Omaha daily bee. (Omaha [Neb.]) 187?-1922, July 17, 1902, Page 7, Image 7
TIIE OMAHA DAILY BEEi THURSDAY, JULY 17, 1902. r I RAILROAD TAXATION IN Arguments of Counsel on the Issues Raised In Case Before Nebraska Supreme, Court p Argument by B. T. White, is amicus - curia for the respondents: If your honors pirate, tt It fortunate for ua that in the division of government ' have a tribunal, which above the din and turmoil may retire for the considera tion, of Important questions that may be ubmllted to It for determination. It Is fortunate, alao, that we have constituting such tribunals those who are learned In the law, so that when the final conclusion shall have been made It "will not have re sulted fro .n extraordinary appeals, but from cold analysis and calm logic. This Is serious question, and will grow more serious as time goes on. So far as t am concerned, It has been ' somewhat of an enigma to me as to Just where our friends stand our friends who represent the relators. I understood at the Inception of this controveray before the State Board of Equalization 'that It was the contention then and there that the franchises of tho class of corporation within sections 39 and 40 should be separ- - ately valued, but when I peruse the alter- native writ whlrh Is the pleading upon which the relators stand In thla court I am somewhat annoyed I find It somewhat . difficult to aay Juat where they stand upon this proposition. For, while they claimed to Lave been entitled to an assessment of the franchises separate and apart from the physical property before the State ' Board of Equalization the writ In Ita con i. elusion seems to point to the thought that there should be one assessment of all of the railroad property of the respective t; companies. But when I look at the brief . of the relators I am Inclined to believe . that they Insist on a proposition for which 'I will contend today, which Is, that when .. the assessment of this property Is made to the railroad companies in the terms which . are set out In section 39 It comprehends 11 of the valuation of railroad property; . that when you take Into consideration the main track, the side track and the rolling stock denominated as such In thst eec .. tlon, then that the board ahould, and It la contemplated by law that they ahould take - Into consideration everything which enters into the value of that property. o But today I am not exactly clear In the confusion which haa reaulted from the dlf--t ferent positions which It seems to me they have taken, whether It la claimed that i these franchises should be assessed aepa v rately or whether they should be simply considered and the assessment made on the aggregate value of all of the property. . perhaps the statement of my brother Har v rlngton would Indicate that they Intend to . Stand on both propositions. But before we I i come to thla there are some things which we must consider with reference to the situation and - the duties of the Btate Board of Equalisation. Aa I read the law, the board la organised and constituted for certain purposes and 'far the performance of certain duties. The i tiatute defines those duties. Under aec v tlons 89 and 40 It Is to value the railroad . property, and la not the mere Instrumental- - Ity which may be guided hither and thither t every branch of the government, but : ft Is to be controlled by the law which de t fines Ha duties. The law reposes In that - board a certain discretion. It la clothed , c with, n quaal-Judlclal function, and when t It enters upon .the consideration of the duty ! entrusted to It when It undertake to make an assessment of railroad property ander tha-law it has undertaken to exercise that discretion aa it la Imposed upon It by law. and Ita decision upon that subject. after it la renderedafter It haa entered ' Upon the exercise of ita discretion and haa exercised the functions which are Imposed vpon It by law la as Inviolable as that of any court upon any subject. If there Is J fraud In Us deliberations, It may be true (hat the courta may take cognisance of It and may compel the board to act again. ' It may be that If there I fraud In Ita . tonduct or fraud Inheres In the determlna - tlon, then the courta may call It back to perform Ita duty; but that right even .then depends, in my Judgment, upon whether or not there 1 another remedy for the person who aeek to ; Invoke the power of thl court for the pur I pose of directing the State Board of Equali sation as to the method of exercising Its Judgment. If the law ha provided a way ' for a review of the action of that board, ., ILen, If there la fraud in that action, and Z hat fraud was known, or if the clrcum ' stances Indicating It were known at the t. tme when the Judgment was rendered, I take It that under the law the remedy which la pointed out by statute must be pursued by the person who has appeared t before that board and aought by evidence . jo Influence Ita action. That applies to county board of equalisation, and why ' Shouldn't ' It apply to the State Board of ' Equalisation? The statute la broad enough to comprehend both. It seema to provide f 2nd comprehend the Idea that a Judgment j bf the State Board of Equalisation may be reviewed upon error by the district court. Section 880 of the Code la as follows: , A Judgment rendered or final order made i M probata court. Justice of the peace or JN any other tribunal, board or officer, exer cising Judicial functions and inferior In , Jurisdiction to the district court, may be reversed, vacated or modified by the dls . trlct court. Then It Is further provided under the statute with reference to settlement of a bill of exceptions, being the latter part of . section til, which was enacted by the legis lature of IS95, that: - ' Any person or officer or the presiding officer of any board or tribunal before whore any proceeding may be had shall, on the request of any party thereto, settle, assign and allow a bill of exceptions of all the evidence offered or given on the hear ing of auch a proceeding. Now, then, as I said before, all of the circumstances entering Into the making of M the assessment Of this property waa as Well known on the day when the Judgment . was rendered by this board aa It la now, or aa It waa on the day when application was made to this court for the alternative writ of mandamus. Knowing thsse facta, . they could have taken that record Into the district court, and It there waa any error on the part of thla board they could have ' ' had It remedied there; If there were any set of facta or circumstances which they - sought to get ta evidence which were ex cluded by the board (I understand it la tba claim of these parties here that they did offer evidence and that they were notified r that that evidence would not be consid ered) then It was their duty to have ap plied tor a bill of exception from the pre- ftijlln rflo, nf that hnanl aa nrnvtflsrf In section 111, had that settled snd allowed t and taken It to the district court and Id that court bad the matter reviewed. They have not aeen fit to do thst. This court haa determined time and )me again you have Iterated and reiterated the fact that . writ ot mandamus Is an extraordinary THE GENUINE EAU do COLOGNE ' Sobann d&arta Sarins BUrnsn. 