The Paducah evening sun. [volume] (Paducah, Ky.) 1906-1929, 1907-10-15
THE NEW WAY To-
TAX MORTGAGES

| II will be interesting when a year
has rolled around TO estimate the
amount Of tax that has been collected
in Kentucky by the state and by coun-
! ties on real estate lien notes and
mortgage notes. This subject of mort
gage taxation is one that Kentucky
| should very carefully consider In
most states it has been recognized
that TO tax mortgages is to impose
double taxation. since by the borrow
ing of money upon real estate no new
| property has been created. but only
the same property twice. Il has been
| considered, however, that the state IS
entitled to some revenue from this
source. and other states have solved
the problem by levying a registration
tax upon mortgages. Under this sys-
TEN, when a mortgage is fled for rec
| ord ii pays a tax of five dollars on
each thousand dollars Of the amount
secured by the mortgage. No subse-
quent tax is imposed and the entire
| amount OF the tax collected goes Into
the state treasury.
Where this system has been tried,
the result has beer a considerable In
crease In the revenue from taxation
Of mortgages. The system which we
are trying in Kentucky. by which the
county clerk is required to make n
! correct return to the assessor Of all
mortgages. gives very little chance
for any mortgages 20 escape taxation.
so that to adopt In Kentucky the sys.
tenn OF a registration tax on mort
cages would not be. productive of
more revenue, and might possibly be
productive OF less; but 1t is question
able whether the slight additional rev.
enUe derived from these mortgages
makes up for the injustice done 10 the
borrowers Of money. II Is not conceiy-
able that a man viii lend money at 5
or per cent. and then pay from pa
TO per cent in the way OF tax, and
yet It would amount to r.is In very
many Of our Kentucky cities and
towns. Rather than do so. since he
can not now. under the law.avoid dis
closing his possession OF the mort
gage. the lender will simply retire
from the money lending market
These restrictions curtail the amount
OF money that will be loaned on mort.
cages and result in a hardship 20 Dor
rowors II should be remembered.
also, that the borrowers affected IN
this case are of the very best class
farmers who need 20 raise money On
their farms: men OF small means who
desire to borrow money 10 build
homes. as well as men who pledge
real estate to aid them In extensive
building or industrial operations. The
possibility Of borrowing the money
they need from private sources has
always been OF great advantage 90
people OF these classes. especially IN
small towns and cities where there
are not so many trust companies max.
ing loans. The lender might stand
the burden of the tax II he we're al.
lowed 10 add that amount 20 his rate
OF interest. but he is headed OF in
that direction by the usury laws. IA
many cases he takes chances on this
point and by various devices will con.
triye TO collect from the borrower
some extra premium by way OF Offset
to the tax he must pay on the mort
gage In this way the burden falls
direct on the borrower and must In.
evitably tend to increase the interest
rate on mortgage loans.
That tax on mortgages does 20
increase the interest rate on mort.
gage loans has been clearly proved by
the experience OF New York
Il Is not to be supposed that there
Will be any opposition TO the tax on
mortgages on the part Of corporations
which have money to lend, since, by
Law, banks and trust companies are
not specifically taxed on their mort
gage loans But any banker dislikes 10
see anything done that restricts the
amount OF available capital in the
state, for such restriction ~ available
capital means restriction Of bust
ness, restriction OF all forms
OF progress that make the state
more prosperous. Experience has. up
to this time. demonstrated that the
only beneaciaries of the attempt TO
rigidly tax mortgages are the foreign
insurance companies. watch come into
the state and lend their money and,
being resident IN other states. do not
have to pay a tax On their mortgages.
The same registration tax where II
has been adopted is applied to the
mortgages filed by railroad and other
corporations. This Is proving a more
effective way Of taxing bonds than TO
take the chance Of individual holderr
being willing to give them in for tax.
alton. which they generally fail to do.
in view Of the fact that the bonds
rarely pay more than 3 TO 10 per cent.
and three-fifths to threefourths ~