MESSAGE OF THE GOVERNOR OF NEW YORK TO THE LEGISLATURE, JANUARY 3, 1900

State of New York, Executive Chamber,
Albany, January 3, 1900

To the Legislature:

It is a very genuine pleasure to congratulate the Legislature upon the substantial sum of achievement in legislation and administration of the past year. Laws of the utmost usefulness to the community have been enacted, and there has been a steady betterment throughout the year in the methods and results of the administration of the government.

The whole problem of taxation is now, as it has been at almost all times and in almost all places, one of extreme difficulty. It has become more and more evident in recent years that existing methods of taxation, which worked well enough in a simpler state of society, are not adequate to secure justice when applied to the conditions of our complex and highly specialized modern industrial development. At present the real estate owner is certainly bearing an excessive proportion of the tax burden. Men who have made a special study of the theory of taxation and men who have had long experience in its practical application are alike in conflict among themselves as to the best general system. Absolute equality, absolute justice in matters of taxation will probably never be realized; but we can approximate it much more closely than at present. The last Legislature most wisely appointed a committee to consider the feasibility of a thorough and far-reaching change in our tax laws; and there is good reason to believe that their forthcoming report will present a scheme which will receive the support of substantially all classes of taxpayers, and which will be of such a character as to commend itself to the most careful consideration of your body upon broad lines.

The law must not only be correct in the abstract; it must work well in the concrete. Experience shows that certain classes or symbols of property which in theory ought to be taxed can not under the present practice be reached. Some kinds of taxes are so fertile in tempting to perjury and sharp dealing that they amount to taxes on honesty—the last quality on which we should impose a needless burden. Moreover, where the conditions and complexity of life vary widely as between different communities, the desirability and possibility of certain taxes may seem or be so different that it is hard to devise a common system that will work. If possible the State tax should be levied on classes of property, and in a manner which will render it collectible with entire fairness in all sections of the community, as for instance the corporation or collateral inheritance tax is now collected. So far as possible we should divorce the State and municipal taxes, so as to render unnecessary the annual equalization of values between the several counties which has proved so fertile a source of friction between the city and the country.

There is a constant influx into New York State of capital ofttimes previously incorporated under the laws of other States, and an increasing number of men of means from other parts of the country, non-residents of New York, come into this State to sojourn and to conduct and be at the head of various business enterprises which are drawn to New York as the financial centre of the whole country. This calls for legislation which shall provide, in a broad and fair spirit, for taxing foreign capital in this State, whether in corporate or individual form, exactly as we tax domestic capital doing business along the same lines.

I call your attention to the fact that the great burden of taxation is local, not State. In the large cities the heavy local charges are mainly due to the action of the local authorities themselves. For this the local authorities are of course responsible. But sometimes taxation is added to by legislative enactment.

On certain points the failure of the tax laws has become so evident that it is possible to provide more or less complete remedies without waiting for a general scheme of reorganization. Again and again in recent years this has been recognized, and through legislative enactment certain species of property which had escaped taxation have been made to pay their proper share of the public burdens. The collateral inheritance tax offers a case in point. The corporation tax offers another. In all these matters of taxation, however, it is necessary to proceed with extreme caution, the path never being so simple and clear as the advocates of any particular measure invariably believe. Every wealthy corporation that perpetrates or is allowed to perpetrate a wrong helps to produce or inflame a condition of angry excitement against all corporations, which in its turn may in the end harm alike the honest and the dishonest agents of public service and thereby do far-reaching damage to the whole body politic. Much of the outcry against wealth, against the men who acquire wealth, and against the means by which it is acquired, is blind, unreasoning and unjust; but in too many cases it has a basis in real abuses; and we must remember that every act of misconduct which affords any justification for this clamor is not only bad because of the wrong done but also because the justification thus given inevitably strengthens movements which are in reality profoundly anti-social and anti-civic. Our laws should be so drawn as to protect and encourage corporations which do their honest duty by the public; and to discriminate sharply against those organized in a spirit of mere greed, or for improper speculative purposes.

