taxation real estate by hervey m. porter second vice president los angeles realty board

8/14/2019 Taxation Real Estate by Hervey M. Porter Second Vice President Los Angeles Realty Board

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The neabg Bl,ueBook of CaUlolnin

Hm\,TY M. Po&TERAecokd !ic" PrcsidefrtLos Angcles Rcalt| Board


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224 TheReatrtyBlua Boolcol Cal,ifornit

TaxationB? H. M. PoRTEB

Genesis ol Torafion-EarlA Anprtrun T@rcs -Thp LL-hcritoltrc T " .Mia.puctneous Stctp Texes_Wherc TarFund.s Go-Mackiner.! f or Ta,fi Col,Lectio11,-ScLletL,t,oloesTarLiabilitu-The Singl,e Tq,ft Plan-lllti,fonL Equi.tabte SustenLHE subjectof [axation. ike the VolsteadAct. is a dry subjecl,,bul neverthelesst is full of inleresting facrs. Taxadon ij foithe purposeof providing or schools, siylums,oliceand fire ile-partltrents, anal those features of modern society. _Taxation is thedl'namic orce that hasbrought hrough the agps he high staie of civ_lllzalron of whtch we are now so proud. The word tax comes lomthe Lal,in root "Taxare'-,,1o touch',-and we havebeen ,touched',ineach succeediDg ge. We are ta-xed rom the moment we are botn orbefole. WF sre bom under a taxed roof; we spendour lives eaiinefood that is taxed and we are finally taid to r;sl in a cofrin thal iiIAXeO. GENDSISOF TAXATION

. Tn the beginning man l ived by himsel l He never gave ajd oraskect rd from anybocly. Al last he garherednto tribes. Each ribehad a leader. The only form of taxal,ion hal existedwas mililarvservice n time of war. In time of pea.e he leaderobtainedhis foodand means rcm his foilowers. As interchange ncreasedthe tribegaveup ils movingabout, ls nomadic ife, andsetueddo1,1,,nn a fixedlocation. Ihe leadernow became king or ruler. It now becameneeessaryo build roeds, bridges and iqueducts; and taxes werenccassaryor lhe adminishalion of {he kingdom. lt wassoon oundt}Iat in timp of war il wasne.essary or thtkins io Dav arse tributeto the victor. In tirnes of peace he fed his a-rniy a;d gainedrood ror rhose.under lm by sendingout collectomand takjng a por_non.or nrs sxoJect property. part of their slaves, rain and l ivestock..As ci{ ies-andownsbpgano springup in his kingdom formor excnangen the tbrm ot moneyhad to be devised o thai taxationcamebobe in the forrnof money axation.As early as the time of the Creekswe 6nd theDublicbeinq axedon personalproperty, amily proppny and slaves, orsesandb-usinessvocalions. In EglTt and portionsof Asia Minor they had {hese axesat the time of Christ. The custom was at that tim; to send out taxcollectors. nd to give them all over a.ertain sum1,hat hey were tobring in lrom certain territories. These ax coilectorsbecame er.vrich. this is vhere the te1m"dch man', in the Bible came rom. The"rich man" refrfed to \ilas a tax collector. No wonder it .w.as,Easier


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Tlk Eealtu BLueBoak of Cdli.foi tiLLfor' a camel to pass thrcLrgh the eye of a needle, han for a rich manto enter the Kingdom of Heaven." Aftel the downfall of Rome in thefifth century, all EuroDe \'!as brokeD up into smatl principalities. Itwas natural that the peopleshould suppo* some eader in time of warand expect protection in time of pcace.It ras ther the feudal system splang up. The men would rendermilitarv seNice iu time ol !r'ar',and iD rcturn hold certain lands in fee.Through this sJrstemevery tenant held lald for life, but there .!vasDoinhe tancc. Later lalge tlscts of land $rele lurned o\.er by the rulerto the chulch oI to his favo].ites. These lands rere ir1 tun siven tor ha r s s n l qo n A I a r b a s i : . A " d i r $ r . ' i , . . . r h i i r ' l . f , r r d r f . r ' s t c. p | a r , g r na r r d , a n n r l o I r . . T l p ! r c J l l sJ . l I I o r d I a ' r r ' d o f l i ^ p ;but it soon becane a denand that they ir$erit this tand, and througha tax iD fee this \{.as rllowed. .lrd the fir'st inhe tance tax came into

