Part 7 (1/2)

will do for one ill.u.s.tration.

The Central Pacific is eight hundred and eighty-one miles in length. The cost of the road as given is $120,432,717, or $136,700 per mile. The actual cost per mile, taking the whole length of the road into consideration, was less than one-half the amount reported. This information we get through reliable channels, and is undoubtedly correct. The evidence induces the belief that the cost was less than $50,000 per mile, and less than $50,000,000 for the whole road. The company report a capital stock of $54,283,190, and a funded debt of $82,208,000. They also report the liabilities of the road at $136,491,190, being more than $80,000,000 above the actual cost, and $16,000,000 more than the reported cost. The stock of this company was watered to so great an extent, that to pay the interest on the funded debt, and declare a dividend on the stock, and pay operating expenses, and other contingencies, the road must earn at least fifty per cent per annum. Or to put it in plain language, the company must defraud the public in unjust and extortionate charges.

The ”Sioux City & Pacific” is the pet road of Ma.s.sachusetts and Iowa congressmen. The cost of this road per mile, as shown by the report of the company, is $34,547. This cost is represented by paid-up capital--$2,067,600, and first mortgage bonds--$1,629,000. The road is one hundred and seven miles long. The actual cost of this road was less than $30,000 per mile.[C] Aside from these government bonds, the reported cost of the road shows that the stock has been _watered_.

[C] NOTE.--This company received $16,000 per mile, government subsidy bonds, amounting in the aggregate to $1,712,000, which does not appear in the report.

The Chicago, Rock Island, & Pacific railroad company has, from Chicago to Davenport, one hundred and eighty-four miles of road, and in Iowa three hundred and sixty miles, making five hundred and forty-four miles in all. The total cost as reported, is $28,496,999, or the sum of $52,384 per mile. The actual cost of the Illinois portion, as shown from official reports, did not amount to $30,000 per mile, and the Iowa extension cost still less, but including the bridge at Davenport, the cost will approximate to $30,000 per mile, making the total actual cost $15,320,000, showing that the stock of this road has been watered to the amount of $13,000,000. The Iowa portion of this road received a grant of five hundred and fifty thousand acres of land, and aid by county and city subscriptions amounting at least to $500,000, that do not appear in the published statement.

The Iowa Falls & Sioux City road is under the special care of congressmen. It has one hundred and eighty-four miles of road, but no rolling stock. The total cost as given is $7,585,000, or $41,222 per mile, while the actual cost was about $31,000. The stock was watered to the amount of $1,800,000, and this, too, after having received a grant of land to the amount of one million two hundred and twenty-six thousand four hundred and six acres.

We might continue this list, but think we have referred to a sufficient number for our purpose. It will be seen, and is now pretty well understood, that the cost of railroads as reported by the companies is not their actual cost, but includes large amounts that are pure fictions--an increase of the capital stock, no part of which is used or needed in the construction of the road, stock that is not even paid up, but is distributed among stockholders in proportion to the amount of _bona fide_ stock each one holds in the company. The capital stock of the company, and bonds issued by it, are supposed to represent the cost of the company's road, rolling stock, &c. But few roads in the country fail to earn large dividends on this actual cost, and but for the custom of watering stock, would show fair profits after running expenses, repairs, &c., are paid. If these corporations were prohibited by statute from increasing their capital stock above the actual cost of their roads, less money would be required for transportation of freights, and there would be no need of resorting to dispatch companies, or any other ring combinations for the purpose of extorting unjust amounts for transportation. But these combinations do not construct roads, simply for the purpose of operating them; this is but a secondary consideration. The main object is to speculate in stock and bonds.

