New-York tribune., 1900-01-15
THE TAXATION COMMITTEES REPORT.

THE TAAAIIOA COHuIIIEES hEFOhI.
The Joint Committee on Taxation has just
Issued officially its complete report, digest of
which had already been published 1t is OF
especial interest as giving reasons for abandon
ing direct State taxation and substituting tax
on mortgages as a means of raising revenue
The committee does not think that the mortgage
tax would fall ultimately on the real estate
owner as many believe Indeed. unless it was
prepared to meet this assertion it could hardly
present the scheme seriously, for one OF its
fundamental propositions is the desirability of
relieving real estate.
The report quotes Mr.. ]. Harsen Rhoades as
saying that if mortgages were exempt from the
taxation which they now generally escape
though theoretically subject to assessment, the
rate of interest would decrease at least one-half
of l per cent. That, he holds, is the cost or the
risk that any particular mortgage may be taxed
Therefore the committee argues that certain
tax of one-half of 1 per cent on all mortgages,
with certain exemption from any other levy,
would leave the interest rate unaffected. 1t is
also stated that in both Pennsylvania and Mas
sachusetts, where mortgages are taxed the rate
of interest has decreased. But it is to be re-
membered that the interest rate almost every
where has decreased. 1t has probably decreased
III New York as much as possibly more than
in the two States mentioned within the same
period and it is difficult to make sure that the
condition of the money market has not brought
about the reduction in them in spite Of their tax
laws and not on account of them. The argu-
ment from Mr.. Rhoadess view, is pure specu-
latiOn.
Arguments in the opposite direction like
wise speculation. Nevertheless the subject Is
one of such far reaching Importance that it is
worth while to speculate on possible results of
yolo tod In Nhn
scheme A principal object of the tax is to
favor land owners by relieving them of the
State tax rate of 2.49 mills. But If by chance
the committees expectation should be disap-
pointed and the money lenders should renew
their loans only with compensation for the tax
of five mills, then the land owner with mort
gage would be paying twice as much State tax
as before on much of his real estate as was
mortgaged The effect of this would be to free
entirely from State taxation the rich land own
ers the holders of great estates whose lands are
free of debt, and shift the burden to the land
owners of small means who have bought farms
and homes on partial payments and are strug-
Cling TO clear off mortgages. This is the class of
real estate proprietors most deserving of tender
ness and encouragement from the State, and yet
it is the class specially marked for hardship un-
less the mortgage tax burden does in practice
remain on the shoulders of the lender, as the
committee hopes and believes it will, instead
of being passed on TO the borrower.
Consider, for instance, the possible operation
of the proposed tax the owner of a house In
this city which might sell at from $4,000 TO
$4,000 1t would probably be assessed at about
$4,000, and might have mortgage of $4,000
at ) per cent Such cases are not uncommon.
The local and State tax on such a house last
year would have been $24S. If with the mort
gage tax the mortgagee raised his rate for con-
tinuing the loan, the owner Of the house would
have to pay 1918 10 directly and indirectly for
taxes. So his contribution to the State govern
ment would be $50 instead of S24 90 Thus
would his real estate be relieved" If the tax
merely prevented him from reducing his interest
charge he would still be the sufferer. In rural
sections of the State, where per cent mort
cages are common, the effect of the tax might
easily be to make borrowing more difficult
where it is already difficult that the rate is
as high as it can be. Wherever men are now
hesitating between home mortgages and other
investments it might give a turn to the scale
most harmful to land owners and home makers.
1t might drive New-York money into mortgages
in other States where it would be exempt.
This as we say, is only speculation. The
committee may be right in thinking that its plan
would work smoothly. Nevertheless, it is diff
cult TO see why one class OF personal properly
should be picked out for State taxation and
| local exemption while other investments are left
subject TO the confessedly unjust system which
now prevails. If mortgages should pay State
| taxes, why not bonds and stocks? If mortgages
! should be freed from the unequal eXactions of
| local assessors, why not bonds and stocks? The
mortgage tax may be a practicable piece of
tinkering, but it is certainly not a logical tax
| reform.
LII .nrIr,