February 22, 1962.
RECORD AND GUIDE.
327
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Vol. LXIX.
FEBRUARY 22, 1902.
No. 1771.
TEE liECOIW AND GUIDE qUABTEELY.
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THE announcement that the Federal government yroposes
to put the legality of the Great Northern—Northern
Pacific consoiidation to a judicial test, could not have affected
the Stock IMarket in the way that it did, if the condition of the
latter had been a really healthy one. As a matter of fact the
market has. so to say. only been waiting Eor an excuse to break
and would have broken long before this had it not been for the
manipulative tactics of interests that have large amounts of se¬
curities still to market. The public has held aloof from specu¬
lative ventures in stocks and bonds since their dangers were
revealed in May of last year. Following a dull summer some
very-determined efforts have been made to lift prices, but without
any real success. These efforts have been made more difficult
in the past few months by the suspicions aroused by the bond
issues of prominent companies and the announcement of plans
of others obstensibly intended to develop their properties and
give the shareholders more returns, but which were only^ too
transparently schemes to raise new capital without the impli¬
cations that would attach to a direct application to the market
therefor. Such strength as the market possessed arose out
of a belief that the concentrative and mutual interest arrange¬
ments of the past few years, gave the railroad and great indus¬
trial companies a position in which they could permanently main¬
tain rates and prices on a paying basis, for even speculators and
manipulators must have something upon which to base their
actions. Now, if that prospect is to be dissolved or obscured by
a legal process, which carries with it a doubt in the minds of
the highest officials in the country of the legality of the combina¬
tions and common interests, there is little or nothing left to sus¬
tain the bull position. First we had inflated prices to serve as a
caution; then the borrowings or intended borrowings of com¬
panies that were supposed to be above that necessity, and now
the attack on the very principle that was relied upon to sustain
both, accompanied by a gi'owing belief that the President is
not in as complete sympathy with the aims of leaders of finance
and of industry as his predecessor in ofiiee was. After this there
is nothing left for quotations to do. but to seek levels where
prices and values will come nearer to each other than they have
done for more than a; year.
IT appears that foreign exchanges have also developed a re¬
actionary tendency. The speculation in Kaffirs reached a
new point of culmination and, although the cables say this is
due to the larger interests shaking off their poorer following—
how natural that should sound to us in New York, who have
heard it so very often—it must be taken that the movement
has been overdone and prices put to points presently unjustified
by the progress made at the mines, or the rate at which the
disturbed country in South Africa is approaching settlement.
Where American shares are dealt in extensively, as at London,
Amsterdam and Berlin, the markets of course sympathize with
New York. Berlin and Paris are the points outside of Spain
most Interested in Spanish securities, and their nervousness is
naturally increased by the news from the Peninsula, which
indicates very depressed industrial conditions there in common
with the rest of the Continent, and the danger of political up¬
heaval not entirely eliminated. The barometer of Spain's con¬
dition are Spanish 4s, which, it will be remembered, touched
40 during the time or our little unpleasantness in Cuba and the'
Philippines, and, as they are the least secured of Spain's debt
issues, they are the first to suffer. Their range is between the
low figure previously given and 80. A number of German cement
companies have lately issued their annual reports, which show
such bad business in the past year that dividends have to be
cut in t-^^o. These reports generally lament the loss of trade
with the United States, btit do not express any hopes of recovering
it,apparentlyconcludingthat, if thistrade is bad forthe Europeaq
makers in a period of unequalled prosperity and of the liveliest
activity, in both public and private btiilding in the United States,
business lost must have gone for good into the hands of native
cement makers. In other lines there is a little more cheerful¬
ness, but all the same it must be understood that Europe is in a
period of restricted activities, when capital accumulates in the
banks, and the only borrowers are governments, national and
municipal; when money becomes as cheap as it is plentiful and
commerce and industry wrestle through poverty and depression
as best they may.
The State Tax Policy.
T T has been amusing to note the way friends of the adminis-
â– ^ tration at Albany have been endeavoring this week to make
New York City, or the representatives of New York City, in the
Senate and Assembly, which for their purpose is the sarae thing,
believe that the special taxes with which the Governor hopes to
supersede the direct state tax, put money into the city's coffers.
Such an assertion is ridiculous on the face of it, and is met at
once by the question, Where does the money come from? It is
argued, and there is no denying that, that the immediate effect
of the legislation, imposing a tax for state purposes on bank,
trust company and other corporate capital, by reducing the
amount of the state tax, proportionately relieves the City; but
nothing is said of the later loss that must be sustained through
these subjects of taxation being reserved for State purposes only.
A specimen of the arguments used was that the city collected on
a trust company capital of. say, using round figures, $10,000,000,
after allowing offsets, which at 2.30 would be $230,000; now, the
State allowing no offset collects one per cent, on, say. $100,000,-
000. or $1,000,000, and as that sum goes in reduction of the State,
tax of which New York City pays about two-thirds, the latter
indirectly receives $GG6.666 to compensate the loss of $230,000;
This ought, apparently, to end the case of those who oppose
the State tax policy, but this tax legislation reacts very pecu¬
liarly on the city, and in ways that legislators do not possibly
foresee. As an illustration of this the effect of the Raines law,
considered merely as a revenue creating measure, may be cited,
That enactment raised the license fee in New York City from
$250 to $800. or increased the running expenses on the premises
in which a liquor business was carried on $550, the eqtiivalent of
5% per annum on $11,000 of capital, and the profit earning ca¬
pacity of the premises was correspondingly decreased. The ef¬
fect of this was a sudden drop in the value of this class of prop¬
erty necessitating in course of time, reductions in assessments
estimated by competent authorities at $10,000,000. How this
came about may be readily recalled to the minds of those ac¬
quainted with the extreme easterly and westerly avenues. The
higher license fee resulted in the closing up of a great many liquor
businesses and the throwing of the premises in which they had
been carried on into competition with other stores, so that there
was a good deal of moving to and fro, lessened rentals, and, fin¬
ally, the least desirable of tlie stores were left vacant on their
owners' hands. Considered as a temperance or a moral agent
the Raines law may have compensated for its pecuniary defects,
but we are not considering that phase of it, nor judging by what
we heard last November did it amount to much. The Raines
law had. however, one good feature that more recent State tax
legislation lacks, and tbat is that two-thirds of the income aris¬
ing from it in any community go to that community, so that in
the case of New York City something is obtained from the higher
license fee to offset the loss of the lower fee and of income on
reduced valuations.
The most objectionable feature of this special State tax leg¬
islation lies in the fact that the State can only collect its own
income by expropriating tax subjects that should belong to the
localities and to which the latter can never thereafter have
recourse for tax raising purposes and which may, thereby, evade
part at least of their just responsibility to contribute to the pub-
lie requirements. Thus, no matter how bank, trust companies
and other similar capital grows, it can only be taxed for State
purposes and the continually increasing burden of municipal
expenditure must be borne by other subjects, the chief of which
in colossal preponderance is, of course, real estate. At the same
time it is the activities and opportunities of the cities that give