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number of shipments and discharges reported was 106,304, and the average expense to the Government of the service per seaman was 56 cents. Under the fee system, which was abolished in 1886, the cost of these services to the owners and masters of vessels was $2 for a ship. ment and $1 for a discharge. The present system accordingly results in a considerable saving to navigation, while operating more satisfactorily in other minor respects than the fee system. Details of the work and expenses of each shipping commissioner's office are stated in Appendix B. While the amount of work performed at several of these offices appears hardly sufficient to justify their maintenance it is not deemed desirable to recommend their abolition, so long as the hope may be reasonably entertained that Congress will soon turn its attention to our navigation laws and enact legislation under which a restoration of our prestige on the sea may be possible. In that event the offices of shipping commissioners will increase in importance, and extensions, instead of curtailments, of the service will doubtless be desirable. For the same reason any legislation looking to a diminution of the powers of these commissioners can not be regarded with favor at the present time. An increase in the number and tonnage of our merchant fleet in the foreign trade, it is natural to assume, will carry with it an increase in the number of American sailors, who, in turn, will increase the field of service of shipping commissioners, and with the increase in the extent of services may well go the grant of larger powers to these offi. cers, insuring better control. It will be noted that the commissioners, almost without exception, favor an amendment to the law making shipments in the coasting trade obligatory, as in the foreign trade. The Bureau is not prepared for the present to concur in this sug gestion, for while it is convinced that the laws concerning the shipment of seamen can be improved and brought more closely into accord with the advanced legislation of other nations that have given more thought to maritime affairs than have the United States, it is of the opinion, first, that such legislation should follow legislation to increase the number of our foreign-going vessels and thus to increase the opportunities for American sailors; second, that such legislation when undertaken should increase the facilities as well as the duties of the offices of shipping commissioners. The reappearance of the United States as a competitor for the world's carrying trade will soon disclose, by practical experience, those respects in which our laws concerning shipments, discharges, the duty of the State toward seamen, etc., are behind modern requirements, and will greatly strengthen the hands of those who desire their improvement; but until the more urgent question of free shipping has been solved, minor changes in the laws of shipment, even if made, would probably disappoint their advocates by their failure to strengthen a merchant marine, declining through the operation of other laws. It will be desirable to follow a law for the increase of our registered steam fleet by another law, granting to our shipping commissioners the more extensive powers and greater facilities possessed by corresponding officials in the British service. The Bureau will submit to your judgment a measure to accomplish this result in time for the consideration of the next Congress.
STATE TAXATION OF SHIPPING.
In spite of any action which Congress may take toward the enactment of liberal and progressive shipping laws American navigation must continue at a great disadvantage compared with the navigation
of other countries, so long as many of the States tax their merchant marine much more heavily than the merchant marine of other nations is taxed. Heavy State taxation of vessel property is not a sufficient explanation of the decline of our oversea navigation-though it has contributed to that decline-for the laws of some States, notably New York and Alabama, are as generous as the laws of foreign nations. In the two states named American vessels in foreign trade are exempt by statute from all property taxes. By a decision of the U. S. Supreme Court vessels engaged in foreign or interstate commerce owned in Pennsylvania are not subject to tax under the corporation tax laws of that State. To what extent that decision has affected or may affect the laws of other States taxing shipping this Bureau is not competent to determine, but the conclusion of that decision (including reference to other deci sions) is quoted as bearing upon the subject under consideration, and declaring the policy which the States should follow. (Philadelphia and Southern Steamship Company v. Pennsylvania, U. S. Reports, 122, p. 326.)
The corporate franchises, the property, the business, the income of corporations created by a State may undoubtedly be taxed by the State; but in imposing such taxes care should be taken not to interfere with or hamper, directly or by indirection, interstate or foreign commerce, or any other matter exclusively within the jurisdiction of the Federal Government. This is a principle so often announced by the courts, and especially by this court, that it may be received as an axiom of our constitutional jurisprudence. It is unnecessary, therefore, to review the long list of cases in which the subject is discussed. Those referred to are abundantly sufficient for our purpose. We may add, however, that since the decision of the railway tax cases now reviewed, a series of cases has received the consideration of this court, the decisions in which are in general harmony with the views here expressed, and show the extent and limitations of the rule that a State can not regulate or tax the operations or objects of interstate or foreign commerce. We may refer to the following: Railroad Co. v. Husen, 95 U. S., 465; Cook v. Pennsylvania, 97 U. S., 566; Guy v. Baltimore, 100 U. S., 434; Webber v. Virginia, 103 U. S., 344; Moran v. New Orleans, 112 U. S., 69; Walling . Michigan, 116 U. S., 446; Pickard v. Pullman Co., 117 U. S., 34; Wabash and St. Louis Railroad v. Illinois, 118 U. S., 557; Robins v. Shelby County, 120 U. S., 489; Fargo v. Michigan, 121 U. S., 230. The cases of Moran v. New Orleans and Fargo v. Michigan are especially opposite to the case now under consideration. As showing the power of the States over local matters incidentally affecting commerce, see Munn v. Illinois, 94 U. S., 113, 123, and other cases in the same volume, viz: Chicago and Burlington Railroad . Iowa, pp. 155, 161; Peik v. Chicago and Northwestern Railway, pp. 164, 176; Winona and St. Peter Railway v. Blake, p. 180, as explained by Wabash Co. v. Illinois. The wharfage cases, viz: Packet Co. v. Keokuk, 95 U. S., 80; Packet Co. v. St. Louis, 100 U. S., 423, 428; Packet Co. v. Catlettsburg, 105 U. S., 559, 563; Transportation Co. r. Parkersburg, 107 U. S., 691, 698; Ouachita Packet Co. v. Aiken, 121 U. S., 444; Mobile v. Kimball, 102 U. S., 691; Brown . Honston, 114 U. S., 622, 630; Railroad Commission Cases, 116 U. S, 307; Coe v. Errol, 116 U. S., 517.