Wall street being the grand center for this kind of speculation, the company, in order to profit by sale of its bonds, must make a showing in this grand mart of receipts sufficient to command public attention, the rule being that stocks and bonds appreciate in value in market in proportion to the dividends declared upon their earnings. They who control these roads have two objects in view: first, to add to their capital stock; and second, to make dividends upon such increase of stock. If a line of road cost $2,000,000, and the company owning it can by any means make it pay dividends on three or four millions, they can issue to themselves stock representing this increase. Having thus increased their stock, under the pretense that they wish to construct more road, or improve or repair what they already have, they issue their bonds to the amount of the increased stock (sometimes to an amount equal to more than their entire capital) and put them upon the market. The first object is to get dividends upon whatever stock they have paid up (if any is paid up), and next to make their roads earn enough to pay the interest on their bonds, and then, if possible, to force the earnings of their roads to a point where dividends can be paid on the increase of stock. Having increased their capital stock, and issued and sold their bonds, they are in no haste to add to, or improve or repair, their roads; for they have already consummated the object in view, to-wit: made in cash the market value of their bonds. This same operation is repeated as often as their capital stock will bear reducing, and in some instances it has been repeated until the stocks and bonds became almost worthless. This species of speculation does not add one dollar to the wealth of the country, nor aid commerce. It only enriches that cla.s.s of speculators who prey upon the public.

We have shown that one and one-fourth cents per mile per ton will compensate for transporting freights over railroads, provided the business is conducted fairly and honestly, and we can now begin to understand why such enormous rates are charged. The roads must earn enough to pay the interest upon all the bonds sold and upon the capital stock issued by these companies. The people, the producers, are taxed for this purpose. One-half of the products of every farm in the west goes into the pockets of these Wall street speculators, and the rates for transportation are increased in the same proportion that these stocks and bonds are increased. When more money is demanded in Wall street, telegrams are sent throughout the country by these railroad kings to their agents and employes to advance the rates on transportation. This reduces the price of the farm products, and puts the earnings of the farmer into the pockets of the railroad monopolist, and the stock and bond gambler in Wall street.

It would look as though the combinations of this oligarchy were perfect; that the system of extorting from the people and robbing the producers could not be improved, and that these most unscrupulous oppressors ought to be satisfied. Such is not the case. Either because they wish to have fewer numbers with whom to divide the spoils, or because they have reduced the value of their stocks and bonds until it is necessary that their roads pa.s.s under other management, or because they must have still higher rates for transportation, of late a new combination for transportation has been formed, called Dispatch agencies or companies--a kind of ”Credit Mobilier” arrangement. These dispatch companies are comparatively new in the west, and we know but little of their organization save that it costs still more to s.h.i.+p with them than with railroad companies. These dispatch agencies are not formed to compete with railroad companies in the transportation of freights, nor are they, in any measure, rivals or opponents of railroad companies. In the nature of things there must be perfect accord between these two corporations, for the railroad companies could and would at once destroy the dispatch business, if the same in any manner conflicted with the interests of railroad managers. The dispatch companies depend entirely upon the railroad companies for cars, locomotives, and railroads for carrying their freight. Enough is known of railroad management to satisfy the most skeptical, that the organization of dispatch companies is for purposes other than the more expeditious transportation of freight.

These dispatch companies are composed mainly of railroad directors and superintendents, with a few figure heads to represent the outside world.

After the formation of the dispatch companies, contracts for the use of cars, locomotives, and roads are made upon the same principle and for the same objects as in the case of the Union Pacific railroad company and the Credit Mobilier company. The directors of the railway company, representing the company, contract with themselves as a dispatch company, to supply themselves cars, locomotives, and roads for the prosecution of the business of the dispatch company, and for a certain consideration agree to pay themselves, as directors of the railway company, for what is so leased to themselves as a dispatch company; and then in order to promote the business interests of the dispatch company, and secure to themselves as its directors higher rates for transportation of freight, they make it a point at all times to give the preference to the said dispatch company. As a result of this arrangement the dispatch companies monopolize the princ.i.p.al part of the business.

They are in appearance opposition lines to the roads on whose tracks they are carried, and are really so, when the interest of the railroad stockholders not concerned in the dispatch companies are considered.

These stockholders get their dividends upon their capital stock and their share of ”watered stock” and bonds, but do not partic.i.p.ate in the profits of the dispatch business.

