TAX MESSAGE 
OF 
GOVERNOR CLIFFORD WALKER 
TO THE 
GENERAL ASSEMBLY 
OF 
GEORGIA 
JULY 5, 1923 
1923 
BYRD PRINTING CO. ATLANTA. GA. 
 
 TAX MESSAGE 
OF 
GOVERNOR CLIFFORD WALKER 
TO THE 
GENERAL ASSEMBLY 
OF 
GEORGIA 
JULY 5, 1923 
1923 BYRD PRINTING CO. 
ATLANTA. GA. 
 
  TO THE GENERAL ASSEMBLY: 
In three elections the people of Georgia, by a mandate clear and unmistakable, written in the platform of principles adopted by the people in Convention, have declared for: 
1. The repeal of the Tax Equalization Law. 2. The adoption of a tax system which will relieve the undue burden now borne by the owners of real estate by placing a fair share of the expense of government upon the owners of intangible property and other property not now on the tax books. 3. The furnishing of free text books to the elementary school grades. 4. Generous treatment and a square deal to the Confederate Veterans. 5. Real economy in State, County and Municipal government. In addressing the General Assembly I am, therefore, assuming that there is general unanimity of opinion that the present ad valore1n or general property tax system has broken down in Georgia as it has in every other State, and that the present system as now administered is no longer tolerable. The program adopted by the people calls for enactment of a tax system which will take the place of the Tax Equalization Law by forcing a fair share of the burden of expense of the government upon a class of property owners who have hitherto escaped taxation-the owners of intangible property. The 
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 plan will not increase the tax on real estate or tangible personal property now fairly taxed, although it 
contemplates raising funds to furnish free school 
books and meeting the State's obligations to the Confederate Veterans. These funds may be raised by: 
1. The proceeds of a tax on intangibles. 2. Savings by reducing expense of government. 3. Providing teeth for the tax laws and practical machinery for systematic and business-like enforcement. After a conscientious study of the tax question, following the experience of several years' service on the State Budget Committee, I unhesitatingly 
. . declare mv belief that the funds necessarv to hold 
Georgia and her institutions in line with the progressive States can thus be raised without additional burden upon real estate. 
1. The Tax on Initangibles. The experience of tax experts of nation-wide reputation and of neighboring States facing the same problems, after years of study, have suggested the following methods of reaching intangibles: 
(a) The Kentucky system of classification, providing a reduced rate on certain specific property on the farm and on money, notes, mortgages and all other credits, with teeth in the law providing for its strict enforcement. 
(b) An act providing that no note, mortgage or other evidence of debt shall be enforcible in the court unless bearing a stamp of the Tax Collector indicating that the paper has been returned for taxation. 
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 (c) A small tax on incomes not otherwise taxed. (d) A combination of two or more of the aboye systems. 
 
(a) Kentucky tax officials report results of the Classification System as follows: 
 
HJ21 Assessments Revenue Assessments Revenue 
 
Intangible Persoualtics .... $08,i.i0,880 $3i8, 12[) $:!08,418,iiil $1,233,67.'i 
 
Bank Deposits 
 
l 1,177,l!J6 (il,4i4 284,161,828 
 
~84,161 
 
Those increases were achieved through a sharp reduction in the rate 011 intangibles, but the new revenue thus secured permitted a reduction of the rate on real estate and other tangibles from 55 cents to 40 cents. 
A similar system in Maryland (City of Balti- 
more) showed results as follows: 
 
Assessnients 
 
1896 ------------$ 6,000,000 
 
1897 ------------ 55,000,000 
 
1902 
 
89,900,000 
 
1907 
 
150,900,000 
 
Minnesota reports as follows: 
 
