The Railroad Tax

By Jason Midyette

For January’s “Show and Tell” meeting Historical Society member Theresa Grossman brought in an 1873 dated property tax receipt (for 1872’s taxes) for her ancestor Thomas Davis’ land located between Troy and Fanning. While most of the tax categories listed, such as General State and County Taxes, School District and Township taxes, would be familiar to those paying property taxes today, one category stood out as decidedly odd from today’s perspective; the “Railroad Tax”. At $23.00, the “Railroad Tax” was the single largest tax paid and represented 22% of the overall $104.67 tax bill. So, just what was the “Railroad Tax”?

To understand the “Railroad Tax”, we first need a  little background;  The 1870’s and 1880’s were a boom time for railroads in America. Rail lines were being built just about everywhere there was a whiff of a population that might need service and for every line that was actually being built, several more were proposed. The railroad represented a massive leap in transportation technology and brought transportation costs, and shipment times, down to never before seen levels. Having a railroad opened up a nationwide market for a rural area’s agricultural products as well as allowing rural farmers the ability to purchase factory made implements and other goods from makers far away. The drop in shipping costs also lowered the cost of such goods as one boxcar could haul what used to take a whole wagon train. A railroad brought an aura of prosperity and permanence to a community (much as a paved highway would 60 or so years down the road and an airport might have 20 years further on) and folks were chomping at the bit to get one.

The hurdle standing in the way of all of this potential greatness was, as is the case with many undertakings, money. Railroads cost a lot of money to build and money was scarce. To help fund railroad construction, railroad companies often asked for and counties and towns often offered to issued bonds to build a railroad through a particular area. The county or town would issue the bonds and give the proceeds to the railroad to construct the line and then, through property or other tax collection, the citizens would pay off the bond principle and interest over a specified time period. Once the bonds were paid off, the tax levy was removed. Like a government bond issue today, such a project required a vote, so if it passed, the citizens must have felt they were getting more benefit from the railroad than the additional taxes were costing them.

In this case, the “Railroad Tax” was the result of Doniphan County issuing $200,000.00 worth of bonds in 1869 to help fund the construction of the Atchison & Nebraska Railroad from Atchison to the Nebraska state line north of White Cloud. Atchison County issued $150,000.00 in bonds for the line and private investors furnished some $90,000.00 to the cause. The railroad between Atchison and the state line was completed in 1871. In 1880 it became part of the Chicago, Burlington & Quincy Railroad (CB&Q) and was expanded north to Rulo, Nebraska and thence on towards Lincoln. By the early 1900’s the line had been cut back to Rulo, where it met another CB&Q line running east – west. What became known as the “Rulo Branch” was abandoned in 1931, with much of the right of way becoming county roads and the route of Highway 7 north of Sparks.

I suppose the final question to be answered about the “Railroad Tax” is Was it worth it? In the end, and as a whole, I would have to guess that it was. The railroad was actually built (and in a timely manner none the less) and provided service well beyond the time it took to pay off the bonds. (Not all who issued bonds were so fortunate, many proposed, and funded, railroads were never built, built in a direction different than originally planned or bit the dust long before the bonds were paid off, leaving taxpayers footing the bill for something that never or no longer existed.) In this case, the railroad lasted over 60 years and even today some of it is still in use as parts of county roads and Kansas Highway 7.