The San Francisco call., 1906-05-25
HOLDS LAW
SHOlj[ D BE
REPEALED
Seawell Objects to the Tax
Levied Against All
Credits.
Points to Fact That 1t
Operates as a Double
Burden.

A strong argument in favor of the
abolition of the mortgage tax law,
as we'll as the repeal of statutes pro-
viding for the taxation OF all otner
credits is advanced by Superior
Judge James M. Seawell, noted as one
of the ablest jurists of California.
Judge Seawell's argument is con-
tanned in a communication to James
D. Phelan, chairman of the nnance
committee of the Reconstruction COM
mittee. 1t is as follows:
In the published reports of the recent
discussions upon the proposed repeal OF
the mortgage tax l have not ooserNeu
that any higher ground has been taken
by the advocates of the repeal than tnat
the tax discourages the investment OF
Eastern capital. l read an editorial In
The Call the other day, in whlch lne
constitutional provision, whlch requl.es ts :
such taxation was defended upon the
ground that it prevented double taxa
ton by the requirement that the mort-
gagor must be taxed merely upon the
value of his land after deducting the
value of the security. II is true ena., -,
this respect, the constitutional provision
is not subject to objection. But why
should the provision be limited to deoss
secured by mortgage? 1t is not olm-
cult to demonstrate that all taxation OF
credits, when all the property OF the
debtor is assessed at its full value, WIN
out deducting the amount or ms oeDls,
is double taxation. This is obvious
enough in the simple case OF safe upon
credit, of merchandise where the buyer
is assessed for the full value of the
merchandise and the seller for the DEBT;
The same is true Of the taxation OF All
other credits. Then why not abolish the
taxation of credits altogether! Wnen
the present constitution was framed the
Supreme Court had decided that the
mortgage tax. then upon the statute
book operated as double taxation. TO
meet that decision the trainers of the
vision which, while il provides for the
taxation of mortgages. guards against
double taxation and prohibits the max
ing of any agreement by which the
mortgagor may assume payment OF the
mortgage tax Everybody knows that
this provision does not benefit the bor-
rover and that its only effect is to In
crease the rate of interest.
UNEQUAL IN OPERATION.
Under our present revenue laws if a
debt is not secured by mortgage all the
property of the debtor is taxable at its
full value, and the value of the credit
is also assessable to the creditor. / say
the most part. escape taxation, except
when owned by corporations. such as
banks. whose books are subject to Off
cial inspection, or by the estate of de-
suns
is filed in the Probate Court Besides,
all assessments being made as of the
first Monday in March only those cred
its are taxed which are outstanding on
that day, and all others which may be
created during the other 364 days of the
year are exempt from taxation if they
are not outstanding on the first Monday
in March. So that, besides that double
taxation, the law requiring taxation of
credits is unequal in its operation. Other
incongruties of the law may be noticed.
creditor whose credit is not secured
by mortgage may deduct from solvent
debts due himself the amount of debts
due by him TO other persons, provided
they are residents of this State. Such
deduction cannot be made by the owner
of any other property than solvent debts
itor is not resident of this State, and
there can be no deduction by creditor
whose debt is secured by mortgage. In
my opinion, and l have so held as a
Judge of the Superior Court. the con-
Stitutional provision as to the mortgage
property. and so far as my informant
extends no attempt has been made by
assessors to apply 1T to mortgages or
pledges of personal property If the
taxation of mortgages is a good thing
why not tax mortgages and pledges of
personal property? Why not provide
that only the value of the chattels mort
gagged or pledged, after deducting the
foibC VI liiC SCCulitys SAdl1 Dc dSSSSSdDlS
TO the debtor?
The distinction in our revenue laws be-
tween debts secured by mortgage and
those not so secured cannot be justified
upon principle; the value of any cred
it depends upon the means of pay
nent owned by the debtor, including
all his property not exempt from
execution. When the creditor doesn't
hold a mortgage security he has
nevertheless a potential lien upon the
property of his debtor. He may by means
of judgment and execution sale apply.
If necessary, all the property of his debtor
not exempt from execution to the pay
ment of his debt. In this sense every debt
is secured. But it is only when the Sc
curity is a mortgage of real property that
any deduction is made in the assessment
of the property of debtor
Suppose that all the land in the State
is owned by two persons. One sells to the
other If the seller takes a note for the
price, secured by mortgage of the land
there would. under our law be no in
crease in the assessment by reason of the
transaction. If however, assessed with
out deduction as before the sale. and be-
sides the vendor would be assessed for
the amount of his note The assessed
value of the property would be Increased
by one-half by the simple transaction of
the sale.
OPPORTUNITY ~ HAND
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