History of Dakota Territory, volume III, Part 49

Author: Kingsbury, George Washington, 1837-; Smith, George Martin, 1847-1920
Publication date: 1915
Publisher: Chicago, Ill. : S.J. Clarke Publishing Company
Number of Pages: 1146

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Under the new law the state board of equalization and the county auditors met for consultation at Pierre in March, 1905. The state board began listing for taxation private car systems and under the law was given until December I to investigate and place on the tax list any property which had escaped taxation, and this was believed to be one of the properties that had thus far evaded its duties. Other special properties were similarly listed. The state board of review was called upon to act upon the protest of the owners of telephone lines owing to the great advance in their valuations. The board decided that telephone company values had been placed at a figure where their taxation would be out of proportion to other property of the state, whereupon a reduction of 15 per cent was granted from the figures adopted by the board of equalization. The Western Union Telegraph Company also asked for a reduction and the board of review granted their requests to the amount of 10 per cent.

The Black Hills Mining Association likewise protested against the rate of assessment placed against them by the state board. For the first time they were returned this year in a separate class from farm lands with which they had previously been assessed. The assessment as returned from Lawrence County was a little over one hundred and eleven dollars an acre and this sum was raised 25 per cent by the state board. Other Black Hills counties returned lower valua- tions, but all were raised by the state board, though not as high as Lawrence County. This was due to the fact that Lawrence County was reputed to have a richer mining section than the Southern Hills. Since the organization of the state efforts to secure separate classification of mining lands for assessment had been made, but the Hills members of the board and of the Legislature had always been able to ward off such a blow until the session of 1905, when the Legislature passed a bill to that effect. The mining people in the Hills prepared to enter formal complaint before the state board in due time.

The state board of equalization in the summer of 1905 made an increase over the assessment of the previous year. It had been authorized to arbitrarily use its judgment in regard to increased valuations, but the board believed it would be wiser to search out and assess new property which had up to this date usually escaped the scrutiny of assessors. The express companies had been assessed on

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an arbitrary basis in the past, but now were placed on a mileage basis. The valuations on telephone and telegraph companies were increased radically, be- cause the companies paid only a state tax of 2.5 mills on the dollar of assessed valuation. In order to make these companies bear their share of the burden the valuation was considerably raised. The total increase in corporate assess- ments, including all classes of property which came under this head, was practically $767,692, of which the railroads stood $414,617. For the first time the Colton Road in Minnehaha County came under this assessment. Telephone companies were assessed $273,015; telegraph companies, $60,000; express companies, $15,- 000, and the Pullman Company, $5,000. This assessment shows how enormously within a few years the telephone companies had spread over the state. There were 143 companies as against 106 for 1904. The increase in the railroad assessment was caused by the branch line extensions. For the first time there was a listing of mineral lands this year under the law of the last winter. The counties making the mineral land returns were Custer, Lawrence and Pennington. Custer returned 4,147 acres valued at $30,449. This was raised 10 per cent by the board. Lawrence County returned 41,570 acres valued at $4,570,017, which was a 25 per cent increase. Pennington returned 9,525 acres valued at $190,913, which was a 15 per cent increase. Farm lands were assessed about the same, but there had been considerable increase in the acreage. The assessed valuation of farm lands was $124,780,992. The highest valuation in any county was $13.36 an acre, in Clay County, and the lowest was $2.13, in Fall River County.

