Article - Taxation of Michigan Railroads in 1898

[Editors Note: This is an article based on a press release from the Michigan Railroad Commissioner which discusses the taxation on railroad in the year 1898. Readers will learn about taxes applied to railroads and the considerable confusion within the law. It is also noted that electric railroads were not included in this article. The amount of taxed owned by railroads - in the list at the bottom - are based on revenues per mile of railroad, which gives readers some idea about how successful railroads were just before turn of the 20th century.]





The Amount to be Paid by the Companies as Now Assessed.

Lansing. Mich.. June 8. Railroad Commissioner Wosselius has completed the taxes of 'Michigan railroad companies for the current year, which computation he gave out to-day, together with the following following statement:

Taxes against railroad companies and depot companies for the year ending December 31 are computed according to the rate established by the provisions of act No, 226. of the session laws of 1897. which is the Merriman law. This act amends the general railroad law. According to the computations made and on file in the office of the auditor-general the railroad and depot companies taxed should pay to the state $945,150.49 as against $742,074 63 for the previous year, showing a net increase of $203.075.

The earnings as reported by the companies showed a net increase over 1896 to theo amount of $373.083.

The department required from the companies as a part of the report of gross earnings, all gross sums earned from switching and gross amounts received from rentals of tracks, yards and terminals. This increased the gross earnings of the companies $228,556. This, added to the amount given in. the reports of the companies first filed, shows a net decrease of $44,826 

The additional revenue to which the state has become entitled from this class of companies, notwithstanding the decreased earnings, is the result of several causes stated below, together with the amount resulting from each.

Amount added by reason, of the increased -rates fixed by. the act above referred to, $127,150.

Additional revenue by reason of the repeal of the provisions of the act exempting railroads north of the forty-fourth parallel from taxation, $16,086.

Additional revenue by reason of the taxation of roads having special charters under under the general law, $31,160.

Additional revenue due on account of requiring a more complete report of switching switching charges, rentals of tracks, yards and terminals, $14,327.

Additional revenue by reason of a reduction by the department of miles of railroad reported as "actually operated", $14,350.

In making the computation of taxes under under the act above mentioned, new difficulties difficulties have been added to those referred to in the annual report of this department for the year ending December 31, 1897. The statute seeks to amend the general railroad law by its title, but does not, in its title, refer to the act under which depot companies are incorporated and have heretofore been taxed. The body of the act. however bv its terms, increases the rate of taxation against depot companies. The department has. however, in its opinion, no discretion which it can exercise' in determining the validity or Invalidity of any act. In the computation of the taxes, the.Commissioner of Railroads is a ministerial officer bound to obey the language of the statute, and hence the department has not decided or attempted to decide whether the law, so far as the same affects depot companies, is valid or invalid. It is maintained, however, by these companies, that the enactment is void because it is in contravention of article 4 of section 20 of the constitution of this state, which provides that no law shall embrace more than one object which shall be expressed in its title. And also as being in contravention of section 23 of article 4 of the constitution.

The amount involved in this dispute of the depot companies is $12,175.90 In this, as in all matters of dispute affecting the computation of taxes, all doubts have been resolved in favor of the state. If the act is void in it application to the depot companies the question will naturally arise and be disposed of as to whether it is invalid as a whole.


By the provisions of section 3 of act 174 of the public acts of 1891, all railroads thereafter constructed, built and operated north of the 44 parallel of latitude were made exempted from taxation under certain conditions, for the period of ten years. This law remained unrepealed upon the statute books from that time until the passage of act No. 228 of the session laws of 1897, by which the entire section was repealed and no reference made to roads theretofore having the benefits of the act.

The act of 1897 further repealed by all acts or parts of acts in any manner inconsistent with its provisions, thus leaving no law upon the statue books under which the roads before its passage exempt from taxation should continue so. I therefore deemed it my duty to follow the letter of the statute as it present upon the books and to compute the taxes upon these roads which were formerly exempt and based th computation upon their annual reports in the department, as required by law.

A hearing was granted to the interested companies at which all were represented by counsel. It is contended by them that the law of 1891 exempting them from taxation constitutes a contract on the part of the state, entered into by it and for a valuable consideration and that the same cannot legally be released by the state without the consent of the companies. A final decision was not made by me upon the merits upon the ground that my jurisdiction did not extend beyond the computation of the taxes as required by the statute, and that the final decision binding upon the state could only be made by a court of competent jurisdiction.

Several suits have been commenced to test the validity of this enactment, a speedy determination of which is very desirable. The amount computed against these companies, and which is said litigation is in dispute, less $16,086.44.