There is plenty of misconduct, plenty of selfish disregard of the rights of others, and especially of the weak. There is also plenty of honorable and disinterested effort to prevent such misconduct or to minimize its effects. Any rational attempt to prevent or counteract the evils, by legislation or otherwise, is deserving of hearty support; but it can not be too deeply impressed upon us that such attempts can result in permanent good only in proportion as they are made in a sane and wholesome spirit, as far removed as possible from whatever is hysterical or revolutionary. It is infinitely better when needed social and civic changes can be brought about as the result of natural and healthy growth than when they come with the violent dislocation and widespread wreck and damage inevitably attendant upon any movement which is revolutionary in its nature.

At the same time a change should never be shirked on the ground of its being radical, when the abuse has become flagrant and no other remedy appears possible. This was the case with the taxation of local franchises in this State. For years most of these franchises escaped paying their proper share of the public burdens. The last Legislature placed on the statute book a law requiring them to be treated as real estate for the purposes of taxation, the tax to be assessed and collected by the State Assessors for the benefit of the localities concerned. This marks an immense stride in advance. Of course at first serious difficulties are sure to arise in enforcing it. The means for carrying it into effect are very inadequate. There may be delay before we get from it the substantial additions to the revenue which will finally accrue, and there may be disappointment to the enthusiasts who are so apt to hope too much from such legislation. But it will undoubtedly add largely to the public revenues as soon as it is fairly in operation, and the amount thus added will increase steadily year by year. The principle which this law establishes has come to stay. There will doubtless have to be additional legislation from time to time to perfect the system as its shortcomings are made evident in actual practice. But the corporations owning valuable public franchises must pay their full and proper share of the public burdens.

The franchise tax law is framed with the intent of securing exact and equal justice, no more and no less. It is not in any way intended as a means for persecuting or oppressing corporations. It is not intended to cut down legitimate dividends; still less to cut down wages or to prevent a just return for the far-sighted business skill of some captain of industry who has been able to establish a public service greatly to the advantage of the localities concerned, where before his time men of less business capacity had failed. But it is intended that property which derives its value from the grant of a privilege by the public, shall be taxed proportionately to the value of the privilege granted. In enforcing this law, much tact, patience, resolution and judgment will be needed. All these qualities the State Board of Tax Commissioners have thus far shown. Their salaries are altogether inadequate, for the new law has immensely increased not only their responsibilities, but their work. They should be given not only the needed increase for themselves, but also an appropriation for an additional number of clerks and experts.

During the year 1899 not a single corporation has received at the hands of the State of New York one privilege of any kind, sort or description, by law or otherwise, to which it was not entitled, and which was not in the public interest; nor has corporate influence availed against any measure which was in the public interest. At certain times, and in certain places, corporations have undoubtedly exerted a corrupting influence in political life; but in this State for this year it is absolutely true, as shown by the history of every measure that has come before the Legislature from the franchise tax down, that no corporate influence has been able to prevail against the interests of the public.

It has become more and more evident of late years that the State will have to act in its collective capacity as regards certain subjects which we have been accustomed to treat as matters affecting the private citizen only, and that furthermore, it must exercise an increasing and more rigorous control over other matters which it is not desirable that it should directly manage. It is neither possible nor desirable to lay down a general hard and fast rule as to what this control should be in all cases. There is no possible reason in pure logic why a city, for instance, should supply its inhabitants with water, and allow private companies to supply them with gas, any more than there is why the general government should take charge of the delivery of letters but not of telegrams. On the other hand, pure logic has a very restricted application to actual social and civic life, and there is no possible reason for changing from one system to the other simply because the change would make our political system in theory more symmetrical. Obviously it is undesirable that the government should do anything that private individuals could do with better results to the community. Everything that tends to deaden individual initiative is to be avoided, and unless in a given case there is some very evident gain which will flow from State or municipal ownership, it should not be adopted. On the other hand, when private ownership entails grave abuses, and where the work is of a kind that can be performed with efficiency by the State or municipality acting in its collective capacity, no theory or tradition should interfere with our making the change. There is grave danger in attempting to establish invariable rules; indeed it may be that each case will have to be determined upon its own merits. In one instance a private corporation may be able to do the work best. In another the State or city may do it best. In yet a third, it may be to the advantage of everybody to give free scope to the power of some individual captain of industry.

