Ellsworth American. [volume] (Ellsworth, Me.) 1855-current, 1905-07-26
pou BILE TAXATION.
Discussion of this Important Ques-
tion--A Practical Suggestion.
CCbarIes p. cleaves. Of Brunswick. Ia Lewiston
JoarHag.l

system Of the taxation of mortgaged rea
estate is bound to come up again ans
again for discussion. Not that it is pos
sible to make exactly proportional
division of the support Of governments
enterprises and common interests; but il
seems probable that the matter viii hardly
rest until we approach nearer our ideal Of
equitable division of taxation on the basis
of ability TO pay. Some light on ths
future may be thrown by a study Of the
present system and its comparison with
the systems Of other states. We have not
only the errors Of our own, but also those
Of other systems TO avoid. This article
aims to put such simple study and COM
parison before the readers as may be sug-
gestive Of improvement in present sys-
tenn with the avoidance of the defects Of
others.
Double taxation" is pretty well under
stood. But suppose we illustrate it. The
owner of a 5000 farm, mortgsged for
1900 pays tax upon the full assessment,
which is about $500. The mortgage, at
the same time, pays a tax upon the face
value of his mortgage or reduced ASSESS
meDt OF it, say q 500. Thus tax is rem
dered upon an assessment of $500, while
the full value OF the farm Is not over 5000.
An argument in favor of this system IS
stated thus: Both farm and mortgage are
instruments of earning capacity. The
entire farm yields income to the occupant,
and the mortgage yields income to the
mortgage. Why is not this argument
conclusiveiy In favor OF double taxation?
The answer is to be found in the incidence
of the tax.
The tax upon the mortgage raises the
rate of interest. The paper instrument is
not productive in the manner in which a
farm or even house is productive. Aside
from money it can produce no economic
goods or facilities; these must be pro-
duced for it By the concern in which the
money is invested. The full earning
capacity, therefore, in this case must be
found in the mortgaged farm. From his
property the mortgagor must furnish the
income from which is to be paid a tax
upon the assessed value OF the farm, plus
an amount of interest sufficient to cover a
rental of the money borrowed and also a
tax thereon. Truly, then, the mortgagor
is paying double tax; triple tax, indeed
his tax proper, the shifted tax Of the
mortgage, and an excessive rate Of tax
alton to cover the cost of assessment of
mortgages and the taxes upon non-pay ing
mortgages.
This system as shown in the present law
of Maine IS as follows:
ssTaxes on real estate shall be assessed
in the town where the estate lies. TO the
owner or person in possession thereof, on
the first day of April. In case Of mort
gagged real estate the mortgagor. for pur-
poses of taxation, shall be deemed the
owner, until the mortgage takes possess
sion, after which the mortgage shall be
deemed the owner" Revised statutes,
chapter 8, section 9.
"Money or personal property loaned or
passed into the hands or possession Of an
other by any person residing in the State.
secured by an absolute deed of real estate,
shall be taxed to the grantee as in case of
a mortgage, although the land is taxed to
the grantor or other person in possession"
Ibid, sec. q.
No better expression OF the most direct
notion of removing the stigma of double
taxation can be given than that found in
the report of the Maine tax commission
for 1880 in their recommended 'Act to
Provide for the Raising of Revenue by
Taxation" Sec. 10.
''When any person has an interest in
real estate not exempt from taxation un-
der the provisions OF this chapter as
holder of a duly recorded mortgage given
to secure the payment OF money, the
amount of which is fixed and certain, the
amount of his interest mortgage shall
be assessed as real estate in the place
where the land lies; and the mortgagor
shall be assessed only for the value of
said real estate after deducting the
assessed value of all such mortgages in
terests therein"
At first this sounds like a benediction
to the over-taxed farmer. 1t is certainly
more just, since a larger per cent. of taxa
tion must be paid by those who actually
own property. And this system, as prac-
tieed in Massachusetts since the law of
1881, has yielded certain beneficent results
in that state. Nathan Mathews, IT,, in an
article in the Quarterly Journcl Of Eco
noDsics, vol. ~: double Taxation OF
Mortgaged Real Estate,'' shows by tabu-
lar statistics that in the eight years sue
ceeding the passage Of the act "a period of
generally declining values) the average
decline in mortgage interest exceeded that
of interest ON the bonds owned by the
three largest savings banks of the state,
and of bank discounts and interest on
railroad bonds in general. Brokers,
money borrowers and trustees testify that
the rate of interest on new mortgage loans
about Boston dropped at once fully one
per cent; building on loans was stimu-
lated, and the taxes lost ON twenty mil
lions of dollars worth OF mortgages was
covered by over nineteen millions in new
buildings within three years buildings
which il was reckoned would not have
been built except for the passage of the
law.
This system, though more just and more
promising than the present system OF
Maine, still has its defects. This is to be
considered: That while the mortgage
nominaIly pays a tax on a share in the