1910 1911 
 
Assessments 14,000,000 115,000,000 
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 (b) The Starnp Tax System. This suggestion only contemplates the enforcement of the present law which requires such credits to be taxed at full value. Against this system is urged: 
(1) That it would drive out foreign capital and outside loans. (2) That it would be practically confiscatory, unreasonably reducing the income on such credits. These alleged objections may well be considered in connection with the Classification System (a). 
(c) Th,e Incorne Tax Syst.e1n. North Carolina, considered by many the most progressive State iu the South at present, has abolished all property tax for State purposes ancl, in its stead, levies a graduated income tax, personal and corporate, with an added franchise tax on corporations of one-tenth of one per cent upon capital stock. It will be observed, of course, that the differeuce in the number and variety of industries in the two States should be considered in adapting any part of the North Carolina plan. 
(cl) A Combi11atio11 of Other Systems. Professor Chas..J. Bullock, head of the Department of Economics in Harvard University and president of the ~ational Tax Association, recommends a combination of the Classification and the income tax systems (a) and (c). Such combination was also recommended as best adapted to the conditions of Georgia. after thorough study by a commission of distinguished Georgians headed b? Governor Dorsey and ex-Senator DeJarnettc of Putnam. 
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 while personally I htffe been inclined to believe 
that the Kentucky plan, with some modification and changes to suit Georgia conditions, can best he adapted to the peculiar needs and industries of our State, I am not wedded to any one single plan and seek only the most equitable distribution of the tax burden. 
(2) Reduced Expenses. Howeyer conservative its membership, a meeting of the Legislature causes more or less business unrest. 'l'hcre is a widespread conviction that the country is suffering from too much legislation. Certainly with the power vested in the Governor to convene tlui Legislature in extraordinary session in any important emergency, there can be no necessity for an annual session. Only fom other Statrs of the fo1ty-rigld States now have an111wl sessions. Biennial sessions would result, dircetl:- and indircctl:-, in a saving which would go a long way toward pa~ring the State's obligations to the Cmifederatc Veterans. 
J1Jconomy should be practiced and will he demamled of eyery department and State institution, and I shall exert every reasonable effort to secure general eo-operation in effecting a reduction of expenses. "\Vhcrever the scale of salaries is fixed on 1he basis of the war-time excessive cost of living it :.;hould he lmvered. Specific economies lmn) already hecn suggested all(l others wil1 be brought to the attention of State officials. I will co-operate with the General Assembly in abolishing any office which, 
after mature consideration, seems unnecessary un- 
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 der the present depressed financial co11<litio11s, arnl 
will not hesitate to suggest that other places be abol- 
ished if, in the course of time, they appear to be mmecessary. 
(3) Enforcenient of Tax Lau:s. The much beloved and highly honored head of the tax departments, Comptroller-General wright, advises me that for many years he has insisted that there be provided a force of field men to enforce the tax laws as written. The last Legislature recognized this necessity and authorized such a force to serve under the State Tax Commissioner. The act provided that compensation for such service should be based on commissions. The State Tax Commissioner considered such basis so unsatisfactory that he declined to organize the force. I am not prepared to give an opinion as to the soundness of his position but it is certainly worthy of the consideration of the Legisla- 
ture. It may appear wise to authorize the Governor or the Tax Department to use discretion iu this 
matter. I _here take the liberty to refer you to the 
Kentucky system of enforcement which appears to 
be operating satisfactorily and successfully. Only a word is necessary to prove the vital im- 
portance of this suggestion and the fruitful results will follow. A citizeu of high character advises me that of the twenty automobiles he counted recently on the streets of a small town, thirteen had no license tag. A fair count of cars in some of the counties indicate a percentage of from 33 to 50 percent without the tags. The record shows that over half the 
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 counties fail to make returns of inheritance taxes. In some cities there are more professionals in the telephone directory than on the tax books. Thousands of polls are not listed. Such conditions make our tax system a faret'. Such lack of system and laxity of operation not only deprive the old soldiers of their -well-earned and direfully needed support, and tlrn deserving children of their school books, but works an indefensible injustice upon the law-abiclilig citizens who make returns of their taxes justly and fairly. By making a mockery of the tax laws there is being created a dangerous disregard for all laws. Present conditions are intolerable and should be corrected at the earliest possible moment by placing teeth iu the law which will insure its uniform and business-like enforcement. As expressed by another, I make the one further appeal to the General Assem- 
bly and to the people that "the business of raising 
the ever increasing revenue needs of a growing State be recognized as the large enterprise that it is, requiring not only wisdom and experience in the construction of the laws levying the taxes, but a comprehensive and adequate organization to administer and enforce them. The most unjust tax is the one that is not equally enforced against all who are liable for it. The results of indifferent or inadequate enforcement of tax laws, which permits one to pay and another to escape, are no less vicious in effect than intentional favoritism which permits the same results. Machinery for administering and enforcing tax laws should he at enry point intelligent, efficient and adequate." 
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 Attention is respectfully directed to the fact that relief from any tax measure involving a constitutional amendment must necessarily be delayed th_ree years. To bridge this period three suggestions have been made which your committees, or a commission, might well consider: 
(1) That the county tax rate, uow runuiug from two to six times the State rate, be limited. It is urged that this will tend to lower the really burdensome county taxes and at the same time result in an increase in taxable values which will offset the loss in tax values anticipated in the repeal of the Tax Equalization Law. 
(2) That a specific tax on all luxuries be levied. Advocates of this tax urge that it tends toward thrift by encouraging economical purchasing and yet toward raising necessary revenue from those not inclined to economize, thus placing a reasonable share of the expense of government upon the class most able to bear it. 
