FINANCE AND TAXATION.

The State of Michigan is practically free from debt. standing $889,000 of its bonds bearing six and seven per

While there are still outcent interest, and not due

until 1883 and 1890, and $15,149.97 in bonds which are past due and now draw no interest but have not yet been presented for payment by their holders, the sinking fund of the treasury contains the means for the payment of every dollar of this indebtedness. Moreover, not only is the State able and willing to meet and cancel all its existing obligations, but it has repeatedly sought to purchase its bonds at a large advance upon their face value; these efforts have failed only because private owners have preferred to hold rather than sell even at a premium securities of such undoubted merit. Michigan only awaits the consent of its creditors to extinguish its entire State debt. For the payment thereof, both principal and interest, ample provision has been made, and it has thus already ceased to be a charge upon the taxpayers.

THE STATE'S CREDIT.

The credit of Michigan is of the first order. Its securities command large premiums in the investment markets of the world, in London and Amsterdam (where a considerable amount is held by capitalists who refuse to part with them), as well as in New York and Boston. Within two years the State itself has unsuccessfully offered for its outstanding bonds bearing six or seven per cent interest an advance of from eighteen to twenty per cent upon their par value. No American community possesses a better financial reputation.

THE TRUST FUNDS.

The Trust Funds of the State are not a debt proper. They are composed of the sums realized by the treasury from the sale of the lands granted for educational purposes. The proceeds of these sales have been expended by the State as received, and their amounts have been placed to the credit of five different funds, whose inviolability is guaranteed in the constitution, and upon which the State will, as trustee of the institutions to which the grants were made, pay interest annually at a fixed rate for all time to come. On September 30, 1881, the amounts to the credit of these funds, not including the sums still due from the purchasers of the lands, were as follows :

For the regular payment of the interest upon these funds the constitution of the State makes ample provision by declaring that all the "specific State taxes, except

those received from the mining companies of the upper peninsula [an exception of slight importance], shall be applied in paying the interest upon the primary school, university, and educational funds and the principal and interest of the State debt in the order herein recited * * "" These specific taxes are levied by the State upon certain classes of corporations, and in the fiscal year of 1881 came from the following

This sum was over $400,000 in excess of the amount required in that year to pay the interest on the Trust Funds and to provide for the principal and interest of the bonded debt. With the constant natural increase in the number of corporations paying specific taxes and the present extinguishment of the State debt, the proportion of this excess is reasonably certain to increase rather than diminish, notwithstanding the fact that the steady sale of lands granted for educational purposes will continue to add to the principal of the Trust Funds for many years to come.

THE STATE CANNOT CONTRACT DEBT EXCEPT FOR WAR PURPOSES.

Again, Michigan is not only free from debt by virtue of the facts (1) that its sinking fund, already realized, is sufficient to pay every outstanding bond, and (2) that it has made ample provision for the payment with the specific taxes of the interest on all obligations not matured and of the annuities for which it is liable in the form of interest on the Trust Funds, but it cannot involve itself in debt in the future except in case of war. Its existing indebtedness was incurred in internal improvements in its early days and in the extraordinary expenditures made necessary by the civil war of 1861-5. By its present constitution it is absolutely prohibited from again engaging in schemes of internal improvement and from running into debt in any manner except to obtain small temporary loans to meet deficits in revenue or to provide the means for "repelling invasion, suppressing insurrection, or defending the State in time of war.”

CONSTITUTIONAL BARRIERS AGAINST A STATE DEBT.

The sections of that instrument bearing upon this subject are as follows, (article 14): SECTION 3. The State may contract debts to meet deficits in revenue. Such debts shall not in the aggregate, at any one time, exceed $50,000. The moneys so raised shall be applied to the purposes for which they were obtained, or to the payment of the debts so contracted.

SECTION 4. The State may contract debts to repel invasion, suppress insurrection, or defend the State in time of war. The money arising from the contracting of such debts shall be applied to the purposes for which it was raised; or to repay such debts.

SECTION 6. The credit of the State shall not be granted to or in aid of any person, association, or corporation.

SECTION 7. No scrip, certificate, or other evidence of State indebtedness shall be

issued except for the redemption of stock previously issued, or for such debts as are expressly authorized in this constitution.

SECTION 8. The State shall not subscribe to or be interested in the stock of any company, association, or corporation.

SECTION 9. The State shall not be a party to or interested in any work of internal improvement, nor engaged in carrying on any such work, except in the expenditure of grants to the State of lands or other property.

Manifestly, the contingencies which can make it possible for this to again become a debt-owing State are very remote. The only other States which, like Michigan, are practically free from debt are Colorado, Illinois, Vermont, and West Virginia.

THE LOW RATE OF STATE TAXATION.

