Railroad Land-Grant Rates

Abstract

F OR nearly a century the reductions in freight rates made by the railroads to the government in return for grants of land made by governments-general and states-to the railroads has been the subject of controversy, legislation, and litigation. The first land grant to a railroad was made on September 20, i850, by the state of Illinois of land granted to that state by the federal government for the purpose of aiding the state to build a railroad. In return for the land the Illinois Central Railroad was obliged to give concessions to the federal government in rates upon the transportation of property and troops and to pay to the state of Illinois 7 per cent of its gross revenues of its so-called in lieu of taxes. The state contended that this payment was in lieu of state taxes only, while the railroad contended that it applied in lieu of all taxes-municipal, county, and state. In the litigation upon this issue Abraham Lincoln was retained as counsel for the Illinois Central Railroad. The case went to the Supreme Court of Illinois, where the contention of the railroads was sustained. Lincoln's five-thousand-dollar fee was contested by the railroad, and, in suit for it, Lincoln won a judgment for the amount against the railroad. Land grants were made from the public lands of the United States in two ways: (i) by direct grants from the federal government to the states to be used for obtaining the construction of railroads by the states and (2) by land grants made directly to the railroads by the federal government. Grants of the first sort are exemplified by the federal grant to the state of Illinois, which was in turn granted by the state to the Illinois Central Railroad to assure the construction of the charter line of that railroad, and by