REGULATION OF PUBLIC UTILITIES 143 
benefit either in lower fares or in franchise taxes. 
It may be assumed that the gross amount of the 
benefit is the same whichever way it is distributed. 
If the franchise is taxed, the benefit is distributed 
immediately among all the people. If rates are re 
duced, would not the benefit, while going immediately 
to the patrons of the road, likewise be ultimately dif 
fused among all the people? 
If the above analysis be correct, it follows that 
the question of method is one, not of justice, but of 
expediency, and it is submitted that, on the ground of 
expediency, the taxation method is preferable by 
reason of its greater simplicity. 
A too frequent change in schedule rates is at 
least inconvenient. This disadvantage finds illustration 
in the contrasted conditions of 1907 and 1908. By 
hard times and greatly reduced business, the railroads 
now seek to justify either a reduction of wages or a 
paradoxical advance of rates, in place of the reduction 
usually resulting from dull business. 
It is at this point that taxation offers itself, like the 
“ratchet” or the “follower” in the machine, to “take 
up the slack” be it more or less from year to year. 
Under the system here considered, in which regula 
tion is supplemented by taxation, instead of a legisla 
tive reduction of rates once in every five, ten, or twenty- 
five years, in the face of a formidable lobby, there would 
be a periodical but not too frequent general readjust 
ment of rates, which presumably must be high enough 
to include dividends on capital actually employed; 
there would be an annual flexible regulation of the tax 
based upon the net earnings of the previous year, in 
the light of an honest, expert, and inquisitorial public