By the provisions of section 50 of act 125 of the public acts of 1891, it is provided that in any case any such railroad or railway company may have been in the past paying a tax different from that imposed upon railroads by the general law, such company may continue to pay such tax or a proratable proposition thereof up the the first day of July, 1892, but thereafter every such company shall pay a tax in the matter and in the amount now provided by the general laws relating to railways. It is also provided by act No. 133 of the laws of 1891 that every railway or railroad company organized or existing under any special act or acts of incorporation or special or general acts of consolidation, or which has heretofore been taxed under any special act or acts of the legislature of this state, shall, from and after the 31st day of December 1891, for all purposes of taxation be subject in all respects to the provisions of chapter 75 of the compiled laws of 1871, and the acts amended thereof, the same as if such company had organized under the provisions of such chapter.

My predecessors in office here have seen fit to ignore these enactments of the legislature. I have taken a different view of the matter and therefore have, as the statute commands, brought all railroad companies operating under special charters, under the general tax laws of the state, so far as the computation of taxes against them is concerned. On account of the decision of the Supreme Court of this state, as well as an account of the existence the above laws, I have assessed the taxes against the Lake Shore & Michigan Southern Railway company and the Detroit Grand Haven & Milwaukee Railroad company claims, as I understand it, to be exempt from the provisions of the last amendment of the railroad tax law.

In the contest which may result from the application of these laws to companies having special privileges under special charters, the rights of the state and their rights should be clearly defined by the courts, and the much-promoted question definitely settled. So far as the state's power to tax these companies is concerned and the extent of its power there should be no uncertainty.


The department has made a careful investigation and revision of the reports of the companies relative to the number of miles of railroad which were entitled to enter into and affect the amount of taxes paid by the respective companies. The statute provides that these companies shall pay a tax upon the gross income of road quote actually operated within this state. The only guide in determining whether or not certain railroad mileage should enter into the question of taxation is found in the words "actually operated". In a broad sense of the term all sidetracks and spurs over which cars are run at stated or even at irregular periods might be construed to mean actually operated, and especially would this be true if they were operated to the extent of accommodating the public to the extent of the demands made upon the company. So a case in double track railroads where both tracks are operated, and hence both tracks might be used to reduce the earnings per mile of the road, and as a consequence, be used to reduce the taxes paid by the company by reducing the rate applied to the earnings in the computation.

There is so much uncertainty surrounding this element affecting the computation that I deemed it wise, so far as possible, to follow the precedent established by the department, and hence such mileage has only been permitted to enter into the question as consists of main track mileage, upon which there is a service to the public generally, at regular and stated periods, or a continuous service for specific purpose. Many spurs and branches, which at one time were regularly operated by existing companies, have now become dead spurs and branches and have ceased to be operated in the regular course of business, while on some of them irregular service is still rendered, mostly at the special request of some shipper living along the branch or spur. Regular trains are not operated, but in lieu there are off switch engines are sent from center points to draw cars into and out of the spurs and branches., There has been a considerable reduction in Michigan railroad mileage so far as mileage actually operated is concerned, and to the amount of 367.58 miles.

Another question of great uncertainty presented under the statute arose out of the leases and trackage rights which certain companies have obtained over the lines of others. For example, the Detroit, Grand Rapids and Western Railroad company has a trackage right from Grand Rapids to Sparta, a distance of 20 miles the Chicago and West Michigan railroad company reports this 20 miles as part of its actual operated railroad, and the Detroit, Grand Rapids and Western reports the same 20 miles is a part of its actually operated railroad, each company using the same mileage to reduce its earnings per mile of road. This method carried to a final conclusion would give the state an immense railroad mileage, but a very small amount of taxes; the greater the mileage resulting from track rights, the less the taxes.

In applying the term "actually operated" to this class of mileage I have decided that the company owning the stations, charged with the duty of keeping the tracks, grounds and stations in repair, supplying the station agent and providing the system of train dispatching, was actually operating in the railroad, and is entitled to use the mileage in the tax computation, and that any other company operating in occasional train there over, less than all the trains operated upon said mileage and was not charged with any specific duty towards keeping the tracks and stations in repair, towards providing station agents and the train dispatching service, was not entitled to use the mileage in the tax computation. There are many instances of this double use of mileage in this state, notably the trackage operated by the depot companies in the city of Detroit. The law should not be left uncertain upon this point, and a decision of the courts should be obtained if that will solve the difficulty, or the law should be amended, if the present system of taxation is to continue.


