The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1903-02-21
THAT TAXATION BILL.

alton. writes an article in the current
number Of the Review of Reviews, por-
tions of which might be studied with
profit by the members of the legislature
who are now wrestling with the taxa
ton question Among other things Mr..
Commons says:
zone of the first things which the In
diana commission set itself to do was
the discovery Of intangible property,
and it began with bank deposits. De
posits in Indiana are treated as cash,
and. unlike other credits, cannot be offset
by debts Bank reports showed more
than one hundred millions on deposit,
and scarcely a million had ever been as
sessed. Here was a rich field in which
to vindicate the new law. Encourage
by its unprecedented powers, extending
even to imprisonment for contempt, the
commission summoned bankers to open
their books, and, on their refusal, con-
demned them to Jail. Habeas corpus
proceedings Immediately brought the
matter to court. The lawyers Of the
state were unprepared, for no important
tax litigation had come to them for
years Judges were equally novitiate,
and listened with inquisitive patience.
Finally, on appeal, the supreme court OF
the state declared that penalties and
imprisonment were judicial preroga-
tives, and the legislature had exceeded
its powers in bestowing such grants
upon an administrative branch. At the
next assessment, on April !, the bank
ers claimed that many millions of de-
posits were Withdrawn from the banks,
and many of them transferred to banks
of other states. and, with this argument,
finally in 1901, they secured a substi-
tute to this section of this law greatly
restricting the inquisitorial powers Of
local assessors.
This chapter from the Indiana ex-
pertinent marks off at least one road
which tax reform cannot follow In
deed. it shows that the more perfect the
machinery of the assessment, the mora
vicious the effect of bad laws. A bank
panic on April 1 every year might well
indicate that the law which provoked 1t
was not merely dangerous to tax
dodgers. but also sound in economies It
banks are taxed on the full value Of
their capital. and the banking business
is not monopolized, their depositOrs are
thereby taxed in the low rate or no
rate of interest on deposits which the
banks can afford to pay"
me Kansas GOIllIfli5SlbAl mas Oil Ce+e9
profited by the Indiana experience and
has not given assessors powers to IN
vestigate bank books.
Taking up the question of the taxa
ton of mortgages. Mr.. Commons con-
tinues.
Another lesson in tax reform is on
the taxation of mortgages. Here Mich
igan and Wisconsin have been more
spectacular but not more instructive.
than Indiana Indiana approached the
subject gradually and gave the tax
dodgers notice. Michigan and Wiscon-
Gin came down suddenly and hard, and
the adjustment is not yet complete. The
Michigan state commission secures from
every recorder of deeds in the state a
list of all unsatisfed mortgages held by
residents of the state, with the address
of the mortgage. These are classified
at headquarters and sent out to every
assessor. In Indiana and Wisconsin the
county assessors exchange their lists
directly. In one year in Michigan the
total assessment of mortgages was
raised from some $4,000 900 to $50, 600, 900.
Wisconsin in four years raised the as
sessment of tangible property from
about $4,000 900 to 100000. nearly all
of the increase being in mortgages.
Other classes of credits escape because
they are not of public record In both
states the results are interesting. Mort
cages are renewed OF new ones made
at an advance of / per cent or IL per
cent in the rate of interest. This has
/ aroused the farmers to a lively interest
in the economics of tax laws, following
their earlier interest in the reform OF
tax administration. But the adjustment
is taking place. and in Indiana it is
already made, with interest on average
mortgage security at 8 per cent, against
6lh and per cent in the other states
THE devices for adjustment are di
verse and ingenious. The inquirer hears
of a new one nearly every day. A col
Iege professor naively relates that ht
sends his money to a sister in New
York, who sends it back for him to lenC
on mortgages at per cent. Others, les:
conscientious, create fictitious friends
or relatives in other states, whose none,
they loan. Mortgages are made out L
trustees, and assigned without record
A presiding elder lends his money ant
assigns the mortgage to an invisible en-
tity. All Of these private lenders are a
a disadvantage. State banks and trus
companies, being assessed on their cap
ital. are not assessed directly on thei
mortgages. And when they hav
reached their limit Of investments II
longtime loans. many of them accomo
date their customers by assigning t
them mortgages held in their own name
Most of ALL foreign insurance com
! panies and other lenders come into tn
state. and it is these lenders in Indians
that have established the rate of pc
3 cent. They probably win do the sam
2 in other states.
Here again is q road which tax re
= form cannot take Improved machiner
I of assessment throws the mortgage ia
on the borrower. or else gives a bonu
to untaxed holders and outside holder.
$ and this forces the unpriviieged holde
: to r.ra.-arIoata Yet naturally anongl