Artifact Spotlight: “Tax Facts,” April 1928

by Paul R. Spitzzeri

Yep, it’s that time of the year, perhaps the single most hated day on our calendars: April 15, Tax Day.  Well, long before Howard Jarvis, there were any number of California tax reformers out there, looking to change the way the system works in our state.

Highlighted here is the April 1928 issue of Tax Facts, a monthly four-page publication issued by The Tax Relief Association of California, a Los Angeles-based organization that produced the newsletter “in the interest of sound economics and American ideals.”

The association was concerned mainly with the taxation of personal property, as well as sales taxes, and looked to overhaul the system.  In this issue, the feature article was titled “The Personal Property Tax Muddle,” with the opening statement being that “the general tax on personal property has never worked well” and that “honest taxpayers pay unequally; dishonest taxpayers do not pay at all.”

By personal property, the article really meant corporate property (interesting how the word “personal” and “corporate” can bring to mind our modern disputed concept of “corporate personhood”), with cited examples dealing with California’s taxation of inventories of goods, machinery, livestock and so forth, while states like New York and Pennsylvania did not.  The call was for California to completely repeal its general personal property tax law.

Another concern was the tax on stocks and bonds of corporations outside the state, while those of companies within California were exempt, bringing up issues of “double taxation” involving California’s “foreign securities” tax and the state in which the securities originated.  Notably, the article observed that there was a state constitutional amendment and two statutes passed by the legislature, but “the Supreme Court [presumably, California’s] has set both statutes aside as unconstitutional.”

Then, there was the matter of the state’s taxation of national banks, while money loaned on real estate by private parties was not taxed, so the organization called for eliminating the former or creating a tax for the latter.  In all of these cases, a total elimination of the state’s personal property tax was advocated by the association.

A separate piece dealt with California’s tax on stored oil, a timely issue given the movement in recent years to create an oil severance (extraction) tax.  In 1928, the association argued against “any great moral or economic right on the part of a county to grab a lot of taxes from oil in transit that happens to be stored in such county.”  Instead, the organization called for, in lieu of a property tax, a business license for the storing of oil.  It also admitted that “oil bearing lands should be taxed,” but “the business of refining and distributing oil, like all other producing businesses using labor and capital, should be as free from taxation as possible.”

Under the heading of “Is This A Wise Policy?” the association criticized the idea of having a higher tax on an improved property than an unimproved one, citing the example of the Firestone Tire and Rubber Company’s new, massive plant in the City of Commerce and the difference between raw land and the huge infrastructure invested on the site.  Of course, the profits of operating on a developed site compared to having no revenue stream from raw land is another matter.

Finally, there is the “Ethics of Taxation” and its main point of taxes for infrastructure like sidewalks, paved roads and sewers, in which a government typically taxed “all citizens according to the amount of wealth they owned,” but then owners of apartment buildings and rented houses could “collect the benefits [of the improvements] by raising rents and prices,” meaning that “the citizen pays twice for the same thing, and the owner of the site, is able, to that extent, to enrich himself at the expense of his tenant.”  Today, a common practice is to have such improvements either paid by developers or by the property owners, as in a Mello-Roos arrangement.

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