9-U in Koln. gaaso t or sale by W. R. BENNETT CO. B, W. Cor. leta and Harney St. writ, and should only be resorted to at the last moment, at the time when all other remedies have been exhausted and when there la no other remedy of which the party can avail himself. Chief Justice Sullivan Does It appear that this corporation, the Bee company, haa sny matter appearing before the board T Mr. White I understand that that waa tho Institution that appeared before the board. Chief Justice Sullivan I don't know., Mr. White That la a fact. Isn't it? Mr. 6imeral It filed a protest there. Mr. White They filed their protest and aaked that the franchises be assessed, and they ssy In the alternative writ that the members of this board said they had no right to consider the franchise and that they did not consider It. Now. I ssy they knew thst, snd they could have had all of those facts and circumstances put Into a bill of exceptions, taken It to the district court and there had the matter reviewed. So I say there are two things to consider here as preliminary. First, If there was no fraud In the action of this state board this court cannot send forth the ex traordinary writ of mandamus and cause those people to reconvene and reassess railroad property. They have already done what Hi required ot them under the law. They did meet. They did move. They have exercised their discretion. They have per formed thel Judicial function la determin ing the value and assessment of this rail road property. But second, even If there Is fraud here, then we ssy It wss Just as ap parent to these men on the day when that Judgment waa entered aa It Is now, and they ought to have taken the proceedings provided In the statute for reviewing it In the district court They have not done that. But suppose we eliminate those questions In the further progress of ths argument. Suppose we enter upon the consideration of fraud here. Let us see then where we stand. Fraud Is not to be lightly pre sumed. This board ta composed ef honor able men, who have been regarded as stand ing well In the communities in which they have resided. Thla court, then I aay, will cot lightly preaume that fraud has been attendant upon their action or that they have had any other intention than that of fairly and honestly performing their ' du ties, and the mere fact that In the valuation ot thla property the board haa placed It lower than this court would have placed It ahould not Influence thla court In determining that theee men that thla board waa guilty of fraud. I have referred to a number of cases In my brelf here which I will not undertake to read, but which are quite pertinent to this line of argument, and In which It la held that even were the asaeesed valuations con siderably lower, or were they considerably greater than the court would have assessed If It had been considering valuations, yet, so long aa they appear to be the expression of an honest exercise of Judgment ot the board, the valuations cannot be interfered with. I desire now to refer more particularly to the Elkhorn company for the purpose ot showing that there la no fraud eo far aa It Is concerned. Under the evidence that haa been introduced here, I have tabulated the earnings of that road for eight years. I find that the total net earnings of that road for those years aa shown by Poor's Manual, 1901.' "page SO, aggregate about 10,0J,893, making tho average for a year $1,157,824, making the average per year per mile our mileage being 1,863 miles $922.83. Now mind you, that is for the whole system and we take into consideration South Dakota, Wyoming and Nebraska. I think it would be in the neighborhood ot $950 or $1,000, It we confined it almply to Nebraska. Now, then, adopting the method used by relator, and you might capitalise that at 4 per cent and it would make $23,000 per mile in round numbers. One-sixth of $23,000 per mile would bo aomethtng like $3,145. Now mind you that Is at 4 per cent. It It was one-seventh It would be $3,296 a mile. But 4 per cent Is not fair, bscause the Elkhorn company hsa outstanding about $21,000,000 worth cf bonds, ot which almoat $2,000,000 bear per cent Interest, matur ing In 1933. There are about $18,000,000 worth of bonds which bear per cent, maturing aome time in the future, upon which only 4 per cent Intereat la paid by reason of this. These bonds are guaran teed by the Northwestern' Railway com pany. The latter plaeee It own bonda at 4 per cent, secured by the Elkhorn bonds above mentioned aa collateral. The North western almply requlrea ot the Elkhorn bond the payment of 4 per cent Interest thereon, hence there Is only about $1,900, 000 upon which the Elkhorn paya ( per cent Interest. On the balance of the $21, 000.000 worth of bonde It paya only 4 per cent, but this Is not a fair rate ot Intereat to the Elkhorn company. I almply refer to the 4 per cent because that la the ex tremely low rate which the relators claim railroad property is entitled to earn. Cap italising at I per cent the value per mile would be about $18,457, one-sixth of which for the purposes of assessment would make the value $3.07. The essesament of the Elkhorn company la $3.(00 per mile. One seventh ot the valuation, and the board aay they assessed railroad property between one-elxth and one-seventh. It should have been aaaeased at $2,(37. It $950 or $1,000 Is capitalised at ( per cent the valuation would be measurably less per mile. Even at the low rat of Intereat contended for by the relatora the assessment of the Elk horn company ahows upon Its face that there waa no fraud upon the part of the board. Another thing to take Into considera tion la that the members of the board ssy they had evidence before them showing that this road could be reprodursd for be tween $19,000 and $20,000 per mile. One sixth of $19,000 would be sbout $3,100 per mile, and at $20,000 tier mile it would be n little more. Ths Elkhorn assessment is $3,600 per mile aud Is one-seventh of $25. 