Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1884-10-22
THE THIRD AMENDMENT TO THE CON-
STITUTION OF CALIFORNIA.

When the new Constitution was before
the people of California for ratification one
of its chief recommendations to the agri-
cultural classes was the feature it contained
taxing mortgages The RECoRD-UNIoN op-
posed the ratification of that Constitution
opposed this particular feature upon the
perfectly tenable ground that tax upon
mortgages was not taxation upon the prop
crty Of the lender, but upon the property
of the borrower. We thought then, and
still think, that the rent rate for money was
forever determined by fiscal conditions, in
dependent of taxation; that money COM
mands five, six, seven, or ten per cent. per
annum because of the condition of the
money market, the activity of business, the
demand for the use of capital, and the vol
ume of capital with which to supply that
demand.
Now, under conditions where money
commands say seven per cent, and the
man who loans it pays the tax upon his
mortgage, and that tax amounts TO say one
per cent, the money would be returning
the lender but six, and since memorable
conditions make the ruling rate of seven
per cent. it follows that a rate of interest
will be attached to the loan which will
cover the amount of taxation, and leave
the current and ruling rate of interest clear
to the lender.
The majority of the people of the State
entertained other views, and the Constitu-
ton was ratified. The clause which pro-
videS for the taxation of mortgages declares
that for the purposes of taxation a mort
gage shall be deemed an interest in the
property affected thereby. These words,
an interest in the property" are equiva-
lent to the assertion of a taxable ownership
in such property. For example: A owns
a farm worth $4,000. He borrows 5000
of b. giving B a mortgage. For all purposes
of taxation BIS mortgage constitutes a tax
able ownership in the farm; that is to say,
A and B own the farm jointly in the
contemplation of the tax collector. Here
was a legal fiction-which becomes fact in
its practical operation-that for purposes Of
taxation A and 3 are joint owners in that
property, and each must pay taxes on his
part of the interest therein.
The third amendment now before the
people for ratification, Invested of all VERDI
age, redundancies of expressions and mis-
leading phraseology, simply proposes to
retain the legal fiction of joint interest
in the property between the mortgagor and
MORTGAGE, but declares that the State
Board of Equalization shall not have the
power, by process Of equalization to raise
the rate upon mortgage.
Take the ease Of \ and L already used
in illustration Suppose the farm to be
located in a county upon which the State
Board of Equalization raises the asses
ment ten per cent. The County Assessor
in fixing the valuation upon the farm
determined by that valuation the proper
ton of interest between a and b. The
farm being mortgaged for 5000, the As
SCISSOR declares that it was mortgagcd for
about one-half of its value He assessed
to A, the mortgagor, 5000 of that value,
and to b, the mortgage, 5000 The
County Board Of Equalization act upon
the matter and sustain the assessment as
originally returned But the State Board
of Equalization for reasons perhaps en-
tirely foreign TO the assessment of lands or
mortgages, finds the general valuation of
property in that particular county ten per
cent lower than in any other county in the
State II therefore raises the entire assess
ment of the county ten per cent. Should
the third proposed amendment be adopted
the interest of a in the land is thereby as
sessed at $500, while the interest of b
would remain at 5000. In the Constitu-
ton, which declares that for purposes of
taxation a mortgage shall be deemed to
be an interest in the property affected
thereby, this would be plain and irrecon-
cilable contradiction. liza mortgage is to
be treated as an interest in real property,
then it must share all the yicissitudes of q
part ownership.
There has been much useless discussion,
and useless objection on the part of the
lending class, to the operation OF equalizing
assessments upon mortgages. This has
grown out of the failure to perceive tie
true import of the provision, which, foT
purposes of taxation, gives the MORTGAGE
a legal interest in the realty affected Icy his
mortgage. Ira legal sense, for purposes of
taxation, it ceases to be q mortgage, and