Speeches delivered by Pat M. Neff, Governor of Texas, discussing certain phases of contemplated legislation Page: 26 of 61
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In Texas, as in most all States, we levy a tax upon the gross receipts
of certain industries. This law should be widened and strengthened.
There are many activities enjoying earnings upon capital far in excess
of the value of their physical properties. The difference between the
taxable value of their physical properties and their going concern value,
represents intangible values. In Texas we tax the intangible values of
railway, bridge, and toll road companies. Unon certain other activities,
in most instances in lieu of the tax on intangibles, we levy a tax
upon gross receipts. As between these activities and others assessed
upon their intangible properties, the question of justice is measured by
the rate of levy. The problem is not so much one of method of application
as one of reaching taxable values not adequately reflected in the
assessment of physical properties. The gross receipts tax is levied in:
addition to the ad valorem tax on physical properties. In most instances
this process with reference to the activities so taxed may, from
the standpoint of the State's justly expectant revenue, be made to serve
the same purpose and with less expense to the State than would their
inclusion under the provisions of the statute providing for taxation of
intangibles. As a matter of law intangible values are, without further legislation,
subject to tax; they are no more exempt than are tangible properties.
But, with few exceptions, we have no governmental machinery
for reaching them. The statute should be broadened that they may be
reached. It will be found that the field of taxation is rich in untaxed
intangibles. In dealing with such activities and doubtless others, ihe
law-making body will find itself obliged to choose from three methods of
taxation: First, a tax upon their holdings, tangible and intangible;
second, in addition to the ad valorem tax upon their physical properties,
the levy of a tax upon gross earnings; and, third, a tax upon net
earnings, or in other words, an income tax.
Among activities coming under the provisions of our Gross Receipts
Tax Law are oil companies; individuals, companies, corporations, or
associations which own, control, manage or lease oil wells within this
State. Under the provisions of the statute an occupation tax is levied,
measured by one and one-half per cent of the average market value of
the oil produced. In effect, this, to a certain extent takes the place of
a severance tax, the levy being made upon the occupation or privilege
of taking the severed mineral from the soil. the point should be emphasized
that there is no relation between the severance tax and the
property tax. Property tax is based on capital value; property we ourselves
accumulate under protection of law. The severance tax is a tax
upon privilege; the right to draw upon our economic wealth; our natural
resources which have accumulated by the gradual operation of
The principles upon which the two are based are entirely distinct.
Nor can it be said that such privilege or severance tax works a greater
hardship upon activities so engaged than upon other business interests
whose operating property may be of the same value. Following this
doctrine the State of Pennsylvania receives annually under its Severance
Tax Law, revenues from its anthracite coal deposits alone amounting
to seven million dollars. West Virginia under a similar statute
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Neff, Pat M. Speeches delivered by Pat M. Neff, Governor of Texas, discussing certain phases of contemplated legislation, book, 1923; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth5835/m1/26/: accessed April 24, 2018), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; .