The tax situation in Georgia

THE TAX SITUATION
IN
GEORGIA
By R. C. NORMAN State Tax Commissioner

The Tax Situation in Georgia
No ONE who !Ias casually studied the tax situation in Georgia can fail to realize that the present system is imposing an unfair burden on the farmer and small home owner and seriously hindering the growth and development of the state. .The act creating the office of State Tax Commissioner puts the incumbent of that office under the obligation of studying existing systems of taxation and of recommending to the General Assembly needed changes in revenue laws.
A study of the revenue systems of other states and actual experience in the administration of the tax laws of Georgia supplies conclusive evidence of inadequacies, inequalities, injustices and the utter unworkableness of Georgia's present system of taxation.
Georgia's present system of taxation, if it may properly be called a system, is what is usually known as the general property tax. All property must be taxed ad valorem; that is, according to value. All property, real and personal, visible and invisible, must be taxed at the same rate.
This system has been in effect since 1867, having first found a place in our fundamental law in the Constitutional Convention of that year, presided over by Governor Bulloch. It was re-enacted, in substance, in the Constitution of 1877, and despite the tremendous changes that have taken place in our economic structure, in spite of the varied and complex forms that wealth has assumed uu.der modern business and industrial conditions, has remained essentially unchanged for a period of more than sixty years.
Economists Condemn General Property Tax.
The general property tax is condemned by every authority on taxation. Economists who have made a life study of taxation and finance and who are completely free from self interest are a unit in condemning it as unfair, unjust, debauching to the conscience, demoralizing to industry and every form of business and totally unfitted to modern needs and conditions.

Beaulieu, an eminent French 'ifiter on finance, says:
"We have examined the general property tax in the United states. Modern taxation h.as seldom invented a more stupid instrument."
Dr. Oharles J. Bullock, past president of the National Tax Association and a noted authority on finance, says:
"Everywhere the story is the same. Existing laws are either unenforced, or if enforced, prove destructive to industry and highly injurious to the individual tax payer."
Dr. Ely, another recognized authority on the subject, says:
"The one uniform tax on all property in direct taxation has never worked well in any modern community or state, though it has been tried thousands of times."
Dr. Seligman, another past president of the National Tax Association and an outstanding authority, says:
"The general property tax as actually administered today is beyond all question the worst tax known to the civilized world. It presses hardest on those least able to pay. It is so flagrantly inequitable that its retention can only be explained through ignorance or inertia."
Dr. McPherson, of Georgia:
"The primitive conditions which rendered the general property tax tolerable have long since passed away."
Dr. Johnson, of Emory, and Dr. Brooks, of Georgia, join other economists in the universal chorus of condemnation.
State Tax 'Oommissions.
A vast majority of the states have either abolished or modified the uniform ad valorem scheme. The commissions that have actually administered this form of taxation, or are now administering it, can speak with authority as to its operation. A few brief quotations from hundreds of criticisms follow:
Louisiana:
"All opinions and reports tell the same sickening story: the discrimination against the weak and helpless; the fraud and trickery and perjury; the hindrance to industrial development; the utter breakdown of the general property system everywhere. This is not the experience of Louisiana alone; it is the universal experience of the civilized world."