It is hardly within the scope of the present discussion to refer to the disastrous effects to which the power to tax interstate or foreign commerce may lead. If the power exists in the State at all it has no limit but the discretion of the State, and might be exercised in such a manner as to drive away that commerce, or to load it with an intolerable burden, seriously affecting the business and prosperity of other States interested in it; and if those States, by way of retaliation or otherwise, should impose like restrictions, the utmost confusion would prevail in our commercial affairs. In view of such a state of things which actually existed under the Confederation, Chief Justice Marshall, in the case before referred to, said:
"Those who felt the injury arising from this state of things, and those who were capable of estimating the influence of commerce on the prosperity of nations, perceived the necessity of giving the control over this important subject to a single government. It may be doubted whether any of the evils proceeding from the feebleness of the Federal Government contributed more to that great revolution which introduced the present system than the deep and general conviction that commerce ought to be regulated by Congress. It is not, therefore, matter of surprise that the grant should be as extensive as the mischief and should comprehend all foreign commerce and all commerce among the States. To construe the power so as to impair its efficacy would tend to defeat an object in the attainment of which
the American public took, and justly took, that strong interest which arose from a full conviction of its necessity." (12 Wheat., 446.)
Nothing can be added to the force of these words.
Our conclusion is, that the imposition of the tax in question in this cause was a regulation of interstate and foreign commerce in conflict with the exclusive powers of Congress under the Constitution.
As a rule, the seaboard and lake States tax shipping as other property is taxed, regardless of the facts that maritime nations usually impose no taxes on shipping as property, but tax only the actual earnings of shipping, and that, from the very nature of its use, shipping can not share in the benefits which are bestowed by the distribution of the proceeds of State and municipal taxation for public purposes. A moment's review of the various public purposes for which the proceeds of State and local taxes are usually expended will show that shipping derives little or no benefit from them. In short, when a vessel is fulfilling the function for which it was built it is navigating the ocean, remote, except during its brief sojourn in port, from the fields and purposes to which State and local taxes are applied. These considerations place vessels in foreign trade on an entirely different footing from other taxable property, and give force to the claim that at the utmost only the earnings of shipping should be taxed. For these reasons an exemption from all taxation, such as New York allows to vessels owned in the State engaged in foreign trade, is not open to the objection which has been raised that such exemption is a special privilege and indirectly a bounty. If the privilege is special, so, too, is the class of property special, in that it can not be benefited by taxation as real and personal property are benefited. If it is a bounty, then that bounty is expended, and more, too, in the various forms of navigation charges by which shipping the world round is required to take care of itself as well as to contribute to the expenses of government, usually beyond the amount of services actually rendered in return for such payments. Still further, heavy taxes on shipping are easily evaded by the owners of large amounts of tonnage, and thus fall with the greater weight on small vessel-owners. It is relatively an easy matter for the owner of several vessels to form a partnership with the resident of another State in which low taxes or none at all are imposed on shipping, and by allowing the vessels to stand in the name of such partner to escape the endeavor of the law to tax him more than his competitors in navigation are taxed. The experience of the city of Chicago some years ago illustrates admirably the result of endeavors to impose heavy taxes on shipping. Some fifteen years ago the local assessors set out to tax the shipping owned at that port on its full insurable value at the rate fixed for municipal taxes for the year. The vessel owners of Chicago, in self-defense and to enable them to continue in business against competing ports, were compelled to make nominal transfers of their property, and thousands of tons of shipping, doubtless owned in Chicago, appear on the records of this office as owned in other States. Though in the number and tonnage of its entries and clearances Chicago ranks with the great ports of the mar itime world, a glance at the statistical returns at the end of this volume will show that its apparent rank as a ship-owning port is insig nificant. A considerable percentage of the tonnage returned from New York and Boston is unquestionably owned in other States, and has made these cities hailing ports on account of the liberal tax laws of New York and Massachusetts. Just as the registry law compels American owners to use foreign flags, so State tax laws have the effect of transferring the ownership of shipping, at least in name, to States
which by their laws have endeavored to put their shipping on an equality with the shipping of other nations.