200. It IS true that the road has probably cost mors, but ths grsater portion ot that road waa built years ago, when It could not be built as cheaply as now. It can now be reproduced for about $20,000 per mile. Bo, I say that anyway you figure It it shows that there la no reason for charging fraud upon the board in the assessment of the Elkhorn property. Page 130 In the last auditor' report shows the mileage of the Elkhorn road, and it ahowa the assessed vslue, and It shows the net earnings per mile. I am not going to atop to figure that out to your honors, but I say tt ap pear to be aa average of $948 per mile taken for ten years. The figures upon which I hsve based the estlmste Just given to your honors Is taken from Poore'a Manual, which has been Introduced by the relators. Now. If you estimate ths earn ings per rnllo according to the figures which sppesr en page 130 of the auditor's report practically the aame result will be reached. So far as the contention cf thess gentlemen is concerned. If anything were te be done, the Elkhorn company ought to have a decrease In ita valuation. Why, In one year, la 189$, we had a deficit of $337,000 more than It ever has put to surplus tn aay one year before or since. Bo much for fraud, a it may be consid ered with reference to the Elkhorn road. Now, let us go Into this question of fran chise a little further, for the purpose of seeing whether or not there is sny fraud with reference to the valuation ot fran chlsea. That Involves the consideration of what a franchise is, whether or not It posseeses this great value this Incalculable value which these gentlemen have attached ta It. What la a franchise? First, there Is a franchise to exist. Second, there la a franchise to do business aa a corporation. Third, there may be a franchise which car ries with it peculiar privileges which can not be enjoyed by sny other person or by sny other corporation. Those are the three clashes of franchises we will aay. The first, the right to exlat aa a corpora tion, la of no value separate and apart by Itself. It could not be aold upon the mar ket. It could not be sold upon adverse process, cor can the right to do business aa a corporation be sold upon the market. It cannot transfer It. Separate and apart from the tangible property it Is not worth a dollar, and It is so held In the Detroit street railway case, 125 Mich., page 873, which goes over similar facta. With reference to the third franchise, It la said that these railroad companies have a great franchise. In thst they are per mitted to charge ratca and fares for hauling passengers and freight. They aay It Is also a great franchise to be permitted to condemn real estate to exercise the right of eminent domain. How valuable? We must remember that the people have their compensation for these franchises and for these rights. We cannot take a foot of land but we have to respond In damagea for the taking of It and often tlmea to pay more than the land would bring for any other purpose, and not only that, but are com pelled to respond In damages for every dollar of damagea that accrues to abutting property. Railroad companies must respond in damages for that even though the advent of the railroad In that community may In crease the value of such property. So I say that the public haa Ita compensation with reference to this privilege. The right of eminent domain In and of Itself has no great value. It has no tangible value In and of Itself. It must be considered with the exercise of the right and with the build ing of the road. And you might say this, too, that this right exists simply by virtue of the will of the legislature. It might be enjoyed by an Individual who Is engaged In a public enterprise and for the public bene fit if the legislature felt Inclined to grant it to him. The only reason that It may not be granted to a private person is because in the organization and operation ot these great corporations it has been found that no single Individual has ever undertaken to control or own one. There has been no necessity to appear before the leaialatura to get auch a right In favor of an Individual for carrying on a public enterprise. witn reference to the right to charge rates and fares, the publlo has ita compen sation. Legislative Invasion may hold rates and fares down to a point where the return upon the Investment will be reason able and the line may be paralleled at any time, so that no exclusive right Is given. It cannot go beyodd what la reaaonable. So we do not get any great right there. But the man who operates a private business who runs a great newapaper, if you pleaae or any pri vate corporation, has the liberty of making as much money as he or it may. limited only oy me iioerauty of their more aggressive competitors. Bo that thia franchise la not so very valuable in and ot itaelf except as it is considered with reference to the tangi ble property. What givee to the tangible property its value as railroad property! Would there be any value to the Union Pa cific Railway company, to the Burlington Railway company, to the Elkhorn Railway company If they allowed the ralla to ac- cumulate rust, and It they allowed the tie to rot In the ground, if they operated no tralna? Would there be anything of value In railroad stock If tralna did not move? Then what la It that glvea life and vitality to thla property? What makes it of value? Why 1 It that this board did not asses it as mere dead material? Why, because they nave tne ngnt to operate the railroad, be cause they have the right to exercise the rights and prlvllegea given to them under the constitution and laws of the state of Nebraska. That Is what Imparts value to railroad property, and It la not thla intangi ble thing that has such great value aepa rate and apart by itself. But tt la the live and operated plant. If you do not have a live and operated plant your franchises havs no value. Thla te Illustrated very forcibly to one's mind by the case on which theae gentlemen seem to depend with so much vigor. The case In the 154 United States, of Backus against Railroad Companies. That waa a caas based upon a law which was passed by the legislature of Indiana In 1891, a general revenue law. That general revenue law repealed all former lawa, and' it pro vided for an assessment of property gen erally, minutely and specifically; it