Mississippi Special:
"The day is not far distant when a Constitutional provision requiring the general property tax will be an exception. No self respecting people ought to permit the present inequality an,d inequity to exist."
Virginia:
"Prior to 1915 Virghl.ia 'had the general property tax. This tax was of (course found to 'be unsatisfactory."
South 'Carolina Special:
"It is the little fellow, the small property owner, the poor man, who is carrying the heavier end of the log."
Arkansas:
"The general property tax burden has been shifted to the owner of real estate. If intangible personal property is to bear its just portion of the expenses of government 'it must be through some other form of taxation."
Illinois:
"The system is debauching to the conscience and subversive to the public morals."
New York:
"It puts a premium on perjury and a penalty on integrity."
West Virginia:
"The payment of the tax on personality is almost as voluntary and is ,considered pretty much in the same light as donations to the neighborhood church or Sunday school."
New Jersey:
"It is now literally true that the only ones who pay honest taxes on personal property are the estates of decedents, widows and orphans, idiots and lunatics."
The National Tax Association, the highest authority on taxation in the United States and Canada:
"The failure of the general property tax in its application to personal property is due to the inherent defects in its theory. Even reasonably fair and effective administration is unattainable."
Trade Bodies and Commercial Organizations.
United States Chamber of Commerce:
"It is notorious that the efforts to tax intangible personal property on the same ibasis as tangible property have failed.
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"The result is that where no efflfi!tive attempts have been made to reorganize the old form of taxation real property is payIng more than its just share of taxes. It Is strongly urged that the farmers are bearing an undue burden of taxation."
Virginia State Chamber of Commerce:
"Large quan'tities of property, particularly tangIble personal property, and intangibles, 'such as bonds, notes, shares of stock, etc., are escaping taxation altogether. This naturally shifts an additional burden to the property taxed."
This was prior to the enactment of Virginia's present excellent and modern system of taxation. The Virginia State Chamber of Commerce led in the movement for this reform.
Ohio State Chamber of Commerce:
"Ohio has operated under a strict uniform rule for more than seventy-five years. An equitable and just system of taxation is apparently not possible under the present Constitutional provision."
Cleveland, Ohio Chamber of Commerce:
"The attempt to enforce these laws is utterly idle."
Other financial and commercial organizations that have sur veyed the tax field agree upon the unfairness and inadequacy of the general property tax.
Georgia Authorities.
Mr. Justice Lamar, United States Supreme Oourt (142 U. S. 351):
"A system which imposes the same tax upon every species of property will be destructive of the principle of uniformity and equality in taxation."
Hon. Murphy Candler, at National Tax Association, 1909:
"We have no real, logical system. We need in Georgia not what our legislators so often declaim about, reform-we need re-creation. WE NEED TO REPEAL OUR CONSTITUTIONAL REQUIREMENT THAT ALL PROPERTY SHALL BE TAXED AD VALOREM."
Mr. Arthur S. Harris, Executive Secretary, Georgia Realtors Association:
"The thread-worn tax sy.stem in Georgia is as ancient by comparison as the timbers in Noah's ark and about as well equipped as this ark would be for the present method of navigation."
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Georgia Bankers Association and Country Bankers !ssociation, in joint convention, 1928:
"The present system of taxation in Georgia is inadequate, obsolete and condemned by alI competent authorities. We cordially endorse the movement to give Georgia a fair, modern and equita'ble system of taxation."
Platform Georgia Democratic Party 1928:
"The burden of taxation can and should be so distributed upon the people of the State of Georgia as to provide adequate revenue for all state needs, without discrimination against any group of individuals or any class of property. We recommend to the next General Assembly of Georgia such a revision of the tax system as will accomplish these purposes."
Special Legislative Tax Commission 1899; composed of Ed L. Wight, W. A. Dodson, R. T. Fouche, S. T. Blalock, Roland Ellis, John D. Little, T. W. Hardwick, M. L. Johnson, R. W. Freeman, A. O. Blalock:
"The system under which this state now operates exacts from the unscrupulous and dishonest disproportionate tolI and lays upon the owner of visible property an unjust share of the burden of taxation." RECOMMEND CHANGE OF UNIFORIM AD VALOREM PROVISION IN CONSTITUTION.
'Commission 1919, composed of Governor Dorsey, H. R. deJarnette, R. A. Denny, Seaborn Wright, E. Z. Arnold, L. R. Akin, E. H.Callaway, J. H. T. McPherson, E. H. Johnson, H. J. Fullbright:
"A careful investigation has so impressed us with the inequitable distribution of the tax burden that the injustice of the present system even more than its inadequacy seems to us to demand redre'ss." RECOMMEND CHANGE OF UNIFORM AD VALOREM PROVISION IN CONSTITUTION.
Commission 1923, composed of T. S. Masont- R. C. Ellis, F. C. McClure, W. D. Anderson, B. D. Brantley, John D. Haddock, J. W. Martin,J. H. T. McPherson, H. S. Peters, John R. Phillips, Sam Tate, U. V. Whipple:
"Concur with previous Commissions in condemning general property tax." RECOMMEND CHANGE OF UNIFORM AD VALOREM PROVISION IN CONSTITUTION.
Commission of 1925, composed of Eugene R. Black, Wilmer Moore, J. M. V. Hoxey, Harold Hirsch, T. K. Glenn, T. D.
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Tinsley, Walter Harris, Graham Wright, L. A.. Dean, T. M. Cunningham, M. B. Lane, Eo' H. Callaway, Hugh Saxon, John' White Morton, E. R. Hodgson,'Jr., W. [C. Bradley, W. C. Vereen, Paul Brown, Lee Council, Victor A.llen:
"The present system of ad valorem taxation upon a uniform basis has been in force since our present ,Constitution was established. It was enacted at a time when Georgia was entirely an agricultural 'state. No change has been made in it to keep abreast of the fact that Georgia now has 'interests, commercial, financial and manufacturing, which equ,al and vie with her agricultural interests.
Under this system the real estate of the state has, borne for half a -century the brunt of taxation and is now paying approximately five-sixth,s of the property tax of the state." RECOMMEND CHANGE IN UNIFORM AD VALOREM SYSTEM INCONSTITUTION.
Every Ohief Executive of Georgia for more than fifteen years has recommended a revi,sion of our antiquated tax system, hundreds of publicists and other prominent Georgians after a study of the question, have joined in the demand for a modern and equitable revenue system.

