We now invite the attention of the reader to the account as it now stands with the subsidy bonds voted by congressmen to companies in which many who voted were stockholders and directors.
As the law stood prior to April, 1871, all railroad companies that had received government lands were required to pay the interest once in six months as it accrued. This interest had not been paid, and the secretary of the treasury withheld, to apply on the accrued interest, the amount earned by the different companies by the transportation of the mails, troops, &c., for government. Congress, composed in part of stockholders and directors in these same companies, passed a law ordering the secretary to pay in money to the different companies one-half of the amount thus earned, and left it optional with the companies to pay, or not to pay the interest on their bonds. This they have not done, and the interest account of these companies with the government stands about as follows:—
Central Pacific, paid$ 527,025Bal.due$5,841,351Kansas Pacific,"973,905""995,448Union Pacific,"2,181,989""4,779,763Central Branch, U. P.15,839""477,969Western Pacific,"9,350""358,329Sioux City & Pacific826""388,780
Making the total amount of payments the sum of $3,708,935, and the amount that these companies owe government, as the accrued interest on subsidy bonds, $12,861,640. This is the amount due in July, 1872. Add the interest accruing since that date and these companies owe the government not less than $16,000,000 interest on their bonds. This amount, as well as future interest, and the principal of the bonds was atone time secured to the government; but when congressmen and their friends get a controlling interest in the companies, they procured the passage of an act, supported by their own votes, which destroyed the security held by the government, and relieved the companies of the payment of this large amount of interest, thereby compelling the people to pay it, while the stockholders, including some of the same congressmen who had voted in favor of the act, received dividends on their stock and on theirCredit Mobilierstock to the amount of two and three hundred per cent; thus, by the abuse of the power vested in themselves as members of congress, compelling the people to pay the interest the companies should have paid, and pocketing in the shape of dividends the money so dishonestly obtained. If we needed any further proof to establish the fact that these Pacific railroads were in fact congressional jobs, that members of congress were looking to their own interests rather than to the interests of the people, we need but glance at the interest account of the Sioux City & Pacific company. The excuse pleaded of the "necessities of government," will not avail in this instance. While the interest account of this company is about $400,000, the account for the transportation of troops, mails, &c., over its road, amounts to the sum of $1,642, one-half of which has been applied on the interest account of the company, and the other half, under the act of congress, has been paid by the secretary of the treasury to the company. The conclusion is irresistible, that the personal interest of congressmen, rather than the wants of the public, has controlled their action.
Connect with the incorporation of railroad companies, and special legislation in their favor, the legislation in favor of "Indian rings," "whisky rings," "patent right combinations," and the numerous other kinds of special legislation, with the advantages presented to legislators to make personal gain from all these sources, and we can well understand why men are willing to spend such large sums to secure an election to the United States senate, or house of representatives. The baneful effects of the modern code of political morality are not seen in the legislative department of the government only. The same disregard of the rights of the people, and a determination to protect andaid combinations in their efforts toward self-aggrandizement, made at a sacrifice of those principles which are supposed to govern all persons holding places of trust, honor, or confidence, seem to influence to a great degree those holding high position in other departments of the government. The acts of congress chartering the Pacific railroad companies make it the duty of the president of the United States to appoint five government directors for these roads. Under the statutes these directors cannot own stock in the companies, nor have in them any personal interest whatever. They are supposed to be free from any bias for or against the companies: but they are appointed to represent the government, and to guard against and report to the secretary of the interior all abuses on the part of the companies, and at such times as they are required to so report, to also make such suggestions as in their opinion shall best subserve the interests of the public. It is made their duty to personally inspect the roads, during their building and after their completion. At least two of these government directors must have a place on all important committees appointed by the companies for the management and prosecution of their business. Any dishonesty on the part of the companies in letting contracts for the construction of their roads, or any misapplication of the grants made by congress, must have been known to these five government directors, or some of them, if they had properly discharged the duties imposed upon them by law. The formation of an inside ring, under the title of "The Credit Mobilier of America," composed entirely of the directors and stockholders of the Union Pacific company, the letting of the contract for the construction of the road to one of the directors of the railroad company, who was also a director in the Credit Mobilier (and a member of congress), at more than double its actual cost, the transfer of this contract to certain trustees who were directors in both companies, in the manner stated in a preceding chapter of this work, and the declaration of large dividends on the stock of the companies at a time when the work on the road was barely begun, and before any dividends could possibly have been earned,—all these facts must have been known to the government directors, and concealed by them from the government. When it is remembered that some of these government directors were members of congress at the date of the passage of the acts chartering the roads, there is but little question that the same influences controlling them in voting these large subsidies to the companies also controlled them as government directors in their supervision of the roads. This conclusion is strengthened on seeing that some of them became owners of stock in the Credit Mobilier.
The same corrupting influences have been felt in other departments of the government. The abuses practiced in the collection of customs by the officers at the different ports of entry, as shown at the recent investigations made by authority of congress, are but the natural sequence of the questionable course of the legislative department. The great frauds practiced by parties having contracts for furnishing supplies to the Indian tribes are traceable to the same source. This assumption by congress of the power to grant charters to private monopolies, its unconstitutional interference in matters reserved to state control, its determination to foster these gigantic corporations by princely grants, with the corruption incident to these selfish and greedy combinations, are the direct cause of the dishonesty prevailing everywhere among our public officers, and besides other rank growth have led to the imposition of burdens upon the people, oppressive to the last degree. The controlling purpose of a large portion of those elected or appointed to government offices seems to be to accumulate wealth without regard to the propriety or honesty of the means employed. In their eagerness to benefit themselves, all consideration for the public good, or respect for their obligations as sworn servants of the people, are of secondary importance. They accept office from purely selfish motives, and enter upon their duties with the same object in view animating those who embark in trade, manufactures, or commerce, viz: private gain. Seemingly viewing the offices they hold as being their own private property, they use them as the banker uses his money—for purposes of speculation. Not unfrequently they permit themselves to be bought and sold, like any other articles of merchandise. While we do not claim that all public officers were pure prior to the legislative creationof the monopolies we have been examining, we do claim that previous to that sad departure, honesty was the rule, and not the exception. It was when congress entered upon the business of chartering railroad companies, donating public lands to them, and voting them money from the public treasury, that the rule changed; and when, in addition, congressmen became principal owners and directors in these companies, while still retaining their seats in congress, they placed themselves upon the record as unfaithful to their trust, and struck a blow at public morality which will be fatal to our popular government, unless resisted by the whole moral power of the nation.