On one point there must be no step backward. There is a consensus of opinion that New York must own its own water supply. Any legislation permitting private ownership should be annulled.

Nothing needs closer attention, nothing deserves to be treated with more courage, caution and sanity, than the relations of the State to corporate wealth, and indeed to vast individual wealth. For almost every gain there is a penalty, and the great strides in the industrial upbuilding of the country, which have on the whole been attended with marked benefit, have also been attended by no little evil. Great fortunes are usually made under very complex conditions both of effort and of surrounding, and the mere fact of the complexity makes it difficult to deal with the new conditions thus created. The contrast offered in a highly specialized industrial community between the very rich and the very poor is exceedingly distressing, and while under normal conditions the acquirement of wealth by an individual is necessarily of great incidental benefit to the community as a whole, yet this is by no means always the case. In our great cities there is plainly in evidence much wealth contrasted with much poverty, and some of the wealth has been acquired, or is used, in a manner for which there is no moral justification.

A profound political and social thinker has recently written: “Wealth which is expended in multiplying and elaborating real comforts, or even in pleasures which produce enjoyment at all proportionate to their cost, will never excite serious indignation. It is the colossal waste of the means of human happiness in the most selfish and most vulgar forms of social advertisement and competition that gives a force to passions which menace the whole future of our civilization.” But in continuance this writer points out that the only effectual check lies in the law of public opinion. Any attempt to interfere by statute in moral questions of this kind, by fettering the freedom of individual action, would be injurious to a degree far greater than is the evil aimed at. Probably the large majority of the fortunes that now exist in this country have been amassed, not by injuring mankind, but as an incident to the conferring of great benefits on the community—whatever the conscious purpose of those amassing them may have been. The occasional wrongs committed or injuries endured are on the whole far outweighed by the mass of good which has resulted. The true questions to be asked are: Has any given individual been injured by the acquisition of wealth by any man? Were the rights of that individual, if they have been violated, insufficiently protected by law? If so, these rights, and all similar rights, ought to be guaranteed by additional legislation. The point to be aimed at is the protection of the individual against wrong, not the attempt to limit and hamper the acquisition and output of wealth.

It is almost equally dangerous either to blink evils and refuse to acknowledge their existence or to strike at them in a spirit of ignorant revenge, thereby doing far more harm than is remedied. The need can be met only by careful study of conditions, and by action which, while taken boldly and without hesitation, is neither heedless nor reckless. It is well to remember on the one hand that the adoption of what is reasonable in the demands of reformers is the surest way to prevent the adoption of what is unreasonable; and on the other hand that many of the worst and most dangerous laws which have been put upon the statute books have been put there by zealous reformers with excellent intentions.

This problem has a hundred phases. The relation of the capitalist and the wage-worker makes one; the proper attitude of the State toward extreme poverty another; the proper attitude of the State toward the questions of the ownership and running of so-called “public utilities,” a third. But among all these phases, the one which at this time has the greatest prominence is the question of what are commonly termed “trusts,” meaning by the name those vast combinations of capital, usually flourishing by virtue of some monopolistic element, which have become so startlingly common a feature in the industrial revolution which has progressed so rapidly during recent years.