This first meeting of the county auditors of the state with the state board of equalization was held at Pierre early in 1905 and was well attended, every county except Stanley being represented. The question of a basis of assessment was radically discussed, and many divergent views were expressed, but on the whole all agreed to certain reform measures concerning taxation. Immediately succeeding the joint meeting the county auditors assembled and formed an organization with the following officers: Charles E. Hill, of Minnehaha, presi- dent ; J. F. F. Parks, of Custer, first vice president ; R. M. Cotton, of Bon Homme, second vice president; W. M. McDonald, of Spink, secretary-treasurer, and P. J. Murphy, of Brookings; George Bippus, of Campbell; W. A. Nevin, of Custer; Chris Myhre, of Lyman, and E. W. Brown, of Turner, executive com- mittee. The recent bill of the Legislature authorized the county equalization board to go behind the assessor's returns to get at any assessable property which to their knowledge or belief had escaped the assessment roll, and in case of failure of the county boards to act placed such authority within the power of the state board to search out such property. The law placed the burden of proof upon the owner in case he was absent and required him to show why it was not listed. At this meeting also attention was called to the list which had been prepared by the state board for a general basis of averaged values for different classes of personal property which was founded on averages as shown on former assessment lists. This list was on the following basis: Horses under three years old, $17; horses over three years old, $35; cattle under two years old, $8; cows over two years old, $14; all other cattle, $18; mules, $30; sheep, $2; swine, $3 ; wagons and bug- gies, $2; organs, $12 ; pianos, $85.

By 1906 it was shown that after an experience of seventeen years it re- quired a deficiency levy by the state of 2 mills every alternate year to meet the

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emergency or deficiency expenses. Thus the annual expenditure required was about three mills on the total assessment. As the assessment of 1906 was $222,- 426,469, the revenue at three mills from this source amounted to $667,279. At this time the bonded debt of the state was only about fifty thousand dollars, and there was more than enough cash in the treasury to equal that sum. Treasurer Collins had paid off during his term in office $300,000 in bonds before they were due. In 1906 the total number of acres assessed in the state was 21,251,642. This was valued at an average of $6.11 per acre by the assessors.

In March, 1909, at the meeting of the county auditors with the state board at Pierre, thirty-seven counties were represented, regardless of the fact that the Legislature had refused to make any provision for the payment of the expenses of such officers in attending the meetings. Every section of the state was rep- resented, even if every county was not. It was decided to appoint a committee to examine the assessment and valuation schedule and report to the meeting. The committee reported a schedule for farm land assessment which, after being slightly modified, was adopted. The changes were all in the line of increase and ranged from 10 per cent up. On the other schedules all rates were adopted as they existed the previous year, with the exception that the valuation of pianos and organs was reduced. All understood that the object this year was to get one-third of the actual value.

In October, 1909, the special state tax commission appointed under the law by Governor Vessey took into consideration after mature deliberation the follow- ing important points : (1) To stop double taxation on mortgages ; (2) to improve the tax law of the state, which was crude and unfair; (3) to place a tax on incomes, which, thought not recognized by the state constitution, could be reached only by special action of the Legislation. The state board of equalization had neither the necessary information nor the official discretion to tax incomes suc- cessfully, nor could they prevent inequalities and variations between the work of different assessors. Under the law the officials of the state, owing to lack of definite authority, were powerless to adjust inequalities in assessment rates, not only between special properties, but between localities such as counties. Everybody knew painfully that large values in personal property wholly escaped taxation.

The constitution of South Dakota specifically required all assessments to be made at full valuation, but remarkable to state this had never been done. The general aim had been to assess property generally at 331/3 per cent of its actual value and to assess bank stock at about 50 per cent of its value. In 1906-7 the assessors began to assess bank stock at 40 per cent of its actual value and other property at 33 per cent of its actual value. The rate on bank stock was placed higher than on other property, owing to the surplus and undivided profits which of right, it was thought, should be deducted from the bank stock proper. It was admitted that it was an impossible matter to make satisfactory assessments, owing to the increase in land values and to the uneven, uncertain and doubtful valuations. While lands rapidly increased in value in some portions of the state, they decreased or remained stationary in others and these changes had to be taken into consideration with much care to equalize the assessment and treat all property holders on a fair basis, a result that thus far had never been accom- plished.

