New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1903-02-19
FOR A LOANING TRUST.

If the report is true that the fil to tax mort
cages which is to be introduced in the legislat-
ure this week will contain provision exempt
ing mortgages held by savings banks and insur-
ance companies, then beforekit is put in hnal
shape il should be redrafteds and entitled, AN
act 10 create lOaning trust" When land
owner cannot borrow money from an individual
without subjecting the loan to tax, while he can
borrow of moneyed institution and have it ex-
empt ne viii without fail borrow of the moneyed
institution. and individual mortgage invest
ments will go out of fashion, TO the great detri-
Inent of the community.
1t is pretty generally admitted that the Dor
rover pays the tax. For a short, time the lender
might have to bear the burden on existing
mortgages, though in view of the threats or
such legislation as is now proposed many of the
mortgages issued in the last five years have
contained clauses obliging the borrower to pay
any new tax which might be levied All new
mortgages would be made that the borrower
would directly pay the tax, or the interest would
be so adjusted that he would pay it indirectly.
Thus it would soon result that all who bOr-
rowed OF individuals and subjected their mort
cages to tax would be at a distinct dsadvan-
tage as compared with the borrowers from
these institutions whose holdings exempt.
This discrimination would operate TO the disad
vantage of the most needy borrowers The
moneyed institutions will now make only gilt
edged" loans The property owner whose needs
require large mortgage or a second mortgage
and the would-be investor whose purchase
money payment is small are driven 10 the in
dvidual money lender. In proportion as their
security is not attractive they are compelled to
pay high for their loans, sometimes to let them
selves be outra geouSly squeezed. Now 1T is pro-
posed to have the State step In and still further
penalize the most needy borrower for his mis-
fortune. His mortgage must pay tax, while
his neighbor with a richer farm or fewer debts,
is able to go TO the savings bank and get loan
free of tax.
This certainly is not good public policy. The
State cannot Of course, make a poor security
good, OF save people from the consequences or
their own financial mistakes or misfortunes but
it can refrain from putting q burden of taxation
upon those least al BILE to meet il. Governor Odell
In his annual message, while admitting that
mortgage taxation was double taxation, spoke OF
the objections 10 entire exemption of mortgages
on the ground that it put a disproportionate
share of taxation or those who held unlncum-
bered property But certainly it is better TO dis
eliminate against those who are rich rather
than those who are poor, if it is necessary to
make any discrimination at all. II taxes can
not be absolutely proportionate it is those who
are least well off who should be favored. The
man with small property requires his whole
income for bare necessities. The man with
double his income can comfortably pay more
than double his tax.
If a mortgage tax is TO be levied at all bor-
rowers should have equal beneft-if benefit
there is, some are ingenious enough to figure
out-or bear an equal burden. This will be
impossible if one class of lenders is TO have
an advantage of one-half of per cent, whether
that advantage is given directly TO the borrower
or not. The loanng institutions might with
their large resources be able to keep up the rate
nearly TO what Others who paid the tax could
afford 10 lend at. while thus making n profit
by reason of the tax, they could still make in
dividual competition impossible Yet some in
dividuaIs would be compelled to continue loan
ing on mortgages. Estates of widows and or
phans cannot be invested in stocks. As trust
funds they are restricted. Consequently the
State would make difficult the advantageous In
vestment of these properties and tax the bust
ness of widows and orphans. Private capital,
except that in trust and SO tied up 10 bond and
mortgage in spite of ruinous competition, would