w
WalfeiM
V embers of the Legislature:
V T tne clse of my administration as governor of
;j the state of Oregon I wish to express'to the people
rrtr appreciation for the great honor that has been con
, ffired upon me, and for the wonderful opportunity
sfor public service which I have enjoyed for the four
P'es last past. I am retiring in the firm belief that
VlJhe main my administration has been most suc
huS and that the real accomplishments will become
;rnM? apparent as the years go by.
In fulfillment of my promise made in my first mes
sage, I am today returning the commission given me, as
clean and as untarnished as I received it four years ago.
The legislature at this time should declare and out
line a state policy on the following issues pressing for
settlement:
(1) Hydro-electric development
(2) Reforestation
(3) Taxation j
(4) Liw enforcement I
(5) Irrigation j
w;
HYDRO-ELECTRIC DEVELOPMENT
ATETi power is,one of our very valuable natural
resources. It belongs to all the people, and if we
should allow this heritage to pass into the hands of
special interests future generations -vjrould scorn our
memory as we do today the men responsible for wast
ing the school fund of Oregdn. j
The development of Oregon's water power will
bring a new era of prosperity to the jstate. Literally
millions of horsepower are available from the streams
coming down the sides of our mountains, fed by the
eternal snows. I ask you to enact suqh legislation as
will make it possible for any district or gity in the
state to organize, acquire power sites, issue bonds,
construct hydro-electric plants and sell the power, so
that the original investment may be absorbed within
a reasonable number of years. This tremendous
resource must be developed by the people, for the
Sieople, or the state of Oregon must yield first place to
fl our sister state on the north, which has developed such
A a vast amount of electric Dower and is now sellincr it to
' M X 1. A - 1 4 1 A 1 x - i 1 -
v ne" citizens ax rates so low mat it can ue usea econom-
1 ? n r . l a; i i i
icany even ior neating xne nomes.
Nut only should factory wheels be turned with
this power, but the homes in both city and country
should he heated and lighted. Propose a constitutional
amendment that will give the people the right to aet
through a municipal corporation. If you enact proper
legislation at this session, Oregon's prosperity will
double and treble, and come to know no bounds. If
you yield to the propaganda of the special interests,
you will do nothing. The people will be able to judge
from your action in this matter whether you desire
to legislate for the many or for the few.
REFORESTATION
tREGON is today, the leading timber state in the
'Union. It can remain such, and the output of
lumber can be quadrupled, if present existing forests
are conserved and proper methods adopted for refor
estation. This problem must be approached from the
standpoint of the whole state and not. from the stand
point of the vested interests. Even on privately owned
land the forest growth should be cut under a selective
logging plan similar to that now in use by the United
States Forestry Service. An unripe tree should not be
cut even on privately owned land. I recongnize the
fright of the individual in privately owned land, but
that right is subordinate to the rights of the entire
people. If the beautiful mountains of Oregon are
denuded of their timber, as they will be in another
generation unless some action is taken, the same disas
trous consequence-will follow here that have resulted
in other parts of the world.
Fully 80 per cent of the timber in this state belongs
to non-resident individuals and corporation, and only
a small part of the himber manufactured in the state
is consumed at home.
The State Board of Forestry consists of the gover
nor, the acting head of the forestry school of the Ore
gon Agricultural College, and five electors of the state
of Oregon, appointed by the governor from and upon
the authoritative recommendation of the Oregon State
Grange, the Oregon Forest Fire Association, the West
Coast Lumbermen's Association, the Oregon .Wool
Growers' Association, and .the United States Forest
Service. The board therefore consists of seven mem
bers, five of whom are appointed by five different pri
vate organizations. I recommend that the law creating
this board be so amended that the governor may have
the free and exclusive right to appoint the members
thereof, without the necessity of a recommendation
from any organization.
The two forestry bills that will be presented at this
session practically vest in the State Board of Forestry
the power of taxation, a greater power than should be
exercised by any commission not directly rtsponsible
to the governor or to the people.
