Chapter XI: Front Matter (11)

By the unanimous action of its people, without the firing of a shot—with a unanimity hardly before recorded in any similar case—the people of Panama declared themselves an independent republic. Their recognition by this Government was based upon a state of facts in no way dependent for its justification upon our action in ordinary cases. I have not denied, nor do I wish to deny, either the validity or the propriety of the general rule that a new state should not be recognized as independent till it has shown its ability to maintain its independence. This rule is derived from the principle of non-intervention, and as a corollary of that principle has generally been observed by the United States. But, like the principle from which it is deduced, the rule is subject to exceptions; and there are in my opinion clear and imperative reasons why a departure from it was justified and even required in the present instance. These reasons embrace, first, our treaty rights; second, our national interests and safety; and, third, the interests of collective civilization.

I have already adverted to the treaty of 1846, by the thirty-fifth article of which the United States secured the right to a free and open transit across the Isthmus of Panama, and to that end agreed to guarantee to New Granada her rights of sovereignty and property over that territory. This article is sometimes discussed as if the latter guarantee constituted its sole object and bound the United States to protect the sovereignty of New Granada against domestic revolution. Nothing, however, could be more erroneous than this supposition. That our wise and patriotic ancestors, with all their dread of entangling alliances, would have entered into a treaty with New Granada solely or even primarily for the purpose of enabling that remnant of the original Republic of Colombia, then resolved into the States of New Granada, Venezuela, and Ecuador, to continue from Bogota to rule over the Isthmus of Panama, is a conception that would in itself be incredible, even if the contrary did not clearly appear. It is true that since the treaty was made the United States has again and again been obliged forcibly to intervene for the preservation of order and the maintenance of an open transit, and that this intervention has usually operated to the advantage of the titular Government of Colombia, but it is equally true that the United States in intervening with or without Colombia’s consent, for the protection of the transit, has disclaimed any duty to defend the Colombian Government against domestic insurrection or against the erection of an independent government on the Isthmus of Panama. The attacks against which the United States engaged to protect New Granadian sovereignty were those of foreign powers; but this engagement was only a means to the accomplishment of a yet more important end. The great design of the article was to assure the dedication of the Isthmus to the purposes of free and unobstructed interoceanic transit, the consummation of which would be found in an interoceanic canal. To the accomplishment of this object the Government of the United States had for years directed its diplomacy. It occupied a place in the instructions to our delegates to the Panama Congress during the Administration of John Quincy Adams. It formed the subject of a resolution of the Senate in 1835, and of the House of Representatives in 1839. In 1846 its importance had become still more apparent by reason of the Mexican war. If the treaty of 1846 did not in terms bind New Granada to grant reasonable concessions for the construction of means of interoceanic communication, it was only because it was not imagined that such concessions would ever be withheld. As it was expressly agreed that the United States, in consideration of its onerous guarantee of New Granadian sovereignty, should possess the right of free and open transit on any modes of communication that might be constructed, the obvious intent of the treaty rendered it unnecessary, if not superfluous, in terms to stipulate that permission for the construction of such modes of communication should not be denied.

Long before the conclusion of the Hay-Herran treaty the course of events had shown that a canal to connect the Atlantic and Pacific Oceans must be built by the United States or not at all. Experience had demonstrated that private enterprise was utterly inadequate for the purpose; and a fixed policy, declared by the United States on many memorable occasions, and supported by the practically unanimous voice of American opinion, had rendered it morally impossible that the work should be undertaken by European powers, either singly or in combination. Such were the universally recognized conditions on which the legislation of the Congress was based, and on which the late negotiations with Colombia were begun and concluded. Nevertheless, when the well-considered agreement was rejected by Colombia and the revolution on the Isthmus ensued, one of Colombia’s first acts was to invoke the intervention of the United States; nor does her invitation appear to have been confined to this Government alone. By a telegram from Mr. Beaupré, our minister at Bogota, of the 7th of November last, we were informed that General Reyes would soon leave Panama invested with full powers; that he had telegraphed the President of Mexico to ask the Government of the United States and all countries represented at the Pan-American Conference “to aid Colombia to preserve her integrity”; and that he had requested that the Government of the United States should meanwhile “preserve the neutrality and transit of the Isthmus” and should “not recognize the new government.” In another telegram from Mr. Beaupré, which was sent later in the day, this Government was asked whether it would take action “to maintain Colombian right and sovereignty on the Isthmus in accordance with article 35 [of] the treaty of 1846” in case the Colombian Government should be “entirely unable to suppress the secession movement there.” Here was a direct solicitation to the United States to intervene for the purpose of suppressing, contrary to the treaty of 1846 as this Government has uniformly construed it, a new revolt against Colombia’s authority brought about by her own refusal to permit the fulfilment of the great design for which that treaty was made. It was under these circumstances that the United States, instead of using its forces to destroy those who sought to make the engagements of the treaty a reality, recognized them as the proper custodians of the sovereignty of the Isthmus.

