Ellsworth American. [volume] (Ellsworth, Me.) 1855-current, 1905-07-26

I
it, A mortgage has more mouths than
one
The failures Of this plan 10 give equali-
ration OF taxation and 10 reduce the
expense of government to the farmer, is
best shown where the system is thor
/ oaghly practiced; where the elimination
OF direct taxation Of mortgaged real estate
is not only offered but compelled by law.
Such an arrangement exists in California
uader the constitution OF the state. The
mortgage is defined as a part interest in
the property. The mortgage IS taxed on
the amount of the mortgage, the mort
gagor on the value of the property less the
mortgage value. Amy written contract by
which the debtor assumes an obligation TO
pay the tax, Is void, and involves the
penalty that the interest cannot be recov-
cred. The results Of this California plan
are now historical and may be recorded as
/ follows:
| 1. The tax is shifted to the mortgagor
/ by higher rate OF intesest.
| 2. The cost OF shifting also falls to him.
In the prospect Of an increased rate Of
| taxztion the lender charges one fourth to
| one half OF one per cent per annum
higher interest, on new loans or renewals.
g. The mortgsged portion Of the pro-
perty like the remainder would be assessed
at less than it's full value If the mortgagor
were 20 pay the tax directly on the entire
property. But since the tax is levied on
the mortgage, who shifts il to the farmer,
the farmer pays higher rate OF interest
ON the whole amount of the mortgage.
while the mortgag may pay tax on an
assessment Of lass than the face value of
the mortgage. II is only fair TO say thst
this may not always add 10 the farmer 5
expense, since the difference in rate Of
interest may not be exactly equal to the
rate Of taxation, but may be naturally
adjusted to the fact just stated.
1. The mortgagor pays interest from
the date OF his loan. But the mortgage
may pay tax only from the beginning Of a
period of taxation which dates some
months after the loan; his money there
fore may have escaped the preceding
period of taxation.
). The California state board Of equali-
cation in 1894 made the statement that it
costs three times as much to assess both
real property and mortgages. This eN-
pense of assessments, as previously shown,
raises the rate OF taxation and falls or
shifts 20 the nortgagor.
@. Ii may be added that the escape OF
any mortgages from taxation win not
always reduce the interest in such case
but it win add fractional increase to the
rate OF taxation.
This arraignment Of the California sys-
tenn points out the cost Of q mortgage to
the naortgager in direct and shifted taxa
| tion-the former as a part of costs, the
latter as part of interest. What this
analysis of the rigid California system
shows viii be true il the same rigid sys-
| tenn is applied in any state. The more
rigid the effort 10 secure the mortgage
from taxation OF his nortgaged property
the higher sum he Will pay in combined
interest and taxation. Better than dou-
Bile taxation though it be, il is by no
means ideal. The worth of the Massa-
ehusetts, California, Pennsylvania and
proposed (Bostwiek bill) New York sys-
TENS, is in the fact that mortgaged prop
| erty is not twice taxed; but this disposes
| of but part OF the difficulty, as has been
| plainly shown.
For the equitable taxation of the mort
gage il is probable that another method is
to be sought. Such method we will
state, first admitting that two things tend
| to make it unpopular (sl 1t is an indi-
rect method; and tb) statistics indicate
that the method would not surpass the
Massachusetts or California system in the
reduction of interest On mortgage loans
in Maine and few other eastern states.
But it is evidently a move in the right di-
rection. 1t aims at and secures more
equitable distribution than the double
tax. And it reduces the cost of assess
ment and the extra interest demanded
from the risks OF higher taxation. The
method may be simply expressed as fol-
lows:
Exempt all mortgage debts from taxa
ton. Exempt all personal property below
certain value, which should be sufficient
| Iy high. Let the mortgagor pay tax on
the value Of the entire estate, and secure q
lower rate of interest from the exemption
of the mortgage. Tax productive enter
prises in such way as to secure revenue
directly from the source of product and
profit, and avoid any double taxation of
such property. Let progress in income
and inheritance-taxation work towards
additional revenue and more equita BILE
distribution.
AS Seligmani has said; 1.-THE question
where tax ought to be imposed involves
a rather simple theoretical problem and
many very difficult pratical problems"
ITO work out the solution for each kind
Of tax would take US too far afield."
But it is believed that. the principles stat
ed above as an outcome OF this study will
directly remedy a manifest wrong and
tend more towards taxation on the princi-
pie of ability to pay, and towards mini
mum cost of assessment and collection.
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