ActuaJ WwIrings of the Genem! Property Tax in Georgia.

The following table shows in round numbers the assessed valu~ of various groups of property returned for taxation in

1928, and the percentage of the total burden borne by each

group:

Aggregate Value of all Property

Assessed,

_ 1,293,000,000

Farm Lands,

_ 301,900,000

City and Town Real Estate, _ 460,000,000

Public Utilities, including raH-

roads, power companies, tele-

phone, telegraph and street

-car lines, etc,

209,000,000

Bank Shares,

33,800,000

23% 35%
16% 2-1/2%

Manufacturing Industries, includ-

ingall tangible and intangible

assets,

_

Mercantile Stocks,

_

Household and Kitchen Furniture,

Stocks and Bonds,

_

Money, Notes, Accounts, etc., _

Horses, Mules, Asses,

_

Cattle,

.

_

Hogs,

_

72,000,000 63,500,000 35,000,000
2,900,000 42,000,000 16,000,000
6,000,000 1,700,000

5-1/2% 4% 3% 2/1000 of 1% 3% 1% 4/1000 of 1% 4/1000 of 1%

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---1_ The tax paid on hogs in Georgia is more than half a.s great as that on stocks and bonds, while cattle pay more than double, and horses and mules more than five times the sum assessed against stocks and bonds.

Stocks, Bonds, Notes and all forms of intangible wealth have tremendously increased within recent years, yet a comparison develops the remarkable fact that the returns of intangibles in 1928 exceed the returns of 1875 by only $6,856,000, while the returns of such property in 1910 exceeded the 1928 returns by $4,247,000.

The returns from the three leading counties of Fulton, Chatham and Bibb present a most interesting study. The Pe);. centage paid for state and county taxes by realty and intangibles in these counties is as follows:

Fulton

Chatham

Bibb

Realty,

71 %

78 %

73%

Stocks and Bonds, 4/1000 of 1 % 8/1000 of 1 % 1/10,000 of 1 %

All other Intangibles, 6 %

2%

3%

The percentage of all intangible returns 'has steadily decre8lsed from 14-1/5% in 1875 to 8% in 1900, 6-1/4% in 1918, and 3-2/1000% in 1928.
Intangible wealth can not be reached under our present archaic and impractical system. This class of property has always escaped under the ad valorem system. Other states have been wise enough to recognize this fact and change their revenue system accordingly.
While Georgia's revenue ha's doubled in the past ten years the increase is largely from special taxes allocated for special purposes. Eight million dollars derived from the gas tax is distributed to the highway department, the counties and the equalization fund; four million dollars derived from the motor vehicle tax is appropriated to highways. The cigar and cigarette tax is allocated to the, payment of pension'S.
If we deduct the rentals from the Western & Atlantic, which have been discounted through the year 1935, the revenue for

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general purposes is but little gre&r than it was ten years ago.. It is therefore not surprising that the state treasury faces a deficit of approximately three million dollars for the year 1929.
Why should Georgia cling to a Isystem condemned by every competent authority in the civilized world Why cling to a system that is termed by one authority "a school of perjury promoted by law", by another "a tax on ignorance and honesty", a system that is depressing to business, demoralizing to industry, stifling to agriculture, and hindering the flow of outside capital into our state.
In the words of Dr. Seligman, "Is it ignorance Is it inertia " Is it a combination of both?
The Remedy
The uniform ad valorem tax has failed always and everywhere. There can be no argument as to the necessity for abolishing it in Georgia. Patching will not suffice. We have been applying patches for sixty years and conditions have steadily gone from bad to worse.
It is obvious that the first step towards substantial and permanent improvement is to change the UNIFORM AD VALOREM CLAUSE IN THE STATE CONSTITUTION.
It is equally obvious that we must follow the principle of modern tax systems which recognize the necessity of discriminating between various classes of property and business by employing different methods and rates of taxation.
The task of working out such a logical, adequate and equitable system has been delegated by Governor Hardman to a Special Tax Commission. This Commission is composed of members of the General Assembly and of citizens who are outstanding in various lines of business. It is a highly conservative, patriotic and intelligent body. It is going into the question with remarkable thoroughness and its report will be of vital concern to every citizen who has the best interests of the state at heart.
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<!. Let me urge upon behalf of this Commission and upon behalf of the General Assembly the earnest cooperation and unselfish support of taxpayers and business men, to the end that we may have a fair and just system of taxation-a system that will stimulate industry, attract outside capital for the development of our marvelous natural resources and enable us to compete upon equal terms with other states
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