great improvement in assessments that has taken place under the reform system. Kansas, like Indiana and a very few other states, publishes regularly the proceedings of its conference conventions with the local assessors.

Exceedingly advanced is the Washington Commission, which was created in 1905. Their first biennial report of 1907 made a large number of recommendations, most of which were adopted, with the exception of the constitutional amendment providing for classification. In the second report, for 1908, the Commission revert to their scheme of classification, as well as to that of separation, and maintain that opposition to the projects "can come only from those who confine themselves to theories, and take no account of the experience of other states and countries." In the third report they emphasize the good results of the annual conventions with local assessors, and again lay stress upon the need for constitutional changes. "The best, fairest and most popular systems of taxation employed in the United States today are found in the states whose constitutions are either free from any provisions upon the subject of taxation whatever, or which are sufficiently liberal to permit legislative freedom in the enactment of laws."

45

We come finally to three commissions which have just made their first report. The Ohio report16 is a little more than a report of progress. The Commission, however, lay emphasis on the fact that they are invested with the duty of supervising the new quadrennial appraisements of real estate, and devote a large portion of space to a consideration of the new corporation tax laws, calling attention to certain suggested changes. While the Arkansas Commission17 is also invested with the duty of supervising and equalizing assessments and making recommendations, it is perhaps not to be wondered at that Arkansas is not up to the level of some of the states in the Northwest. Although the report contains abundant figures to show the shocking inequalities of the existing system, and is full of platitudes as to justice in taxation, the Commission believe that all that is needed will be new laws compelling

Third Biennial Report of the State Board of Tax Commissioners for the Period ending September 30, 1910. Olympia, 1911, pp. 136.

46

"First Annual Report of the Tax Commission of Ohio. Columbus, 1911, pp. 102.

First Biennial Report of the Arkansas Tax Commission for the Period between May 8, 1909, and December 19, 1910. Little Rock, 1911, pp. 85.

assessments at full values. This is practically the position taken some years ago by the Kansas Special Commission. Perhaps after a few years' experience fiscal opinion in Arkansas will approach that of Kansas, not to speak of the more progressive states.

The Oregon report is in some respects the most noteworthy of all. 48 The report informs us how the commission came to be created. It is well known that in 1901 Oregon provided for the abandonment of the apportionment of state taxation according to county valuations and adopted the apportionment-by-expenditure basis. The time when this should become effective was, however, successively postponed, first from 1905 to 1910, and then to 1912. In the meantime a method of apportionment by a fixed table of ratios, based on the assessed valuations of the five years preceding 1901, was enacted in 1907. In 1909 this was declared unconstitutional in the Yamhill County case, the principle of which substantially included the apportionment-by-expenditure scheme. It therefore became necessary to provide for an emergency measure, and the law of 1909 provided for a board of state tax commissioners to equalize county valuations and to assess public service corporations.

The state board did what they could and report that they have accomplished, at all events, some approximation to equality. But that they much prefer the other plan is evident from their recommendation of a constitutional amendment. Such an amendment, together with another amendment making possible the separation of state and local revenue and the classification of property, was defeated at the autumn election of 1910. The board held, however, “that this result is due entirely to the fact that their purpose and the wisdom of their enactment were not fully understood and appreciated." They therefore recommend a resubmission of the amendments. Especial attention is called to the adoption by a narrow majority of the new constitutional amendment which was urged not by the board but by the single taxers, who made a remarkable campaign and who spread broadcast thousands of copies of a pamphlet published under the auspices of the Joseph Fels Fund.49 The board inform us that "this measure appeared on the ballot under an attractive title and later discussion discloses that its purpose was not fully understood." They object to it

48

4 First Biennial Report of the Board of State Tax Commissioners to the Legislative Assembly of the State of Oregon. Salem, 1911, pp. 136. Peoples' Power and Public Taxation. Pp. 128.

first, because it deprives the legislature of the right to enact laws regulating taxation throughout the state; and second, because the so-called "local option" may lead to grave disorder. The board also recommend a development of the inheritance tax, the adoption of the New York system of mortgage registration tax, and the extension of the new system to certain other corporations. In view of the interesting and peculiar situation in Oregon, the report should receive wide attention.

