at official figures. The census of governments property tax studies for 1957 and 1962 dealing with assessments in the previous year in each instance, show that between 1956 and 1961 State-assessed railroad property values declined moderately, while all other assessments rose substantially. I have the figures in my statement here.

In 1956 State-assessed railroad property amounted to $6.5 billion; in 1961 it amounted to $5.9 billion. Thus in those 5 years it went down slightly more than 9 percent-the assessed value of railroad property State assessed went down 9 percent. State-assessed property of other public utilities rose from $13.3 bililon to $18.7 billion, or 40 percent. And all locally assessed property went up 31 percent.

It is true that much of this increase in the assessed valuation of the nonrailroad utilities and the locally assessed property is the result of new investment. However, it is also clear that in this period the railroads made substantial investments. In the 5 years inclusive, 1956 to 1960, these new investments by railroads in plant and equpiment amounted to $5.3 billion. Therefore, you have here a period when you had improving economic activity; you had generally rising prices, and you will find that the assessment of railroad property by State agencies showed not only a relative, but an absolute, decline. You can point that up a little bit more by looking at the 1956 State railroad property assessment, $6.5 billion, the addition in the next 5 years of $5.3 billion of new investment, and you end up in 1961 with a lower figure than you started with; as a matter of fact, a figure not greatly more than the total amount of new investment in that 5-year period.

Incidentally, between 1961-62 and 1963-64 the annual percentage increase in expenditure for plant and equipment by the railroad industry was higher than for any other industry. I think this all goes to show that the problems of the lack of uniformity in property tax assessments is recognized, certainly it has been recognized in the case of the railroads.

The tax departments of the several States are aware of the situation and they know that work needs to be done to make all property tax assessments conform to the standard of uniformity that is required by the constitution or statutes of the States, and they have done much to forward such a program.

For example, working through this association the tax departments of the several States have formulated standard procedures for the conduct of sale assessment ratio studies, and these are now widely used. As a matter of fact, these standards that were formulated by the tax departments of the several States were actually used by the Census Bureau, so I think that gives you some warrant of the fact that this is satisfactory.

This is a very important thing. It has done much to improve the degree of uniformity that has been achieved in the assessment process generally, because it is by means of these assessment ratio studieson the basis of these property tax assessment ratio studies-that the judicial remedy in discrimination cases has been made available.

This improvement stems directly from the fact that we now have the means and we are using it effectively to tell whether and to what extent assessment of property that are subject to that process are not uniform.

Now in the more specialized public utility assessment field, a committee of this association has formulated extensive procedures for the valuation of public utility property. Mr. Travis referred to those this morning. Also, it recommended standards to be followed in allocating an appropriate portion of the taxpayer's property among the taxing districts in each State in which the enterprise operates. As an indication that these types of activities have been effective, I refer you again to those figures on trends in railroads and other public utilities assessments that I mentioned a moment ago.

The point that is of concern to the State tax officials about 4972 and the identical bills before the committee is, that in considering these you must give some thought to the potential impact of specialized treatment for a particular type of property on the whole process of property tax administration. As a practical matter, progress toward an acceptable standard of uniformity simply has to be gradual. The predominant position of the property tax in the whole State-local revenue system-by the way, property tax accounts for one-half of all the tax revenue in the combined State-local tax system, this is speaking nationally, the proportions will vary from State to Statespeaking nationally, this in an indication of just how formidable a property tax is is as a component of the combined State-local revenue system.

It is so important, if you were to attempt to remedy all the inequities that exist, to do so overnight, the result might be disastrous to local government finances. Now this is something, I think we should emphasize, that involves not only public utility property but it involes all types of property subject to ad valorem taxes-both business and nonbusiness property; real and personal property; tangible and intangible; residential, farm, vacant lot, commercial, and industrial inventories; work in progress; stock in trade, and other classsifications of types of property-they are all mixed up in this particular picture. If property under one type of ownership or one type of use is singled out for special treatment under a Federal statute, as I think was suggested by a committee member this morning, there probably would not be any reason for denying similar treatment in the long run to any owner of property that is used in or becomes subject to trade in interstate commerce. If you get moving in that direction, this is tantamount to Federal supervision of the local property tax system through Federal judicial procedure. I think this is a function over which the Federal judiciary has certainly no unique qualifications.

