requirements or of assisting in setting them up in budget form. The Governor has been receiving the reports, but has not been assisted in making use of them in budget-making.

It does not follow, however, that it would not be desirable to extend the functions of the Inspector or Budget Officer's office. In other parts of the report recommendations are made that would have this effect. Particularly the State budget office should meet the need for a budget approving agency to enforce the laws as regards county fiscal affairs. The Inspector and Examiner's functions already extend to county fiscal affairs so this is a step which will not mean a very radical departure from present practice.

Most of the strictly auditing work of the Inspector and Examiner's office is believed to be misplaced. The Auditor of Public Accounts should handle such work in connection with and with definite regard to the current auditing of claims and receipts passing through his office. It is now necessary for the Auditor of Public Accounts to rely upon another officer to look into all matters requiring visits to the departments, institutions, or counties, and as a result the current auditing is seriously handicapped. With the present division of responsibility for auditing, it is difficult for either auditing agency to know what its proper function should be. It is believed that full responsibilities of the Auditor cannot be realized and the full possibilities of the current audit developed so long as the existing duplication exists.

It is proposed, therefore, that the investigatory work of the Inspector and Examiner's (or Budget Officer's) office do not include the detailed checking of vouchers, etc., embodied in the present field audits, and that the Auditor's office handle this latter work. The investigation should continue on a scheduled basis but the exact statement of accounts should be furnished by the Auditor's office. The proposed reduction in work of the office is far more than compensated for by the increase in responsibilities for budget work and it is believed that the office in the future should carry a higher salary than the

concentration of taxation on real estate, in the escape, partial or complete, of many types of taxable capacity from their due share of the tax burden, and in the failure of the State revenues to meet the needs of an expanding and progressive program of State activities because of the practical impossibility of adding to the already excessive tax burden borne by real estate. Such has been the uniform experience of all states which have attempted to finance their activities wholly or mainly by resort to the ad valorem taxation of property in its unreformed manifestation. There have been no exceptions to this general rule.

In its unreformed state the general property tax is altogether unsatisfactory as the main source of revenue. The amount of property possessed is an inadequate measure of ability to pay taxes. Some persons may receive from professional earnings or from trading profits, or from salaries received within the State, high incomes which will wholly escape direct taxation under a property tax. Even as between persons deriving their income from property there will be great differences in the income derived from equivalent amounts of property.

In those occupations and industries in which a great amount of fixed capital is essential to the pursuit of the business, the earnings of capital and the personal earnings of those owning the capital or employed by it will together form a much smaller percentage of the value of the property used than in those other occupations and industries where little capital is used and the returns are mainly to personal effort. The value of property in any case will correspond only roughly to earning and tax paying capacity.

Property taken by itself, without respect to its incomeyield to all participants in the enterprise in which the property is utilized and even if the property is non-revenue-producing, presents a suitable basis for taxation, only if property taxation is a minor element in the tax system as a whole and other sources of revenue are used to an important extent.

If taxation must rest on a single basis, income affords a much more satisfactory and equitable basis than property.

Where property is used as the sole or the chief basis of taxation it is vital that all property be not taxed at a uniform rate, but that on the contrary, property be classified at least roughly according to its income-yield in order that lower rates may be imposed on low-yield or non-revenue-producing classes of property than on high-yield classes of property. One of the main defects of the general property tax has been its failure to take into account the importance of income as an index of tax paying capacity and its consequent attempt to apply a uniform tax rate to all classes of property.

Difficulties of Administration: Another shortcoming of the general property tax in the past has been the failure of the assessor to discover all property and to assess all property discovered at its full value or at an equal proportion of its full value. Intangibles, such as securities, credits, mortgages, money, and deposits, have very largely escaped assessment. This can readily be explained. Once discovered or reported for taxation, intangibles can usually be readily assessed at their full value and under-assessment is difficult without the collusion of the assessor. While other types of property have been generally assessed at only a fraction of their true value, such intangibles as have been reported or discovered have been assessed at or near their true value. Moreover, because much of the intangible property consists merely of documentary evidence of an equity in other property of a tangible character, which has already been subject to assessment, a uniform tax rate applied alike to tangibles and intangibles falls with much greater severity on intangibles if all property is fully assessed. The oppressive and even confiscatory weight with which the current rates of State and local property taxation would fall on intangibles if they were fully reported or discovered for taxation, has resulted almost universally in their owners taking advantage of the ease with which they may be concealed or moved outside the taxing jurisdiction to refrain from disclosing their holdings of intangibles to the assessors. This

was done in Kentucky before the classification act was passed just as it was, or is, in all other states.

The result is everywhere a paradoxical situation in which a tax system which, if it were enforced to the letter, would fall most heavily on intangibles, operates to permit intangibles to escape almost completely from the necessity of making a contribution to the revenues of the State. A few unusually conscientious persons, for whom virtue is its own and only reward, and a few trustees who have no strong motive for concealment, are the only ones to report their intangibles for taxation with any degree of completeness.

But the failure to report property for taxation, though most conspicuous in the case of intangibles, is not by any means confined to this class of property. Tangible personalty, and especially household goods, stocks in trade, and materials in process of manufacture, are returned in grotesquely incomplete fashion. Even farms and urban lots escaped the assessors and improvements to realty are frequently not taxed until many years after they have been constructed.

Unequal Burden of the Tax: Even where the items of property are returned for taxation or are discovered by the assessor, there are everywhere glaring inequalities in the assessments. These inequalities are equally prominent as between kinds of property, sizes of the parcels of property, persons owning property of the same kind and size, and property of the same kind and size situated in different districts.

The values of some kinds of property, once they have been reported or discovered for taxation, can readily be determined with approximate accuracy by capable assessors if they choose to do so. This is true in greatest degree of readily marketable securities, bank deposits, and mortgages, and, in large degree, of town lots and farming acreage. For other types of property, the ascertainment of actual value is a task of varying degree of difficulty, but difficult for all and rarely achieved with any great degree of uniformity of assessment or under-as

accordance with the appropriations therefor. He is liable for the acts of his assistant and may require bond from him. The Treasurer may be removed from office by the Governor, the Auditor, and the Attorney-General or a majority of them, subject to action by the General Assembly at its next session.

Functions:

The State Treasurer, as such, has but one general function, namely, the custody of public moneys, including the receipt and disbursement of the same upon authority from the State Auditor. As accessory to this function the Treasurer is required to keep certain records and make certain reports; also to declare warrants interest bearing when there are not sufficient funds to pay them and to call in such warrants when funds are sufficient, in the manner prescribed by law.

The Treasurer acts as custodian for securities deposited with the Insurance Commissioner according to the laws governing insurance companies. As a secondary function the Treas urer has certain duties as an ex-officio member of the Sinking Fund Commission. Among these is the duty of supervising the activities of the Custodian of Public Buildings at Frankfort, subject to the directions of the Commission. The supervision exercised by the Treasurer is not such as to require any considerable time.

Organization:

The force in the Treasurer's office is regularly as follows:

During the year 1922-23 temporary services were employed at a total expense of $250.00. The Treasurer receives additional compensation to the amount of $600.00 per annum from the Insurance Department for his services as custodian of securities deposited with the department by insurance com