EARI]Y {MERICAN AXESThele *-as thus a heavr bulden of taxatioD on ihe larld oll.1rer.s.They wADtedsonrenethod of relief, so thel' got together and stalted atax that could be levied on the Door peolle without theil tmowing it.So hey starte. l he excise ax, knonn in this country as the intemalreverue tax; that is, a t:lx on commodities. If sugxr. $as selling fortwelve cents a pourd they would laise it to fourteen. and so with othercommodities. PeoDle paid their taxes \dthout realiziDg it, payingit in i he increasedrjce of ploducts. This has beenone ofthe mainfor-msof taxation in thc \1or'ld evef si ce. Itl:1 r rv:r|s h:rve alisenovei this lo|m of taxation. Chatles the First of EnEland lost his headthlough Ih;q ,x\. I t \ \_:rsheca .F of l- . \ rrpricrn tpro urio ' ' .In the United States, Drior to the last war, our. taxes $.ere raisedlrcm trvo soluces: Flom custom dutics, excise taxes or inter.nalrevenue taxes. Cushms duties ,tre tnxes on all eoods. war.es. orm p t , ^ n d i s .h r ' o u g l ^ rr ' r . r hc U r , i r e d , c L p s" o n t . o r pg c n r u r u y .Excise tax is ^ tax on goods, \yares, .)1'melchaldise, Uoduced in theUnited States.When the great war camc o , it \\'as {ound that it was inpossibleto r'aisesullicient Dloney from these sources,and theF $'as added thelncome ll\ and Lhe fcderal esl,at ax. These are discussed t lenqth^ l s a $ . f c r ' r h i . \ o . r m . .In addition to the tecleral income tax 1.hegolehment has theestatc ax. ' lhich is not . lrr nheri tancc ax.,I!IE INHERITANCE AXlI a nlan dies and leaves an cstrte of S150,000. n California. theheils nust rcpolt that to the Fcderal Go\.cl nrent. Thc \fife gelshalf the estate.so t'ou deduct g?5,000as the lvife's sharc of the estate-That lcaves $75,000 o be inxed. Out of that 1j75,000 'on cnn deductal l funeral and administratioD cxpenses, hen you have a deductionof $50,000on $,hich you pa-vno tax. That leares g25,000on whicl to

paya tax. The excess ror.ld then b $25.000on an estate of 9150,000You need not repolt under 950,000estatcs.In California \,!e have a peculial situation. All of our state taxescome rom trvo sourcs, axs from corporation franchises and an in-heritarce :rx. Oul o1' .r l l he taxes aisedhere ast year (940,000,000)

225


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226 TlLeRe(Lltu lue Bookof Ca.Iilornia$34,000,000was paid by the coryorations and g6,000,000 y the inheri-tarce tax. If a Inan dies in Califomia with an estate of 91b0,000,aswith the Federal Government, 975,000gos to the widow. He leavesthrpc chi ldren,ona ol agc. $25.000 oes ro eachchild. Betore lheInhentanre tax is f igured you f i rsr deduct.as with rhe federal a-x,al l iuneral and a.dmiDis{rat ion xpenses.We wil l assump het thereis sl i l l $25,000 el l tor eachchild. Ch;ldrel|undcr aee hare e aleduc-l ion of $24.000. hich lpave!onlv $1,000 o be {axedof rhose hi ldrenunder age. ThoseovFr age havecn exemprionol g15.000.Thus thetotal tax on a 9150,000 estate as mentioned above would be onlv$170.00. I l a man leaveshis propprtr io h js wife and brorhersandsislers. \p ra-xwouldbe higher.. The brolhersand sisterswould onlJbe al loweda dpduction f $2,000 ach. That would brinq i t up muchhigher. Uncles.aun(s and .ousinscre al lo$cd 9t,000dpaucli6n andall othr persons 9500. AII gifts to charitable or educational irstitu-tions are exempt from this tax.