This recognition was, in the second place, further justified by the highest considerations of our national interests and safety. In all the range of our international relations I do not hesitate to affirm that there is nothing of greater or more pressing importance than the construction of an interoceanic canal. Long acknowledged to be essential to our commercial development, it has become, as the result of the recent extension of our territorial dominion, more than ever essential to our national self-defence. In transmitting to the Senate the treaty of 1846, President Polk pointed out as the principal reason for its ratification that the passage of the Isthmus, which it was designed to secure, “would relieve us from a long and dangerous navigation of more than 9,000 miles around Cape Horn, and render our communication with our own possessions on the northwest coast of America comparatively easy and speedy.” The events of the past five years have given to this consideration an importance immeasurably greater than it possessed in 1846. In the light of our present situation, the establishment of easy and speedy communication by sea between the Atlantic and the Pacific presents itself not simply as something to be desired, but as an object to be positively and promptly attained. Reasons of convenience have been superseded by reasons of vital necessity, which do not admit of indefinite delays.

To such delays the rejection by Colombia of the Hay-Herran treaty directly exposed us. As proof of this fact I need only refer to the programme outlined in the report of the majority of the Panama Canal Committee, read in the Colombian Senate on the 14th of October last. In this report, which recommended that the discussion of a law to authorize the government to enter upon new negotiations should be indefinitely postponed, it is proposed that the consideration of the subject should be deferred till October 31, 1904, when the next Colombian Congress should have met in ordinary session. By that time, as the report goes on to say, the extension of time granted to the New Panama Canal Company by treaty in 1893 would have expired, and the new Congress would be in a position to take up the question whether the company had not, in spite of further extensions that had been granted by legislative acts, forfeited all its property and rights. “When that time arrives,” the report significantly declares, “the Republic, without any impediment, will be able to contract, and will be in more clear, more definite, and more advantageous possession, both legally and materially.” The naked meaning of this report is that Colombia proposed to wait until, by the enforcement of a forfeiture repugnant to the ideas of justice which obtain in every civilized nation, the property and rights of the New Panama Canal Company could be confiscated.

Such is the scheme to which it was proposed that the United States should be invited to become a party. The construction of the canal was to be relegated to the indefinite future, while Colombia was, by reason of her own delay, to be placed in the “more advantageous” position of claiming not merely the compensation to be paid by the United States for the privilege of completing the canal, but also the forty millions authorized by the act of 1902 to be paid for the property of the New Panama Canal Company. That the attempt to carry out this scheme would have brought Colombia into conflict with the Government of France can not be doubted; nor could the United States have counted upon immunity from the consequences of the attempt, even apart from the indefinite delays to which the construction of the canal was to be subjected. On the first appearance of danger to Colombia, this Government would have been summoned to interpose, in order to give effect to the guarantees of the treaty of 1846; and all this in support of a plan which, while characterized in its first stage by the wanton disregard of our own highest interests, was fitly to end in further injury to the citizens of a friendly nation, whose enormous losses in their generous efforts to pierce the Isthmus have become a matter of history.

In the third place, I confidently maintain that the recognition of the Republic of Panama was an act justified by the interests of collective civilization. If ever a government could be said to have received a mandate from civilization to effect an object the accomplishment of which was demanded in the interest of mankind, the United States holds that position with regard to the interoceanic canal. Since our purpose to build the canal was definitely announced, there have come from all quarters assurances of approval and encouragement, in which even Colombia herself at one time participated; and to general assurances were added specific acts and declarations. In order that no obstacle might stand in our way, Great Britain renounced important rights under the Clayton-Bulwer treaty and agreed to its abrogation, receiving in return nothing but our honorable pledge to build the canal and protect it as an open highway. It was in view of this pledge, and of the proposed enactment by the Congress of the United States of legislation to give it immediate effect, that the second Pan-American Conference, at the City of Mexico, on January 22, 1902, adopted the following resolution:

The Republics assembled at the International Conference of Mexico
applaud the purpose of the United States Government to construct an
interoceanic canal, and acknowledge that this work will not only
be worthy of the greatness of the American people, but also in the
highest sense a work of civilization, and to the greatest degree
beneficial to the development of commerce between the American
States and the other countries of the world.

