Theodore Roosevelt:

To the Legislature: It is a very genuine pleasure to congratulate the legislature upon the substantial sum of achievement in legislation and administration of the past year. Laws of the utmost usefulness to the community have been enacted, and there has been a steady betterment throughout the year in the methods and results of the administration of the government....

The whole problem of taxation is now, as it has been at almost all times and in almost all places, one of extreme difficulty. It has become more and more evident in recent years that existing methods of taxation, which worked well enough in a simpler state of society, are not adequate to secure justice when applied to the conditions of our complex and highly specialized modern industrial development. At present the real estate owner is certainly bearing an excessive proportion of the tax burden. Men who have made a special study of the theory of taxation and men who have had long experience in its practical application are alike in conflict among themselves as to the best general system. Absolute equality, absolute justice in matters of taxation will probably never be realized; but we can approximate it much more closely than at present. The last legislature most wisely appointed a committee to consider the feasibility of a thorough and far-reaching change in our tax laws; and there is good reason to believe that their forthcoming report will present a scheme which will receive the support of substantially all classes of taxpayers, and which will be of such a character as to commend itself to the most careful consideration of your body upon broad lines.

The law must not only be correct in the abstract; it must work well in the concrete. Experience shows that certain classes or symbols of property which in theory ought to be taxed cannot under the present practice be reached. Some kinds of taxes are so fertile in tempting to perjury and sharp dealing that they amount to taxes on honesty—the last quality on which we should impose a needless burden. Moreover, where the conditions and complexity of life vary widely as between different communities, the desirability and possibility of certain taxes may seem or be so different that it is hard to devise a common system that will work. If possible the state tax should be levied on classes of property, and in a manner which will render it collectible with entire fairness in all sections of the community, as for instance the corporation or collateral inheritance tax is now collected. So far as possible we should divorce the state and municipal taxes, so as to render unnecessary the annual equalization of values between the several counties which has proved so fertile a source of friction between the city and the country.

There is a constant influx into New York State of capital ofttimes previously incorporated under the laws of other states, and an increasing number of men of means from other parts of the country, nonresidents of New York, come into this state to sojourn and to conduct and be at the head of various business enterprises which are drawn to New York as the financial center of the whole country. This calls for legislation which shall provide, in a broad and fair spirit, for taxing foreign capital in this state, whether in corporate or individual form, exactly as we tax domestic capital doing business along the same lines.

I call your attention to the fact that the great burden of taxation is local, not state. In the large cities the heavy local charges are mainly due to the action of the local authorities themselves. For this the local authorities are of course responsible. But sometimes taxation is added to by legislative enactment.

On certain points the failure of the tax laws has become social or revolutionary. It is infinitely better when needed social and civic changes can be brought about as the result of natural and healthy growth than when they come with the violent dislocation and widespread wreck and damage inevitably attendant upon any movement which is revolutionary in its nature.

At the same time a change should never be shirked on the ground of its being radical, when the abuse has become flagrant and no other remedy appears possible. This was the case with the taxation of local franchises in this state. For years most of these franchises escaped paying their proper share of the public burdens. The last legislature placed on the statute book a law requiring them to be treated as real estate for the purposes of taxation, the tax to be assessed and collected by the state assessors for the benefit of the localities concerned. This marks an immense stride in advance. Of course, at first serious difficulties are sure to arise in enforcing it. The means for carrying it into effect are very inadequate. There may be delay before we get from it the substantial additions to the revenue which will finally accrue, and there may be disappointment to the enthusiasts who are so apt to hope too much from such legislation. But it will undoubtedly add largely to the public revenues as soon as it is fairly in operation, and the amount thus added will increase steadily year by year. The principle which this law establishes has come to stay. There will doubtless have to be additional legislation from time to time to perfect the system as its shortcomings are made evident in actual practice. But the corporations owning valuable public franchises must pay their full and proper share of the public burdens.

The franchise tax law is framed with the intent of securing exact and equal justice, no more and no less. It is not in any way intended as a means for persecuting or oppressing corporations. It is not intended to cut down legitimate dividends; still less to cut down wages or to prevent a just return for the far-sighted business skill of some captain of industry who has been able to establish a public service greatly to the advantage of the localities concerned, where before his time men of less business capacity had failed. But it is intended that property which derives its value from the grant of a privilege by the public shall be taxed proportionately to the value of the privilege granted. In enforcing this law, much tact, patience, resolution, and judgment will be needed. All these qualities the State Board of Tax Commissioners have thus far shown. Their salaries are altogether inadequate, for the new law has immensely increased not only their responsibilities, but their work. They should be given not only the needed increase for themselves, but also an appropriation for an additional number of clerks and experts.

