Publication 216, The First 100 Years



When the Mexican War came to an end in 18481 California’s state and local authorities were faced with serious revenue problems. In annexing the region now known as California, the United States Congress had failed to extend any of its revenue laws to the newly acquired territory. This left California Governor Richard B. Mason with no statutory means of collecting revenue.

Prior to the treaty, military officials had been charged with the collection of customs. Realizing the need for an immediate source of revenue, Governor Mason instructed those military officials already collecting customs revenues that they were to enforce the United States Tariff Law of 1846 until civil officers could be appointed to the task. Both Governor Mason and his successor, Governor Bennett Riley, enforced this 1846 tariff act until November 12, 1849 when President Zachary Taylor appointed a man by the name of Collier as Collector of Customs at San Francisco on November 12, 1849.2

On June 3, 1849 Governor Riley issued a proclamation recommending the forming of a state constitution or a plan for territorial government. Delegates were elected on August 1, 1849 and a convention was held in Monterey beginning September 1, 1849. Here began the discussion as to what form of taxation might best suit the new government.

The establishment of a system of taxation was not an easy assignment. One basic problem was that all but seven of the forty-eight delegates were recent immigrants from all corners of the United States. As such, their views differed widely, for they were better acquainted with the needs and conditions of their native states than those of California. Most of the conflict revolved around one issue—whether the Legislature’s powers in tax matters should be absolute or limited. With this problem in mind, Mr. William Gwin, a representative from the San Francisco District, drafted a resolution which was subsequently amended to read:

“Resolved, that a committee of three be appointed by the President to report a plan to defray the expenses of the State Government, to be adopted by this Convention.” 3

The appointed committee consisted of Mr. Gwin, Joseph Hobson, and Abel Stearns. Their report, submitted on September 25, 1849, essentially called upon the United States Government for appropriations in the form of outright grants or a return of the aforementioned customs revenues collected after the Mexican War. The committee also suggested that any system of taxation be taken up by the first Legislature. The final paragraph of Mr. Gwin’s report explains the latter suggestion:

“In the opinion of the Committee, any system of taxation at present might fail in the object of revenue, and they believe that, when the necessity or policy for adopting this measure may arise, the Legislature will be the proper authority to provide for the case.” 4

Mr. Stearns goes beyond this in reporting:

“The undersigned, a member of the Committee, finds great difficulty in organizing the ‘ways and means’ best adapted to the present peculiar and unprecedented circumstances in which the State is placed, but would recommend as the most eligible plan, that the Legislature be empowered to raise the proper revenue for defraying the State expenses by levying an Income Land Property Tax, which shall not exceed one quarter percent; as likewise a Poll Tax which shall be left to the Legislature to decide upon, both in relation to the amount as well as the manner of carrying out the same.” 5

Needless to say, not all the delegates favored such a recommendation. Both the native population and the southern delegates feared the political power of the mining counties. They would not be satisfied until some constitutional guarantee of equitable tax laws were given to them. In an effort to act upon Mr. Stearns’ proposal while satisfying these southern delegates, the convention, acting as a Committee of the Whole, adopted the following:

“All lands liable to taxation in this State shall be taxed in proportion to their value; and this value shall be appraised by officers elected by the qualified electors of the district, county, or town in which the lands to be taxed are situated.” 6

Mr. Gwin, in turn, offered the following substitute (which he had admittedly borrowed in part from the constitution of Texas):

“Taxation shall be equal and uniform throughout the State. All property in this State shall be taxed in proportion to its value; to be ascertained as directed by law.” 7

This substitute clause disturbed some of the larger landowners because they feared that this would permit assessment by people outside of their particular locales. Mr. J. M. Jones of the San Joaquin district, therefore, offered this amendment to William Gwin’s amendment:

“But assessors and collectors of town, county, and State taxes shall be elected by qualified electors of the district, county, or town in which the property taxes for the State, county, or town purposes is situated.” 8

Thus the delegates arrived at Article XI, Section 13, of the Constitution of 1849:

“Taxation shall be equal and uniform throughout the state. All property in this state shall be taxed in proportion to its value, to be ascertained as directed by law; but assessors and collectors of town, county, and state taxes shall be elected by the qualified electors of the district, county, or town in which the property taxed for state, county, or town purposes is situated.” 9

It was this constitutional provision which gave the Legislature its powers regarding property taxation and which would later give birth to the Board of Equalization.

The customs duties collected in California between August 7, 1848 and September 9, 1850, the day California became a state, amounted to $2,968,748.40.10 During California’s Constitutional Convention of 1849, many delegates voiced the opinion that this money belonged not to the United States government but to California. However, in January 1850, the Civil Treasurer received orders from Washington to turn over this revenue plus that collected during the Mexican War to the United States War Department until Congress made a final decision on the matter. California, which would never succeed in recovering this money, was left without funds.

The new Legislature, recognizing its financial needs, began an immediate search for alternate sources of revenue. The first effort to obtain revenue came with the Legislature’s passage of the Temporary State Loan Act on February 1, 1850.11 This act, which called for the issuance of up to $300,000 in state bonds, provided temporary funds but could not serve as a permanent source of revenue. If the Legislature were to give the new state financial stability, it would have to adopt long-range revenue programs, which would inevitably require taxation.

1 The Treaty of Guadalupe Hidalgo was signed on February 2, 1848 and was ratified by Congress on May 30, 1848. News of the treaty did not reach Governor Mason until August 7, 1848.

2 Fankhauser, William C. A Financial History of California (University of California Publications in Economics, vol. 3 (1913) ) p. 13 hereinafter referred to as “Fankhauser”)

3 Browne, J. Ross, Report of the Debates in the Convention of California, on the Formation of the State Constitution, in September and October, 1849, p. 43.

4 Browne J., Ross, op. cit., p. 202.

5 Loc, cit.

6 Ibid, p. 364.

7 Loc. cit.

8 Browne, Op cit.

9 Ibid.

10 Appendix to the Congress Globe, 30th Congress 1st Session, vol. 29, pp. 71-74.

11 Statutes of California, 1850, Chapter 10, p. 53.