THE A B C OF TAXATION 
I40 
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, com 
mon use of tracks, connections, extensions, mergers, 
pooling, strikes, and wages would naturally range them 
selves under the same head; and so, too, it is respect 
fully 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 operating- 
like 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