For car companies, from 3 per cent. to 4 per cent., an increase over the old rate of 331⁄2 per cent.

For telephone and telegraph companies, from 31⁄2 per cent. to 4 1/5 per cent., an increase over the old rate of 20 per cent.

For gas and electric companies, from 4 per cent. to 4 3/5 per cent., an increase over the old rate of 15 per

cent.

The rate paid by insurance companies on their gross premiums was increased from 11⁄2 per cent. to 134 per cent. The rates paid by banks and by express companies were left unchanged.

On the ad valorem basis, if the estimates of the Board of Equalization were correct, this increased the rates paid on each $100 valuation by the several groups as a whole, as follows:

On railroads, including street railroads, from $0.9092 to $1.0797.

On car companies from $0.8813 to $1.1750.

On telephone and telegraph companies from $0.9060 to $1.0872.

On gas and electric companies from $0.7500 to $0.8625.88

With the exception of that of the car companies, none of these rates equaled the estimated $1.1386 on the $100 valuation paid by the general taxpayer. Par-. ticularly was the small increase in the rates paid by the gas and electric companies criticized.

88 According to estimates compiled at the time, these increases in rates, with the natural increase of corporation earnings, would bring in additional revenue to the total of $3,383,168 for the biennial period or $1,691,584 a year. It was held that this would remove all danger of a deficit.

The gas and electric companies, as a whole paying the lowest rate of all the groups, were given the smallest percentage of increase. On the other hand, many of the smaller gas and electric companies were, on the ad valorem basis, being taxed higher than any other class of taxpayers of the State. To have increased the rate by a percentage high enough to compel the large gas and electric companies 89 to pay their fair proportionate tax would have worked enormous hardship upon the smaller companies already paying from two to four times the rate paid by the general taxpayer. The same was true of the telephone and telegraph companies group. To a less degree it was true of the railroads and street railroads group. The adjustment was, according to the data given by the State Board of Equalization, inequitable as between the general taxpayer and the corporations; it was inequitable as between the corporations.

But the joint committee apparently could offer no better solution. The rates fixed by the four Senators and four Assemblymen were accepted by the committee.

89 One of the greatest beneficiaries of this small increase in the rates paid by gas and electric companies, was the Pacific Gas and Electric Company. Under the old rate it had been paying $0.7037 on the $100 valuation; under the increase its rate was made $0.8092. The ad valorem rate on the $100 for the Pacific Light and Power Corporation was increased from $0.7089 to $0.8152; of the Northern California Power Company from $0.3089 to $0.3552; of the San Joaquin Light and Power Company from $0.5345 to $0.6146; of Southern California Edison Co. from $0.7990 to $0.9188; of the Sierra and San Francisco Power Company from $0.8035 to $0.9240; of the Western States Gas and Electric from $0.6793 to $0.7812.

On the other hand the ad valorem rate of the Davenport Light and Power Company was raised from $4.4112 on the $100 valuation to $5.0728; that of the Los Angeles Gas and Electric Corporation from $1.1824 to $1.3597; that of the Vallejo Electric Light and Power Company from $3.6700 to $4.2205; that of the Consumers' Light and Power Company from $3.7230 to $4.2814, etc., etc.

On the recommendation of the committee, Senate' and Assembly accepted them, also.

The Senate accepted them without opposition. In the Assembly, however, Finnegan of Nevada City offered amendments to increase the rates paid by railroad companies on their gross earnings to 5 per cent., of telephone and telegraph companies to 42/5 per cent., of gas and electric companies to 6 per cent. Finnegan also offered amendments to increase the rates paid by insurance companies to 2 per cent. of their gross premiums, and the tax on bank capital stock, accumulated surplus and undivided profits, from 1 to 11⁄2 per cent. These amendments were defeated, however, by a vote of 7 to 66.90 The Assembly was apparently acting on its faith in the judgment of the Joint Committee on Revenue and Taxation. The Joint Committee on Revenue and Taxation had acted on its faith in the judgment in the eight men who had sat up all night to decide upon the percentages of increase. Some of the eight are reported to have been incapacitated by sleep when the decision was reached. Thus even less than eight legislators out of 120 are responsible for the percentages of increase agreed upon.

90 The vote by which the Finnegan amendments were defeated

was:

For the amendments, and to increase the rates-Cram, Dower, Finnegan, Polsley, Schmitt, Stuckenbruck, and Wyllie-7.

