the assessor of incomes liable to a fine of five dollars for every question unanswered on an income tax return. It is hardly necessary to state that no prosecutions have been attempted under this provision of the law.

Administration. The distinguishing feature of the Wisconsin income tax law is the prominence given to the scheme of administration. Of the seventeen closely printed pages which contain the law in pamphlet form about two-thirds are devoted to the methods by which the law is to be administered. It was realized that the failure of all state income taxes in the past was directly traceable to lax methods on the part of local officials, and this danger was sought to be avoided by securing a higher degree of centralization. To this end the administration of the law was placed wholly in the hands of the permanent state tax commission. This commission appointed the writer of this article as "supervisor of the income tax" and the arduous task of arranging all the administrative details of a new and untried system was placed in his hands.

Assessors. In accordance with the provisions of the law assessors of income were appointed by the tax commission. These assessors were selected after a rigid civil service examination, from a large number of applicants, and with special reference to character, fitness and ability. No attention was paid to the political affiliations of the applicants. The appointments were for three years and the salaries ranged from $800 to $3,600. In the populous and wealthy counties in the southern portion of the state one assessor was appointed for each county; but in the more sparsely settled northern portions an assessment district was made to include two or even three counties. The result was that it was found necessary to appoint only thirty-nine income tax assessors for the seventy-two counties in the state. In a few of the more important counties the assessors were permitted to have assistant assessors and necessary clerical assistance. The office of county supervisor of assessment for the general property tax was abolished and the duties of such officers were transferred to the income tax assessors. The Wisconsin income tax assessor, therefore, really serves in a dual capacityas assessor of income tax and as supervisor of the assessment of the general property tax.

Returns. Six different forms of return are used, separate blanks being provided for (a) individuals, (b) guardians, trustees, execu

tors, agents, receivers, (c) firms and copartnerships, (d) corporations, (e) farmers and dairymen and (f) wage earners, salaried men and other individuals deriving their income from personal services.

All returns of incomes by firms and individuals are to be made to the income tax assessors before the first of March in each year. Upon receipt of these returns they are carefully edited and the assessors make an assessment of the tax in each case. If the assessor

has reason to believe that a return is erroneous or does not disclose the full amount of income he can increase the amount upon which the tax is based upon giving written notice to the taxpayer. A board of review of three persons is appointed by the tax commission for each district. An appeal lies from the decision of the assessor to the board of review, and then from the board of review to the tax commission. It should be noted, however, that very few such appeals have been taken.

The corporations are assessed directly by the tax commission and are given a right of appeal to the circuit court of Dane County, the county in which the capital of the state is situated.

Information at Source. The Wisconsin tax commission has organized a system of "information at the source" which has been found to work very efficiently and smoothly. When the forms for income tax returns are given out they are accompanied by blanks upon which the taxpayer is required to fill out the name and address of every person to whom a salary or wages to the amount of seven hundred dollars or more has been paid during the year and the amount paid in each case. There is an additional blank for corporations upon which the names and addresses of all stockholders to whom dividends have been paid, together with the amount paid, are given. In like manner claims for interest paid on indebtedness must be accompanied by a statement of the name and address of the person to whom such interest was paid. The information thus obtained by the tax commission is classified and arranged so as to be furnished to the assessors of the respective districts where the recipients of the wages or dividends reside.

This plan, which is not provided for in the law, but has been worked out by the tax commission under its general authority to make needful regulations, operates as a three-fold check. In the first place it will show whether any excessive salaries are being paid to officers of the corporations; in the second place it enables the

commission to test the correctness of the corporate deductions for wages, salaries and dividends paid; and in the third place it calls attention to any omission on the part of individuals to report the full amount received by them as interest, wages or dividends. The deterrent effect of such a system will be at once apparent, and the tax commission thus becomes a sort of clearing house where a vast amount of information centers and is redistributed to the district

assessors.

Exemption of Intangibles. It should be emphasized that the Wisconsin income tax law is not an additional tax supplemental to the general property tax, but is a substitute for the tax heretofore levied-or attempted to be levied-upon intangible personal property. Coincident with the passage of the income tax law, the general laws were amended so as to exempt from taxation: (a) Moneys; (b) Stocks and bonds; (c) "All debts due from solvent debtors, whether on account, note, contract, bond, mortgage or other security, or whether such debts are due or to become due."

