THE  A  B  C  OF  TAXATION

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Most  of  the  things  set  down  under  the  head  of
“Regulative”  clearly  belong  there.  The  regulative
reduction  of  earnings  would  involve  a  reduction  of
rates  in  general,  but  the  original  making  of  specific
rates  would  seem  to  fall  inevitably  within  the  province
of  administration,  while  questions  of  absorption,  common ­
  use  of  tracks,  connections,  extensions,  mergers,
pooling,  strikes,  and  wages  would  naturally  range  themselves ­
  under  the  same  head;  and  so,  too,  it  is  respectfully ­
  submitted,  the  most  effective,  definite,  and  delicate
(because  flexible)  regulation  possible  is  through  the
agency  of  a  franchise  tax,  which  can  be  made  to  extract
annually  from  the  corporation  that  part  of  its  profits
directly  contributed  by  the  public,  leaving  all  its
improvements  —  in  other  words,  its  plant,  the  capital
devoted  to  its  industry  —  free  of  taxation.
The  natural  operation  of  such  a  system  would  be  to
leave  to  the  corporation  only  such  profits  as  are  due
to  capital  and  industry  actually  involved,  and  thus  to
reduce  capital  stock  to  a  fair  market  value,  tending  to
reduce  present  overcapitalisation,  as  is  now  being
effected  in  the  City  of  New  York.
The  trend  of  such  taxation  would  be  to  destroy
the  motive  for  exploitation,  by  appropriating,  through
taxation,  the  public's  share  of  the  profits,  thus  tending
to  take  public  utilities  out  of  politics.  Taxation:
would  thus  be,  as  it  were,  the  vital  nexus  between  public;
and  private  Interest,  extracting  annually  a  profit
already  accrued  to  the  franchise  alone,  and  operatinglike
  a  board  of  equalisation  between  the  corporation;
and  the  state.  When  this  point  is  reached,  regulation;
and  administration  will  no  more  think  of  exploiting
each  other  than  would  individual  partners  in  a