Like the Credit Mobilier, it pays large dividends which it extorts from the people, charging even higher rates than the railroad companies; but it only divides among its members, and not with the stockholders of the railroad company whose track it uses. The interest of these stockholders is not considered. They have built and equipped the road, and selected their directors and managers; but these managers and directors turn the road over to a hostile company, composed of themselves and select friends. To promote the business of the dispatch companies, their trains are transported from one end of the railroad to the other in less than half the time required to transport a train of freight cars belonging to the road. The effect of this course of procedure is obvious. s.h.i.+ppers, finding that these railroad managers discriminate against the cars belonging to the road proper, and that they grant extraordinary favors and facilities to the _opposition_ lines, quit patronizing the former and do business with the dispatch companies. The result is that the dispatch companies now control the freight business, and the railroads have, as a rule, quit providing themselves with freight cars. When applied to for cars, the answer is, ”We have none,” while at the same time the side tracks are filled with freight cars belonging to these dispatch companies, demanding much higher rates than the regular charges. At the first glance we fail to understand why a course so suicidal to the best interests of the railroad company is pursued by its directors and managers, nor can we readily comprehend why they permit these dispatch companies to monopolize their tracks and destroy the business of their roads. We think we can solve the problem. These managers of the railroads, and such stockholders as are admitted to a partic.i.p.ation in the conspiracy, are the proprietors and incorporators of the dispatch companies. After payment of the running and other expenses of the road, and their own salaries (fixed by themselves) the dividends on their railroad stock is small. Their position as stockholders in both the railroad and dispatch companies is the same as was that of the stockholders of the Pacific railroad companies and the Credit Mobilier, who could well afford to sacrifice the interests of the road and its stockholders who had no interest in the Credit Mobilier, provided they received large dividends from their Credit Mobilier stock.

So, in organizing the dispatch companies and giving them the preference over the roads, with the absolute control of the freighting business, while the railroad stocks pay no dividends and depreciate in value, and the roads and rolling stock are being worn out, the dispatch business thrives and pays large dividends to this inside ring--comparatively small in numbers--which controls the road, and in addition to preying upon the public, so arrange the business as to exclude the stockholders of the road from any share in the profits of the dispatch company.

Having oppressed the public by extortionate charges for transportation, increased the stock of the railroad company to an amount that precludes profitable dividends, even from the highest of tariffs, and issued and sold bonds of the company to so large an extent as to make it impossible to pay the interest on them, and at the same time meet the running expenses of the road, including their own salaries as officers and managers, having, in short, loaded the railroad companies with burdens greater than they can bear, as a last master stroke of financiering they organize themselves into dispatch companies, and while they enrich themselves they reduce the railroad companies in which they are managing directors to absolute bankruptcy. The stockholders who, confiding in the integrity of these men, elected them directors and managers, are swindled out of their legitimate dividends, their stock becomes worthless, debts acc.u.mulate against the company, locomotives, tracks, and cars are worn out in transporting freights for the dispatch company, at rates ruinous to the railroad company, and as a grand _finale_ the road pa.s.ses into the hands of these conspirators, under the orders or judgments of courts. In the meantime s.h.i.+ppers are compelled to pay double prices for freights, because the _railroad companies_ have not the necessary facilities for s.h.i.+pping; all has pa.s.sed into the hands and under the control of the dispatch companies. By a mere fiction, the managers of the road contracting with themselves as dispatch companies, a compet.i.tion is permitted to take the control of the carrying trade over the road, control the track and rolling stock, as well as the officers of the railroad company, destroy their business and drive them into bankruptcy. Those not in the secret of the organization fail to comprehend its necessity; why, for example, a train of cars run in the interest of the dispatch companies can travel at double the rate of speed of the trains run in the interest of the railroad company, or why higher rates for transportation should be taxed and paid. The only solution we can give is, that it presents additional means for taking from the producer an additional portion of his product, in the shape of charges supposed to be paid to a company organized for the purpose of aiding in the transportation of freights, but which is, as a matter of fact, a combination in the interest of the managers of the road with the real purpose of making personal gain to themselves at the sacrifice of the interests of the stockholders.