Assessing property for the purpose of taxation is
one of the most important function of government. It
is intolerable that such powers should be exercised
by a board, the majority of the members of which, are
appointed neither by the electorate nor by any govern
mental agency whatever, but solely by private" organiza-
Jtions standing In no responsible relation to the state,
controlled, it may be, by persons who are not
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the members of this board is repugnant to the whole
spirit of representative government. The oonstitution-
J W ahfy of this law. should be tested at an early date.
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for future generations. Nature has given us the soil, t
the rain and tfuy simi the necessary elements to gttfw'
the tree.- When the h-e?rha$ reached maturity itf fcTiiof
right nor jus that it should be the property of descen'-'
dants of men who are fortunate? endugfr today to own '
the land-and are-powerful enough in political Circles
: ; v''. ( CONTINUED
to secure legislation that will enable them to grow the
tree to maturity practically, free from taxes.
I do not believe! that standing timber should be
taxed, but I do believe in a severance tax. In former
messages I have recommended such a tax on timber, to
be divided into four parts, one-fourth to go to the state,
one-fourth to the irreducible school fund, one-fourth
to the county in which the timber is cut, and one-fourth
for reforestation. Vested interests seem to be so
strongly entrenched in this state that it appears utterly
impossible to secure the enactment of such a law from
an Oregon legislature. By way of compromise I now
recommend that a severance tax be imposed and the
entire proceeds used for reforestation by the state.
We should not allow our beautiful forests to be cut,
manufactured into lumber, and sold in eastern states
and foreign countries, and not realize enough revenue
therefrom to start an active reforestation program.
TAXATION
IN my first message I stated that the reduction and
redistribution of the tax burden was the paramount
question. We have made progess with this vexing prob
lem, but it is still a paramount issue. The enactment
of the income tax law in 1923 was a signal triumph
. for the overburdened taxpayers of the state, and for
those who believed that the money necessary for the
maintenance of state government, including the millage
taxes, should be collected from sources other than a
tax on property. The income tax was in effect only
ten months, but under its operation the state collected
$2,928,320.65, and the money so collected has been
largely responsible for the reduction made in the state
tax levy, which in 1922 was $9,376,289.11, and in 1926
was $7200,830.79. There has been a. material reduc
tion in the amount annually, contributed by each county
in the state. I claim and have a right to claim full
credit for this reduction, by reason of my championing
the income tax, vetoeing bills and curtailing the expen
diture of state funds. I have never faltered in my
demand upon the legislature to enact laws for collecting
money for state governmental functions without resort
ing to a property tax. Ten years ago, for the second
time, I returned to the state senate, advocating the
principle that visible property should not bear the bur
den of maintaining state government. Three tax inves
tigating committees have reached the decision that vis
ible property must be relieved of part of the burden.
The special tax investigating committee, appointed by
the last legislature, went on record unanimously last
month as being in favor of this principle. I consider
the action of this committee a complete vindication of
what I have advocated so long, so earnesly and so
faithfully.
There are several states in the Union, California,
Pennsylvania, North I Carolina and Virginia, that levy
no tax on visible property for the maintenance of state
government. North Carolina, collecta abnost all state
revenue from a tobacco tax and an income tax. Penn
sylvania, with a budget of $63,452,654.00, raises the
money from the following sources :
Charter stock taxi.' $18,333,086
Corporate loans tax 6,851,989
Corporation bonus on charters 1,760,393
Gross receipts tax 4,104,414
Insurance premiums tax 4,026,489
Bank stock tax 1,455,704
Mercantile license tax 3,650,222
Anthracite coal tax 6,741,761
Emergency profits- tax 2,125,000
Inheritance tax 11,561,367
License fees tax 2,444,274
Miscellaneous 397,955
$63,452,654
Ohio levies only $2,800,000 on visible property,
while Oregon, in 1926, levied nearly three times as
much. Yet Ohio has a budget of more than $50)00,-
000 and has fifteen times more wealth than Oregon.
The same situation prevails in most of the states of the
Union. ' Only three states exact a larger per capita
contribution than Oregon from the owners of visible
property for the maintenance of state government.
