works better in the city than in the country, it is also true that the defect is a small one and is counterbalanced by defects of the property tax working in the other direction. The two taxes are mutually corrective.

VI

The insignificant yield of the income tax in rural districts raises sharply the question whether or not the income tax has proved a successful substitute for the personal property tax. No categorical answer to this question can be given. The income tax produced in the first year several times as much as the revenue formerly collected from the important classes of personalty exempted when the income tax took effect. In the larger cities, moreover, the income tax produced enough to warrant the immediate exemption of all personal property from taxation. On the other hand, in the smaller cities, villages and rural townships, the yield of the income tax is, except where there are important mines or factories, almost negligible.

In farming districts at the present time personal property represents only about ten per cent of the total assessment, and the yield of the income tax is small. In the villages and smaller cities personal property constitutes about 30 per cent of the entire assessment, and the revenue from the income tax is again insignificant. In the larger cities, however, while personal property constitutes from 25 to 30 per cent of the total assessment, the yield of the income tax is large. From this statement it is apparent that the personal property tax might be abandoned without any substitute in the farming districts, and that the income tax would fill the place of the exempted personal property tax in the larger cities; but in many of the towns, villages and smaller cities, probably in most of them, the abolition of the personal property tax would cause a decided increase in the tax rate on real estate. Unfortunately, also, the very places in which the personal property tax is most important and the income tax least important are those places in which land values are least affected by the influences which give rise to the so-called "unearned increment." In these jurisdictions real estate is least able to bear the entire burden of taxation.

The Wisconsin Tax Commission has twice recommended to the legislature the abolition of the personal property tax; and the legislature in retaining the tax on merchants and manufacturers' stock, farm animals and other forms of tangible personal property was influenced not by any desire to preserve the personal property tax but by prudent resolution to test out the income tax before relinquishing present sources of revenue. In the writer's opinion this action of the legislature was wise; and it will probably be many years before the personal property tax can be entirely abolished in Wisconsin. Under the circumstances it seemed to be the wisest alternative to make provision for such elasticity in the tax system as would permit some localities to do away with the personal property tax, allowing other jurisdictions, which find its abolition impracticable, to retain it. Accordingly, there was introduced in 1913 and passed in both houses of the legislature an amendment to the constitution of Wisconsin sanctioning a scheme of limited local option.

The proposed amendment, which must pass another session of the legislature and then be ratified by popular vote before it can become effective, is quoted below. It will be noted that it does not give the local governments power to exempt property from county and state taxation, but leaves each jurisdiction in limited control of its own taxes-the state to say what forms of property shall be subject to the state tax, the county to determine what forms of property shall be subject to the county tax, and the town or city to decide what forms of property shall be subject to local taxation. This is really home rule. The trouble with many home-rule amendments introduced in the past is that they have proposed to permit the smaller unit to dictate the policy of the larger unit by authorizing local subdivisons to exempt property from all kinds of taxes-state, county and local. The proposed amendment is as follows:

The legislature shall have power to authorize counties, towns, cities and villages, by a vote of the electors therein, to exempt from taxation, in whole or in part, designated classes of property; but the value of such property exempted by any county shall be included in the assessment and equalization for state taxes, and the value of such

property exempted by any town, city or village, shall be included in the assessment and equalization for state and county taxes.

If this amendment passes, Wisconsin will have reached the principal goal toward which the income tax constitutes the first and most important step. It is not believed that the introduction of the federal income tax will seriously interfere with state income taxation. Why should it? The federal income tax replaces regressive customs taxes, and the state income tax replaces defective property taxes. No new burden is created. The old burden is simply redistributed from the shoulders of those less able to pay over to the shoulders of those more able to pay. The individual who has no income above the minimum of subsistence and the business concern which makes no profit are not called upon to pay the income tax. Within reasonable limits it would seem that we could hardly move too fast in this direction of relieving from taxation consumption, property and business, as such, and placing an equivalent burden upon the successful people and business concerns of the community. And there is every reason to believe that the two taxes will be mutually helpful from an administrative standpoint. In Wisconsin the income tax rolls are public records and incidentally it may be said that they attract little attention and produce none of the awful consequences so often predicted. The federal officials will find the state income tax rolls of material assistance in their work. As a return courtesy the corporation assessments of the federal government will be thrown open to the properly accredited officers of any state government imposing a general income tax.1 This is the beginning of a fruitful coöperation between state and federal governments which when consummated will vastly improve our system of commonwealth taxation.