And here we might well pause, and ask, what security have the people for the continuance of republican government? These gigantic corporations are in their nature anti-republican; they tend to a centralization of power; they compel the people to submit to their demands; they are under the protection of congress, under whose special legislation they are permitted to disregard state laws; their ramifications extend throughout the country; their artifices and money control the votes of the people; they elect their friends to both the senate and house; they organize and send strong bodies of men to the lobby of congress and state legislatures, well supplied with money to obtain the passage of laws in their interest, and to prevent such legislation as would be detrimental to them, and in favor of the people; they have their friends and emissaries in every department of the government, and throughout the country, and they exercise a controlling influence not only at Washington, but at almost all the seats of state government. The offices filled by appointment of the executive and confirmation of the senate, are too often the agencies of this same influence. We would not be understood as saying that the president acts corruptly in these appointments; we mean that the influences that secure many of the presidential nominations are the same as used by these corporations in the election oftheirsenators and representatives. The appointment of judges of the supreme court of the United States has, in at least two instances, within the last few years, been made through the influence and in the interest of these monopolies. These corporations arealso represented in the cabinet. It is well understood that the removal of Attorney General Ackerman, and the appointment of his successor, was done by these corporate influences. The fact that the secretary of the interior, to whom reports should have been regularly made of the progress and condition of the Pacific railroad, was silent, while private fortunes were being fraudulently taken from the public treasury, proves that he also was under the same influence. It can be accepted as an established fact, that all the departments of the government are to a great extent controlled by corporations and combinations of speculators whose interests are adverse to those of the people, and the result is, that statutes are enacted, executive offices appointed, and decisions of court rendered in the favor of these powerful classes, while the rights guaranteed to the people by the constitution are disregarded.
The influence of corporations is also powerful in the administration of state governments. While no such gigantic monopolies as the Pacific railroad have been organized in any state yet, either by special charters granted by state legislatures, or under general incorporation laws, railroad corporations in large numbers have been organized, and by combining their influence, have obtained control of most of the state governments; they have been granted special and exclusive privileges, and by the use of money and patronage have been able to control state conventions, state legislatures, and state courts. As a logical result, the people are taxed, while railroad companies are practically free from taxation; subsidies to corporations are authorized and declared to be constitutional, and the people are obliged to submit to rates of charges for transportation of freight that amount to a confiscation of the farm products of the country. We need not enter into a history of state grants to railroad companies, for it is familiar to all; the same corrupt practices incident to national, attend state, legislation. In many instances, corporations have organized under state statutes, or obtained special charters from state legislatures, located their roads, procured local aid, and then obtained from congress land grants for their roads, and have thus become powerful in the states where they are located, while other companies have built their roads exclusively with the means afforded by local aid voted under state laws, and loans of money or sale of bonds; but in every instance so planning and contriving that the entire road shall pass into the exclusive control of a select few, leaving to those who furnished the local aid no rights or privileges in connection with the company, or the road, save that of paying extortionate freights and burdensome taxes.
Taxes can only be levied, and collected, for public purposes; but all the property of the country can be taxed to its entire value, when the public good requires it. The exigency demanding high rates of taxation is left to the determination of the legislatures of the states, and of the general government. No taxes can be legally levied or collected save for the support of the government, state and national, and subject to the restrictions incorporated in the constitution. All other taxes imposed upon the people are unconstitutional, illegal, and oppressive, and should be declared absolutely void. Direct taxation, for the support of the general government, has never been practiced in time of peace. The usual method for raising a sufficient revenue for its support has been by duties, or tariff imposed by acts of congress upon imports. This has always been deemed the best method for raising the revenue necessary for the support of the government. The powers and duties of the general government are limited and restricted by the constitution of the United States; and as its legislative, executive, and judicial powers are thus limited, it follows that its power to impose taxes upon the people is limited in the same manner, and that it can tax for no purpose save for defraying the expenses of its different departments in the exercise of the powers delegated by the federal constitution. This conceded, all that can be claimed by those who administer the affairs of the nation, unless they transcend the constitutional limit, is conceded. The power to appropriate the lands or money of the public to private parties or corporations not being found in the constitution, nor implied in any of the granted powers, all such appropriations are usurpations; they are donations of the people's money and property to private corporations and individuals in violation of the constitutional restrictions; and no authority is vested in congress to tax the people, either directly or indirectly, for the purpose of making return of the money and property thus wrongfully taken from them. A private corporation is not a public necessity; its franchises are private property, and even if the United States owned the whole of its stock, and took the entire control of its business, it could not become a public corporation, for the reason that congress does not possess the power, under the constitution, to create private corporations. The fact that the United States owned the stock and controlled the corporation would not impart to it any of the attributes of sovereignty, but in so far as the general government was interested in the corporation, it would be treated as any other private party, and would be amenable to the same law and subject to the same jurisdiction as private parties or individuals. If the action of the general government can confer none of the attributes of sovereignty upon a private corporation—if it has no constitutional authority to donate lands or money