Among those who signed this resolution on behalf of their respective governments was General Reyes, the delegate of Colombia. Little could it have been foreseen that two years later the Colombian Government, led astray by false allurements of selfish advantage, and forgetful alike of its international obligations and of the duties and responsibilities of sovereignty, would thwart the efforts of the United States to enter upon and complete a work which the nations of America, re-echoing the sentiment of the nations of Europe, had pronounced to be not only “worthy of the greatness of the American people,” but also “in the highest sense a work of civilization.”

That our position as the mandatary of civilization has been by no means misconceived is shown by the promptitude with which the powers have, one after another, followed our lead in recognizing Panama as an independent State. Our action in recognizing the new republic has been followed by like recognition on the part of France, Germany, Denmark, Russia, Sweden, and Norway, Nicaragua, Peru, China, Cuba, Great Britain, Italy, Costa Rica, Japan, and Austria-Hungary.

In view of the manifold considerations of treaty right and obligation, of national interest and safety, and of collective civilization, by which our Government was constrained to act, I am at a loss to comprehend the attitude of those who can discern in the recognition of the Republic of Panama only a general approval of the principle of “revolution” by which a given government is overturned or one portion of a country separated from another. Only the amplest justification can warrant a revolutionary movement of either kind. But there is no fixed rule which can be applied to all such movements. Each case must be judged on its own merits. There have been many revolutionary movements, many movements for the dismemberment of countries, which were evil, tried by any standard. But in my opinion no disinterested and fair-minded observer acquainted with the circumstances can fail to feel that Panama had the amplest justification for separation from Colombia under the conditions existing, and, moreover, that its action was in the highest degree beneficial to the interests of the entire civilized world by securing the immediate opportunity for the building of the interoceanic canal. It would be well for those who are pessimistic as to our action in peacefully recognizing the Republic of Panama, while we lawfully protected the transit from invasion and disturbance, to recall what has been done in Cuba, where we intervened even by force on general grounds of national interest and duty. When we interfered it was freely prophesied that we intended to keep Cuba and administer it for our own interests. The result has demonstrated in singularly conclusive fashion the falsity of these prophecies. Cuba is now an independent republic. We governed it in its own interests for a few years, till it was able to stand alone, and then started it upon its career of self-government and independence, granting it all necessary aid. We have received from Cuba a grant of two naval stations, so situated that they in no possible way menace the liberty of the island, and yet serve as important defences for the Cuban people, as well as for our own people, against possible foreign attack. The people of Cuba have been immeasurably benefited by our interference in their behalf, and our own gain has been great. So will it be with Panama. The people of the Isthmus, and as I firmly believe of the adjacent parts of Central and South America, will be greatly benefited by the building of the canal and the guarantee of peace and order along its line; and hand in hand with the benefit to them will go the benefit to us and to mankind. By our prompt and decisive action, not only have our interests and those of the world at large been conserved, but we have forestalled complications which were likely to be fruitful in loss to ourselves, and in bloodshed and suffering to the people of the Isthmus.

Instead of using our forces, as we were invited by Colombia to do, for the twofold purpose of defeating our own rights and interests and the interests of the civilized world, and of compelling the submission of the people of the Isthmus to those whom they regarded as oppressors, we shall, as in duty bound, keep the transit open and prevent its invasion. Meanwhile, the only question now before us is that of the ratification of the treaty. For it is to be remembered that a failure to ratify the treaty will not undo what has been done, will not restore Panama to Colombia, and will not alter our obligation to keep the transit open across the Isthmus, and to prevent any outside power from menacing this transit.