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The tax .commission, consisting of Dean Sterling of the university, J. B. Hanton of Watertown, and Dr. H. K. Warren, president of Yankton College, appointed by Governor Vessey late in 1909 and later sent as delegates to the International Tax Conference at Milwaukee, made full report to the governor in January, 1911. The report discussed elaborately the various taxing systems and compared their respective merits. The report said that the system in South Dakota was such that under the constitution property could not be classified for taxation according to kind or economic use or value. The burden of the report was that an entire change in system was imperative before an improvement in taxation in the state could be expected. The commission was of the opinion that the law should permit the classification of personal property so that the taxing authorities could impose a different rate upon different classes of property ; that under the existing system a large amount of intangible personal property was not listed at all for taxation, but left the burden to be borne by the property that was tangible. The report of the commission was drastic and went to the bottom of a defect which had perplexed the state since its organization.

In I911 about one million acres in the state, which had never before been taxed, was placed on the assessment roll. The land had previously been entered and was now transferred permanently from the Government to private owners. The appropriations for 1911 amounted to $1,066,417, and in 1912 to $1,083,662. The assessment in 1910 was $337,702,276, and in 1911 it was $349,640,703.

In 1912 successful efforts to bring under taxation several large industrial concerns of the state were made. The Homestake Mining Company, it was ascertained, had never paid its proportionate rate of tax. The company had become really an important property factor and apparently for this reason was permitted to list only a small fraction of its property for taxation. For years it had been listed at $2,000,000, though it was well known that its property was worth at least $25,000,000. In 1912, seeing the inevitable apparently, the con- pany voluntarily raised its assessment to $8,000,000, hoping thus perhaps to escape a much larger and juster assessment, but the new State Tax Commission was not to be deceived by such ledgerdemain and accordingly during the summer of 1913 fixed the valuation of the property for assessment at $16,000,000. This act occasioned great indignation, assumed or real, from the members of that corporation, who proceeded in severe terms to criticise the fairness of the tax commission. Other big concerns in the Black Hills and at Sioux Falls received the same surprise.

The tax commission appointed by Governor Byrne in February, 1913, were H. C. Preston, of Mitchell, six years; Hugh Smith, of Howard, four years; C. N. Henry, of Redfield, two years. H. C. Preston was made president of the commission. At a meeting of the county auditors held in Pierre near the last of March, he outlined what the commission expected to do under the new tax law which had just been passed and of which so much was expected. The total valuation or assessment of all property in the state under the new tax law was $1,196,708,270 and the tax rate was I mill. This gave the state a revenue of $1,196,708. In 1912 the assessment under the old law was $353,228,056 with a 4-mill levy. Thus the levy under the new law of 1913 was $184,406 less than that under the old law of 1912. It was figured that the tax-dodger would be required to pay a greater tax, and that other property holders would thereby

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be required to pay less. The total appropriations for the fiscal year 1913-14 were $1,946,578.

Thus in 1913, for the first time in the history of South Dakota, assessments were presumed to be made upon the real valuation in accordance with the con- stitution which had been adopted nearly a quarter of a century before. The revolution was complete and overwhelming. Land values were placed at 31/3 times over those of 1913 and railway property was placed at 3.9 times over those of 1912. The increase in land assessment was 235 per cent, in railroad assessment 290 per cent, and in express assessment 321 per cent. On an average quarter section of land, the tax under the new system was $4.09 and under the old system was $4.95. Thus the value of the land was increased about 31/3 times, while the state levy thereon was reduced to about one-fourth of what it had been under the old system. The I mill levy, despite assertions to the contrary by opponents of the measure, raised enough revenue for necessary state expenditures. It was found in 1913 by the tax commission that lands in the west- ern part of the state had been assessed year after year more proportionately than land in the southeastern part of the state had been assessed. The commis- sion in marking the assessment took counties by groups where the same condi- tions and products were and made a common basis of moneys and credits for all counties within such group. The moneys and credits were increased from about one million five hundred thousand dollars to over eight million dollars.

It was admitted, however, that no real reform could come without a suitable amendment to the constitution. The question had been submitted to the voters in 1907 and 1909, but had afterward in each instance been voted down by the Legislature. It was believed that the reform would have to be gradual and not sudden, in order to achieve success at the polls and satisfy the people. During the year 1913 the tax commission regularly issued bulletins to acquaint the public with its methods and operations. Governor Byrne said in October, 1913, "Our present constitutional provisions in regard to taxation are equitable in theory, but will not work in practice. In fact it is admitted by all students of the subject that the general personal property tax system has broken down and failed. It does not work equitably as between individuals or efficiently to raise revenue. My own idea is and has been that ultimately we should substitute an income tax for part or all of the personal property tax."