to railroad companies—how can it lawfully collect taxes from the people, either by direct levies, or in duties upon articles of commerce, for the purpose of re-imbursing the government for the lands donated to corporations, or to pay either the principal or interest on the bonds given to these corporations? As well might congress levy a direct tax upon the property of the people for the purpose of donating to a private party sufficient means to build a residence; there is not found in the constitution any warrant for either of such levies. Both alike are unwarranted usurpations of power, not to be justified under any grant of power from the people to the federal government. To admit that the congress of the United States possesses the power to tax the people for any purpose save for the support of the general government, is to admit that the constitution is elastic, subject to any congressional construction, and liable to be used as an instrument for promoting personal and private ends. Congress had no power to vote subsidy bonds to railroad corporations, as we have already shown; nor could it release these corporations from the payment of these bonds, and the interest as it accrues, and collect the amount from the people in duties onimports, or in any other kind of taxes. No such power was ever delegated to the general government by the people. This power cannot be found in any part of the constitution. While this is true, the people are now taxed annually to the amount of many millions of dollars to pay the interest on the bonds issued to the Pacific railroads. Taxes are also collected to the amount of $18,000,000 or $20,000,000 to pay the interest on the banking capital of the country, the stock of a gigantic corporation, chartered by congress, but in the hands and under the control of private parties and companies. While the general government, under the constitution, has the control of the money of the country, and its coinage, value, etc., and can provide such means as shall be deemed best for the administration of the national or public finances, it has no power to enter into private banking; and because it has not this power, it cannot create private banking institutions and tax the people for their support. Any tax levied upon the citizen by the general government for any purpose whatsoever, save for the necessary expenses in the administration of the same, in all of its departments, in accordance with the letter and spirit of the constitution, is without authority, and violates the fundamental law. The levy of taxes in aid of private corporations subserves none of the purposes of the government, and is the exercise of a power not possessed by congress. Our position is fully sustained by legal adjudications, and by the writings of eminent jurists. Chief Justice Marshall, in his writings upon the constitution, has considered this point. He says, on page 345 of his work: "It is, we think, a sound principle, that when a government becomes a partner in a trading company, it divests itself, so far as concerns the transactions of the company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which it transacts. * * * As a member of a corporation, a government never exercises its sovereignty. It acts merely as a corporator, and exercises no other powers in the management of the affairs of the corporation than are expressly given by the incorporation act. The government ofthe Union held shares in the old Bank of the United States; but the privileges of the government were not imparted by that circumstance to the bank."
If there exists any authority in the general government to create a corporation for any purpose, it is in relation to the finances of the country. The necessity of a fiscal agent of some kind would seem to warrant the creation of a banking corporation. But, if the power is conceded, it does not follow that the people should be taxed to provide a bounty, payable semi-annually, to the private companies who are engaged in banking, and who alone receive the profits arising from the business. Yet the act of congress creating the banks provides for the payment of semi-annual interest on the capital invested; and this interest is collected from the people. All railroad corporations, created by act of congress, are absolutely private corporations. The insertion in the charter of the words—"to secure the more safe and speedy transportation of the mails, troops, munitions of war, and government supplies"—found in all of these charters, does not change the character of the corporations. The grants are made to private parties; the roads are under their control; they receive aid from the general government, but in their own names own and control the roads, and can, at any time, dispose of the roads and franchises, and the general government has no power to prevent any action the companies may choose to adopt so long as they regard the provisions of their charters. No statesman or jurist of our country has at any time, until within the last few years, claimed that congress could create corporations for private purposes; on the contrary, in all of the earlier decisions of the federal courts, it was uniformly conceded that congress did not possess the power to create such corporations. Chancellor Kent, Chief Justice Marshall, and other eminent writers, are all agreed that, under the constitution, congress cannot create a private corporation. If congress had no constitutional right to create railroad corporations, how can it possess the power to tax the people to pay their debts? The people are now paying at least $8,000,000 per annum in shape of taxes for the purpose of liquidating the interest due from railroads chartered by congress in violation of the fundamental law of the land. Thislarge amount of taxes is collected and applied by the general government in payment of interest due from railroad companies, because the influence of congressmen and their friends, in these companies, was sufficiently powerful to override constitutional barriers, and to procure the passage of an act enabling the parties holding the stock to pocket the earnings of their roads and make good the deficit in their interest account by taxing the people.
The whole history of congressional legislation does not present a case of such entire disregard of the provisions of the constitution, and such dishonest and corrupt legislation as is contained in the acts of congress relating to the Pacific railroads. It is questionable whether another instance can be found in this or any other country, having a constitutional government, where legislators, by direct vote, have taken millions of money from the public treasury and given it to private corporations of which they were members and directors, and to make good the amount thus taken from the treasury have providedby lawfor its collection from the people in the shape of taxes and duties! When we remember that congress does not possess the power to charter private corporations; that in so doing it violates the letter and spirit of the constitution; upon what principle can it claim the right to tax the people for the benefit of these private corporations? We repeat, no country in the world, governed by a written constitution, offers a parallel case. Not even in France, under the personal government of the late emperor, would such an unwarranted act have been attempted.
