and all such land "not leased or rented" was free from public dues. Two years later even this limitation was repealed and all property, whether real or personal, used in connection with religion and education, or the income of which was devoted to religion or education, was exempted. In 1870 the real and personal property of free public libraries or in- corporated library societies was added to the list, while the exemptions of the personal property of religious and charitable societies was limited to $20,000. The financial crisis of 1872 emphasized the ques- tions of exemptions anew. It was estimated that the property ex- empted by law throughout the state was worth $20,000,000. It was pointed out by those who were opposed to any and all exemptions that the existing laws did not conform to the fundamental principles of Rhode Island, which pronounced for a distinct separation of church from state, and that this principle had been voiced in the constitution of 1842, which expressly declared that no man should "be compelled to frequent or to support any religious worship, place or ministry whatever". In the arguments presented before a committee of the legislature a prejudice against the Roman Catholic church was but ill- concealed. Many seemed to see in its teachings a lack of respect for and loyalty to the state. The Romanists, however, claimed that the establishment of parochial schools saved the city an expenditure of a large sum of money for educating their children. The law passed, as a result of the free discussion of the question at the time, bore heavily
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