The State Tax Commission was criticised sharply by its opponents. It was declared to be an expensive luxury by the Aberdeen News, which said that it cost the state from eighteen to twenty thousand dollars per year paid to the commission and that they spent most of their time in looking after political matters and not attending to their duties. The News thereupon advocated the reactionary policy that the next Legislature should abolish the tax commission and return to the old system of taxation under the governor, state treasurer, state auditor and State Board of Equalization.

In the spring of 1915 a tax conference was held at Pierre and was largely attended by county assessors, county boards of commissioners, state assessors and members of city boards. The object of the conference was to examine thor- oughly the program of taxation in the state and still further to improve it. The conference was addressed by Governor Byrne and nearly all of the state officials were called upon to assist with information and suggestions. On that occasion

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there was held a session of the State Association of County Auditors, of which Harry H. Howe, auditor of Minnehaha County, was president. This meeting covered all subjects of interest in the line of duty of county auditors and was not confined to the subject of taxation alone. Many important innovations and improvements were suggested at this conference.

In July, 1915, the South Dakota Tax Commission reported a considerable increase in the assessment of public service properties in the state. Other prop- erty valuations remained about the same as the year before. The public service properties of the state were assessed as follows in 1914 and 1915:

Properties

1915

Railroads

1914 $129,384,257

$130,206,405

Telephones

4,043,33I

4,192,834

Express

2,959,960

2,897,680

Telegraph

928,353

Private Car Companies

280,000

413,454

Total

$137,595,90I

$138,638,726

The bugaboo of a crushing state debt has kept South Dakota back at least a dozen years. The constitution of 1889-90 fixed the maximum of state taxation at 2 mills on the dollar, but under rigid restriction also provided that in certain emergencies an additional 2-mill tax could be levied. At the time the constitution was adopted and for seven or eight years thereafter the whole country, including South Dakota, was in the iron grasp of a public or political movement which had for its slogan-better times for the laboring man, far greater economy and the obliteration of boss, ring and graft rule. No doubt this influence in the consti- tutional convention dictated the 2-mill clause. So strong was the cry of economy here that no politician had the temerity or courage to advocate an increase of taxation or the creation of a state debt for any purpose. Such a policy, he knew, would promptly spell his political and public doom in South Dakota. It is a fact that this sentiment was so paramount throughout the state that the public officials hesitated for many years to take advantage of the emergency clause in the constitution and levy the other 2-mill tax. They did not care to do it in the face of the call for economy, the cry against public extravagance, the demand for help from the laboring man and the shout that arose against mal- feasance in office, the corruption of public officials and the graft of political bosses, rings and cabals. The state officials could do little more than to levy the 2-mill tax and cut out all expenses, regardless of merit or importance, down to the lowest figures.

In 1914 the City of Seattle, Wash., with a population in round numbers of three hundred and eighty thousand had an indebtedness of about thirty million dollars. Of this a little more than seventeen million dollars was city debt proper, incurred for lighting, water and sewer systems, etc., and the remainder was indi- vidual debt assessed against the realty of citizens for the improvement of streets, walks, etc., adjoining their property. Every dollar of the indebtedness of $30,- 000,000 was voted by the citizens from time to time over a period of about twenty-five years. Why? Because they were satisfied with the results. The city has outstripped every municipality on the northwestern Pacific Coast. Had it