MISCELLANEOUSTATE AXESIn addition to the iDheritance tax there is a corDoration tax. the"franchisp tax, prid b) p\erJ corporal ion n rhe .iate. Thp publicservrcecorporat ions. yplps.. rai lroad. elpcrr ic ighr companies, ayfrom 4 to 5 per cent of their gross earnings to the state ai a tai indpay no tzrx any piace else. The insurance companiespay tuo per centof their goss premiums to th state as a tax ; and all banks pay onernd ona-f i{ thper cent o rhplr capilal stock ro the srarp. The totallrom .orporat ionswrq $34.000,000asl Jpar.\!'HDRE TAX FUNDSCOW}lat does the state do with the money it raises from taxation ?We produce in the State ot Califor.nia g160,000,000 i,ear. Of thisamount 9100,000,000 oes o the schoots,of which sum the state Daysabour 20 per cFnr. That is someth,ng hal dops nol f fcur in theother states. I f there happ"ns1obe a poorcoLnry n thc othpr sLaresthey have to employ cheap teachers,and children have to go to schoolfewer days in the year. But in the state of California thd state payspart of the cost. For everypupil lhe slate pays$30.00. Thp avaiagpdaily a-ttcndanca uhipl iedLy lhe 930.00 s what thp eommuniuy elsf r o m l h e s r a l e . l n 1 8 7 0 r c o s r 1 5 . 0 0 e rp u p i lp F rv e a r ;n o * r h e i o s tis $30.00 for eA.h .h i ld artpndirg ar elamFnrafy school, and$200 for those ir1 high school. In Los Angeles county $.e have anassessed aluation of one billion dollars, and the assesseal aluation ofLos Angeles cit.v'' s one billion. That makes two billion of assesseclvaluat ion; and rre raised here. last ) 'ear 960.000,000.Out of thatsixty million, thirt). million went to schools, and thirtv million toother purposes.

MACI]INERY FOR COLLECTIONHow ar,e taxes paid? In every county and city and hamlet inCalifornia the Tax Collector. endsout his tax assessors n the firstMonday n March. If he comes o personal ropertl, hat has nothingto securet, he makes 'oupay he ta-x ght then and there. He startiout in Malch to make he assessmentsnd makes he retur-n he fiIstMondat_n JLly. By the first Monday n July all of the property in


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?he Req,l,tABltue Boot of Cq,tiforntia 227

*$a?$g+i'*#ftn+lita:t""ni5:1"*!i:d;i;""f;i"iil'#tifliiixTnilt;ralyway.1* il""iX"""",""It""i.v",;"ifif"iuftT::"?"'1i"ffi;:"ff*'r#'jitrnfii"}Jl!,1i"";'ix""ll"nti,t",,'''x"rigj:tti*il:iTl,i*#1iih:l{":i+t"rfifi#"[dlli;""qhiH',"1:,'J"Tj:i;Xlliffi53Ti"T,S;x",1;'1flt'"$:I""",,*p"?u*Ji"ffr1?T,';.Xl.:#iilii;'ir"Ji.H"":ifl",1,"lJi;if,i"r'fl:i#Y,i"'J,,,lll,"3i"o?"nf::ln" "i "ott""toi'*"uniir''tr'";;;,ft."r,##;;:f;i""t#*..,"r,;llf,il'"','0,T:;,i{,l""o"",,..f"",l#ri-rux#rr{i;i###iarxT";gxiili.rSALE INVOLWS TAX LIAIIILITY,,"mit.'.::1il:$f":""Hy,l$;i'"T-$ilili3i"'1i""fi;:X,9{r'.;;',1',1"",""1?,"i?;.;il;ffi"""l#?Ti:iTJr*"tii%?""J,",',*PERSONAL PROPE&TY TAXESffi $f.qjft:h*":rlill!Ftlti*',ii.j**:lryl""i,Ji",l,i#,I#,l?,'":'$j:l3iil 1J",""ai,""i"i"i""""r.i".i,i!THE SINCLE-TAXPLAN,y1x,['i:.1"*i*xi]il"m*,"rFi.rll