Judging from the statements that appear in the courts now and then, it is something that they are not particularly desirous to undertake. On the other hand, working through the procedures and remedies and with the tools that have been utilized in the procedures that have been established in the past years, I think the States and local governments have achieved a good deal of improvement already, and the prospects are that they can continue to do so and do a good deal more, if the responsibility and means for dealing with the whole problem remain in their hands. The possibilities are not so good if they deal with part of the property and the Federal Government deals with some other part.

Now I would like to mention a couple of points about the bills themselves, from the technical standpoint. One, suggested already, is that the bills apply to all property used by a carrier, whether it is operating properly or not. Secondly, I think that, despite what has been said, in those instances where relief is sought directly against the State agency that makes the property tax assessment, that these bills raise a constitutional question where you are dealing with taxpayers who are not organized in the State where the remedial action is begun. This is because of the 11th amendment-the judicial facilities of the United States are not available in suits against States unless they consent to be sued, and none of the States do, as you know, consent to be sued in the Federal courts with respect to property tax assessments. This is an ordinary feature of the remedial provisions provided. Where you pay your tax and you pay it under protest and you challenge the assessment, then that challenge or request for refund, or whatever it may be, must be made in a State court.

Under these bills, that remedy would be in the Federal court.

The third, and from a practical standpoint really the most important point about the bill, is that what it really does is clothe the Federal courts with a sort of veto power over the State property tax assessment. These could have some adverse effects on the local budget. I think this follows, because the remedy provided is an injunction. It is an injunction against the collection of any tax that is adjudged to be invalid on the basis of the criteria laid down in the bill.

Now if tax collection is enjoined, it means that the money anticipated in local budgets in that year would not be available for expenditure during that tax year. Such a situation would be an extremely important one for a very small, medium size unit of government, including local school districts and rural school districts, particularly those which operate under tax rate and tax debt limits. In many jurisdictions the localities are right up against the tax rate limitations now. This remedy is quite different from the procedure that is ordinarily involved in contesting a tax assessment where the common rule is that you pay the tax and pay it under protest and in the meanwhile the local jurisdiction has the money. If it is subsequently found you are correct, then you get the money back. But in the meantime, in contrast to what these bills provide, the operations of local governments are not jeopardized by the withholding of either all or part of the tax. Now I agree, and I think my colleagues will, that it is quite possible that if a Federal court takes jurisdiction of one of these cases, under the procedure set up in the bill, it will proceed to revise the assessment and to fix the amount of tax due with each local jurisdiction where the carrier property is situated. Now this raises a dilemma. I think Professor Sanders touched on it this morning in his reference to the Moses Lake case where the U.S. Supreme Court said it was not the function of the Federal court to assess the property in place of State agencies or local agencies.

I am not going to argue the point whether this intrusion by the Federal courts into the tax assessment process-or the tax review process, which is one that is historically reserved to the States or localities-is within the general jurisdictional powers of the Federal court. At any rate, I would make the point it does not seem desirable to do so. I do not see how in one of the proceedings contemplated by

H.R. 4972 a Federal court could refrain from finding out what the value of that property was, at what proportion of its true value it was put on the tax rolls, and at what proportion of its true value other property in the jurisdiction was taxed, because, without doing that, there is no way by which the Federal district court could determine the amount of the illegal assessment; in other words, that part of the assessment which is attributed to the type of discrimination that is described by the proponents of the bill.

Therefore, you do not avoid this process of finding out what the value of the property is and what the assessment ratio is, and what the assessment of other properties are by transferring the review procedure over to the Federal court. The Federal court would have to do the very things that have to be done now in State administrative agencies or State courts in order to make this kind of determination. It is a factual determination. I think there is no way to shortcut the determination of the facts.

Furthermore, if you are in the Federal courts, if you don't like the decision of the Federal courts, your appeal is going to be channeled through an entirely different review process from that now followed where you go from the district or county court to an intermediate appellate court and the State supreme court, and then, if there are any Federal questions, to the U.S. Supreme Court. When you start in the U.S. district courts, you will go from the district court to the courts of appeal, and then to the U.S. Supreme Court, and bypass whatever administrative or judicial machinery is provided by the State.