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not been for this proudly acclaimed "Seattle spirit" the city would have been crushed absolutely and completely back in the '7os and the 'Sos by the Northern Pacific Railroad and other gigantic influences which boosted Tacoma and did everything in their power to belittle, benumb, dwarf and kill Seattle. The Northern Pacific announced that it would go no farther-that Tacoma was the south terminal point, and thus, as it seemed, Tacoma was bound to become the great city of the sound country and Seattle was doomed to mere village propor- tions. And Tacoma began to grow rapidly. In this direful and threatening extremity, what did Seattle do? One thing it did not do-it did not sit down and bemoan its sad fate. The whole city put its hand down to the bottom of its pocket and willingly, enthusiastically, drew out enough coin to thoroughly adver- tise the city throughout the entire East. They employed every effort to secure railroad connection with the East. They pointed out the adjacent coal and iron supplies, the vast forests of fir and pine, the salmon, halibut and other sound and deep sea fisheries, and the fact that manufactories were sure to come there owing to the already vast trade with the Orient ; the fact that all of Alaska would be certain to give the city the bulk of its trade. They finally built their own first railroad of thirty miles back in the interior to the coal and iron mines and in direct line for use by any other railroad company that should come that way. They likewise entered into every negotiation that seemed feasible, to induce other railroad companies to make Seattle the sound terminal point. In every one of these particulars, except that of securing many large factories, the city has won; but it has succeeded far beyond its expectations in its trade with Alaska and its fisheries and its timber output. It has far outstripped Tacoma, has secured five transcontinental railways, has the best water system in the country without any exception. All is due to the "Seattle spirit," of which all boast-real grit and self-sacrifice to make their city the greatest on the Pacific Coast. And what do the citizens say about their big debt? They snap their fingers and say that they are ready to vote more if necessary and really did so in 1914-voted $3,000,000 for the improvement of their unrivaled large-vessel harbor. They will tell you that the debt does not scare them, that they can and will, if necessary, put their hands down in the aforesaid pockets which have been so responsive to their requests in the past and pay off the whole $30,000,000 in from two to five years or in one year if the progress and advancement of the city demand. If the present population is 380,000 and the debt is $30,000,000, the debt per capita is about eighty dollars. Aside from a few thousand families with large numbers of children, the payment of that debt in a year-$80-would scarcely cause a flutter of the pulse. And the few thousand families that would find it incon- venient would be promptly helped by the leading men who are inspired and glorified by the "Seattle spirit." They would be loaning their money on their own time. Or the big debt would be paid on the basis of wealth and not per capita.

It is true that most people are deceived by the ignus fatuus of taxation. Nine men out of ten spend each year more for tobacco and liquor than they do for their taxes. Ninety-nine out of a hundred spend more for luxuries and unnecessary things than they do on the assessment roll. But they are afflicted with the chronic disease of ascribing to taxation all their petty delinquencies, their business slips and their unnecessary and deplorable failure to make a living

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SOUTH DAKOTA: ITS HISTORY AND ITS PEOPLE

while carrying this bugaboo, this Old Man of the Sea, on their backs. From the start this has been the disease that has hampered the "South Dakota spirit." The early leaders did not have the ability to create the public pride that the leaders of Seattle did. Should this state now, the year of our Lord 1915, be suddenly placed in debt $30,000,000, it is reasonable to presume, from a knowl- edge of the past, that all the leading men would scarcely survive the blow. As the population of the state is about 583,000 the debt would be about $50 per capita. Where is the South Dakotan who could not pay $50 for every member of his family in from two to five years? Where is the South Dakotan who does not squander or waste that much every year? What, then, should be said of a debt of only $5,000,000 of $10,000,000 needed to develop the state irrigation systems and water power? A few years ago when the state debt was less than $500,000 it was both amusing and ludicrous to hear the lamentations that arose from every quarter. And once when the state debt was but $100,000 the official reports were filled with anxiety lest the state should suffer serious harm.

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History of Dakota Territory, volume III, Part 49

Author: Kingsbury, George Washington, 1837-; Smith, George Martin, 1847-1920 Publication date: 1915 Publisher: Chicago, Ill. : S.J. Clarke Publishing Company Number of Pages: 1146

Author: Kingsbury, George Washington, 1837-; Smith, George Martin, 1847-1920
Publication date: 1915
Publisher: Chicago, Ill. : S.J. Clarke Publishing Company
Number of Pages: 1146