If the income tax should fail to yield as much revenue as was previously derived from personal property, the excess would fall upon real estate, which is already bearing its full share of the public burden. It is common observation that the trend of population in recent years is strongly toward the cities with a consequent neglect of rural development. The effect of this tendency is to increase the cost of living and lessen the economic independence of our people. Nothing should be done further to load down the land owner, but on the contrary he should be given every economic advantage as a check on the abnormal drift of population to industrial centers. In distinctively agricultural counties the income tax this year will fall considerably short of the amount raised from personal property. Doing away with the personal property tax would inevitably increase the burden now laid on land in these districts unless the basis for the distribution of the proceeds of income taxation should be changed at the same time.

The income tax in its present form may and probably will yield the full equivalent of the personal property tax before the next legislature convenes. Then also administration of it will have settled to a definite, fixed course and most if not all of the legal questions now open will have been determined. I therefore recommend that no radical change in the general scope or character of the income tax law be undertaken at this session and that no further exemption of personal property be made. But amendments necessary to make the law simpler and more easily understood by the tax payer and more effective from an administrative standpoint should be adopted without delay.

TAXATION OF TELEPHONE COMPANIES.

During the closing days of the last regular session I called the attention of the legislature to the fact that in all probability our present laws for the taxation of telephone companies are invalid for unconstitutionality. These laws make the basis of the tax the earnings these utilities derive from their interstate business as well as that done within the state. Under the commerce clause of the federal constitution the power to impose burdens of any kind upon interstate trade is expressly reserved to the general government. In the cases entitled Galveston, Harrisburg and San Antonio Railway Company vs. the State of Texas, 210 U. S. 217, and the Western Union Telegraph Company vs.

The State of Kansas, 216 U. S. 1, then called to the attention of the legislature, the Supreme Court of the United States held that a tax of this sort is a burden upon interstate commerce and in violation of the provision of the federal constitution to which I have referred. The legislature however was then so occupied with other matters and so little time remained that nothing was done. It seems to me that if the telephone companies of Wisconsin doing an interstate business should refuse to pay the taxes imposed upon them under present laws we should be unable to compel them to do so. On this account and for the additional reasons stated in my regular message to the legislature two years ago relative to this matter, a change should now be made from the present license fee method of taxing telephone companies to the ad valorem system now applicable to every other public utility in the state. Fair treatment of all property owners similarly situated as well as the desirability of undoubted validity in the ground work of the tax equally justify such a change.

Highways.

The last legislature created the Wisconsin Highway Commission and appropriated $350,000 of state money to aid towns and counties in the construction of roads and bridges. The first work under this law was done in 1912. Despite the fact that the season was rainy and bad for road building and that almost all of the state engineers and the county highway commissioners were inexperienced in the work, over 500 miles of road in 65 counties and 276 bridges in 52 counties were completed in a very satisfactory manner, at a total cost of about $960,000. Of this amount $850,000 were paid out for road work and $110,000 for bridge construction. The state contributed practically onethird of the cost. In addition to this financial aid the commission furnished plans for the construction of county bridges that cost $198,000 and made surveys and plans for many road improvements in counties, villages and towns.

The policy of state aid for the construction and maintenance of public highways inaugurated two years ago has therefore proved a complete success. Indeed, it is almost too successful. The petitions for state aid for 1913 call for an appropriation of $823,000 by the state. This is almost three times as

much as was spent in 1912. It is a rapid increase; but if possible the legislature should not permit this work to lag for want of necessary funds or the encouragement coöperation by the state affords. It should be borne in mind also that in order to make such an additional appropriation available in time for work during the present year it must be made very early in the session.

Under the present law the state highway fund is raised by a property tax, specially levied and collected each year. A better policy would be if possible to make it up from the general revenues of the state and to raise only the amount not thus available by a state tax.

The last legislature appropriated a definite sum annually to cover the cost of supervising the construction of roads and bridges. Since this item of expense must necessarily vary with the amount of work to be supervised, it is desirable that a more elastic provision be incorporated in the law. I am told that in engineering work of this sort the expense of supervision is customarily figured at a percentage of the total cost. In many states this item runs as high as fifteen per cent of the entire amount. The Highway Commission has informed me however that it will be able to carry on the work for not to exceed five per cent of the cost of construction. Should this percentage seem reasonable to the legislature the law should be amended accordingly so as to obviate the necessity of changing the amount to be allotted for this purpose each session of the legislature.

