REPORT.

The "Board of State Tax Commissioners," frequently spoken of as the "State Tax Commission," is the state board created to have and exercise supervision over assessments and assessing officers.

"It shall be the duty of the Governor on the first day of November nineteen hundred and five to appoint three resident freeholders of this State, who shall be duly qualified electors thereof, and who shall hereafter constitute a Board of State Tax Commissioners, with power and duties as prescribed under this Act, one of whom so appointed shall hold office until the first Wednesday in January nineteen hundred and nine, one of whom so appointed shall hold office until the first Wednesday in January nineteen hundred eleven, and one of whom so appointed shall hold office until the first Wednesday in January nineteen hundred thirteen, and until their successors shall have been appointed and shall have qualified. Thereafter the successors of each member of the Board of State Tax Commissioners shall be appointed by the Governor by and with the advice and consent of the Senate, and shall hold office for the term of six years and until their successors shall have been appointed and qualified"....

"Said Board shall elect a Secretary at a salary not to exceed $2,000 per annum, and a chief clerk at a salary not to exceed $1,500 per annum. The persons so elected shall hold their offices during the pleasure of said Board."

"In addition to the Secretary and chief clerk said Board may employ such other clerical assistance as may be necessary and required to perform the duties imposed upon it by this Act. The average compensation paid for such clerical assistance shall not exceed $1,000 per annum for each clerk employed: Provided, that said Board may employ such expert assistance as may from time to time be necessary and essential to a proper exercise of the powers and performance of the duties prescribed in this Act. The compensation for such expert assistance shall be fixed by said Board at such an amount as shall be approved by the Board of State Auditors." Sections 145 and 153, General Tax Laws.

"The members of the Board of State Tax Commissioners shall receive an annual salary of $3,500. The members of said Board shall also receive all expenses actually incurred in the performance of official duties all of which shall be allowed by the Board of State Auditors and paid from the general fund: Provided, however, That the members of said Board shall devote their entire time to the duties of their respective offices." Section 331, Public Acts of 1913.

The "State Board of Assessors" is the body created for the assessment and taxation of public service corporations paying taxes into the primary school fund of the state.

"The Board of State Tax Commissioners created under the laws of this State, together with the Governor, shall ex officio, constitute a State Board of Assessors, one of whom shall be elected chairman of said Board. The Secretary of the Board of State Tax Commissioners shall be ex officio Secretary of the State Board of Assessors without extra compensation. In addition to the Secretary, said Board may employ such other clerical assistance as may be necessary and required to perform the duties imposed upon it by this Act. Provided, That the compensation paid for such clerical assistance shall not in any case exceed $1,000 for each person employed, per annum: Provided further, That such Board may employ such other assistance as may be necessary, with the consent of the Governor and the Board of State Auditors." Section 1, Act No. 282 P. A. 1905, as amended.

The Board of State Tax Commissioners and the State Board of Assessors, though nominally separate organizations established by different legislative acts, and exercising different functions, are practically one Board, co-operating with and supplementing each other, and are the agencies through which the State works to establish and maintain "equality of burden" in taxation.

The work of these twin Boards, its character, extent and purpose, its influence upon general taxation, its effect upon the individual taxpayer, is less generally known, less correctly understood, less justly criticised, than that of any other State Department or Board. The individual taxpayer whose property assessment has been reviewed, considers the review of assessments to be the Tax Commissions principal, if not sole duty. Public utility corporations paying taxes into the primary school fund, remembering that increased taxation for them began with the establishment of a State Board of Assessors, profess to believe it is most strenuously working to increase their tax burdens. Private corporations, the great majority of which throughout the State have been re-assessed, hold the State Tax Commission responsible for a great increase in their assessments. All, whether farmers, business men, public corporations or private corporations, are more or less inclined to believe the entire activities of the Tax Commission to be confined to those with which they have had personal contact, and to pass judgment upon its work from a local point of view, without consideration of its activities in other fields.

There is also lack of accurate information on the part of many, as to the theory and system of taxation in effect in Michigan and the legislation enacted in connection therewith, and this lack of information is largely responsible for the doubts on the part of some fairminded and intelligent men as to the wisdom of all of the activities of the Tax Commission, and for the feeling on the part of others that it is an autocratic body roaming about the State and needlessly interfering with local conditions as to taxation that are perfectly satisfactory to those most interested.