During the year 1899 not a single corporation received at the hands of the State of New York one privilege of any kind, sort or description, by law or otherwise, to which it was not entitled, and which was not in the public interest; nor has corporate influence availed against any measure which was in the public interest. At certain times, and in certain places, corporations have undoubtedly exerted a corrupting influence in political life; but in this state for this year it is absolutely true, as shown by the history of every measure that has come before the legislature from the franchise tax down, that no corporate influence has been able to prevail against the interests of the public.

It has become more and more evident of late years that the state will have to act in its collective capacity as regards to certain subjects which we have been accustomed to treat as matters affecting the private citizen only, and that furthermore, it must exercise an increasing and more rigorous control over other matters which it is not desirable that it should directly manage. It is neither possible nor desirable to lay down a general hard and fast rule as to what this control should be in all cases. There is no possible reason in pure logic why a city, for instance, should supply its inhabitants with water, and allow private companies to supply them with gas, any more than there is why the general government should take charge of the delivery of letters but not of telegrams. On the other hand, pure logic has a very restricted application to actual social and civic life, and there is no possible reason for changing from one system to the other simply because the change would make our political system in theory more symmetrical. Obviously it is undesirable that the government should do anything that private individuals could do with better results to the community. Everything that tends to deaden individual initiative is to be avoided, and unless in a given case there is some very evident gain which will flow from state or municipal ownership, it should not be adopted. On the other hand, when private ownership entails grave abuses, and where the work is of a kind that can be performed with efficiency by the state or municipality acting in its collective capacity, no theory or tradition should interfere with our making the change. There is grave danger in attempting to establish invariable rules; indeed it may be that each case will have to be determined upon its own merits. In one instance a private corporation may be able to do the work best. In another the state or city may do it best. In yet a third, it may be to the advantage of everybody to give free scope to the power of some individual captain of industry.

On one point there must be no step backward. There is a consensus of opinion that New York must own its own water supply. Any legislation permitting private ownership should be annulled.

Nothing needs closer attention, nothing deserves to be treated with more courage, caution, and sanity, than the relations of the state to corporate wealth, and indeed to vast individual wealth. For almost every gain there is a penalty, and the great strides in the industrial upbuilding of the country, which have on the whole been attended with marked benefit, have also been attended by no little evil. Great fortunes are usually made under very complex conditions both of effort and of surrounding, and the mere fact of the complexity makes it difficult to deal with the new conditions thus created. The contrast offered in a highly specialized industrial community between the very rich and the very poor is exceedingly distressing, and while under normal conditions the acquirement of wealth by an individual is necessarily of great incidental benefit to the community as a whole, yet this is by no means always the case. In our great cities there is plainly in evidence much wealth contrasted with much poverty, and some of the wealth has been acquired, or is used, in a manner for which there is no moral justification....

The true questions to be asked are: Has any given individual been injured by the acquisition of wealth by any man? Were the rights of that individual, if they have been violated, insufficiently protected by law? If so, these rights, and all similar rights, ought to be guaranteed by additional legislation. The point to be aimed at is the protection of the individual against wrong, not the attempt to limit and hamper the acquisition and output of ‘wealth....

It is well to remember on the one hand that the adoption of what is reasonable in the demands of reformers is the surest way to prevent the adoption of what is unreasonable; and on the other hand that many of the worst and most dangerous laws which have been put upon the statute books have been put there by zealous reformers with excellent intentions.

This problem has a hundred phases. The relation of the capitalist and the wage-worker makes one; the proper attitude of the state toward extreme poverty another the proper attitude of the state toward the questions of the ownership and running of so-called "public utilities," a third. But among all these phases, the one which at this time has the greatest prominence is the question of what are commonly termed trusts, meaning by the name those vast combinations of capital, usually flourishing by virtue of some monopolistic element, which have become so startlingly common a feature in the industrial revolution which has progressed so rapidly during recent years.

Every new feature of this industrial revolution produces hardship because in its later stages it has been literally a revolution instead of an evolution. The new inventions and discoveries and the new methods of taking advantage of the business facilities afforded by the extraordinary development of our material civilization have caused the changes to proceed with such marvelous rapidity that at each stage some body of workers finds itself unable to accommodate itself to the new conditions with sufficient speed to escape hardship. In the end the accommodation of the class takes place; at times too late for the well-being of many individuals. The change which would be unaccompanied by hardship if it came slowly, may be fraught with severe suffering if it comes too fast, even when it is in the end beneficial. Occasionally, moreover, the change is positively deleterious, and very often, even when it is on the whole beneficial, it has features which are the reverse. In some cases, while recognizing the evil, it is impossible with our present knowledge to discover any remedy. In others, a remedy can be applied, but as yet only at a cost that would make it worse than the trouble itself. In yet’ others it is possible, by acting with wisdom, coolness, and fearlessness, to apply a remedy which will wholly or in great part remove the evil while leaving the good behind. We do not wish to discourage enterprise. We do not desire to destroy corporations; we do desire to put them fully at the service of the state and the people.

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