pro vided for the assessment of stocks and bonde; it provided for the assessment of railroad property; it provided specifically for reports which were to be made by railroad companies to the auditor, and it provided among other things that there should be listed with the auditor a Hat of atocka and bonda, differing from our statute. It provided directly that thoaa atocka and bonds should be listed with the auditor for the purpose of being considered by the board in the assessment of railroad prop erty. Section 137 ot the Indiana law pro vided that the board should assess railroad property as railroad track and rolling stock. It was assessed aa auch tn thia particular case.. An action waa brought by ths railroad companlea to have ths law declared unconstitutional, and alao for the purpose of wiping out the assessment mads becsuse it waa inequitable. Among other things, it wss claimed that it allowed the State Board of Equalization to go over Into Ohio and Illinois and take the valuea there and commingle them with the value of property In Indiana and make an assess ment upon such valuation. They alao claimed It waa a tax or burden upon Inter state commerce. Tbeae contentiona were found not correct, and were not considered by the court ss valid. In paaalng upon the Indiana law Justice Brewer usea thla lan guage: Counsel sought tn argument to narrow the meaning of the worJj "railroad track" and "rolling stock" aa though the two did not Include the entire rallruad property; but evidently the supreme court of the state construed, and ss we think properly, the two terms as embracing all which goes to make up what is strictly railroad prop erty, by section 1 of the act it is provided that all property In the state shall be sub- iecl to taxation unless expressly exempted, iy section 4, that wien ths property of a corporation is taxed to the corporation the shares held by Individuals shall not be sub ject to taxation. Thfre is In terms no exemption of any railroad property nor any part thereof: and there Is no provi sion of the tax law reaching that which la strictly railroad property, except as em braced within the two terms "railroad track" and "rolling stock." Obviously It waa assumed by that court, though the matter is not discussed in the opinion, that by these two descriptive terms tha legis lature, carrying out the d-lured purpose of subjecting all properly wiihln the Slate to taxation, nut expressly exempted, meant tu Include all the property owned or used by the raiload rompaaulea In the operation of their roads, and which may fairly be called "railroad iiroptrty." And wheu the statute COURT the Mandamus viu provides that such property shall be as sessed at Its "true rash value" It means to require that It shall be atid at the value which it has, as used, and by reason of Its use. Nothing is ssid about the assessment ot franchises. Why? Because within the two terms "railroad track" and "rolling stock" was comprehended everything of value of railroad property. That sugges tion finds force from a subsequent case In the aame volume, commencing at page 433, in which the contention was more vigor ously made that It waa a tax upon Inter state commerce, In which the direct ques tion was put to ope ot the state officials on h's examination as a witness, If he as sessed anything for the franchise of n cer tain road, and he answered he did not. I Justice Brewer comments upon thst In his opinion and says or notices distinctly that the franchise was not assessed. And, by the wsy, we might say here that of course franchises are property, and the fact that a franchlae la named In the constitution does not give It any additional force. . By way of paren thesis we might say here it might Just as well have been left out. Justice Brewer save In that opinion, at page 44St The rule of property taxation is that the value nf the property Is the basla of taxa tion. It does not mean a tax upon the earnings which the property makes nor for the privilege of using the property, but rests solely upon the value. But the value of the property results from the use to which It is put and varies with the profitableness of that use,' present and prospective, actual and anticipated. There is no pecuniary value outside of that which results from such use. The amount and profitable character of such use determines the value and if property is tsxed at Its actual cash value it Is taxed upon something which la cre ated by the uses to which It Is put. So we say that this decision contemplates, when the board aasessed the railroad prop erty under the designation "railroad track" and "rolling stock," they included every thing of value in railroad property. Now this Is borne out by another case which I did not cite in my brief. It Is the case of De troit Citizens' Street Railway Company against Common Council of City of Detroit, 85 N. W. 96. I will not attempt to read any great portion of that caee, but here is the gist of It. It Is found in the fourth para graph of the syllabi: If property may be assessed as a unit there Is no obligation to value Its separate elements. Now that would naturally dispose of all this cross-firing at these men who were put upon the stand and asked It they separately valued the franchises of these corporations, because under the statute ot the state of Nebraska they are not obligated to assess the franchises of the corporations separately. In thl Kentucky case read here It Is proper to aay that they have a distinct statute requiring that the franchise shall be aasessed separate and apart from the tangible property. Section 4077 ot the law of that state provide as follows: Every railway company or corporation and every Incorporated bank, trust com pany, guaranty or security company, gaa company, water company, ferry company, bridge company, street railway company, express company, electric light company, electric power company .telegraph com pany, press dispatch company, telephone company, turnpike company, palace car company, dining car company, sleeping car company, chair car company and every other like company, corporation or associa tion, also every other corporation, company or association having or. exercising any special or exclusive privilege or franchise not allowed by law to natural persons, or performing- any publlo Service, shall. In ad dition to the other taxes Imposed on it by law, annually pay a tax on Its franchise to the atate and a local tax thereon to the county, Incorporated city, town and taxing district where rta franchise