The Charleston daily news. [volume] (Charleston, S.C.) 1865-1873, 1873-02-18
The Taxation of mortgages-A Lesson
Eor Our Legislature.

structive discussion OF the effects OF that
tax. Its most conspicuous impropriety Is
that it taxes the same property twice, or at
tempts to do 80; it taxes at lts full value the
property mortgaged and taxes the mortgage
on it. A farmer who owns farm worth
$4,000, on which there is mortgage Tor
$4,000. paws taxes on $4,000, and the holder
OF the mortgage pays taxes on $1,000; 30
that the farm, worth only $4,000, actually
paws taxes on $1,000; in other words, the
State, in this case, collects taxes on $4,000
worth OF property which does not exist BY
all rules OF equity the farmer should pay
only $4,000, minus the mortgage, or on S3OoO;
or the holder of the mortgage should go
free. It might be said that to let the mort
gagee 20 free, by exemptiug the mortgage,
would be an oppression to debtors and
special favor to the creditor class, or loaners
of money. But, on the other hand, it is
argued that the benefit would ultimately 60
to the borrower, since it would increase the
amount of money offered on mortgages,
cheaper the rate OF interest, and enable
debtors to borrow more easily. A tax is
not always borne by those on whom 1t is d.
rectly laid; this Class may Shift it to the
shoulders OF others, and thus 1t may in the
end fall upon those who least expected 1t,
and who not unirequently pay it without
knowing it. The advocates OF the repeal OF
the mortgage tax in New York say that 1t
is one of this kind. Pretending to be tax
on the rich creditor, it really leaves him
free, and falls with heavy force upon the
poor debtor, who needs money and has to
borrow it; for il the creditor has TO pay O
2 Der cent. tax on his mortgage, he adds
that per cent. to the rate OF interest, and
makes the debtor pay 10 per cent on loan
which, otherwise, he might have TO- 8 per
cent. And even this ls not all. The debtor
continues to pay taxes on the whole value
OF the property mortgaged, as we'll as the 2
per cent. which the mortgage shifts to him.
Traced back To It's final result, 1t would be
| found that farmer who owns farm worth
$4,000, on which there is mortgage OF
$4,000, actually pays taxes, first, on the farm
itself, $4,000; second. on the mortgage,
$4,000; making total valuation OF $1,000
on which he pays annually. II is said that
the mortgage tax in New York has 30 dis
couraged the investment OF money in this
species OF security that farmer owning
sl5, 600 worth OF real estate flnds the utmost
difficulty In raising loan OF $4,000 on 1t;
he can do 30 only by paying rate OF inter-
est which farmers cannot afford; and thus
the development OF agricultural wealth and
the improvement OF farms are seriously re-
tarded by the difficulty OF securing favorable
loans.
Mr.. Mann, OF Troy, told the committee
that all classes there we're 10 favor OF repeal.
Mechanics and other small borrowers were
unable to borrow money for building, while
interest on money borrowed on mortgages
was at rates OF ten to fifteen per cent, be-
ing enhanced by the double burden of the
tax. Mortgages were drug on the market,
and something should be done to bring them
up to the same value, as securities, as govern
! ment and railroad bonds. 1t was far more
profitable now to take q government bond
at five per cent. than mortgage at ten.
The present tax was 90 onerous that small
borrowers could not get money. Mr.. Holt
man, from Albany, said he had been In the
real estate business for twelve years. In
that time he had had hundreds OF applica-
tions from small borrowers owning houses,
such as mechanics, for money to be raised
on mortgage; but the tax on them reduced
the interest to three per cent. and people
would not lend money at this rate. II the
law exempted mortgages from taxation, he
would say that within o fortnight there
would be s5O,OOO ready to loan out OF
houses, where now no one can borrow dol
lar on them.
A still more interesting point was made by
man OF great experience, Mr.. Mathews, o
New York, who said that the tax on mort
cages does not yield more than s500,00t
revenue to the State, and il they were ex
empted from taxation the disposition to in
vest In mortgages in New York would revive
and would acquire so great an impetus thai
money to build could be borrowed at six pei
cent, and the additional buildings would ado
millions to the taxable property OF the State
Loans OF estates and trusts made on then
had been called in; 1t was no longer thu
custom to loan money to be invested il
mortgages; and, from lack OF funds anc
other causes, the amount OF building going
on this year was from ten to fifteen milliont
less than in 1871.
1t would be instructive to inquire how
much the tax on mortgages yields in Souti
Carolina. 1t is sale to say that not one
fourth, probably not one-teDth, OF the mort
cages pay It. 1t is species OF propert!
easily concealed, or transferred, and thui
kept out Of sight Of the assessor, while thu
property mortgaged, being tangible ant
visible, never escapes The creditor ma.
escape the tax, but the debtor cannot. Al
inquiry into the subject might reveal tha,
the mortgage tax, which is tax on money
loaned, falls, not on the loaner, but on the
borrower at last, and that a reppal M r. wouIf