Democratic Sentinel, Volume 18, Number 35, Rensselaer, Jasper County, 14 September 1894 — RAILROAD TAX SUITS. [ARTICLE]

RAILROAD TAX SUITS.

Origin, Object and Results of This Famous Litigation. Most Important of the Kind That Ever Engaged the Courts. .AX£I4l The Democratic Law Fully Vindicated. Valuable Work of Attorney General Smith —An Adverse Opinion Would Have Bankrupted the State—Full and Succinct History of These Great Suits and Analysis of the Law They Were Intended to Nullify. Prior to the passage of the tax law, approved March 0, 1891, the subject of taxation in this state was practically misunderstood. Those who paid taxes under the old system did so upon valuations fixed by themselves, without the slightest legal restraint or desire to fix a value upon their property representing either a fair or true cash value. Every person had been educated to the belief that it was right to force valuations down, because it was generally understood that the policy of taxation in this state rested upon the principle that to force a low-valuation of property was to escape, in a measure, the payment of taxes necessary to support the government. This principle was manifested most clearly in valuations fixed upon all classes of corporate property. The owners of this property, being able to present their contentions more fully before the taxing boards than the owners of other property, always got the advantage of the situation by representing a condition which caused the authorities to place the lowest possible valuation upon their property, and this fact was known to all the taxpayers of the state, and, to counteract its evil consequences, the owners of real estate and other small possessions entered into the spirit of the times and fully competed with the owners of corporate property to the end that values should be made as low as> possible, and in this competitive struggle for low values the land owner and the possessor of homes and small holdings were necessarily the sufferers from such a system. They could not, and did not, compete in this matter with those who held large property interests and controlled the corporate wealth of the state. Therefore in a short time the concentrated wealth of the state received the largest benefit from this system of pressing down the values of the taxable property, and the owners of other property were necessarily made to bear the largest share of the public burden. This was the condition of things when the legislature of 1891 met to consider ways and means to raise a sufficient revenue to carry on the affairs of the state government, to pay the interest on the public debt and to gradually reduce the principal. The principle of taxation, that justice and equality can only be maintained by placing a fair cash value upon all property, had been lost sight of, and those most fortunate in the scramble to avoid taxation bore the least share of the public burden while, as in all such cases, those who were most numerous and .farthest removed from the taxing authorities were made to bear the greatest, as well as an unequal, share of the public burden. Prior to 1891 there was no such thing as equality in assessment of taxes in this state. The constitutional provision which provides for a uniform and equal rate of assessment and taxation had been lost sight of or totally disregarded by those who may have misunderstood it.

Another principle under this system of taxation, which had been forgotten or disregarded, was that an increased and equal valuation of all property does not necessarily increase the amount of taxes to be paid by the citizen, for the reason that where all property is placed upon the tax duplicate at its true cash value all citizens will pav equally, according to the property which they own, and the higher the valuation the lower the rate of taxation; so it is a fundamental truth that the proper way to reduce the taxes, which the citizens must bear as a reward for good government, is to place upon the tax duplicate all the property of the state and attach to it a value according to the cash basis, which alone can equalize the burden of taxation. But this was not the rule prior to 1891, and the principle of equality having been destroyed by a violation of the constitutional rule of taxation, the burden of government fell most heavily upon that class of property which never can escape the eye of the tax assessor, the homes and farms and tangible personal property of the people, while railroads and banks and great corporate interests, the value of which is most difficult to understand, bore but a slight portion of the public burden in comparison to what the people necessarily had to pay by reason of this misapplication of the equity rule in taxation. In 1890 the property of this state was valued so unequally that it scarcely pro- • duced a revenue sufficient to pay the ordinary expenses of state government, and did not produce sufficient revenue to carry on the public institutions of the state and pay the interest on the public debt, necessarily requiring each year a temporary loan, at a high rate of interest, to meet these public expenditures. And it was this condition, which was known and severely felt throughout the state, that prompted certain persons to demand of the legislature of 1891 that the entire tax laws of the state be revised, and to cause a re-valuation for the purpose of taxation of all property, real, personal and corporate, to be made in the year 1891. The revisions of the tax laws of that year did not essentially differ in principle from the laws that have always been in force in this state. In fact, they had the same machinery for valuing railroad property and equalizing the value of real estate and to value small holdings and personal property of the citizens prior to 1891 as is incorporated in the tax laws of that year. But the laws concerning the valuation of all