Every new feature of this industrial revolution produces hardship because in its later stages it has been literally a revolution instead of an evolution. The new inventions and discoveries and the new methods of taking advantage of the business facilities afforded by the extraordinary development of our material civilization have caused the changes to proceed with such marvelous rapidity, that at each stage some body of workers finds itself unable to accommodate itself to the new conditions with sufficient speed to escape hardship. In the end the accommodation of the class takes place; at times too late for the well-being of many individuals. The change which would be unaccompanied by hardship if it came slowly, may be fraught with severe suffering if it comes too fast, even when it is in the end beneficial. Occasionally, moreover, the change is positively deleterious, and very often, even when it is on the whole beneficial, it has features which are the reverse. In some cases, while recognizing the evil, it is impossible with our present knowledge to discover any remedy. In others, a remedy can be applied, but as yet only at a cost that would make it worse than the trouble itself. In yet others it is possible, by acting with wisdom, coolness and fearlessness, to apply a remedy which will wholly or in great part remove the evil while leaving the good behind. We do not wish to discourage enterprise. We do not desire to destroy corporations; we do desire to put them fully at the service of the State and the people.

The machinery of modern business is so vast and complicated that great caution must be exercised in introducing radical changes for fear the unforeseen effects may take the shape of widespread disaster. Moreover, much that is complained about is not really the abuse so much as the inevitable development of our modern industrial life. We have moved far away from the old simple days when each community transacted almost all its work for itself and relied upon outsiders for but a fraction of the necessaries, and for not a very large portion even of the luxuries, of life. Very many of the anti-trust laws which have made their appearance on the statute books of recent years have been almost or absolutely ineffective because they have blinked the all-important fact that much of what they thought to do away with was incidental to modern industrial conditions, and could not be eliminated unless we were willing to turn back the wheels of modern progress by also eliminating the forces which had brought about these industrial conditions. Not only trusts, but the immense importance of machinery, the congestion of city life, the capacity to make large fortunes by speculative enterprises, and many other features of modern existence could be thoroughly changed by doing away with steam and electricity; but the most ardent denouncer of trusts would hesitate to advocate so drastic a remedy. What remains for us to do, as practical men, is to look the conditions squarely in the face and not to permit the emotional side of the question, which has its proper place, to blind us to the fact that there are other sides. We must set about finding out what the real abuses are, with their causes, and to what extent remedies can be applied.

That abuses exist, and that they are of a very grave character, it is worse than idle to deny. Just so long as in the business world unscrupulous cunning is allowed the free rein which, thanks to the growth of humanity during the past centuries, we now deny to unscrupulous physical force, then just so long there will be a field for the best effort of every honest social and civic reformer who is capable of feeling an impulse of generous indignation and who is far-sighted enough to appreciate where the real danger to the country lies. The effects are bad enough when the unscrupulous individual works by himself. They are much worse when he works in conjunction with his fellows through a giant corporation or trust. Law is largely crystallized custom, largely a mass of remedies which have been slowly evolved to meet the wrongs with which humanity has become thoroughly familiar. In a simple society only simple forms of wrong can be committed. There is neither the ability nor the opportunity to inflict others. A primitive people provides for the punishment of theft, assault and murder, because the conditions of the existing society allow the development of thieves and murderers and the commission of deeds of violence; but it does not provide for the punishment of forgery because there is nothing to forge, and therefore, no forgers. The gradual growth of humanitarian sentiment, often unconscious or but semi-conscious, combined with other causes, step by step emancipated the serf from bodily subjection to his over-lord; he was then protected in his freedom by statute; but when he became a factory hand the conditions were new and there were no laws which prevented the use of unguarded machinery in the factories, or the abuses of child labor, forced upon the conscientious employers by the unscrupulous until legislation put them on an equality. When new evils appear there is always at first difficulty in finding the proper remedy; and as the evils grow more complex, the remedies become increasingly difficult of application. There is no use whatever in seeking to apply a remedy blindly; yet this is just what has been done in reference to trusts.

Much of the legislation not only proposed but enacted against trusts is not one whit more intelligent than the mediæval bull against the comet, and has not been one particle more effective. Yet there can and must be courageous and effective remedial legislation.

