The Nonpartisan Leader Newspaper, March 17, 1919, Page 4

- ~erenaey . ‘Tax Laws for People in North Dakota Summary of the Important Changes Made by the 1919 Legislative Session Just Closed—Fairest Way Substituted for ‘*Easiest Way” BY SPECIAL CORRESPONDENT. NE of the most remarkable and important things that the 1919 session of the North Dakota legislature has done is to adopt taxation radically different from the unfair system now being practiced in a large majority of the 48 United States. Heretofore the motto of tax collectors has been “The easiest way.” They have had to raise a cer- tain amount, so they have gone out and assessed flat taxes against everything in sight. Notice very carefully the words “in sight.” Corporations and individuals, owners of big incomes represented in stocks, bonds or in such property as coin and jew- elry, carefully kept such property out of sight when the assessor came around. So they escaped tax- ation. But the farmer could not hide his farm buildings, his livestock and machinery in a safe deposit box, even if he wanted to, so he and the owners of town and city business houses havé paid the bulk of the tax. ’ It is going to be somewhat different in North Dakota in future, because the farmer legislators ° have abandoned the old motto of “The easiest way” and have adopted in place of it this one: “The fairest way.” : - “The fairest way” means that the effort will be ‘made, so far as it is humanly possible, to lay the burden of taxation upon those best able to bear it— those with incomes large enough—and to lay the heaviest tax burdens upon those who get the great- est benefit from government while contributing the least—those who hold nonproductive property for ° speculation. EXEMPTION OF IMPROVEMENTS AND TOOLS s North Dakota, like other states, will rely upon two main classes of taxation for its revenues, di- rect taxation, which means a flat tax levy upon real and personal property, and indirect taxation, including such taxes as income taxes, corporation taxes, inheritance taxes and the like. One big step in the direction of fair distribution of the cost of government comes in connection ‘with the classification of property for direct tax- ation. Under the new North Dakota law these provisions are made: All land, business structures, including stores and factories and houses for rent, and all public utilities, including elevators and flour mills, will be assessed at their full, 100 per cent value. Town and city homes, occupied by their owners, and all personal property will be as- sessed at 50 per cent of its actual value. All farm’ buildings and improve- ments, and $1,000 worth of farm ma- chinery and equipment, will be exempt from taxation. g The heavier taxation of land will mean that a much heavier burden will be laid upon the speculator who is holding his property idle. On the other hand, the working “farmer will be relieved of all taxation upon his buildings and improvements and upon $1,000 worth of machinery, so that he can easily afford to pay whatever increased - assessment re- sults upon his land. The final effect of this plan of assessment undoubt- edly will be to throw open for opera- tion -and use thousands of acres of farm land and thousands of city lots now held idle. It also will add ma- -terially to state revenues. It'is necessary for North Dakota to raise considerably more money during the next two years. The reasons for this are various. One is that former Governor L. B. Hanna of North Da- kota, when he got ready to retire from the governorship and run for the sen- ate, lowered the state assessment so that he-could make a showing of re- duced taxes. He lowered the' assess- ment so much that a deficit of $500,000 resulted. It is necessary now for North Dakota to retire this: floating ~ an entirely new principle of ganized far The new tax laws just passed in North Dakota show many imaportant changes as would naturally be the case when control of the taxing machinery is taken from special privilege. This staté now puts more burden on idle land; whereas formerly the law used to favor this class of property. It dis- tinguishes between earned and un- earned incomes, with the heavier bur- It exempts farm den on the latter. improvements and $1,000 worth of farm machinery and equipment from the assessment. Inheritance taxes will yield more to support the government . activities. The new laws will help the common people in two ways: They discourage speculation im~ city and country Jland and thus will increase land use; they relieve the industry of the people of some of the tax bur- den and put it on privilege. debt and get back on a cash basis. ‘The war caused additional expenditures by the state mounting into the hundreds of thousands, and the increased prices practically doubled the costs of maintaining all state institutions. The schools of the state, which have been starved to death, especially in the coun- try districts, for the last five years, need immedi- ate relief, and the new industries which the state is starting, will add to the cost until they are in full running order, when they will become self-sup- porting. All this means that taxes must be raised. And all of this explains why the anti-farmer press of North Dakota has been howling that the state is going into bankruptcy ‘and that farmers will be called upon to pay “millions more in taxes.” = - But the farmers of North Dakota are not wor- ried. They are not worried because they know where the new taxes are coming from. Part of the new taxes are coming from higher assessment of idle lands for direct taxation as was just explained. But most of the new funds are coming from in- direct taxation. 