In order that the owner of tangible personal property should not be placed at a disadvantage 'as compared with the owner of intangibles, the income tax law provides that the receipts for general taxes paid on personal property may be used as cash in paying the income tax. This is called "offsetting.". For example, if a person's income tax is, say, $27 and he has paid taxes on personal property to the amount of $15 he can turn in the personal property tax receipt and $12 as full payment of the income tax.

Application of Proceeds. The Wisconsin income tax is not a state income tax in the sense that it is applied to state purposes. The law provides that the moneys raised by means of the tax shall be apportioned in the proportion of 70 per cent to the local taxing unit (city, village or town) where it was collected; 20 per cent to the county and the remaining 10 per cent to the state. It was thought that the 10 per cent given to the state would about cover the expenses of administration, but the amount actually received was more than double the cost of collection. In the first year of the tax when the expenses were unusually large the total cost of administration (about half of which was incurred in connection with general taxes) was approximately $100,000, while the state's share of the tax actually collected was $220,000.

The amounts of income taxes assessed, both individual and cor

porate, are certified to the respective county clerks by the tax commission and assessors and again by the county clerks to the city, town and village clerks.

There has been some complaint on the ground that the insertion of the amount of income tax in the tax rolls was a violation of the secrecy required by the law. But the tax rolls must, under the general law, be public records and the amount of income tax paid is far from being a reliable index to one's financial condition. A large income may be derived from dividends, the tax upon which is paid by the corporations at the source, so that the individual income tax may be very small. Even the income of salaried persons may be so reduced by exemptions and deductions that the amount of tax throws no light upon the total amount of gross income received.

Income from Interstate Business. A leading authority on income taxation has suggested that an insuperable obstacle to the success of a state income tax would be the practical impossibility of drawing the line between interstate and intrastate income. Income flows back and forth across state lines so constantly that the question of its situs for purposes of taxation is a very complicated one. The solution of this problem which has been attempted in Wisconsin presents some interesting features and is outlined in the following quotation from the law:

In determining taxable income, rentals, royalties and gains or profit from the operation of any farm, mine or quarry shall follow the situs of the property from which derived and income from personal service and from land contracts, mortgages, stocks, bonds and securities shall follow the residence of the recipient. With respect to other income, persons engaged in business within and without the state shall be taxed only upon such income as is derived from business transacted and property located within the state, which may be determined by an allocation and separate accounting for such income when made in form and manner prescribed by the tax commission, but otherwise shall be determined in the manner specified in subdivision (e) of subsection 7 of section 1770b of the statutes as far as applicable.

The section of the statutes referred to authorizes a computation by taking the gross business in dollars of the corporation in the state and adding the same to the full value of the property of the corporation located in the state. The sum thus obtained is used as the numerator of a fraction-the denominator of which is to consist of the total gross business in dollars of the corporation both with

in and without the state added to the full value of the property of the corporation within and without the state. The quotient of the numerator divided by the denominator is a decimal which indicates the proportion of the whole net income which should be apportioned to Wisconsin.

This somewhat complicated and arbitrary method is applied quite frequently, but sometimes leads to grotesque results. For example, a foreign corporation may have a large amount of property in Wisconsin but its business, so far as Wisconsin is concerned, may be carried on at a great loss, Nevertheless, if profits have been large in other states, the application of the above rule might show a considerable income for Wisconsin. Yet on the whole the plan has worked more smoothly than was to be expected. In speaking of interstate corporations the report of the tax commission for 1912 uses the following language:

The Wisconsin income tax has, on the whole, encountered very little difficulty with this class of taxpayers, and such difficulty as has been encountered can be avoided very largely in subsequent years. The large foreign corporations have dealt quite as fairly with the Wisconsin income tax as any other class of taxpayers. It is just as easy to assess the big interstate corporations under the income tax as it is under the property tax.

Results. As a fiscal measure the Wisconsin income tax has far exceeded the expectation of its most enthusiastic sponsors. When the law went into effect many doleful predictions were made as to the probable yield of the tax. It was freely prophesied that Wisconsin would only duplicate the experiences of other states and that the amount collected would scarcely suffice to pay the cost of collection. Even the friends of the measure did not estimate the probable yield at over one million dollars, and it was realized that the administration of the tax would be attended by many peculiar difficulties in the first year of its operation.

Under these circumstances there was no small surprise when it was found that the income tax levy of the first year (based on income of 1911, collected in 1912) amounted to the very respectable sum of $3,501,161.46. In the second year the amount was $4,091,090.30.

This remarkable showing will perhaps be better appreciated when it is remembered that the Civil War income tax yielded for the first year, 1863, only $2,741,858 or about 78.3 per cent of the first