Because of these conditions and this lack of information, the Board of State Tax Commissioners deems it proper to preface the report of actual operations of the past two years with a brief statement as to our taxation system and the powers and duties of the Tax Commission in connection therewith.

THEORY AND SYSTEM OF TAXATION.

The fundamental principles of our taxation system established by constitutional provisions have, except as to taxation of public utilities, been practically unchanged since Michigan became a State. The first four sections of Article 10 of the Constitution embody these provisions.

"All subjects of taxation now contributing to the primary school interest fund under the present laws shall continue to contribute to that fund, and all taxes from such subjects shall be first applied in paying the interest upon the primary school, university and other educational funds in the order herein named, after which the surplus of such moneys shall be added to and become a part of the primary school interest fund."

"The legislature shall provide by law for an annual tax sufficient with other resources to pay the estimated expenses of the state government, the interest on any state debt and such deficiency as may occur in the resources."

"The legislature shall provide by law a uniform rule of taxation, except on property paying specific taxes, and taxes shall be levied on such property as shall be prescribed by law: Provided, that the legislature shall provide by law a uniform rule of taxation for such property as shall be assessed by a state board of assessors, and the rate of taxation on such property shall be the rate which the state board of assessors shall ascertain and determine is the average rate levied upon other property upon which ad valorem taxes are assessed for state, county, township, school and municipal purposes."

"The legislature may impose by law specific taxes, which shall be uniform upon the classes upon which they operate."

In accordance with the provision that the legislature shall determine what property shall be taxed, that body has in Section one of the general tax law declared,

"All property real or personal within the jurisdiction of this State not expressly exempt, shall be subject to taxation."

In the scheme of the general property tax, the assessment of property has been devised for the purpose of equitably distributing taxation to the individual taxpayer. The essential thing aimed at in assessments is not "value" as such, but the providing of a sure base for equitably distributing taxation to the individual taxpayer. As any equality in the assessments must necessarily be reflected in the allotment of taxation, a just and equitable assessment is absolutely necessary for just and equitable taxation. To insure uniform and equitable assessments and consequent "equality of burden" in taxation has been the aim of our lawmakers since Michigan became a State. Much of the machinery of our assessment and taxation system has been devised for that purpose; a supervisor to make the assessment, a local board of review to correct it, a

county board of supervisors to equalize between different assessing districts of the county, a state board of equalization to equalize between the counties, a state tax commission to supervise all assessments and assessing officers.

Recognizing that assessments to be uniform throughout the entire State must everywhere be made on a common basis, the framers of our State constitution wrote into that instrument this paragraph:

"All assessments hereafter authorized shall be made upon property at its cash value."

Just and equitable assessments, however, are not necessarily secured by this constitutional requirement because assessing officers may honestly differ in their interpretation of "cash value" and in the methods employed for determining it. To prevent such a condition and secure absolute uniformity the legislature placed in the general tax law this section:

"The words 'cash value' wherever used in this Act shall be held to mean the usual selling price at the place where the property to which the term is applied, shall be at the time of the assessment, being the price which could be obtained therefor at private sale and not at forced or auction sale."

These fundamental requirements as to assessments are accompanied by carefully prepared machinery for detecting and correcting any departure from "cash value" or in methods of determining it and severe penalties are prescribed for those guilty of such acts.

"If any supervisor or other assessing officer of any township or city shall wilfully assess any property at more or less than what he believes to be its true cash value he shall be guilty of a misdemeanor and on conviction thereof he shall be punished by imprisonment in the county jail not exceeding one year or pay a fine not exceeding $300.00, at the discretion of the court."

"If any Board whose duty it is to review the assessment of an assessing officer, shall wilfully assess property at more or less than its true cash value, the members voting in favor of such act shall severally be guilty of a misdemeanor and on conviction thereof shall be punished by imprisonment in the county jail not exceeding six months or by a fine not exceeding $300, at the discretion of the court."

"If any Board (State Board of Assessors) shall wilfully assess any property at more or less than what the members taking part in such assessment believe to be its true cash value, the members voting in favor of such assessment shall be guilty of a misdemeanor and on conviction thereof shall be punished by imprisonment in the county jail not exceeding one year or a fine not exceeding $5,000, at the discretion of the court."

Condensed into a single paragraph: the taxation system of Michigan for both state and local purposes, except as to property expressly exempted from all taxation or specifically taxed as are automobiles, or as to public utility corporations assessed by the State Board of As