The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1879-03-15

: UtTC, tVtT sTICe IUt EUIuIIIIVu OF Tue gUVETuutuEs
to allow debts. due and owing by the taxpayer to
be deducted from the value Of his personal estate
and 10 assess his taxes on the balances; so that, the
man, who had the 81 900 in his hands by borrowing
and who owed the note, would deduct the amount Of
his bill payable before assessment. Thus, if 4 had
81 coo. and b had nothing, and borrowed the
81 coo OF 4 TO 20 into business with, we have been
accustomed to consider that L was no richer, sad \
no poorer by their transaction; that Il was n mere
employer OF AS money, and that b was no more
able TO pay taxes than before lie borrowed the
81, 900, and A no less able to pay taxes. 1t was
even the custom, before the amendment of Sec
ton 4S4 Of the Civil Code, TO allow mortgages TO be
deducted from the value Of real property. By
Chapter LXH of the Session Laws of 1876, it was
enacted. There shall be assessed and collected
upon all real property within the Kingdom, not
1 specially exempted from taxation, an annual tax OF
three quarters Of one per cent. on the full cash value
Of the same, TO be assessed in the district where
situated irrespective of any mortgage" This change
in the law regarding real estate was probably made
to avoid the deduction of foreign mortgages, as well
as TO fix the taxation of real estate in the district
where it is situated.
Thus il will be seen, that in the case supposed by
Judge McKinstry the creditor, as the one best able
to pay the tax, would pay it in this country, and
not the debtor, or man least able to pay it; at any
rate, the same thousand dollars does not pay tax
twice.
And, even since the passage of the Act above al
luded TO, requiring real estate to be taxed for its
full value, Notwithstanding a mortgage. the map
who owes the mortgage is always allowed 10 deduct
the amount of his mortgage from the value of his
personal estate, if he has any; so that the so-called
double tax is paid only when a man has q piece Of
real property, which is mOrtgaged, and owns moth
ing else. Thus, if n man has in his hands s. 1900.
and n house worth $4,000, and owes q debt of
81 900. he would pay tax on s 900 personal pro-
Perty and on the $4,000 for his house; but if his
creditor desired security, and he was anxious to
keep the money for the purpose of employing it in
his business, and therefore gave a mortgage on his
house, the mortgage, that is to say, the security,
would not make any difference in his position; he
would still have 10 pay 81, 600 on his house, ard
81 900 on his personal property.
In arguing this case, Counsel asked, where is the
justice IN allowing persons to deduct the amount OF
their debts from the amount Of their personal pro-
perty and not from the amount of their real pro-
perty' The answer is, it is a matter of policy, for
which many reasons might be assigned were it nee
essary; but it is sufficient TO say, that the Legisla-
ture have so decided and the Court must obey the
Legislature, and it certainly does not lay in the tax
payers mouth to complain that he is able to deduct
his debts from one kind of property, because he is
unable to deduct them from another.
Judge Wallace in rendering his opinion, IN the
case above quoted says, that the Legislature sin
making up the budget. must necessarily look to the
aggregate amount Of the actual wealth in the hands
of the people. This constitutes the capacity to pay,
which it is always indispensable for the statesman to
consider and in considering it, how can it be sup
posed that the aggregate wealth of the people is all
made up Of credits, the mere Indebtedness owing by
individual members of the body polite TO others of
its MEMBERS
Now, we say likewise, thGs the aggregate of the
actual wealth constitutes the capacity to pay. But
we say, likewise, that it is indispensable for the
statesman to consider what individuals represent
that aggregate wealth ? what individuals have the
capacity TO pay7 and it is certain that the creditor
class has more capacity to pay than the debtor class.
In the case supposed above, the borrower, who IS
working with other mems money, has no capacity to
pay at all, in comparison with the lender who has
aggregated wealth.
The allegation that the borrower does pay the
lenders taxes in the higher rate of interest demand
oil IL IN iDfarauaa nn1u II 6oas NOT onnaar fhat IF
mortgage loans be exempt from taxation, they will
be placed at n rate lower by the amount of the tax.
This circumstance infer ALA might be considered,
but the controlling circumstances are supply and
demand, the market value Of the security and the
character and necessities of the borrower. The rate
of interest in this Kingdom has fallen from Is per
cent. to 9, and even lower during the years the tax
has risen from nothing up to ! of one per cent.
II has been said above that deduction is allowed
from the personal property for the debts owed by
the tax payer; and that we might be entirely certain
Of this, we have sent for the assessment roll of one
OF the citizens, who was sworn to have owed the sum
of 1000, and we find that his personal property
consists largely of schooners valued at say 1884,
500, from which he deducts SIG 600 debts. and
among the debts are noted, " Hackfeld & Co., +.
Krull, $l2, 900.
But even in a case where the mortgaged pro-
perty does pay tax, it is no hardship on the creditor
that his debtor pays the tax.
There is no reason why A should not pay the tax
on his property, because that b his debtor pays more
tax than he ought to on his property.
In the case of People VS.. McCreary, 81 Cal, 432,
the action was to recover from the mortgage q tax
levied on the debts secured by the mortgage, and
one of the defences was, that in as much as the land
covered by the mortgage was also taxed. it presented
q case of double taxation; but it was held, that II
the facts presented q case of double taxation, 1t
would be only the mortgagor and not the mortgage
whose property was doubly taxed, and the latter
could not complain, because the former had been
doubly taxed.
In People VS.. whartonby, SO Cal, 46l, it was
held in the same way.
In Lick vs., Austin, AZ Cal. $50, it was the mort
gagor who complained that his real estate had been
taxed to its full value, without deducting therefrom
the amount of the existing mortgage to which 1t was
subject; which mortgage was a distinct subject of
taxation under the statute, and it was claimed that
this was a double taxation of the same subject
matter.
But the Court held that it did not concern the
mortgagor, whether the mortgaged debt was taxed
in the hands of the mortgage, and that he could
not complain Of double taxation, unless his own
property was taxed twice, and it was farther held
that a solvent debt, secured by mortgage, is proper
~ for the purpose Of taxation.
Therefore, again by the light of reason and these
authorities, as well as by our statute. the solvent
debts Of these plaintiffs are the subject Of taxation,
and they cannot complain, even if it were true that
their debtors are taxed more than they ought to be.
the only question for them is, whether their own
property is dou6ly taxed. Judgment for defendant.
The Attorney General for defendant.
Honolulu, February 22nd, 1879.