We are aware that it is claimed that railroad corporations are public corporations—and this granted, taxes may be rightfully levied and collected for their benefit. But we donotgrant this, and shall, in the following pages, essay to demonstrate that all railroad corporations are private, being owned and controlled by private citizens, and not by the state or national government. But admitting they are public and not private corporations, the general government even then cannot legally charter or control them, because the power for that purpose has never been delegated by the states or the people; and it follows that the general government cannot rightfully imposetaxes upon the people for the support of corporations over which it can have no control. If congress can levy taxes for the construction and support of railroads, and take the management and control of them, it certainly can take the entire supervision of all the highways in all the states, provide for their construction, and tax the people at will for that purpose. This being admitted, no local or police regulation in any of the states is exclusively under the jurisdiction of the state governments; but the general government may at any time take the absolute control of the governmental affairs of the several states, and thus complete the centralization of power now so rapidly developing in all the departments at Washington. The assumption of the right to tax the people for any and every purpose that to congress shall seem expedient, irrespective of constitutional prohibition, is at once destructive of the rights that were supposed to be guaranteed and preserved to the whole people by the constitution. If the will of those men who happen to occupy seats in congress (and that will too often controlled by personal interest) is to govern, then all constitutional government is at an end, and the liberty and property of the citizen have no constitutional safeguard. Taxes to the entire value of all the wealth in the country may be levied by the general government, and the citizen of this republic holds his entire estate at the will of the persons who fill the offices of the country. Under the system of congressional legislation that now obtains, the laboring and producing classes are being rapidly reduced to a state of servitude that would grace the most despotic government.
The question of taxation for the benefit of private corporations has agitated the public mind since the construction of railroads became one of the admitted necessities of the country. For the purpose of justifying and legalizing governmental aid to railroad corporations, in the various forms in which such aid has been afforded, the doctrine has obtained among the advocates of the measure that railroads are public highways, as well as a public necessity; and such being the fact, that aid in the shape of grants, taxes, and subsidies, are legal, legitimate, and proper. They draw an argument in favor of this doctrine, from the fact that legislatures, state and national, have provided by law for the condemnation of private property, for the use of the companies, respectively, upon paying the assessed value thereof; and that thus the right of eminent domain is vested in these corporations; that the right ofeminent domainis an attribute of sovereignty, and that the granting of this attribute to corporations imparts to them the character of public highways. They reason that because they are public highways, and the companies owning them are common carriers, taxes may be legally levied and collected for the exclusive use of these companies. They claim that because the United States, states, counties, cities, towns, and townships, have authority to construct, or to aid in constructing, common highways, they have the same right to construct, or aid in constructing, railroads.
If it were not that precedent has tended to sustain this "false doctrine," we would not think it profitable to combat it. The only point in the argument in favor of this doctrinethat has any real foundation, is, that railroad companies are allowed to locate their roads where they please, upon payment of the damages assessed in the manner prescribed by statute. The answer to this is, that railroads could not be built, unless the companies had permission to pass over the lands of private citizens. If the title from each land owner could be procured only by negotiation and purchase, no railroad could be constructed, for the reason that a direct or continuous line for a road could rarely be secured. Railroads are constructed to aid in the transportation of freight and passengers from one part of the country to another; to promote commerce throughout the whole country; to supply the wants of a people, just as a mill or factory supplies the wants of a particular locality. The miller constructs his dam across a stream, and, under the statutes of most of the states, he can procure the condemnation of the land of his neighbor overflowed by his dam, to his own use, upon payment of the damages assessed. It is not a condemnation for the use of the public, but for the use and benefit of the owner of the mill. The mill itself, while it is owned by a private individual, and can be sold and transferred by him at any time, is also a public benefit. Can it be said that the right of eminent domain attaches to the mill or its owner? So with railroads: They are owned by private companies—are built and controlled by them; they are of public benefit, but not owned or controlled by the public or by the state, or local authority, as in the case of public highways. Their private owners can sell them, with all their franchises, rights, and privileges. The rules for their operation, rates of charges, and all other matters affecting their government, are exclusively under the control of the parties owning them. Only that the companies may become the owners of the necessary grounds over which to build their roads, have legislatures provided that they may enter upon lands owned by private persons, and upon the payment of the appraised value thereof, appropriate a narrow strip (the width being fixed by statute) for the purpose of locating their road upon it. It is not condemned for public use, as in the case of a public highway, or where land is needed for public buildings, or any other public purpose. The assessed value is not paid by the government,or from the public fund, nor by individuals for the public; but by the private corporation out of its own purse, and for its own gain.
This is what is called, by the advocates of the measure, "the right of eminent domain," a right that only belongs to the supreme government. This power cannot be exercised by local or subordinate governments, unless it is delegated to them by the supreme or superior government. While the courts in some of the states, Iowa included, have, by decisions, made this right of eminent domain attach to railroad companies, it cannot be supported on principle. To allow it to obtain is to clothe private corporations with the attributes of sovereignty. But conceding that this right attaches to these corporations, upon no principle of constitutional law or justice can the right to levy taxes upon private citizens to aid in the construction of railroads, either by acts of congress, by state statutes, or by local municipal government, be supported. And it matters not in what form these taxes are imposed upon the people, whether in the shape of municipal subscriptions of stock, to be paid by assessments upon the people; by donations of land or money, to be repaid by imposing a larger price upon lands sold to the citizen; by indirect taxation, or by special local elections held in cities, towns, or counties,—the compulsory taxation of the property of individuals, under our system of government, can only be imposed for governmental or public purposes. Taxes are levied for the support of the government in all its departments; for the construction and repairing of highways; for the building of school houses and all other edifices of a public character; for the support of schools; for the necessities of local municipal governments, and for other objects having the public weal for their sole consideration. These taxes are legitimate and proper, because the ends sought to be reached by such taxation are for the use and benefit of the whole people, and for the protection of their rights. For all of these purposes the legislature can provide an uniform system of taxation. But when the government attempts to compel A to pay a tax to assist B and C in building a railroad, it enters upon the exercise of a despotic and oppressive power, that is in conflict with the letter and spiritof our constitutions, both state and national. The legislature, by the passage of such a statute, says, in substance, to the taxpayer: "A company is formed for the purpose of building a railroad which passes through the county in which you reside. This company has not sufficient means for constructing and stocking its road. That the necessary means may be furnished to it for that purpose, you must pay a tax upon your property, amounting to one-tenth or one-twentieth of its value; this amount you must donate to the company. True, you will have no interest in this road when it is completed; you will not be a stockholder; you cannot ride in its cars, or ship your freights over the road, without paying the same price as other persons. It may cause you to sacrifice a part of your property to pay this tax, but the road will be of great advantage to the public, and you must make this donation to help the enterprise." The consequences flowing from this unjust and oppressive system of taxation are appalling. It has no foundation in right or justice. The legislature has no inherent right to impose taxes for any purpose. The authority to levy taxes is dependent upon the power delegated by the people as contained in the fundamental law. In a republic even a majority of the people do not possess the inherent right to tax the minority for private purposes. Such taxation can be imposed by no other government than a despotic one, where the will of the despot is the supreme law, and where might rather than right is the controlling power. So conscious are the advocates of this species of taxation of the fact that taxes can be levied for public purposes alone, that they deem it all-important to connect and blend in one—the right of eminent domain and taxation.