Heretofore, railway companies of this state have been instructed to report only balances earned from switching and rents of tracks, yards and terminals. The annual reports followed the form of the interstate commerce blanks in this respect. The interstate commerce commission, however, desire this information only for statistical purposes while in Michigan it should have been, and now is required, for the purpose of living taxed upon the amounts reported. The balance is reported by the company's consisted of the amount or amounts outstanding to the credit of the company after deducting the amount earned from these sources the amount paid out and reporting this balance in the earning. If there was no balance in favor of the company making a report, then no taxes on account of any revenue derived from these sources.

Additional information was required by the department upon the subject and furnished by the companies in many instances, under protest. This information consisted of a report of the gross amount earned from their sources by the company, independent of the amount paid out to the other companies for switching or for the use of the tracks, yards, and terminals of the other companies. The amount so reported have been added to the gross income of the company reporting the same and have been taxed under the law. The gross amount reported as earned from these sources by the companies is $228,256.72.

The following is the amount of taxes to be paid by the several companies:

  • Ann Arbor - $31,000
  • Arcadia & Betsy River - $143
  • Au Sable & Northwestern - $1,625
  • Boyne City & Southeastern - $750
  • Chicago, Detroit, and Canada Grand Trunk Junction - $6,301
  • Chicago & Grand Trunk - $82,083
  • Chicago, Kalamazoo and Saginaw - $1,415
  • Chicago, Milwaukee and St. Paul - $6,821
  • Chicago and Northwestern - $61,675
  • Chicago and West Michigan - $39,626
  • Chicago and North Michigan - $3,542
  • Cincinnati Northern - $1,917
  • Cincinnati, Saginaw and Mackinaw - $3,332
  • Cleveland, Cincinnati, Chicago and St. Louis - $4,373
  • Detroit, Grand Haven & Milwaukee - $33,187
  • Detroit, Grand Rapids and Western - $87,598
  • Detroit and Mackinac - $11,610
  • Duluth, South Shore & Atlantic - $40,722
  • Flint and Pere Marquette - $66,865
  • Gogebic and MontrĂ©al River - $946
  • Grand Rapids and Indiana main line - $51,371
    • Muskegon, Grand Rapids and Indiana - $3,349
    • Traverse City - $986
  • Hancock and Calumet - $5,326
  • Indiana & Lake Michigan - $1,023
  • Lake Shore and Michigan Southern mainline - $31,127
    • Detroit and Chicago - $905
    • Detroit, Hillsdale and Southwestern - $969
    • Detroit, Monroe and Toledo - $15,728
    • Fort Wayne and Jackson - $1,492
    • Kalamazoo, Allegan and Grand Rapids - $3,677
    • Kalamazoo and White Pigeon - $2,584
    • Northern Central Michigan - $2,110
    • Sturgis, Goshen and St. Louis - $90
  • Lima Northern - $4,934
  • Lowell and Hastings - $325
  • Manistee and Grand Rapids - $1,533
  • Manistee and Northeastern - $6,919
  • Manistique - $2,762
  • Manistique and Northwestern - $940
  • Mason and Oceana - $320
    Michigan Air Line - $3,827
  • Michigan Central mainline - $184,067
    • Battle Creek and Sturgis - $463
    • Bay City and Battle Creek - $190
    • Canada Southern and Bridge - $47
    • Detroit and Bay City - $10,352
    • Detroit, Delray and Dearborn - $3
    • Grand River Valley - $7,978
    • Jackson, Lansing and Saginaw - $31,344
    • Kalamazoo and South Haven - $1,458
    • Michigan Air Line - $8,248
    • Michigan, Midland and Canada - $160
    • Saginaw Bay and Northwestern - $630
    • Toledo, Canada Southern and Detroit - $1,374
  • Midland and Northern - $50
  • Mineral range - $5,040
  • Minneapolis St. Paul and Sault St. Marie - $22,208
  • Munising - $1,512
  • Pontiac, Oxford and Northern - $3,103
  • Saginaw, Tuscola and Huron - $2,840
  • Sault Ste. Marie Bridge Co. - $821
  • South Haven & Eastern - $742
  • St. Clair Tunnel Company - $5,578
  • St. Joseph Valley - $93
  • Toledo, Saginaw & Muskegon - $3,031
  • Wisconsin & Michigan - $1,066
  • Wabash - $11,456
  • Detroit Union RR Depot & Station Co. - $7,385
  • Fort Street Union Depot Co. - $10,617
  • Bear Lake & Eastern - $219
  • Crawford & Manistee River - $181
  • Hecla & Torch Lake - $3,716
  • Lake Superior & Ishpeming - $3,682
  • Lewiston & Southeastern - $105
  • Manistee & Luther - $830
  • Quincy & Torch Lake - $923
  • Detroit, Toledo & Milwaukee - $6,370
  • Total - $945,150