It seems to have been assumed in certain quarters that the proposition that the obligations of article 35 of the treaty of 1846 are to be considered as adhering to and following the sovereignty of the Isthmus, so long as that sovereignty is not absorbed by the United States, rests upon some novel theory. No assumption could be further from the fact. It is by no means true that a state in declaring its independence rids itself of all the treaty obligations entered into by the parent government. It is a mere coincidence that this question was once raised in a case involving the obligations of Colombia as an independent state under a treaty which Spain had made with the United States many years before Spanish-American independence. In that case Mr. John Quincy Adams, Secretary of State, in an instruction to Mr. Anderson, our minister to Colombia, of May 27, 1823, said:

By a treaty between the United States and Spain concluded at a time
when Colombia was a part of the Spanish dominions ... the principle
that free ships make free goods was expressly recognized and
established. It is asserted that by her declaration of independence
Colombia has been entirely released from all the obligations by
which, as a part of the Spanish nation, she was bound to other
nations. This principle is not tenable. To all the engagements of
Spain with other nations, affecting their rights and interests,
Colombia, so far as she was affected by them, remains bound in
honor and in justice. The stipulation now referred to is of that
character.

The principle thus asserted by Mr. Adams was afterward sustained by an international commission in respect to the precise stipulation to which he referred; and a similar position was taken by the United States with regard to the binding obligation upon the independent State of Texas of commercial stipulations embodied in prior treaties between the United States and Mexico when Texas formed a part of the latter country. But in the present case it is unnecessary to go so far. Even if it be admitted that prior treaties of a political and commercial complexion generally do not bind a new state formed by separation, it is undeniable that stipulations having a local application to the territory embraced in the new state continue in force and are binding upon the new sovereign. Thus it is on all hands conceded that treaties relating to boundaries and to rights of navigation continue in force without regard to changes in government or in sovereignty. This principle obviously applies to that part of the treaty of 1846 which relates to the Isthmus of Panama.

In conclusion let me repeat that the question actually before this Government is not that of the recognition of Panama as an independent republic. That is already an accomplished fact. The question, and the only question, is whether or not we shall build an Isthmian Canal.

I transmit herewith copies of the latest notes from the minister of the Republic of Panama to this Government, and of certain notes which have passed between the special envoy of the Republic of Colombia and this Government.

THEODORE ROOSEVELT.

WHITE HOUSE,
_January 4, 1904_

EXTRACTS FROM THE MESSAGES OF THEODORE ROOSEVELT AS GOVERNOR OF THE STATE OF NEW YORK

MESSAGE OF THE GOVERNOR OF NEW YORK TO THE LEGISLATURE, JANUARY 2, 1899

STATE OF NEW YORK, EXECUTIVE CHAMBER,
ALBANY, _January 2, 1899_

_To the Legislature_:

The people of New York, like the people of every other State in the Union, are to be congratulated, because during the past year the Nation has carried to a brilliant triumph one of the most righteous wars of modern times. When last spring it became evident that the interests of humanity and of national honor alike demanded that we should drive Spain from the Western Hemisphere and free from her tyranny the subject peoples of the islands of the sea, New York responded with eager zeal to the call for volunteers, and in the Cabinet, in Congress and in camp, her representatives did all they could to insure the success of the American policy. We are not merely New Yorkers. We are Americans; and the interests of all Americans, whether from the North, the South, the East or the great West, are equally dear to the men of the Empire State. As we grow into a mighty nation, which, whether it will or not, must inevitably play a great part for good or for evil in the affairs of the world at large, the people of New York wish it understood that they look at all questions of American foreign policy from the most thoroughly national standpoint. The tropic islands we have taken must neither be allowed to lapse into anarchy nor to return under the sway of tyranny. War is a grim thing at best, but the war through which we have passed has left us not merely memories of glory won on land and sea, but an even more blessed heritage, the knowledge that it was waged from the highest motives, for the good of others as well as for our own national honor. Above all, we are thankful that it brought home to all of us the fact that the country was indeed one when serious danger confronted it. The men from the East and the West, from the North and the South, the sons of those who wore the blue and of those who wore the gray, the men of means and the men who all their lives long had possessed only what day by day they toiled to earn, stood shoulder to shoulder in the fight, met the same dangers, shared the same hardships and won the same ultimate triumph.

In our domestic affairs, the State is to be congratulated on the gradual return of prosperity. Though temporarily checked by the war this return has been on the whole steady. The capitalist finds constantly greater business opportunities; the wage-worker, in consequence, is more steadily employed; the farmer has a better market.

TAXATION

No other question is of such permanent importance in the domestic economy of our State as the question of taxation. At present our system of taxation is in utter confusion, full of injustices and of queer anomalies. It is an exceedingly difficult subject, one well worthy the attention of our best men, the men with most highly trained minds and the broadest practical experience; men who are able to approach the subject from the standpoints alike of the farmer, the merchant, and the manufacturer. Not only is it necessary to consider whether any kind of tax ought, if practicable, to be levied, but whether it is in fact practicable to levy it. We should discourage the building up of non-taxable interests, and yet we should discourage driving property out of the State by unwise taxation, or levying a tax which is in effect largely a tax upon honesty. I most earnestly commend the whole matter to your special attention.