But this position is not tenable. Bouvier defines the term, "Eminent Domain," as follows: "The right which the people or government retains over the estate of individuals, to resume the same for public use." Taxes are defined to be burdens or charges imposed by the legislative power of a state, upon persons or property, to raise money for public purposes. It will be seen that there is a wide distinction between the taxing power and the right of eminent domain: that while they both appropriate private property for public uses, theydiffer in degree. While the right of eminent domain takes from the private citizen the absolute title to property upon just and fair compensation, taxation exacts from each property owner a contribution for the support of the government, or for the benefit of the public, without any other compensation than the protection the government affords him in life, liberty, and property. Contribution for this purpose is a duty imposed upon all who are under the protection of government. A complete power to procure a regular and adequate supply of revenue forms an indispensable article in our constitution; and provisions for levying and collecting this revenue is a charge laid upon the legislative department. The levy and collection of all taxes deemed necessary for the administration of the government and for the public good, is an incident of sovereignty; but this does not extend to the levy and collection of taxes to aid private interests or enterprises. The taxing power is limited; the needs of the public fix this limit. When this is passed, the citizen is subject to continual plunder. The value of his property is destroyed; he is but a trustee holding his property subject to the will of an arbitrary power, that can at any moment call for a part or all of it. He had entered into a governmental contract for the purpose of appealing to the strong arm of constitutional law when his rights are assailed, but finds, instead of the protection he had reason to expect, an irresponsible, arbitrary, power, compelling him to divide his property with railroad corporations, or other private parties, without any consideration; not only without consideration, but the taxes illegally and forcibly taken from him are used to build up and protect a monopoly that is blasting the fruit of his labor, while it is as surely destroying constitutional and republican government. His property is taken from him by what can only be termed a superior, despotic, power, and appropriated without his consent for the benefit of a private corporation.
It is not difficult to distinguish what are proper objects of public support and for which taxes can be levied and collected from those that are not, if we keep in sight the fundamental or organic law. In the formation of a republic no new rights are created. The adoption of a constitution is but declaratoryof pre-existing rights and laws; its object is to define and limit the powers of the government, and to guard and protect the rights of the citizens. An eminent jurist, in speaking of the constitution, uses the following clear and forcible language: "It is not the beginning of a community, nor the origin of private rights; it is not the fountain of law, nor the incipient state of government; it is not the cause, but the consequence, of personal and political freedom; it grants no rights to the people, but is the creation of their power, the instrument of their convenience, designed for their protection in the enjoyment of the rights and powers which they possessed before the constitution was made; it is but the frame-work of the political government, and necessarily based upon the pre-existing condition of laws, rights, habits, and modes of thought. There is nothing primitive in it; it is all derived from a known source. It pre-supposes an organized society, law, order, property, personal freedom, a love of political liberty, and enough of cultivated intelligence to know how to guard it against the encroachments of tyranny. A written constitution is, in every instance, alimitationupon the powers of the government in the hands of agents, for there never was a written republican constitution which delegated to functionaries all thelatent powerswhich liedormantin every nation, and are boundless in extent, and incapable of definitions." Keeping in mind the distinction existing between measures of a governmental or public nature, and those that are private, and applying the above quoted definition of constitutional power, we cannot find it difficult to determine what are, and what are not, constitutional levies and collection of taxes.