A brief digest of the methods employed by the seaboard and lake. States in the taxation of shipping will be found in Appendix F, and Appendix H gives a brief review of the methods of taxation in use by the leading maritime nations. It will be noted that only the earnings of shipping are taxed by Great Britain and Germany, our natural rivals on the sea, and Austria has just exempted from taxation shipping in foreign trade.
To obtain concrete illustrations of the workings of State and local tax laws the Bureau inquired of local assessment boards in a number of the principal ports the amount of taxes actually paid by shipping as property during the last tax year, the assessed valuation of the shipping so taxed, and an approximate statement of the percentage of assessed valuation to full valuation. For comparison, a tabulation has been made from the reports of steamship companies, incorporated in Appendix L, of the taxes they paid and the valuation and tonnage of their shipping. In nearly every instance local assessment boards politely furnished the information desired, and to their thoughtfulness the following significant table owes its value. In some instances, for various reasons, chiefly because shipping had been taxed with other property of the owner, no separate statement was obtainable.
As city limits (within which assessments are levied) and customs districts (for which tonnage is returned) are not coterminous, the figures as to tonnage for 1893 give only an approximation and overstatement of the tonnage of vessel property paying the taxes mentioned. The tonnage documented at any given large port in the list will be, to an extent, owned and taxed in smaller places near by (e. g., of 18,611 tons documented from Belfast, Me., only 2,860 tons in the city paid the tax named, $844; the remainder was owned, valued for assessment, and paid taxes, not included in the tabulation, at numerous small places near by). The tonnage figures thus are available only for rough comparison with foreign tonnage. The valuation in the case of foreign steamship companies is the sum at which the vessel property is carried as an asset on the books of the company, and may thus be taken as full valuation. The tonnage of these companies is almost wholly iron and steel steamships.
The general argument for lower taxes on shipping is a familiar one, and has frequently been presented in the reports of this Bureau, but it is believed that it will be appreciably strengthened by these concrete facts.
a The chairman of the board of assessors states: "It will be impossible to state the total assessed valuation of vessels in the city of Boston, Mass., for 1893. Such class of property is included (excepting vessels in foreign carrying trade) in the dooming of those citizens who do not make returns, without specifying the same, and is assessed as all other property, at a full and fair cash value and at the same rate ($12.90 per $1,000 in value). The proportion of personal estate returned to us under oath is about 20 per cent of the total assessed valuation ($202,015,500), of which $31,500 was for ships and vessels not engaged in the foreign carrying trade, these being practically exempt by law. The value of ships in foreign trade, as returned to us, was, for 1893, $281,856."
The assessors of taxes state: "In this State no personal property is listed' for taxation unless a sworn return is made by the taxpayer. In the absence of such a return the taxpayer is doomed in such an amount as in the judgment of the assessors is sufficient to cover the value of his property. Comparatively few returns are made, and therefore no estimate can be given from the assessment rolls as to the value of vessels property. Corporations are not in this State taxed for vessels, but the cap. ital stock is taxable to the stockholders at its market value. No tax is levied on the earnings of corporations owning vessels. No discrimination is made in favor of vessels engaged in foreign trade." e The secretary of the department of taxes and assessments states: "It is impossible to answer your first question as to the total assessed valuation of vessels of all descriptions in this city of the year 1893. The tax rate on real estate and personal property of individuals and corporations, not taxed directly by the State, for 1893 in this city was 1.82 per cent. The capital stock of corporations and the personal property of individuals owning vessels are taxable, under the laws of this State, in this city as personal property. ** Corporations owning vessels engaged exclusively in plying between this city and foreign ports are exempt from taxation on their capital."
d The clerk to the board of revision of taxes, states: "Vessels belonging to individuals or corporations in this city and State are not subject to taxation. All corporations of this State are subject to a tax upon their capital stock.
e Delaware exempts all vessel property from taxation. f No response.
The chairman of the board of assessors states: "The greater number of vessels running into and out of this port are owned by railroad corporations, and have their principal offices in other ports than Buffalo, so that we can not, according to law. assess them here. We have consequently no assessment on vessels for city taxes, as the vessels which might be legally assessed are so encumbered with mortgages as to prevent their taxation."
While no reply from the assessors has been received, the Bureau learns from private citizens that some years ago the assessors taxed vessel property at its full insurable value, and that accordingly many vessel owners were compelled to make nominal transfers of this property through partnerships, etc., to other ports. Thus Chicago, though in tonnage of entries and clearances a port of the first rank, in its ownership of documented vessel property takes very low rank, its vessel property being assessed at about $300,000. These facts illustrate one result of heavy State taxation of floating property.