Conclusions

From the above survey several facts stand out prominently. In the first place, the dissatisfaction with the general property tax and the recognition of the evils connected with the assessment of personalty, have now become well-nigh universal. Whereas formerly they appeared in only a few states, they are now expressed by every one of the special State Tax Commissions without exception, and by almost all the permanent Tax Commissions. Since a recognition of the evils to be overcome is the first condition of progress, this may be considered a substantial advance.

In the second place, there is a growing recognition of the weakness of the local assessment of property, whether real or personal. What Sidney Webb has recently called the "American anarchy of local autonomy" is slowly being recognized by the administrative officials themselves. Nothing, perhaps, has been more cheering during the last few years than the progress of centralization of assessment and the creation of permanent commissions designed to cope with just this evil. This movement has only just begun, and from its continuance much may be expected in the future.

In the third place, there has been a great spread of the idea of the separation of state and local revenues. In most of the reports we find a recommendation of its advisability, and in some states, like California, the recommendations have been actually enacted into law. The discussion, however, has not yet proceeded far enough to show some of the limitations, or rather the conditions of the reform, and the movement away from complete separation which is reflected in the Connecticut report, and in the more recent discussions in Ohio and New York, deserves earnest attention.

Fourthly, the discussion of possible substitutes for the personal property tax has only just commenced. In several of the states. classification is suggested, but in others it is not favored. Almost all the commissions in states with rigid constitutions, however,

are in favor of relaxing the constitutional prohibition. The Massachusetts report to the contrary is due largely to local considerations which would not be apt to prevail in the other states.

Finally, perhaps the most encouraging results of the last decade have been the increasing attention given to the problem; the great improvement in the character of the commissions, both special and permanent; the utilization to an ever increasing degree of the expert and of the professional economist; and the evident determination on the part of the various commissions to keep abreast of the best action and of the best thought in the other commonwealths.

It may indeed now be said that the movement for tax reform is en train. Never before has so much attention been devoted to it. Never before has there been so intelligent and so vigorous a discussion. Never before has there been manifested such anxiety to deal correctly and yet conservatively with the problem. To this result the annual conferences of the International Tax Association have contributed not a little, and we may expect to witness during the next few years a still more decided evidence of the progress which has now become so marked and so widespread in the United States. EDWIN R. A. SELIGMAN.

Columbia Universit ̧.

"THE EQUATION OF EXCHANGE," 1896-1910.

In my book on The Purchasing Power of Money1 I have endeavored to express in figures and diagrams the rise of prices in the United States and the causes of this rise for the period 1896-1909. When the book was about to go to press sufficient data were received to make it possible to include in an addendum the corresponding figures for 1910, but it was, of course, not possible to make the corresponding changes in the diagrams.

The object of the present paper is chiefly to reconstruct the principal diagram (figure 14) so as to include 1910. I shall take this opportunity to include also a correction for the year 1900 called to my attention through the kindness of Professor O. M. W. Sprague, a correction which increases the figure for M', deposits subject to check, from 4.24 to 4.44 and decreases the figure for V', their velocity of circulation, from 40.1 to 38.3.

According to the theory of Ricardo, as algebraically expressed by Newcomb, Hadley and Kemmerer, and elaborated in The Purchasing Power of Money, the general level of prices (P) in any community is determined by five and only five factors; namely, M, the volume of money in circulation; V, the velocity of its circulation, (that is, the number of times that the money in circulation is "turned over" in a year, or what is sometimes called "the efficiency of money"); M', the volume of bank deposits subject to check; V', their velocity of circulation, (that is, the number of times they turn over in a year, or what bankers sometimes call the "activity" of bank accounts); and T, the volume of trade, or the transactions effected by money and deposits. These five determining magnitudes and the sixth magnitude, P, determined by them, are connected by the "equation of exchange", namely MV + M'V'= PT.

In this equation, MV, the product found by multiplying the money in circulation by its velocity of circulation, expresses the total monetary circulation or the total expenditure of money per annum; and M'V', the product found by multiplying the deposits subject to check by their velocity of circulation, expresses the total deposit circulation or the total expenditure by check per annum. Consequently the sum MV + M'V', constituting the left side of the equation, represents the grand total expenditure in a year by both money and checks. The right side of the equation rep

'The Macmillan Company, 1911.