Some states are now employing their prison convicts in building highways. Colorado has been especially successful in the development of this idea. If it be possible to apply it advantageously in Wisconsin, it is highly desirable; but before finally deciding the matter preliminary experiments should be made. I respectfully recommend therefore that the Board of Control and the Highway Commission be given authority and a limited appropriation to carry on a joint investigation of this subject by the use of a limited number of convicts in road work in the northern part of the state, preferably on lands reserved for reforestation, and that they be required to report to the next legislature the results of the experiment, together with their recommendations.

There is some criticism of the lack of continuity in the stretches of road now being built by means of state aid and many suggestions have been made for the more rapid completion of the main

lines of traffic. One way in which this object may be promoted is to change the automobile license tax from a uniform sum per car as at present to a reasonable minimum charge for the lighter cars, with a proportionate increase for the larger automobiles, depending on horse power or weight. The proceeds of this tax instead of going as at present in large part to the counties where it is frequently frittered away without any permanent improvement to show for it, should be used under the direction of the Highway Commission in the maintenance and construction of the lines of traffic which connect the principal cities and villages of the state.

The plan of an unsalaried highway commission has worked well. For the present at least there should be no change. The demand for better roads is growing everywhere throughout the state as rapidly as the development of properly trained road builders and the condition of the labor market will permit.

There are few things within the control of this legislature that will accomplish more for the upbuilding of the state than the development of our public highways and I have been pleased to note the growth of public sentiment favorable to it. Wisconsin has entered upon a far-reaching, constructive and beneficient policy in a safe, conservative way and I believe the enactment into law of the recommendations here made will permit of the efficient accomplishment of the work lying immediately before. us as rapidly as is consistent with good business judgment.

Conservation of Natural Resources.

MINERALS.

In my message of two years ago I called attention to the disparity which exists between taxes on mineral deposits and on timber. Standing timber is taxed every year under the general rule. Minerals, being underground and not readily open to view, almost invariably escape. This is true of all the important minerals of the state, whether iron, lead, or zine. In regard to iron, explorations have shown large quantities of ore in the Baraboo, Gogebic, and Iron Ridge districts. Dr. C. K. Leith of the University gives the following rough approximation of the merchantable tonnage now in sight: Gogebic district, 5,000,000 tons; Baraboo district, 5,000,000 to 10,000,000 tons; and Iron

Ridge district, 30,000,000 to 40,000,000 tons. The facts in detail for each piece of property in these explored areas both as regards. quantity and quality of the deposits should be ascertained as in Michigan and Minnesota, and the land taxed the same as other property.

Aside from these discovered ore bodies, there are extensive areas in the northern part of the state, some of which are known to contain iron bearing formations. The mineral rights are partly owned by those in possession of the land and partly by great lumber companies that reserved title to them when they sold their cutover holdings to settlers. These companies now pay no taxes on these undeveloped properties. I am told it is entirely practicable quite accurately to delimit these mineral areas and to ascertain their value for purposes of taxation.

This should now be done. The state geological survey should be authorized to make an accurate determination of the iron ores of merchantable value that have been developed as a result of exploration and should classify the lands of the northern part of the state on the basis of their mineral value. Statistics along similar lines should be compiled for the lead and zine districts in the southwestern part of the state. With this information at hand it will be possible for the Tax Commission to ascertain the value of all mineral rights within the state both for the areas in which there are definitely circumscribed deposits and those that are not yet developed. All such property should then be made to bear its just proportion of taxes.

WATER POWERS.

At the special session of the legislature less than a year ago I called attention to the fact that out of all the controversy concerning water powers there had come a substantial consensus of opinion that water power legislation is desirable for the accomplishment of at least three principal objects and I then recommended the enactment of a bill that had been carefully prepared by the Joint Committee on Water Powers and Conservation. Discussing the objects to be attained by the proposed legislation, I said:

"First is the need of public control of the location, construction, height and strength of dams, their sluices and spill-ways, in the interest of improvement in navigation and