'1i'j#{;?",{:Hi;"Ji*}":Ti:x1ffi'r,':,r#*;:rxril'fftT,li;'"#fs,",H*;tji,":"'ffi.ll;i'"^x'::"l"::!l';^1llil1""l:"1*^;:,;:!:[::,"lfi,"'i:?"",iT#ui:l-:X*;f":,f"*


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224 The natl,ta BLueBook oI Col,ilorniaadvocated and the single tax on lard proclaimd by IIenry Georgeis the last planof single ax propounded.The reasons advocated for a single land tax are the following:Land is th creation of God, therefore no one is entitled to ownershipof land. Increase n land valuesare caused y growth of the commu-nity, therefore h unearned ncrementor advancen valuebelongsosociety. The government hould, helefore, ake sll land or the bene.fit of the whole community,The defects of the single ta-y system are pointedout as follows:The single a-\ wouldpreventquality of taxation, would divorce heintrest of peoplefrom the govemment, wolild discriminate betweenprofits on land and profits from other sources,would not raise suffi-cient rvenue n poor communities,would exempt a large part ofproperty from taxes without brirging relief, eliminate ability orfaculty, and put the burdensof the many on the shouiders of theUNIFORM EQUITABI,ESYSTDMLACTING

In the organization and co-ordination of business the UnitedStates eads he world, but, paradoxicalas it may seem, n the build-ing up of a uniform equitable machine for the assessmeniand collec-tion of taxs in this country we have been a failure. In every staiet}ere is a complete ariation ol systemand conflictof laws. n twenty-onestates, ersonalproperty ncludes ver,4hingexcept cal property;in eighteen laLes,eEonalpropefly s (onfinedo particular tms:in eleven states three to fifteen classsof taxable property are recog-nized; in twenty states mprovementsare not separated n makingassessments,and in eleven states improvements are assessedsepa-rately. The United States s the only nation taxing credits. In somestates debts are deducted tom c].editsand in others not. In somestates mortgages and bonals are taxed; in others .a small ta>( s im-posed, nd n still othersno tax at all is leviedon this classof property.fn some states raihoads are taxd on their general property; in otherstates on their franchises; in other states on the amount of theirissueal onals nd stock,and in other stateson a percentage f eithertheir gross or net earnings. In Iova ten stands of beesare exemptedfrom iaxation. In Idahoand Nevadaall propertyof FreeMasonsandOdd Fellows; in Massachusetts, ll prolerty of old maids; in Miss-issippi he propertyof the deafand dumb; n the Distdct of Columbiaall jei'elry; in Alabamaonesewingmachine; n Connecticut ll churchmusical nstruments,and in New York, New Jersey and Californiadepositsn SavingsBanks. In Mississippibarbrs r|aya state icensetax; in Tennesseeloak and hat rooms; in Texas or operatingcockpits and dog ffghts; in Alabama sleight-of-handmen; in Connecticutosteopaths;n Inuisiana oculists; n Mississippiarchitectsand pianoand organagents; n Tennesseeecond-handlothing merchantsandundertakers; n Alabama,vendoNof brassknucklesand dirk knives,ancl n Louisiana operators of slaughter houses,chute-the-chutesandcaHan dancers; in Mississippi contractors employing more than teDmen and in Virginia, g}asies.