may be exer cised. It Is a legislative enactment and entirely different from our. Your Montana law 1 ths same. They simply have the value of the uae of the property valued by It self and then the value of the tangible property valued by luelf, and then aggre gated. In other words, they are separated; here we combine them and assess them to gether. I want to call your attention to this section 31 Just for a moment. I do not un derstand that-section 33 contemplate the aggregation of stocks and bonds for the pur pose of finding the value ot the property of corporation under the construction this court haa placed upon It It does not aay anything about adding tha value of stocks and bonds. The fifth and sixth items de duct the debts and value' of real and per sonal property. The method these gentle, men contend for" is sot found in that stat ute. Ot course that atatute 1 not applica ble hero because, if I am correct in my premise that the value of the property a a used, going concern 1 to be valued, then it could not be legally aasessed under sec tion 33 for many reason. You would get the franchise twice, and it was never in tended. And again, ths very fact that tha law was paaaed In 1879 and section 31 being the part referring to stocks, and sections 39 and 40 referring railroad property, were all passed at one time and at the same session. Upon the face ot theae respective statutes it appears that the unit idea waa in the minds of the legislators; they wanted to aaaesa the railroad property a a unit by one tribunal, with a view of avoiding the annoyance and inconvenience Involved In assessing railroad property and the many Incongruous results produced by local as sessments, and I say. If you construe sec tlon 32 with sections 39 and 40, It wholly de troys the unit idea, because, under section 82, la aaaeased the value of the franchise by the local assessor, or State Board, of Equalization, without the latter being named in the statute. The local aasessor make one assessment under aectlon 31, and the state board another under sections 39 and 40. This was not contemplated, and It Is not ths law. Section 13, 15 and 137 ot the Indiana law, and ssctlon 81, 89 and 40 of the Nebraska law are parallel statute. It was no more contemplated that there should be a separata valuation of the fran chises under the Nebraska law than under the Indiana law. I say thla is borne out by the Backus case, which I have men tioned. . It that la true, then these men were Justified in saying "We aasessed this property with reference to it use. W assessed it a a live going property. We assessed It with reference to Its earnings I want to call your attentlsn to Mr. Stuefer's testimony.. Hs said he found the earnings of the Union Paclflo main Una to be $(.000 or $7,000 per mile You will find on page 130 ot the auditor' report where he got those figures. So these Intangible things, thess fraachlaes, are not to b valued separata and apart Let u go a atep farther. Our friend ssy, "Your franchise are worth $200,000,000; your tangible property 1 worth $200,000,000. Your whole property ia worth $400,000,000." This appear irom the al ternatlve writ. Eight per cent ot 400,000,000 la $32,000,000 and per cent la $24.0000,000. The railroad companies of Nsbraaka have never earned S per cent of $40,000,000, which would be $20,000,000. The railroads of the atate of Nebraska have never netted $20, 000.000. Four per cent of $400,000,000 would be $18,000,000 and the railroads ef Nebraska have never netted $18,000,000. Three per cent of $400,0000,000 would be $13,000,000. The railroad companies ot Nebraska have never netted $11,000,000 over and above operating expenses. Two and one-half per cent of $400,000,000 would be $10,000,000; $10,000,000 as shown en page XI of the au dltor's report Is the utmost thst ha ever been earned by all tba railroads. Out ot this was paid fixed charges, taxes and In terest. Then, my friend Harrington has a proposition. He Is going to reduce rates IS per cent. Now, then, I ssy this un covers a little of this moonshine on the shovel. It Is Interesting to find gentle men who hsve time to engage In such abstruse questions Interesting to listen to this new school of philosophers, whoss time hss heretofore been limited to trac ing the distinction between a "living hero" rnd a dead "Jackasa" dilate upon the question ot valuation of railroad proper ties.. Another point I went to make here Is this. The rule of taxation In this stats provided by the constitution is upon the valuation of property. It Is upon nothing elss. It Is not upon brains, neither Is tt upon the value of labor nor the value of anything Intellectual, nor the value ot energy, but upon the value of property. The constitution determines that taxes shall be raised upon the value of property and nothing else. We have no business to levy taxea upon any other basis. The constitu tion ot this state by aectlon 1 ot article ix, provldee for the raising ot revenue by taxation upon the value of property. It does not provide for the assessment and taxation upon the value of mental or phys ical labor employed in the use ot property. The different enterprises cf the present day, with reference to the production of pecuniary returns; may b classified about aa follows: 1. Knterorlses whlrh ilenenil more unnn the capacity for management and the ap- fllcatlon of mental and physical labor han upon the use of tangible property. 3. Enterprise in which profits accrue more largely through the use of property than of labor employed. a. Enterprises in which profits are re turned through the employment of prop erty and labor In about equal parts. In the operation of railroads it la fair to aay that from 65 to 70 per cent of the gross Income thereof Is expended In the cost of operation. The compensation of employes of railways represents from 55 to (0 per cent of the operating expenses of the road, and 39 per cent of their gross earnings, aa la stated in the fifteenth an nual report ot the Interstate Commerce commission for 1901, psge 64, distributed among trackmen, brakemen, conductors, firemen, engineers, shopmen, machinists and operating and managing officials. When one- considers the army ot em ployes in the service of the Burlington, Union Paclflo and Elkhorn companies, the truth of this statement will hardly be dis puted. Therefore, to the (extent that Interest payments are made upon bonda, dividend declared upon stocks, or net earnings are derived from the operation ot railroad property, tt must be remembered