Ellsworth American. [volume] (Ellsworth, Me.) 1855-current, 1902-05-07
SAVINGS BANK TAX.
State Examiner Explains How It is
Assessed.

I NNooN'fNN-
The methods followed by the State
assessors In assessing the franchise tax
/ upon savings banks Is not thoroughly
understood by the people Of Maine, and
even among bank men themselves the
system Is not wholly clear. THIS latter
Tact Is evidenced by correspondence
that has Just taken place between treas
urer OF one OF the Maine savings banks
and Hon. F. r, Timberlake, State bank
examiner. Mr.. Tim berlake's letter to the
! gentleman In question is clear and COM
prehensive, covering every detail of the
/ methods prescribed by law. It Is as
+ follows.
"Pardon me II explain fully about the
tax law. When considering this matter
persons are in danger of getting at 1t
wrong end to. They think the tax
Is based upon the property they hold.
This Is not so. 1t is a franchise tax, the
value OF which is fixed by an arbitrary
rule laid down by the legislature. Like
the law prior to 1898, the basis lie the
amount OF deposits. You viii remember
that at the time the tax was assessed at
the rate OF 3-4 of per cent. directly upon
the average amount of deposits. The
new law followed this same principle and
only adopted the present somewhat CON-
plicated system for the purpose of dis
eliminating in favor OF investments
within the State, with the idea of
tempting this capital to seek home in
vestmepts. We, therefore, start out
with the same basis for the tax, /. e.,
the average amount of deposits with
the average OF reserve and undivided
profits included).
"The rule for determining the amount
OF this tax Is as follows: From the average
amount OF deposits, reserve and I'M
divided profits deduct: LIST, government
bonds. End, the shares of corporation
stock such as are by law Of this State free
from taxation. 3rd, ID the real estate
owned by the banks. 4th, an amount
| equal to 1t of such, other assets as
were acquired prior to the enactment OF
the law. 9Th, 81 OF all new assets within
the State, and then assess tax at Z OF Il
per cent.
"Thus you see that the basis is precisely
the same as the old law, excepting that 1t
includes the reserve and undivided
profits with the deposits. Government
bonds, the corporation stock named and
real estates are deducted the same as I'M
der the old law because they are either
positively exempted from ia xation to 9th r
holders or pay municipal taxes. On all
investments acquired prior to the enact.
ment OF the law there was a deduction OF
1t to make the tax upon that portion OF
the value OF the franchise precisely the
same as before the law was changed, /. e.,
3-4 of l per cent. This was because the
banks claimed there should be no dis
elimination on Investments that were
already made without any expectations OF
such law as is now in force.
"Now comes the only real change
from the tax law In force prior to
1893, and it is the only discrimination
It contains. Up to this point the law
is precisely the same as the old one,
| with the exception of the addition OF
a tax upon reserve and profits. You
will notice there is no deduction upon
| investments out OF the State acquired
subsequent to 1893, but there is de-
duction of 81 upon all investments
within the State. The effect of this
would be, II an equal amount of new
| invest ments were made without and
within the State, to make the average
3 4 for the entire tax at the same rate
a. before. II, however, the greater
amount OF the new Investments are
without the State the new tax law
would slightly increase the amount OF
the tax paid by that bank, while il the
greater amount OF the investments
were within the State it would make
the amount OF tax less than under the
old law.
IL tGink l have now answered your in
| curry about municipal notes. You see
that It does not matter whether they are
notes or bonds, as no deduction is made
on account OF them. Your tax would be
precise he same as though you held the
bonds of the same municipalities.
~ also note what you say about street
railroad bonds guaranteed by steam
railroad. l cannot sgree with you il
| your construction of the law. l think
YOU are deciding the matter as you think
it ought to be, basing your judgment
upon the quality OF the security aud not
upon the law our legislature has enacted.
| The legfslatu re says that no savings banks
shall buy a street railroad bond until GER
tain conditions are first complied with.
know OF no way in which we can dodge
that provision. am not attempting to
make law, l am attempting to construe
laws which the legislature has seen fit to
enact"
In order to obtain the balance or basis
remaining for the purposes OF taxation,
the average OF deposits, average OF
reserve and average OF profit and loss are
added together to secure the total average
of basis for tax. From this total is de-
Quoted the value OF government bonds,
| value OF stock exempt from taxation, as
| sessed value OF real estate owned, one
| seventh of all investments acquired prior
| to 1898, and two-sevenths OF all invest