property for the purpose.-, of taxation in thia state had not been faithfully and honestly executed. The principle of valuing propertv according to its true cash value and placing all property upon the tax duplicate had not been adhered to, but had been abandoned, and the question was sharply presented to the people of the state as to whether the government of Indiana should be supported by means of a uniform and equal rate of assessment and taxation, or by going into the market every year and borrowing money to support the government, ana thereby going into debt and increasing the state debt each year. The lesson taught by the passage of the tax law of 1891 was the lesson of constitutional taxation based upon a uniform and equal rate of assessment. As soon as the law was passed its execution assumed a partisan phase. One political party of the state, at least, denounced the law as infamous and retarded its execution and enforcement in every wav possible; and so fierce were the assaults made upon this system of taxation by the Republican party that even the friends of the law despaired of its execution and, at times, were almost willing to abandon the effort of constitutional taxation in this state. While it was not a new law, yet it was a new enactment, and being a new enactment, its enemies urged against it all the objections that might have been made against an original and new law. It became necessary, to carry out the provisions of the law of 1891, that nearly every section of it should be defended and construed by some one. This defense began early in the spring of 1891 and was vigorously prosecuted by the attorney general until all the values for that year had been fixed and placed upon the tax duplicate. The contest which was waged during that year against the tax system by the corporate interests of this and other states having property in this state was the fiercest and most unrelenting that has been witnessed since the organization of the state government. From the tax boards, who fixed the values upon the property of the rich and wealthy, appeals were taken to the courts for the purpose of having the salient features of the law declared unconstitutional. It was alleged in the courts that this law violated nearly all of the provisions in the constitution of Indiana, and that it violated the most essential provisions of the constitption of the United States; that it denied due process of law to the corporations; denied the equal protection of the laws to them; that it was an invasion of the constitutional provision that the states shall not regulate or place a burden upon interstate commerce. It was alleged by these corporations, who sought to break down this system, that the valuations fixed upon their property were so high that, in themselves, they constituted a fraudulent administration of the law and, for this reason, they asked that the power of the court be exerted in their behalf. It will be remembered now, and a history of transaction has been written, that the valuations of all property in this state, including railroad property and other corporations, was the result of the labors of the attorney general, who gave such construction to this system of taxation that, when the values were increased upon real estate by the local authorities, it became absolutely certain and necessary that the values of corporate property under the jurisdiction of the state board should be increased by that body. There was no escaping the proposition that prior to the passage of the law, real estate had borne the heaviest share of the public burden, and although it was not valued at its true cash value, still it was valued proportionately higher than corporate property within the state, and that since the local assessors valued real estate at a sum deemed to be its true cash value, thereby increasing the value over 46 per cent over the value of former years, that the authority charged with the duty of valuing railroad property must increase the value of that property in such equal proportions as to bring it up to the level of a statutory cash value. The action of placing a value upon property for the purpose of taxation is merely an executive or administrative function which, if honestly performed, must proceed in the line of construction given to the general system, so that one class of property shall bear the same relation to the public burden as any other class of property shall bear. Prior to 1891 railroad property in this state had been valued in the aggregate at 169,000,000. It was admitted by the railroads themselves that this valuation represented only three-fifths of the true cash value of such property, and to bring it up to the true cash value it would require a large increase to be placed upon all railroad property. This increase was the result of the general contest which was waged in behalf of the law by the attorney general of the state, who fought the corporations on the basis of equal and just taxation at every inch, and contested with them every step from the passage of the law to the values fixed by the assessing boards. And with this contest the values on the property of railroads were increased from <69,000,000 to $191,000,000. This increase represents the difference between the true cash value of the property as fixed by the board under the construction given to the law by the attorney general and the values which they themselves fixed upon their property. The per cent of increase of 1891 over 1890 was 130, and it was this increase that drove these corporations into the courts, where the attorney general appeared and fought them from the circuit court through the supreme court of Indiana ' and to and through the supreme court ' of the United States, in one of the most bitterly contested lawsuits that has ever been brought or concluded in this coun- ! try, and the success which crowned the efforts of the attorney general in these lawsuits is written in the history of this state. The amount involved, directly and indirectly, in the litigation which resulted in the supreme court of the United States holding the law to be constitutional and refusing to interfere with the assessment of the taxes against these corporations is, at first blush, fabulous. No such consideration was ever involved in any tax litigation in this country. The law was assailed because it was unconstitutional, and if the courts had held that it was unconstitutional all the taxes assessed under it would have been null and void, and where any of them had been paid the state would have been obliged to refund them to the corporations. The amount involved in this litigation on the day the supreme court of the United States decided the cases in favor of the state was $7,101,827. Of this amount at least $8,000,000 had been paid under protest, and since the decis-

ion of the case by the supreme court of the United States there has been paid into the county treasuries throughout the state at least $4,000,000, thedirect and necessary result of the victory won by the attorney general of Indiana over the corporations of this state. No such victory was ever before won for a state in the matter of taxation. The contest which resulted in bringing these taxes into the public treasury of the various counties of this state was directed, planned and executed by the attorney general and by no one else. He commenced with the beginning of the controversy and first laid open to the people of this state the doctrine of constitutional taxation in the great bank controversy, which originated in the superior court of Marion county, wherein the beat lawyers of the state appeared for the purpose of getting a decision not so much affecting the banks, but a decision that would break down these laws and destroy their force in the matter of railroad and corporate taxation. This contest was carried on by the attorney general, not for any good result that might come in the so-called bank litigation, but for the purpose of asserting the constitutional power of taxation and maintaining it, so that when the threatened suits, which were afterwards brought, should be commenced, that this policy of buttle should be continued all along the line as against them. And it is not forgotten that the fight made in the superior court and afterwards in the supreme court in the bank oases resulted in the establishment of the same constitutional doctrine as was afterwards asserted and settled by the supreme court of the United States. These contests on the part of the attorney general in asserting the true doctrine of constitutional taxation has set at rest forever the objections raised against the law involved in these litigations, and the amount of taxes which the settlement of these questions will produce to the people of the state of Indiana in the future cannot be well or accurately calculated. They are like Tennyson's Brook. They will flow on forever, and if the public servants selected to administer this law in the future will adhere to the doctrine as asserted by the attorney general, and execute the duties of their trust with fidelity to the people, it will not be 10 years until this system of taxation will produce sufficient money not only to carry on affairs of the state, but to pay the interest on the state debt and to wipe out the principal. And it is to be hoped that the lesson taught by this great contest will never fall upon deaf ears, nor be forgotten by the taxpayers of Indiana, and it is the prayer of all good people that neither time nor jealousies, the egotism of some or the vanity of others, will ever deprive the real author of this blessing to our state of the merits due him for nis labor and fidelity in standing by the cause of all people in behalf of just, uniform and equal taxation, to the end that every citizen of high or low degree, of much or little property, will be required to pay his just share or the public burden and feel that when the taxpaying time comes that he has not been called upon to contribute more to the maintenance of good government than his neighbors have been required to do.