that about one-half thereof la contributed by labor, and only one-half by the prop erty used. Hence, If assessments of value are to be placed upon the aggregate worth of securities, or net earnings are to be capitalized. It is clear that only aboat one half ot the result thus obtained can be truly traced to the value ot the property used. The balance of the result is due to the labor employed. When values thus ascertained are used for the purpose of as sessment and taxation, the companies are thereby compelled to pay taxes not only upon property used In their business, but upon earnings resulting far more largely from the employment of labor than the value of property, thus doing violence to the constitutional requirement that taxes shall be derived from a property valuation. In Illustration of the three classes above referred to, I will present one under the first class. We will suppose that a party organises a district messenger service. The only property used In the business consists ot desks, cbalr and book for the purpose of keeping memoranda and ac count. Thl would be a business In which there was little or no tangible property, and In which the dependence for results must be placed upon the good management of the proprietor, and the faithful service and intelligence ot the boys employed as messenger. In the first Instance the busi ness Is conducted by one msn, who hires the boys and take all of the proceed and enjoy the profits. He may hire twenty boys from whom be makes 20 cents apiece, which would be $4 a day. It i apparent from thl that the profits accrue from the physical and intellectual labor ot the manager or owner of the business and those whom he employs. Now, will It be contended for a moment that In order to ascertain the value of the man's property invented in the bualneas It is to be ascertained by capitalising hi net earnlnga for the year at ( or 8 per cent? If thl could be done It .would be an Instance in which the entire taxable value is that which results from the em ployment of labor and not from the prop erty itself. After conducting the business in this way for awhile he finds it advisable to in corporate. Thereupon the required num ber form a corporation, and the services thereafter are rendered by a greater num ber of boys employsd by the new company an increase of mental and physical labor. Relatively no greater amount of tangible property ia used in the transaction of the bualneas tbsn before the formation of the new company. , But the net profits may be double what they were before, all resulting from the Increass in labor, mental and phyatcal, employed in the transaction ot the business. There is no more reason now, since ths institution has become a corporation, for capitalizing the business on ths net profits and using the sum thus ascertained for the purpose of valuing the property of the corporation for the pur poses of taxation, than when it was con ducted in the name of a private party, nor ia the constitutional objection ob viated that the tax ta not made upon prop erty because of the business being con ducted by a corporation. If capital stock la authorised, Issued and dividends declared, the dividends simply measure the right of the holder of ths lock to participate In the earnings of ths company through the dividends. It In no manner measures the value of the prop erty used by the corporation, because such value Is no greater relatively now than it was when carried on In the name of one individual. I will take another Illustration. Sup pose a person la occupying a bouse, in which he Uvea with hi family. If ths property be occupied simply as a family realdence, no earnlnga are made upon the property. If. on the other hand, the same house is used for an excellent and success ful boarding house. In which a score of servants may be employed under skillful and competent management for the conduct et the boarding house business therein, large earnlnga may result; but they come not nearly so much from the property as from ths labor of the manager and em ployes of the business conducted on ths property. Can It be said for a moment that theae earnings from the business at' ford a basis for asesrtat&lng the value of the premises? Certainly not The preml- ses are the same, whether used for a dwell ing or a boarding houss business. Tbe landlord's rent in tbe case of the property being uaed as a residence, truly measures the esrning power of the -property itself. but the profits of the boarding house keeper, ia the other case, measure, beside the mere value of the paaalvs use of tbe property, the Larger and more Important factor of the returna for the large amount of wprk done on the) premises. This lattsr factor la aa much a rsturn for labor as are the wages ot any working man whether hs drive a dray, or Is a car penter, or railroad engineer, or a switch man. Suppose, further, that the boarding house business Is conducted by a stock company. What will be the market price ot the stock in this company, which we will suppose to be conducting the earn successful and profitable business? The price will be de termined by the value of the stockholders' right to participate, through dividends. In the profile bf the boarding house business. and those profile we have seen to be the outcome only In part ot what may truly be regarded as rent and much more the outcome of earnings through Isbor, skilled and unskilled. Thia market price ot the stock in the boarding house, tt its business be successful, will be much higher than would be the price ot the stock of a com pany merely owning the premises and renting them aa a residence; for tn the latter case the stockholders would merely participate In the rent, while tn the esse of the boarding house, the stockholder participates in tbe additional earnlnga from the business conducted on the prein hies. A real estate agency conducted by a per son or corporation li also within this lass. He, or It may be In the business ot buying or selling real estate, employing a number of clerks and solicitors, and yet. not at any time be the owner ot any prop erty except the office furniture used in tho conduct of the business. Profit from a well conducted business cf this character may be considerable, yet their valuo could not be asaeesed and taxed. Railroads come within, the second class. We may use one as an Illustration. Let us suddosb that the lines of the Burlington company in Nebraska (we refer to the Bur lington company for the reason that It has a greater mileage within