As a result of this new mode of conducting business, let us see how the price of freights is affected. During the summer and fall of 1872 the price of freights by water from Chicago to New York was $4.25 per ton, and by railroad from $7.00 to $8.00. With the close of navigation the rates, under the management of the dispatch companies, advanced to from $25.00 to $28.00 per ton. While the railroad companies can carry for $7.00, the dispatch companies charge $25.00. The margin for profit on the stock of these dispatch companies promises to equal the dividends of the Credit Mobilier stock, and from this showing we can have some idea of the robbery being practiced upon the people, particularly the farmers. Well may the producers of the west complain of these swindling monopolies, and band together for mutual protection.

CHAPTER XVI.

A PRIVILEGED CLa.s.s--THE MONOPOLISTS RELIEVED OF THE BURDENS OF TAXATION--AN OUTRAGE UPON REPUBLICAN GOVERNMENT.

Another evil resulting from the railroad system of the country is the partiality shown railroad companies in the matter of taxation. The const.i.tutions of all the states provide that the levy of taxes shall be uniform; and in contemplation of law each owner of property subject to taxation must bear a proportionate share of the taxes levied for the support of the government. Indeed, it is a part of the compact entered into among all civilized people, that each will contribute a proportionate share towards defraying the expenses of the government under which he lives, and which affords him protection, and secures to him the enjoyment of his rights as a citizen. In a republic where all have, or are supposed to have, equal rights, this contribution to the support of the government is a duty weighing upon all, and to make a discrimination in favor of any man or cla.s.s of men, or of any companies or corporations, contradicts the fundamental principles of republican government, and recognizes favored or privileged cla.s.ses. To compel the property of individuals to alone bear the burdens which should be shared by that of corporations violates both the letter and spirit of the const.i.tution. All public burdens should bear equally upon all people, a.s.sociations, and corporations. The legislature has as much right to say that the property of one-half of the citizens of a state shall pay the entire expenses of the government, while no taxes shall be imposed upon the property of the other half; or to provide that they who engage in particular branches of business shall supply all the means for defraying the expenses of the government, as to provide for the partial or total exemption from taxation of the property of corporations. Yet as a matter-of-fact railroad corporations are not required to pay their proportionate share of taxes, nor is their property subjected to the same rules of taxation as that of individuals. In almost all the states these corporations are taxed upon their earnings; their own officers keep the books, and once in each year make a showing, and upon this showing a small tax is levied. If they are honest and present a correct statement of the earnings of their road, the amount of tax fixed by the legislature of the state is paid; but if they choose to suppress the truth a less amount must suffice. Take the state of Iowa as an ill.u.s.tration. Prior to 1872 railroad property in this state did not pay more than one-seventh as much tax upon its value as the property of individuals, and under the present law it does not pay more than one-half as much. Yet no property in the state has yielded such large profits on its actual cost and value as railroad property. Iowa had in 1872, subject to taxation, 3,160 miles of railroad. Take the value of their roads as fixed by the companies and reported in the Railroad Manual, and the average per mile is over, rather than under, $40,000.

Then for the purpose of taxation reduce the valuation to about the same rates as are fixed upon the property of individuals, and the average would be about $18,000 per mile. This would make the grand aggregate for tax purposes $56,000,000. Now if a two per cent tax (which is less than the average rate for all purposes) was a.s.sessed upon this property, the revenue to the state and counties would amount to the sum of $1,120,000.