REAI,TY BEARS BUBDENIn the United States he valuesof real estateand peNonalprop-


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TlLeEealt! Bhe Bookol Calilor is, 229erly are about equal, bur }pal estate pays over eighly-nve per cent ofau laxas. tnls ls tnevttatrle undef our aystem of taxation. Here inCalifomia, for instance, a wido'i{ left with a tract of uncultivateal lsndvaluedat. say, $25.000.00,f in Los Arjgelescounly, would pay aDannual tax ofl from 9300.00 o 9400.00. She mav have no income romwhich to pay this tax and will be compellFd o moflgage her land tosecuremoney to pay her taxes, provided the land is not alreaalvmort_gaged. On the olhpr hrnd. a sucresslulphysician, aw\er or c;rDora-t ion executi\ , with an incomeor salary o[ 925,000.00r more a vear.can ive n an expensive entedhome, nvesthis surDll,sn tax exemntbonds.and not pry any taxeq, receiving all the benefils oI a motlerncity and a civilized community.Remarkable gro{4h in the increasing burdeD of taxetion in thU0ited States is revesled n a report recently made public bv theNational nduslr ial Conference oard. The Board call i alrnt ion tolhp mFnaceof the constant ly ising amounLol property wli"h hasDeen erioered ) varrousmeanspxempt from te\at ion Jnd the valuc0l whrch. is ivpn as 954,000.000.000n.19ZZ. This stuperdous um ofnon-taxable propedy in the form of tax exajpt securities representsa little less than one-fifth of our national wea.lih and is equai to one-third oJ aI property assessedunder the gereral property_tax, whichfbrms the bulwark of state and local government dnance.'. Summarizing !e growlh of the.ountrJ s tax bil l . reporl showslhat lhe nat ion paid last year in taxes approximately$?,000,000,000compare-d i th $2.194,000.000n 1913 and $1.A82.000,000n t908.laxes ot slate and toral go\emments have greatly incrpased. Sl,atpl,axes ncreasedrom $30?.000.000n tgtg to $846.000,000n 1922.ine tcx bhlden tigured n lerms of pachperson income n l92Z was$64.63per capita as compared yrith g1Z.O?per capita in 1913.

TNEND OF TAXATIONThe preseDt trend of taxation in the United States is towaratsco-ordination in the assessmentand collect:on of taxes and the sub-st i tut ionol income or propertyas the besjsol tcxat ion. f t is sener_allyFcogrized that a s),stem I propedy taxaiion, exfepr n soiar asceflain forrns ol reel e.tale are concerned, s ulsuited lo modem eco_

nomiccondit ions. Ihp t ime is not frr otr when the vast expense fre-duplica{ionl taxrngma.hinery wil l bc el iminated,whenrl l ' federal.3tal,e.ounly. schooland cily taxes wil l be asscssed nd collected lone ime by the United States Governmeni and re-apportioneal o thevadous divisions, or will be assessed nd collectedund_er n efficiendvorga.nized ax Commission n each state made up of federal and stateselect ion. ompetenr. rained men. well paid lor their servicesandFhose osit ions re lree f fom l)ol ir .s. Thp asseslors Dder hentwouldhold-hpir Fosit ionsdur' :nggoudbpha\ior, bp fraid adequalc alat ips.work the entire yeer and be free lrom polirical control. The laxpaverwrll make but one return. Rel'enuF will bp derived from the taxiLlonof ranchise f the corporaton. ax on incomp,ax on inheritances,axoh angrbleroperty nd ax on business. heresullwil lbeacoordi-natron l taxation thar will makaa far moreequiiabledistributionoftheburdenoflaxation andbdng grearcr.ornJoitana appin.ss lo iheIax-payrngublic.


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taxation real estate by hervey m. porter second vice president los angeles realty board

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