the state ot Nebraska than any other company) anouia come to be owned by a company not llke- wlae owning the Burlington system of rall roada in other statea. The Burlington property in Nebraska would remain the same as it is today, but the bualneas con ducted thereon by the new owner would undoubtedly be very much less, thsn the business which tbe Burlington company now doe upon that property, for the reason that the new owner would not have the advantage ot all the traffic which the Bur lington company 1 able to procure for it Nebraska line through Its control ot other railroad property in adjacent state. A respect earnings, tha result would be that the new owner would earn very much leas on Its Nebraska railroad than the Bur lington company doe today. The market price of stock Is the new company owning this Nebraska road would be much less than the market price of the Burlington company' stock. Would that difference In the market price of the two stocks be due, except In a relatively small degree, to the difference In the value of the railroad In Nebraska, being the same railroad in all ita features, whether owned by the Burlington company or by the new purchaaer? Surely not. The difference would be due, rather, to the difference of earnings of the two companies through the reduction of business thereon in the hands of the new company. That Is to say, the Burlington company runs two and perhaps three times as many trains, car ries two or three times aa much freight, considerably more passengers and employs 50 per cent more men than the new com pany would with ita diminished volume ot business. The difference In earnings, there fore, chiefly amounts from the different amount of labor done on the property and this element while It 1 all Important aa respect the profit of the business and the consequent market price of the stock. is not In any way a measure or test of the value ot the property on which the business Is conducted. That property is the ssme whether owned by the Burlington company or tbe supposed new purchaser and its fitness -for use In business 1 the same in the two cases, but the difference as respects earnings and, consequently, aa respects market price of the company' tock He in tbe fact that in one ease a very much larger business Is done through the possession ot extraneous advantage and opportunities for obtaining business and a very much larger amount ot labor Is consequently expended than In the other case. A an Illustration ot ths third class we might take a large department store, owned and conducted either by an individual or by a corporation. In either event we will assume tbe individual or corporation to be tho owner of the building and a large stock and variety of good such as are usually found In the department stores of great cities. The building le of great value. The stock Is constantly being depleted and supplied, turned over two or three times a year. There may be the usual number of department manager and clerk, but the profit, If made, will result to a greater extent from the property used and sold than from the labor employed, although the latter may be of considerable value and form quite a factor In the production of earning. It Is no more lawful to find the value of railroad property by aggregating the market value of stock and bonds or capitalizing the net earnings than it is to find the value of tbe property of the engineer, the firemen, the clerk or day laborer by capitalising; their earnings. In either caae it 1 an in com tax. Under the constitution the as sessment and collection of taxes must be upon a property valuation and not upon tbe value of the labor which proceeds from an effort of the brain or the .application ot the hands and the feet, or all combined. The truth Is that stock and bond prloes do not measure the value of a railroad prop erty for the purpoae, either of taxation or of rate making. Such prices do not indi cate the value of railroad property at all; but rather the value of the right of a stock or bondholder to participate In tbe earnings through the company' dividend or the stipulated Interest on ' bonds, and there earnings, the right to participate ta which is the basis of stock and bond prices, pro ceed. as has been already indicated, far more largely and far more truly from the labor of thousands of men than from the mere use of the property. In other words, a ratlrosd company's earning In much the larger part, if it be prosperous, represents compensation for the labor of large num ber of menu rather .than the mere rental value of tbe property by the partial help ot which the work 1 done. " You cannot arrive at the fair value of railroad property tn the aggregate by this method of combining the market value of stocks and bonda or by capitalising net earnlnga. The result doe not, a Intl mated, represent the franchise in the case ot a corporation any more than In tbe cass of aa Individual. A corporation may be In the exerciae ot all Its right and privilege it franchlae all the time and yet it tock and bond be below par. It may have no net earning, but It 1 tn the exer cise of Its franchise. The truth Is, Ita net earnings increase with the increase in the amount of labor employed. The value of the franchise la'as of the value of the prop erty and haa no value separata and apart from the property. Labor may be valued by Itaelf. There 1 much in thla proposi tion for study. I da not think a vsluatloa for tbe purposes of taxation which Is based upon the aggregate market value of stocks and bonda. or one that la baaed upon net earnings capitalized. Is a fair value either for tbe earning of revenue by the company or for the purposes of taxation. The valu tlon for the purpoee of taxation ought to be tbe aame aa that for rate earning pur poeea. It would be considerable ef a task to make our friends, Rosewater, Judge Howe, Harrington and Slmtral bsllev that tha railroad companies were entitled to earn rate upoa $400,000,000, the amount which they name tn the alternative writ as Tito Dinner Pali Of tbe American working tann I gen erally well filled. In some cases tt Is too well filled. It contains too many kinda of food, and very often the food is of the wrong kind hard to digest and containing uiue nutri tion. A a conse quence many a work ing man develop some form of stomach trouble which inter fere with hi health and reduces his work ing capacity, where there is indigestion or any other indi cation of dis ease of the stom ach and its allied organ of digestion and nu trition, the