Michigan is a State of low taxes. The State itself raises money by the specific taxes upon corporations and by direct taxes upon the lands, houses, and personal accumulations of its citizens. The specific taxes, which, as shown, now exceed $750,000 annually, are paid directly into the treasury by the corporations taxed, and are disposed of as follows: One half of the small amount contributed by the mining companies of the upper peninsula is used for general State expenses, while the other half is returned to the Lake Superior counties and applied by them to local purposes. The bulk of the specific taxes is, as has been stated, first used to pay the interest on the Trust Funds and to provide for the State debt, and the remainder is then added to the annual income of the primary schools. The direct taxes which are paid by the people at large are used to meet the current expenses of the State Government, including the maintenance of its institutions. The tax levy of 1881 was composed of the following items:

1

This sum was apportioned equally upon the $810,000,000 of real and personal property which form the present assessed valuation of the taxable wealth of this State. The current rate of taxation in Michigan for State purposes is thus but about fourteen cents on each $100. For thirteen years this average has ranged from eight to eighteen cents, and in thirty years it has not exceeded thirty-seven cents, this upper limit having been reached during the civil war, when Michigan raised and partially equipped an army of 90,000 men.

The State tax of 1881 amounted to less than 70 cents per inhabitant, and that average has never been exceeded in the history of Michigan.

STATISTICS OF LOCAL INDEBTEDNESS.

Porter, the special agent
Each item is for the date

The following statistics of the local indebtedness of Michigan have been kindly furnished, in advance of official publication, by Mr. R. P. of the U. S. Census Bureau on wealth, debt, and taxation. of September, 1880:

How light the burden of outstanding local debt resting upon the tax-payers of Michigan really is appears in this table in which its rates per inhabitant and per dollar of the assessed valuation are given and contrasted with those of the only three States whose returns had become public when this edition was prepared:

Comparison of the Population, Local Debt, and Valuation of Four States.

*This total does not include the debt of the school districts, which would materially increase it.

Comparisons with nearly all of the States, especially the older ones, would show similar results. Michigan is more conservative in the matter of "running into debt" than the great majority of American communities, and among its people there is a growing tendency to adhere in all ordinary municipal transactions to the wholesome rule of "pay as you go."

NO BURDENSOME INDEBTEDNESS.

The existing debt of the counties, cities, villages, towns, and school districts of this State represents almost without exception permanent improvements and is not the product of extravagant business management. The people have its equivalent in substantial court-houses, schools, alms-houses, jails, water-works, fire departments, and systems of sewerage. Public works of this character frequently involve large cost, which is distributed by the issue of bonds through a series of years in order that the tax-payer may not be over-burdened. This policy explains the existence of the local

indebtedness of this State.

Settlers or intending settlers in the farming districts or in the newer counties of Michigan will not be called upon to assume any heavy burdens from this cause. More than two-thirds of the local debt belongs directly to the cities and villages.

* Against this total there were sinking funds amounting to $548,734.

Their share of the county and school district indebtedness is also large.

Deductions

on these accounts bring the debt resting directly upon the agricultural communities down to trifling proportions. It is of course not possible to make an accurate calculation on this basis, but the following statement, which is an approach to such a calculation, will show its force: The debt of the cities and villages must be met by their inhabitants exclusively; the debts of the counties, towns, and school districts rest more equally, although not with absolute equality, upon the whole body of the people; they amount to but $2,915,578, or $1.78 per inhabitant.

The foregoing pages show that the people of Michigan have fully provided for their State debt, and that the total of their local public indebtedness of all kinds amounts to but one and one-tenth cents on the dollar of the valuation of their taxable wealth.

THE STATISTICS OF TAXATION OTHER THAN STATE.

The latest statistics obtainable concerning the local taxes of Michigan are for those assessed in 1879 and collected in that year and in 1880. They are given in this table, as furnished in advance of official publication by Special Agent Porter, of the United States Census Bureau:

This table does not include the paving, sidewalk, and private sewer taxes of the cities and villages, or the ditch taxes of counties and towns, or the taxes levied in connection with the opening of streets and roads, for the reason that all such taxes are met by special assessments upon the adjoining property which is benefited by these improvements; they do not appear in the general tax rolls, and do not form part of the public burden.

THE RATE OF LOCAL TAXATION LESS THAN ONE CENT PER DOLLAR.

These figures show that the current rate of local taxation for all purposes in Michigan is less than nine-tenths of a cent on each dollar of the assessed value of the taxable property of the State. In the rural townships, whose tax for their own purposes is small, and which bear only their share of the county and school taxation and escape the relatively large city and village tax entirely, the rate is much smaller. It cannot be accurately determined, but must average less that half a cent on the dollar.

WHEN TAXES ARE PAYABLE.

The cities and incorporated villages of the State collect their purely local taxes at different times, but all other taxes, whether State, county, township, or school district, uniformly fall due in the month of December of each year, and are all payable at one time and place. This provision of law especially consults the convenience of the farming community, who at that time have usually received the money for the crops of the preceding season, are not busy, and can thus meet their obligations as citizens with the minimum of personal trouble.

EDUCATION THE LEADING SOURCE OF TAXATION IN MICHIGAN.

The aggregate of the taxes assessed in Michigan in 1879-obtained by adding the State tax ($1,153,096) to the total of local taxation as already given-was. $8,101,443, or one cent on the dollar of the assessed valuation of 1881. Of this amount there