APPENDIX NO. 2. ILLINOIS CONSTITUTION, Article IX......... 306 318 B. Maryland Budget Amendment of 1916.. C. Massachusetts Budget Amendment of 1918...... 321 APPENDIX NO. 5. BUDGET PROVISIONS OF CIVIL ADMINISTRA- 322 APPENDIX NO. 6. CONSTITUTIONAL PROVISIONS ON DEBT LIMITS.. 325 I. SUMMARY Taxation. The first state constitution of Illinois had few provisions relating to taxation and finance. The article on the legislative department contained several brief sections relating to revenue bills and appropriations. A provision in the Bill of Rights laid down the uniform rule of taxation more definitely than in any previous state constitution. In practice the tax laws for twenty years after 1818 provided a crude system of classification and segregation, but a law of 1839 established the general property tax in full force. In the state constitution of 1848 the financial provisions were much more detailed. The uniform rule of taxation was continued, with additional provisions relating to poll tax, special taxes, exemptions, tax sales and redemptions, local taxation, state appropriations and restrictions on state debt. The township organization law of 1851 and a new revenue law of 1853 decentralized tax administration, and amplified the rules for the assessment of property with specific reference to intangible property. In the constitution of 1870 further details were added. Provisions relating to appropriations and state debt were made more specific. The article on Revenue was increased from six to twelve sections, with additional provisions as to special taxes, exemptions, limitations on municipal debts and county taxes, and for special assessments and special taxation for local improvements. Separate sections prohibit municipal aid to private corporations and state aid for railroads and canals. Constitutional amendments have authorized special assessments for drainage districts, the Governor's veto of items in appropriation bills and additional debt for the city of Chicago and for a deep waterway. A new revenue law of 1872 further elaborated the rules relating to the assessment of property for taxation and reorganized the State Board of Equalization (established in 1867). Numerous amendments and additional tax laws have since been passed, providing for an inheritance tax, increasing the powers of county officers in the work of assessment, recognizing the practice of undervaluation and changing the basis of assessment, limiting local tax rates, establishing a state. tax commission, and increasing the license taxes on corporations and insurance companies. Two early decisions of the Supreme Court of Illinois upholding tax laws indicated a liberal construction of the rule of uniformity in taxation. But in later decisions the uniform general property tax has been more strictly enforced, not alone as to all forms of tangible property but also as to intangible wealth, such as stocks and bonds, mortgages and other securities and credits. The inheritance tax has been upheld; and also special taxes authorized by section 1 of Article IX, where imposed in addition to the general property tax; but special taxes to supersede taxes on personal property have been held to be invalid. The constitutional enumeration of certain classes of property which may be exempted from taxation has been held to be an exclusion of all other subjects of taxation and a limitation on the power of the General Assembly to grant other exemptions. Provisions for vesting local authorities with power to tax for corporate purposes have been held to limit the grant of local taxing powers to locally elected municipal officers, or officers appointed in at manner to which the people to be taxed have given their assent. The provision for special assessments by "cities, towns and vilages" was held to prevent the grant of authority to levy special assessments by drainage districts; a decision which led to the adoption of a constitutional amendment in 1878 authorizing special assessments by such districts. But it has been held that park boards may be vested with power to make local improvements by special assessments. In connection with the provisions as to local improvements, the Supreme Court has held that such improvements involve the idea of permanence; that special assessments and special taxation may not be combined for the same improvement; and that each improvement must be wholly within the limits and under the control of one municipality. Criticism of the present system of taxation in Illinois has been long continued and widespread, relating to defects in administration, failure to meet its own standard of uniformity, and injustice in the theory of the general property tax. More specifically, complaints are made of the general undervaluation of property, great inequalities in assessments, and the escape from taxation of large amounts of property. A comparison of assessed valuations with the census estimates of the true value of tangible property shows a steady decrease in the percentage of true value assessed from 1850 to 1890; and while there was an improvement for a time after 1898, there has been a renewed decline since 1904, and the "full value" assessments are less than half of the census estimates of true value. It is further clear that there is a great degree of inequality in the degree of undervaluation as between classes of property, local districts and taxpayers. Such inequalities appear even in the assessment of real estate, as between different counties, and as between farm lands and urban lots. So long as real estate is thus underassessed, the full assessment of intangible personalty can hardly be expected. More striking are the variations in the assessment of personal property. The total assessments of all personal property in 1912 were only 31 per cent of the census estimates of the true value of tangible personal property, as compared with 54 per cent for real estate. The assessments for the various items of enumerated personal property show the most absurd and whimsical variations, both as to the number and value of particular items in different taxing districts. It seems evident that in practice large amounts of such property are not included, at the discretion of the various local as sessors. Improvement in the assessment of real estate and of some kinds of tangible personal property may be secured by more efficient methods of administration, under the new State Tax Commission. But to exempt a minimum of household furniture, or to provide special methods for taxing particular classes of such property will require changes in the present constitutional provisions. The most serious evasions of the present tax laws, however, are in connection with the assessment of intangible wealth, such as money, credits, stocks and bonds. A comparison of the assessments in Cook county and other counties shows that the assessments for most of the items of tangible and intangible wealth for Cook county is only a small fraction of that for the rest of the State. On the other hand about half of the total assessment for personal property in Cook county is under the heading "all other property", which probably includes lump sum assessments made without attempting to show the various items in the schedule. A comparison of the assessments for money of other than bankers etc., with individual bank deposits as shown in bank reports, and of assessments for credits of other than bankers, etc., with estimates of the true value of taxable mortgages indicates that such money and credits have been assessed at not more than one third as much of their true value as real estate, and in recent years at not more than one fifth as much as real estate. This does not mean that there is a general undervaluation of intangible wealth in this proportion. Some intangible property is assessed on about the same basis as real estate, and some (in the case of estates in trust or in probate) may be assessed at its true value, and hence at a relatively much higher rate than is real estate. On the other hand a large proportion of intangible wealth escapes assessment and taxation altogether. These difficulties are not likely to be overcome by any changes in methods of administration. The experience of other states confirms that of Illinois as to the impossibility of securing the full assessment of intangible property under the general property tax; while in a number of other states special taxes on mortgages and intangible property or on incomes have secured larger revenues from intangible property than the general property tax. Some use has been made of special taxes in Illinois; but such taxes will not be utilized fully so long as they must be imposed in addition to the general property tax. To use such special taxes as a partial substitute for the general property tax will require changes in the present constitutional provisions for the uniform taxation of all property. Some difficulties and problems have been raised by the constitutional provisions relating to special assessments and special taxation for local improvements, under the decisions of the Supreme Court. Changes in the constitutional provisions will be needed, if it is desired |