If you concede-and I think the proponents of the bill do concedethat there is an effective remedy, at least in many States, for this type of situation, what real purpose is served by the bill? I think certainly the enactment of the legislation serves as a sort of bargaining lever in the assessment process; because, if the taxpayer can go into either the State court or State administrative agency, or the Federal court, I think that the implication is going to be that if they don't like the assessment here they will take it before a Federal tribunal for review under the injunctive process.

Under the bill, the taxpayer would have that option. He could go to the Federal court or State court. He can exhaust administrative remedies or choose not to do so. He has that kind of option. I think this is not conducive to the continuation of sound, equitable tax assessment procedure, and I think that it would not be good public policy to give one group to taxpayers a special remedy above and beyond those accorded to other taxpayers who have the same type of property-namely, business taxpayers generally.

Also I would suggest that even if the remedial provisions in these bills were not utilized, even if you found it was unnecessary to go into the Federal courts and you obtained whatever relief you thought you were entitled to administratively or in the State courts, you still would have this prohibition against classification which would, in effect, freeze the status of carrier-owned property so as to render it immune to any type of classification system that is now on the books or which might be adopted by any State in the future.

I think it would not be good public policy for Congress in effect to sort of provide an insurance policy against changes in State property

tax policy that one aspect or another of the changing times might render desirable to the legislature.

I have listed on the back of this statement, Mr. Chairman, the agencies of the States, the official name of the property tax assessment agencies that join in this statement. I thank you for the privilege of presenting these comments on their behalf. And, if I may, I would like to also file with the committee for the record an additional statement submitted by Mr. Earl Berry, director of the tax division of the Arkansas Public Service Commission. If I may.

The CHAIRMAN. Without objection, it may be included in the record. Mr. CONLON. Thank you, sir.

(Mr. Berry's statement follows:)

STATEMENT OF EARL BERRY, DIRECTOR, TAX DIVISION, ARKANSAS PUBLIC SERVICE COMMISSION

The Tax Division of the Arkansas Public Service Commission is charged with the responsibility of assessing for ad valorem tax purposes all carriers engaged in interstate commerce operating for hire within, into, from, or through the State of Arkansas. The tax division wishes to express opposition to the legislation proposed in H.R. 4972 and other identical bills dealing with discriminatory property tax assessment against common carriers.

We would call attention first to article 16, section 5, constitution of Arkansas, 1874, which provides: "All property subject to taxation shall be taxed according to its value, that to be ascertained in such manner as the general assembly shall direct, making the same equal and uniform throughout the State. No one species of property from which a tax may be collected shall be taxed higher than another species of property of equal value ***"

Section 84-103, Arkansas Statutes, 1947, annotated, as amended, provides that the public service commission shall determine and fix the ratio of assessed value to full market or actual value, and that all utility and carrier property assessed by the tax division shall be assessed at the per centum fixed by the public service commission. It further directs the public service commission to direct the county assessor, the county equalization board, and the county courts of the various counties to assess all property locally assessed at the same per centum of full market or actual value as that property assessed by the tax division.

The Arkansas Public Service Commission has since 1951 ordered and directed that all property assessed by the tax division shall be assessed at 20 percent of its full market or actual value. It has also directed the assessor, the county equalization board, and the county courts to assess local property at 20 percent. In 1955, the General Assembly of Arkansas, by Act 153 of the 1955 legislature, provided for a complete reappraisal and reassessment of all property in Arkansas. This act has been amended by subsequent legislation which requires all local property to be assessed at 20 percent of its full market or actual value on penalty of losing a pro rata part of State revenues going to the various taxing units of the State if such taxing units fail to reach the required 20 percent.

This legislation also requires the Assessment Coordination Division of the Arkansas Public Service Commission to conduct annually a survey to determine at what per centum property is assessed in the various taxing units. It requires a 3 percent sample of the various categories of property, both real and personal, in each taxing unit of the State to ascertain whether or not such property is assessed at 20 percent of its full market or actual value. A very few taxing units in the State of Arkansas have failed to comply, and these have been penalized by withholding of State funds.

It is the considered judgment of the tax division that there exists little discrimination against common carriers engaged in interstate commerce in Arkansas. It is further the judgment of the tax division that such discrimination, if such there be, could be eliminated through proper administrative procedures if used, and if not used, by court action in the State courts of Arkansas.

Under provisions of (A) section 25-A, the expression that a value which bears a higher ratio to the true market value of such property than the assessed value of all other property in the taxing district subject to the same property tax levy bears to the true market value of all such property raises the question as to