UNIVERSITY OF WISCONSIN.

T. S. ADAMS.

The new income tax act contains in paragraph D of section g, the following provision: "Provided further, that the proper officers of any state imposing a general income tax may, upon the request of the governor thereof, have access to said returns or to an abstract thereof, showing the name and income of any such corporation, joint stock company, association or insurance company, at such times and in such manner as the Secretary of the Treasury may prescribe."

GOVERNMENTAL REGULATION OF SECURITIES

ISSUES

'NTIL very recently it has been tacitly agreed that a man

UNTI

runs his own risk in choosing securities in which to invest, goes into such a project with his eyes open, and deserves no governmental protection from swindlers and companies of unsound organization. The last two or three years, however, have indicated a decided change in opinion. There has been a realization that the individual investor, the banks, and the sound corporations all need the protection that a supervisory board or official can afford in detecting the imposter and excluding him from the market. Following the lead of Kansas, eighteen states have passed "blue-sky" laws, and other states have such legislation now under consideration. The general purpose of these laws is to force those who intend to offer stocks and bonds to the public to make known to some proper state authority their organization, plan of business and the purpose for which the income from the securities will be used. If this official does not believe that the project offers a fair opportunity to the investor he may forbid the proposed sale. This power has been variously given to the bank commissioner, the secretary of state, or to a specially created securities commissioner.'

The first steps in this direction, however, antedated the Kansas blue-sky law. The first corporations to which this principle was applied were public utility companies, which have received the lion's share of attention in restrictive legislation. As early as 1908 clauses began to appear in the new publicservice laws providing for commission regulation of securities issues. The evolution of this legislation can be traced with profit. Beginning with the establishment of commissions with

Corporation Commissioner: Arizona, Oregon, Montana. Bank Commissioner: Arkansas, Idaho, Kansas, Maine, Missouri, Vermont. Secretary of State: Iowa. Bank Examiner: North Dakota, West Virginia. Securities Commission: Michigan, South Dakota.

an undefined power of advising changes in the service and rates of common carriers, the states have year by year increased the powers of these commissions, extended their jurisdiction to all public utilities, and broadened the scope of their duties. Naturally enough the consumers' interests were the first to receive. protection; the most recent laws have extended this protection. to the interests of investors as well. This is achieved by giving to public officers power to pass upon stock and bond issues of companies under their jurisdiction.

In this, as in other progressive legislation, the provisions in different states vary widely, some allowing the corporations great freedom of issue, others putting a large share of the responsibility upon the regulative boards. Since 1908 some of the most backward states have stepped to the very forefront in this matter, modeling their laws after the notable examples of New York and Wisconsin. Other states that have long possessed commissions with complete power to fix rates and command improvement of service have not yet seen the necessity of regulating the issue of securities.

In 1912 this supervisory power existed in thirteen states: Georgia, Massachusetts, Michigan, Kansas, Nebraska, New York, Wisconsin, California, Maryland, New Jersey, New Hampshire, Ohio and Vermont. In these jurisdictions it is required that the corporation file a statement showing (1) the amount and character of the securities to be issued, (2) the purpose for which they are issued, (3) the terms and (4) the total assets and liabilities of the corporation. The commission will then grant a certificate authorizing the issue, stating the amount allowed, the character, purpose and terms. the corporation has not been allowed to issue the full amount petitioned for. For example, in New York (first district) in 1908-the first year in which this law had effect-stock and bond issues amounting to $155,000,000 were asked for, while permission was granted to issue only $70,000,000. Yet the companies are ultimately more than repaid through the increased value of their securities in the eyes of the investing public. Mr. R. V. Johnson writes:

Often