This section is from the "The Subvention In The State Finances Of Pennsylvania" book, by Frederic B. Garver.
The same legislature that provided for the appointment of the commission of 1889 undertook to bring about a slight equalization of revenue resources by providing for the return of one-third of the proceeds of the state tax on personal property to the counties or to cities co-extensive with counties. *37 But this arrangement did not mean a very great addition to the resources of the localities. The act provided that in the future the localities should assume responsibility for uncollectible amounts due for taxes upon personal property, for abatements, and for all other expenses connected with the levy and assessment of the tax. *38 The return of one-third of the revenue was, therefore, more in the nature of a payment for the assumption of all expenses connected with its levy and collection. *39
Although the assembly did not pass the bill which was recommended by the commission of 1889, additional relief was granted to the localities and to the owners of real estate. The first measure of relief, passed by the legislature in 1891, was the return of three-fourths of the state tax on personal property, which was increased from three to four mills on the dollar. *40 The act also made changes in the corporation tax calculated to increase the revenue from that source. *41 That this arrangement, which obviously increased the local revenues without additional taxes on real estate, was specifically designed to readjust the burdens of taxation is a matter of common knowledge to all who are familiar with this portion of the financial history of the state. *42 No further change was made in the distribution of the personal property tax until 1913, when the state turned over to the localities the personal property tax on mortgages, money owed by solvent debtors, interest-bearing accounts, public loans, except those exempted by law or taxed by the state, shares of stock except those taxable by the state, moneys invested in other states or in foreign countries, other moneyed capital in the hands of individuals, or annuities of over $200 annually, and on such conveyances as cabs, hacks and omnibuses. *43 The rate that should be levied on such property was retained at four mills on the dollar. *44 The state retained the tax on loans of private and municipal corporations. *45
37 Act 1 June, 1889, P.L. pp. 420-438, at 426.
39 Eastman. Taxation in Pennsylvania, II, p. 791. The personal property tax in Pennsylvania is imposed on mortgages, notes, money owned by solvent debtors, collectable accounts, public loans except those of the United States and of the state, bonds of corporations generally, certificates of indebtedness, and stock of corporations not subject to the capital stock tax. There are numerous exceptions to this general statement. See Eastman, Taxation in Pennsylvania, II, pp. 772-773.
40 Act 8 June, 1891, P.L. pp. 229 fif.
42 "In 1891, when there appeared to be great danger of the passage of the 'Granger Revenue Bill, then pending, it was agreed, as a sop to Cerberus, to increase the proportion of the personal property tax] to be returned to three-fourths, which was accordingly done. The one-third granted by the Act of 1889 was given in commutation of payments theretofore made, but the difference between one-third and three-fourths, given by the Act of 1891, was a donation." Eastman, Taxation in Pennsylvania, II, p. 791.
It is apparent that the method employed by Pennsylvania since 1887 to bring about an equalization of revenue resources between the state and the localities, and to equalize the burden of taxation among tax payers, has been somewhat similar to that employed by Mr. Goschen in solving the same problem in Great Britain. In both cases the central government relinquished certain taxes (or the proceeds of those taxes) to the localities in order to lighten the burden on property subject to local taxation. In Great Britain the assigned revenues were used to make possible a partial abolition of the grants in aid. In Pennsylvania, on the other hand, the subventions have increased more rapidly since the period when the adjustment by means of assigned revenues was made than they did before. In fact, it seems highly probable that when the " Granger " bill was defeated, in 1891, it was generally understood that the subventions from the state treasury would be increased. *46 Numerous statements to that effect have been made in the legislature since that date. Mr. Focht, speaking in the senate in 1903, asserted flatly that the increases in the school appropriations, which began at that time, were the result of a compromise in the struggle between the corporations and the "grangers. *47 Again, in a debate in the lower house, in 1897, one member (Mr. Morrow) asked another member (Mr. Farr) "what was the object" of the increased appropriations to common schools provided at the session of 1891. The answer was, " I think the object was to lessen the burden of taxation in different parts of the state. That was the statement at that time. *48 Contemporary opinion of the effect of the grants is well expressed by Mr. McCamant, a member of the Revenue Commission of 1889, who pointed out in his report that the state might relieve the localities of some of their financial burdens in two ways. In the first place, it might assume "a further share of the expenses of local government," or it might relinquish to the localities any surplus revenues attached to the state treasury. *49
43 Act 17 June, 1913, P.L. pp. 507-519.
44 Idem, p. 508. 45 Idem, p. 516.
46 The evidence of such an understanding is not conclusive. No enactment or resolution of the legislature gave definite expression to such a policy.
47 Legislative Record, 1 April, 1903, p. 2606, col. 1.
48 Legislative Record, 23 March, 1897, p. 915.
49 Report, p. 35.