Another thought having weight in connection with the constitutional right to tax the people in aid of railroads, is, that minorities have the right to live, and to own and enjoy property; and the majority has no right to compel the minority to contribute aid to railroad corporations. It has always been conceded that in a republican government the majority should rule, and that their will expressed in a constitutional and legal manner should be the law of the land; yet no one claiming to respect constitutional law will contend that this will of the majority can act outside, or independent of, constitutional restrictions. If this doctrine should obtain, constitutional government is at an end; private rights are destroyed, and the unrestricted will of a bare majority becomes supreme; all the guarantees of the constitution are annulled; life, liberty, and property, are all dependent upon the popular will; constitutional safeguards are destroyed, and the stability of the government is lost. The first step in this direction is fraught with the greatest danger. When the restrictions embodied in the constitution are overridden and disregarded in one instance it affords a precedent for a second step in the same direction. Acquiescence in encroachments upon constitutional restriction by the people, undermine and absolutely destroy republican institutions and the government itself. If, for the accomplishment of some private purpose, a community, a state, or the general government disregard the provisions of the constitution, and assume powers not granted them by that instrument, they arbitrarily act the part of the absolute tyrant. And it makes no difference whether the course pursued, or the measure adopted, proves beneficial to the public, or oppressive. In the fact that it is the usurpation of an unauthorized power, lies the danger. The disregard of the limits fixed by the constitution, in the administration of the government, destroys the only guarantee the people have for the protection of their private rights. Among all the unconstitutional measures which now obtain throughout the country, the affording of aid to railroads, by the government, state and national, has proved the most burdensome to the people. Of this class of subsidies, that afforded by local, municipal subscription, with or without a vote of the people, has caused the greatest injury. A local or municipal government can lawfully impose taxes for the support of its administration, and for contribution to the general comfort and happiness of the people. It can tax for the purpose of laying out and constructing streets and public highways, because these objects are intended to be, and in fact are, open to the use of the whole people; all can use them on equal terms; they are made for the benefit of the public; each citizen has undertaken to contribute his just proportion of the expense of providing for the common, public benefit. But when a county, a city, town, or township, organized for theconvenience of the people, and to more effectually protect their rights, attempts to become a stockholder in a railroad corporation, it attempts the exercise of a power it does not and cannot possess under the constitution. Municipal corporations were not created for the purposes of private speculation or private gain, but for purely and strictly government purposes. No power is granted (nor can it be implied) to county judges, commissioners, or supervisors, nor to township trustees, or city boards, to take stock in railroad corporations, or to issue bonds of the municipality in payment for such stock, for the reason that such power is not necessary for the administration of these several governments, and does not come within the limit of the powers granted by the people. We know there are many decisions of courts sustaining the position that municipal corporations can become stockholders in railroads, and may issue bonds in payment therefor, and that it is within the scope of the powers vested in such corporations to levy taxes for the payment of the bonds so issued; but we have yet to see a decision that is sustained by any provision of the constitution. Many of these decisions admit that the right to subscribe stock is not contained in the constitution, and cannot be justified on constitutional grounds. Of these decisions we shall speak hereafter, and we leave them for the present. We insist that there is no authority in the constitutions, state or national, under which any department of any of the governments can become stockholders in a railroad corporation; nor is the right to take such stock in accordance with the genius or spirit of republican government. The distinction that exists between cities and towns acting under charters, and counties, townships, school and road districts, is marked, and should be kept in mind in considering the nature of the powers possessed by each. County, township, school, and road district organizations are necessary in the administration of the laws of the state. They are at most butquasicorporations; all their powers are derived from, and executed under, the general statutes of the state. They have no special grants or privileges, but are the chosen means for executing state laws. In the distribution of the powers and duties vested in and imposed upon the state governments, the dutiesof administering the local affairs of the counties, townships, and districts, are delegated to, and imposed upon, thesequasicorporations respectively. They can only exercise such powers as are necessary for the accomplishment of the objects of their creation. Their acts are the acts of the state government as applied to their respective localities. They are not clothed with any extraordinary power; nor can the state government delegate to them a power it does not itself possess. When the constitution of a state (as in the case of Iowa and other states) prohibits the state from subscribing stock, loaning its credit, or issuing its bonds to private corporations, we would at once conclude that it could not delegate authority to one of its subordinate departments to do an act forbidden to itself by the constitution. But this is what it has done, if thesequasicorporations possess the power to afford aid to railroad or other private enterprises. Municipal corporations, such as cities, towns, &c., act under special charters, and in some respects are sovereign. But they are governed and controlled as absolutely by the provisions of their charters, as is the state by its constitution. They can only act within the scope of their delegated powers, and in all doubtful questions the presumption is against their right and in favor of the public, for the reason that only special privileges are conferred upon them. Nor can the legislature confer upon them privileges or powers not possessed by itself under the constitution. It is then absolutely certain that neither counties, cities, nor towns can aid private corporations, or become stockholders in such corporations, unless the power has been delegated to them by the state legislature. It is equally certain that unless the state, in its sovereign capacity, possesses this power, it cannot delegate it to either counties or cities, and that when the constitution of a state forbids the exercise of a power, it includes the legislature, all the departments of the state government, all counties, cities, and towns, and all the people. All these corporations are agencies in the administration of the affairs of the public. Being political in their nature, they are entirely distinct from private corporations organized for the purpose of pecuniary profit. They are established for public purposes exclusively. Judge Dillon, in his valuablework on municipal corporations, says that "They can exercise the following powers, and no others: First, those granted in express words. Second, those necessarily or fairly implied, or incident to the powers expressly granted. Third, those essential to the declared objects and purposes of the corporation—not simply convenient, but indispensable." The same author, in treating upon aid to railroads, while admitting that the current of judicial decision is in favor of the principle that in the absence of special constitutional restrictive provisions, it is competent for the legislature to grant this power to municipal corporations, says that "Notwithstanding the opinions of so many learned and eminent judges, there remains serious thought as to the soundness of the principle, viewed simply as one of constitutional law. Regarded in the light of its effects, however, there is little hesitation in affirming that this invention to aid private enterprises has proved itself baneful in the last degree," and he adds: "Taxes, it is everywhere agreed, can only be imposed for public objects, and taxation to aid in building the roads of private railway companies is hardly consistent with a proper respect for the inviolability of private property and individual rights. Fraud usually accompanies its exercise, and extravagant indebtedness is the result, and sooner or later the power will be denied either by constitutional provision (as in Pennsylvania, Ohio, and Illinois, it already is) or by legislative enactment."