To say that the present system of haphazard license and lack of supervision and regulation, is the best possible, is absurd. The men who endeavor to prevent the remedying of real abuses, not only show callous disregard for the suffering of others, but also weaken those who are anxious to prevent the adoption of indiscriminate would-be remedies which would subvert our whole industrial fabric. The chicanery and the dishonest, even though not technically illegal, methods through which some great fortunes have been made, are scandals to our civilization. The man who by swindling or wrongdoing acquires great wealth for himself at the expense of his fellow, stands as low morally as any predatory mediæval nobleman and is a more dangerous member of society. Any law, and any method of construing the law which will enable the community to punish him, either by taking away his wealth or by imprisonment, should be welcomed. Of course, such laws are even more needed in dealing with great corporations or trusts than with individuals. They are needed quite as much for the sake of honest corporations as for the sake of the public. The corporation that manages its affairs honestly has a right to demand protection against the dishonest corporation. We do not wish to put any burden on honest corporations. Neither do we wish to put an unnecessary burden of responsibility on enterprising men for acts which are immaterial; they should be relieved from such burdens, but held to a rigid financial accountability for acts that mislead the upright investor or stockholder, or defraud the public.

The first essential is knowledge of the facts, publicity. Much can be done at once by amendment of the corporation laws so as to provide for such publicity as will not work injustice as between business rivals.

The chief abuses alleged to arise from trusts are probably the following: Misrepresentation or concealment regarding material facts connected with the organization of an enterprise; the evils connected with unscrupulous promotion; overcapitalization; unfair competition, resulting in the crushing out of competitors who themselves do not act improperly; raising of prices above fair competitive rates; the wielding of increased power over the wage-earners. Of course none of these abuses may exist in a particular trust, but in many trusts, as well as in many corporations not ordinarily called trusts, one or more of them are evident. Some of these evils could be partially remedied by a modification of our corporation laws; here we can safely go along the lines of the more conservative New England States, and probably not a little farther. Such laws will themselves provide the needed publicity, and the needed circumstantiality of statement. We should know authoritatively whether stock represents actual value of plants, or whether it represents brands or good will; or if not, what it does represent, if anything. It is desirable to know how much was actually bought, how much was issued free; and to whom; and, if possible, for what reason. In the first place, this would be invaluable in preventing harm being done as among the stockholders, for many of the grossest wrongs that are perpetrated are those of promoters and organizers at the expense of the general public who are invited to take shares in business organizations. In the next place, this would enable us to see just what the public have a right to expect in the way of service and taxation. There is no reason whatever for refusing to tax a corporation because by its own acts it has created a burden of charges under which it staggers. The extravagant man who builds a needlessly large house nevertheless pays taxes on the house; and the corporation which has to pay great sums of interest owing to juggling transactions in the issue of stocks and bonds has just as little right to consideration. But very great hardship may result to innocent purchasers; and publicity by lessening the possibility of this would also serve the purpose of the State.

Where a trust becomes a monopoly the State has an immediate right to interfere. Care should be taken not to stifle enterprise or disclose any facts of a business that are essentially private; but the State for the protection of the public should exercise the right to inspect, to examine thoroughly all the workings of great corporations just as is now done with banks; and wherever the interests of the public demand it, it should publish the results of its examination. Then, if there are inordinate profits, competition or public sentiment will give the public the benefit in lowered prices; and if not, the power of taxation remains. It is therefore evident that publicity is the one sure and adequate remedy which we can now invoke. There may be other remedies, but what these others are we can only find out by publicity, as the result of investigation. The first requisite is knowledge, full and complete.

FIRST ADMINISTRATION
INDEX

FIRST ADMINISTRATION
INDEX

TRANSCRIBER’S NOTE

The index was not checked for proper alphabetization or correct page references.

Obvious typographical errors and punctuation errors have been corrected after careful comparison with other occurrences within the text and consultation of external sources.

Some hyphens in words have been silently removed, some added, when a predominant preference was found in the original book.

Except for those changes noted below, all misspellings in the text, and inconsistent or archaic usage, have been retained.

[Pg 524]: “crinimal” replaced by “criminal”
[Pg 627]: “foregn” replaced by “foreign”
[Pg 640]: “commertial” replaced by “commercial”