* * * * *

MESSAGE OF THE GOVERNOR OF NEW YORK TO THE LEGISLATURE, MAY 22, 1899

STATE OF NEW YORK, EXECUTIVE CHAMBER,
ALBANY, _May 22, 1899_

_To the Legislature_:

I have called you together in extraordinary session for the purpose of considering the subject of the taxation of franchises.

My message to the Legislature of March 27, 1899, ran in part as follows:

“At present the farmers, the market gardeners, and the mechanics and tradesmen having small holdings are paying an improper and excessive portion of the general taxes, while at the same time many of the efforts to remedy this state of affairs, notably in the direction of taxing securities, are not only unwise, but inefficient, and often serve merely to put a premium upon dishonesty.”

* * * * *

“There is evident injustice in the light taxation of corporations. I have not the slightest sympathy with the outcry against corporations as such, or against prosperous men of business. Most of the great material works by which the entire country benefits have been due to the action of individual men, or of aggregates of men, who made money for themselves by doing that which was in the interest of the people as a whole. From an armor plant to a street railway no work which is really beneficial to the public can be performed to the best advantage of the public save by men of such business capacity that they will not do the work unless they themselves receive ample reward for doing it. The effort to deprive them of an ample reward, merely means that they will turn their energies in some other direction; and the public will be by just so much the loser. Moreover, to tax corporations or men of means in such a way as to drive them out of the State works great damage to the State. To drive out of a community the men of means and the men who take the lead in business enterprises would probably entail, as one of its first results, the starvation of a considerable portion of the remainder of the population.

“But while I freely admit all this, it yet remains true that a corporation which derives its powers from the State should pay to the State a just percentage of its earnings as a return for the privileges it enjoys. This should be especially true for the franchises bestowed upon gas companies, street railroads and the like. The question of the municipal ownership of these franchises can not be raised with propriety until the governments of all municipalities show greater wisdom and virtue than has been recently shown, for instance, in New York City; and the question of laying and assessing the tax for franchises of every kind throughout the State should in my opinion be determined by the State itself. I need not point out to you that in foreign communities a very large percentage of the taxes comes from corporations which use the public domain for pipes, tracks and the like.”

I stated that the power of assessing the tax on franchises should be left with the State authorities—not the local authorities—because in my view this was desirable both for the sake of providing against improper favoritism of or discrimination against corporations by the local authorities, for the sake of working equity as between the franchises in different localities, and finally for the sake of providing for the cases where a railroad or telephone or telegraph line runs through several different communities.

Many representatives of corporations owning franchises heartily approve of having them properly taxed; and I am confident that, in the end, this will be of positive benefit to the franchise owners, and in no way oppressive to them, save as all taxes are oppressive to all owners of property.

The line of cleavage between good and bad citizenship does not follow the line dividing the men who represent corporate interests from the men who do not; it runs at right angles to it. We are bound to recognize this fact, to remember that we should stand for good citizenship in every form, and should neither yield to demagogic influence on the one hand, nor to improper corporate influence on the other. There is no intention of oppressing people who have put their money into franchises. We recognize that, as in the case of all legitimate business, they benefit not only themselves but the community at large. If a franchise is worth very little, it should be taxed very little; but where the franchise is of great value, it certainly should be heavily taxed; and the value is of course based upon the use of the city’s or State’s real estate. Such use of the public real estate should not be given without substantial returns; returns not only in the way of service to the public, which of course a street railway or a gas company gives, precisely as the proprietor of a grocery or dry goods store gives it, but also in the way of bearing a just share of the burden of taxation; again, precisely as the owner of the grocery or dry goods store bears his share, the difference being that a railroad company, for instance, owes infinitely more than the proprietor of a big business establishment does, to the real estate itself. Of course, this value differs greatly in different places. Where population is dense, as in New York City, the real estate along which the tracks are laid on Broadway may be worth an immense amount for every lineal foot, exactly as the real estate fronting this portion of Broadway is worth an immense amount for every lineal foot. In sparsely settled districts, however, the value of the real estate of the railroad will diminish greatly, just as the value of the realty through which it runs diminishes.

