The record-union., 1892-10-06
TAXATION OF CREDITS.
Some fof the Inconsistencies of I'll
Present Revenue SvstnIn

Some 'of the Inconsistencies of the
Present Revenue System.
1t is not intended to show the useless
ness OF taxing mortgages as a means of
distributing the burden of taxation-that
such taxation has no such effect is well
understood by many, but until the fact is
recognized by at least a majority of the
voters of the State it may be well to let
| those Incapable OF good, sound thought
IN this behalf indulge in the Ito them)
haiIuclnat'on that the taxation of credits
affords relief to the debtor class.
The assessment and collection of mort
gage taxes costs the counties, cities and
towns OF the State in their corporate ca
paclty some two hundred thousand dol
lars actual money, disbursed for requisite
stationery and Ior hire of additional
clerks.
This item, important even in the wealthy
State or California, was probably not fully
considered by the trainers OF our revenue
system, and it would perhaps be elimi-
mated at an early day except for the fact
that political bosses must have places at
their disposal in the offices Of Assessors
and Tax Collectors as a reward for the
services of their adherents.
1t being understood that the taxation
Of mortgages is a luxury for which pay
ment must be made-with their taxation
for State and county purposes there is
relatively little fault to be boundaries of
taxation do not vary much year by year,
and interest rates can be fixed by esti-
mate to meet them without doing much
injury TO either party.
10 be sure, there is the trouble and an
| noyance Of making two returns to the
Assessor instead Of one, and of two pay
ments to the Tax Collector when one
should serve, and there is also increased
expense for the hire of additional clerks
| IN the offices of the Assessors and Tax
Collectors to be paid by the different
counties-nO inconsiderable amount-but
| perhaps all this personal Inconvenience
and public expense is compensated by
the abiding satisfaction felt by those un-
skilled III political economy when they
reflect that mortgages are taxed.
While the taxation of mortgages is
non-etfective for the purposes that were
in view when the New Constitution was
adopted, it cannot be said that it is posi-
but such is not the case with municipal
taxation Of the same instruments or of
their taxation for special purposes, such
as building school-houses, opening roads
etc.
Municipal taxes are relatively uncer-
tain quantities.
In some cities and towns they are linn
lt
majority of cases they are at the discre-
ton OF the authorities, with the result
that tax one year may be onehalf of
per cent, and the next it may mount up
TO Z, 3 and even 1 per cent, as has been
the case in some instances when public
improvements of note have been under
taken at the cost of the municipality,
The uncertainty as to rate, coupled with
the annoyance OF making returns to two
Assessors and paying taxes to two Col
lectorS, has for its effect that money!
lenders will not loan their funds on
town property, except in the long-estab-
lished cities of very considerable popu-
lation.
1t is a well-known fact that the real
estate owners in the many new and thriv-
ing cities of California cannot secure
loans from the institutions of the State
engaged in the business of money lend
ing.
Like usury laws in their operation, the
attempt at legislation supposed to be in
favor OF the debtor has deprived the prop
erty-owner most in need Of a loan of all
chance of borrowing money.
AS rule the building of schoolhouses.
the opening OF new roads and like oper-
atlonS enhance the value of the real estate
taxed to cover the expense
When property is encumbered. the
gain results to the mortgage debtor: in it
VIC liIOll las HO part or lot, and to
tax him for share of the cost is precisely
equivalent to compelling him TO assist his
debtor in the erection of his dwelling.
Why mortgage creditor should be taxed
for building a schoolhouse and exemnt
from contributing to the expense of street
improvements IN city is one of the
many anomalies of our revenue laws.
The absurdity of taxing mortgages for
special purposes needs but one illustra-
ton to be appreciated:
An owner of land in the San Joaouin
Valley sold large body to an association
of colonists, taking a small cash paw
ment and notes secured by mortgage for
one year for deferred payments.
Within the year these thrifty colonists
organized school district, levied a tax
and built schoolhouse costing 50, 900, the
mortgage creditor, as his share of the tax.
paying very nearly the whole cost, con-
Stunning practically the whole sum of in
terest by him received.
This was in effect a swindle, but one
countenanced by law, and which may be
repeated at the expense not only of the
vendor of lands, but of creditor who
lends money solely for the sake of the
interest.
Fortunately for the business interests
of the State mortgages appreciate the in
justice OF requiring their creditors to pay
special taxes, and neither expect nor de-
The moral sense of the debtor is sune-
rior, or his business insight clearer than
those of the good and wise men who
frame our Constitutions and make our
laws.
There is another form Of credits which
the State seeks to tax to the direct and
serious detriment of the taXpayer-to
wit: The bonds issued for State, county
and municipal Indebtedness.
That il is absurd for State to tax its
own borrowing power must be conceded
by every sensible person who Will give
the subject attention.
If governmental obligations are liable
TO taxation there must be added to what
would otherwise be the rate of interest
the tax rate. else the obligations will not
find purchasers.
In other words the Government must
first pay its creditors in form of increased
interest the full rate it may claim TO have
returned in form of taxes.
Now if such return was made, the pub
lie would be injured to the extent of cost
of paying out with one hand while re-
ceiving with the other but such is not the
case, for, as matter of fact, nine-tenths
of the bonds escape taxation; some few
are caught say those owned by money!
| lending corporations compelled to report
their securities, and in the hands of ad-
ministrators, executors, guardians, etc.
The total Indebtedness of the counties
of this State was, on the Both of June,
1890, s., ~, ,4S4, as per report of State Con-
troller.
To this amount may safely be added for
debts OF cities, towns and school districts
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