As we are now dealing with constitutional rights, and not with judicial decisions, we think we have fully shown that public or municipal corporations have no authority under the constitution to aid railroads by subscription of stock, or the issue of bonds, and that no authority exists for taxing the people to pay for such stock or bonds; and if it be true that counties and cities are not, and cannot be, clothed with the power to aid in the prosecution of private enterprises, it is equally true that the legislature cannot delegate to the majority of the voters of a county, city, township, or district, the authority to tax the minority for the same purpose. Legislatures cannot create new powers; they can only exercise such as they possess under the constitution. The powers not delegated by the people in the fundamental law, are retained bythem. If the people are sovereign, they are the source of power, and all that is not vested in some department of the government remains vested exclusively in the sovereign. If the legislative, executive, or judicial department of the government can act independently of the restrictions and prohibitions contained in the constitution, then the will of the servants of the people is the supreme law, and the sovereign power supposed to reside in the people is destroyed, and constitutional government is at an end. Oppressive taxation imposed without authority, for private and selfish ends, if persisted in, will eventually subvert our republican institutions. This, and other unconstitutional legislation, to some of which we have already referred, has caused such a departure from the old landmarks that it is questionable if we now have, in fact, a republican government. Under the rules adopted in legislation, and the pliant decisions of courts, constitutions are made to yield to the demands of combinations, stock-jobbers, and private corporations, until we cease, as a people, to revere and respect these safeguards of our liberty.
The justification for the munificent grants and lavish taxation of the people in aid of railroads has been, that these roads afford the necessary facilities for transportation of freight, promote speedy communication throughout the country, provide ready markets for the products of husbandry, increase the value of property in their vicinity, and assist in improving and developing the new portions of our country. While some, or all, of these objects may have been in a degree promoted, the little good thus accomplished has been more than counterbalanced by the evils uniformly attending this species of aid to railroads. What are the evils incident to the general incorporation acts, and local taxation in favor of railroads?
First.They take from the individual the natural and constitutional right of owning and controlling his own property, and license the agents of a county, city, or town, to incumber his property with a debt, without his consent and against his protest.
Second.The policy engenders a rivalry between different localities, causing reckless extravagance and the creation of an immense indebtedness by public corporations. This indebtedness not unfrequently retards the settlement of the locality expected to be benefited, and depreciates instead of enhancing the value of property, for the constant and compulsory drain of the resources of the place in payment of the debt thus created can leave nothing but barrenness behind, the rule being, with but few exceptions, that non-residents hold the evidences of the indebtedness, and as a consequence, payment must be made to distant creditors. If one thinks that this isoverdrawing the picture, let him examine the condition of those counties and cities that years ago loaned their credit to railroad companies, or subscribed to their capital stock. Localities less favorably situated, with fewer natural advantages, fewer miles of railroad, and with less productive countries tributary to their growth, have far outstripped their bonded neighbors in wealth, improvements, and the increased value of their property. Persons who are seeking locations dread and shun these bond-cursedlocalities, and seek homes elsewhere. New counties far outstrip these old ones in improvement and wealth; new towns and cities spring up and destroy the business of these old bond-ridden ones, and the latter, instead of receiving the anticipated and promised increase of wealth, show a paralyzed industry and depreciated property. Localities that fifteen or twenty years ago gave promise of a prosperous future, are less wealthy, less prosperous, and in some instances less populous than when they subscribed stock, and issued bonds to railroads. For years to come, the wealth and industry of these places must suffer from the incubus of enormous taxes levied for the payment of bonds issued under the mistaken idea that great benefit was to result from the indebtedness.
Third.It places the pecuniary interests of all of the people of the counties and cities creating this kind of indebtedness in the hands of unscrupulous and relentless non-resident creditors, mainly Wall Street stock-jobbers, who obtained it at large discounts, often at one-fourth its par value, and who own not only the county and city bonds, but control the railroads in aid of which they were issued, and so by constantly collecting from the people the oppressive taxes required to pay the interest and principal of these bonds, withdrawing the amounts so collected from circulation and sending it to the east without leaving, or ever having paid any equivalent, they are constantly impoverishing the people with the very means which were to have been sources of prosperity.
Fourth.The aid granted to railroad companies has enabled them to get control of the commerce of the country. As a general rule, all of the railroads receiving subsidies in land, government, state, county, and city bonds, and large gifts inlocal taxes, have been owned or controlled by the same class of men, and not a few of the roads by the same ring or combination. Then speculators have visited all parts of the country, claiming to be men of "large hearts" who desire to benefit mankind. They talk of their large experience in railroad matters; of the great benefit the particular locality will derive from the construction of a certain line of road; of the great profit to be returned in the shape of dividends if local aid is voted, and after having by fraud, falsehood, and willful deception induced the people to move in the matter, they then turn their attention to state legislatures and to congress for more aid, and so perfect is their combination, that in almost all their attempts they are successful. Among these rings and combinations are found men to fill every department in the scheme for plundering the people. Some of them become directors in the corporations to which the aid is voted and granted, and they thus get control of the donations, grants, and bonds. Some members of the ring become agents to sell the bonds of the corporation, as well as any others received from the general or local government, and to mortgage the lands granted to the companies. Still another division of the ring become the purchasers of the bonds at theirmarketvalue. They all unite in this way and mortgage their roads, rights, and franchises, and construct the road, taking care that when the road is