3 One of the biggest sources of new funds is the income tax law, estimated to produce $1,000,000 a year. This law deserves to be classed as one of the best. passed by the North Dakota legislature. The effect of this law is to raise revenues from _ FARMER AND CITY WORKER . Governor. Lynn J. Frazier of North Dakota (on left) shaking hands with John Fitzpatrick, Labor candidate for mayor of Chicago, at the time Governor Frazier addressed the Labor party convention. successful fight for freedom from gang rule made a great impression on Chi- cago labor men, and the cordial relations established between the or- - mers and the new Labor party have alarmed the - - politicians throughout the nation. The story of North Dakota’s those best able to pay. This law will mean that owners of. stocks and bonds, who have heretofore escaped taxation, will not get away so lightly here- after. On the other hand, thé man who is taxed on personal property will not have to pay again under the income tax law, unless his income tax figures higher than his personal property tax. Any person may use his personal property tax receipt to rep- resent that much payment of income taxes. In the case of a single man with no dependents, $1,000 of his income is exempt; a married man or a man with other dependents, has $2,000 exempt, with additional exemptions for each child, as under the federal law. After the 1,000 or $2,000 mark the tax begins. - DISTINCTION BETWEEN EARNED AND UNEARNED INCOMES Here is an important difference between the North Dakota and the federal law. The North Dakota law recognizes a difference between earned incomes, that is, incomes consisting of wages, sal- aries and fees for personal service or the profits from a business (not a corporation) personally managed, and unearned incomes, that is, profits from stocks, bonds, etc. The unearned incomes are to be taxed, as they deserve, at a much higher rate than the earned incomes. The tax starts at one-fourth of 1 per cent ($2.50 per $1,000) on earn- ed incomes, and at one-half of 1 per cent ($5 on $1,000) on unearned incomes, and from that up- . wards the rate_progresses. From $20,000 to $20,000, for instance, the rate is 8 per cent for unearned incomes and 5 per cent for earned incomes, and for larger incomes a still higher rate applies. The bill includes provisions for a flat*3 per cent tax on the net income of corporations. Another bill, intended to raise approximately $50,000 per year, is the corporation excise tax. This bill assesses a tax of 50 cents per $1,000 on the fair value of corporation stocks and bonds is- sued in excess of $10,000. Again the farmers are not worried particularly. The inheritance tax laws have been revised, so that larger state taxes are assessed against large bequests of money, especially those to distant rela- tives or strangers to the blood. The new law will not increase the state taxes on bequests left to the widow and children of the decedent. * Another new tax bill is the oil tax. This is in- tended, not merely to raise money, but to raise the standard of the-oil and gasoline that is supplied to North Dakota users. Testimony before the com- mittees investigating these matters has been that the Standard Oil company is supplying an imita- tion gasoline under the trade name of “Red Crown ' -~gasoline,” of quality so inferior that its value is several cents less than that of straight-run gasoline. The tax bill provides to assess a tax of 1 cent g gallon on-gasoline substitutes, with a tax of only one-half cent against straight-run gasolines. The-effect of the bill ‘undoubtedly will be to en- courage the sale of straight-run gaso- line, which will mean a marked sav- ing to the majority of North Dakota “gas” users: o . The North Dakota legislature also is providing a new motor vehicle tax. All money raised. under this law, ap- proximately $700,000 a year, will be spent on the highways of the’state and will be matched, dollar for doller, by the federal government. Again this tax will not bear heavily on the farmer operating a “tin lizzie,” which will be taxed only $6 or $7 when new, and less each year as its value de- teriorates, but under a combination purchase price, horsepower and weight rating, the bulk of the tax will be borne by the owners of big, expensive a_nd speedy touring”cars and limou- sines. All of which is as it should be, for the big cars not only generally belong to the men best able to pay, but. do the most damage to the roads, _which have to be built up again, in part at least, for their benefit. Less burden for industry and more for privilege is North Dakota’s big tax principle. j R AT G S R s i