The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1906-01-02
THE MORTGAGE TAX.
How Exemption Operates il
Other States.

New York Tax Reform Association. vii
liam G. Low, president: Spencer Aldrlci.
dent; Dallas 3. Pratt, treasurer.
Secretary's Office. 52 William Street,
room sos. Lawson Purdy, secretary.
December 20, 1906.
Editor of The Times-Dispatch:
Sir.-Your discussion OF mortgage tax
alton and your opinion that mortgages
should be exempt from taxation, with
which opinion ] am in full accord, leads
ed in brief review of the law in the
States in which mortgages are not taxed.
In the State OF Idaho among the items
of property exempt from taxation are =.
classed .'all dues and credits secured by
mortgages, trust deeds Or other lien. In
four States the law In regard 10 the tax
alton OF mortgages is similar and pro-
vides that the mortgage shall not be
of the mortgage Is claimed by the owner
of the real estate mortgaeed. These
States are Connecticut. MASSACHUSETTS,.
New .Jersey and Wisconsin. The law Is
similar in all the States, and that OF
New Jersey is as follows: Hereafter no
mortgage of real or personal property,
or both. whether given by individuals or
corporations, or the debt secured by such
mortgage, shall be assessed for taxation
unless deduction therefor shall have been
claimed by the owner of such mortgaged
property and allowed by the assessor.
In these States the practice Is to pro-
vide in the mortgage itself that the hor-
rover OF money shall not claim any de-
duction from the assessed value OF the
the real estate is assessed at It's full
value, but the mortgage IS not taxed,
and the borrower SECURES his loan at the
lowest rate of interest colnpatlple WIN
the condition of the money market and
the soundness of the security without
any increase on account of taxation or
the fear of taxation.
rhe law OF Colorado Is in effect sim
liar to that of New Jersey, although quite
different worded on account of the Con-
stitution. Mortgages are practically eX-
cmpt in Colorado.
system in that the Constitution requires
that the equity in the real sestate mort
gagged shall be taxed to the, owner and
ufgee, where the real estate is situated;
Emit any contract by which the borrower
agrees 10 pay the tax shall be void. Ihe
result is that in California the rate OF
Interest on mortgages exceeds the rate,
or Interest on unsecured loans by about
the average tax rate plus one-third 70
one-half per cent. more to insure the
lender against a possible increase in the
rate and to compensate him for his
trouble in paying the tax. In 1898 the Sr-
preme Court Of California held IN the
Bandmann case that an agreement .a not 81
m,lltaneuus with or a part of the mort
gage by which the borrower contracts
to nay the tax Is not contrary. to the Con-
stitution. Now the law stationers carry
blanks tcmDuuS lilS - WV. oSPo, ~
and distinct from the mortgage, IN which
the creditor agrees to reduce the interest
II, case the debtor agrees to pay the
tax, i have been informd by county
auditors Of Idaho that after the passage
Of the law exemptlng mortgages in 1883
tie rate OF interest on mortgages drop
ned d third. In Massachusetts mortgages
we're exempted In 1881 and the Massachu-
salts Tax Commission Of 1897 estimated
that the reduction in the rate OF interest
due 10 such exemption was from one-llalf
10 tliree-auarterS OF one per cent Mort
cages are taxable in the State Of New
anees in tho rural counties of Massacht-
Sets bordering on New York is less than
in similar counties across the line In
New York. The rate OF interest lpon y
,inorgtages ID less In Boston ana Phi a.
delphia than II is in the city OF New