But if the same rule of taxation were applied alike to all property in the state the rate demanded of individuals would be less than at present, while railroad companies would only be required to do what the const.i.tution exacts of them, to-wit: pay their just proportion of taxes for the support of state government. Is it any wonder that we complain of high rates of taxes when so large a portion of the property in the state is exempt from taxation? In Muscatine county there is at present about eighty-five miles of railroad. At an a.s.sessed value of $18,000 per mile the total for taxation would be $1,530,000, which, on a two per cent tax would afford a revenue of $30,600, of which, if divided between the state and county as other taxes are divided, there would be paid into the county treasury about $24,500, which would be a large increase over the amount now paid to the county. The same would be the result in all the other counties in the state were the manner of taxing railroads so changed as to make no discriminations in their favor. The same kind of discrimination is made in most of the states in favor of the railroads and against the people. No good reason has ever been given for this kind of discrimination, nor can it be supported or justified upon principle or upon const.i.tutional grounds. The value of a mile of railroad can be as easily ascertained as that of an acre of ground, or of a house and lot. The depot, and station grounds and buildings can be a.s.sessed as readily as any grounds or buildings. The value of their rolling stock is always included by the companies in giving the cost of their roads, and the value of the roads, including rolling stock, can be more easily ascertained by the a.s.sessor than the value of many kinds of personal property, yet it has never been considered necessary or permissible under the const.i.tution to discriminate in favor of individuals or cla.s.ses of individuals when a.s.sessing property for the purposes of taxation. But when the property of these gigantic corporations is to be taxed, when they are called upon for their share of taxes to aid in defraying the expenses of the governments that are granting them extraordinary and exclusive privileges, they refuse to submit to the law which prescribes the manner of collecting taxes from the people and ask special legislative enactments in their favor. To secure such enactments they use their great influence in filling the legislative halls with their stockholders, directors, and attorneys.

Thus far they have generally succeeded, and in most of the states special statutes, discriminating in their favor, are now in force.

Because of this special legislation the people are paying taxes that should be paid by railroad companies, and in return for favors shown, these companies are constantly increasing their extortions, and imposing additional burdens upon the people.

We can more fully realize the extent of the unjust burdens imposed upon the people by ascertaining the amount of capital invested in railroads in the United States, and showing its relative value compared with the taxable property of the country. For this purpose it will not be unfair to take the value of railroad property as given by the different companies and published in the Railroad Manual. The reported cost of all but forty-six roads in the United States is $2,070,980,285. If we add to this amount the probable cost of those not reported, among which is the Union Pacific, this large sum will be swollen to nearly $3,000,000,000.

The taxable property in the United States, reported in the census of 1870, was $14,178,986,732. If this railroad property was included, these corporations should pay about one-fifth of all the taxes collected in the country. The method of taxing railroad property that has always obtained in Iowa, and some of the other states, relieves it of at least three-fourths of the taxes justly due from it, and requires the people to supply the deficiency created by this exemption. But, as will appear from the census returns, a small portion only of the vast railroad wealth of the country is included in the valuation of property returned; nor is it listed and returned by local a.s.sessors as is the case with the property of individuals. In Iowa the census returns show the value of the property in the state to be $302,515,418. The value of railroads in Iowa, as shown by the different companies, is $84,067,663. An equal a.s.sessment and levy of taxes upon all the property in the state subject to taxation would require this railroad property to pay over one-fourth of all the taxes levied in the state; yet as a matter of fact not one-twentieth of this amount has ever been collected, unless we except the year 1872, when a small increase over old rates was required. While all acknowledge the injustice of this system of discrimination in favor of railroad companies, and while the people are burdened with more than their just proportion of taxes, all efforts to correct the evil seem to have proved abortive. The fact that more than eighty-four millions of dollars, being over one-fourth of the entire wealth of the state, is held and controlled by corporations, possessing under their charters special privileges, who have combined to prevent legislation that would require of them a contribution of their just share for the support of the government, explains the reasons for these discriminations in the collection of taxes. The power of this railroad oligarchy is now so great that it shapes and controls all revenue statutes. In all cases where the interests of the people and those of these corporations conflict, the corporations acting in concert, are triumphant, and the interests of the people are disregarded. Taxes justly due from the corporations, by special legislation, are extorted from the people, because this anti-republican combination, controlling the wealth of the country, demands it.

CHAPTER XVII.