Columns and pages of misinformation have been
published in the pres4 .of the state during the past two
years about the difficulties surrounding the function
ing of state government, by reason of the fact that
property taxes can not be increased more than 6 per
cent a year. I have been accused of being largely
responsible for this condition. I am proud to acknowl
edge the responsibility. I was president of the State4
Taxpayers' league that was largely responsible for
enacting the 6 per cent constitutional limitation amend
ment, I also have been a member for four years of the
State Tax Commission when tax levies have been made.
1 have made it impossible for the state levy to be
increased materially on the small homes and farms of
this state." Most of the functions of state government
are fpr the benefit of the corporations and business
interests of the state,; and even the most profligate of
legislatures would have more money than it could spend
if these . same corporations and business1 interests paid
taxes in proportion to the amount paid by the farmers
and the small property owners.
The situation demands that you enactl legislation
that will force an equalization of the burden. Records
on file here in the statehouse show that in 1923 there
were 2,260 business concerns on our tax rolls that had
a book value of $254,000,000; they were assessed for
$63,000,000, or 25 per cent of the book value. These'
same 2,260 business concerns had a net income' of
$29,283,000, or.li per cent of book value, Just think'
of it! These 2,260 business 'concerns made a net
profit in one year of 47 per cent of their assessment
I am not dreaming, guessing or estimating. These fig-
urea have . been takexi from the sworn statements of
these business firms. It is also worth noting that these
. figures are not from a few firms,', but; from manyv ,
scattered all over the state. In one county, not Multno
mah, nine hlanufadfiiiing concerns had a boblfvalue of
over' $10,0d0,000, 'a- net income. of: $2,755,000, assessed?
for $246,690; qr: 81 iper3 cent of their net profits' f by
pnV year. ' In another comity! five corporations' had ;
is;FaEewel
I Message Tp'StH
FROM PAGE ONE)
book value of $17,560,000, a net profit of $2,629,000,
and were assessed for $2,754,000.
The federal census for 1925 shows 700,000 acres
less cultivated land in Oregon during that year than for
the year 1920. The number of abandoned acres will
increase with the years unless he who cultivates the
land is able to realize a larger portion of the real value
of the products he raises, and also be given relief from
the excessive amount of taxes he is now obliged to pay.
short time ago my attention was called to a corner
lot in one of the prosperous cities of the state. Upon
this lot there had been recently erected a beautiful
building, costing many thousands of dollars. The lot
was appraised by three shrewd business men. The
highest appraisal was $125,000; the lowest, $90,000.
That lot is assessed for $16,000. This instance could
be multiplied thousands of times. I warn the owners
of great wealth, those who control the business inter
ests of this state, and also largely control its politics,
that the continuation of this policy is exceedingly
dangerous, for loyalty, can not be expected among the
citizens of this Republic and of this state when a man
is obliged to give up his farm for taxes and then behold
hundreds of instances just like the one I have cited.
Such a condition breeds not patriotism, but bolshevism.
Notwithstanding the repeal of the income tax law
in 1925, and the failure of the people to enact the
Grange Income Tax Bill in 1926, 1 still contend that it
is the fairest and most equitable method of distributing
part of the burdens of state government. I believe it is
yorur duty, at an early hour in this session, to enact into
law the principles embodied in the Grange Graduated
Income Tax Bill.
A tobaeco tax is in force in twenty-two states in
the Union. Many more states will enact such a law this
year. From this source a million dollars could be raised
annually. Two years ago, in the office of the president
of, the senate, an agreement was entered into between
myself, as governor, and representatives of the to
bacco interests, to the effect that if I would sign the
tobacco bill, which omitted cigars, there would be no
referendum called on the bilh I kept my part of the
agreement. Because this bill was referred, there is
today a deficit instead of a surplus in the state
treasury.
Much printer's ink has been waited on the so-called
deficit in the state treasury, and how handicapped this
legislature would be in providing for the proper func
tioning of state institutions. Here are the facts from the
books of the state auditor : There has been a deficit at
the close of nearly every year for ten years last past.