Against the amendments, and to leave the rates at the percentages fixed by the joint committee-Alexander, Bagby, Beck, Benedict, Bloodgood, Bohnett, Bowman, Bradford, Brown, Bush, Byrnes, Canepa, Cary, Chandler, Clark, Wm. C.; Clarke, Geo. A.; Collins, Ellis, Emmons, Farwell, Ferguson, Fish, Ford, Gabbert, Gates, Gelder, Green, Griffin, Guiberson, Guill, Hayes, Hinkle, Inman, Johnson, Geo. H.; Johnston, T. D.; Judson, Killingsworth, Kingsley, Kuck, Libby, McDonald, Moorhouse, Morgenstern, Mouser, Murray, Nelson, Nolan, Palmer, Richardson, Roberts, Ryan, Scott, Shanahan, Simpson, Slater, Smith, Strine, Sutherland, Tulloch, Wall, Walsh, Weisel, Weldon, White, Woodley, and Young-66.

The debate over Finnegan's amendments had one curious feature. Assemblyman Schmitt of San Francisco acted not unlike an attorney who aims to get something into the record. For some reason, Schmitt considered it necessary to question the members of the Committee on Revenue and Taxation as to their reason for advising increase in rates. Schmitt was particularly desirous of knowing whether the increase had been made because of a deficit in the State Treasury.

Although told repeatedly that the increase had been made to equalize taxes, not to meet a deficit, Schmitt persisted in his curious questioning.

"The committees met," Guiberson of Kings finally thundered back at him, "to equalize the tax rates. They did this regardless of whether or not a deficit existed."

The Joint Committees' rates were accepted in the Assembly by a vote of 76 to 0. In the Senate the vote for them was 35 to 0.91

The unsatisfactory settlement of the revenue problem resulted in a movement in both Houses to abolish the new system of taxation and restore the old. To this

91 The vote for the committee's rates was:

In the Assembly-Alexander, Bagby, Beck, Benedict, Bloodgood, Bohnett, Bowman, Bradford, Brown, Bush, Byrnes, Canepa, Cary, Chandler, Clark, Wm. C.; Clarke, Geo. A.; Collins, Cram, Dower, Ellis, Emmons, Farwell, Ferguson, Finnegan, Fish, Ford, Gabbert, Gates, Gelder, Green, Griffin, Guiberson, Guill, Hayes, Hinkle, Inman, Johnson, Geo. H.; Johnston, T. D.; Johnstone, W. A.; Judson, Killingsworth, Kingsley, Kuck, Libby, McDonald, Moorhouse, Morgenstern, Mouser, Murray, Nelson, Nolan, Palmer, Peairs, Polsley, Richardson, Roberts, Ryan, Schmitt, Scott, Shannon, Shearer, Simpson, Slater, Smith, Strine, Stuckenbruck, Sutherland, Tulloch, Wall, Walsh, Weisel, Weldon, White, Woodley, Wyllie, and Young -76.

In the Senate-Anderson, Avey, Beban, Birdsall, Boynton, Breed, Brown, Bryant, Butler, Caminetti, Campbell, Carr, Cassidy, Cogswell, Cohn, Curtin, Gates, Gerdes, Grant, Hewitt, Jones, Jullliard, Kehoe, Larkins, Lyon, Mott, Owens, Regan, Rush, Sanford, Shanahan, Strobridge, Thompson, Tyrrell, and Wright-35.

end a constitutional amendment was introduced in the Senate by Avey and in the Assembly by Cram.

The Avey amendment, through the error of a clerk, was sent back to the Senate with recommendation of the Senate Committee on Revenue and Taxation that it be adopted. The committee, however, had taken no such action. While a majority of its members recognized the weaknesses of the new system of taxation, they were not prepared to return to the old system. On motion of Senator Thompson the amendment was returned to the committee. Nothing more came of it.

In the Assembly, the Cram amendment was reported out of the Assembly Committee on Revenue and Taxation without recommendation. The Assembly took no action.92

The 1913 Legislature adjourned, as the 1911 Legislature had done, with the State's revenue and taxation problem unsolved.

92 The argument used against reverting to the old plan of taxation was presented by the Fresno Republican in its issue of January 16, 1913, as follows:

"As to the demerits of the old system (of taxation) informed opinion is unanimous. It has no defenders except the uninformed. As to the abstract desirability of the new system, educated opinion was practically unanimous at the time of its adoption. It is not quite unanimous now, and the slight division of opinion may indicate that we are approaching the development of still a newer system, which will turn out to be better than this one. That would at least not be an unprecedented situation in the evolution of governmental devices. But at any rate, the only visible division of opinion, among tax experts, is between the system to which California has attained and a movement forward to a better one. There is no movement, among those equipped to speak with authority, backward to the old system. And there would be no such movement in the California Legislature, except for an instinctive dissatisfaction with a system which is now not working perfectly and a line-of-least-reaction to the only other popularly familiar system."