That Railroad Tax Bill

Prof. P.ridley M. Thompson, of t1 of M.. li:is written tliis letter to Gov. Pingree relative to the constitutionality m' the Mei-liman bil] which the goveruor ei : Law Department, ü. of M., June 4, 1S97. Gpv. Hazen S. Piagree, Lansing; Mieb. Dear Sir: - The only opinión whicli the law faculty could give yon upon the constitutionality of the Merriman act is the one transmitted by the dean, whicli is in effect tb at no one can foretèll wliat constnictions the court will put upon statute. Such au opinión is not satisfactory either to the person receiving or to the person giving it. I have, therefore, coucluded on ray own behalf to write you more fully. The constitutionality of the Merriman act depends only upon how our present statute upon the subject of railroad taxatiou will be eonstrued. It is not a new act and does not change the existiug method of railroad taxation. It ainends simply the present law; it' if that law is constitutional, the Merriman act will iiot make it uuconstitutional. Tlüs act simply increases the amount of taxation, the amount of specific taxes which the railroails will be required to pay under the present system. The state can levy a tax upon railroad property within the state wheu the road lies partly within aud partly without the state and is engaged in interstate commerce, hut it may not impose a tax upon such commerce, and a tax upon gross earnings derived from interstate commerce is a tax upon such couimerce. The Merriman act, following the language of the existing statute, which it auieuds, provides that every railroad operating in this state shall pay "a specüie tax upon the property and business of such railroads, which shall be computed in the following marnier." Prior to 1891 that section of the law provided that every railroad should pay "au animal tax upon the gross receipts of said railroad, computed in the following marnier," The ruauuer of eoinputing the tax has remained the same; it was not chauged by the law of 1891, or by the act under consideraron ; the only change was in the amount of tax levied. Uuder this system acertain per cent. is levied upon the flrst $2,000 of gross earuings per mile, which amount is increased upon the excess over $2,000 and up to $4,000, and so on in a sliding scale of taxation. Is such a tax a tax upon the gross earnings, as such, or is it a tax upon the property of the road, as it purports to be, based upon the value of the road computed and ascertained from the amount of such gross earnings? The answer to that question eau only be given by the courts. All answers from every other source are mere guesses. If it is a tax upou property, the law is valid. If upou earuings derived from the interstate commerce it is uncons titutional. The opinión furnished you by ilr. Wesselius states the law correctly as I understaud it. His opinión, however, is based upon the assumption that our present system of railroad taxation is in fact a tax upon gross earnings derived from interstate commerce. That assumption begs the very question in dispute. This subject was lately considered in the United States supreme court in the case of the Adams Express Co. vs. Ohio, 165 U. S. 194. The question in that case involved the constitutionality of the companies doing business in Ohio and other states. The Ohio statute was sustained, the court standing 5 to 4. Both a inojority and dissenting opinión are exhaustive and instructive. I assume that you desire the opinión of the law faculty upon the question submitted to assist you in coming to a conclusión in regard to your official course in approving or disapproving the Merriman act. 1 think the act should be approved. I do not speak, however, for any other member of the faculty. Nothing will be gained by vetoing this act, since in the event the present law will stand unchanged, and the people of the state would lose at least a chance of obtaining the increased tax provided for under this act. As I have said, the act is a mere amendnient and does not change or modify the present method of railroad taxation. If the present system is valid, it will be valid still when made more drastic under this act. Again, the state cannot test the validity of the present law by any independent action on its part. The railroads can. Tiiey have aCquiesced in the present system, however, for several years. If this act is vetoed there is every reason to believe that they will submit to pay their taxes hereafter. The roads may acquiesce if you approve this act and their taxes increase. If they do, the people will gain several hundred thousand dollars. If the roads, however, made a contest, then we shall obtain from the courts a decisión that will determine the validity or invalidity of the present system. 'if it is held bad, an then adopt some system of railroad and other corporations taxation siiniliar to the Ohio act which bas already the sanction of the courts. Very respectfullv.