On December 31, 1922, at the time I was inaugurated
governor, there was a deficit in the state treasury of
$582,872.85. The same books now show a bookkeeping
deficit of $969,823.71, which will be reduced by the
return of the unused balances from the various appro
priations. These unused balances will aggregate $300,
000. In other words, the total actual deficit now is not
to exceed $100,000 greater than when I was Inaugu
rated governor four years ago, and this amount was
appropriated by the people in November for the
Eastern Oregon Tuberculosis Hospital, and is included
in the estimates. What a mess of falsehoods have been
spread, circulated and hammered into the people of this
state as propaganda. We heard nothing about the
deficit four years go, six years ago or eight years ago,
but now we hear much about the present deficit because
powerful influences in the state desire to put over
this misinformation.
Many, many times the statement has been made that
all Pacific Coast states should have the same kind of
tax laws. Friends of" the income tax have been severely
criticized for pioneering in this method of raising
revenue. The critics can now show their sincerity by
assisting in the passage of a law in Oregon similar to
the California law taxing corporate excess. Under that
law California is collecting over $6,000,000 annually.
Such a law would yield over $1,000,000 annually in this
state. It would hurt no one, reaching only those enjoy
ing excess profits It would reach firms in Oregon that
have a small amount of tangible property and large net
profits, often exceeding the assessments.
When I was inaugurated governor the insurance
department of the state was collecting for the state
treasury 316,793 in revenue. The amount collected in
1926 was $695,597. The fees collected from insurance
companies very justly can be increased. California col
lects a larger percentage than we do in Oregon.
At least 1 per cent should be levied on the premiums
of all domestic insurance companies in the state. The
law provides that they must be examined at frequent
intervals, and this entails considerable expense. There
is no reason why the domestic companies should be
entirely free from bearing their part of the burdens of
government, which have been increased by reason of the
operation of these same domestic insurance companies'.
The life insurance companies have derived great
benefit financially from the work of the state boards of
health in the various states by reason of the prolonga
tion of life. It is my belief that a special tax should be
levied on these companies sufficient to pay the expense
of maintaining the state board of health.
Corporation fees can and should be increased. Espe-'
cially should a much heavier tax be levied on non
resident corporations.
As a resuit bf my vetoing the appropriation for the
Public Service Commission two years ago, the legisla
ture provided for a special tax on public utilities, to
raise funds to maintain the Public Service Commission. -
The fund provided has not been found sufficient. The
commission should not be a burden on the general tax-'
payer. The percentage collected should be increased.
' LAW ENFORCEMENT
ITTIHE fourth great issue demanding solution is law,
X enforcement. ? The first 'great cause of crime is
lack of respohsibility. ; A large number of our people
do hot realize and appreciate the wonderful privilege
"of being American citizens. They simply don't care.
The rich and, the powerful must be made to see that
if is not only their duty, but is necessary for their
safety, to help the less f ortnuate to secure positions
where they can earn a competence. Equal opportunity
to earn and acquire is necessary! above all things;- Free
institutions will be approaching the end when men arid
women accumulate in numbers and t are not able to
secure employment at remunerative wages, and these
great fortunes of the rich and .the powerf-ul may melt
in anight, before the angry, 'unreasoning mob, demand
ing bread, just as such fortunes have melted away
many times in the centuries past ; -1'
Prohibition and the enforcement of the Eighteenth
Amendment is here to stay. The bootlegger and the
manufacturer of moonshine whisky must be driven
from the boundaries of our state. The product sold as
whisky is killing and blinding hundreds and disabling
and impairing thousands. No man can with safety
today drink the moonshine whisky that is being illi
citly sold. I " :f r
There is decidedly a far better degree of ; law
enforcement today in Oregon thaA. there was when I
was elected governor. There are counties, in the state
where there are practically no violations of the law. I
have repeatedly said that the success of law enforce
ment is measured by the degree of cooperation between
citizen and official. It is noticeable that the sentiment
for law enforcement grows steadily better as the years
come and go. I am aware of the fact that there is a
studied, carefully planned campaign of propaganda
sweeping this country from end to end, poisoning the'
minds of the people, and endeavoring to create the
impression that there is more drinking of alcoholic
liquor now than before the passage of the Eighteenth
Amendment. This is absolutely untrue and not founded
on fact There is not 5 per cent of the liquor consumed .
in Oregon today that was consumed ten years ago, and
the amount is growing less year by year.
