Other kinds of corporations besides public utilities have been put in special classes for the purpose of taxation. Some of the most general of these classes are banks, insurance companies, and, frequently, manufacturing industries.

Taxation of Banks. - With the passage of the National Banking Act, the taxation of banks by the states became entangled with constitutional restrictions, and Federal legislation and court decisions were necessary to establish the status of bank taxation. This taxation by the various states has been very unequal, varying from very lenient legislation in some to almost repressive legislation in others. This situation exists because of the difference in the attitude which has been taken toward the taxation of banking capital. Some have advocated a high tax, while others favor complete exemption. The one class looks upon banks as favored creatures of the government, while the other looks upon them as essential to business prosperity, and seeks to establish them more extensively.

All sorts of productive capital might be more remunerative if it were not taxed, yet the state must have revenue. The banking business is not of such a nature as to suggest any clear reason why it should bear especially high or especially low taxes. The granting of franchises to such institutions in no sense gives them a monopoly or increases their earning power. Moreover, banks render a necessary service and are essential to business operations. By furnishing credit when needed they help to develop productive business enterprise, and thus enlarge the basis of taxation. If banks are unduly burdened, banking facilities will be correspondingly lessened. It would seem reasonable, therefore, not to tax them to such an extent as appreciably to hinder capital from seeking that form of investment. Care should also be taken that discriminating tax burdens are not placed upon essentially competing institutions. The modern trust company, for example, has developed so many banking practices as to be a competitor with banks, and should be treated as such by tax laws.

Taxation of Insurance Companies. - Much discussion has arisen over the proper method for taxing insurance companies, especially those doing a life insurance business. It is often contended that insurance companies should be taxed very lightly, if at all, since the burden is shifted to the policyholder. Life insurance is looked upon as an institution which makes for the public welfare because, in providing for many who might otherwise become dependents, it has cut down the burden of state expenditures. In opposing such taxation, the beneficent features are extolled; the provision for widows and orphans is emphasized; this wise provision for the future is pictured; the incentive to providence and thrift is pointed out; the assets of the company are shown to be the accumulated savings of the policy holders. A tax upon life insurance companies, then, falls upon this form of savings, and is consequently undesirable.

Such a conclusion would condemn a large part of the general scheme of taxation. All taxes are burdens upon savings and restrictions upon thrift. The problem in taxing insurance companies is to levy a tax upon them which will be equitable with that placed upon other forms of investment. Peculiar difficulties arise in that the length of time a company has been in existence is an important factor, the premiums are not income, the companies take on so many different forms, and do business in so many tax jurisdictions.

The tax which is most generally used by the states is a percentage levy upon the gross premiums. While this, no doubt, introduces some injustices, and while the rate varies considerably from state to state, yet no other proposed plan has appeared so satisfactory. An added justification for some payment is to maintain the insurance department in the state which renders the companies safer and more serviceable to the public. This is a special service, and should at least command enough from those benefited to pay the cost of the service.

Taxation of Manufacturing Corporations. - In the earlier history of corporation taxation, manufacturing concerns were usually treated more leniently than other corporations, or were entirely exempt from taxes. A number of states even yet exempt this form of industry, to a great extent, from tax burdens. There is no good reason, however, why manufacturing concerns should not bear their share of the public burden. They can no longer be considered as infant industries which need the fostering hand of the state. The men who put capital into such enter-prises have no more claim to exemption than those who invest in other industries. The problem of taxing this form of business is the problem of taxing capital in general in a just and equitable manner. The taxation should be such, however, that there will be no discrimination in favor of particular fields of business endeavor, and uniformity should be extended, if possible, throughout the whole competitive district.