completed, the liabilities resting upon it shall be sufficient to represent its entire value. By this means they become the creditors of the counties and towns through which the road runs; they own and control the road; and the combination being the same substantially throughout the country, owning and controlling all the roads, holding and using the subsidy bonds, fixing the rates of freight and passenger transportation, they control the whole country and hold the best interests of the people subject to their will. In the prosecution of their ends they bribe local officers, state legislatures, and members of congress. To secure the election of their friends to congress, large gifts are made. In one instance one of these raiders upon the rights of the people bestowed upon a prospective United States senator, $10,000, for the purpose, as he stated, of securing friendly legislation for a certainrailroad company. The pirates and robbers who prey upon mankind are not more dishonest or unscrupulous than are these rings who make the people their prey. They differ only in the degree of punishment received; the former being executed or sent to prison, while, of the latter, many are elected to congress or to other high and responsible offices, or they are appointed to high places of trust and profit in the government. If the reader will look through theRailroad Manual, he will find a long list of names of men, prominent now from the recent raids upon the people and public treasury, who have been engaged in the same business for at least twenty years; men whose names are now as familiar to the western people as "household words," who, like birds of prey, have flitted from one part of the country to another until their blighting influence is felt in the whole land. We are referring of course to the men who have followed the business of "organizing" railroad companies for the purpose of procuring aid in lands, bonds, and taxes, and who have devoted their energies to this class of railroads, and not to those capitalists who, with their own money and credit, have constructed their roads and pursued a legitimate business. Prominent among the men who have devoted their time and talents to railroad enterprises, will be found the names of Thomas C. Durant, John A. Dix, Henry Farnham and others, whose memory will remain fresh with western men, because of their diligence in procuring local aid to railroad companies from counties and cities fifteen or twenty years ago, and who, after obtaining such aid, by some means became the owners of city and county bonds, to a large amount, and then to prompt the people to greater diligence in the payment of taxes, levied to liquidate these bonds, applied to the president of the United States for troops to aid in their collection. Slightly varied, the same organization of men which inaugurated the system of constructing railroads through land grants, donations, and subsidies, is still in the same business. With their headquarters in New York and Boston; with Wall Street as the principal depot for all railroad stocks and bonds, as well as the bonds of the United States, and of such states, counties, and cities as have been duped by them, theseraidersupon the treasury and resourcesof a people have taken the absolute control of the railroad interest of the country, and "run it" for their own exclusive benefit, to the injury of the country and the absolute destruction of the agricultural interests of the great west. By having placed in their hands the large grants of land and subsidies voted to railroad corporations, they acquired the means of controlling the principal roads throughout the country. Roads in Texas, Louisiana, Alabama, Arkansas, Kansas, Nebraska, Iowa, and in other states and territories, are owned and managed in the exclusive interest of capitalists in the eastern cities who have no interest in the communities where these roads are located, save to realize large dividends by extortions and oppressions. All of the roads receiving large grants and subsidies, whether from the general or state government, or as local aid, are in the hands of this class of men, with their fiscal and transfer agencies in the cities above named.
This statement has its illustration in the Kansas City, St. Joseph, & Council Bluffs company, which has five directors in Boston, two in New York, one in Michigan, and one in Missouri—Fiscal agency and transfer office, Boston. Peoria & Bureau Valley company has its principal office in New York; Chicago & Northwestern—Financial and transfer office, Wall street, New York; Dubuque & Southwestern—all of the directors, save one, and its financial agency, in New York; Atchinson, Topeka, & Santa Fe company—fiscal agency and transfer office, Boston; Galveston, Harrisburg, & San Antonio company—Fiscal and transfer agency, Boston; Leavenworth, Lawrence, & Galveston company—Fiscal agency and transfer office, Boston; Kansas City & Sante Fe company—Fiscal and transfer agency, Boston; Cedar Falls & Minnesota company—All of the directors reside in New York; Iowa Falls & Sioux City company—Of the directors, John B. Alley, Oliver Ames, P. S. Crowell, and W. T. Gilden, reside in Massachusetts, J. I. Blair in New Jersey, and W. B. Allison and Horace Williams in Iowa—Fiscal and transfer agency, Boston; Colorado Central company—Of the directors, Oliver Ames, Frederick L. Ames, and four others, reside in Massachusetts, and the fiscal agency is in Boston, and the principal office in California; Cedar Rapids and Missouri River company—JohnB. Alley, Oliver Ames, and nine other of the directors are in the eastern states, and James F. Wilson, and three others, are of Iowa; Northern Pacific company—Principal office, New York; Hannibal & St. Joseph company—Fiscal and transfer office, New York; Burlington & Missouri River company—Fiscal and transfer office, New York; Union Pacific (central branch)—All but two of the directors in Washington City and the east, and principal office in New York; Union Pacific—Among the directors are Oliver Ames, Oakes Ames, and eleven others in New York and Massachusetts, one in Illinois, and G. M. Dodge in Iowa—Fiscal agency, Boston; transfer offices, Boston and New York; Fremont, Elkhorn, & Missouri Valley company—John B. Alley, of Boston, John I. and D. C. Blair, of New Jersey, C. G. Mitchell, of New York, and three Cedar Rapids men, directors (this is a part of the Sioux City & Pacific road); Winona & St. Peters company—Fiscal and transfer office, Wall street, New York; Burlington & Missouri River (in Nebraska)—Principal office, Boston; Sioux City & Pacific company—Directors: Oakes Ames, and six others, in the east, and G. M. Dodge, of Iowa—Fiscal and transfer office, Boston; Missouri River, Fort Scott, & Gulf company—Fiscal and Transfer office, Boston; Central Pacific company—Fiscal offices, San Francisco and New York;[A]New Orleans, Mobile, & Texas company—Oakes Ames and twelve other directors, resident in New York and the east, and two in New Orleans; principal office, New York; Houston & Texas company—Fiscal agency and transfer office, New York; Chicago & Northern Pacific Air Line company—Principal office, New York; Elizabeth, Lexington, & Big Sandy company—Principal office, New York; Dubuque & Sioux City company—General offices, Dubuque, Iowa, and New York.[B]Texas and Pacific company—Principal office, New York.