. IRRIGATION
THE fifth leading issue upon which you shouljl
declare a state policy is irrigation. The increased
population will soon demand every available acre in the
state. The trouble with agriculture today is not over
production, but under-consumption. There are many,
many thousands of our citizens who are financially
unable to buy. The increase of the arable area in Ore
gon depends upon irrigation. The federal government
has at last entered upon the active development of the
irrigation projects of Malheur and Owyhee. Undoubt
edly, in the near future, provision will be made for the' '
Baker, the North Unit, and many other projects that
will require federal aid for proper development ;
The state, however, has a problem of its own,
brought upon us by the ill-advised constitutional amend
ment which gave the securities commission authority'
to guarantee interest on bonds issued by irrigation dis
tricts for a period not exceeding five years. Under the
operation of this law the state guaranteed the interest
on bonds issued by 15 districts. Like the usual guaran
tor the state was called upon to pay, and did pay, inter
est for several of these districts, by. issuing general,
obligation bonds of the state to the amount of $2,168,
260, upon which interest has accrued to the amount of .
thousands of dollars. The state f has certified to the
value of twenty-nine irrigation districts, and these dis
tricts have issued fconds to the amount of $11,871,000.
Since the expiration of the state guarantee several of
these districts have defaulted ill the payment of inter-
est and principal, and chaos now prevails. -
Upon this question you should declare a state policy
I recommend ( 1-) that it be.declared that the state in no
way asumes responsibility for the, bonds issued by the
irrigation districts; (2) that you propose the repeal,
of the constitutional amendment guaranteeing interest
on these bonds; (3) that the right of the bondholder
to all of the property in-the districts be freely ac
knowledged; .(4) that you do not provide for a commis-r
sion or committee to investigate. It simply means
delay, There-is" nothing to investigate Like the man
who loans more money on a piece of property .than the
property is worth, the bondholder individually and in
the aggregate, must accept his part Of the loss, which
is the difference between the actual value of the land,
and the amount due under the bond. v
' By reason of having paid the interest for some of ..
the districts, the state occupies a peculiar position in,.,
this matter. There is a reasonable probability that if
the case is presented properly, the Supreme Court will
find that the state, by reason of its advances, holds a
prior lien over the bondholder. . At least the state is in
position to effect a compromise between the holder of
the bond, the settler and the people. The first thing
necessary is tar put the land to work. That can be done
only by securing permanent settlers. Permanent set-
tiers can be secured only by giving them a limited
- liability ; that is, by selling them a specif ied number of '
acres for a stated sum of money, frpe from the general
blanket mortgage that now covers every irrigation dis
trict Any attempt on the part of the state.to pay delin- .
quent taxes will cost the state all the money so invested,
will be of ho aid to the settlers and may result in the
state's being obliged to assume the entire bond issue. ,
;. I ave" persistently,; opposed th,e guaranteeing of
interest on irrigation bonds. I lost my seat in the
senate six years ago because I dared to fight the corpo
rations who were in favor, of it j-1 faced threat of
recall three years ago because as governor I refused to
allow further interest to be guaranteed upon other dis- .
tricts. I felt the full power of the opposition in the
recent election. -I warn you that they have strength
political and financial, and if the people fall asleep, as
they ate apt to do, state bonds will be substituted for
the entire amount of the -outstanding irrigation bonds,
and instead of a loss of nearly $3,000,000, as at present,
the amount may reach 15000.000, if the plans prevail
that will be presented, at this 'session, by; the powerful
banking group ' which- holds and owns many of these
iiriffafioji bonds. This law has been the cause of many
farmers lr5ingl their earnings of a lifetime'when thoy
-were invested in farms .within the boundaries of these
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