Port Tobacco times, and Charles County advertiser., 1889-08-02
Taxation Of Mortgages.

The question raised by the appeal
o; Mr.. Z. Nj. Allen now pending be-
fore the Court Of Appeals, upon which
we bave heretofore commented, raises
consequentIallv the eonstitutienality of
the law exenpting mortgage loans
from taxation. 1t is we'll known that
such loans are now taxable in nearly
every State of the Union, and were
taxable in this Stare until special
act of the Legislature, exempting
them. was passed, some twenty years
ago. Since that time, though loans
secured by notes, bonds and other Sc
carities are still subject to taxation,
: loans secured by mortgage upon real
estate are specially exempted. But
the ostensible owner of the land upon
which the mortgage lien rests is still
liable to pay the tax upon the full
assessed value of the property.
The act exenipting mortgage loans
from taxation seems in it's inception
to have been an effort On the part of
the Legislature to avoid the usury
laws of the State with regard to this
particular class of loans. The owner
of the mortgage security, when taxed,
was compelled to deduct the amount
of his tax from the six per cent, in
terest allowed by law, and the tax
was therefore ,remitted in order that
this class of lenders might have a net
six per cent. interest on their loans.
At the time the law was passed it was
fully sustained by public opinion as
founded in wise policy. At that time
the Federal bonds bearing 6 and Z $40
per cent interest and non-taxable,
were on the market at par, and there
was great danger of the capital already
invested in real estate mortgages, as
we'll as that seeking such investment,
being absorbed BY these profitable
loans.
At this time, however, the financial
market presents quite a different
The Government per cent.
failsia are now at premium, and
isere are few safe and taxable
eans attainable at higher rate of in
ssrest. Hence there is a decided pub
he opinion to the effect that the ext
sency which justified the law exempt
ing mortgage loans has entirely pass
ed, and that the law should be prompt
ly renealed. Upon this point the
State Tax Commissioner in has last
report says! "When the bonds of the
general government. paying only three
per cent, are at considerable
premirm and the State finds 1t easy
to float it's loans at like figures it is
not to be anticipated that any embar-
rassment can accrue to our people by
suhjecting such capital (mortgage
loans) to taxation, as other capital
which is now paying taxes" In this
opinion the TINES heartily concurs.
There are. however, calm Judging
and apparently disinterested public
men in the State, whose opinions are
entitled to high respect, who, not
withstanding the change of circum-
stauces, still MAINTAIN that it would
be ine1pedient to revive the tax upon
mortgage loans. Among these may
be mentioned the State Tax Commits
sion, consisting of John 2. Poe, Chas.
NJ. Armstrong, James A. Pearce and
Prof. Richard L. Ely, appointed by
the Legislature Of 1886 to investigate
the subject of State taxation. In
their lengthy report to the last Leg
isiatnre the majority of this commit
tee say that, while they went into
their investigation prejndiced in favor
Of the taxation of mortgages, they
arrived at the reluctant conclusion
that it would be inexpedient to do so.
These gentlemen give the reason for
their reluctant conclusion as follows
TO impose tax on mortgages would
be to reduce the income of the mort
gagee on an average from about one
sixth to one-third. In other words,
out of six per cent. interest on his
loan, he would realize four or five per
cent, according to the tax rate of the
county or city where the money was
loaned. The facility with which
money is now invested and especially
the constant inducements offered by
associations organized for the purpose
of placing loans on western lands,
where 8 per cent. or more can be
realized, will serve as an incentive to
the mortgage whose income is re-
duced by taxation, to demand the pay
ment of the loan at maturity, instead
o. 7enewing it, in order that he may
invest it elsewhere" AS a further
apology for their reluctant conclusion,
tue commissioners say that "these
considerations have been earnestly
Impressed upon as by the representa-
ti4es of agricultural. interests on the
Eastern Shore