use of Dr. Pierce' Golden Medical Discovery will almost invari ably produce a per fect and perman ent cure. Mr. Theraaa A. BwsrU, ot Rub Station C, Colusabua, O , Boa lot. writes: "I waa taken with severe headache, thea cramp la tbe itomuh. am my food would set digest, thea kldaey and liver trouble aad my back got weak so I could scarcely get around. At last I had aU tha com plaints at once, the mom I aoetored the won I gut until tlx years passed. I had become so poorly I emits only walk la tbe house by the aid of a chair, and I got so thin I had stara u te die, thinkiog that I could sot be cared. Then one of my aihhort fa Id, ' Take my advice and take Dr. Pierce's Golden Medical Discovery aad make a aew maa out of yourself.' The first bottle helped me so I thought t wow Id get another, and after t had taken eight bottles la about six weeks. I was wet shed, and found I had gained twenty-ervea (7 pounds. I am as stoat snd healthy to-4ay, I tblak, as I ever was. Pass. Dr. Pierce's Common Sense Medical Adviser, paper cover, is sent frti on receipt of ai one-cent stamp to pay expense Of mailing only. Address Dt. R. V. Pierce, Buffalo, N. Y. the value of railroad property ia this state. No rate case which has ever been tried, that I know of, has considered the valu of franchises separate and apart from ths uae of the tangible property. When tb value of a railroad company Is testified to In these rate case it 1 reproduced at it value with reference to ita physical con struction, use and operation, which include everything. The stock and bond and net earning theory is no better for the purpose of fixing tax able value than it I for the purpoae of fixing rates and it ta Just as proper for the purpoae ot fixing ratee a It la for the pur pose of taxation. But it Is not proper In either ease. In all the cases that have ever been tried, either with reference to rates or taxation, it has never been determined that the valuation of stocks and bond or net earning capitalized should be ex clusive items of evidence upon which rate may be fixed or valuations for. taxation de termined. A multitude of Items are to be consid ered by a court In arriving at a conclualoa a to the value ot railroad property. It should not be confined to stock and bend alone nor earning alone. Allowance must be made for the part which labor plays la fixing the value of stocks and bonds and tn producing net esrnlngs. Tou must consider the condition of the country through which, the railroad passes, the physical condition of the railroad property and It connec tions. If the valuations tor the purpose ef taxation were fixed by the stock and bond or net esrnlngs theory, then to be logical en should say when stock and bond are be low par or there are no net earning, that then the property ought not-to be taxed, but theae extreme advocate would never consent to this. If It is unfair to value It this way when the stock and bond are below par or there are no net earning, it ought not to be recognised a the method when stocks and bonds are above par or there are net earnings. If It is the value of the physical property as used in case the property is operated at a loaa It ought to be the value of that property which should control for the purpose of fixing the value for taxation when the property Is operated at a profit. The truth la, you arrive at the value of railroad property as you do In the case of any other enterprise the same a you would arrive at tbe value of a manu facturing plant that may employ 1,000 men and haa Invested million of dollars. The property la valued as property for the pur pose or taxation and that is the only way that the fair value can be arrived at. If you simply take the on Item of stocks and bonds or net earnings, you will arrive at an erroneous value of the property. Tou will adopt a method that I not recognised or authorized by the constitution. It may be that there are constitutions and statutes In some bf the states in this union in which this method is recognized, however wrong it may be. Of this I do not know. But In this state the assessment for taxation must be made upon a property valuation. It can not be upon the value of Intellectual or phyalcal labor. This Item of stock and bond and net earning I about all that haa been intro duced here before thl court for the purpose cf proving that the member of thl board tct-4 fraudulently. How uncertain and il Ive it la must be plain. Court have . !-rid time and time again that it I only on. i-fm ot evidence to be considered, and some have aald that it Is the most unsat isfactory and uncertain, a it is in fact. How to Prevent Sunstroke. Tbe heated term Is withstood without whimper by those people who have a healthy stomach. Hot weather cannot hurt the man or woman whose stomach aad di gestive organs are perfectly healthy. But you go Into July and August with a dis ordered stomach and see what tbe result will be. Sunstroke attacks only ths man or woman whose stomach and dlgsstlv or gan are too fesbl te protect the strength and maintain one's phyalcal power te resist the depressing effects of tbe summer's sun. Summer diet, with all Its vegetables and unripe fruits, adds ks unstable Influence t the depressing effect of hot weather, caus ing a still greater decline In one strength and vitality. Ninety-nine of every one hundred people whose health and strength runs down In summer, allow their stomach or digestive organs to get out of order. This is easy enough in fact, it la hard to prevent with out the us of aome thoroughly reliable dlgeatant. Kodol after meals is not osly a thor oughly reliable dlgestant, but it contains great tonic and reconstructive properties as well. Thia famous remedy enables the stomach and digestive orgsas to thoroughly digest, assimilate and contribute te the tis sues all of tbe nourishment that Is ceo talned tn such food aa may be eaten. Kodol clear the way and make sure the Journey from sickness to health and weak ness to strength. If tb stomach Is disor dered Kodol will correct It. If dlseaaed Kodol will cure it. Kodol laya the foundation for health, and the upbuilding ot strength by cleaaslag, purifying and sweetening the gland snd membranes of tbe stomach, and by supply ing natural Juices necessary to perfect di gestion, assimilation aad nutrition. Kcdol prevents colic, cholera, diarrhoea, flux, dys entery and summer complaints generally, and ita use will curs indigestion snd chronic dyspspsla permsnsntly. Kodol Is good alike for young and old. Your druggist (alls It. 1 B il