I am perfectly well aware that as Chief Justice Marshall says: “The power of taxation is the power of destruction.” But this applies to every species of property. If demagogues or ignorant enthusiasts who are misled by demagogues could succeed in destroying wealth, they would of course simply work the ruin of the entire community; and first of all, of the unfortunates for whom they profess to feel an especial interest. But the very existence of unreasoning hostility to wealth should make us all the more careful in seeing that wealth does nothing to justify such hostility. We are the true friends of the men of means, we are the true friends of the lawful corporate interests which do good work for the community, when we insist that the man of means and the great corporation shall pay their full share of taxes and bear their full share of the public burdens. If this is done, then sooner or later will follow public recognition of the fact that it is done; and when there is no legitimate basis for discontent, the American public is sure sooner or later to cease to feel discontent.

The Legislature passed, and there is now before me, a bill for the taxation of franchises by treating them as realty. After watching the progress of this bill I became convinced that the opposition to it was less to its particular features than to the general principle of taxing franchises in any way; in other words, I became convinced that any really effective measure of taxation aimed at franchises would be vigorously opposed. It therefore became of the utmost importance to secure this year some statutory enactment which would distinctly recognize the principle which we seek to establish. Toward the end of the session it became evident that the influences against the taxation of franchises would be content with nothing save the defeat of any measure of substantial relief; and a measure of less than substantial relief I would not accept. Finally it became evident that the Legislature could pass only one bill and that without amendment. I therefore sent in a special message asking for the passage of this bill. It was passed on the last day of the session. It represents a long stride in the right direction, and one from which there must be no retrogression.

Nevertheless, it can be greatly bettered if amended in two important particulars. In its essential principle, that of taxing franchises as realty, it is right and proper. After much study of the question, I am convinced that in this way we can come nearer to doing justice than in any other which has as yet been proposed. It is no new thing to treat franchises as realty. They are so treated in Washburn’s work on real property, and by Chancellor Kent; but under the laws of New York as they are now a franchise can not be taxed except by special statute, and as a matter of fact this extremely valuable species of property is in very many, if not in most, cases untaxed or taxed far below its value in comparison with other kinds of real estate. Local franchises are granted for various purposes and under varying conditions; sometimes by special statute and sometimes by the municipal authorities under a general statute. The value of the franchise of course varies widely in different localities, depending upon a variety of circumstances; but a great part of its value is dependent upon the same causes which operate to make other kinds of real estate more valuable in one locality than in another. The franchise is inseparable from the property of the corporation in the street, whether this property consists of poles, pipes, or tracks, above the ground, under the ground, or on the ground. The right to lay a railroad track and operate a railroad in a public street can not be separated or dissociated from the railroad itself. This is equally true of the right to lay water and gas mains and the like. The franchise is a necessary and inevitable element of value and is a proper subject of consideration in determining the taxable value of the real property of the corporation enjoying it. The right to occupy a street should not be classed as an intangible something, distinct from the other property of the company, but should be treated as a necessary incident to the tangible property and one to be considered in measuring the value of the whole property. The Nichols law in Ohio which provides for the taxation of certain kinds of corporations such as telegraph and telephone companies and the like, doing business in the public streets, proceeds along these lines, and has in practice been found to work admirably. It is possible that further experience may enable us to find some better method of taxing franchises, but with our present knowledge it is certainly wisest to tax them as realty.

Under the bill before me the assessment will be levied by the local authorities. This would result in many cases in a dozen different sets of local authorities assessing the value of different parts of the same franchise. It is on every account far better that this assessment should be delegated to the State authorities who will necessarily ascertain all the conditions affecting the franchise and obtain information which will enable them to judge of the value of the franchise in the different localities in which it is exercised. The Board of State Tax Commissioners can collate the facts, compare conditions and determine values as a result of a wider range of observation and experience than can be obtained by local officers, and under them the system of assessment will tend to produce justice, harmony and uniformity. This is the system adopted under the Nichols law and it has worked well in practice.

