The Portland daily press., 1893-01-16
THE PRESS.
MONDAY, JANUARY 1e.
TAXATION OF SAVINGS BANKS.

We published on Saturday the text OF
a curious and complicated bill relating
to the taxation of savings banks which
has been introduced into the legislature.
The originators of the bill are not pub
licly known, but apparently they are
very much in earnest about it, as ac-
cording to dispatch to the Lewiston
journal, the Hon. Herbert M. Heath and
the Hon. Orville D. Baker have been re-
tanned to push it, This bill has two OBJ
jects in view; one is to increase the taxa
ton on savings bank deposits; the other
is to stimulate the investment OF savings
bank funds in Maine securities, in order
to s'boom'' the state. The second OF these
objects is to be accomplished by reduc-
ing the tax on all investments in Maine
to one half of one per cent and increas-
ing the tax on all investments outside OF
Maine to one per cent. AS the tax on
all investments is now three-quarters of
one per cent, this bill would make dis
elimination of one quarter of one per
CCnO LII ldVOI VI 1ueeiAO III W 1890 -
discrimination of the same amount
against outside investments.
Whether this bill will increase the
taxes of the banks depends upon the pro-
portion of their deposits now invested
and which may be invested in the future
in Maine securities. Let us assume that
it will, and consider the question for a
moment whether the tax on savings in
situations ought to be increased; wheth-
er it will be in accordance with wise pol
icy to increase this tax.
In 1882 the tax on savings bank depos-
its was one per cent. This tax had been
fixed in 1875 when money was commands
ing high rate of interest and when six
or seven per cent. was easily realized on
the soundest securities. In 1882 the
bank examiner of the state was the Hon.
Fred E. Richards, one of the ablest, most
intelligent and far-seeing gentlemen that
ever filled that Office. In his report of
that year he discussed the question of
the taxation of savings banks at consid-
cradle length. His argument is so clear
and cogent and its applicability to the
present situation, as we'll as to the one
that existed at that time, so obvious
that we reproduce the most essential
portion of it here. Mr.. Richards said:
In 1875 the legislature authorized the present
state tax OF one per centum per annum on the
deposits Of savings banks. At that time the
best investments of the country were available
on basis which would yield seven and eight
per cent interest to the purchaser. With such
earnings, a tax of one per cent was indeed a
light burden, and reasonable proportion of the
expense OF maintaining the government OF the
state.
The unprecedented business prosperity of the
country during the last three years has COM
pletely revolutionized monetary values. The
''money power was never before SO circum-
scribed, and Its power to earn is now so weak
bearing bonds are Immediately absorbed by in
vestorS, at prices which limit the income there
from to four per cent interest.
The savings bank in its capacity of trustee,
holding the Savings Of those Who are unable to
invest for themselves, and compelled by law to
respond on call OF depositors after sixty days
pable OF being converted, without loss, into cash
IN sixty days, and such securities as these COM
mand the highest prices and necessarily yield
the smallest interest. Consequently one fourth
OF the gross earnings OF the savings of the me-
chanic, whose all is deposited in the savings
bank, is appropriated by law toward maintain
ing the government of the state.
True. savings banks are permitted to loan
seventy-five per centum Of their deposits on
MORTGAGES of real estate, and mortgage loans
command six per cent interest; but the best
mortgage loans are sought for and taken by in
diYidual money lenders, who, generally eScap-
ing taxation altogether, render savings banks
unequal competitors. Assuming however, that
good mortgages are available in abundance at
six per cent interest. and savings bank invests
therein seventy-five per cent Of its deposits
suddenly wave of financial Stringency sweeps
over tie country its depositors become alarmed
and serve notices on the bank to Withdraw; the
mortgage loans are safe and good but incon
yertiOle, and the bank is rendered legally insol
vent and forced into liquidation within ninety
days.
1t is, however. urged that one per cent is 3
light tax. Let us examine this proposition and
see what portion of the property held by savings
banks receive special favors by unusual exemp
til
III savings banks of Maine hold S5,647,
1913 in United States bonds and these they
are allowed to deduct from the amount returned
to the State Treasurer for purposes of taxation
true, but United States bonds are exempt from
taxation wherever found or by whoever owned
Savings banks are also Permitted to deduct