A Critical Assessment of the Originalist Case Against Administrative Regulatory Power: New Evidence from the Federal Tax on Private Real Estate in the 1790s.

Date01 April 2021
AuthorParrillo, Nicholas R.

Part 2 of 2

[I]f it shall be found practicable much advantage would in my opinion result from indications of the sentiments of the Commissioners respecting the value of different descriptions of Houses, and the value of Lands of different qualities in various parts of each division-- Without some standards to which reference can be had for determining the relative value of property in distant parts of the same State, there may be danger that the opinions of the Assessors will be so variant as greatly to increase the labor of the Commissioners in equalizing the valuations, as directed by the twenty second section of the act; for a proper decision on this point, I however repose entire confidence in the judgment and discretion of the Commissioners. (388) Note Wolcott's acknowledgment that assistant assessors were prone to have "variant" opinions on valuation, and also that he refrained from suggesting how each board should formulate its "standards" or what data it should use in doing so. In later correspondence with the federal board in South Carolina regarding a controversy over setting per-acre values for certain broad categories of land, Wolcott disclaimed any control of the boards' substantive decisionmaking about valuations. (389)

  1. The Federal Boards' Regulations and Approaches

    The regulations and instructions issued by the federal boards for the principal and/or assistant assessors--of which full copies are extant for seven boards and newspaper excerpts are extant for another two boards--show that the boards could take distinct approaches and, further, that neither historical sale prices nor any other type of hard data were widely accepted as providing a universal basis for valuation. It should be noted that nearly all the extant regulations and instructions are from northern boards: full copies are available for New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, and New Jersey, plus a newspaper excerpt for Pennsylvania. For the southern boards, our only knowledge of regulations is from the one in South Carolina, and consists of newspaper excerpts of the regulations, plus a published letter regarding the board's approach.

    Perhaps the most prominent distinction among the boards was that the federal board in South Carolina took up Secretary Wolcott's suggestion to give quantitative standards in advance on the value of different classes of land, while none of the eight northern boards did. According to a newspaper excerpt, regulations of the federal board in South Carolina adopted in 1799 included this language:

    The commissioners... recommend to the assessors to observe, in the assessment of the lands in their respective districts, the several regulations hereinafter expressed, that is to say: Class No. 1, shall contain

    * all tidal swamp, of the first quality, not generally affected by the salts, or freshes, which shall be rated at twenty-one dollars per acre;

    * all tide swamp, of the second quality, not generally affected by the salts, or freshes, which shall be rated at fourteen dollars per acre;

    * all tide swamp of the third quality, not generally affected by the salts, or freshes, which shall be rated at six dollars per acre. (390)

    It is unclear whether these classes and ratings were mandatory for the assessors. Unfortunately, almost no other text of the regulations has survived. (391) The word "recommend" suggests they were not mandatory, while the repeated phrase "shall be rated" suggests they were. A former member of the federal board stated that he viewed the regulations as mandatory, (392) while other officials apparently had a different view, though their statements were not entirely clear. (393) A published letter describing the assistant assessors' valuations once they were completed after an extraordinary delay in 1804 indicates those officers adopted inconsistent approaches, (394) suggesting that the regulations were nonmandatory or perhaps that they were rescinded sometime between 1799 and 1804. At the very least, the board in 1799 was announcing values of different land classes in advance of the frondine assessment, and it was recommending (if not requiring) that assessors follow them--something that its northern counterparts all refrained from doing. Notably, the values assigned to the classes by the federal board differed from the values assigned to the very same classes by the South Carolina state legislature in the annual state tax enacted just a few months earlier. (395) When the federal board was criticized for this divergence, a board member publicly asserted that the state legislature's class valuations sometimes did not reflect the prices at which land would actually sell, but in saying this, he cited no specific sources and seemed to rely simply on common knowledge. (396) His statement was then criticized by a former board member who said "the judgments of man, individually, respecting the value of landed property, are as various as their principles and practices in the common occurrences of life"--and that the board ought simply to have followed the state legislature's views. (397)

    Putting aside the controversy over the substance of the board's standards (on which I shall say more in Section III.D), the board's choice to specify any standards before the frontline assessors did their work was significant because it presumably aimed to reduce (or if mandatory, negate) the discretion of the frontline officials. In her study of taxation and slavery, Robin Einhorn argues that southern state legislatures often adopted mandatory land-classification schemes to keep tax assessors from trying to gather information about individual plantations, as such nosing-around might interfere with the authority of masters over enslaved people. (398) Notably, the Connecticut state legislature also had a mandatory land-classification scheme, yet the federal board there did not attempt to establish any standards ex ante, (399) underscoring how much discretion each board had to imitate its corresponding state legislature, or not.

    As for the eight northern federal boards that all refrained from articulating class-wide value standards prior to the assessors' frontline work, they exhibited important variation in their attitude toward historical sale prices. For a sense of this variation, consider how they responded to Secretary Wolcott's statements in his circular that urban houses are "frequently transferred" at ascertainable prices that "may serve as standards by which to value the remainder"; that "[h]ouses in the country are however rarely sold except in connection with farms"; and that a farmhouse might be valued at "the increased price at which a farm would [sell] in consequence of" the house being there. (400) In New Jersey, the board simply repeated Wolcott's statement, as part of a wholesale repetition of his circular. (401) In Massachusetts, the board similarly repeated Wolcott's statement as part of a more general repetition of his circular (which the board said it "in general adopt[ed]") except it omitted the part of the statement that said house valuation "will not be difficult." (402)

    Contrast these boards' close adherence to Wolcott's cautious statement with the federal boards in Connecticut and Rhode Island, who went farther than Wolcott in asserting full-throatedly that historical price data was plentiful and usable not only for houses but also for farms. The board in Connecticut rewrote Wolcott's language to say, "Houses and house lots in the principal towns, and farms in all parts of the state, are frequently transferred at prices which may be easily ascertained--these prices may serve as standards by which to value the remainder." (403) The board in Rhode Island announced that "the value of farms with the buildings thereon is generally known in each district by comparing sales which are frequently made." (404)

    Yet other federal boards went in the opposite direction, modifying Wolcott's statement to be less sanguine than the Secretary about using historical sale prices of urban homes, to say nothing of farms. In New York, the federal board said that "[h]ouses, in large towns, are often sold: and the prices they bring, when sold voluntarily, sufficiently determine their value." (405) This phrasing omitted Wolcott's assertion that historical prices of some houses "may serve as standards by which to value the remainder," implying that a historical price indicated the value of the house sold but not others. The phrasing also added the qualifier "when sold voluntarily"--an insertion that resonated with the board's admonition later in the regulations for assessors to look critically at historical sale prices, distinguishing between price and the Valuation and Enumeration Act's touchstone worth:

    A man of great property or one who has particular occasion for a place may give far more for it than what it is worth. On the other hand, property brought to a forced market, at Sheriff's sale or by a person in distress for money, will not usually bring near so much as it is worth. Neither of these is your rule. You will seek the price which a judicious man would pay for property bought for use and bought of a person not in want. (406) In Vermont, too, the federal board told assessors to look critically at historical sale prices, likewise positing a distinction between price and worth that could emerge not only in necessitous bargaining circumstances but also when the money supply was, in the judgment of officials, abnormal. After repeating much of Wolcott's circular, (407) the board then qualified it by saying that the "worth in money" of houses "must not be determined merely by the price they were last sold for by an unfortunate owner, or purchased by a man to suit his fancy or convenience, or set off upon Execution, or what they would fetch in any scarcity of current coin; but what a prudent man, would willingly pay for them, in cash, when a due proportion of...

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