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right to increase rates. It will work against the people on the same principle that the colored gentleman's coon trap worked against the coons-it will "cotch 'em a-cumin' an' a-gwine." When the effect of that decision is well understood, there will be no more worthless railroad stock on the market.

If the rule adopted by the Federal courts in Smith vs. Ames is law, it virtually makes what were heretofore worthless fiat stocks and bonds of a face value of more than $6,000,000,000 a special public debt, the interest and principal of which must be paid by the producers of the country, and for that reason is a greater burden on the industries of the country than would be a regular increase of the public debt to that amount, the interest and principal of which would be paid by all the people.

It must have been in anticipation of some such ruling, that prompted the reorganization committee of the Union Pacific to announce their intention to stock and bond that road for $236,000,000, when they had just paid about $100,000,000 for it. If the original cost of construction is to be a basis upon which to fix rates, why should the present value of the roads be considered? On the other hand, if the rates are to be such as will afford a fair rate of interest on the value of the property, why consider the original cost? "INJUDICIOUS CONTRACTS, POOR ENGINEER

ING, UNUSUALLY HIGH COST OF MATERIAL, RASCALITY ON THE PART OF THOSE ENGAGED IN THE CONSTRUCTION AND MANAGE

MENT OF THE PROPERTY," as described by Mr. Justice

Brewer, added a great amount of cost, but no value whatever, to the property,-especially the amount expended in poor engineering, which to-day detracts from what would otherwise give a value to the roads. The poor engineering is still in evidence, and increases the cost of operation.

CHAPTER 7.

Taxation of railroads.― Taxes are paid by the patrons of the roads: not one cent of tax comes from the stock- and bond-owners.-The burden falls most heavily on the producers, while the capitalists, bankers, bond- and mortgage-owners escape. The principal part of the railroad tax is paid by the farmer.-Taxation of the roads greatly increases number of officers and clerks, and the operating expenses.-Taxation of franchises a fraud on the people.- How it gives the roads the right to increase their rates.

Railroads, when properly operated and controlled, have but one legitimate way of earning money, and that is by the carriage of passengers and freight, mails, express matter, etc.; all their earnings come directly or indirectly from the people. The people pay all the salaries of railroad officials, all the wages of other railroad employees, and all the operating expenses of the roads. The interest and dividends on railroad bonds and stocks are paid by the people. All taxes paid by the railroads to the States, counties, cities, towns and school districts are paid by the paying patrons of the roads, and the burden falls most heavily on those who pay the freights. In proportion to the value of his gross products, the farmer pays the highest rates of any shipper or producer in the United States. Table No. 22 shows that while the passenger traffic paid 23.18 per cent., the freight traffic paid 68.39 per cent. of the total earnings of the railroads in 1896; or, putting it in plain language, for every dollar that the roads received for carrying passengers, they received almost three dollars for

carrying freight. The products of the farm, such as cotton, wheat, corn, and other grains and seeds, cattle, hogs, horses, hay, fruit, and all other products of the land, are heavier and of greater bulk in proportion to their market price than any other class of freight, except coal and some of the low-grade ores that are shipped for reduction; and as to these two classes of freight, they are usually shipped at such rates as are never given to the farmer when he attempts to ship to the market point instead of selling to the local middleman, and consequently a larger proportion of the farmer's gross earnings are absorbed in the payment of freights than are those of any other class of producers. The prices of many of the products of the farm are made in Europe, and when the farmer sells at the home station the freight is deducted then and there, and the farmer has paid it. The prices of wagons, plows, and all kinds of farming implements and machinery are made at the factories; the farmer pays the factory. price, the local merchant's profit, and the freight. When the farmer sells, others fix the price and the farmer pays the freight; when the farmer buys, the price is fixed by others and the farmer pays the freight.

How is it as to fares? Many people are under the impression that through passengers pay a large proportion of the fares collected by the railway companies; and that is true when applied to the unsettled or sparsely settled portions of some of the Western States and Territories, but when applied to all the railroad mileage of the country it does not hold good. During

the year ending June 30, 1890, there were 498,070,093 passengers carried on the railroads of the United States, of which number but 68,218,009 were through passengers, while 429,852,084 were local passengers.

(See

p. 593, part 1, Transportation by Land, Census of 1890.) These figures show that only 13.69+ per cent. of the passengers traveled on through passes or tickets. The through passenger gets reduced rates, while the local passenger usually pays full local rates; and it may here be permissible to say, that the through passenger who travels on a pass or at reduced rates is generally one of that class of persons who are best able to pay full fare. But however that may be, it is certain that the agricultural class pays its full share of railroad fares.

TABLE No. 22.-COMPARATIVE SUMMARY OF EARNINGS AND INCOME AND
ANALYSIS OF EARNINGS FROM OPERATION FOR THE YEARS
ENDING JUNE 30, 1896 AND 1895.

[From the Statistical Report of the Interstate Commerce Commission.]

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2177.746.25 miles of line represented.

8 Covers twelve roads making no classification of earnings under the several heads.

* Covers seven roads making no classification of earnings under the several heads.

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