The problem of making a proper distribution of revenue resources between the state and the localities, in Pennsylvania, is, as was shown in the preceding section, closely connected with the problem of equalizing the burden of taxation upon the different forms of property and income. This is due to the fact that since 1866 the state and the localities have derived their revenues from different objects of taxation. At first sight it would appear that two problems are involved. But a moment's consideration will show that in Pennsylvania these problems are practically identical. If the localities need more revenue, their chief resource is to levy heavier taxes on real estate. If this process of adding to the local tax rate continues, the owners of real estate are sure to protest that they are paying a higher rate than other property owners. They then demand an equalization. If, however, the rate upon real estate is kept equal to, or below that imposed on other wealth, the local governments must, assuming that they are in actual need of additional funds, either remain impoverished or have recourse to borrowing. A widespread demand for increased local revenues is certain to be followed by a demand for equalization of the burden of taxation among property owners. As long, therefore, as the separation of state and local revenues shall continue every large increase in local taxation will be accompanied by a demand for equalization. And every attempt to increase local revenue will mean a redistribution of the burden of taxation on those kinds of property that pay local taxes.

After the separation of sources, which took place in 1866, it was inevitable that such complications and problems should arise. Changes in the relative amount of work performed by the state and the localities or changes in the rate of growth of the property taxed by the state and by the localities soon distrubed any arrangements that were made. And, finally, new legislation and court decisions tended to produce the same result.

As was pointed out in the preceding section, the owners of real estate succeeded, during the years 1885 to 1889, in gaining the support of the governor and of the legislature in their demand for relief. But the relief was, at first, given only in a limited way. In 1887 the legislature turned over to the localities a portion of the proceeds of certain licenses for the sale of intoxicating liquors. The revenue received by the local authorities from this source was not, however, very large, amounting to only $5,600,448 during the years 1888-1891. In 1891, however, these licences were turned over to the localities to administer, to collect, and to retain the revenue, but the rate of the tax was fixed by state enactment. The yield was, in 1892, about $3,000,000 annually, and even as late as 1905 it was estimated that the total receipts from them did not exceed $3,500,000. *31 In later years the state imposed additional license taxes upon dealers, but the local taxes were not disturbed.

The agitation for a readjustment, which continued throughout the latter part of the decade 1880 to 1890, also resulted, in 1890, in the appointment of a commission to examine the complaints of the owners of real estate and to work out a revision of revenue laws for both the state and the localities. *32

The introductory part of the resolution providing for the commission recited that the existing system had worked injustice by exempting from local taxation large amounts of both real and personal property held by corporations. It was also asserted that there was an "urgent demand" for reduction of taxation for local purposes. The resolution required the commission to be composed of the Auditor General, a representative of the manufacturing interests appointed by the governor, a representative of the mercantile and financial interests elected by the lower house of the General Assembly, two specialists in taxation, one elected by each branch of the legislature, one representative selected by the Association of County Commissioners, and, finally, a representative of the agricultural interests chosen by the State Grange. *33 A representative of the laboring classes was added when the commission was finally organized. *34

A commission so constituted naturally found great difficulty in teaching an agreement either as to facts or as to a proposal for constructive legislation. Furthermore, since they were poorly equipped for making investigations, little reliance can be placed upon their findings as to the actual inequality in the distribution of the burden of taxation. Governor Beaver stated bluntly, in 1891, that the commission had failed to produce evidence that showed the degree of inequality actually existing. *35 The majority of the commission agreed upon a bill which would have brought personal property and wealth owned by corporations within the taxing power of the localities, *36 but the General Assembly refused, in the session of 1891, to follow the commission's recommendations.

31 Compendium and Brief History of Taxation, p. 43.

32 For the legislative authority for the appointment of the commission see Joint Resolution No. 27, 1889, P.L. pp. 456-457.

33 Ibid.

34 Revenue Commission (1889), Report, p. 6.

35 Pennsylvania Archives, IV Ser. X, p. 879.