Furthermore, the bill before me fails to take account of the fact that, in a very unequal and irregular way, many corporations do already pay a certain, though usually an utterly inadequate sum in taxes. Some pay nothing at all to the local municipalities, but others pay sums varying from one to five per cent on their gross earnings. The amounts have been determined in the most haphazard manner and bear no proportion whatever to the value of the franchises or to their earning capacity. It is obviously unjust, when introducing a system under which we believe that these franchises will for the first time be fully and fairly taxed according to their respective values, not to allow for this existing and inequitable taxation. Accordingly it should be provided that from the sum assessed by the State authorities as the tax which a corporation must pay because of its local franchise, there shall be deducted the amount already annually paid by it to the locality for such franchise. In no other way is it possible to tax these corporations with uniformity and equity. It is contended by the advocates of the bill that in reaching the value of the franchise under the new law the amount thus paid away in taxes must be allowed for and deducted anyhow; but it is not certain that this would be done, and in any event the principal should be definitely established by the law itself. There can be no possible opposition to putting it in the law by any man who is anxious to tax corporations as other property is taxed, and who believes that this end can be attained by taxing them as realty. Either by taxing them as realty we shall tax them at their full value, or we shall not; if, as we hold, the former is the case, it would be unjust to tax them for more than their full value, and this would happen were not these existing taxes deducted.

If it is claimed that the particular method of assessment by the State Tax Commission may be improper or unjust, provision can be made for the same appeal to the courts that now lies in the case of any assessment on other kinds of property.

Accordingly, I recommend the enactment of a law which shall tax all these franchises as realty, which shall provide for the assessment of the tax by the Board of State Tax Commissioners, and which shall further provide that from the tax thus levied for the benefit of each locality there shall be deducted the taxes now paid by the corporation in question. Furthermore, as the time for assessing the largest and wealthiest corporations, those of New York and Buffalo, has passed for this year, and as it will be preferable not to have the small country corporations taxed before the larger corporations of the cities are taxed, I suggest that the operations of the law be deferred until October first, of this year.

THEODORE ROOSEVELT.

MESSAGE OF THE GOVERNOR OF NEW YORK TO THE LEGISLATURE, JANUARY 3, 1900

STATE OF NEW YORK, EXECUTIVE CHAMBER,
ALBANY, _January 3, 1900_

_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 can not 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, non-residents 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 centre 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 so evident that it is possible to provide more or less complete remedies without waiting for a general scheme of reorganization. Again and again in recent years this has been recognized, and through legislative enactment certain species of property which had escaped taxation have been made to pay their proper share of the public burdens. The collateral inheritance tax offers a case in point. The corporation tax offers another. In all these matters of taxation, however, it is necessary to proceed with extreme caution, the path never being so simple and clear as the advocates of any particular measure invariably believe. Every wealthy corporation that perpetrates or is allowed to perpetrate a wrong helps to produce or inflame a condition of angry excitement against all corporations, which in its turn may in the end harm alike the honest and the dishonest agents of public service and thereby do far-reaching damage to the whole body politic. Much of the outcry against wealth, against the men who acquire wealth, and against the means by which it is acquired, is blind, unreasoning and unjust; but in too many cases it has a basis in real abuses; and we must remember that every act of misconduct which affords any justification for this clamor is not only bad because of the wrong done but also because the justification thus given inevitably strengthens movements which are in reality profoundly anti-social and anti-civic. Our laws should be so drawn as to protect and encourage corporations which do their honest duty by the public; and to discriminate sharply against those organized in a spirit of mere greed, or for improper speculative purposes.

There is plenty of misconduct, plenty of selfish disregard of the rights of others, and especially of the weak. There is also plenty of honorable and disinterested effort to prevent such misconduct or to minimize its effects. Any rational attempt to prevent or counteract the evils, by legislation or otherwise, is deserving of hearty support; but it can not be too deeply impressed upon us that such attempts can result in permanent good only in proportion as they are made in a sane and wholesome spirit, as far removed as possible from whatever is hysterical 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 has 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 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.

A profound political and social thinker has recently written: “Wealth which is expended in multiplying and elaborating real comforts, or even in pleasures which produce enjoyment at all proportionate to their cost, will never excite serious indignation. It is the colossal waste of the means of human happiness in the most selfish and most vulgar forms of social advertisement and competition that gives a force to passions which menace the whole future of our civilization.” But in continuance this writer points out that the only effectual check lies in the law of public opinion. Any attempt to interfere by statute in moral questions of this kind, by fettering the freedom of individual action, would be injurious to a degree far greater than is the evil aimed at. Probably the large majority of the fortunes that now exist in this country have been amassed, not by injuring mankind, but as an incident to the conferring of great benefits on the community—whatever the conscious purpose of those amassing them may have been. The occasional wrongs committed or injuries endured are on the whole far outweighed by the mass of good which has resulted. 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.