The Helena independent. [volume] (Helena, Mont.) 1875-1943, 1891-02-22
ruE TAXATION OF MORTGAGES.

THE TAXATION OF MORTGAGEs.
Montana should take warning from
other states and free herself from all
schemes for tho taxation Of mortgages.
II our people want plenty Of money, at
low rates Of interest for the development
of the resources Of the state, they must
not keep it out by taxation. The cry
that the exemption of mortgages is leg
~islation in the interest OF money lenders
is arfant demagogism. 1t is the money
borrower, in fact the community at
large, that reaps the chief benefit from
laws that bring money here for invest
ment on advantageous terms. Prof.
Ely in his work on Taxation in American
States and Cities, gives this practical
illustration of the benefits of e%xempting
mortgages:
Anyone who in Baltimore walks from
Baltimore street in anortherly direction out
FL. Paul or Calvert street. beyond the bound
ary of the city, into the country, will notice a
large number of houses newly constructed
or in process Of construction, and which
ara offered for sale or rent at far lower prices
than such houses can be obtained for in
any other great city i'll the American union.
II ia not too much to say that a house in
this section of the city, which can be OBJ
tanned for twenty-five dollars a month";
pleasant, we'll situated house-could not be
obtained in any other city OF the size
of Baltimore in the United States
for less than fifty dollars a month. Now
WHY is it that so much building is going on
and that houses are so cheap? 1T anyone
thinks that the exemption of mortgages
from taxation is not connected with II, a
conversation with "a practical builder or
anker will disabuse him of this idea. As
matter Of fact, savings banks would not
and could not put their money into such
improvements in Maryland if they were
taxed. They do this now; but if mort
cages were taxed. money now spent In
MARYLAND would go to the west. just as
thirty millions of dollars have recently left
New Hampshire. Who. then, gets the ben
eGts of this exemption? They are difused
widely through the community. The work
ip1nan does, for he has more abundant
OPPORTUNITIES for labor, and the taxation OF
mortgages would be a blow which he would
feel, In addition to this. to tax mortgages
would tend to raise the rent. The real es-
tate man derives q benefit as he does from
every improvement, for it raises the value
of his land. The farmer is also benefited
in a better home market for his produce.
The merchant is benefited in larger sales.
II the money-lender is benefited at all, his
advantage 10 not greater than that OF other
members of the community.
To make clear his point that such ex-
emption directly benefits the small Dor
rover, Mr.. Ely uses this illustration:
II want to borrow money on a promis-
sorry note. Well, the lender could let
me have it, we will say, for five per
cent. if he we're certain that he would
not be taxed on money lent; but as the
tax assessor may possibly find him out,
he says: i must have one per cent.
extra on account Of risk. You must
pay me six per cent"
The Chicago Tribune, which has been
discussing the mortgage tax question IN
a series Of able articles, contains the
following communication from a Cali
fornia man which will be OF practical
interest to our legislators:
During my short stay in Chicago 1 have
read with much interest the different views
of real estate dealers and others, as ex-
pressed in the Tribune. regarding taxation
oil mortgages. Having been engaged in the
mortgage brokerage business for several
years in California, where sach a law has
been in force since tho Dennis kearnel
reign, and reference having been made Il
the California law by those favoring iti
enactment. / feel constrained to outline
briefly a few results.
The worst result from such a law is tia
eastern investors in mortgages do no
favor the law and give Rs their reasons tn
uncertainty OF the tax rate during the lif
of a ive-year loan, the disturbance of SO
c%urities, and the trouble of paving the city
county and state taxes twice a year. The.
prefer Ioaning in " rate fields. A
proof of this fact / do not know of on
eastern mortgage or debenture compan,
doing business IN our state, while the stat
of Washington and territory OF bta
are full of them. And yet the mortgage
tax invariably comes ont of the borrower
and very often more, from the fact that o.
a fye-year loan no one can approIImat
the exact per cent. of taxes. therefore tn
Ioaner, where he can be induced to loan 70
five years, exacts from one-fourth to one
half per cent. in excess of the actual rate t
cover fuctuation, and the same prsctic
prevails on loans for one year. For in
stance, this year IN the city of Los Angeles
nv home. the rate of taxation for city
county and state was 2 and 75-1O0 per cen
Last year it was 2 and 55-lD0 per cent.
-.r.r BOW nf . Loan hahn, mazda ON 80
property where the loaner e1aoted less tina
three per cent for mortgage tax. the count
and state rate being / and G1,lOO per cent.
A man borrowing 1880 on real estate Al
sessed for taxation at 500. pays three ps
cent. extra for mortgage tax In the way {
interest TO the loaner on amount Dol
rowed. If a seven per cent. interest rate
made, the mortgage note calls for 10 ~
cent, the extra three per cent. covering Ia
rate. When tax-paying time comes, ii
mortgasee steps up and pays in the reguI
tax rate of . and 75-1O per cent. on on
300. the borrower in that instance payir
the loaner as interest three per cent. ext
on difference between assessed v~alustit
and amount borrowed, in addition to ON
fourth per cent. charged to cover fiuctu
ton. Though the law prohibits by pc
atty any collugion between borrower al