The Hawaiian gazette., 1881-11-09
Daluaiial1 6azettR,
EST MoDUs IN MINUS.
WEDNESDAY, NOVEMBER ., 1881.
nc Battle Of the 1fortgnge..


mortgages may be said TO have been fought
out in California to its legitimate conclusion.
There had been a wrangle over the subject for
number Of years in England, which resulted
IN the rule that mortgages ought not to taxed.
But this settlement was based on financial
consideration, which, when the question came
up here, could not easily be pOpularized. They
were 10 the effect that the capitalist could bet
Ter afford to keep his money than the borrower
can afford to do Without it; that when he loaned
money on mortgage he would exact stipulation
shat the morisagor should pay the taxes, and
that if any effort was made TO compel the cap
italist to pay the tax he would either evade it
or nut it in the interest. The discussion in
this State eliminated ia the decision OF the
Supreme Court, in the celebrated Hibernia
Bank case, under the old Constitution, that
mortgages were not taxable. But the reason
ing upon which it was based was never fully
grasped by the people at large. 1t seemed 10
be a regulation in favor Of the capitalist and
against the borrower.
The dissatisfaction which this view of the
case created was potent factor IN bringing
about the Constitutional Convention which
framed the benetcent organic law, under GER
tain fragments Of which we are now living.
Previous to that date the people had resisted
every attempt TO get up new-fangled constitu-
ton. The opinion Of the State on the subject
may be said to have been highly conservative.
1t was generally held that if there was any
eject in the existing Constitution, there was a
speedy and inexpensive method of amending it.
The decision in the Hibernia Bank case, as re-
spects mortgages, never fully understood, be-
yund question, added great strength TO the
movement for a Constitutional Convention. 1t
was thought that that was the only way Of
obtaining relief from a ruling which many con-
sidered handed over the State to the money
lenders-never popular class.
The Convention, true TO the impulse which
brought it into life, laid down the rule in the
new organic law that the mortgagee shall pay
the taxes on his mortgage, and that the
mortgagor on the residue for which the prop
erty is assessed. At the same time it was
provided that any attempt on the part Of the
mortgage 10 force the mortgagor 10 pay taxes
on the mortgage should work forfeiture of
the interest This placed the mortgage ques-
hon, 10 all appearances, on fair and equiia-
Die basis. But, as a matter Of fact, it did not
change the existing conditions by single
hair breadth. The taxes which the mortgagee
has now to pay are calculated beforehand and
20 into the interest. The fundamental propo-
sition is the value of money. That is regu-
lated by the law Of supply aud demand. Under
the old rule, money was worth so much on
mortgage minus the taxes now il is worth so
much plus the taxes. That is all there is of it.
The borrower now pays the taxes on the
money loaned to the lender i'll advance, and
not 10 the tax gatherer, when they become due.
1t is illustrative Of the false notions which
prevailed on the subject that it was Thought
M some quarters that the taxable basis would
be greatly enlarged by the provision requiring
mortgages 10 pay taxes on the money loaned
by them. 1t was popular delusion that mort
cages were escaping taxation. But the ntw
Constitution did not add one cent under tins
head TO the assessment roll. Nothing had taken
place but setting over of the mortgage for
tax purposes to the mortgages, instead of as
sessing the whole property to the mortgagOr.
But everybody appears now to be perfectly
satisfied, aud that is certainly a great point
gained II is true that interest is now much
lower than it was under the old Constitution.
That fact, for the time being, tends to obscure
the actual results of the change that has been
made. But the real cause of the low interest
is glut of money, brought about by entirely
different causes.
All the other States of the Union without ex-
cepiion arc wofully behind us in their dealing
with this abstruSe question. In New York they
are not further advanced than we were ten or
fifteen years ago. They are wrestling there
darkly with tho problem Of double taxation.
The needs OF the tax-eaters are SO great that
they want, as they did here, to tax mortgages.
This, Of course, ELECTS the protest Of the Dor
rover who AYERS that as he is now paying taxes
on the full value of his property he is also pay
ing taxes on tie mortgage, and that TO tax the
4
chusetts, where the fight has been long and
bitter, they have forged considerably anead.
The people of that State may be said to have
reached the plane occupied by the Californians.
After much anxious discussion they have sue
ceeded in passing law modelled ON our Con-
stitution as repects mortgages.
Probably we should have nothing to saw oft
but that it is now heralded as the great Massa-
chusetts discovery in political science. But
they are only following, more or less-uncon-
sciously, perlaps-the course which we long
ago outlined. Nor is this the only instance in
which California has taken the lead of her
Eastern sisters on questions in economic
scienc. Our statute books have never been
numbered up with those antique and useless
regulations known as usury laws. We were
not long blinded by the sophism Of the pre-
MUM on gold during the war, which was pro-
ddctivc of such icids consequences at the East
We can claim to be the discoveries of the prin-
ciple of specific contract in the Federal Consli-
tuition, which we successfully invoked to pro-
tect ourselves from Congressional currency
tinkcring. These in sense must be regarded
as tTiumphs of accurate reasoning. Perhaps
they to be attributed to the clearness of our
atmosphere, or the newness of our civilization,
where tradition and custom offer no impedi-
mentS, to the view, or to both. But they are,
nevertheless, many and substantial.-S. F.
lFeeIy,, E,,Ils,f,