(3) That taxes on Insurance Companies be increased. I am advised that Georgia collects on gross Insurance Premiums only 1 percent, ,vhile Virginia and North Carolina collect 3 percent. The latter figure would increase the State's income approximately $600,000.00, annually. 
Firmly believing as a fixed conviction that the permanence of our government and its free institutions depends upon fidelity to the principle of complete separation of the three departments of government, the Legislative, the Executive and the ,Judicial, 
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 provided in the Constitution, I shall not be a party to the slightest effort on the part of any one branch to dictate to or otherwise interfere with the rights and duties of any other branch. However, in line with the constitutional right of the Executive to declare an extraordinary emergency, I will be permitted to indicate that in my judgment not only harmony and peace, but the prosperity of the people and the progress of the State along all constructive lines, depend upon the prompt and effective stabilizing of the tax system. It is vitally necessary that such system be equitable, conservative and fair to every class of people and its adoption should be approached with the utmost care. I am, therefore, taking the liberty to suggest that the other duties of the Assembly be so marshalled as to permit a maximum of time for the consideration of this question, which all thinking minds concede is of such preeminent importance at this time. 
The platform on which I was elected expressed my 
conviction that the interests involved in a general 
tax law are so manifold and so important that no one 
man could or should frame the law. rt was sugges- 
ted, therefore, that a non-political commission, in connection with the tax committee of the Senate and the House, should make a careful study of the tax plans and machinery of other states and adapt the same to the practical interests and the peculiar needs of Georgia, it being understood, of course, that all states differ in resources, natural and artificial, and it does not follow as a matter of course 
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 that because a tax system is satisfactory in any one state, though a neighboring state, it could be blindly followed in its entirety as meeting the necessities of Georgia. The idea being that such a Commission to be composed of representative farmers, business men, bankers and manufacturers from every section of the State, could make helpful suggestions and otherwise assist in the deliberations of the committee of the Legislature. 
Maturer reflection has strengthened the original views on which I was elected. If the General Assembly should concur in these views, a proper committee, either standing or special, or working through a subcommittee, jointly or in co-operation with a commission as outlined in the platform referred to, if the Legislature should see fit to invite such co-operation, could take all matters of taxation under consideration, make a survey of the needs of the government and of the institutions of the state to hold Georgia in line with the States now in the forefront in progress and development, prepare a budget in accord with those needs, study the practical operation of the tax systems of other states, adapting and combining any good features to the peculiar needs of Georgia, confer with tax students and experts in this and other States, hold public hearings in several sections of the State, invite citizens of every class to appear and give the Commission the benefit of their views, and then suggest a tax system which would provide the necessary funds while distributing the burden fairly among all classes of property, tangible and intangible. 
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 Economy, so vitally necessary in these times of financial depression, as well as other considerations already referred to, suggest that a report be made and the tax laws finally reformed at the earliest hour, consistent with proper care and wise conservatism. I sincerely trust that this can be done at this session of the Legislature, as practically all constructive programs must be suspended pending such action. If, however, the assembly should reach the conclusions that this vitally important work cannot be properly completed within the fifty day term, then I respectfully but earnestly suggest that the Legislature give its prompt attention to other matters pending, in order that an early adjournment may make possible an extra session to be held later in the year for the exclusive consideration of the report of such tax commission without the burden of extra expense to the tax payers of the State. I confidently believe that the Legislature would receive the cordial commendation of the people if, in this spirit it would complete its other labors within 30 days and then adjourn for an extra session of 20 days during the last weeks of the year. For emphasis I repeat my deliberate conviction that the best interest of the State demands that the tax laws be reformed before we enter into another fiscal year. To that end and to the exercise of ever~ reasonable ecoomy in reaching that end, I confidently crave the sympathetic co-operation of the Legislature. 
Impressed as I am, as has already been indicated to you, with the vital importance of the earliest possible tax reform, I have up to this time referred only 
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 to the tax question. From time to time, later, I shall send you communications on other subjects which seem to be worthy of your consideration. 
In conclusion let me express again my earnest desire to cooperate with the Legislature in every possible way. I have no desire and certainly no intention to over-step the constitutional prerogatives of the Executive. In outlining the foregoing possible tax plans, I do so in obedience to the provisions of the Constitution which calls upon the Governor to advise with the General Assembly and not in the spirit of dictation. I would not if I could shape a system which is to be the basis of taxation of millions of people for years to come without the fullest conference with the people of every section and class through you, their representatives, duly chosen for this special service. I do not come to you to suggest unity of thought but I do plead for unity of purpose -a determination to servo the best interests of the State. I come not to dictate, but to advise -with you; not to direct, but to assist you; not to commarnl, but to serve with you. 
And finally, let me say that while we labor together my office and my home will be open to you; whether on business or on social mission bent, a gcmuino welcome will await you. I trust we may thus continue to tho end of the task before us in a spirit of fraternity in purpose and of fellowship in service. 
Respectfully submitted, CLIFFORD WALKER, Governor. July 5th, 1923. 
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